MIDDLEBURG FINANCIAL CORP. 
By MIDDLEBURG, Va., Oct. 28 /PRNewswire-FirstCall/ --
Third Quarter and Year-to-Date 2010 Highlights:
-- Net loss of $5.8 million for the quarter;
-- Net loss of $4.3 million for the nine month period;
-- Diluted loss per share of $0.83 for the quarter;
-- Net interest margin of 3.27% for the quarter and 3.61% for the year;
-- Total assets grew by $50 million or 4.7% for the quarter; assets grew by
$135 million or 13.8% for the year;
-- Total loans increased by $11.1 million or 1.7% for the year in a
challenging environment;
-- Strong mortgage loan originations of $217.7 million in the third quarter
and $555 million for the year;
-- Robust deposit growth of $38 million or 4.4% for the quarter; increase
in deposits of $91.3 million or 11.3% for the year;
-- Aggressive credit actions resulted in a $9.1 million provision for loan
losses for the quarter; and
-- Capital ratios continue to be strong: Total Risk-Based Capital Ratio of
13.4%, Tier 1 Capital Ratio of 12.2%, and a Tier 1 Leverage Ratio of
9.1% at September 30, 2010.
Middleburg Financial Corporation (the "Company") (Nasdaq: MBRG) announced today that it had taken nearly $12 million in pre-tax charges to earnings, which resulted in a loss of $5.8 million for the quarter ending September 30, 2010. The charges reflect the Company's proactive approach to addressing problem loans amid the continued financial downturn as well as other charges related to the Company's on-going business. Additionally, the Company announced that it would reduce its quarterly dividend to 5 cents per share from the current level of 10 cents per share.
"We are moving aggressively from a position of financial strength to deal with our problem loans," said Gary R. Shook, president and CEO of Middleburg Financial Corporation. "We increased the reserve for loan losses to reflect an increase in non-performing loans during the third quarter, recognized other-than-temporary impairment on certain trust preferred securities in the investment portfolio, wrote down the carrying values of two properties that are no longer sites for future branch development, and wrote down the carrying values of several of our foreclosed properties. Additionally, charges were taken to reflect a 10% reduction in the Company's payroll and termination of the defined benefit pension plan. These necessary charges will allow the Company to move ahead in a substantive way and are reflective of our desire to address the changes to the industry resulting from the protracted economic downturn as well as anticipated expenses related to new regulations stemming from the passage of Dodd-Frank," added Mr. Shook.
Regarding the dividend, Mr. Shook said, "The decision to reduce the dividend was a difficult one. While we understand how important these dividends are to many of our shareholders, the Board believes this is the prudent course of action at this time." Mr. Shook continued, "We will review the status of the dividend in the third quarter of 2011 in light of the Board's long term strategy of a 40% payout of earnings. Further, expected retained earnings over the coming quarters will recover much of the capital expended by taking these charges."
Net Interest Income and Net Interest Margin
Net interest income was $8.0 million during the three months ended September 30, 2010; a decrease of 6% compared to the quarter ended June 30, 2010. Average earning assets increased by 5.2% during the quarter. The average yield on earning assets was 4.74% for the quarter ended September 30, 2010 while the average cost of interest bearing liabilities was 1.73%, representing decreases of 48 basis points and 9 basis points, respectively, from the previous quarter. The net interest margin for the three months ended September 30, 2010 was 3.27%, compared to 3.67% for the previous quarter, a decline of 40 basis points during the period. While the cost-of-funds did decrease during the third quarter, the decrease was not sufficient to offset the decline in yields of earning assets. The decline in yields on earning assets in the third quarter reflected increased runoff of loans in the permanent loan portfolio as well as an increase in prepayments of mortgage securities in the securities portfolio, in conjunction with the low interest rate environment in the third quarter. Growth in the permanent loan portfolio was flat for the quarter as higher yielding loans that paid off were replaced with lower yielding loans. Balances for the securities portfolio as well as the balance of mortgage loans held-for-sale increased during the quarter. Since the increase in earning assets was primarily due to lower yielding securities and residential mortgage loans, the aggregate yield for earning assets declined during the quarter. On the funding side, costs for wholesale borrowings declined 99 basis points during the quarter, as we refinanced maturing FHLB advances. On the other hand, costs for retail deposits decreased only 4 basis points during the quarter. Total retail deposit growth during the quarter was driven by increases in interest bearing deposits, with the greatest increase occurring in time deposits.
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.
Asset Quality and Provision for Loan Losses
$9.1 million was added to the loan loss reserve to reflect an increase in non-performing loans and $3.3 million of loans were charged off during the quarter. According to Mr. Shook, "We have been working with these clients for some time and they continue to feel the pressures of this economic environment. We felt it was important to preserve our options as we move these relationships through the collection process." The Company continues to see improvement in delinquencies in its loan portfolio - the 90 day delinquency rate was 0.00% ($7,000) as of the end of the third quarter vs. 0.95% ($6.2 million) at the end of the previous quarter.
The Company increased its allowance for loan and lease losses ("ALLL") by $6.7 million or 72.8% during the first nine months of 2010. The ALLL at September 30, 2010 was $15.9 million representing 2.42% of total portfolio loans outstanding versus 1.43% of total portfolio loans at December 31, 2009.
Non-performing assets increased from $18.1 million or 1.9% of total assets at December 31, 2009 to $38.5 million or 3.5% of total assets as of September 30, 2010. The increase was primarily due to the reclassification of two loans to non-accrual status during the quarter.
Non-Interest Income
Non-interest income increased by $2.8 million or 70.0% to $6.9 million when comparing the quarter ended September 30, 2010 to the quarter ended September 30, 2009. The strong non-interest income, driven by the Company's mortgage operations this year has caused total revenues, defined by the sum of net interest income and non-interest income, to increase in each linked quarter of 2010, despite pressures on the net interest margin. This increase reflects the benefits of the Company's diversified business model whereby strong non-interest income is able to supplement net interest income in periods of declining net interest margins.
Trust and Investment advisory service fees earned by Middleburg Trust Company ("MTC") and Middleburg Investment Advisors ("MIA") were flat for the quarter ended September 30, 2010 compared to the quarter ended September 30, 2009. Southern Trust Mortgage, the Company's majority owned subsidiary, originated $217.7 million in mortgage loans during the quarter ended September 30, 2010 compared to $188.7 million originated during the previous quarter - an increase of 15.3% when comparing linked quarters - and $198.1 million originated during the quarter ended September 30, 2009 - an increase of 9.9% when comparing calendar quarters. Mortgage loans originated for the nine months ended September 30, 2010 were $555.4 million versus $785.8 million for the nine months ended September 30, 2009. Gains on mortgage loan sales increased by 34.2% when comparing the quarter ended September 30, 2010 to the previous quarter. Gains on mortgage loan sales increased by 113.8% when comparing the quarter ended September 30, 2010 to the quarter ended September 30, 2009. Additionally, fees related to mortgage loan sales increased $282,000 or 144.6% to $477,000 from the quarter ended September 30, 2009 to the quarter ended September 30, 2010.
The revenues and expenses of Southern Trust Mortgage for the three and nine month periods ended September 30, 2010 are reflected in the Company's financial statements on a consolidated basis following generally accepted accounting principles in the United States. The outstanding equity interest not held by the Company is reported on the Company's balance sheet as "Non-controlling interest in consolidated subsidiary" and the earnings or loss attributable to the non-controlling interest is reported on the Company's statement of operations as "Net (income) / loss attributable to non-controlling interest."
Trust and investment advisory fees are based primarily upon the market value of the accounts under administration. Total consolidated assets under administration by MTC and MIA were at $1.2 billion at September 30, 2010, an increase of 9.1% relative to September 30, 2009. MTC's assets under administration were $905.6 million at September 30, 2010 versus $730.7 million at September 30, 2009 representing an increase of 23.9%. MIA's assets under administration were $325.2 million at September 30, 2010 versus $389.6 million at September 30, 2009 representing a decrease of 16.5%.
Net securities losses were $438,000 during the quarter ended September 30, 2010 compared to net securities losses of $258,000 during the quarter ended September 30, 2009. The net securities losses during the quarter ended September 30, 2010 included $726,000 of other than temporary impairment losses related to three trust preferred securities identified as impaired under generally accepted accounting principles.
Non-Interest Expense
Non-interest expense in the third quarter of 2010 increased $2.5 million, up 20.8% relative to the quarter ended September 30, 2009. The increase was primarily the result of the following charges taken during the third quarter:
-- $1.4 million to reflect an adjustment to the carrying value of two
branch sites that had been previously held for future expansion and are
now being readied for sale. The Company will actively market these
properties to potential buyers in the fourth quarter.
-- $481,000 in adjustments to Other Real Estate Owned.
-- $530,000 restructuring charge related to workforce downsizing. The
restructuring is expected to reduce payroll expenses by approximately
10%.
-- $50,000 associated with the termination of the Company's defined benefit
pension plan. The Company froze the plan during 2008 and suspended
contributions during that year.
Salaries and employee benefit expenses increased by $539,000 in the third quarter of 2010 relative to the quarter ended September 30, 2009. This increase is primarily due to higher commission expense associated with the mortgage company. The Company anticipates that these expenses will decrease in future quarters as the benefits of the restructuring program are realized.
Total Consolidated Assets
Total assets at September 30, 2010 were $1.1 billion, an increase of $135.0 million or 13.8% over December 31, 2009.
Growth in total portfolio loans was flat for the third quarter and increased 1.7% for the year in a challenging lending environment characterized by weak borrower demand for new loans coupled with increased refinancing of existing credit relationships. The investment portfolio grew by $41.3 million in the third quarter and was $242.1 million at September 30, 2010. The securities portfolio increased $69.4 million or 40.2% for the entire year. Mortgages held for resale increased $15 million in the third quarter, reflective of the strong pace for mortgage originations. Cash balances and deposits at other banks decreased by 3.1% in the third quarter.
Deposits and Other Borrowings
The Company continues to experience strong deposit growth with total deposits increasing by $38 million or 4.4% for the third quarter, driven by growth in interest checking, savings and certificates of deposit. Total deposits increased by $91.3 million or 11.3% for the year. Brokered deposits, including CDARS program funds, were $116.1 million at September 30, 2010, up $39.9 million or 52.4% from December 31, 2009. FHLB advances were $52.9 million at September 30, 2010, up $17.9 million from December 31, 2009. We refinanced $35 million in maturing FHLB advances in the third quarter into longer term advances at lower rates.
Equity
Total shareholders' equity at September 30, 2010 was $101.4 million, compared to shareholders' equity of $103.4 million as of December 31, 2009. Retained earnings at September 30, 2010 were $36.4 million compared to $42.7 million at December 31, 2009. The book value of the Company's common stock at September 30, 2010 was $14.22 per share.
As the following table illustrates, the Company exceeds the regulatory "well-capitalized" levels in all categories after accounting for the charges:
Regulatory Capital Ratios
Middleburg Financial Corporation
September 30, 2010
Regulatory Percent
Middleburg Well Exceeding
Financial Capitalized Well
Corporation Levels Capitalized
----------- ------ -----------
Tier 1 Leverage Ratio 9.1% 5.0% 4.1%
Tier 1 Risk Based Capital
Ratio 12.2% 6.0% 6.2%
Total Risk Based Capital
Ratio (1) 13.4% 10.0% 3.4%
(1) Current regulatory guidelines for calculating the Total Risk Based Capital ratio impose a limit of 1.25% of risk-adjusted assets on the amount of the Company's allowance for loan losses balance that can be included in Tier 2 capital. Under these guidelines, the Company excluded approximately $5.7 million from Tier 2 capital at September 30, 2010 in the above calculations. If the disallowed allowance for loan losses amount were included, the Company's Total Risk Based Capital ratio at September 30, 2010 would be 14.1%.
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, 2009, and other filings with the Securities and Exchange Commission.
About Middleburg Financial Corporation
Middleburg Financial Corporation is headquartered in Middleburg, Virginia and has two wholly owned subsidiaries, Middleburg Bank and Middleburg Investment Group, Inc. Middleburg Bank serves communities in Virginia with financial centers in Ashburn, Gainesville, Leesburg, Marshall, Middleburg, Purcellville, Reston, Warrenton and Williamsburg. Middleburg Investment Group owns Middleburg Trust Company and Middleburg Investment Advisors, Inc. Middleburg Trust Company is headquartered in Richmond, Virginia with offices in Williamsburg and Middleburg. Middleburg Investment Advisors, Inc. is an SEC registered investment advisor located in Alexandria, Virginia. 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 and Subsidiaries
Consolidated Statements of Operations
(In Thousands, Except Per Share Data)
Unaudited
---------
For the Nine Months
Ended September 30,
2010 2009
---- ----
Interest and Dividend Income
Interest and fees on loans $30,661 $37,793
Interest on securities available for
sale
Taxable 3,194 3,622
Exempt from federal income taxes 1,914 2,248
Dividends 75 64
Interest on federal funds sold and
other 99 95
--- ---
Total interest and dividend income $35,943 $43,822
------- -------
Interest Expense
Interest on deposits $9,410 $11,981
Interest on securities sold under
agreements to repurchase 144 32
Interest on short-term borrowings 245 518
Interest on long-term debt 1,298 2,341
----- -----
Total interest expense $11,097 $14,872
------- -------
Net interest income $24,846 $28,950
Provision for loan losses 11,350 3,584
------ -----
Net interest income after provision
for loan losses $13,496 $25,366
------- -------
Other Income
Trust and investment advisory fee
income $2,497 $2,402
Service charges on deposit accounts 1,396 1,419
Net gains (losses) on securities
available for sale 757 1,345
Total other-than-temporary impairment
loss on securities (1,091) (2,128)
Portion of loss recognized in other
comprehensive income (117) (1,416)
---- ------
Net other-than-temporary impairment
loss (974) (712)
Commissions on investment sales 453 405
Bank owned life insurance 391 380
Gain on loans held for sale 11,621 8,577
Fees on loans held for sale 1,311 722
Other service charges, commissions and
fees 353 $400
Other operating income 221 235
--- ---
Total other income $18,026 $15,173
------- -------
Other Expense
Salaries and employee benefits $21,845 $21,855
Net occupancy expense of premises 4,651 4,404
Other taxes 598 438
Advertising 685 549
Computer operations 1,008 946
Other real estate owned 1,171 2,163
Audits and examinations 373 448
Legal fees 401 442
FDIC insurance 1,521 $1,567
Other operating expenses 6,343 3,944
----- -----
Total other expense $38,596 $36,756
------- -------
Income /(Loss) before income taxes $(7,074) $3,783
Income tax expense / (benefit) (3,135) 69
Net income / (Loss) $(3,939) $3,714
Less: Net (income) /loss attributable
to non-controlling interest (311) $(1,307)
Net income /(loss) attributable to
Middleburg Financial Corporation $(4,250) $2,407
======= ======
Amortization of discount on preferred
stock - 26
Dividend on preferred stock - 733
Net income /(loss) available to common
shareholders $(4,250) $1,648
======= ======
Net income /(loss) per common share,
basic $(0.61) $0.32
Net income /(loss) per common share,
diluted $(0.61) $0.32
Dividends common per share $0.30 $0.48
Unaudited
---------
For the Three Months
Ended September 30,
2010 2009
---- ----
Interest and Dividend Income
Interest and fees on loans $9,832 $11,973
Interest on securities available for
sale
Taxable 1,166 1,159
Exempt from federal income taxes 621 774
Dividends 32 28
Interest on federal funds sold and
other 36 37
---
Total interest and dividend income $11,687 $13,971
------- -------
Interest Expense
Interest on deposits $3,160 $3,866
Interest on securities sold under
agreements to repurchase 63 7
Interest on short-term borrowings 134 51
Interest on long-term debt 372 691
---
Total interest expense $3,729 $4,615
------ ------
Net interest income $7,958 $9,356
Provision for loan losses 9,130 964
----- ---
Net interest income after provision
for loan losses $(1,172) $8,392
------- ------
Other Income
Trust and investment advisory fee
income $807 $813
Service charges on deposit accounts 487 474
Net gains (losses) on securities
available for sale 288 275
Total other-than-temporary impairment
loss on securities (791) (533)
Portion of loss recognized in other
comprehensive income (65) -
--- ---
Net other-than-temporary impairment
loss (726) (533)
Commissions on investment sales 142 148
Bank owned life insurance 136 123
Gain on loans held for sale 5,147 2,407
Fees on loans held for sale 477 195
Other service charges, commissions and
fees 97 103
Other operating income 42 52
---
Total other income $6,897 $4,057
------ ------
Other Expense
Salaries and employee benefits $7,464 $6,925
Net occupancy expense of premises 1,557 1,454
Other taxes 201 148
Advertising 257 184
Computer operations 340 285
Other real estate owned 666 703
Audits and examinations 96 120
Legal fees 96 144
FDIC insurance 368 510
Other operating expenses 3,342 1,432
-----
Total other expense $14,387 $11,905
------- -------
Income /(Loss) before income taxes $(8,662) $544
Income tax expense / (benefit) (3,297) (92)
---
Net income / (Loss) $(5,365) $636
Less: Net (income) /loss attributable
to non-controlling interest (423) (26)
---
Net income /(loss) attributable to
Middleburg Financial Corporation $(5,788) $610
======= ====
Amortization of discount on preferred
stock - 10
Dividend on preferred stock - 275
Net income /(loss) available to common
shareholders $(5,788) $325
======= ====
Net income /(loss) per common share,
basic $(0.83) $0.05
Net income /(loss) per common share,
diluted $(0.83) $0.05
Dividends common per share $0.10 $0.10
Middleburg Financial Corporation
Consolidated Balance Sheets
(In Thousands, Except for Share Data)
(Unaudited) (Unaudited)
September
30, June 30,
2010 2010
---- ----
Assets:
Cash and due from banks $23,371 $20,776
Interest-bearing deposits in
banks 45,612 50,448
Securities available for sale 242,056 200,786
Loans held for sale 77,452 62,442
Restricted securities, at cost 6,430 6,225
Loans, net of allowance for loan
losses of $15,870 in September
2010
and $10,075 June 2010 639,365 644,181
Premises and equipment, net 22,996 23,264
Goodwill and identified
intangibles 6,403 6,446
Other real estate owned, net of
valuation allowance of
$1,110 in 2010 and $1,121 in 2009 8,142 8,257
Prepaid federal deposit insurance 5,505 5,837
Accrued interest receivable and
other assets 34,132 32,690
------ ------
Total assets $1,111,464 $1,061,352
========== ==========
Liabilities and Shareholders'
Equity:
Liabilities:
Deposits:
Non-interest bearing demand
deposits $124,724 $121,504
Savings and interest-bearing
demand deposits 421,119 411,249
Time deposits 351,097 326,302
------- -------
Total deposits $896,940 $859,055
Securities sold under agreements
to repurchase 25,416 23,213
Short-term borrowings 21,875 8,851
Long-term debt 52,912 52,912
Subordinated notes 5,155 5,155
Accrued interest and other
liabilities 7,736 6,874
Commitments and contingent
liabilities - -
Total liabilities $1,010,034 $956,060
---------- --------
Shareholders' Equity:
Common stock, par value $2.50
share, authorized 20,000,000
shares
issued and outstanding at
September 30, 2010 -6,915,687
shares
issued and outstanding at
December 31, 2009 -6,909,293
shares $17,289 $17,286
Capital surplus 42,930 42,883
Retained earnings 36,378 42,859
Accumulated other comprehensive
income /(loss), net 1,729 (434)
Total Middleburg Financial
Corporation shareholders' equity $98,326 $102,594
------- --------
Non-controlling interest in
consolidated subsidiary 3,104 2,698
Total shareholders' equity $101,430 $105,292
-------- --------
Total liabilities and
shareholders' equity $1,111,464 $1,061,352
========== ==========
Middleburg Financial Corporation
Consolidated Balance Sheets
(In Thousands, Except for Share Data)
(Unaudited)
September December
30, 31,
2010 2009
---- ----
Assets:
Cash and due from banks $23,371 $18,365
Interest-bearing deposits in banks 45,612 24,845
Securities available for sale 242,056 172,699
Loans held for sale 77,452 45,010
Restricted securities, at cost 6,430 6,225
Loans, net of allowance for loan
losses of $15,870 in 2010
and $9,185 in 2009 639,365 635,094
Premises and equipment, net 22,996 23,506
Goodwill and identified intangibles 6,403 6,531
Other real estate owned, net of
valuation allowance of
$1,110 in 2010 and $1,121 in 2009 8,142 6,511
Prepaid federal deposit insurance 5,505 6,923
Accrued interest receivable and other
assets 34,132 30,665
------ ------
Total assets $1,111,464 $976,374
========== ========
Liabilities and Shareholders' Equity:
Liabilities:
Deposits:
Non-interest bearing demand deposits $124,724 $106,459
Savings and interest-bearing demand
deposits 421,119 397,720
Time deposits 351,097 301,469
------- -------
Total deposits $896,940 $805,648
Securities sold under agreements to
repurchase 25,416 17,199
Short-term borrowings 21,875 3,538
Long-term debt 52,912 35,000
Subordinated notes 5,155 5,155
Accrued interest and other liabilities 7,736 6,475
Commitments and contingent liabilities - -
Total liabilities $1,010,034 $873,015
---------- --------
Shareholders' Equity:
Common stock, par value $2.50 share,
authorized 20,000,000 shares
issued and outstanding at September
30, 2010 -6,915,687 shares
issued and outstanding at December 31,
2009 -6,909,293 shares $17,289 $17,273
Capital surplus 42,930 42,807
Retained earnings 36,378 42,706
Accumulated other comprehensive income
/(loss), net 1,729 (2,474)
Total Middleburg Financial Corporation
shareholders' equity $98,326 $100,312
------- --------
Non-controlling interest in
consolidated subsidiary 3,104 3,047
Total shareholders' equity $101,430 $103,359
-------- --------
Total liabilities and shareholders'
equity $1,111,464 $976,374
========== ========
MIDDLEBURG FINANCIAL CORPORATION
KEY STATISTICS
(Unaudited. Dollars in
thousands except per share
data) For the Three Months Ended
--------------------------
Sep 30, Jun 30, Mar 31,
2010 2010 2010
-------- -------- -------
Net Income / (Loss) $(5,788) $724 $814
Earnings per share, basic $(0.83) $0.10 $0.12
Earnings per share, diluted $(0.83) $0.10 $0.12
Dividend per share $0.10 $0.10 $0.10
Return on average total
assets -Year to Date -2.11% 0.28% 0.33%
Return on average total
equity -Year to Date -22.03% 2.85% 3.25%
Dividend payout ratio NA 100.00% 84.90%
Non-Interest income as a
percent of total revenue
(1) 38.56% 34.05% 28.00%
Net interest margin (2) 3.27% 3.67% 3.94%
Yield on average earning
assets (2) 4.74% 5.22% 5.58%
Yield on average interest-
bearing liabilities 1.73% 1.82% 1.93%
Net interest spread 3.01% 3.40% 3.65%
Non-interest income to
average assets (3) 2.69% 2.39% 1.93%
Non-interest expense to
average assets (3) 5.29% 4.73% 4.90%
Efficiency ratio (4) 91.77% 81.78% 87.85%
(Unaudited. Dollars in thousands except per
share data) For the Three Months Ended
--------------------------
Dec 31, Sep 30,
2009 2009
-------- --------
Net Income / (Loss) $1,115 $610
Earnings per share, basic $0.07 $0.05
Earnings per share, diluted $0.07 $0.05
Dividend per share $0.10 $0.10
Return on average total assets -Year to
Date 0.35% 0.29%
Return on average total equity -Year to
Date 2.82% 2.51%
Dividend payout ratio 142.86% 200.00%
Non-Interest income as a percent of total
revenue (1) 29.37% 23.60%
Net interest margin (2) 3.83% 4.13%
Yield on average earning assets (2) 5.61% 6.08%
Yield on average interest-bearing
liabilities 2.16% 2.35%
Net interest spread 3.45% 3.73%
Non-interest income to average assets (3) 2.10% 1.71%
Non-interest expense to average assets (3) 4.74% 4.71%
Efficiency ratio (4) 83.48% 84.26%
(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.
(3) Ratios are computed by dividing annualized income and expense amounts by quarterly average assets.
(4) The efficiency ratio is not a measurement under accounting principles generally accepted in the United States. It is calculated by dividing non interest expense by the sum of tax equivalent net interest income and non interest income excluding gains and losses on the investment portfolio. The tax rate utilized is 34%. The Company calculates this ratio in order to evaluate its overhead structure or how effectively it is operating. The increase from the second quarter 2010 to the third quarter 2010 reflects the restructuring charges and write downs of Company property during the quarter as previously discussed in this release.
MIDDLEBURG FINANCIAL CORPORATION
SELECTED FINANCIAL DATA BY QUARTER
(Unaudited. Dollars in thousands Sep 30, Jun 30, Mar 31,
except per share data) 2010 2010 2010
-------- -------- -------
BALANCE SHEET RATIOS
Net loans to deposits 71.28% 74.99% 78.32%
Average interest-earning assets to
average-interest bearing
liabilities 117.22% 117.69% 117.51%
PER SHARE DATA
Dividends $0.10 $0.10 $0.10
Book value $14.22 $14.84 $14.65
Tangible book value $13.29 $13.91 $13.71
SHARE PRICE DATA
Closing price $14.08 $13.91 $15.06
Diluted earnings multiple (1) NA 34.78 31.38
Book value multiple (2) 0.99 0.94 1.03
COMMON STOCK DATA
Outstanding shares at end of period 6,915,687 6,914,687 6,909,293
Weighted average shares O/S Basic
-QTD 6,934,366 6,911,744 6,909,293
Weighted average shares O/S,
diluted -QTD 6,934,366 6,924,338 6,912,173
CAPITAL RATIOS
GAAP Capital to Assets -Common
shareholders 8.85% 9.67% 9.94%
Total risk based capital ratio 13.41% 14.58% 15.02%
Tier 1 risk based capital ratio 12.15% 13.33% 13.77%
Leverage ratio 9.08% 10.58% 10.71%
CREDIT QUALITY
Net charge-offs to average loans 0.47% 0.15% 0.04%
Total non-performing loans to
total loans 4.63% 2.81% 2.00%
Total non-performing assets to
total assets 3.46% 2.64% 1.88%
Non-accrual loans to:
total loans 4.57% 1.87% 1.46%
total assets 2.69% 1.15% 0.94%
Allowance for loan losses to:
total loans 2.42% 1.54% 1.50%
non-performing assets 41.25% 35.98% 51.43%
non-accrual loans 53.04% 82.51% 102.67%
NON-PERFORMING ASSETS:
Loans delinquent over 90 days and
still accruing $7 $6,188 $3,544
Non-accrual loans 29,923 12,211 9,613
Restructured Loans 404 1,346 -
Other real estate owned and
repossessed assets 8,142 8,257 6,034
Total non-performing assets $38,476 $28,002 $19,191
------- ------- -------
NET LOAN CHARGE-OFFS:
Loans charged off $3,351 $1,142 $291
(Recoveries) (16) (56) (47)
Net charge-offs $3,335 $1,086 $244
------ ------ ----
PROVISION FOR LOAN LOSSES $9,130 $1,291 $929
------ ------ ----
ALLOWANCE FOR LOAN LOSS SUMMARY
Balance at the beginning of period $10,075 $9,870 $9,185
Provision 9,130 1,291 929
Net charge-offs / (recoveries) 3,335 1,086 244
Balance at the end of period $15,870 $10,075 $9,870
------- ------- ------
(Unaudited. Dollars in thousands except per Dec 31, Sep 30,
share data) 2009 2009
-------- --------
BALANCE SHEET RATIOS
Net loans to deposits 78.83% 81.67%
Average interest-earning assets to
average-interest bearing liabilities 121.36% 120.32%
PER SHARE DATA
Dividends $0.10 $0.10
Book value $14.52 $14.61
Tangible book value $13.57 $13.65
SHARE PRICE DATA
Closing price $14.59 $13.05
Diluted earnings multiple (1) 52.11 65.25
Book value multiple (2) 1.00 0.89
COMMON STOCK DATA
Outstanding shares at end of period 6,909,293 6,901,843
Weighted average shares O/S Basic - QTD 5,635,687 5,208,624
Weighted average shares O/S, diluted - QTD 6,906,429 6,267,267
CAPITAL RATIOS
GAAP Capital to Assets -Common shareholders 10.27% 12.27%
Total risk based capital ratio 15.06% 18.22%
Tier 1 risk based capital ratio 13.86% 16.97%
Leverage ratio 10.40% 12.50%
CREDIT QUALITY
Net charge-offs to average loans 0.18% 0.17%
Total non-performing loans to total loans 1.80% 1.57%
Total non-performing assets to total assets 1.86% 1.88%
Non-accrual loans to:
total loans 1.34% 1.38%
total assets 0.88% 0.90%
Allowance for loan losses to:
total loans 1.43% 1.41%
non-performing assets 50.68% 49.21%
non-accrual loans 106.70% 102.43%
NON-PERFORMING ASSETS:
Loans delinquent over 90 days and still
accruing $908 $1,206
Non-accrual loans 8,608 9,008
Restructured Loans 2,096 -
Other real estate owned and repossessed
assets 6,511 8,537
Total non-performing assets $18,123 $18,751
------- -------
NET LOAN CHARGE-OFFS:
Loans charged off $1,057 $1,216
(Recoveries) (48) (49)
Net charge-offs $1,009 $1,167
------ ------
PROVISION FOR LOAN LOSSES $967 $964
---- ----
ALLOWANCE FOR LOAN LOSS SUMMARY
Balance at the beginning of period $9,227 $9,430
Provision 967 964
Net charge-offs / (recoveries) 1,009 1,167
Balance at the end of period $9,185 $9,227
------ ------
(1) The diluted earnings multiple is calculated by dividing the period's closing market price per share by the annualized diluted earnings per share for the period. The diluted earnings multiple is a measure of how much an investor may be willing to pay for $1.00 of the Company's earnings. In quarters where the Company incurs net losses, the diluted earnings multiple is not meaningful and is shown as "NA".
(2) The book value multiple (or price to book ratio) is calculated by dividing the period's closing market price per share by the period's book value per share. The book value multiple is a measure used to compare the Company's market value per share to its book value per share.
Middleburg Financial Corporation
Average Balances, Income and Expenses, Yields and Rates
Three Months Ended September 30,
---------------------------------
2010
----
Average Income/ Yield/
Rate
Balance Expense (2)
------- ------- -----
(Dollars in thousands)
Assets :
Securities:
Taxable $172,955 $1,198 2.75%
Tax-exempt (1) 60,101 941 6.21%
Total securities $233,056 $2,139 3.64%
Loans
Taxable $716,173 $9,832 5.45%
------
Total loans $716,173 $9,832 5.45%
Federal funds sold - - -
Interest bearing deposits
in
other financial
institutions 55,721 36 0.25%
------ ---
Total earning assets $1,004,950 $12,007 4.74%
Less: allowances for
credit losses (10,156)
Total nonearning assets 93,947
------
Total assets $1,088,741
==========
Liabilities:
Interest-bearing deposits:
Checking $280,585 $569 0.80%
Regular savings 79,348 173 0.86%
Money market savings 55,190 101 0.73%
Time deposits:
$100,000 and over 169,903 1,217 2.84%
Under $100,000 171,379 1,100 2.55%
------- -----
Total interest-bearing
deposits $756,405 $3,160 1.66%
Short-term borrowings 16,341 134 3.25%
Securities sold under
agreements
to repurchase 26,534 63 0.94%
Long-term debt 58,067 372 2.54%
Federal funds purchased - - -
--- ---
Total interest-bearing
liabilities $857,347 $3,729 1.73%
Non-interest bearing
liabilities
Demand deposits 117,110
Other liabilities 7,080
Total liabilities $981,537
Non-controlling interest 2,947
Shareholders' equity 104,257
Total liabilities and
shareholders'
equity $1,088,741
==========
Net interest income $8,278
======
Interest rate spread 3.01%
Interest expense as a
percent of
average earning assets 1.47%
Net interest margin 3.27%
Three Months Ended September 30,
---------------------------------
2009
----
Average Income/ Yield/
Rate
Balance Expense (2)
------- ------- -----
(Dollars in thousands)
Assets :
Securities:
Taxable $102,120 $1,187 4.61%
Tax-exempt (1) 66,146 1,172 7.03%
Total securities $168,266 $2,359 5.56%
Loans
Taxable $695,738 $11,974 6.83%
-------
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 - - -
--- ---
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) All yields and rates have been annualized on a 365 day year.
Middleburg Financial Corporation
Average Balances, Income and Expenses, Yields and Rates
-------------------------------------------------------
Nine Months Ended September 30,
-------------------------------
2010
----
Average Income/ Yield/
Rate
Balance Expense (2)
------- ------- -----
(Dollars in thousands)
Assets :
Securities:
Taxable $145,188 $3,269 3.01%
Tax-exempt (1) 60,078 2,900 6.45%
Total securities $205,266 $6,169 4.02%
Loans
Taxable $701,446 $30,661 5.84%
Tax-exempt (1) - - 0.00%
---
Total loans $701,446 $30,661 5.84%
Federal funds sold - - 0.00%
Interest bearing deposits in
other financial institutions 49,194 95 0.27%
------ ---
Total earning assets $955,906 $36,925 5.17%
Less: allowances for credit
losses (9,742)
Total nonearning assets 92,521
------
Total assets $1,038,685
==========
Liabilities:
Interest-bearing deposits:
Checking $282,245 $1,748 0.83%
Regular savings 75,671 544 0.96%
Money market savings 52,625 323 0.82%
Time deposits:
$100,000 and over 163,380 3,508 2.87%
Under $100,000 153,284 3,287 2.87%
------- -----
Total interest-bearing
deposits $727,205 $9,410 1.73%
Short-term borrowings 9,065 245 3.61%
Securities sold under
agreements
to repurchase 24,402 144 0.79%
Long-term debt 53,236 1,298 3.26%
------ -----
Total interest-bearing
liabilities $813,908 $11,097 1.82%
Non-interest bearing
liabilities
Demand Deposits 112,721
Other liabilities 6,657
Total liabilities $933,286
Non-controlling interest 2,781
Shareholders' equity 102,603
Total liabilities and
shareholders'
equity $1,038,685
==========
Net interest income $25,832
=======
Interest rate spread 3.34%
Interest expense as a percent
of
average earning assets 1.55%
Net interest margin 3.61%
Nine Months Ended September 30,
-------------------------------
2009
----
Average Income/ Yield/
Rate
Balance Expense (2)
------- ------- -----
(Dollars in thousands)
Assets :
Securities:
Taxable $105,853 $3,686 4.66%
Tax-exempt (1) 64,441 3,406 7.07%
Total securities $170,294 $7,092 5.57%
Loans
Taxable $716,151 $37,793 7.06%
Tax-exempt (1) 1 - 0.00%
---
Total loans $716,152 $37,793 7.06%
Federal funds sold 27,551 42 0.20%
Interest bearing deposits in
other financial institutions 26,151 53 0.27%
------ ---
Total earning assets $940,148 $44,980 6.40%
Less: allowances for credit
losses (9,153)
Total nonearning assets 82,868
------
Total assets $1,013,863
==========
Liabilities:
Interest-bearing deposits:
Checking $245,326 $2,425 1.32%
Regular savings 55,212 555 1.34%
Money market savings 40,354 336 1.11%
Time deposits:
$100,000 and over 133,269 3,238 3.25%
Under $100,000 195,944 5,427 3.70%
------- -----
Total interest-bearing
deposits $670,105 $11,981 2.39%
Short-term borrowings 21,667 518 3.20%
Securities sold under
agreements
to repurchase 21,413 32 0.20%
Long-term debt 77,096 2,341 4.06%
------ -----
Total interest-bearing
liabilities $790,281 $14,872 2.52%
Non-interest bearing
liabilities
Demand Deposits 108,196
Other liabilities 10,603
Total liabilities $909,080
Non-controlling interest 2,692
Shareholders' equity 102,091
Total liabilities and
shareholders'
equity $1,013,863
==========
Net interest income $30,108
=======
Interest rate spread 3.88%
Interest expense as a percent
of
average earning assets 2.11%
Net interest margin 4.28%
(1) Income and yields are reported on tax equivalent basis assuming a federal tax rate of 34%.
(2) All yields and rates have been annualized on a 365 day year.
SOURCE Middleburg Financial Corporation
