MIDDLEBURG FINANCIAL CORP. 
By 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
