MIDDLEBURG, Va., Feb. 3, 2011 /PRNewswire/ --
Fourth Quarter and Full Year 2010 Highlights: -- Net income of $1.6 million for the quarter or $0.23 per diluted share; -- Net loss of $2.7 million for the year or $0.39 per diluted share; -- Net interest margin of 3.60% for the quarter and 3.61% for the year; -- Total revenue of $16.9 million for the quarter, an increase of 14.3% compared to previous quarter; -- Total assets grew by $128.1 million or 13.1% for the year; -- Total loan growth of 0.6% in the fourth quarter; total loans increased by $15.0 million or 2.3% for the year; -- Strong mortgage originations of $227.1 million in the fourth quarter and $782.6 million for the year; -- Deposit growth was flat in the fourth quarter and increased by $84.6 million or 10.5% for the year; -- Provision for loan losses for the quarter decreased by 32.0% from the quarter ended December 31, 2009; and -- Capital ratios continue to be strong: Total Risk-Based Capital Ratio of 14.1%, Tier I Risk-Based Capital Ratio of 12.8%, and a Tier 1 Leverage Ratio of 9.0% at December 31, 2010.
Middleburg Financial Corporation (the "Company") , today announced net income of $1.6 million for the quarter ending December 31, 2010 and a net loss of $2.7 million for the full year 2010.
"We are certainly gratified at posting our best quarterly net income for our shareholders since the third quarter of 2007. In fact, our work in the third quarter of 2010 continues to yield positive returns," commented Gary R. Shook, President and CEO of Middleburg Financial Corporation. "Our already strong capital ratios have strengthened, management's focus on greater corporate efficiency continues to show bottom line benefits, and sales of foreclosed properties at fair valuations are gaining momentum- trends we expect to see continuing as we enter the first quarter of 2011. Additionally, the Corporation's 2011 focus on client centric revenue generation in all lines of business should allow for greater market penetration as we begin to move out of the current prolonged negative economic cycle."
Net Interest Income and Net Interest Margin
Net interest income was $9.0 million during the three months ended December 31, 2010; an increase of 13.2% compared to the quarter ended September 30, 2010 and an increase of 3.3% compared to the quarter ended December 31, 2009. Average earning assets increased by 2.3% during the quarter ended December 31, 2010. The average yield on earning assets was 4.78% for the quarter ended December 31, 2010 compared to 4.74% for the previous quarter and 6.46% for the quarter ended December 31, 2009, representing an increase of 4 basis points from the previous quarter and a decrease of 168 basis points from the quarter ended December 31, 2009. The increase in yields on earning assets in the fourth quarter reflected an increase of 15 basis points in the yield of the securities portfolio and a 3 basis point decrease in yields for the loan portfolio. The yield on average earning assets was 5.20% in 2010 compared to 6.06% in 2009, a decrease of 86 basis points. The primary reasons for the decline in yields on earning assets during 2010 was loan repricing and prepayments which caused yields on loans to decrease by 111 basis points and yields on securities to decrease by 151 basis points.
The average cost of interest bearing liabilities was 1.41% for the quarter ended December 31, 2010, compared to 1.73% in the previous quarter, and 2.16% for the quarter ended December 31, 2009, representing a decrease of 32 basis points from the previous quarter and a decrease of 75 basis points from the quarter ended December 31, 2009. Costs for wholesale borrowings declined by 95 basis points during the quarter, while costs for retail deposits decreased by 30 basis points during the same period. The decline in the cost of retail deposits was broad-based with a 5 basis point decline in the cost of interest checking deposits, a 1 basis point decline in the cost of savings deposits, and a 58 basis point decline in the cost of time deposits. The average cost of interest bearing liabilities was 1.71% in 2010 compared to 2.43% in 2009, representing a decrease of 72 basis points. The primary reasons for the decrease in the cost of interest bearing liabilities during the twelve month period were a 68 basis point decrease in the cost of interest bearing deposits and a 129 basis point decrease in the cost of long term wholesale borrowings. Cost of funds was 1.21% for the quarter ended December 31, 2010 compared to 1.52% for the quarter ended September 30, 2010, a decrease of 31 basis points from the previous quarter. Cost of funds was 1.50% for 2010 compared to 2.13% in 2009, representing a decrease of 63 basis points.
The net interest margin for the three months ended December 31, 2010 was 3.60%, compared to 3.27% for the previous quarter, and 3.83% for the quarter ended December 31, 2009, representing an increase of 33 basis points from the previous quarter and a decrease of 23 basis points compared to the quarter ended December 31, 2009. The net interest margin was 3.61% in 2010 compared to 4.16% in 2009, representing a decrease of 56 basis points.
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
The provision for loan losses in the quarter ended December 31, 2010 was $655,000 compared to a $967,000 provision in the quarter ended December 31, 2009, representing a decrease of 32.3%.
The Allowance for Loan and Lease Losses (ALLL) at December 31, 2010 was $15.0 million representing 2.27% of total portfolio loans outstanding versus 2.42% at September 30, 2010 and 1.43% of total portfolio loans at December 31, 2009.
Loans that were delinquent for more than 90 days and still accruing were $909,000 as of December 31, 2010 compared to $388,000 as of September 30, 2010, representing an increase 134.3% during the fourth quarter. Non accrual loans were $29.4 million at the end of the fourth quarter compared to $29.9 million at the end of the third quarter, representing a decrease of 1.7% during the fourth quarter. The balance of restructured loans was $404,000 at the end of the fourth quarter, unchanged from the previous quarter. Other Real Estate Owned (OREO) was $8.4 million as of December 31, 2010 compared to $8.1 million as of September 30, 2010, representing an increase of 3.7% during the fourth quarter.
Non-performing assets were $39.1 million or 3.5% of total assets at December 31, 2010 compared to $38.9 million or 3.5% of total assets as of September 30, 2010. Non-performing assets increased from $18.1 million or 1.9% of total assets at December 31, 2009 to $39.1 million or 3.5% of total assets as of December 31, 2010. The increase was primarily due to the reclassification of two loan relationships to non-accrual status during the year.
Non-Interest Income
Non-interest income increased by $1.1 million or 15.6% when comparing the quarter ended December 31, 2010 to the previous quarter, and increased by $5 million or 24.0% compared to the quarter ended December 31, 2009, primarily due to strong growth in revenues from the Company's mortgage operations. The strong non-interest income, primarily driven by the Company's mortgage operations, has contributed to an increase in total revenues, defined as the sum of net interest income and non-interest income, in each linked quarter of 2010.
Total revenue was $16.9 million in the quarter ended December 31, 2010 compared to $14.9 million in the previous quarter and $14.5 million in the quarter ended December 31, 2009, representing an increase of 14.3% compared to the previous linked quarter and an increase of 17.5% compared to the calendar quarter ended December 31, 2009. 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.
Southern Trust Mortgage, the Company's majority owned subsidiary, originated $227.7 million in mortgage loans during the quarter ended December 31, 2010 compared to $217.7 million originated during the previous quarter, an increase of 4.6%, and $204.3 million originated during the quarter ended December 31, 2009, an increase of 11.4% when comparing calendar quarters. Mortgage loans originated for the twelve months ended December 31, 2010 was $782.6 million compared to $990.0 million for the twelve months ended December 31, 2009. Gains on mortgage loan sales increased by 7.6% when comparing the quarter ended December 31, 2010 to the previous quarter. Gains on mortgage loan sales increased by 68.6% when comparing the quarter ended December 31, 2010 to the quarter ended December 31, 2009. Additionally, fees related to mortgage loan sales increased by 19.5% when comparing the quarter ended December 31, 2010 to the previous quarter, and increased by 77.0% compared to the quarter ended December 31, 2009.
The revenues and expenses of Southern Trust Mortgage for the three and twelve month periods ended December 31, 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 service fees earned by Middleburg Trust Company ("MTC") and Middleburg Investment Advisors ("MIA") increased by 3.8% when comparing the quarter ended December 31, 2010 to the previous quarter, and increased by 2.7% compared to the quarter ended December 31, 2009. On January 3, 2011, MIA became a wholly owned subsidiary of MTC.
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 $1.3 billion at December 31, 2010, an increase of 14.9% relative to December 31, 2009. MTC's assets under administration were $932.4 million at December 31, 2010 versus $771.5 million at December 31, 2009 representing an increase of 20.9%. MIA's assets under administration were $314.7 million at December 31, 2010 versus $313.5 million at December 31, 2009 representing an increase of 0.4%.
Net securities losses were $20,000 during the quarter ended December 31, 2010 compared to net securities losses of $438,000 during the quarter ended September 30, 2010. The net securities losses during the quarter ended December 31, 2010 included $129,000 of other than temporary impairment losses related to one trust preferred security identified as impaired under generally accepted accounting principles.
Non-Interest Expense
Non-interest expense in the fourth quarter of 2010 decreased by 1.7% compared to the previous quarter.
Salaries and employee benefit expenses increased by $284,000 when comparing the fourth quarter of 2010 to the quarter ended September 30, 2010, primarily due to expenses related to the defined contribution plan. Expenses related to Other Real Estate Owned (OREO) increased by $176,000 when comparing the fourth quarter of 2010 to the previous quarter. Other expenses, which include expenses such as FDIC insurance premiums, supplies, travel and entertainment expenses fell by $941,000 when comparing the quarter ended December 31, 2010 to the previous quarter. Other expenses in the third quarter of 2010 were higher because of $1.4 million in write-downs in the carrying value of two branch properties.
The Company's efficiency ratio which is represented by the ratio of non-interest expense to the sum of tax equivalent net interest income and non-interest income, excluding securities gains and losses, was 81.42% for the fourth quarter of 2010, compared to an efficiency ratio of 83.48% in the quarter ending December 31, 2009. The efficiency ratio for the full year 2010 was 85.55% and reflects write-downs and restructuring charges in the third quarter of 2010.
Total Consolidated Assets
Total assets at December 31, 2010 were $1.1 billion, an increase of $128.8 million or 13.2% over December 31, 2009.
Growth in total portfolio loans was 0.6% for the fourth quarter. Total portfolio loans increased by $15.0 million or 2.3% in 2010 in a challenging lending environment characterized by weak borrower demand for new loans coupled with increased refinancing of existing credit relationships. The securities portfolio grew by $9.9 million in the fourth quarter, representing an increase of 4.0% compared to the previous quarter. The securities portfolio increased by $79.4 million or 44.3% for the entire year. Balances of mortgages held for resale declined by $18.1 million or 23.4% in the fourth quarter of 2010. Mortgages held for resale increased by $14.3 million or 31.8% for the entire year. Cash balances and deposits at other banks decreased by 6.2% in the fourth quarter of 2010.
Deposits and Other Borrowings
Total deposits decreased by 0.7% in the fourth quarter. Deposits increased by $84.7 million or 10.5% for the year. Brokered deposits, including CDARS program funds, were $122.3 million at December 31, 2010, up $46.1 million or 60.1% from December 31, 2009. FHLB advances were $62.9 million at December 31, 2010, up $27.9 million from December 31, 2009, or an increase of 79.7%.
Equity
Total shareholders' equity at December 31, 2010 was $100.1 million, compared to shareholders' equity of $103.4 million as of December 31, 2009. Retained earnings at December 31, 2010 were $37.8 million compared to $42.7 million at December 31, 2009. The book value of the Company's common stock at December 31, 2010 was $14.02 per share. The Company's total risk-based capital ratio increased from 13.54% at September 30, 2010 to 14.10% at December 31, 2010 and the Tier 1 risk-based capital ratio increased from 12.29% to 12.84% during the same period. The increases in the risk-based capital ratios were due primarily to a net increase in zero percent risk-weighted assets during the fourth quarter of 2010.
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, which is headquartered in Richmond, Virginia with offices in Middleburg, Alexandria and Williamsburg. Middleburg Financial Corporation is also the majority owner of Southern Trust Mortgage, which is based in Virginia Beach and provides mortgages through 17 offices in 11 states.
Middleburg Financial Corporation and Subsidiaries Consolidated Statements of Operations (In Thousands, Except Per Share Data) Unaudited --------- For the Twelve Months Ended December 31, 2010 2009 ---- ---- Interest and Dividend Income Interest and fees on loans $40,548 $48,834 Interest on securities available for sale Taxable 4,733 4,743 Exempt from federal income taxes 2,514 2,944 Dividends 105 88 Interest on federal funds sold and other 131 137 --- --- Total interest and dividend income $48,031 $56,746 ------- ------- Interest Expense Interest on deposits $12,033 $15,614 Interest on securities sold under agreements to repurchase 205 40 Interest on short-term borrowings 393 592 Interest on long-term debt 1,544 2,836 ----- ----- Total interest expense $14,175 $19,082 ------- ------- Net interest income $33,856 $37,664 Provision for loan losses 12,005 4,551 ------ ----- Net interest income after provision for loan losses $21,851 $33,113 ------- ------- Other Income Trust and investment advisory fee income $3,335 $3,218 Service charges on deposit accounts 1,884 1,905 Net gains on securities available for sale 866 2,070 Total other-than-temporary impairment loss on securities (901) (2,224) Portion of (gain) loss recognized in other comprehensive income (202) 1,152 ---- ----- Net other-than-temporary impairment loss (1,103) (1,072) Commissions on investment sales 622 580 Bank owned life insurance 503 489 Gain on loans held for sale 17,158 11,860 Fees on loans held for sale 1,881 1,044 Other service charges, commissions and fees 467 507 Other operating income 390 311 --- --- Total other income $26,003 $20,912 ------- ------- Other Expense Salaries and employee benefits $29,794 $28,042 Net occupancy expense of premises 6,249 5,904 Other taxes 798 587 Advertising 1,071 760 Computer operations 1,324 1,290 Other real estate owned 2,013 3,819 Audits and examinations 592 631 Legal fees 451 481 FDIC insurance 1,907 2,051 Other operating expenses 8,543 5,297 ----- ----- Total other expense $52,742 $48,862 ------- ------- Income (Loss) before income taxes $(4,888) $5,163 Income tax expense / (benefit) (2,562) 64 Net income (loss) $(2,326) $5,099 Less: Net (income) loss attributable to non-controlling interest (362) (1,577) Net income (loss) attributable to Middleburg Financial Corporation $(2,688) $3,522 ======= ====== Amortization of discount on preferred stock - 429 Dividend on preferred stock - 987 Net income (loss) available to common shareholders $(2,688) $2,106 ======= ====== Net income (loss) per common share, basic $(0.39) $0.37 Net income (loss) per common share, diluted $(0.39) $0.37 Dividends per common share $0.35 $0.58 Unaudited --------- For the Three Months Ended December 31, 2010 2009 ---- ---- Interest and Dividend Income Interest and fees on loans $9,887 $11,041 Interest on securities available for sale Taxable 1,539 1,121 Exempt from federal income taxes 600 696 Dividends 30 24 Interest on federal funds sold and other 32 42 --- Total interest and dividend income $12,088 $12,924 ------- ------- Interest Expense Interest on deposits $2,623 $3,633 Interest on securities sold under agreements to repurchase 61 8 Interest on short-term borrowings 148 74 Interest on long-term debt 246 495 --- Total interest expense $3,078 $4,210 ------ ------ Net interest income $9,010 $8,714 Provision for loan losses 655 967 --- --- Net interest income after provision for loan losses $8,355 $7,747 ------ ------ Other Income Trust and investment advisory fee income $838 $816 Service charges on deposit accounts 488 487 Net gains on securities available for sale 109 1,877 Total other-than-temporary impairment loss on securities (44) (1,512) Portion of (gain) loss recognized in other comprehensive income (85) - --- --- Net other-than-temporary impairment loss (129) (1,512) Commissions on investment sales 169 174 Bank owned life insurance 112 109 Gain on loans held for sale 5,537 3,283 Fees on loans held for sale 570 322 Other service charges, commissions and fees 114 107 Other operating income 169 76 --- Total other income $7,977 $5,739 ------ ------ Other Expense Salaries and employee benefits $7,748 $6,187 Net occupancy expense of premises 1,598 1,499 Other taxes 200 150 Advertising 386 211 Computer operations 316 344 Other real estate owned 842 1,656 Audits and examinations 219 183 Legal fees 50 131 FDIC insurance 386 484 Other operating expenses 2,401 1,262 ----- Total other expense $14,146 $12,107 ------- ------- Income (Loss) before income taxes $2,186 $1,379 Income tax expense / (benefit) 573 (5) --- Net income (loss) $1,613 $1,384 Less: Net (income) loss attributable to non-controlling interest (51) (270) ---- Net income (loss) attributable to Middleburg Financial Corporation $1,562 $1,114 ====== ====== Amortization of discount on preferred stock - 378 Dividend on preferred stock - 253 Net income (loss) available to common shareholders $1,562 $483 ====== ==== Net income (loss) per common share, basic $0.23 $0.07 Net income (loss) per common share, diluted $0.23 $0.07 Dividends per common share $0.05 $0.10 Middleburg Financial Corporation Consolidated Balance Sheets (In Thousands, Except for Share Data) (Unaudited) (Unaudited) December September 31, 30, 2010 2010 ---- ---- Assets: Cash and due from banks $21,955 $24,118 Interest-bearing deposits in banks 42,769 44,865 Securities available for sale, at fair value 252,042 242,056 Loans held for sale 59,361 77,452 Restricted securities, at cost 6,296 6,430 Loans, net of allowance for loan losses of $14,967 at December 31, 2010 and $15,870 at September 30, 2010 644,345 639,365 Premises and equipment, net 23,039 22,996 Goodwill and identified intangibles 6,360 6,403 Other real estate owned, net of valuation allowance of $1,486 at December 31, 2010 and $1,110 at 8,394 8,142 September 30, 2010 Prepaid federal deposit insurance 5,154 5,505 Accrued interest receivable and other assets 34,772 34,132 ------ ------ Total assets $1,104,487 $1,111,464 ========== ========== Liabilities and Shareholders' Equity: Liabilities: Deposits: Non-interest bearing demand deposits $130,488 $124,724 Savings and interest-bearing demand deposits 436,718 421,119 Time deposits 323,100 351,097 ------- ------- Total deposits $890,306 $896,940 Securities sold under agreements to repurchase 25,562 25,416 Short-term borrowings 13,320 21,875 Long-term debt 62,912 52,912 Subordinated notes 5,155 5,155 Accrued interest and other liabilities 7,085 7,736 Commitments and contingent liabilities - - Total liabilities $1,004,340 $1,010,034 ---------- ---------- Shareholders' Equity: Common stock, par value $2.50 share, authorized 20,000,000 shares issued and outstanding at December 31, 2010 -6,925,437 shares issued and outstanding at September 30, 2010 -6,915,687 shares $17,314 $17,289 Capital surplus 43,058 42,930 Retained earnings 37,799 36,378 Accumulated other comprehensive loss, net (1,064) 1,729 Total Middleburg Financial Corporation shareholders' equity $97,107 $98,326 ------- ------- Non-controlling interest in consolidated subsidiary 3,040 3,104 Total shareholders' equity $100,147 $101,430 -------- -------- Total liabilities and shareholders' equity $1,104,487 $1,111,464 ========== ========== Middleburg Financial Corporation Consolidated Balance Sheets (In Thousands, Except for Share Data) (Unaudited) December 31, December 31, 2010 2009 ---- ---- Assets: Cash and due from banks $21,955 $18,365 Interest-bearing deposits in banks 42,769 24,845 Securities available for sale, at fair value 252,042 172,699 Loans held for sale 59,361 45,010 Restricted securities, at cost 6,296 6,225 Loans, net of allowance for loan losses of $14,967 in 2010 and $9,185 in 2009 644,345 635,094 Premises and equipment, net 23,039 23,506 Goodwill and identified intangibles 6,360 6,531 Other real estate owned, net of valuation allowance of $1,486 in 2010 and $1,121 in 2009. 8,394 6,511 Prepaid federal deposit insurance 5,154 6,923 Accrued interest receivable and other assets 34,772 30,665 ------ ------ Total assets $1,104,487 $976,374 ========== ======== Liabilities and Shareholders' Equity: Liabilities: Deposits: Non-interest bearing demand deposits $130,488 $106,459 Savings and interest-bearing demand deposits 436,718 397,720 Time deposits 323,100 301,469 ------- ------- Total deposits $890,306 $805,648 Securities sold under agreements to repurchase 25,562 17,199 Short-term borrowings 13,320 3,538 Long-term debt 62,912 35,000 Subordinated notes 5,155 5,155 Accrued interest and other liabilities 7,085 6,475 Commitments and contingent liabilities - - Total liabilities $1,004,340 $873,015 ---------- -------- Shareholders' Equity: Common stock, par value $2.50 share, authorized 20,000,000 shares issued and outstanding at December 31, 2010 -6,925,437 shares issued and outstanding at December 31, 2009 -6,909,293 shares $17,314 $17,273 Capital surplus 43,058 42,807 Retained earnings 37,799 42,706 Accumulated other comprehensive loss, net (1,064) (2,474) Total Middleburg Financial Corporation shareholders' equity $97,107 $100,312 ------- -------- Non-controlling interest in consolidated subsidiary 3,040 3,047 Total shareholders' equity $100,147 $103,359 -------- -------- Total liabilities and shareholders' equity $1,104,487 $976,374 ========== ======== QUARTERLY SUMMARY INCOME STATEMENTS MIDDLEBURG FINANCIAL CORPORATION (Unaudited. Dollars in thousands except per share data) For the Three Months Ended -------------------------- Dec. 31, Sep. 30, Jun. 30, 2010 2010 2010 --------- --------- --------- Interest and Dividend Income Interest and fees on loans $9,887 $9,832 $10,384 Interest on securities available for sale Taxable 1,539 1,166 1,090 Exempt from federal income taxes 600 621 600 Dividends 30 32 22 Interest on federal funds sold and other 32 36 28 --- --- Total interest and dividend income $12,088 $11,687 $12,124 ------- ------- ------- Interest Expense Interest on deposits $2,623 $3,160 $3,077 Interest on securities sold under agreements to repurchase 61 63 60 Interest on short-term borrowings 148 134 67 Interest on long-term debt 246 372 488 --- --- Total interest expense $3,078 $3,729 $3,692 ------ ------ ------ Net interest income $9,010 $7,958 $8,432 Provision for loan losses 655 9,130 1,291 --- ----- ----- Net interest income after provision for loan losses $8,355 $(1,172) $7,141 ------ ------- ------ Other Income Trust and investment advisory fee income $838 $807 $875 Service charges on deposit accounts 488 487 468 Net gains (losses) on securities available for sale 109 288 (37) Total other-than- temporary impairment loss on securities (44) (557) (97) Portion of (gain) loss recognized in other comprehensive income (85) (169) - --- ---- --- Net other-than- temporary impairment loss (129) (726) (97) Commissions on investment sales 169 142 167 Bank owned life insurance 112 136 130 Gain on loans held for sale 5,537 5,147 3,844 Fees on loans held for sale 570 477 476 Other service charges, commissions and fees 114 97 143 Other operating income 169 42 88 --- --- Total other income $7,977 $6,897 $6,057 ------ ------ ------ Other Expense Salaries and employee benefits $7,748 $7,464 $7,457 Net occupancy expense of premises 1,598 1,557 1,490 Other taxes 200 201 201 Advertising 386 257 248 Computer operations 316 340 340 Other real estate owned 842 666 295 Audits and examinations 219 96 162 Legal fees 50 96 167 FDIC insurance 386 368 352 Other operating expenses 2,401 3,342 1,554 ----- ----- Total other expense $14,146 $14,387 $12,266 ------- ------- ------- Income (Loss) before income taxes $2,186 $(8,662) $932 Income tax expense / (benefit) 573 (3,297) 75 Net income (loss) $1,613 $(5,365) $857 Less: Net (income) loss attributable to non- controlling interest (51) (423) (133) Net income attributable to Middleburg Financial Corporation $1,562 $(5,788) $724 ====== ======= ==== Amortization of discount on preferred stock - - - Dividend on preferred stock - - - Net income (loss) available to common shareholders $1,562 $(5,788) $724 ====== ======= ==== Net income (loss) per common share, basic $0.23 $(0.83) $0.10 Net income (loss) per common share, diluted $0.23 $(0.83) $0.10 Dividends per common share $0.05 0.10 $0.10 For the Three Months Ended -------------------------- Mar. 31, Dec. 31, 2010 2009 --------- --------- Interest and Dividend Income Interest and fees on loans $10,445 $11,041 Interest on securities available for sale Taxable 938 1,121 Exempt from federal income taxes 693 696 Dividends 21 24 Interest on federal funds sold and other 35 42 --- --- Total interest and dividend income $12,132 $12,924 ------- ------- Interest Expense Interest on deposits $3,174 $3,633 Interest on securities sold under agreements to repurchase 20 8 Interest on short-term borrowings 44 74 Interest on long-term debt 438 495 --- --- Total interest expense $3,676 $4,210 ------ ------ Net interest income $8,456 $8,714 Provision for loan losses 929 967 --- --- Net interest income after provision for loan losses $7,527 $7,747 ------ ------ Other Income Trust and investment advisory fee income $815 $816 Service charges on deposit accounts 441 487 Net gains (losses) on securities available for sale 506 1,877 Total other-than-temporary impairment loss on securities (151) (1,512) Portion of (gain) loss recognized in other comprehensive income - - --- --- Net other-than-temporary impairment loss (151) (1,512) Commissions on investment sales 144 174 Bank owned life insurance 125 109 Gain on loans held for sale 2,630 3,283 Fees on loans held for sale 358 322 Other service charges, commissions and fees 113 107 Other operating income 91 76 --- --- Total other income $5,072 $5,739 ------ ------ Other Expense Salaries and employee benefits $6,924 $6,187 Net occupancy expense of premises 1,604 1,499 Other taxes 196 150 Advertising 180 211 Computer operations 328 344 Other real estate owned 210 1,656 Audits and examinations 115 183 Legal fees 139 131 FDIC insurance 801 484 Other operating expenses 1,446 1,262 ----- ----- Total other expense $11,943 $12,107 ------- ------- Income (Loss) before income taxes $656 $1,379 Income tax expense /(benefit) 87 (5) --- --- Net income (loss) $569 $1,384 Less: Net (income) loss attributable to non-controlling interest 245 (270) --- ---- Net income attributable to Middleburg Financial Corporation $814 $1,114 ==== ====== Amortization of discount on preferred stock - 378 Dividend on preferred stock - 253 Net income (loss) available to common shareholders $814 $483 ==== ==== Net income (loss) per common share, basic $0.12 $0.07 Net income (loss) per common share, diluted $0.12 $0.07 Dividends per common share $0.10 $0.10 MIDDLEBURG FINANCIAL CORPORATION KEY STATISTICS (Unaudited. Dollars in thousands except per share data) For the Three Months Ended -------------------------- Dec 31, Sep 30, Jun 30, 2010 2010 2010 -------- -------- -------- Net Income / (Loss) $1,562 $(5,788) $724 Earnings per share, basic $0.23 $(0.83) $0.10 Earnings per share, diluted $0.23 $(0.83) $0.10 Dividend per share $0.05 $0.10 $0.10 Return on average total assets -Year to Date -0.25% -2.11% 0.28% Return on average total equity -Year to Date -2.71% -22.03% 2.85% Dividend payout ratio 22.21% NA 100.00% Non-Interest income as a percent of total revenue (1) 39.82% 38.56% 34.05% Net interest margin (2) 3.60% 3.27% 3.67% Yield on average earning assets (2) 4.78% 4.74% 5.22% Yield on average interest- bearing liabilities 1.41% 1.73% 1.82% Net interest spread 3.37% 3.01% 3.40% Non-interest income to average assets (3) 2.88% 2.69% 2.39% Non-interest expense to average assets (3) 5.09% 5.29% 4.73% Efficiency ratio (4) 81.42% 91.77% 81.78% (Unaudited. Dollars in thousands except per share data) For the Three Months Ended Mar 31, Dec 31, 2010 2009 ------- -------- Net Income / (Loss) $814 $1,115 Earnings per share, basic $0.12 $0.07 Earnings per share, diluted $0.12 $0.07 Dividend per share $0.10 $0.10 Return on average total assets - Year to Date 0.33% 0.35% Return on average total equity - Year to Date 3.25% 2.82% Dividend payout ratio 84.90% 142.86% Non-Interest income as a percent of total revenue (1) 28.00% 29.37% Net interest margin (2) 3.94% 3.83% Yield on average earning assets (2) 5.58% 5.61% Yield on average interest-bearing liabilities 1.93% 2.16% Net interest spread 3.65% 3.44% Non-interest income to average assets (3) 1.93% 2.10% Non-interest expense to average assets (3) 4.90% 4.74% Efficiency ratio (4) 87.85% 83.48% (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 Dec 31, Sep 30, Jun 30, except per share data) 2010 2010 2010 -------- -------- -------- BALANCE SHEET RATIOS Net loans to deposits 72.37% 71.28% 74.99% Average interest-earning assets to average-interest bearing liabilities 118.50% 117.22% 117.69% PER SHARE DATA Dividends $0.05 $0.10 $0.10 Book value $14.02 $14.22 $14.84 Tangible book value (3) $13.10 $13.29 $13.91 SHARE PRICE DATA Closing price $14.26 $14.08 $13.91 Diluted earnings multiple (1) 15.50 NA 34.78 Book value multiple (2) 1.02 0.99 0.94 COMMON STOCK DATA Outstanding shares at end of period 6,925,437 6,915,687 6,914,687 Weighted average shares O/S Basic -QTD 6,937,801 6,934,366 6,911,744 Weighted average shares O/S, diluted -QTD 6,938,359 6,934,366 6,924,338 CAPITAL RATIOS Capital to Assets -Common shareholders 8.79% 8.85% 9.67% Tangible common equity ratio (4) 8.26% 8.32% 9.11% Total risk based capital ratio 13.91% 13.54% 14.58% Tier 1 risk based capital ratio 12.84% 12.29% 13.33% Leverage ratio 14.10% 9.08% 10.58% CREDIT QUALITY Net charge-offs to average loans 0.22% 0.47% 0.15% Total non-performing loans to total loans 4.66% 4.69% 2.81% Total non-performing assets to total assets 3.54% 3.50% 2.64% Non-accrual loans to: total loans 4.46% 4.57% 1.87% total assets 2.66% 2.69% 1.15% Allowance for loan losses to: total loans 2.27% 2.42% 1.54% non-performing assets 38.29% 40.84% 35.98% non-accrual loans 50.93% 53.04% 82.51% NON-PERFORMING ASSETS: Loans delinquent over 90 days and still accruing $909 $388 $6,188 Non-accrual loans 29,385 29,923 12,211 Restructured Loans 404 404 1,346 Other real estate owned and repossessed assets 8,394 8,142 8,257 Total non-performing assets $39,092 $38,857 $28,002 ------- ------- ------- NET LOAN CHARGE-OFFS: Loans charged off $1,600 $3,351 $1,142 (Recoveries) (42) (16) (56) Net charge-offs $1,558 $3,335 $1,086 ------ ------ ------ PROVISION FOR LOAN LOSSES $655 $9,130 $1,291 ---- ------ ------ ALLOWANCE FOR LOAN LOSS SUMMARY Balance at the beginning of period $15,870 $10,075 $9,870 Provision 655 9,130 1,291 Net charge-offs (1,558) (3,335) (1,086) Balance at the end of period $14,967 $15,870 $10,075 ------- ------- ------- (Unaudited. Dollars in thousands Mar 31, Dec 31, except per share data) 2010 2009 ------- -------- BALANCE SHEET RATIOS Net loans to deposits 78.32% 78.83% Average interest-earning assets to average-interest bearing liabilities 117.51% 121.36% PER SHARE DATA Dividends $0.10 $0.10 Book value $14.65 $14.52 Tangible book value (3) $13.71 $13.57 SHARE PRICE DATA Closing price $15.06 $14.59 Diluted earnings multiple (1) 31.38 52.11 Book value multiple (2) 1.03 1.00 COMMON STOCK DATA Outstanding shares at end of period 6,909,293 6,909,293 Weighted average shares O/S Basic -QTD 6,909,293 5,635,687 Weighted average shares O/S, diluted -QTD 6,912,173 6,906,429 CAPITAL RATIOS Capital to Assets -Common shareholders 9.94% 10.27% Tangible common equity ratio (4) 9.36% 9.67% Total risk based capital ratio 15.02% 15.06% Tier 1 risk based capital ratio 13.77% 13.86% Leverage ratio 10.71% 10.40% CREDIT QUALITY Net charge-offs to average loans 0.04% 0.18% Total non-performing loans to total loans 2.00% 1.80% Total non-performing assets to total assets 1.88% 1.86% Non-accrual loans to: total loans 1.46% 1.34% total assets 0.94% 0.88% Allowance for loan losses to: total loans 1.50% 1.43% non-performing assets 51.43% 50.68% non-accrual loans 102.67% 106.70% NON-PERFORMING ASSETS: Loans delinquent over 90 days and still accruing $3,544 $908 Non-accrual loans 9,613 8,608 Restructured Loans - 2,096 Other real estate owned and repossessed assets 6,034 6,511 Total non-performing assets $19,191 $18,123 ------- ------- NET LOAN CHARGE-OFFS: Loans charged off $291 $1,057 (Recoveries) (47) (48) Net charge-offs $244 $1,009 ---- ------ PROVISION FOR LOAN LOSSES $929 $967 ---- ---- ALLOWANCE FOR LOAN LOSS SUMMARY Balance at the beginning of period $9,185 $9,227 Provision 929 967 Net charge-offs (244) (1,009) Balance at the end of period $9,870 $9,185 ------ ------ (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. (3) Tangible book value is not a measurement under accounting principles generally accepted in the United States. It is computed by subtracting identified intangible assets and goodwill from total Middleburg Financial Corporation shareholders' equity and then dividing the result by the number of shares of common stock issued and outstanding at the end of the accounting period. (4) The tangible common equity ratio is not a measurement under accounting principles generally accepted in the United States. It is computed by subtracting identified intangible assets and goodwill from total Middleburg Financial Corporation shareholders' equity and total assets and then dividing the adjusted shareholders' equity balance by the adjusted total asset balance. Average Balances, Income and Expenses, Yields and Rates Three Months Ended December 31, -------------------------------- 2010 ---- Average Income/ Yield/ Rate Balance Expense (2) ------- ------- ----- (Dollars in thousands) Assets : Securities: Taxable $201,278 $1,570 3.09% Tax-exempt (1) 58,396 910 6.18% Total securities $259,674 $2,480 3.79% Loans Taxable $724,063 $9,886 5.42% ------ Total loans $724,063 $9,886 5.42% Interest bearing deposits in other financial institutions 44,715 32 0.28% ------ --- Total earning assets $1,028,452 $12,398 4.78% Less: allowances for credit losses (15,207) Total nonearning assets 97,522 ------ Total assets $1,110,767 ========== Liabilities: Interest-bearing deposits: Checking $286,407 $544 0.75% Regular savings 84,372 181 0.85% Money market savings 57,661 105 0.72% Time deposits: $100,000 and over 150,217 791 2.09% Under $100,000 185,238 1,001 2.14% ------- ----- Total interest-bearing deposits $763,895 $2,623 1.36% Short-term borrowings 14,487 148 4.05% Securities sold under agreements to repurchase 28,018 61 0.88% Long-term debt 61,437 246 1.59% Federal funds purchased 54 - 0.00% --- --- Total interest-bearing liabilities $867,891 $3,078 1.41% Non-interest bearing liabilities Demand deposits 143,492 Other liabilities 7,432 Total liabilities $1,018,815 Non-controlling interest 3,161 Shareholders' equity 88,791 Total liabilities and shareholders' equity $1,110,767 ========== Net interest income $9,320 ====== Interest rate spread 3.37% Interest expense as a percent of average earning assets 1.19% Net interest margin 3.60% Return on average assets 0.56% Return on average equity 6.98% Three Months Ended December 31, -------------------------------- 2009 ---- Average Income/ Yield/ Rate Balance Expense (2) ------- ------- ----- (Dollars in thousands) Assets : Securities: Taxable $105,503 $1,145 4.31% Tax-exempt (1) 63,902 1,055 6.55% Total securities $169,405 $2,200 5.15% Loans Taxable $694,603 $11,041 7.09% ------- Total loans $694,603 $11,041 7.09% Interest bearing deposits in other financial institutions 75,089 42 0.22% ------ --- Total earning assets $939,097 $13,283 6.46% Less: allowances for credit losses (9,177) Total nonearning assets 86,153 ------ Total assets $1,016,073 ========== Liabilities: Interest-bearing deposits: Checking $270,939 $666 0.98% Regular savings 64,959 183 1.12% Money market savings 50,796 137 1.07% Time deposits: $100,000 and over 140,727 1,105 3.12% Under $100,000 166,898 1,542 3.67% ------- ----- Total interest-bearing deposits $694,319 $3,633 2.08% Short-term borrowings 12,662 74 2.32% Securities sold under agreements to repurchase 20,259 8 0.16% Long-term debt 46,590 495 4.22% Federal funds purchased - - --- --- Total interest-bearing liabilities $773,830 $4,210 2.16% Non-interest bearing liabilities Demand deposits 107,160 Other liabilities 10,341 Total liabilities $891,331 Non-controlling interest 3,020 Shareholders' equity 121,722 Total liabilities and shareholders' equity $1,016,073 ========== Net interest income $9,073 ====== Interest rate spread 3.44% Interest expense as a percent of average earning assets 1.78% Net interest margin 3.83% Return on average assets 0.44% Return on average equity 3.63% (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. Average Balances, Income and Expenses, Yields and Rates Twelve Months Ended December 31, -------------------------------- 2010 ---- Average Income/ Yield/ Rate Balance Expense (2) ------- ------- ----- (Dollars in thousands) Assets : Securities: Taxable $159,326 $4,838 3.04% Tax-exempt (1) 59,654 3,810 6.39% Total securities $218,980 $8,648 3.95% Loans Taxable $707,135 $40,548 5.73% Tax-exempt (1) - - 0.00% --- Total loans $707,135 $40,548 5.73% Federal funds sold - - 0.00% Interest bearing deposits in other financial institutions 47,836 131 0.27% ------ --- Total earning assets $973,951 $49,327 5.06% Less: allowances for credit losses (11,119) Total nonearning assets 94,005 ------ Total assets $1,056,837 ========== Liabilities: Interest-bearing deposits: Checking $283,294 $2,294 0.81% Regular savings 77,864 725 0.93% Money market savings 53,894 427 0.79% Time deposits: $100,000 and over 160,063 4,298 2.69% Under $100,000 161,338 4,289 2.66% ------- ----- Total interest-bearing deposits $736,453 $12,033 1.63% Short-term borrowings 10,419 393 3.77% Securities sold under agreements to repurchase 25,314 205 0.81% Long-term debt 55,303 1,544 2.79% Federal funds purchased 25 - 0.00% --- --- Total interest-bearing liabilities $827,514 $14,175 1.71% Non-interest bearing liabilities Demand deposits 120,475 Other liabilities 6,850 Total liabilities $954,839 Non-controlling interest 2,876 Shareholders' equity 99,122 Total liabilities and shareholders' equity $1,056,837 ========== Net interest income $35,152 ======= Interest rate spread 3.35% Interest expense as a percent of average earning assets 1.46% Net interest margin 3.61% Return on average assets -0.25% Return on average equity -2.71% Twelve Months Ended December 31, -------------------------------- 2009 ---- Average Income/ Yield/ Rate Balance Expense (2) ------- ------- ----- (Dollars in thousands) Assets : Securities: Taxable $105,765 $4,830 4.57% Tax-exempt (1) 64,305 4,461 6.94% Total securities $170,070 $9,291 5.46% Loans Taxable $710,745 $48,834 6.87% Tax-exempt (1) 1 - 0.00% --- Total loans $710,746 $48,834 6.87% Federal funds sold 20,607 42 0.20% Interest bearing deposits in other financial institutions 38,485 95 0.25% ------ --- Total earning assets $939,908 $58,262 6.20% Less: allowances for credit losses (9,160) Total nonearning assets 83,698 ------ Total assets $1,014,446 ========== Liabilities: Interest-bearing deposits: Checking $251,781 $3,091 1.23% Regular savings 57,669 738 1.28% Money market savings 42,985 473 1.10% Time deposits: $100,000 and over 135,149 4,342 3.21% Under $100,000 188,623 6,969 3.69% ------- ----- Total interest-bearing deposits $676,207 $15,614 2.31% Short-term borrowings 19,425 592 3.05% Securities sold under agreements to repurchase 21,122 40 0.19% Long-term debt 69,407 2,836 4.08% Federal funds purchased - - 0.00% --- --- Total interest-bearing liabilities $786,161 $19,082 2.43% Non-interest bearing liabilities Demand deposits 107,936 Other liabilities 10,537 Total liabilities $904,634 Non-controlling interest 2,774 Shareholders' equity 107,038 Total liabilities and shareholders' equity $1,014,446 ========== Net interest income $39,180 ======= Interest rate spread 3.77% Interest expense as a percent of average earning assets 2.03% Net interest margin 4.17% Return on average assets 0.35% Return on average equity 3.21% (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
CONTACT: Gary R. Shook, President & CEO, +1-540-687-4801,
pres@middleburgbank.com, or Raj Mehra, EVP & CFO, +1-540-687-4816,
cfo@middleburgbank.com, or Jeffrey H. Culver, EVP & COO, +1-703-737-3470,
coo@middleburgbank.com
Web Site: http://www.middleburgbank.com/
