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MIDDLEBURG FINCL CP
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Middleburg Financial Corporation Announces Second Quarter 2012 Results

2012-07-31 14:00 ET - News Release

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 


Rate 


 Balance 


 Expense 


Rate 



(2)



(2)


(Dollars in thousands)

Assets :












Securities:












   Taxable

$    263,757


$         3,528


2.69%


$    215,085


$         3,222


3.02%

   Tax-exempt (1)

61,808


1,823


5.93%


54,691


1,765


6.51%

       Total securities

$    325,565


$         5,351


3.31%


$    269,776


$         4,987


3.73%

       Total loans (3)

$    747,647


$       19,547


5.26%


$    698,183


$       19,466


5.62%

Interest bearing deposits in












      other financial institutions

47,174


49


0.21%


44,619


60


0.27%

       Total earning assets

$ 1,120,386


$       24,947


4.48%


$ 1,012,578


$       24,513


4.88%

Less: allowances for credit losses

(15,005)






(14,710)





Total nonearning assets

82,625






94,830





Total assets

$ 1,188,006






$ 1,092,698

















Liabilities:












Interest-bearing deposits:












    Checking

$    306,953


$            717


0.47%


$    290,710


$            976


0.68%

    Regular savings

105,867


211


0.40%


93,129


392


0.85%

    Money market savings

57,095


106


0.37%


59,451


195


0.66%

    Time deposits:












       $100,000 and over

141,460


1,132


1.61%


135,205


1,238


1.85%

       Under $100,000

180,568


1,573


1.75%


168,156


1,838


2.20%

       Total interest-bearing deposits

$    791,943


$         3,739


0.95%


$    746,651


$         4,639


1.25%













Short-term borrowings

10,542


236


4.50%


5,789


117


4.08%

Securities sold under agreements












    to repurchase

33,196


167


1.01%


31,141


125


0.81%

FHLB borrowings and other debt

87,627


585


1.34%


78,205


602


1.55%

    Total interest-bearing liabilities

$    923,310


$         4,727


1.03%


$    861,788


$         5,483


1.28%

Non-interest bearing liabilities












    Demand Deposits

147,411






122,370





    Other liabilities

6,536






7,250





Total liabilities

$ 1,077,257






$    991,408





Non-controlling interest

2,293






2,397





Shareholders' equity

108,456






98,893





Total liabilities and shareholders'












   equity

$ 1,188,006






$ 1,092,698

















Net interest income



$       20,220






$       19,030















Interest rate spread





3.45%






3.60%

Cost of Funds





0.89%






1.12%

Interest expense as a percent of












    average earning assets





0.85%






1.09%

Net interest margin





3.63%






3.79%













(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.









SOURCE Middleburg Financial Corporation

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