Middleburg Financial Corporation Announces Second Quarter 2012 Results

Jul 31, 2012, 14:00 ET from Middleburg Financial Corporation

MIDDLEBURG, Va., July 31, 2012 /PRNewswire/ -- Middleburg Financial Corporation (the "Company") (Nasdaq: MBRG), today announced net income of $1.8 million or $0.25 per share for the second quarter of 2012.

"The second quarter results demonstrate the trend toward improved earnings at Middleburg Bank as well as at subsidiaries Southern Trust Mortgage and Middleburg Investment Group," commented Gary R. Shook, president and CEO of Middleburg Financial Corporation. "Moreover, we continue to take advantage of this market cycle as an opportunity to attract high level talent in each of our business lines.  While we are certainly pleased with the Company's progress this quarter and with year to date results, we recognize that we must continue our efforts to improve asset quality, increase loan growth, and improve our efficiency."

Second Quarter 2012 Highlights:

  • Net income of $1.8 million or $0.25 per diluted share, compared to $1.2 million or $0.17 per diluted share for the second quarter of 2011;
  • Net interest margin of 3.57%, compared to 3.78% for the second quarter of 2011;
  • Gain-on-sale revenue from mortgages increased 89.7% compared to the second quarter of 2011;
  • Total revenue of $16.8  million, an increase of 20.2%  over the second quarter of 2011;
  • Total assets of $1.2 billion, an increase of 2.2% over December 31, 2011;
  • Deposits increased by $45.4 million or 4.9% since December 31, 2011;
  • Provision for loan losses decreased by 32.8% compared to second quarter of 2011; and
  • Capital ratios continue to be strong: Tangible Common Equity Ratio of 8.6%, Total Risk-Based Capital Ratio of 14.9%, Tier 1 Risk-Based Capital Ratio of 13.7%, and a Tier 1 Leverage Ratio of 9.0% at June 30, 2012.

Total Revenue

Total revenue was $16.8 million in the quarter ended June 30, 2012 compared to $15.7 million in the quarter ended March 31, 2012, representing an increase of 6.8%, and $14.0 million in the quarter ended June 30, 2011, representing an increase of 20.2%.   

Net interest income was $9.7 million during the three months ended June 30, 2012, which was 2.4% lower than the quarter ended March 31, 2012 and an increase of 2.9% compared to the quarter ended June 30, 2011. The yield on average earning assets was 4.40% for the quarter ended June 30, 2012 compared to 4.56% for the previous quarter and 4.86% for the quarter ended June 30, 2011, representing a decrease of 16 basis points from the previous quarter and a decrease of 46 basis points from the quarter ended June 30, 2011.  The decrease in yields on earning assets in the second quarter of 2012 compared to the previous quarter was primarily due to a large increase in cash balances at the end of the second quarter combined with a decline in yields on loans. The decrease in the yield on earning assets from the quarter ended June 30, 2011 reflected a 40 basis point decrease in the yield on the loan portfolio and a decrease of 59 basis points in the yield on the securities portfolio. 

The average cost of interest bearing liabilities was 1.00% for the quarter ended June 30, 2012, compared to 1.06% in the previous quarter, and 1.26% for the quarter ended June 30, 2011, representing a decrease of 6 basis points from the previous quarter and a decrease of 26 basis points from the quarter ended June 30, 2011.  Costs for wholesale borrowings decreased by 4 basis points during the quarter, while costs for retail deposits decreased by 4 basis points during the same period.  The decline in the cost of retail deposits during the quarter ended June 30, 2012, compared to the previous quarter, was primarily due to reductions in interest expenses related to interest bearing non maturity deposits. Lower rates also allowed us to refinance maturing brokered deposits and Federal Home Loan Bank advances during the quarter. 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 0.86% for the quarter ended June 30, 2012 compared to 0.91% for the quarter ended March 31, 2012, a decrease of 5 basis points from the previous quarter.

The net interest margin for the three months ended June 30, 2012 was 3.57%, compared to 3.69% for the previous quarter, and 3.78% for the quarter ended June 30, 2011, representing a decrease of 12 basis points from the previous quarter and a decrease of 21 basis points compared to the quarter ended June 30, 2011.   

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 $1.3 million or 22.5% when comparing the quarter ended June 30, 2012 to the previous quarter and increased by $1.1 million or 18.7% compared to the quarter ended June 30, 2011. The primary reason for the higher non-interest income in the second quarter of 2012 relative to the prior quarter was higher gain-on-sale revenues from the Company's mortgage operations.

Southern Trust Mortgage originated $232.3 million in mortgage loans during the quarter ended June 30, 2012 compared to $210.8 million originated during the previous quarter, and $153.0 million originated during the quarter ended June 30, 2011, an increase of 10.2% compared to the previous quarter and an increase of 51.8% when comparing calendar quarters.  Gains on mortgage loan sales increased by 34.1% when comparing the quarter ended June 30, 2012 to the previous quarter.  Gains on mortgage loan sales increased by 89.7% when comparing the quarter ended June 30, 2012 to the quarter ended June 30, 2011.  Gains on mortgage loan sales included in the accompanying statements of income are presented net of originator commissions incurred to originate the loans.   

The revenues and expenses of Southern Trust Mortgage for the three month periods ended June 30, 2012 and June 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 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."

Trust and investment advisory service fees earned by Middleburg Trust Company ("MTC") increased by 6.3% when comparing the quarter ended June 30, 2012 to the previous quarter, and increased by 5.0% compared to the quarter ended June 30, 2011.  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 $1.3 billion at June 30, 2012, a decrease of 1.0% relative to March 31, 2012 and an increase of 5.0% relative to June 30, 2011.

Net securities gains were $148,000 during the quarter June 30, 2012 compared to $140,000 during the previous quarter and $87,000 during the quarter ended June 30, 2011.

Non-Interest Expense

Non-interest expense in the second quarter of 2012 was unchanged compared to the previous quarter and increased by 2.8% compared to the quarter ended June 30, 2011.  

Salaries and employee benefit expenses increased by $149,000 or 2.0% when comparing the second quarter of 2012 to the previous quarter. Salaries and employee benefits increased by $1.0 million or 16.3% versus the second quarter of 2011 due to increased compliance and operational salaries at the Company's mortgage subsidiary.  Expenses related to Other Real Estate Owned (OREO) increased by $588,000 or 206% when comparing the second quarter of 2012 to the previous quarter. Advertising expenses increased by $147,000 or 49.0% during the quarter.  

The Company's efficiency ratio was 72.7% for the second quarter of 2012, compared to an efficiency ratio of 76.5% for the second quarter of 2011.  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.  Prior to March 31, 2012, the Company did not exclude amortization of intangibles and other real estate expenses from total non-interest expense.  The efficiency ratios for the periods ended December 31, 2011 and prior and included in tables in this release have been restated for consistent presentation.

Asset Quality and Provision for Loan Losses

The provision for loan losses in the quarter ended June 30, 2012 was $730,000 compared to a provision of $792,000 in the previous quarter and a provision of $1.1 million in the quarter ended June 30, 2011, representing a decrease of 7.8% from the previous quarter and a decrease of 32.8% from the quarter ended June 30, 2011.

The Allowance for Loan and Lease Losses (ALLL) was $14.9 million representing 2.18% of total portfolio loans outstanding at June 30, 2012 and at March 31, 2012.

Loans that were delinquent for more than 90 days and still accruing were $1.4 million as of June 30, 2012 compared to $167,000 as of March 31, 2012.

Non-accrual loans were $18.8 million at the end of the second quarter compared to $22.3 million as of March 31, 2012, representing a decrease of 15.5% during the second quarter of 2012. Troubled debt restructurings that were performing as agreed were $4.3 million at the end of the second quarter compared to $4.0 million as of March 31, 2012. Other Real Estate Owned (OREO) was $13.3 million as of June 30, 2012 compared to $12.1 million as of March 31, 2012, representing an increase of 10.3% during the second quarter. Total non-performing assets were $37.8 million or 3.1% of total assets at June 30, 2012, compared to $38.6 million or 3.2% of total assets as of March 31, 2012.  

Total Consolidated Assets

Total assets at June 30, 2012 were $1.2 billion, an increase of 1.3% from March 31, 2012.

Total portfolio loans increased by $3.5 million or 0.5% in the second quarter of 2012. The securities portfolio (excluding restricted stock) decreased by $9.1 million or 2.8% in the second quarter relative to the previous quarter. Balances of mortgages held for sale decreased by $13.1 million or 16.1% in the second quarter of 2012 compared to the previous quarter.   Cash balances and deposits at other banks increased by 75% in the second quarter of 2012 compared to the previous quarter.   

Deposits and Other Borrowings

Total deposits increased by $23.5 million or 2.5% in the second quarter.  Brokered deposits, including CDARS program funds, were $85.8 million at June 30, 2012, down 15% from March 31, 2012. FHLB advances were $77.9 million at June 30, 2012, compared to $82.9 million in advances at March 31, 2012.    

Equity and Capital

Total shareholders' equity at June 30, 2012 was $109.9 million, compared to shareholders' equity of $107.9 million as of March 31, 2012. Retained earnings at June 30, 2012 were $43.8 million compared to $42.4 million at March 31, 2012. The book value of the Company's common stock at June 30, 2012 was $15.57 per share.

The Company's total risk-based capital ratio continued to increase to 14.9% as of June 30, 2012 from 14.8% at March 31, 2012 and 14.7% at December 31, 2011.  The Tier 1 risk-based capital ratio also increased from 13.5% at December 31, 2011 to 13.7% at June 30, 2012 and the Tier 1 Leverage Ratio increased to 9.0% from 8.8% at December 31, 2011.   

As depicted in the following table, the Company's risk-based capital ratios remain well above regulatory minimum capital ratios:

 

MIDDLEBURG FINANCIAL CORPORATION

Risk-Based Capital Ratios

June 30, 2012

(1)

MFC

Regulatory

Excess

Minimum

MFC

over

Requirement

Ratios

Minimum

Tier 1 Leverage Ratio

4.0%

9.0%

5.0%

Tier 1 Risk-Based Capital Ratio

4.0%

13.7%

9.7%

Total Risk-Based Capital Ratio

8.0%

14.9%

6.9%

(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, 2011, 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 17 offices in 11 states.

 

MIDDLEBURG FINANCIAL CORPORATION 

Consolidated Balance Sheets

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

(Unaudited)

(Unaudited)

June 30,

March 31,

December 31,

2012

2012

2011

ASSETS

Cash and due from banks

$

5,934

$

6,514

$

6,163

Interest-bearing deposits with other institutions

72,877

38,523

45,107

     Total cash and cash equivalents

78,811

45,037

51,270

Securities available for sale

314,530

323,584

308,242

Loans held for sale

67,965

81,027

92,514

Restricted securities, at cost

7,167

7,665

7,117

Loans receivable, net of allowance for loan losses of $14,969 at June 30,

  2012, $14,861 at March 31, 2012, and $14,623 at December 31, 2011

670,941

667,508

656,770

Premises and equipment, net

21,021

21,099

21,306

Goodwill and identified intangibles

6,103

6,146

6,189

Other real estate owned, net of valuation allowance of $1,982 at June 30,

  2012, $1,492 at March 31, 2012, and $1,522 at December 31, 2011

13,335

12,095

8,535

Prepaid federal deposit insurance

3,510

3,753

3,993

Accrued interest receivable and other assets

35,467

35,297

36,924

    TOTAL ASSETS

$

1,218,850

$

1,203,211

$

1,192,860

LIABILITIES

Deposits:

      Non-interest-bearing demand deposits

$

154,838

$

150,385

$

143,398

      Savings and interest-bearing demand deposits

509,291

475,138

460,576

      Time deposits

311,156

326,249

325,895

   Total deposits

975,285

951,772

929,869

Securities sold under agreements to repurchase

33,034

32,154

31,686

Short-term borrowings

8,393

14,166

28,331

FHLB borrowings

77,912

82,912

82,912

Subordinated notes

5,155

5,155

5,155

Accrued interest payable and other liabilities

7,066

7,457

6,894

Commitments and contingent liabilities

-

-

-

    TOTAL LIABILITIES

1,106,845

1,093,616

1,084,847

SHAREHOLDERS' EQUITY

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

7,052,554, 7,005,315 and 6,996,932 issued and outstanding at 

June 30, 2012, March 31, 2012, and December 31, 2011, respectively)

17,364

17,359

17,331

Capital surplus

43,616

43,551

43,498

Retained earnings

43,805

42,389

41,157

Accumulated other comprehensive income 

5,100

4,582

3,926

    Total Middleburg Financial Corporation shareholders' equity

109,885

107,881

105,912

Non-controlling interest in consolidated subsidiary

2,120

1,714

2,101

    TOTAL SHAREHOLDERS' EQUITY

112,005

109,595

108,013

    TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

1,218,850

$

1,203,211

$

1,192,860

 

MIDDLEBURG FINANCIAL CORPORATION 

Consolidated Statements of Income

(In thousands, except for per share data)

                         Unaudited

                  Unaudited 

For the Six Months

For the Three Months

Ended June 30,

Ended June 30,

2012

2011

2012

2011

INTEREST AND DIVIDEND INCOME

Interest and fees on loans

$          19,547

$         19,466

$          9,616

$        9,731

Interest and dividends on securities available for sale

Taxable 

3,439

3,150

1,704

1,751

Tax-exempt

1,203

1,165

596

604

Dividends

89

72

45

36

Interest on deposits in banks and federal funds sold

49

60

25

33

    Total interest and dividend income

24,327

23,913

11,986

12,155

INTEREST EXPENSE

Interest on deposits

3,739

4,640

1,846

2,332

Interest on securities sold under agreements to 

  repurchase

167

125

84

69

Interest on short-term borrowings

237

116

89

53

Interest on FHLB borrowings and other debt

584

602

287

306

    Total interest expense

4,727

5,483

2,306

2,760

NET INTEREST INCOME

19,600

18,430

9,680

9,395

Provision for loan losses

1,522

1,541

730

1,087

NET INTEREST INCOME AFTER PROVISION

FOR LOAN LOSSES

18,078

16,889

8,950

8,308

NONINTEREST INCOME

Service charges on deposit accounts

1,068

1,015

538

526

Trust services income

1,900

1,850

979

983

Gains on loans held for sale

8,822

6,785

5,053

3,938

Gains on securities available for sale, net

288

122

148

87

Total other-than-temporary impairment losses

(46)

(17)

(36)

-

Portion of loss recognized in other 

  comprehensive income

46

16

36

-

Net other than temporary impairment losses

-

(1)

-

-

Commissions on investment sales

272

365

125

185

Fees on mortgages held for sale

106

241

64

87

Other service charges, commissions and fees

271

249

121

134

Bank-owned life insurance

245

262

123

139

Other operating income (expense)

12

105

(2)

(55)

    Total noninterest income

12,984

10,993

7,149

6,024

NONINTEREST EXPENSE

Salaries and employees' benefits

14,863

15,129

7,506

7,813

Net occupancy and equipment expense

3,533

3,316

1,755

1,640

Advertising

747

441

447

285

Computer operations

779

708

394

343

Other real estate owned

1,160

950

874

606

Other taxes

408

402

205

205

Federal deposit insurance expense

519

765

261

358

Other operating expenses

4,616

3,478

1,869

1,703

    Total noninterest expense

26,625

25,189

13,311

12,953

Income before income taxes

4,437

2,693

2,788

1,379

Income tax expense

1,014

618

598

301

NET INCOME

3,423

2,075

2,190

1,078

Net (income) loss attributable to non-

  controlling interest

(72)

351

(421)

121

Net income attributable to Middleburg

  Financial Corporation

$            3,351

$           2,426

$          1,769

$        1,199

Earnings per share:

Basic

$             0.48

$             0.35

$           0.25

$          0.17

Diluted

$             0.48

$             0.35

$           0.25

$          0.17

Dividends per common share

$             0.10

$             0.10

$           0.05

$          0.05

 

QUARTERLY SUMMARY STATEMENTS OF INCOME

MIDDLEBURG FINANCIAL CORPORATION

(Unaudited. Dollars in thousands except per share data)

For the Three Months Ended

Jun. 30, 2012

Mar. 31, 2012

Dec. 31, 2011

Sep. 30, 2011

Jun. 30, 2011

Interest and Dividend Income

  Interest and fees on loans

$           9,616

$           9,931

$         10,014

$        9,912

$           9,731

  Interest and dividends on securities available for sale

     Taxable 

1,704

1,735

1,750

1,727

1,751

     Tax Exempt

596

607

606

592

604

     Dividends

45

44

36

36

36

  Interest on deposits in banks and federal funds sold

25

24

20

30

33

      Total interest and dividend income

$         11,986

$         12,341

$         12,426

$      12,297

$         12,155

Interest Expense

  Interest on deposits

$           1,846

$           1,893

$           1,940

$        2,287

$           2,332

  Interest on securities sold under agreements to repurchase

84

83

84

84

69

  Interest on short-term borrowings

89

148

144

58

53

  Interest on FHLB borrowings and other debt

287

297

299

312

306

      Total interest expense

$           2,306

$           2,421

$           2,467

$        2,741

$           2,760

      Net interest income

$           9,680

$           9,920

$           9,959

$        9,556

$           9,395

Provision for loan losses

730

792

319

1,024

1,087

      Net interest income after provision

       for loan losses

$           8,950

$           9,128

$           9,640

$        8,532

$           8,308

Non-Interest Income

 Trust services income

$              979

$              921

$              911

$           932

$              926

 Service charges on deposit accounts

538

530

542

538

526

 Net gains on securities available for sale (1)

148

140

197

141

87

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

(36)

(10)

6

(16)

-

   Portion of (gain) loss recognized in other comprehensive income

36

10

(9)

(5)

-

 Net other-than-temporary impairment loss

-

-

(3)

(21)

-

 Commissions on investment sales (1)

125

147

101

100

98

 Bank owned life insurance

123

122

101

123

139

 Gains on loans held for sale

5,053

3,769

4,294

3,780

2,664

 Fees on mortgages held for sale

64

42

8

84

87

 Other operating income

119

164

220

104

79

       Total non-interest income

$           7,149

$           5,835

$           6,371

$        5,781

$           4,606

Non-Interest Expense

  Salaries and employee benefits (2)

$           7,506

$           7,357

$           8,470

$        6,900

$           6,452

  Net occupancy and equipment expense

1,755

1,778

1,732

1,700

1,640

  Other taxes

205

203

205

205

205

  Advertising

447

300

512

446

285

  Computer operations

394

385

428

365

343

  Other real estate owned 

874

286

925

689

606

  Federal deposit insurance expense

261

258

251

244

358

  Other operating expenses

1,869

2,747

2,244

1,689

1,646

       Total non-interest expense

$         13,311

$         13,314

$         14,767

$      12,238

$         11,535

       Income before income taxes

$           2,788

$           1,649

$           1,244

$        2,075

$           1,379

       Income tax expense

598

416

278

454

301

       Net income

$           2,190

$           1,233

$              966

$        1,621

$           1,078

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

(421)

349

170

(223)

121

       Net income attributable to Middleburg Financial Corporation

$           1,769

$           1,582

$           1,136

$        1,398

$           1,199

Net income per common share, basic

$             0.25

$             0.23

$             0.16

$          0.20

$             0.17

Net income per common share, diluted

$             0.25

$             0.23

$             0.16

$          0.20

$             0.17

Dividends per common share

$             0.05

$             0.05

$             0.05

$          0.05

$             0.05

(1)     As of March 31, 2012, amounts presented are net of commissions paid to generate these revenue sources.  Prior periods have been restated to conform to this presentation.

(2)     As of March 31, 2012, salaries and employee benefit expenses exclude commissions paid on mortgage loan originations and investment sales.  These commissions are netted against their respective revenue amounts in the statements of income.  Prior periods have been restated to reflect this presentation.

 

MIDDLEBURG FINANCIAL CORPORATION

KEY STATISTICS

(Unaudited. Dollars in thousands except per share data)

For the Three Months Ended

Jun 30, 2012

Mar 31, 2012

Dec 31, 2011

Sep 30, 2011

Jun 30, 2011

Net income

$ 1,769

$ 1,582

$ 1,136

$ 1,398

$ 1,199

Earnings per share, basic

$ 0.25

$ 0.23

$ 0.16

$ 0.20

$ 0.17

Earnings per share, diluted

$ 0.25

$ 0.23

$ 0.16

$ 0.20

$ 0.17

Dividend per share

$ 0.05

$ 0.05

$ 0.05

$ 0.05

$ 0.05

Return on average total assets - Year to Date

0.57%

0.54%

0.44%

0.46%

0.45%

Return on average total equity - Year to Date

6.21%

5.95%

4.87%

5.07%

4.95%

Dividend payout ratio

19.87%

22.11%

30.80%

25.00%

29.41%

Non-interest revenue to total revenue (1)

41.97%

36.47%

38.27%

37.12%

32.48%

Net interest margin (2)

3.57%

3.69%

3.67%

3.64%

3.78%

Yield on average earning assets

4.40%

4.56%

4.55%

4.66%

4.86%

Yield on average interest-bearing liabilities

1.00%

1.06%

1.07%

1.21%

1.26%

Net interest spread

3.40%

3.50%

3.48%

3.45%

3.60%

Non-interest income to average assets(3)

2.35%

1.93%

2.10%

1.97%

1.63%

Non-interest expense to average assets(3)

4.47%

4.50%

5.03%

4.28%

4.16%

Efficiency ratio - QTD (Tax Equiv) (4)

72.68%

77.24%

83.64%

73.92%

76.51%

 

(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 (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.  Prior to March 31, 2012, the Company did not exclude amortization of intangibles and other real estate expenses from total non-interest expense.  The efficiency ratios for the periods ended December 31, 2011 and prior have been restated for consistency of presentation purposes.

 

MIDDLEBURG FINANCIAL CORPORATION

SELECTED FINANCIAL DATA BY QUARTER

(Unaudited. Dollars in thousands except per share data)

Jun 30, 2012

 Mar 31, 2012

Dec 31, 2011

Sep 30, 2011

Jun 30, 2011

BALANCE SHEET RATIOS

Loans to deposits (Including HFS)

77.30%

80.21%

82.15%

81.65%

80.02%

Portfolio loans to deposits

70.33%

71.69%

72.20%

74.29%

74.66%

Average interest-earning assets to

    average-interest bearing liabilities

121.73%

120.99%

121.22%

119.85%

117.42%

PER SHARE DATA 

Dividends

$               0.05

$               0.05

$               0.05

$               0.05

$               0.05

Book value (MFC Shareholders)

$             15.57

$             15.40

$             15.13

$             15.04

$             14.68

Tangible book value (3)

$             14.71

$             14.52

$             14.24

$             14.15

$             13.78

SHARE PRICE DATA 

Closing price

$             17.00

$             15.71

$             14.25

$             15.00

$             14.94

Diluted earnings multiple  (1)

17.00

17.08

22.27

18.75

21.97

Book value multiple(2)

1.09

1.02

0.94

1.00

1.02

COMMON STOCK DATA

Outstanding shares at end of period

7,052,554

7,005,315

6,996,932

6,996,932

6,996,932

Weighted average shares O/S Basic  - QTD

7,030,639

6,994,858

6,996,932

6,996,932

6,977,503

Weighted average shares O/S, diluted - QTD

7,042,111

7,000,169

6,998,019

6,998,494

6,980,331

CAPITAL RATIOS  

Capital to Assets - Common shareholders

9.02%

8.97%

8.88%

9.13%

8.97%

Capital to Assets - with Noncontrolling Interest

9.19%

9.11%

9.05%

9.32%

9.16%

Tangible common equity ratio (4)

8.56%

8.50%

8.40%

8.63%

8.47%

Total risk based capital ratio

14.92%

14.83%

14.72%

14.13%

14.16%

Tier 1 risk based capital ratio

13.66%

13.57%

13.46%

12.87%

12.90%

Leverage ratio

8.99%

8.89%

8.81%

8.97%

9.12%

CREDIT QUALITY

Net charge-offs to average total loans

0.08%

0.07%

0.11%

0.13%

0.08%

Total non-performing loans to total portfolio loans

3.57%

3.88%

4.53%

4.80%

5.25%

Total non-performing assets to total assets

3.10%

3.21%

3.27%

3.34%

3.66%

Non-accrual loans to:

      total portfolio loans

2.74%

3.26%

3.78%

4.51%

4.76%

      total assets

1.54%

1.85%

2.12%

2.64%

2.82%

Allowance for loan losses to:

      total portfolio loans

2.18%

2.18%

2.18%

2.24%

2.22%

      non-performing assets

39.56%

38.53%

37.53%

39.24%

35.98%

      non-accrual loans

79.61%

66.80%

57.69%

49.61%

46.67%

NON-PERFORMING ASSETS:

    Loans delinquent over 90 days and still accruing

$             1,372

$                167

$             1,233

$             1,561

$             3,230

    Non-accrual loans    

18,802

22,247

25,346

30,485

32,298

    Restructured loans (Not in non accrual)

4,334

4,056

3,853

404

112

    Other real estate owned and repossessed assets

13,335

12,095

8,535

6,096

6,255

Total non-performing assets 

$           37,843

$           38,565

$           38,967

$           38,546

$           41,895

NET LOAN CHARGE-OFFS:

    Loans charged off (QTD)

$                694

$                700

$                893

$             1,017

$                621

    Recoveries (QTD)

(72)

(146)

(73)

(44)

(32)

Net charge-offs  (QTD)

$                622

$                554

$                820

$                973

$                589

PROVISION FOR LOAN LOSSES 

$                730

$                792

$                319

$             1,024

$             1,087

ALLOWANCE FOR LOAN LOSS SUMMARY

Balance at the beginning of period

$           14,861

$           14,623

$           15,124

$           15,073

$           14,575

Provision

730

792

319

1,024

1,087

Net charge-offs

(622)

(554)

(820)

(973)

(589)

Balance at the end of period

$           14,969

$           14,861

$           14,623

$           15,124

$           15,073

(1)     The diluted earnings multiple is calculated by dividing the period's closing market price per share by the annualized diluted earnings per share for the period.  The diluted earnings multiple is a measure of how much an investor may be willing to pay for $1.00 of the Company's earnings.

(2)     The book value multiple (or price to book ratio) is calculated by dividing the period's closing market price per share by the period's book value per share.  The book value multiple is a measure used to compare the Company's market value per share to its book value per share.

(3)     Tangible book value is not a measurement under accounting principles generally accepted in the United States.  It is computed by subtracting identified intangible assets and goodwill from total Middleburg Financial Corporation shareholders' equity and then dividing the result by the number of shares of common stock issued and outstanding at the end of the accounting period.

(4)     The tangible common equity ratio is not a measurement under accounting principles generally accepted in the United States.  It is computed by subtracting identified intangible assets and goodwill from total Middleburg Financial Corporation shareholders' equity and total assets and then dividing the adjusted shareholders' equity balance by the adjusted total asset balance.

 

 

MIDDLEBURG FINANCIAL CORPORATION

Average Balances, Income and Expenses, Yields and Rates

 Three Months Ended June 30, 

2012

2011

 Average 

 Income/ 

Yield/

 Average 

 Income/ 

Yield/

Balance 

 Expense 

Rate 

 Balance 

 Expense 

Rate 

(2)

(2)

(Dollars in thousands)

Assets :

Securities:

   Taxable

$    264,106

$         1,749

2.66%

$    225,332

$         1,787

3.18%

   Tax-exempt (1)

61,813

903

5.88%

55,400

915

6.62%

       Total securities

$    325,919

$         2,652

3.27%

$    280,732

$         2,702

3.86%

       Total loans (3)

$    749,834

$         9,616

5.16%

$    701,701

$         9,731

5.56%

Interest bearing deposits in

      other financial institutions

48,025

25

0.21%

47,222

32

0.27%

       Total earning assets

$ 1,123,778

$       12,293

4.40%

$ 1,029,655

$       12,465

4.86%

Less: allowances for credit losses

(15,138)

(14,672)

Total nonearning assets

83,781

94,479

Total assets

$ 1,192,421

$ 1,109,462

Liabilities:

Interest-bearing deposits:

    Checking

$    310,262

$            334

0.43%

$    294,374

$            490

0.67%

    Regular savings

106,725

96

0.36%

96,570

205

0.85%

    Money market savings

57,566

49

0.34%

58,046

94

0.65%

    Time deposits:

       $100,000 and over

140,233

560

1.61%

139,718

633

1.82%

       Under $100,000

180,961

807

1.79%

167,780

910

2.17%

       Total interest-bearing deposits

$    795,747

$         1,846

0.93%

$    756,488

$         2,332

1.24%

Short-term borrowings

7,687

88

4.60%

5,840

53

3.64%

Securities sold under agreements

    to repurchase

32,268

83

1.03%

32,956

69

0.84%

FHLB borrowings and other debt

87,463

288

1.32%

81,638

306

1.50%

Federal funds purchased

3

-

0.00%

3

-

0.00%

    Total interest-bearing liabilities

$    923,168

$         2,305

1.00%

$    876,925

$         2,760

1.26%

Non-interest bearing liabilities

    Demand deposits

150,689

122,380

    Other liabilities

6,822

7,863

Total liabilities

$ 1,080,679

$ 1,007,168

Non-controlling interest

2,231

1,999

Shareholders' equity

109,511

100,295

Total liabilities and shareholders'

   equity

$ 1,192,421

$ 1,109,462

Net interest income

$         9,988

$         9,705

Interest rate spread

3.40%

3.60%

Cost of Funds

0.86%

1.11%

Interest expense as a percent of

    average earning assets

0.82%

1.07%

Net interest margin

3.57%

3.78%

(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 366 day year.

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

 

MIDDLEBURG FINANCIAL CORPORATION

Average Balances, Income and Expenses, Yields and Rates

 Six Months Ended June 30, 

2012

2011

 Average 

 Income/ 

Yield/

 Average 

 Income/ 

Yield/

 Balance 

 Expense