MIDDLEBURG, Va., Oct. 28 /PRNewswire/ -- Middleburg Financial Corporation (the "Company"), (Nasdaq: MBRG), parent company of Middleburg Bank (the "Bank") and Middleburg Investment Group, Inc., today reported its financial results for the third quarter of 2009.
Third Quarter 2009 Highlights
For the Quarter:
-- Net income attributable to the Company of $610,000; -- Basic and diluted earnings per share available to common shareholders of $0.05; -- Net interest margin of 4.13%; -- Consolidated total assets of $997.8 million; -- Non-performing assets to total assets ratio of 1.88%; -- Net loans to deposits ratio of 81.7%; -- Tier I capital ratio of 17.0% and leverage ratio of 12.5%.
For the Year:
-- Net income attributable to the Company of $2.4 million; -- Basic and diluted earnings per share available to common shareholders of $0.31; -- Net interest margin of 4.28%; -- Gain on sales of loans of $8.6 million; -- Total FDIC assessment expense of $1.6 million, including special assessment of $481,000; -- Total deposits increased 42.8 million; -- Short-term borrowings and long-term debt decreased $77.7 million.
"This economic cycle continues to create a negative environment for our communities and thus for the financial services sector" commented Joseph L. Boling, Chairman and CEO of Middleburg Financial Corporation. "While we don't foresee an immediate broader economic recovery, we do see positive signs in the portfolio of Middleburg Bank. Our Balance Sheet continues to strengthen with the addition of $19.3 million in capital raised during the third quarter, as well as the continued growth in deposits of nearly $43 million, year to date. Additionally, our non performing assets, although higher than our traditional levels, do continue to track at levels significantly less than our peers." Mr. Boling continued, "We also used surplus cash generated from our deposit base during the third quarter to materially reduce the Company's wholesale funding levels."
Net Interest Income and Net Interest Margin
Interest and fees on loans was $12.0 million during the three months ended September 30, 2009, compared to $12.9 million during the three months ended June 30, 2009. Loan fees decreased $1.0 million when comparing the quarter ended September 30, 2009 to the quarter ended June 30, 2009, while interest on real estate loans increased $247,000 for the same periods. During the third quarter, loan production at Southern Trust Mortgage decreased 37.5% from the record high of $316.9 million at the end of the second quarter. Loans, net of the allowance for loan losses increased $410,000 at September 30, 2009 from the June 30, 2009 balance of $642.9 million. For the quarter ended September 30, 2009, tax equivalent yield on loans was 6.83% or 26 basis points lower than for the quarter ended June 30, 2009.
Interest income from the investment portfolio, which includes securities available for sale, federal funds sold and other interest bearing deposits, increased $8,000 from the three months ended June 30, 2009 to the three months ended September 30, 2009. The average balance of securities available for sale increased $3.0 million to $168.3 million during the three months ended September 30, 2009, when compared to the three months ended June 30, 2009. During the third quarter, the Company reinvested the proceeds of maturities and principal payments of securities into available for sale securities as part of its investment strategy. The average balance of federal funds sold decreased $2.1 million during the third quarter to $29.6 million. During the three months ended September 30, 2009, the Company invested excess cash into an interest-bearing deposit account at the Federal Reserve Bank of Richmond, as a precaution against the current economic uncertainties. For the quarter ended September 30, 2009, the tax equivalent yield on the securities available for sale decreased 15 basis points when compared to the quarter ended June 30, 2009, to 5.56%.
Total interest expense for the three months ended September 30, 2009 decreased $335,000 when compared to the three months ended June 30, 2009. Interest expense on short-term borrowings decreased $138,000 as a result of decreases in short-term interest rates, when comparing the three months ended September 30, 2009 to the three months ended June 30, 2009. Interest expense on long-term debt decreased $107,000 as the result of maturities during the third quarter, when compared the second quarter of 2009. The total average cost of interest bearing liabilities decreased 15 basis points to 2.35%, during the quarter ended September 30, 2009, when compared to the prior quarter. The costs of savings and interest-bearing demand deposits within certain categories was relatively unchanged, while increases in the average balances resulted in increases in interest expense of $88,000, when comparing the third quarter to the second quarter. Interest expense related to time deposits decreased $181,000 as a result of decreases in the average balances, when comparing the third quarter to the second quarter. The total average balance of interest bearing liabilities decreased $16.2 million during the quarter ended September 30, 2009.
The net interest margin decreased from 4.36% for the quarter ended June 30, 2009 to 4.13% for the quarter ended September 30, 2009. The decrease in the net interest margin was mostly attributable to the decreases in interest and fees on loans.
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 footnote (3) following the "Key Statistics" table below.
Asset Quality and Provision for Loan Losses
Provisions for loan losses were $964,000 for the three months ended September 30, 2009, compared to $1.6 million for the three months ended June 30, 2009. Although the Company experienced a decrease in portfolio loans during 2009, it has recognized certain loans for charge-off and given the level of problem loans, continued uncertainty in the economy, and the current nationwide credit crisis, the Company deemed it prudent to maintain its allowance for loan losses at Middleburg Bank at 1.34% of total loans. Southern Trust Mortgage recognized net charge-offs of $1.4 million related to several problem loans in its loan portfolio during 2009. The Company had specific allowances for loan losses related to these loans. As a result of these charge-offs and the corresponding decrease in the loan portfolio, the Company decreased the allowance at Southern Trust Mortgage to 16.7% from 26.6% of total portfolio loans at June 30, 2009.
Non-performing assets, including loans past due more that 90 days, decreased from $20.4 million or 1.96% of total assets at June 30, 2009 to $18.8 million or 1.88% of total assets at September 30, 2009. This change was mostly a result of the decrease in non-accrual loans held by Middleburg Bank. During the third quarter of 2009, non-accrual loans at Middleburg Bank decreased by $4.0 million to $8.8 million. Non-accrual loans at Southern Trust Mortgage were $202,000 at September 30, 2009. Total other real estate owned increased by $1.1 million to $8.5 million at September 30, 2009. Loans past due more than 90 days were $1.2 million at September 30, 2009. Given the current economic environment, it is anticipated there could be an increase in non-performing loans.
There were no loans past due more than 90 days at June 30, 2009 compared to $1.2 million at September 30, 2009. The Company realized $1.2 million in net charge-offs for the quarter ended September 30, 2009 versus $1.9 million for the prior quarter. Additional past dues and credit losses are expected due to the current economic forecast.
The following table reflects asset quality and provision for loan loss details for the Bank and Southern Trust Mortgage:
2009 2008 ----------------------- ---------- (Dollars in Sept. June March Dec. Sept. thousands) 30, 30, 31 31, 30, ---- ----- ----- ----- ------ Loans 90+ days past due Middleburg Bank $1,198 $ -- $ 31 $ 540 $2,857 Southern Trust Mortgage 8 -- -- 577 1,461 Non-accrual loans Middleburg Bank $8,806 $12,783 $6,738 $5,550 $2,966 Southern Trust Mortgage 202 202 2,150 1,340 3,725 Other Real Estate Owned and Other Repossessed Assets Middleburg Bank $5,002 $ 4,215 $5,001 $4,586 $4,753 Southern Trust Mortgage 3,535 3,240 3,366 3,026 2,114 Allowance for loan losses Middleburg Bank $8,748 $ 8,757 $7,922 $8,056 $7,884 Southern Trust Mortgage 479 673 1,785 1,989 1,997
Non-Interest Income
Including net losses on securities available for sale, consolidated non-interest income decreased by $2.1 million or 33.8% when comparing the quarter ended September 30, 2009 to the quarter ended June 30, 2009. Gains on the sale of loans decreased $971,000 to $2.4 million for the quarter ended September 30, 2009, when compared to the prior quarter. The Company recognized two asset-backed securities for other than temporary impairment during the quarter ended September 30, 2009. The recognized loss of $533,000 is included in net losses on securities available for sale.
Trust and investment advisory fees earned by Middleburg Trust Company ("MTC") and Middleburg Investment Advisors ("MIA") increased $21,000 when comparing the quarter ended September 30, 2009 to the quarter ended June 30, 2009. Trust and investment advisory fees are based primarily upon the market value of the accounts under administration/management. For the quarter ended September 30, 2009, MTC's consolidated fees increased 4.7% or $22,000 when compared to the quarter ended June 30, 2009. MIA's consolidated fees decreased by 0.4% or $1,000 when comparing the three months ended June 30, 2009 to the three months ended September 30, 2009. Total consolidated assets under administration by MTC and MIA were at $1.1 billion at September 30, 2009, an increase of $79.4 million or 7.6% from the $1.0 billion under administration at June 30, 2009. The increase is the result of growth in new accounts at MTC. The Bank holds a large portion of its investment portfolio in custody with MTC and is included in assets under administration.
Service charges on deposits decreased by $16,000 or 3.3% from the quarter ended June 30, 2009 to the quarter ended September 30, 2009. Fees related to overdrafts decreased $13,000 from the previous quarter.
Commissions on investment sales decreased $24,000 from the quarter ended June 30, 2009 to the quarter ended September 30, 2009.
Gains on the sale of loans were $2.4 million for the quarter ended September 30, 2009 and $3.4 million for the prior quarter. Southern Trust Mortgage closed $198.1 million in loans for the three months ended September 30, 2009 and $316.9 million in loans for the three months ended June 30, 2009.
Net losses on the sale of securities were $258,000 for the quarter ended September 30, 2009, including an other than temporary impairment loss of $533,000 on two asset-backed securities. Asset-backed securities were $2.8 million and reflected a market value of $583,000 at September 30, 2009. The Company will continue to monitor the credit quality of its securities portfolio for impairment. The Company sold $20.7 million in securities available for sale during the three months ended September 30, 2009 as part of its investment strategy of shortening the weighted average life of its investment portfolio and improve its liquidity.
Equity earnings in unconsolidated subsidiaries represent Southern Trust Mortgage's equity earnings from its unconsolidated mortgage affiliates. For the quarter ended September 30, 2009, the Company recognized income of $23,000 on these investments, compared to $92,000 for the previous quarter.
Income earned from the Bank's $11.3 million investment in Bank Owned Life Insurance (BOLI) was $123,000 and $130,000 for the quarters ended September 30, 2009 and June 30, 2009, respectively. The Company purchased $10.8 million in BOLI in 2004 and $485,000 in BOLI in 2007 to help subsidize increasing employee benefit costs and expenses related to the restructure of its supplemental retirement plans.
Other service charges, including fees from loans, mortgages held for sale and other service fees, decreased $152,000 or 33.8% when comparing the three months ended September 30, 2009 to the three months ended June 30, 2009. Safe deposit box fees decreased $41,000 from the quarter ended June 30, 2009 to the quarter ended September 30, 2009. Middleburg Bank collects the majority of its safe deposit box fees in the second quarter of each year. Brokerage fees provided by Southern Trust Mortgage decreased $109,000 during the three months ended September 30, 2009 when compared to the previous quarter. The decrease is related to the decreases in loan production.
Non-Interest Expense
Non-interest expense decreased $1.1 million or 8.6% from the quarter ended June 30, 2009 to the quarter ended September 30, 2009. The decrease was primarily due to decreases in salary and employee benefits and decreases in net occupancy expenses.
Salaries and employee benefit expenses decreased $745,000 or 9.7% when comparing the quarter ended June 30, 2009 to the quarter ended September 30, 2009. The decrease, when compared to the prior quarter, is impacted by decreased commissions paid to mortgage originators and corresponds to decreased loan production.
Net occupancy expense decreased $111,000 when comparing the quarter ended June 30, 2009 to the quarter ended September 30, 2009. The decrease is the result of decreases in depreciation of fixed assets and decreases in rental expense and property taxes. As growth efforts continue to progress, the Company anticipates higher levels of occupancy expense to be incurred.
Other taxes of $148,000 were relatively unchanged for the quarter ended September 30, 2009, when compared to the previous quarter. Other taxes includes franchise taxes paid by Middleburg Bank and Middleburg Trust Company and is based on total capital of each company, respectively, net of certain adjustments.
Computer operations decreased $75,000 from the quarter ended June 30, 2009 to the quarter ended September 30, 2009.
Advertising and marketing expense decreased $32,000 when comparing the quarter ended June 30, 2009 to the quarter ended September 30, 2009. The Company decreased the amount of advertising during the three months ended September 30, 2009, compared to the three months ended June 30, 2009.
Other operating expenses decreased $154,000 or 5.0% when comparing the quarter ended June 30, 2009 to the quarter ended September 30, 2009. The decrease is the result of a one time expense related to FDIC insurance which was recognized in the second quarter.
Total Consolidated Assets
Total consolidated assets were $997.8 million at September 30, 2009. This is a decrease of $46.8 million from $1,044.6 million at June 30, 2009. Cash and cash equivalents decreased $14.4 million. The Company focused on maintaining liquidity while simultaneously reducing risk by investing more of its excess cash in deposits with the Federal Reserve Bank as a safer alternative to federal funds sold. Cash and due from banks was $80.6 million at September 30, 2009 compared to $39.7 million at June 30, 2009. Federal funds sold decreased $54.6 million from June 30, 2009 to September 30, 2009.
The investment portfolio increased $5.7 million or 3.7% to $168.0 million at September 30, 2009 compared June 30, 2009. The Company continued its effort to shorten the weighted average life of its investment portfolio and improve its liquidity through sales and purchases of securities. At September 30, 2009, the tax equivalent yield on the investment portfolio was 5.56%, compared to 5.71% at June 30, 2009.
Loans, net of allowance for loan losses, increased by $410,000 when comparing June 30, 2009 to September 30, 2009. Considering the current interest rate and competitive market environment, the Company has been diligent about maintaining its credit quality and thereby cautious about the growth it has permitted in the loan portfolio.
Mortgages held for resale decreased 50.5% or $37.5 million to $36.8 million when comparing the September 30, 2009 balance to that at June 30, 2009. Production during the second quarter of 2009 was $198.1 million compared to $316.9 million during the second quarter of 2009. An agreement between Middleburg Bank and Southern Trust Mortgage provides for participation of mortgages held for resale as a funding source. Southern Trust Mortgage also has a long standing line of credit with a regional bank that is primarily used to fund its mortgages held for sale.
Premises and equipment, net of accumulated depreciation, increased $126,000 to $22.8 million at September 30, 2009 from $22.7 million at June 30, 2009.
Deposits and Other Borrowings
Total deposits, which include brokered deposits, decreased $22.5 million or 2.8% to $787.6 million at September 30, 2009 from $810.1 million at June 30, 2009. Brokered deposits decreased $19.9 million, as a result of maturities, to $87.6 million at September 30, 2009 from $107.5 million at June 30, 2009. Non-interest bearing demand deposits decreased $18.8 million to $105.6 million at September 30, 2009 when compared to June 30, 2009. Savings and interest-bearing demand deposits increased $33.0 million, from $347.6 million at June 30, 2009. In particular, interest checking increased $21.6 million when comparing September 30, 2009 to June 30, 2009. Money market and savings deposits increased to $11.4 million at September 30, 2009 from $96.3 million at June 30, 2009. Time deposits, excluding brokered certificates of deposit, decreased $17.4 million to $204.6 million at September 30, 2009.
Short term borrowings, which include Southern Trust Mortgage's line of credit with a regional bank, were $7.1 million at September 30, 2009 and $21.3 million at June 30, 2009.
Equity
Total shareholders' equity, which includes non-controlling interest as required by the Consolidation Topic of the FASB Accounting Standards Codification, at September 30, 2009 and June 30, 2009, was $125.2 million and $103.5 million, respectively. In the third quarter, the Company raised $19.3 million through the issuance of 1,908,598 shares of common stock. The Company expects to use the proceeds for general corporate purposes, including the redemption of all or a portion of our Preferred Stock and warrants issued to the U.S. Treasury as part of the Capital Purchase Program. Middleburg Financial Corporation's shareholders' equity at September 30, 2009 and June 30, 2009 was $122.4 million and $100.5 million, respectively. The book value available to common shareholders at September 30, 2009 was $14.61 per common share. Total common shares outstanding were 6,901,843 at September 30, 2009.
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, 2008, and other filings with the Securities and Exchange Commission.
Middleburg Financial Corporation is headquartered in Middleburg, Virginia and has two wholly owned subsidiaries, Middleburg Bank and Middleburg Investment Group, Inc. Middleburg Bank serves Loudoun, Fairfax, and Fauquier Counties in Virginia with eight financial service centers. Middleburg Investment Group owns Middleburg Trust Company and Middleburg Investment Advisors, Inc. Middleburg Trust Company are headquartered in Richmond, Virginia with a branch office in Middleburg and Williamsburg. Middleburg Investment Advisors, Inc. is an SEC registered investment advisor located in Alexandria, Virginia.
MIDDLEBURG FINANCIAL CORPORATION SUMMARY INCOME STATEMENT (Unaudited, dollars in thousands) For the Three Months Ended, Sept. June March Dec. Sept. 30, 30, 31, 31, 30, 2009 2009 2009 2008 2008 -------- -------- -------- -------- ------- INTEREST INCOME Interest and fees on loans $11,973 $12,870 $12,950 $12,036 $11,968 Interest on investment securities 1,998 1,990 2,041 2,004 2,049 TOTAL INTEREST INCOME $13,971 $14,860 $14,991 $14,040 $14,017 ------- ------- ------- ------- ------- INTEREST EXPENSE Interest on deposits 3,866 3,959 4,156 4,262 3,793 Interest on borrowings 749 991 1,151 1,315 1,658 TOTAL INTEREST EXPENSE $4,615 $4,950 $5,307 $5,577 $5,451 ------ ------ ------ ------ ------ NET INTEREST INCOME $9,356 $9,910 $9,684 $8,463 $8,566 PROVISION FOR LOAN LOSSES 964 1,583 1,037 572 318 NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES $8,392 $8,327 $8,647 $7,891 $8,248 ------ ------ ------ ------ ------ NON INTEREST INCOME Trust and investment advisory fee income $813 $792 $797 $828 $947 Service charges on deposits 474 490 455 440 504 Gain on the sale of loans 2,407 3,378 2,792 1,796 2,274 Net (losses) gains on securities available for sale (258) 661 230 130 (785) Commissions on investment sales 148 172 85 95 94 Equity earnings in unconsolidated subsidiaries 23 92 111 55 78 Bank owned life insurance 123 130 127 109 114 Other service charges, commissions and fees 298 450 374 356 558 Other operating income 29 (36) 16 45 192 TOTAL NON INTEREST INCOME $4,057 $6,129 $4,987 $3,854 $3,976 ------ ------ ------ ------ ------ NON INTEREST EXPENSE Salaries and employee benefits $6,925 $7,670 $7,260 $6,361 $5,964 Net occupancy expense of premises 1,455 1,566 1,384 1,500 1,502 Other taxes 148 145 145 161 161 Computer operations 285 360 301 299 268 Advertising and marketing 184 216 149 373 136 Other operating expenses 2,908 3,062 2,593 2,944 2,013 TOTAL NON INTEREST EXPENSE $11,905 $13,019 $11,832 $11,638 $10,044 ------- ------- ------- ------- ------- INCOME BEFORE TAXES $544 $1,437 $1,802 $107 $2,180 Income tax expense (benefit) (92) 21 140 21 654 --- -- --- -- --- NET INCOME (1) $636 $1,416 $1,662 $86 $1,526 LESS: NET (INCOME) LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST (26) (603) (678) 405 29 --- ---- ---- --- -- MIDDLEBURG FINANCIAL CORPORATION NET INCOME $610 $813 $984 $491 $1,555 ==== ==== ==== ==== ====== AMORTIZATION OF DISCOUNT ON WARRANTS 19 19 13 -- -- DIVIDEND ON PREFERRED STOCK 275 278 186 -- -- NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $316 $516 $785 $491 $1,555 ==== ==== ==== ==== ====== (1) On January 1, 2009, Middleburg Financial Corporation adopted Statement of Financial Accounting Standards No. 160 (SFAS No. 160), "Non-controlling Interests in Consolidated Financial Statements - an amendment of ARB No. 51," (Codified within ASC 810) the provisions of which, among others, requires that minority interests be renamed non-controlling interests and that a company present a consolidated net income (loss) measure that includes the amount attributable to such non-controlling interests for all periods presented. MIDDLEBURG FINANCIAL CORPORATION CONSOLIDATED BALANCE SHEET (Unaudited, dollars in thousands) Sept. June March Dec. Sept. 30, 30, 31, 31, 30, 2009 2009 2009 2008 2008 ---- ---- ---- ----- ---- Assets: Cash and due from banks $80,646 $39,721 $21,059 $23,980 $23,747 Interest-bearing balances in banks 2,214 2,958 1,725 2,400 560 Federal funds sold -- 54,600 24,500 9,000 5,100 Securities at fair value 168,049 162,355 165,921 181,312 155,859 Loans, net of allowance for loan losses 643,293 642,883 650,600 662,375 649,975 Mortgages held for resale 36,826 74,346 66,439 40,301 36,661 Bank premises and equipment, net 22,848 22,722 22,920 22,987 23,036 Other assets 43,901 44,975 45,099 42,836 42,351 ------ ------ ------ ------ ------ Total assets $997,777 $1,044,560 $998,263 $985,191 $937,289 ======== ========== ======== ======== ======== Liabilities: Deposits: Non-interest bearing demand deposits $105,648 $124,472 $113,130 $110,537 $116,467 Savings and interest-bearing demand deposits 380,527 347,561 329,042 300,006 305,061 Time deposits 301,453 338,100 331,075 334,239 273,683 ------- ------- ------- ------- ------- Total deposits $787,628 $810,133 $773,247 $744,782 $695,211 Securities sold under agreements to repurchase 19,808 19,505 18,989 22,678 25,389 Short term borrowings 7,112 21,278 15,340 40,944 38,526 Long-term debt 43,000 74,000 74,000 84,000 89,000 Trust preferred capital notes 5,155 5,155 5,155 5,155 5,155 Other liabilities (2) 9,853 10,981 10,833 10,027 8,256 ----- ------ ------ ------ ----- Total liabilities $872,556 $941,052 $897,564 $907,586 $861,537 Shareholders' Equity: (1) Middleburg Financial Corporation shareholders' equity: Preferred stock, par value $1,000.00 per share $21,622 $21,603 $21,584 $-- $-- Common stock, par value $2.50 per share 17,255 12,483 11,826 11,336 11,322 Capital surplus 42,703 28,310 26,083 23,967 23,885 Retained earnings 43,051 43,235 43,665 43,555 43,070 Accumulated other comprehensive income (loss), net (2,203) (5,156) (5,026) (3,181) (4,874) ------ ------ ------ ------ ------ Total Middleburg Financial Corporation shareholders' equity 122,428 100,475 98,132 75,677 73,403 Non-controlling interest 2,793 3,033 2,567 1,928 2,349 ----- ----- ----- ----- ----- Total shareholders' equity $125,221 $103,508 $100,699 $77,605 $75,752 -------- -------- -------- ------- ------- Total liabilities and shareholders' equity $997,777 $1,044,560 $998,263 $985,191 $937,289 ======== ========== ======== ======== ======== (1) On January 1, 2009, Middleburg Financial Corporation adopted Statement of Financial Accounting Standards No. 160 (SFAS No. 160), "Non-controlling Interests in Consolidated Financial Statements - an amendment of ARB No. 51," (Codified within ASC 810) the provisions of which, among others, requires that minority interests be renamed non-controlling interests and that a company present such non-controlling interests as equity for all periods presented. (2) Other liabilities include the issued and outstanding preferred stock of Southern Trust Mortgage, LLC owned by the non-controlling interest, in accordance with ASC 810. MIDDLEBURG FINANCIAL CORPORATION KEY STATISTICS (Unaudited, dollars in thousands, except per share data) Sept. June March Dec. Sept. 30, 30, 31, 31, 30, 2009 2009 2009 2008 2008 ---- ---- ---- ----- ---- $610 $813 $984 $491 $1,555 Net Income Earnings per share, basic $0.05 $0.11 $0.17 $0.11 $0.34 Earnings per share, diluted $0.05 $0.11 $0.17 $0.11 $0.34 Return on average total assets (1) 0.29% 0.19% 0.35% 0.21% 0.66% Return on average total equity (1) 2.51% 1.88% 3.84% 2.66% 8.42% Dividend payout ratio, net of preferred dividends 200.00% 172.73% 111.76% 0.00% 55.88% Fee revenue as a percent of total revenue(2) 23.60% 26.90% 24.09% 20.96% 25.35% Net interest margin(3) 4.13% 4.36% 4.45% 4.00% 4.09% Yield on average earning assets 6.08% 6.46% 6.79% 6.53% 6.62% Yield on average interest-bearing liabilities 2.35% 2.50% 2.73% 2.94% 2.94% Net interest spread 3.73% 3.96% 4.06% 3.59% 3.67% Non-interest income to average assets(2) 1.71% 2.15% 1.93% 1.56% 2.03% Non-interest expense to average assets 4.71% 5.12% 4.80% 4.71% 4.27% Efficiency ratio(4) 84.26% 82.25% 79.50% 89.21% 73.64% (1) Gains (losses) on securities are treated as one-time occurrences and have not been annualized in the calculations of return. (2) Excludes gains and losses on securities available for sale. (3) 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%. For the quarters ended September 30, 2009, June 30, 2009, March 31, 2009, December 31, 2008 and September 30, 2008 net interest income on a tax equivalent basis was $9.8 million, $10.3 million, $10.1 million, $8.8 million and $8.8 million, respectively. See the table below for a reconciliation of net interest income to tax equivalent net interest income. 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. (4) The efficiency ratio is not a measurement under accounting principles generally accepted in the United States. It is calculated by dividing non interest expense by the sum of tax equivalent net interest income and non-interest income excluding gains and losses on the investment portfolio. The tax rate utilized is 34%. For the quarters ended September 30, 2009, June 30, 2009, March 31, 2009, December 31, 2008 and September 30, 2008, tax equivalent net interest income was $9.8 million, $10.3 million, $10.1 million, $8.8 million and $8.8 million, respectively. See the table below for a reconciliation of net interest income to tax equivalent net interest income. Total non- interest income, excluding gains and losses on the investment portfolio, for the quarters ended September 30, 2009, June 30, 2009, March 31, 2009, December 31, 2008 and September 30, 2008, was $4.3 million, $5.5 million, $4.8 million, $3.7 million and $4.8 million, respectively. The Company calculates this ratio in order to evaluate its overhead structure or how effectively it is operating. An increase in the ratio from period to period indicates the Company is losing a larger percentage of its income to expenses. The Company believes that the efficiency ratio is a reasonable measure of profitability. MIDDLEBURG FINANCIAL CORPORATION SELECTED FINANCIAL DATA BY QUARTER (Unaudited, dollars in thousands, except per share data) Sept. June March Dec. Sept. 30, 30, 31, 31, 30, 2009 2009 2009 2008 2008 ---- ---- ---- ----- ---- BALANCE SHEET RATIOS Net loans to total deposits 81.67% 79.36% 84.14% 88.94% 93.49% Average interest-earning assets to average-interest bearing liabilities 120.32% 119.05% 116.57% 116.07% 116.73% PER SHARE DATA(1) Dividends $0.10 $0.19 $0.19 $0.00 $0.19 Book value $14.61 $15.80 $16.14 $16.69 $16.21 Tangible book value $13.65 $14.47 $14.74 $15.21 $14.70 SHARE PRICE DATA Closing price $13.05 $13.76 $11.47 $14.59 $17.49 Diluted earnings multiple(2) 0.67 0.66 0.53 0.88 1.08 Book value multiple(3) 0.89 0.87 0.55 0.87 1.08 COMMON STOCK DATA Outstanding shares at end of period 6,901,843 4,993,245 4,730,317 4,534,317 4,528,817 Weighted average shares outstanding 5,208,624 4,675,849 4,536,495 4,528,108 4,528,476 Weighted average shares outstanding, diluted 6,267,267 4,822,365 4,538,598 4,545,468 4,551,843 CAPITAL RATIOS Total parent equity to total assets 12.27% 9.62% 9.83% 7.68% 7.83% Total risk based capital ratio 18.22% 14.73% 14.51% 11.49% 11.77% Tier 1 risk based capital ratio 16.97% 13.54% 13.28% 10.24% 10.52% Leverage ratio 12.50% 10.58% 10.52% 8.40% 8.51% CREDIT QUALITY Net charge-offs to average loans 0.17% 0.26% 0.19% 0.11% 0.03% Total non-performing loans to total loans 1.57% 1.99% 1.35% 1.02% 1.01% Total non-performing assets to total assets 1.88% 1.96% 1.73% 1.47% 1.45% Non-accrual loans to: total loans 1.38% 1.99% 1.35% 1.02% 1.01% total assets 0.90% 1.24% 0.89% 0.70% 0.71% Allowance for loan losses to: total loans 1.41% 1.45% 1.48% 1.40% 1.40% Non-performing assets 49.21% 46.14% 56.16% 69.27% 72.56% Non-accrual loans 102.43% 72.62% 109.21% 145.79% 147.03% NON-PERFORMING ASSETS: Loans delinquent over 90 days $1,206 $-- $31 $1,117 $4,318 Non-accrual loans 9,008 12,985 8,888 6,890 6,691 Other real estate owned and repossessed assets 8,537 7,455 8,367 7,612 6,867 NET LOAN CHARGE-OFFS (RECOVERIES): Loans charged off $1,216 $1,866 $1,369 $794 $239 (Recoveries) (49) (6) (19) (16) (7) Net charge-offs 1,167 1,860 1,350 778 232 Provision for loan losses $964 $1,583 $1,037 $572 $318 ALLOWANCE FOR LOAN LOSS SUMMARY Balance at the beginning of period $9,430 $9,707 $10,020 $9,777 $9,691 Provision 964 1,583 1,037 572 318 Net charge-offs (recoveries) 1,167 1,860 1,350 329 232 Balance at the end of period $9,227 $9,430 $9,707 $10,020 $9,777 (1) Based on capital available to common shareholders only. (2) The diluted earnings multiple (or price earnings ratio) is calculated by dividing the period's closing market price per share by total equity per weighted average shares outstanding, diluted 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. (3) 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. Middleburg Financial Corporation Average Balances, Income and Expenses, Yields and Rates Three Months Ended September 30, 2009 ------------------ Average Income/ Yield/ (Unaudited, dollars in Balance Expense Rate(3) thousands) ------- ------- ------ Assets : Securities: Taxable $102,120 $1,187 4.61% Tax-exempt (1) (2) 66,146 1,172 7.03% ------ ----- Total securities $168,266 $2,359 5.56% Loans Taxable $695,738 $11,974 6.83% Tax-exempt (1) -- -- 0.00% Total loans $695,738 $11,974 6.83% Federal funds sold 29,640 15 0.20% Interest bearing deposits in other financial institutions 43,478 21 0.19% ------ -- Total earning assets $937,122 $14,369 6.08% Less: allowances for credit losses (9,111) Total nonearning assets 85.368 ------ Total assets $1,013,379 ========== Liabilities: Interest-bearing deposits: Checking $263,674 $834 1.25% Regular savings 58,624 195 1.32% Money market savings 45,887 121 1.05% Time deposits: $100,000 and over 137,241 1,073 3.10% Under $100,000 182,109 1,643 3.58% ------- ----- Total interest-bearing deposits $687,535 $3,866 2.23% Short-term borrowings 2,787 52 7.40% Securities sold under agreements to repurchase 20,609 7 0.13% Long-term debt 67,938 690 4.03% ------ --- Total interest-bearing liabilities $778,869 $4,615 2.35% Non-interest bearing liabilities Demand Deposits 107,092 Other liabilities 10,782 ------ Total liabilities $896,743 Non-controlling interest 2,909 Shareholders' equity 113,727 Total liabilities and shareholders' Equity $1,013,379 ========== Net interest income $9,754 ====== Interest rate spread 3.73% Interest expense as a percent of average earning assets 1.95% Net interest margin 4.13% (1) Income and yields are reported on tax equivalent basis assuming a federal tax rate of 34%. (2) Income and yields include dividends on preferred bonds which are 70% excludable for tax purposes. (3) All yields and rates have been annualized on a 365 day year. Middleburg Financial Corporation Average Balances, Income and Expenses, Yields and Rates Three Months Ended June 30, 2009 ------------- Average Income/ Yield/ (Unaudited, dollars in Balance Expense Rate(3) thousands) ------- ------- ----- Assets : Securities: Taxable $100,118 $1,221 4.89% Tax-exempt (1) (2) 65,100 1,131 6.97% ------ ----- Total securities $165,218 $2,351 5.71% Loans Taxable $727,690 $12,870 7.09% Tax-exempt (1) 1 -- 0.00% - Total loans $727,691 $12,870 7.09% Federal funds sold 31,720 14 0.18% Interest bearing deposits in other financial institutions 21,876 9 0.17% ------ - Total earning assets $946,505 $15,244 6.46% Less: allowances for credit losses (8,499) Total nonearning assets 81,352 ------ Total assets $1,019,358 ========== Liabilities: Interest-bearing deposits: Checking $247,303 $783 1.27% Regular savings 54,980 176 1.28% Money market savings 39,190 103 1.05% Time deposits: $100,000 and over 132,288 1,046 3.17% Under $100,000 200,553 1,851 3.70% ------- ----- Total interest-bearing deposits $674,314 $3,959 2.35% Short-term borrowings 21,003 191 3.65% Securities sold under agreements to repurchase 20,559 3 0.06% Long-term debt 79,155 797 4.04% ------ --- Total interest-bearing liabilities $795,031 $4,950 2.50% Non-interest bearing liabilities Demand Deposits 110,153 Other liabilities 10,828 ------ Total liabilities $916,012 Non-controlling interest 2,851 Shareholders' equity 100,495 Total liabilities and shareholders' Equity $1,019,358 ========== Net interest income $10,295 ======= Interest rate spread 3.96% Interest expense as a percent of average earning assets 2.10% Net interest margin 4.36% (1) Income and yields are reported on tax equivalent basis assuming a federal tax rate of 34%. (2) Income and yields include dividends on preferred bonds which are 70% excludable for tax purposes. (3) All yields and rates have been annualized on a 365 day year. Middleburg Financial Corporation Average Balances, Income and Expenses, Yields and Rates Three Months Ended September 30, 2009 ---- Average Income/ Yield/ (Unaudited, dollars in Balance Expense Rate(3) thousands) ------- ------- ------- Assets : Securities: Taxable $102,120 $1,187 4.61% Tax-exempt (1) (2) 66,146 1,172 7.03% ------ ----- Total securities $168,266 $2,359 5.56% Loans Taxable $695,738 $11,974 6.83% Tax-exempt (1) -- -- 0.00% Total loans $695,738 $11,974 6.83% Federal funds sold 29,640 15 0.20% Interest bearing deposits in other financial institutions 43,478 21 0.19% ------ -- Total earning assets $937,122 $14,369 6.08% Less: allowances for credit losses (9,111) Total nonearning assets 85.368 ------ Total assets $1,013,379 ========== Liabilities: Interest-bearing deposits: Checking $263,674 $834 1.25% Regular savings 58,624 195 1.32% Money market savings 45,887 121 1.05% Time deposits: $100,000 and over 137,241 1,073 3.10% Under $100,000 182,109 1,643 3.58% ------- ----- Total interest-bearing deposits $687,535 $3,866 2.23% Short-term borrowings 2,787 52 7.40% Securities sold under agreements to repurchase 20,609 7 0.13% Long-term debt 67,938 690 4.03% Federal Funds Purchased -- -- 0.00% Total interest-bearing liabilities $778,869 $4,615 2.35% Non-interest bearing liabilities Demand Deposits 107,092 Other liabilities 10,782 ------ Total liabilities $896,743 Non-controlling interest 2,909 Shareholders' equity 113,727 Total liabilities and shareholders' Equity $1,013,379 ========== Net interest income $9,754 ====== Interest rate spread 3.73% Interest expense as a percent of average earning assets 1.95% Net interest margin 4.13% (1) Income and yields are reported on tax equivalent basis assuming a federal tax rate of 34%. (2) Income and yields include dividends on preferred bonds which are 70% excludable for tax purposes. (3) All yields and rates have been annualized on a 365 day year. 2008 ---- Average Income/ Yield/ (Unaudited, dollars in Balance Expense Rate(3) thousands) ------- ------- ---- Assets : Securities: Taxable $108,949 $1,422 5.19% Tax-exempt (1) (2) 47,244 831 7.00% ------ --- Total securities $156,193 $2,253 5.74% Loans Taxable $695,866 $11,967 6.84% Tax-exempt (1) 7 -- 0.00% - Total loans $695,873 $11,967 6.84% Federal funds sold 6,903 34 1.96% Interest bearing deposits in other financial institutions 3,648 45 4.91% ----- -- Total earning assets $862,617 $14,299 6.59% Less: allowances for credit losses (9,805) Total nonearning assets 82,080 ------ Total assets $934,892 ======== Liabilities: Interest-bearing deposits: Checking $210,527 $1,116 2.11% Regular savings 52,514 210 1.59% Money market savings 39,639 124 1.24% Time deposits: $100,000 and over 122,972 1,082 3.50% Under $100,000 131,979 1,261 3.80% ------- ----- Total interest-bearing deposits $557,631 $3,793 2.71% Short-term borrowings 45,881 413 3.58% Securities sold under agreements to repurchase 30,533 137 1.79% Long-term debt 101,981 1,105 4.31% Federal Funds Purchased 474 3 2.52% --- - Total interest-bearing liabilities $736,500 $5,451 2.94% Non-interest bearing liabilities Demand Deposits 114,456 Other liabilities 7,702 ----- Total liabilities $858,658 Non-controlling interest 2,771 Shareholders' equity 73,463 Total liabilities and shareholders' Equity $934,892 ======== Net interest income $8,848 ====== Interest rate spread 3.65% Interest expense as a percent of average earning assets 2.51% Net interest margin 4.03% (1) Income and yields are reported on tax equivalent basis assuming a federal tax rate of 34%. (2) Income and yields include dividends on preferred bonds which are 70% excludable for tax purposes. (3) All yields and rates have been annualized on a 365 day year. MIDDLEBURG FINANCIAL CORPORATION RECONCILIATIONS OF NET INTEREST INCOME TO TAX EQUIVALENT NET INTEREST INCOME For the Year-to-Date Period Ended --------------------------------- Sept. June March Dec. Sept. 30, 30, 31, 31, 30, 2009 2009 2009 2008 2008 ---- ---- ---- ----- ---- (Unaudited, dollars in thousands) GAAP measures: Interest and fees on loans $37,793 $25,820 $12,950 $48,088 $36,052 Interest and dividends on securities and other investments 6,029 4,031 2,041 7,834 5,830 Interest on deposits (11,981) (8,115) (4,156) (15,492) (11,230) Interest on borrowings (2,891) (2,142) (1,151) (7,227) (5,912) ------- ------- ------ ------ ------ Total net interest income $28,950 $19,594 $9,684 $33,203 $24,740 Non-GAAP measures: Tax benefit realized on non-taxable loans $-- $-- $-- $1 $-- Tax benefit realized on non-taxable municipal securities 1,158 760 375 1,124 787 ----- --- --- ----- --- Total tax benefit realized on non-taxable interest income $1,158 $760 $375 $1,125 $787 ------ ---- ---- ------ ---- Total tax equivalent net interest income $30,108 $20,354 $10,059 $34,328 $25,527 ======= ======= ======= ======= ======= For the Quarter-to-Date Period Ended --------------------------------- Sept. June March Dec. Sept. 30, 30, 31, 31, 30, 2009 2009 2009 2008 2008 ---- ---- ---- ----- ---- (Unaudited, dollars in thousands) GAAP measures: Interest and fees on loans $11,973 $12,870 $12,950 $12,036 $11,967 Interest and dividends on securities and other investments 1,998 1,990 2,041 2,004 2,049 Interest on deposits (3,866) (3,959) (4,156) (4,263) (3,793) Interest on borrowings (749) (991) (1,151) (1,314) (1,657) ---- ---- ------ ------ ------ Total net interest income $9,356 $9,910 $9,684 $8,463 $8,566 Non-GAAP measures: Tax benefit realized on non-taxable loans $-- $-- $-- $-- $-- Tax benefit realized on non-taxable municipal securities 398 385 375 338 282 --- --- --- --- --- Total tax benefit realized on non-taxable interest income $398 $385 $375 $338 $282 ---- ---- ---- ---- ---- Total tax equivalent net interest income $9,754 $10,295 $10,059 $8,801 $8,848 ====== ======= ======= ====== ======
SOURCE Middleburg Financial Corporation