Exhibit 99.1
E A R N I N G S R E L E A S E
Press Contacts: Gary R. Shook, President & CEO 540-687-4801 or
pres@middleburgbank.com
Raj Mehra, EVP & CFO 540-687-4816 or
cfo@middleburgbank.com
Jeffrey H. Culver, EVP & COO 703-737-3470 or
coo@middleburgbank.com
MIDDLEBURG FINANCIAL CORPORATION ANNOUNCES THIRD QUARTER 2015 RESULTS
MIDDLEBURG, VA. – October 30, 2015 – Middleburg Financial Corporation (the “Company”) (Nasdaq: MBRG), today announced net income of $2.32 million, or $0.32 per diluted share, for the quarter ended September 30, 2015.
Gary R. Shook, president and CEO commented: "The third quarter reflected the results of management's methodical approach to a return to higher performance. The increased loan growth seen this year has continued through the third quarter with loan pipelines remaining strong as we move into the fourth quarter of 2015. The net interest margin showed signs of stabilizing during the quarter which bodes well for net interest income going forward. Continued improvement in asset quality has allowed the Company greater flexibility with the adjustment of reserve levels. Record corporate annual earnings of $8.2 million, achieved in 2003, are now within our sight as we move toward year's end. Finally, we were again gratified to be rated as a Five Star Bank by BauerFinancial, Inc."
Third Quarter 2015 Highlights:
| • | Net income increased to $2.32 million or $0.32 per diluted share, higher by 9.43% compared to $2.12 million or $0.30 per diluted share for the third quarter of 2014. Net income for the nine months ended September 30, 2015 was $7.05 million or $0.98 per diluted share compared to $5.95 million or $0.84 per diluted share for the same period in 2014. |
| • | Net interest margin increased to 3.28%, higher by 4 basis points ("bp") compared to the previous quarter and lower by 8 bp compared to the third quarter of 2014. |
| • | Cost of funds declined to 37 bp, a decrease of 1 bp compared to the previous quarter and 8 bp lower than the third quarter of 2014. |
| • | Total revenue increased to $12.01 million for the third quarter of 2015, higher by 2.26% compared to the previous quarter and an increase of 1.59% compared to the third quarter of 2014. |
| • | Net interest income increased to $9.66 million, higher by 3.72% compared to the previous quarter and 1.19% higher than the third quarter of 2014. Net interest income was $28.60 million for the nine months ended September 30, 2015, a decrease of 0.57% from net interest income reported for the same period for 2014. |
| • | Non-interest income declined by 3.33% compared to the previous quarter and was higher by3.25% compared to the third quarter of 2014. |
| • | Non-interest expense increased slightly to $9.27 million, higher by 2.16% compared to the previous quarter and higher by 10.52% compared to the third quarter of 2014. Non-interest expense for the nine months ended September 30, 2015 fell by 13.91% compared to the nine months ended September 30, 2014, primarily due to the sale of the Company's majority interest in Southern Trust Mortgage in the second quarter of 2014. |
| • | The efficiency ratio improved to 73.30%, compared to 74.88% for the previous quarter and 68.82% for the third quarter of 2014. The year to date efficiency ratio of 72.11% compared to 74.41% for the same period in 2014. |
| • | Total assets were $1.26 billion, an increase of 3.14% since December 31, 2014. |
| • | Total deposits were $1.03 billion, an increase of 4.38% since December 31, 2014. |
| • | Loan momentum increased with loans held-for-investment growing to $780.87 million as of September 30, 2015 compared to $754.85 million on December 31, 2014 and $728.75 million on September 30, 2014, representing an annualized growth rate of 4.6% for 2015 through the end of the third quarter and a 7.1% growth rate comparing calendar quarters. |
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| • | The allowance for loan losses declined by $494,000 compared to the previous quarter as a result of net charge-offs of $62,000 and a recovery of the provision for loan losses of $432,000. The allowance for loan losses was 1.46% of total loans compared to 1.54% for the previous quarter and 1.56% at year-end 2014. |
| • | Capital ratios continue to be strong: Total Risk-Based Capital Ratio of 18.25%, Tier 1 Risk-Based Capital Ratio of 16.99%, Common Equity Tier 1 Ratio of 16.31% and Tier 1 Leverage Ratio of 9.84% at September 30, 2015. |
TOTAL REVENUE
Total revenue was $12.01 million for the third quarter of 2015, higher by 2.26% compared to the previous quarter and an increase of 1.59% compared to the third quarter of 2014.
Net Interest Income
The Company recorded net interest income of $9.66 million for the third quarter of 2015, an increase of 3.72% compared to the previous quarter and higher by 1.19% compared to the quarter ended September 30, 2014. The net interest margin was 3.28%, higher by 4 bp compared to the previous quarter and 8 bp lower than the quarter ended September 30, 2014.
The following factors contributed to the increase in net interest margin during the third quarter of 2015, compared to the previous quarter:
| • | Yields on earning assets increased by 4 bp compared to the previous quarter, primarily due to a 9 bp increase in yields on investments. |
| • | Yields on investment securities increased as we added securities with reduced prepayment sensitivity and premium amortization slowed during the quarter. |
| • | A combination of robust loan growth and reduced payoff activity resulted in no change to loan yields compared to the previous quarter. |
| • | Cost of funds was 37 bp, lower by 1 bp compared to the previous quarter. |
The following table analyzes changes in net interest income comparing the third quarter of 2015 to the previous quarter and to the quarter ended September 30, 2014.
| Quarters Ended (Annualized) | ||||||||||||||||||||||||
| (Dollars in thousands) | September 30, 2015 vs. June 30, 2015 Increase (Decrease) Due to Changes in: | September 30, 2015 vs. September 30, 2014 Increase (Decrease) Due to Changes in: | ||||||||||||||||||||||
| Volume | Rate | Total | Volume | Rate | Total | |||||||||||||||||||
| Earning Assets: | ||||||||||||||||||||||||
| Securities: | ||||||||||||||||||||||||
| Taxable | $ | 114 | $ | 485 | $ | 599 | $ | 923 | $ | (280 | ) | $ | 643 | |||||||||||
Tax-exempt (1) | 3 | (35 | ) | (32 | ) | (179 | ) | (372 | ) | (551 | ) | |||||||||||||
| Loans: | ||||||||||||||||||||||||
| Taxable | 541 | 304 | 845 | 3,107 | (3,619 | ) | (512 | ) | ||||||||||||||||
Tax-exempt (1) | — | — | — | (1 | ) | (3 | ) | (4 | ) | |||||||||||||||
| Interest on deposits with other banks and federal funds sold | (10 | ) | (22 | ) | (32 | ) | (88 | ) | (23 | ) | (111 | ) | ||||||||||||
| Total earning assets | $ | 648 | $ | 732 | $ | 1,380 | $ | 3,762 | $ | (4,297 | ) | $ | (535 | ) | ||||||||||
| Interest-Bearing Liabilities: | ||||||||||||||||||||||||
| Checking | $ | (4 | ) | $ | 16 | $ | 12 | $ | (18 | ) | $ | 70 | $ | 52 | ||||||||||
| Regular savings | 3 | 1 | 4 | 12 | — | 12 | ||||||||||||||||||
| Money market savings | — | 4 | 4 | (11 | ) | 3 | (8 | ) | ||||||||||||||||
| Time deposits: | ||||||||||||||||||||||||
| $100,000 and over | 166 | (24 | ) | 142 | 204 | (105 | ) | 99 | ||||||||||||||||
| Under $100,000 | (38 | ) | (9 | ) | (47 | ) | (298 | ) | (166 | ) | (464 | ) | ||||||||||||
| Total interest-bearing deposits | $ | 127 | $ | (12 | ) | $ | 115 | $ | (111 | ) | $ | (198 | ) | $ | (309 | ) | ||||||||
| Securities sold under agreements to repurchase | (1 | ) | (59 | ) | (60 | ) | (67 | ) | (247 | ) | (314 | ) | ||||||||||||
| FHLB borrowings and other debt | (63 | ) | 27 | (36 | ) | 137 | (311 | ) | (174 | ) | ||||||||||||||
| Total interest-bearing liabilities | $ | 63 | $ | (44 | ) | $ | 19 | $ | (41 | ) | $ | (756 | ) | $ | (797 | ) | ||||||||
| Change in net interest income | $ | 585 | $ | 776 | $ | 1,361 | $ | 3,803 | $ | (3,541 | ) | $ | 262 | |||||||||||
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Comparing the third quarter of 2015 to the previous quarter, the table shows the increase in interest income for investments was largely driven by rate changes, as premium amortization slowed causing yields to increase. The increase in interest income from loans was mostly due to volume as higher loan balances helped stabilize loan yields during the quarter.
Non-Interest Income
Non-interest income decreased by 3.33% compared to the previous quarter and increased by 3.25% compared to the quarter ended September 30, 2014.
| • | Total revenue generated by our wealth management group, Middleburg Investment Group ("MIG") was $1.17 million for the quarter ended September 30, 2015, a decrease of 6.03% compared to the previous quarter and higher by 4.38% compared to the quarter ended September 30, 2014. The decline in fee income during the third quarter of 2015 was largely due to changes in market value of assets under administration during the quarter. Fee income is based primarily upon the market value of assets under administration which were $1.91 billion at September 30, 2015, $1.87 billion at December 31, 2014 and $1.78 billion at September 30, 2014. |
| • | Other operating income was $266,000 for the quarter ended September 30, 2015, an increase of 19.28% compared to the previous quarter and higher by 75.00% compared to the quarter ended September 30, 2014. Most of the increase in other operating income during the periods stem from rental income received and prepayment penalties on certain investment securities. |
NON-INTEREST EXPENSE
Non-interest expense increased slightly by 2.16% compared to the previous quarter and by 10.52% compared to the the quarter ended September 30, 2014. Principal categories of non-interest expense that changed were the following:
| • | Salaries and employee benefit expenses decreased by 2.97% when compared to the previous quarter and increased by 8.85% when compared to the quarter ended September 30, 2014. The decline in salary and benefit expenses compared to the previous quarter was primarily due to lower incentive accruals as we aligned compensation to the achievement of growth targets. The increase in salary and benefit expenses compared to the third quarter of 2014 resulted from staffing changes related to our mortgage division. |
| • | Costs related to other real estate owned (OREO) increased, primarily driven by a valuation adjustment for one property resulting from an updated appraisal received during the current quarter. |
| • | Other operating expenses increased by 8.41% compared to the previous quarter and by 14.83% compared to the same period in 2014. Most of the increase in other expenses in the third quarter of 2015 was due to expenses related to a fraud loss and advisory fees that were non-recurring in nature. |
ASSET QUALITY
While total non performing assets increased in the first nine months of 2015, the increase was primarily due to the restructuring of two loans that are part of a single relationship. During the second quarter of 2015, two loans from a single relationship totaling $9.93 million underwent a restructuring and one of the loans was downgraded that quarter, which resulted in total nonperforming assets increasing to $26.07 million at September 30, 2015 compared to $19.45 million at December 31, 2014. This also increased troubled debt restructurings ("TDR's") to $15.94 million at September 30, 2015 compared to $6.90 million at December 31, 2014. While this loan was restructured and downgraded during 2015, the Company had properly classified this loan as impaired at December 31, 2014. The loan is also an accruing TDR.
With the exception of the increase in TDR's discussed earlier, there were declines in past due, nonaccrual and loans risk rated as special mention, substandard, doubtful or loss during the nine months ended September 30, 2015.
| • | Total past due loans have declined 36.21% to $3.09 million as of September 30, 2015 from $4.85 million as of December 31, 2014. |
| • | Nonaccrual loans have declined 11.23% to $8.83 million as of September 30, 2015 from $9.94 million as of December 31, 2014. |
| • | Loans that were risk rated as special mention, substandard, doubtful, and loss declined by 23.46% to $42.12 million as of September 30, 2015 from $55.03 million as of December 31, 2014. |
In a continuing effort to enhance asset quality, the Company also sold $1.02 million of nonperforming loans in the second quarter of 2015.
The improvement in asset quality resulted in the allowance for loans losses declining to $11.40 million or 1.46% of total loans at September 30, 2015 compared to $11.79 million or 1.56% of total loans at December 31, 2014.
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CONSOLIDATED ASSETS
Total consolidated assets increased to September 30, 2015 were $1.26 billion, higher by 3.14% since December 31, 2014. Changes in major asset categories were as follows:
| • | Cash balances and deposits with other banks decreased by $15.24 million compared to December 31, 2014. |
| • | The Company deployed some of its excess liquidity into growing its securities portfolio which increased by $24.52 million compared to December 31, 2014. |
| • | Loan momentum increased with loans held-for-investment growing to $780.87 million as of September 30, 2015 compared to $754.85 million on December 31, 2014, an increase of $26.02 million from December 31, 2014. Gross loans were $728.75 million on September 30, 2014. This represents an annualized growth rate of 4.6% for 2015 through the end of the third quarter and a 7.1% growth rate comparing calendar quarters. Our mortgage division contributed $4.66 million and $6.06 million to total loan growth during the three and nine month periods ended September 30, 2015, respectively. |
CONSOLIDATED LIABILITIES
Total consolidated liabilities at September 30, 2015 were $1.13 billion, an increase of 3.09% compared to December 31, 2014. Deposit growth continues to be strong with total deposits increasing by $43.27 million from December 31, 2014 to $1.03 billion as of September 30, 2015. Federal Home Loan Bank borrowings increased by $5.00 million from December 31, 2014 to $60.00 million at September 30, 2015.
SHAREHOLDERS' EQUITY AND CAPITAL
Shareholders’ equity at September 30, 2015 was $126.41 million, compared to $122.03 million at December 31, 2014. Retained earnings at September 30, 2015 were $60.54 million compared to $55.85 million at December 31, 2014. The book value of the Company’s common stock at September 30, 2015 was $17.65 per share versus $17.11 per share at December 31, 2014.
The Company’s capital ratios remain well above regulatory minimum capital ratios as of September 30, 2015:
| • | Tier 1 Leverage ratio was 9.84%, 5.84% over the regulatory minimum of 4.00%. |
| • | Common Equity Tier 1 Ratio was 16.31%, 9.31% over the regulatory minimum of 7.00%. |
| • | Tier 1 Risk-Based Capital Ratio was 16.99%, 8.49% over the regulatory minimum of 8.50%. |
| • | Total Risk Based Capital Ratio was 18.25%, 7.75% over the regulatory minimum of 10.50%. |
Caution about Forward Looking Statements
Certain information contained in this discussion may include “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements relate to the Company’s future operations and are generally identified by phrases such as “the Company expects,” “the Company believes” or words of similar import. Although the Company believes that its expectations with respect to the forward-looking statements are based upon reliable assumptions within the bounds of its knowledge of its business and operations, there can be no assurance that actual results, performance or achievements of the Company will not differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. For details on factors that could affect expectations, see the risk factors and other cautionary language included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, and other filings with the Securities and Exchange Commission.
About Middleburg Financial Corporation
Middleburg Financial Corporation is headquartered in Middleburg, Virginia and has two wholly owned subsidiaries, Middleburg Bank and Middleburg Investment Group, Inc. Middleburg Bank serves communities in Virginia with financial centers in Ashburn, Gainesville, Leesburg, Marshall, Middleburg, Purcellville, Reston, Richmond, Warrenton and Williamsburg. Middleburg Investment Group owns Middleburg Trust Company, which is headquartered in Richmond, Virginia with offices in Middleburg, Alexandria and Williamsburg.
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| MIDDLEBURG FINANCIAL CORPORATION AND SUBSIDIARIES | |||||||||||
| Consolidated Balance Sheets | |||||||||||
| (In thousands, except for share and per share data) | |||||||||||
| (Unaudited) | |||||||||||
| September 30, 2015 | June 30, 2015 | December 31, 2014 | |||||||||
| ASSETS | |||||||||||
| Cash and due from banks | $ | 6,498 | $ | 5,001 | $ | 7,396 | |||||
| Interest bearing deposits with other banks | 33,281 | 44,406 | 47,626 | ||||||||
| Total cash and cash equivalents | 39,779 | 49,407 | 55,022 | ||||||||
| Securities held to maturity, fair value of $1,375, $1,374 and $1,397, respectively | 1,500 | 1,500 | 1,500 | ||||||||
| Securities available for sale, at fair value | 372,779 | 351,990 | 348,263 | ||||||||
| Restricted securities, at cost | 5,349 | 5,774 | 5,279 | ||||||||
| Loans, net of allowance for loan losses of $11,400, $11,894 and $11,786, respectively | 769,467 | 761,196 | 743,060 | ||||||||
| Premises and equipment, net | 19,787 | 19,888 | 18,104 | ||||||||
| Goodwill and identified intangibles, net | 3,679 | 3,722 | 3,807 | ||||||||
| Other real estate owned, net of valuation allowance of $890, $663 and $755, respectively | 3,871 | 3,402 | 4,051 | ||||||||
| Bank owned life insurance | 23,107 | 22,940 | 22,617 | ||||||||
| Accrued interest receivable and other assets | 21,972 | 22,166 | 21,154 | ||||||||
| TOTAL ASSETS | $ | 1,261,290 | $ | 1,241,985 | $ | 1,222,857 | |||||
| LIABILITIES | |||||||||||
| Deposits: | |||||||||||
| Non-interest bearing demand deposits | $ | 242,890 | $ | 235,246 | $ | 216,912 | |||||
| Savings and interest bearing demand deposits | 539,972 | 526,985 | 523,230 | ||||||||
| Time deposits | 249,491 | 243,221 | 248,938 | ||||||||
| Total deposits | 1,032,353 | 1,005,452 | 989,080 | ||||||||
| Securities sold under agreements to repurchase | 24,468 | 24,049 | 38,551 | ||||||||
| Federal Home Loan Bank borrowings | 60,000 | 70,000 | 55,000 | ||||||||
| Subordinated notes | 5,155 | 5,155 | 5,155 | ||||||||
| Accrued interest payable and other liabilities | 12,902 | 12,539 | 13,037 | ||||||||
| TOTAL LIABILITIES | 1,134,878 | 1,117,195 | 1,100,823 | ||||||||
| Commitments and contingent liabilities | |||||||||||
| SHAREHOLDERS' EQUITY | |||||||||||
| Common stock ($2.50 par value; 20,000,000 shares authorized, 7,162,716, 7,163,255 and 7,131,643, issued and outstanding, respectively) | 17,522 | 17,521 | 17,494 | ||||||||
| Capital surplus | 45,224 | 45,063 | 44,892 | ||||||||
| Retained earnings | 60,542 | 59,152 | 55,854 | ||||||||
| Accumulated other comprehensive income | 3,124 | 3,054 | 3,794 | ||||||||
| TOTAL SHAREHOLDERS' EQUITY | 126,412 | 124,790 | 122,034 | ||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 1,261,290 | $ | 1,241,985 | $ | 1,222,857 | |||||
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| MIDDLEBURG FINANCIAL CORPORATION AND SUBSIDIARIES | |||||||||||||||
| Consolidated Statements of Income | |||||||||||||||
| (In thousands, except for per share data) | |||||||||||||||
| (Unaudited) | |||||||||||||||
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||
| 2015 | 2014 | 2015 | 2014 | ||||||||||||
| INTEREST AND DIVIDEND INCOME | |||||||||||||||
| Interest and fees on loans | $ | 8,227 | $ | 8,357 | $ | 24,484 | $ | 25,656 | |||||||
| Interest and dividends on securities | |||||||||||||||
| Taxable | 1,938 | 1,763 | 5,636 | 5,173 | |||||||||||
| Tax-exempt | 444 | 535 | 1,354 | 1,656 | |||||||||||
| Dividends | 71 | 84 | 196 | 230 | |||||||||||
| Interest on deposits with other banks and federal funds sold | 23 | 51 | 84 | 123 | |||||||||||
| Total interest and dividend income | 10,703 | 10,790 | 31,754 | 32,838 | |||||||||||
| INTEREST EXPENSE | |||||||||||||||
| Interest on deposits | 877 | 955 | 2,580 | 2,952 | |||||||||||
| Interest on securities sold under agreements to repurchase | 2 | 81 | 64 | 243 | |||||||||||
| Interest on FHLB borrowings and other debt | 165 | 209 | 507 | 876 | |||||||||||
| Total interest expense | 1,044 | 1,245 | 3,151 | 4,071 | |||||||||||
| NET INTEREST INCOME | 9,659 | 9,545 | 28,603 | 28,767 | |||||||||||
| (Recovery of) provision for loan losses | (432 | ) | 550 | (407 | ) | 1,510 | |||||||||
| NET INTEREST INCOME AFTER (RECOVERY OF) PROVISION FOR LOAN LOSSES | 10,091 | 8,995 | 29,010 | 27,257 | |||||||||||
| NON-INTEREST INCOME | |||||||||||||||
| Service charges on deposit accounts | 622 | 635 | 1,792 | 1,815 | |||||||||||
| Trust services income | 1,168 | 1,119 | 3,629 | 3,224 | |||||||||||
| Gains on sales of loans held for sale | — | 1 | 3 | 4,859 | |||||||||||
| Gains on sales of securities available for sale, net | — | 12 | 138 | 141 | |||||||||||
| Commissions on investment sales | 132 | 193 | 415 | 479 | |||||||||||
| Bank owned life insurance | 166 | 168 | 489 | 494 | |||||||||||
| Gain on sale of majority interest in consolidated subsidiary | — | — | — | 24 | |||||||||||
| Other operating income | 266 | 152 | 1,331 | 1,399 | |||||||||||
| Total non-interest income | 2,354 | 2,280 | 7,797 | 12,435 | |||||||||||
| NON-INTEREST EXPENSE | |||||||||||||||
| Salaries and employee benefits | 4,834 | 4,441 | 14,664 | 17,467 | |||||||||||
| Occupancy and equipment | 1,248 | 1,262 | 3,813 | 4,841 | |||||||||||
| Advertising | 98 | 136 | 332 | 430 | |||||||||||
| Computer operations | 524 | 439 | 1,536 | 1,408 | |||||||||||
| Other real estate owned | 193 | (33 | ) | 285 | 145 | ||||||||||
| Other taxes | 230 | 220 | 684 | 637 | |||||||||||
| Federal deposit insurance | 188 | 220 | 583 | 687 | |||||||||||
| Other operating expenses | 1,959 | 1,706 | 5,355 | 6,042 | |||||||||||
| Total non-interest expense | 9,274 | 8,391 | 27,252 | 31,657 | |||||||||||
| Income before income taxes | 3,171 | 2,884 | 9,555 | 8,035 | |||||||||||
| Income tax expense | 850 | 763 | 2,506 | 2,179 | |||||||||||
| NET INCOME | 2,321 | 2,121 | 7,049 | 5,856 | |||||||||||
| Net loss attributable to non-controlling interest | — | — | — | 98 | |||||||||||
| Net income attributable to Middleburg Financial Corporation | $ | 2,321 | $ | 2,121 | $ | 7,049 | $ | 5,954 | |||||||
| Earnings per share: | |||||||||||||||
| Basic | $ | 0.32 | $ | 0.30 | $ | 0.99 | $ | 0.84 | |||||||
| Diluted | $ | 0.32 | $ | 0.30 | $ | 0.98 | $ | 0.84 | |||||||
| Dividends per common share | $ | 0.13 | $ | 0.10 | $ | 0.33 | $ | 0.24 | |||||||
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| MIDDLEBURG FINANCIAL CORPORATION AND SUBSIDIARIES | |||||||||||||||||||
| Quarterly Summary Statements of Income | |||||||||||||||||||
| (Unaudited, Dollars In thousands, except for per share data) | |||||||||||||||||||
| For the Three Months Ended | |||||||||||||||||||
September 30, 2015 | June 30, 2015 | March 31, 2015 | December 31, 2014 | September 30, 2014 | |||||||||||||||
| INTEREST AND DIVIDEND INCOME | |||||||||||||||||||
| Interest and fees on loans | $ | 8,227 | $ | 8,014 | $ | 8,243 | $ | 8,176 | $ | 8,357 | |||||||||
| Interest and dividends on securities | |||||||||||||||||||
| Taxable | 1,938 | 1,792 | 1,906 | 1,728 | 1,763 | ||||||||||||||
| Tax-exempt | 444 | 449 | 461 | 481 | 535 | ||||||||||||||
| Dividends | 71 | 66 | 59 | 64 | 84 | ||||||||||||||
| Interest on deposits with other banks and federal funds sold | 23 | 31 | 30 | 38 | 51 | ||||||||||||||
| Total interest and dividend income | 10,703 | 10,352 | 10,699 | 10,487 | 10,790 | ||||||||||||||
| INTEREST EXPENSE | |||||||||||||||||||
| Interest on deposits | 877 | 848 | 855 | 933 | 955 | ||||||||||||||
| Interest on securities sold under agreements to repurchase | 2 | 17 | 45 | 79 | 81 | ||||||||||||||
| Interest on FHLB borrowings and other debt | 165 | 174 | 168 | 160 | 209 | ||||||||||||||
| Total interest expense | 1,044 | 1,039 | 1,068 | 1,172 | 1,245 | ||||||||||||||
| NET INTEREST INCOME | 9,659 | 9,313 | 9,631 | 9,315 | 9,545 | ||||||||||||||
| (Recovery of) provision for loan losses | (432 | ) | (425 | ) | 450 | 450 | 550 | ||||||||||||
| NET INTEREST INCOME AFTER (RECOVERY OF) PROVISION FOR LOAN LOSSES | 10,091 | 9,738 | 9,181 | 8,865 | 8,995 | ||||||||||||||
| NON-INTEREST INCOME | |||||||||||||||||||
| Service charges on deposit accounts | 622 | 612 | 558 | 606 | 635 | ||||||||||||||
| Trust services income | 1,168 | 1,243 | 1,218 | 1,138 | 1,119 | ||||||||||||||
| Gains on sales of loans held for sale | — | 3 | — | 1 | 1 | ||||||||||||||
| Gains on sales of securities available for sale, net | — | 37 | 101 | 45 | 12 | ||||||||||||||
| Commissions on investment sales | 132 | 154 | 129 | 132 | 193 | ||||||||||||||
| Bank owned life insurance | 166 | 163 | 160 | 168 | 168 | ||||||||||||||
| Other operating income | 266 | 223 | 842 | 260 | 152 | ||||||||||||||
| Total non-interest income | 2,354 | 2,435 | 3,008 | 2,350 | 2,280 | ||||||||||||||
| NON-INTEREST EXPENSE | |||||||||||||||||||
| Salaries and employee benefits | 4,834 | 4,982 | 4,848 | 5,134 | 4,441 | ||||||||||||||
| Occupancy and equipment | 1,248 | 1,226 | 1,339 | 1,336 | 1,262 | ||||||||||||||
| Advertising | 98 | 101 | 133 | (65 | ) | 136 | |||||||||||||
| Computer operations | 524 | 522 | 490 | 485 | 439 | ||||||||||||||
| Other real estate owned | 193 | 25 | 67 | 110 | (33 | ) | |||||||||||||
| Other taxes | 230 | 231 | 223 | 212 | 220 | ||||||||||||||
| Federal deposit insurance | 188 | 184 | 211 | 212 | 220 | ||||||||||||||
| Other operating expenses | 1,959 | 1,807 | 1,589 | 1,999 | 1,706 | ||||||||||||||
| Total non-interest expense | 9,274 | 9,078 | 8,900 | 9,423 | 8,391 | ||||||||||||||
| Income before income taxes | 3,171 | 3,095 | 3,289 | 1,792 | 2,884 | ||||||||||||||
| Income tax expense | 850 | 815 | 841 | 162 | 763 | ||||||||||||||
| NET INCOME | $ | 2,321 | $ | 2,280 | $ | 2,448 | $ | 1,630 | $ | 2,121 | |||||||||
| Earnings per share: | |||||||||||||||||||
| Basic | $ | 0.32 | $ | 0.32 | $ | 0.34 | $ | 0.23 | $ | 0.30 | |||||||||
| Diluted | $ | 0.32 | $ | 0.32 | $ | 0.34 | $ | 0.23 | $ | 0.30 | |||||||||
| Dividends per common share | $ | 0.13 | $ | 0.10 | $ | 0.10 | $ | 0.10 | $ | 0.10 | |||||||||
Page 7
| MIDDLEBURG FINANCIAL CORPORATION AND SUBSIDIARIES | |||||||||||||||||||
| Selected Financial Data by Quarter | |||||||||||||||||||
| (Unaudited, Dollars in thousands, except for per share data) | |||||||||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | |||||||||||||||
| 2015 | 2015 | 2015 | 2014 | 2014 | |||||||||||||||
| BALANCE SHEET RATIOS | |||||||||||||||||||
| Loans to deposits | 75.64 | % | 76.89 | % | 74.60 | % | 76.32 | % | 73.87 | % | |||||||||
| Average interest-earning assets to average interest-bearing liabilities | 135.94 | % | 135.72 | % | 136.04 | % | 133.54 | % | 130.14 | % | |||||||||
| INCOME STATEMENT RATIOS | |||||||||||||||||||
| Return on average assets (ROA) | 0.73 | % | 0.73 | % | 0.80 | % | 0.53 | % | 0.69 | % | |||||||||
| Return on average equity (ROE) | 7.33 | % | 7.31 | % | 8.01 | % | 5.31 | % | 7.00 | % | |||||||||
| Net interest margin (1) | 3.28 | % | 3.24 | % | 3.40 | % | 3.31 | % | 3.36 | % | |||||||||
| Yield on average earning assets | 3.63 | % | 3.59 | % | 3.77 | % | 3.72 | % | 3.79 | % | |||||||||
| Yield on securities | 2.86 | % | 2.77 | % | 2.98 | % | 2.87 | % | 3.13 | % | |||||||||
| Yield on loans | 4.20 | % | 4.20 | % | 4.45 | % | 4.42 | % | 4.54 | % | |||||||||
| Cost of funds | 0.37 | % | 0.38 | % | 0.39 | % | 0.43 | % | 0.45 | % | |||||||||
| Efficiency ratio (5) | 73.30 | % | 74.88 | % | 68.35 | % | 77.53 | % | 68.82 | % | |||||||||
| PER SHARE DATA | |||||||||||||||||||
| Dividends | $ | 0.13 | $ | 0.10 | $ | 0.10 | $ | 0.10 | $ | 0.10 | |||||||||
| Book value | 17.65 | 17.42 | 17.51 | 17.11 | 16.97 | ||||||||||||||
| Tangible book value (4) | 17.13 | 16.90 | 16.99 | 16.58 | 16.43 | ||||||||||||||
| SHARE PRICE DATA | |||||||||||||||||||
| Closing price | $ | 17.61 | $ | 18.00 | $ | 18.30 | $ | 18.01 | $ | 17.74 | |||||||||
| Diluted earnings multiple (2) | 13.76 | 14.06 | 13.45 | 16.99 | 14.78 | ||||||||||||||
| Book value multiple (3) | 1.00 | 1.03 | 1.04 | 1.05 | 1.05 | ||||||||||||||
| COMMON STOCK DATA | |||||||||||||||||||
| Outstanding shares at end of period | 7,162,716 | 7,163,255 | 7,127,105 | 7,131,643 | 7,123,914 | ||||||||||||||
| Weighted average shares O/S , basic - QTD | 7,162,930 | 7,145,929 | 7,127,910 | 7,127,164 | 7,108,450 | ||||||||||||||
| Weighted average shares O/S, diluted - QTD | 7,181,183 | 7,167,165 | 7,148,702 | 7,146,140 | 7,134,262 | ||||||||||||||
| Dividend payout ratio | 40.63 | % | 31.25 | % | 29.41 | % | 43.48 | % | 33.33 | % | |||||||||
| CAPITAL RATIOS | |||||||||||||||||||
| Capital to assets - common shareholders | 10.02 | % | 10.05 | % | 9.86 | % | 9.98 | % | 10.01 | % | |||||||||
| Leverage ratio | 9.84 | % | 9.85 | % | 9.76 | % | 9.90 | % | 9.71 | % | |||||||||
| Common equity tier 1 ratio | 16.31 | % | 16.35 | % | 16.49 | % | N/A | N/A | |||||||||||
| Tier 1 risk based capital ratio | 16.99 | % | 17.04 | % | 17.20 | % | 15.70 | % | 16.04 | % | |||||||||
| Total risk based capital ratio | 18.25 | % | 18.28 | % | 18.45 | % | 16.95 | % | 17.30 | % | |||||||||
| CREDIT QUALITY | |||||||||||||||||||
| Net charge-offs (recoveries) to average loans | (0.002 | )% | (0.04 | )% | 0.03 | % | 0.46 | % | 0.09 | % | |||||||||
| Total nonperforming loans to total loans | 2.71 | % | 2.63 | % | 1.83 | % | 1.89 | % | 1.63 | % | |||||||||
| Total nonperforming assets to total assets | 2.07 | % | 1.99 | % | 1.46 | % | 1.59 | % | 1.50 | % | |||||||||
| Nonaccrual loans to: | |||||||||||||||||||
| Total loans | 1.13 | % | 1.04 | % | 1.26 | % | 1.32 | % | 1.01 | % | |||||||||
| Total assets | 0.70 | % | 0.64 | % | 0.76 | % | 0.81 | % | 0.61 | % | |||||||||
| Allowance for loan losses to: | |||||||||||||||||||
| Total loans | 1.46 | % | 1.54 | % | 1.58 | % | 1.56 | % | 1.57 | % | |||||||||
| Nonperforming assets | 43.73 | % | 48.03 | % | 65.23 | % | 60.59 | % | 63.18 | % | |||||||||
| Nonaccrual loans | 129.15 | % | 148.53 | % | 124.92 | % | 118.52 | % | 155.80 | % | |||||||||
| NONPERFORMING ASSETS | |||||||||||||||||||
| Loans delinquent 90+ days and still accruing | $ | 224 | $ | 173 | $ | 74 | $ | 30 | $ | 30 | |||||||||
| Nonaccrual loans | 8,827 | 8,008 | 9,625 | 9,944 | 7,332 | ||||||||||||||
| Restructured loans (not in nonaccrual) | 12,106 | 12,138 | 4,262 | 4,295 | 4,522 | ||||||||||||||
| Other real estate owned | 3,871 | 3,402 | 3,402 | 4,051 | 5,064 | ||||||||||||||
| Repossessed assets | 1,044 | 1,044 | 1,070 | 1,132 | 1,132 | ||||||||||||||
| Total nonperforming assets | $ | 26,072 | $ | 24,765 | $ | 18,433 | $ | 19,452 | $ | 18,080 | |||||||||
Page 8
| (1) | 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 non taxable interest income due to the mix in its investment and loan portfolios, net interest income for the ratio is calculated on a tax equivalent basis as described above. This calculation excludes net securities gains and losses. |
| (2) | 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. |
| (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. |
| (4) | 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. |
| (5) | The efficiency ratio is not a measurement under accounting principles generally accepted in the United States. It is calculated by dividing non-interest expense (adjusted for amortization of intangibles, other real estate expenses, and non-recurring one-time charges) by the sum of tax equivalent net interest income and non-interest income excluding gains and losses on the investment portfolio. The tax rate utilized in calculating tax equivalent amounts is 34%. The Company calculates and reviews this ratio as a means of evaluating operational efficiency. |
Page 9
MIDDLEBURG FINANCIAL CORPORATION AND SUBSIDIARIES Average Balances, Income and Expenses, Yields and Rates (Unaudited) | |||||||||||||||||||||
| Three months ended September 30, | |||||||||||||||||||||
| 2015 | 2014 | ||||||||||||||||||||
Average Balance | Income/ Expense | Yield/ Rate (2) | Average Balance | Income/ Expense | Yield/ Rate (2) | ||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||
| Assets: | |||||||||||||||||||||
| Securities: | |||||||||||||||||||||
| Taxable | $ | 320,684 | $ | 2,009 | 2.49 | % | $ | 282,860 | $ | 1,847 | 2.59 | % | |||||||||
| Tax-exempt (1) | 51,252 | 672 | 5.20 | % | 54,410 | 811 | 5.91 | % | |||||||||||||
| Total securities | $ | 371,936 | $ | 2,681 | 2.86 | % | $ | 337,270 | $ | 2,658 | 3.13 | % | |||||||||
| Loans: | |||||||||||||||||||||
| Taxable | $ | 777,039 | $ | 8,222 | 4.20 | % | $ | 730,006 | $ | 8,351 | 4.54 | % | |||||||||
| Tax-exempt (1) | 630 | 8 | 5.04 | % | 652 | 9 | 5.48 | % | |||||||||||||
| Total loans (3) | $ | 777,669 | $ | 8,230 | 4.20 | % | $ | 730,658 | $ | 8,360 | 4.54 | % | |||||||||
| Interest on deposits with other banks and federal funds sold | 46,671 | 23 | 0.20 | % | 90,463 | 51 | 0.22 | % | |||||||||||||
| Total earning assets | $ | 1,196,276 | $ | 10,934 | 3.63 | % | $ | 1,158,391 | $ | 11,069 | 3.79 | % | |||||||||
| Less: allowance for loan losses | (11,870 | ) | (11,309 | ) | |||||||||||||||||
| Total nonearning assets | 77,155 | 74,477 | |||||||||||||||||||
| Total assets | $ | 1,261,561 | $ | 1,221,559 | |||||||||||||||||
| Liabilities: | |||||||||||||||||||||
| Interest-bearing deposits: | |||||||||||||||||||||
| Checking | $ | 343,584 | $ | 176 | 0.20 | % | $ | 354,080 | $ | 163 | 0.18 | % | |||||||||
| Regular savings | 120,104 | 56 | 0.18 | % | 113,607 | 53 | 0.19 | % | |||||||||||||
| Money market savings | 66,144 | 32 | 0.19 | % | 72,034 | 34 | 0.19 | % | |||||||||||||
| Time deposits: | |||||||||||||||||||||
| $100,000 and over | 148,998 | 322 | 0.86 | % | 121,274 | 297 | 0.97 | % | |||||||||||||
| Under $100,000 | 103,897 | 291 | 1.11 | % | 129,578 | 408 | 1.25 | % | |||||||||||||
| Total interest-bearing deposits | $ | 782,727 | $ | 877 | 0.45 | % | $ | 790,573 | $ | 955 | 0.48 | % | |||||||||
| Securities sold under agreements to repurchase | 28,859 | 2 | 0.03 | % | 39,142 | 81 | 0.82 | % | |||||||||||||
| FHLB borrowings and other debt | 68,416 | 165 | 0.96 | % | 60,372 | 209 | 1.37 | % | |||||||||||||
| Total interest-bearing liabilities | $ | 880,002 | $ | 1,044 | 0.47 | % | $ | 890,087 | $ | 1,245 | 0.55 | % | |||||||||
| Non-interest bearing liabilities: | |||||||||||||||||||||
| Demand deposits | 242,983 | 200,768 | |||||||||||||||||||
| Other liabilities | 12,815 | 10,539 | |||||||||||||||||||
| Total liabilities | $ | 1,135,800 | $ | 1,101,394 | |||||||||||||||||
| Non-controlling interest | — | — | |||||||||||||||||||
| Shareholders' equity | 125,761 | 120,165 | |||||||||||||||||||
| Total liabilities and shareholders' equity | $ | 1,261,561 | $ | 1,221,559 | |||||||||||||||||
| Net interest income | $ | 9,890 | $ | 9,824 | |||||||||||||||||
| Interest rate spread | 3.16 | % | 3.24 | % | |||||||||||||||||
| Cost of Funds | 0.37 | % | 0.45 | % | |||||||||||||||||
| Interest expense as a percent of average earning assets | 0.35 | % | 0.43 | % | |||||||||||||||||
| Net interest margin | 3.28 | % | 3.36 | % | |||||||||||||||||
| (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. |
| (3) | Total average loans include loans on non-accrual status. |
Page 10
MIDDLEBURG FINANCIAL CORPORATION AND SUBSIDIARIES Average Balances, Income and Expenses, Yields and Rates (Unaudited) | |||||||||||||||||||||
| Nine months ended September 30, | |||||||||||||||||||||
| 2015 | 2014 | ||||||||||||||||||||
Average Balance | Income/ Expense | Yield/ Rate (2) | Average Balance | Income/ Expense | Yield/ Rate (2) | ||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||
| Assets: | |||||||||||||||||||||
| Securities: | |||||||||||||||||||||
| Taxable | $ | 315,507 | $ | 5,832 | 2.47 | % | $ | 278,650 | $ | 5,403 | 2.59 | % | |||||||||
| Tax-exempt (1) | 51,680 | 2,051 | 5.31 | % | 57,556 | 2,509 | 5.83 | % | |||||||||||||
| Total securities | $ | 367,187 | $ | 7,883 | 2.87 | % | $ | 336,206 | $ | 7,912 | 3.15 | % | |||||||||
| Loans: | |||||||||||||||||||||
| Taxable | $ | 764,337 | $ | 24,468 | 4.28 | % | $ | 743,703 | $ | 25,639 | 4.61 | % | |||||||||
| Tax-exempt (1) | 620 | 25 | 5.39 | % | 652 | 26 | 5.33 | % | |||||||||||||
| Total loans (3) | $ | 764,957 | $ | 24,493 | 4.28 | % | $ | 744,355 | $ | 25,665 | 4.61 | % | |||||||||
| Interest on deposits with other banks and federal funds sold | 52,858 | 84 | 0.21 | % | 73,759 | 123 | 0.22 | % | |||||||||||||
| Total earning assets | $ | 1,185,002 | $ | 32,460 | 3.66 | % | $ | 1,154,320 | $ | 33,700 | 3.90 | % | |||||||||
| Less: allowance for loan losses | (11,894 | ) | (12,497 | ) | |||||||||||||||||
| Total nonearning assets | 76,703 | 78,292 | |||||||||||||||||||
| Total assets | $ | 1,249,811 | $ | 1,220,115 | |||||||||||||||||
| Liabilities: | |||||||||||||||||||||
| Interest-bearing deposits: | |||||||||||||||||||||
| Checking | $ | 342,184 | $ | 517 | 0.20 | % | $ | 342,551 | $ | 485 | 0.19 | % | |||||||||
| Regular savings | 117,981 | 164 | 0.19 | % | 113,378 | 158 | 0.19 | % | |||||||||||||
| Money market savings | 67,314 | 95 | 0.19 | % | 73,910 | 105 | 0.19 | % | |||||||||||||
| Time deposits: | |||||||||||||||||||||
| $100,000 and over | 136,980 | 900 | 0.88 | % | 125,036 | 937 | 1.00 | % | |||||||||||||
| Under $100,000 | 107,181 | 904 | 1.13 | % | 130,776 | 1,267 | 1.30 | % | |||||||||||||
| Total interest-bearing deposits | $ | 771,640 | $ | 2,580 | 0.45 | % | $ | 785,651 | $ | 2,952 | 0.50 | % | |||||||||
| Securities sold under agreements to repurchase | 30,578 | 64 | 0.28 | % | 36,682 | 243 | 0.88 | % | |||||||||||||
| FHLB borrowings and other debt | 69,752 | 507 | 0.97 | % | 76,803 | 876 | 1.52 | % | |||||||||||||
| Federal funds purchased | 2 | — | — | % | 1 | — | — | % | |||||||||||||
| Total interest-bearing liabilities | $ | 871,972 | $ | 3,151 | 0.48 | % | $ | 899,137 | $ | 4,071 | 0.61 | % | |||||||||
| Non-interest bearing liabilities: | |||||||||||||||||||||
| Demand deposits | 239,791 | 193,501 | |||||||||||||||||||
| Other liabilities | 13,126 | 9,947 | |||||||||||||||||||
| Total liabilities | $ | 1,124,889 | $ | 1,102,585 | |||||||||||||||||
| Non-controlling interest | — | — | |||||||||||||||||||
| Shareholders' equity | 124,922 | 117,530 | |||||||||||||||||||
| Total liabilities and shareholders' equity | $ | 1,249,811 | $ | 1,220,115 | |||||||||||||||||
| Net interest income | $ | 29,309 | $ | 29,629 | |||||||||||||||||
| Interest rate spread | 3.18 | % | 3.29 | % | |||||||||||||||||
| Cost of Funds | 0.38 | % | 0.50 | % | |||||||||||||||||
| Interest expense as a percent of average earning assets | 0.36 | % | 0.47 | % | |||||||||||||||||
| Net interest margin | 3.31 | % | 3.43 | % | |||||||||||||||||
Page 11