Attached files
| file | filename |
|---|---|
| 8-K - 8-K - MIDDLEBURG FINANCIAL CORP | a12-31x15earningsrelease.htm |
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 FOURTH QUARTER 2015 RESULTS
MIDDLEBURG, VA. – January 28, 2016 – Middleburg Financial Corporation (the “Company”) (Nasdaq: MBRG), today announced net income of $781,000, or $0.11 per diluted share, for the quarter ended December 31, 2015 and $7.83 million, or $1.09 per diluted share, for the full year 2015.
The net income in the fourth quarter was impacted by the previously announced impairment charge of $3.0 million recognized during the quarter. The impairment related to a loan participation totaling $4.0 million secured by receivables and inventory. Excluding this charge for the quarter, there would have been no provision for loan losses, and salary and employee benefits expense and tax expense would have been $4.27 million and $769,000, respectively, resulting in net income of $2.22 million or $0.31 per diluted share. Excluding this charge for the full year 2015, there would have been a recovery of provision for loan losses of $407,000, and salary and employee benefits expense and tax expense would have been $18.93 million and $3.28 million, respectively, resulting in net income of $9.27 million or $1.29 per diluted share for the full year 2015. This would have resulted in an annualized return on average assets ("ROA") of 0.69% and annualized return on average equity ("ROE") of 6.98% for the quarter. For the full year 2015, ROA would have been 0.74% and ROE of 7.40%. These effects on net income and related ROA and ROE ratios are non-GAAP measures of profitability.
Gary R. Shook, President and CEO commented: "We were pleased with the positive momentum in our overall performance metrics for 2015. Robust loan and deposit growth and a strong loan pipeline combined with good expense control have built the foundation for improvements in 2016. While we were disappointed with the $3.0 million impairment charge on a loan participation, we were gratified that the net income for the full year 2015 increased compared to the previous year. Furthermore, the performance in 2015 benefited from record net income of nearly $1.0 million from our wealth management subsidiary, Middleburg Investment Group.
As we turn our attention to 2016 we will continue our focus on improving net interest margin and maintaining the asset sensitivity of the balance sheet. The balance sheet is positioned well for an increase in rates.
We have been pleased with the success of the stock repurchase program that was launched in the fourth quarter of 2015. As of December 31, 2015, the Company had repurchased 77,500 shares of common stock. It is our strong belief that judicious open market purchases of stock coupled with a strong focus on dividends will further enhance shareholder value as does our commitment to delivering robust financial performance."
Fourth Quarter 2015 Highlights:
• | Net income was $781,000 or $0.11 per diluted share in the fourth quarter of 2015 compared to $1.63 million or $0.23 per diluted share for the same period in 2014. Net income for the full year 2015 increased to $7.83 million or $1.09 per diluted share compared to $7.58 million or $1.06 per diluted share for the full year 2014. |
• | Net interest margin decreased to 3.17% in the fourth quarter of 2015, lower by 11 basis points ("bp") compared to the previous quarter and lower by 14 bp compared to the same period in 2014. Net interest margin for the full year 2015 was 3.27%. |
• | Cost of funds was flat at 37 bp compared to the previous quarter and was 6 bp lower than the same period in 2014. |
Page 1
• | Total revenue increased to $12.06 million, higher by 0.42% compared to the previous quarter and an increase of 3.42% compared to the same period in 2014. |
• | Net interest income decreased to $9.47 million, lower by 1.95% compared to the previous quarter and 1.67% higher than the same period in 2014. Net interest income was $38.07 million for the full year 2015, relatively unchanged compared to net interest income reported for the full year 2014. |
• | Non-interest income increased by 10.15% compared to the previous quarter and was higher by10.34% compared to the same period in 2014. |
• | Non-interest expense decreased to $8.37 million, lower by 9.70% compared to the previous quarter and lower by 11.13% compared to the same period in 2014. Non-interest expense for the full year 2015 fell by 13.28% compared to the full year 2014. |
• | The efficiency ratio improved to 67.21%, compared to 73.30% for the previous quarter and 77.53% for the same period in 2014. The efficiency ratio for the full year 2015 was 70.86% compared to 75.10% for the full year 2014. |
• | Total assets increased to $1.29 billion, higher by 5.89% since December 31, 2014. |
• | Total deposits were $1.04 billion, an increase of 5.23% since December 31, 2014. |
• | Loans held-for-investment increased by 6.73% to $805.68 million on December 31, 2015 compared to $754.85 million on December 31, 2014. |
• | The allowance for loan losses was 1.37% of total loans compared to 1.46% for the previous quarter and 1.56% at December 31, 2014. |
• | Capital ratios continue to be strong: Total Risk-Based Capital Ratio of 17.52%, Tier 1 Risk-Based Capital Ratio of 16.27%, Common Equity Tier 1 Ratio of 15.61% and Tier 1 Leverage Ratio of 9.59% at December 31, 2015. |
TOTAL REVENUE
Total revenue, computed as net interest income plus non-interest income, was $12.06 million for the fourth quarter of 2015, higher by 0.42% compared to the previous quarter and an increase of 3.42% compared to the same period in 2014. Total revenue for the full year 2015 was $48.46 million while revenue for all of 2014 was $52.87 million. Total revenue for 2014 included revenue contributions from Southern Trust Mortgage. The Company sold its 62.3% ownership interest in Southern Trust Mortgage in May of 2014.
Net Interest Income
The Company recorded net interest income of $9.47 million for the fourth quarter of 2015, a decrease of 1.95% compared to the previous quarter and higher by 1.67% compared to the same period in 2014. The net interest margin in the fourth quarter of 2015 was 3.17%, lower by 11 bp compared to the previous quarter and 14 bp lower than the same period in 2014.
The following factors contributed to the changes in net interest margin during the fourth quarter of 2015, compared to the previous quarter:
• | Yields on earning assets decreased by 11 bp compared to the previous quarter, primarily due to a 19 bp decrease in yields on loans. |
• | Yields on investment securities decreased by 3 bp compared to the previous quarter as a result of lower yields on securities added to the investment portfolio. |
• | Yields on loans decreased by 19 bp compared to the previous quarter as a result of payoff activity, lower yields on loans added to the balance sheet and reversal of accrued interest. The accrued interest that was reversed represented 9 bp of loan yield. |
• | Cost of funds was 37 bp, unchanged compared to the previous quarter. |
The following table analyzes changes in net interest income comparing the fourth quarter of 2015 to the previous quarter and to the quarter ended December 31, 2014.
Page 2
Quarters Ended (Annualized) | ||||||||||||||||||||||||
(Dollars in thousands) | December 31, 2015 vs. September 30, 2015 Increase (Decrease) Due to Changes in: | December 31, 2015 vs. December 31, 2014 Increase (Decrease) Due to Changes in: | ||||||||||||||||||||||
Volume | Rate | Total | Volume | Rate | Total | |||||||||||||||||||
Earning Assets: | ||||||||||||||||||||||||
Securities: | ||||||||||||||||||||||||
Taxable | $ | 281 | $ | (75 | ) | $ | 206 | $ | 970 | $ | 97 | $ | 1,067 | |||||||||||
Tax-exempt | 33 | 3 | 36 | (126 | ) | (65 | ) | (191 | ) | |||||||||||||||
Loans: | ||||||||||||||||||||||||
Taxable | 630 | (1,554 | ) | (924 | ) | 3,912 | (4,634 | ) | (722 | ) | ||||||||||||||
Tax-exempt | — | — | — | — | — | — | ||||||||||||||||||
Interest on deposits with other banks and federal funds sold | (50 | ) | 46 | (4 | ) | (58 | ) | (5 | ) | (63 | ) | |||||||||||||
Total earning assets | $ | 894 | $ | (1,580 | ) | $ | (686 | ) | $ | 4,698 | $ | (4,607 | ) | $ | 91 | |||||||||
Interest-Bearing Liabilities: | ||||||||||||||||||||||||
Checking | $ | 4 | $ | — | $ | 4 | $ | 26 | $ | 30 | $ | 56 | ||||||||||||
Regular savings | 11 | 1 | 12 | 23 | — | 23 | ||||||||||||||||||
Money market savings | 26 | 6 | 32 | 15 | 9 | 24 | ||||||||||||||||||
Time deposits: | ||||||||||||||||||||||||
$100,000 and over | (45 | ) | 37 | (8 | ) | 139 | (36 | ) | 103 | |||||||||||||||
Under $100,000 | (15 | ) | (5 | ) | (20 | ) | (247 | ) | (162 | ) | (409 | ) | ||||||||||||
Total interest-bearing deposits | $ | (19 | ) | $ | 39 | $ | 20 | $ | (44 | ) | $ | (159 | ) | $ | (203 | ) | ||||||||
Securities sold under agreements to repurchase | — | (4 | ) | (4 | ) | (60 | ) | (250 | ) | (310 | ) | |||||||||||||
FHLB borrowings and other debt | (16 | ) | 48 | 32 | 119 | (67 | ) | 52 | ||||||||||||||||
Total interest-bearing liabilities | $ | (35 | ) | $ | 83 | $ | 48 | $ | 15 | $ | (476 | ) | $ | (461 | ) | |||||||||
Change in net interest income | $ | 929 | $ | (1,663 | ) | $ | (734 | ) | $ | 4,683 | $ | (4,131 | ) | $ | 552 | |||||||||
Comparing the fourth quarter of 2015 to the previous quarter, the table shows the increase in interest income for investments was largely driven by growth in the securities portfolio. We continue to add securities that are less sensitive to prepayments while retaining a balance between fixed and floating rate investments. The decrease in interest income from loans was mostly due to rate as the strong growth in loan balances was offset by lower loan rates. The changes in interest income in the fourth quarter of 2015 compared to the same quarter in 2014 reflected similar factors, namely increased interest income from investments driven by higher securities balances and lower interest income from loans stemming from lower loan rates that more than offset growth in loan balances. Competition for good credits continues to pressure loan rates.
Non-Interest Income
Non-interest income increased by 10.15% compared to the previous quarter and increased by 10.34% compared to the quarter ended December 31, 2014.
• | Total revenue generated by our wealth management group, Middleburg Investment Group ("MIG") was $1.16 million for the quarter ended December 31, 2015, relatively unchanged compared to the previous quarter and higher by 1.58% compared to the same quarter in 2014. Fee income is based primarily upon the market value of assets under administration which were $1.93 billion at December 31, 2015 and $1.87 billion at December 31, 2014. |
• | Other operating income was $527,000 for the quarter ended December 31, 2015, an increase of 98.12% compared to the previous quarter and higher by 102.69% compared to the quarter ended December 31, 2014. Most of the increase in other operating income during the periods was due to prepayment penalties from certain government guaranteed securities. |
NON-INTEREST EXPENSE
Non-interest expense decreased by 9.70% compared to the previous quarter and by 11.13% compared to the the same period in 2014. Principal categories of non-interest expense that changed were the following:
• | Salaries and employee benefit expenses decreased by 21.99% when compared to the previous quarter and decreased by 26.55% when compared to the same period in 2014. The decline in salary and benefit expenses was due to lower |
Page 3
incentive accruals as we aligned compensation to the achievement of income and growth targets and exercised strong expense control throughout 2015.
• | Costs related to other real estate owned (OREO) decreased when compared to the prior quarter and also when compared to the same period in 2014. In the previous quarter, we recorded a valuation adjustment of $157,500 for one property resulting from an updated appraisal. Additional reasons for the improvement in OREO expense include an overall decline in maintenance costs for the properties. |
• | Computer expense increased to $801,000 for the current quarter compared to $524,000 and $485,000 for the quarters ended September 30, 2015 and December 31, 2014, respectively. The increase in computer operations expense was primarily related to costs associated with conversion to a new on-line banking platform in the fourth quarter of 2015. |
ASSET QUALITY
Total nonperforming assets increased in 2015 primarily due to the restructuring of two loans that are part of a single relationship totaling $9.93 million. The loans were restructured in the second quarter of 2015 and one of them was downgraded that quarter, which resulted in an increase in accruing Troubled Debt Restructurings ("TDR's"). Accruing TDR's rose to $12.06 million at December 31, 2015 compared to $4.30 million at December 31, 2014. While this loan was restructured and downgraded in 2015, the Company had properly classified the loan as impaired at December 31, 2014, and as a result no additional reserves were recorded in 2015 for this loan. This resulted in total nonperforming assets increasing to $25.51 million at December 31, 2015 compared to $19.45 million at December 31, 2014.
• | Total past due loans declined by 31.33% to $3.33 million as of December 31, 2015 from $4.85 million as of December 31, 2014. |
• | Nonaccrual loans declined by 11.67% to $8.78 million as of December 31, 2015 from $9.94 million as of December 31, 2014. |
• | Loans that were risk rated either as special mention, substandard, doubtful, or loss declined by 15.20% to $46.67 million as of December 31, 2015 from $55.03 million as of December 31, 2014. |
• | OREO balances declined by 17.43% when compared to year end 2014. Changes in OREO include the sale of properties totaling $1.04 million, new foreclosures of $1.20 million and transfers of $855,000 to the Company's fixed assets to be used as part of the Bank's operations. |
In an ongoing effort to improve the credit quality of the balance sheet, the Company also sold $1.02 million of nonperforming loans in the second quarter of 2015.
The Company reduced its allowance for loan and lease losses ("ALLL") to $11.05 million or 1.37% of total loans at December 31, 2015 compared to $11.79 million or 1.56% of total loans at December 31, 2014. The provision for loan losses increased to $2.7 million in the fourth quarter of 2015 compared to a recovery of provision of $432,000 in the previous quarter and a provision of $450,000 for the same period in 2014. The provision is based on the Company's methodology for determining the allowance for loan and lease losses.
CONSOLIDATED ASSETS
Total consolidated assets at December 31, 2015 were $1.29 billion, higher by 5.89% since December 31, 2014. Changes in major asset categories were as follows:
• | Cash balances and deposits with other banks decreased by $15.79 million compared to December 31, 2014. |
• | The Company deployed some of its excess liquidity into growing its securities portfolio which increased by $29.02 million compared to December 31, 2014. |
• | Loans held-for-investment grew to $805.68 million as of December 31, 2015 compared to $754.85 million on December 31, 2014, an increase of $50.84 million from December 31, 2014 and a growth rate of 6.73% for 2015. |
• | Other assets increased $4.87 million compared to December 31, 2014, primarily due to a $3.0 million investment in low income housing tax credit funds. |
CONSOLIDATED LIABILITIES
Total consolidated liabilities at December 31, 2015 were $1.17 billion, an increase of 6.40% compared to December 31, 2014. Deposit growth continues to be strong with total deposits increasing by $51.72 million from December 31, 2014 to $1.04 billion as of December 31, 2015. Federal Home Loan Bank ("FHLB") advances increased by $30.00 million from December 31, 2014 to $85.00 million at December 31, 2015. Most of the growth in FHLB advances occurred in the fourth quarter of 2015.
SHAREHOLDERS' EQUITY AND CAPITAL
Shareholders’ equity at December 31, 2015 was $123.55 million, compared to $122.03 million at December 31, 2014. Retained earnings at December 31, 2015 were $60.39 million compared to $55.85 million at December 31, 2014. On September 15, 2015, the Company's Board of Directors authorized the repurchase of up to $10 million of the Company’s common stock, or approximately
Page 4
8% of the Company’s outstanding shares. The repurchase program was effective immediately and runs through December 31, 2017. This program replaces the previous repurchase program adopted in 1999, pursuant to which the Company had 24,084 shares remaining eligible for repurchase. As of December 31, 2015, the Company had repurchased 77,500 shares, totaling $1.42 million, for an average price of $18.37. The book value of the Company’s common stock at December 31, 2015 was $17.44 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 December 31, 2015:
• | Tier 1 Leverage ratio was 9.59%, 5.59% over the regulatory minimum of 4.00% to be well capitalized. |
• | Common Equity Tier 1 Ratio was 15.61%, 8.61% over the regulatory minimum of 7.00% to be well capitalized. |
• | Tier 1 Risk-Based Capital Ratio was 16.27%, 7.77% over the regulatory minimum of 8.50% to be well capitalized. |
• | Total Risk Based Capital Ratio was 17.52%, 7.02% over the regulatory minimum of 10.50% to be well capitalized . |
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.
Page 5
MIDDLEBURG FINANCIAL CORPORATION AND SUBSIDIARIES | |||||||||||
Consolidated Balance Sheets | |||||||||||
(In thousands, except for share and per share data) | |||||||||||
(Unaudited) | |||||||||||
December 31, 2015 | September 30, 2015 | December 31, 2014 | |||||||||
ASSETS | |||||||||||
Cash and due from banks | $ | 5,489 | $ | 6,498 | $ | 7,396 | |||||
Interest bearing deposits with other banks | 33,739 | 33,281 | 47,626 | ||||||||
Total cash and cash equivalents | 39,228 | 39,779 | 55,022 | ||||||||
Securities held to maturity, fair value of $4,163, $1,375 and $1,397, respectively | 4,207 | 1,500 | 1,500 | ||||||||
Securities available for sale, at fair value | 374,571 | 372,779 | 348,263 | ||||||||
Restricted securities, at cost | 6,411 | 5,349 | 5,279 | ||||||||
Loans, net of allowance for loan losses of $11,046, $11,400 and $11,786, respectively | 794,635 | 769,467 | 743,060 | ||||||||
Premises and equipment, net | 19,531 | 19,787 | 18,104 | ||||||||
Goodwill and identified intangibles, net | 3,636 | 3,679 | 3,807 | ||||||||
Other real estate owned, net of valuation allowance | 3,345 | 3,871 | 4,051 | ||||||||
Bank owned life insurance | 23,273 | 23,107 | 22,617 | ||||||||
Accrued interest receivable and other assets | 26,026 | 21,972 | 21,154 | ||||||||
TOTAL ASSETS | $ | 1,294,863 | $ | 1,261,290 | $ | 1,222,857 | |||||
LIABILITIES | |||||||||||
Deposits: | |||||||||||
Non-interest bearing demand deposits | $ | 235,897 | $ | 242,890 | $ | 216,912 | |||||
Savings and interest bearing demand deposits | 560,328 | 539,972 | 523,230 | ||||||||
Time deposits | 244,575 | 249,491 | 248,938 | ||||||||
Total deposits | 1,040,800 | 1,032,353 | 989,080 | ||||||||
Securities sold under agreements to repurchase | 26,869 | 24,468 | 38,551 | ||||||||
Federal Home Loan Bank borrowings | 85,000 | 60,000 | 55,000 | ||||||||
Subordinated notes | 5,155 | 5,155 | 5,155 | ||||||||
Accrued interest payable and other liabilities | 13,485 | 12,902 | 13,037 | ||||||||
TOTAL LIABILITIES | 1,171,309 | 1,134,878 | 1,100,823 | ||||||||
Commitments and contingent liabilities | |||||||||||
SHAREHOLDERS' EQUITY | |||||||||||
Common stock ($2.50 par value; 20,000,000 shares authorized, 7,085,217, 7,162,716 and 7,131,643, issued and outstanding, respectively) | 17,330 | 17,522 | 17,494 | ||||||||
Capital surplus | 44,155 | 45,224 | 44,892 | ||||||||
Retained earnings | 60,392 | 60,542 | 55,854 | ||||||||
Accumulated other comprehensive income | 1,677 | 3,124 | 3,794 | ||||||||
TOTAL SHAREHOLDERS' EQUITY | 123,554 | 126,412 | 122,034 | ||||||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 1,294,863 | $ | 1,261,290 | $ | 1,222,857 | |||||
Page 6
MIDDLEBURG FINANCIAL CORPORATION AND SUBSIDIARIES | |||||||||||||||
Consolidated Statements of Income | |||||||||||||||
(In thousands, except for per share data) | |||||||||||||||
(Unaudited) | |||||||||||||||
For the Three Months Ended December 31, | For the Year Ended December 31, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
INTEREST AND DIVIDEND INCOME | |||||||||||||||
Interest and fees on loans | $ | 7,995 | $ | 8,176 | $ | 32,479 | $ | 33,833 | |||||||
Interest and dividends on securities | |||||||||||||||
Taxable | 1,992 | 1,728 | 7,628 | 6,900 | |||||||||||
Tax-exempt | 449 | 481 | 1,803 | 2,137 | |||||||||||
Dividends | 69 | 64 | 265 | 293 | |||||||||||
Interest on deposits with other banks and federal funds sold | 22 | 38 | 106 | 162 | |||||||||||
Total interest and dividend income | 10,527 | 10,487 | 42,281 | 43,325 | |||||||||||
INTEREST EXPENSE | |||||||||||||||
Interest on deposits | 882 | 933 | 3,462 | 3,889 | |||||||||||
Interest on securities sold under agreements to repurchase | — | 79 | 64 | 318 | |||||||||||
Interest on FHLB borrowings and other debt | 174 | 160 | 681 | 1,036 | |||||||||||
Total interest expense | 1,056 | 1,172 | 4,207 | 5,243 | |||||||||||
NET INTEREST INCOME | 9,471 | 9,315 | 38,074 | 38,082 | |||||||||||
Provision for loan losses | 2,700 | 450 | 2,293 | 1,960 | |||||||||||
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES | 6,771 | 8,865 | 35,781 | 36,122 | |||||||||||
NON-INTEREST INCOME | |||||||||||||||
Service charges on deposit accounts | 613 | 606 | 2,405 | 2,422 | |||||||||||
Trust services income | 1,156 | 1,138 | 4,785 | 4,362 | |||||||||||
Gains (losses) on sales of loans held for sale | (4 | ) | 1 | (1 | ) | 4,860 | |||||||||
Gains on sales of securities available for sale, net | 2 | 45 | 140 | 186 | |||||||||||
Commissions on investment sales | 132 | 132 | 547 | 611 | |||||||||||
Bank owned life insurance | 167 | 168 | 656 | 662 | |||||||||||
Gain on sale of majority interest in consolidated subsidiary | — | — | — | 24 | |||||||||||
Other operating income | 527 | 260 | 1,858 | 1,659 | |||||||||||
Total non-interest income | 2,593 | 2,350 | 10,390 | 14,786 | |||||||||||
NON-INTEREST EXPENSE | |||||||||||||||
Salaries and employee benefits | 3,771 | 5,134 | 18,435 | 22,601 | |||||||||||
Occupancy and equipment | 1,293 | 1,336 | 5,106 | 6,177 | |||||||||||
Advertising | (44 | ) | (65 | ) | 288 | 365 | |||||||||
Computer operations | 801 | 485 | 2,337 | 1,893 | |||||||||||
Other real estate owned | (1 | ) | 110 | 284 | 256 | ||||||||||
Other taxes | 231 | 212 | 915 | 849 | |||||||||||
Federal deposit insurance | 203 | 212 | 786 | 899 | |||||||||||
Other operating expenses | 2,120 | 1,999 | 7,475 | 8,041 | |||||||||||
Total non-interest expense | 8,374 | 9,423 | 35,626 | 41,081 | |||||||||||
Income before income taxes | 990 | 1,792 | 10,545 | 9,827 | |||||||||||
Income tax expense | 209 | 162 | 2,715 | 2,341 | |||||||||||
NET INCOME | 781 | 1,630 | 7,830 | 7,486 | |||||||||||
Net loss attributable to non-controlling interest | — | — | — | 98 | |||||||||||
Net income attributable to Middleburg Financial Corporation | $ | 781 | $ | 1,630 | $ | 7,830 | $ | 7,584 | |||||||
Earnings per share: | |||||||||||||||
Basic | $ | 0.11 | $ | 0.23 | $ | 1.10 | $ | 1.07 | |||||||
Diluted | $ | 0.11 | $ | 0.23 | $ | 1.09 | $ | 1.06 | |||||||
Dividends per common share | $ | 0.13 | $ | 0.10 | $ | 0.46 | $ | 0.34 | |||||||
Page 7
MIDDLEBURG FINANCIAL CORPORATION AND SUBSIDIARIES | |||||||||||||||||||
Quarterly Summary of Consolidated Statements of Income | |||||||||||||||||||
(Unaudited, Dollars In thousands, except for per share data) | |||||||||||||||||||
For the Three Months Ended | |||||||||||||||||||
December 31, 2015 | September 30, 2015 | June 30, 2015 | March 31, 2015 | December 31, 2014 | |||||||||||||||
INTEREST AND DIVIDEND INCOME | |||||||||||||||||||
Interest and fees on loans | $ | 7,995 | $ | 8,227 | $ | 8,014 | $ | 8,243 | $ | 8,176 | |||||||||
Interest and dividends on securities | |||||||||||||||||||
Taxable | 1,992 | 1,938 | 1,792 | 1,906 | 1,728 | ||||||||||||||
Tax-exempt | 449 | 444 | 449 | 461 | 481 | ||||||||||||||
Dividends | 69 | 71 | 66 | 59 | 64 | ||||||||||||||
Interest on deposits with other banks and federal funds sold | 22 | 23 | 31 | 30 | 38 | ||||||||||||||
Total interest and dividend income | 10,527 | 10,703 | 10,352 | 10,699 | 10,487 | ||||||||||||||
INTEREST EXPENSE | |||||||||||||||||||
Interest on deposits | 882 | 877 | 848 | 855 | 933 | ||||||||||||||
Interest on securities sold under agreements to repurchase | — | 2 | 17 | 45 | 79 | ||||||||||||||
Interest on FHLB borrowings and other debt | 174 | 165 | 174 | 168 | 160 | ||||||||||||||
Total interest expense | 1,056 | 1,044 | 1,039 | 1,068 | 1,172 | ||||||||||||||
NET INTEREST INCOME | 9,471 | 9,659 | 9,313 | 9,631 | 9,315 | ||||||||||||||
Provision for (recovery of) loan losses | 2,700 | (432 | ) | (425 | ) | 450 | 450 | ||||||||||||
NET INTEREST INCOME AFTER PROVISION FOR (RECOVERY OF) LOAN LOSSES | 6,771 | 10,091 | 9,738 | 9,181 | 8,865 | ||||||||||||||
NON-INTEREST INCOME | |||||||||||||||||||
Service charges on deposit accounts | 613 | 622 | 612 | 558 | 606 | ||||||||||||||
Trust services income | 1,156 | 1,168 | 1,243 | 1,218 | 1,138 | ||||||||||||||
Gains (losses) on sales of loans held for sale | (4 | ) | — | 3 | — | 1 | |||||||||||||
Gains on sales of securities available for sale, net | 2 | — | 37 | 101 | 45 | ||||||||||||||
Commissions on investment sales | 132 | 132 | 154 | 129 | 132 | ||||||||||||||
Bank owned life insurance | 167 | 166 | 163 | 160 | 168 | ||||||||||||||
Other operating income | 527 | 266 | 223 | 842 | 260 | ||||||||||||||
Total non-interest income | 2,593 | 2,354 | 2,435 | 3,008 | 2,350 | ||||||||||||||
NON-INTEREST EXPENSE | |||||||||||||||||||
Salaries and employee benefits | 3,771 | 4,834 | 4,982 | 4,848 | 5,134 | ||||||||||||||
Occupancy and equipment | 1,293 | 1,248 | 1,226 | 1,339 | 1,336 | ||||||||||||||
Advertising | (44 | ) | 98 | 101 | 133 | (65 | ) | ||||||||||||
Computer operations | 801 | 524 | 522 | 490 | 485 | ||||||||||||||
Other real estate owned | (1 | ) | 193 | 25 | 67 | 110 | |||||||||||||
Other taxes | 231 | 230 | 231 | 223 | 212 | ||||||||||||||
Federal deposit insurance | 203 | 188 | 184 | 211 | 212 | ||||||||||||||
Other operating expenses | 2,120 | 1,959 | 1,807 | 1,589 | 1,999 | ||||||||||||||
Total non-interest expense | 8,374 | 9,274 | 9,078 | 8,900 | 9,423 | ||||||||||||||
Income before income taxes | 990 | 3,171 | 3,095 | 3,289 | 1,792 | ||||||||||||||
Income tax expense | 209 | 850 | 815 | 841 | 162 | ||||||||||||||
NET INCOME | $ | 781 | $ | 2,321 | $ | 2,280 | $ | 2,448 | $ | 1,630 | |||||||||
Earnings per share: | |||||||||||||||||||
Basic | $ | 0.11 | $ | 0.32 | $ | 0.32 | $ | 0.34 | $ | 0.23 | |||||||||
Diluted | $ | 0.11 | $ | 0.32 | $ | 0.32 | $ | 0.34 | $ | 0.23 | |||||||||
Dividends per common share | $ | 0.13 | $ | 0.13 | $ | 0.10 | $ | 0.10 | $ | 0.10 | |||||||||
Page 8
MIDDLEBURG FINANCIAL CORPORATION AND SUBSIDIARIES | |||||||||||||||||||
Selected Financial Data by Quarter | |||||||||||||||||||
(Unaudited, Dollars in thousands, except for per share data) | |||||||||||||||||||
December 31, | September 30, | June 30, | March 31, | December 31, | |||||||||||||||
2015 | 2015 | 2015 | 2015 | 2014 | |||||||||||||||
BALANCE SHEET RATIOS | |||||||||||||||||||
Loans to deposits | 77.41 | % | 75.64 | % | 76.89 | % | 74.60 | % | 76.32 | % | |||||||||
Average interest-earning assets to average interest-bearing liabilities | 136.05 | % | 135.94 | % | 135.72 | % | 136.04 | % | 133.54 | % | |||||||||
INCOME STATEMENT RATIOS | |||||||||||||||||||
Return on average assets (ROA) | 0.24 | % | 0.73 | % | 0.73 | % | 0.80 | % | 0.53 | % | |||||||||
Return on average equity (ROE) | 2.45 | % | 7.33 | % | 7.31 | % | 8.01 | % | 5.31 | % | |||||||||
Net interest margin (1) | 3.17 | % | 3.28 | % | 3.24 | % | 3.40 | % | 3.31 | % | |||||||||
Yield on average earning assets | 3.52 | % | 3.63 | % | 3.59 | % | 3.77 | % | 3.72 | % | |||||||||
Yield on securities | 2.83 | % | 2.86 | % | 2.77 | % | 2.98 | % | 2.87 | % | |||||||||
Yield on loans | 4.01 | % | 4.20 | % | 4.20 | % | 4.45 | % | 4.42 | % | |||||||||
Cost of funds | 0.37 | % | 0.37 | % | 0.38 | % | 0.39 | % | 0.43 | % | |||||||||
Efficiency ratio (5) | 67.21 | % | 73.30 | % | 74.88 | % | 68.35 | % | 77.53 | % | |||||||||
PER SHARE DATA | |||||||||||||||||||
Dividends | $ | 0.13 | $ | 0.13 | $ | 0.10 | $ | 0.10 | $ | 0.10 | |||||||||
Book value | 17.44 | 17.65 | 17.42 | 17.51 | 17.11 | ||||||||||||||
Tangible book value (4) | 16.93 | 17.13 | 16.90 | 16.99 | 16.58 | ||||||||||||||
SHARE PRICE DATA | |||||||||||||||||||
Closing price | $ | 18.48 | $ | 17.61 | $ | 18.00 | $ | 18.30 | $ | 18.01 | |||||||||
Diluted earnings multiple (2) | 16.95 | 13.76 | 14.06 | 13.45 | 16.99 | ||||||||||||||
Book value multiple (3) | 1.06 | 1.00 | 1.03 | 1.04 | 1.05 | ||||||||||||||
COMMON STOCK DATA | |||||||||||||||||||
Outstanding shares at end of period | 7,085,217 | 7,162,716 | 7,163,255 | 7,127,105 | 7,131,643 | ||||||||||||||
Weighted average shares O/S , basic - QTD | 7,152,844 | 7,162,930 | 7,145,929 | 7,127,910 | 7,127,164 | ||||||||||||||
Weighted average shares O/S, diluted - QTD | 7,171,498 | 7,181,183 | 7,167,165 | 7,148,702 | 7,146,140 | ||||||||||||||
Dividend payout ratio | 118.18 | % | 40.63 | % | 31.25 | % | 29.41 | % | 43.48 | % | |||||||||
CAPITAL RATIOS | |||||||||||||||||||
Capital to assets - common shareholders | 9.54 | % | 10.02 | % | 10.05 | % | 9.86 | % | 9.98 | % | |||||||||
Leverage ratio | 9.59 | % | 9.84 | % | 9.85 | % | 9.76 | % | 9.90 | % | |||||||||
Common equity tier 1 ratio | 15.61 | % | 16.31 | % | 16.35 | % | 16.49 | % | N/A | ||||||||||
Tier 1 risk based capital ratio | 16.27 | % | 16.99 | % | 17.04 | % | 17.20 | % | 15.70 | % | |||||||||
Total risk based capital ratio | 17.52 | % | 18.25 | % | 18.28 | % | 18.45 | % | 16.95 | % | |||||||||
CREDIT QUALITY | |||||||||||||||||||
Net charge-offs (recoveries) to average loans | 0.390 | % | (0.002 | )% | (0.04 | )% | 0.03 | % | 0.46 | % | |||||||||
Total nonperforming loans to total loans | 2.62 | % | 2.71 | % | 2.63 | % | 1.83 | % | 1.89 | % | |||||||||
Total nonperforming assets to total assets | 1.97 | % | 2.07 | % | 1.99 | % | 1.46 | % | 1.59 | % | |||||||||
Nonaccrual loans to: | |||||||||||||||||||
Total loans | 1.09 | % | 1.13 | % | 1.04 | % | 1.26 | % | 1.32 | % | |||||||||
Total assets | 0.68 | % | 0.70 | % | 0.64 | % | 0.76 | % | 0.81 | % | |||||||||
Allowance for loan losses to: | |||||||||||||||||||
Total loans | 1.37 | % | 1.46 | % | 1.54 | % | 1.58 | % | 1.56 | % | |||||||||
Nonperforming assets | 43.30 | % | 43.73 | % | 48.03 | % | 65.23 | % | 60.59 | % | |||||||||
Nonaccrual loans | 125.75 | % | 129.15 | % | 148.53 | % | 124.92 | % | 118.52 | % | |||||||||
NONPERFORMING ASSETS | |||||||||||||||||||
Loans delinquent 90+ days and still accruing | $ | 278 | $ | 224 | $ | 173 | $ | 74 | $ | 30 | |||||||||
Nonaccrual loans | 8,784 | 8,827 | 8,008 | 9,625 | 9,944 | ||||||||||||||
Restructured loans (not in nonaccrual) | 12,058 | 12,106 | 12,138 | 4,262 | 4,295 | ||||||||||||||
Other real estate owned | 3,345 | 3,871 | 3,402 | 3,402 | 4,051 | ||||||||||||||
Repossessed assets | 1,043 | 1,044 | 1,044 | 1,070 | 1,132 | ||||||||||||||
Total nonperforming assets | $ | 25,508 | $ | 26,072 | $ | 24,765 | $ | 18,433 | $ | 19,452 | |||||||||
Page 9
(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 10
MIDDLEBURG FINANCIAL CORPORATION AND SUBSIDIARIES Average Balances, Income and Expenses, Yields and Rates (Unaudited) | |||||||||||||||||||||
Three months ended December 31, | |||||||||||||||||||||
2015 | 2014 | ||||||||||||||||||||
Average Balance | Income/ Expense | Yield/ Rate (2) | Average Balance | Income/ Expense | Yield/ Rate (2) | ||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||
Assets: | |||||||||||||||||||||
Securities: | |||||||||||||||||||||
Taxable | $ | 332,163 | $ | 2,061 | 2.46 | % | $ | 292,726 | $ | 1,792 | 2.43 | % | |||||||||
Tax-exempt (1) | 51,884 | 681 | 5.21 | % | 54,275 | 729 | 5.32 | % | |||||||||||||
Total securities | $ | 384,047 | $ | 2,742 | 2.83 | % | $ | 347,001 | $ | 2,521 | 2.88 | % | |||||||||
Loans: | |||||||||||||||||||||
Taxable | $ | 791,590 | $ | 7,989 | 4.00 | % | $ | 733,090 | $ | 8,171 | 4.42 | % | |||||||||
Tax-exempt (1) | 578 | 8 | 5.49 | % | 617 | 8 | 5.14 | % | |||||||||||||
Total loans (3) | $ | 792,168 | $ | 7,997 | 4.01 | % | $ | 733,707 | $ | 8,179 | 4.42 | % | |||||||||
Interest on deposits with other banks and federal funds sold | 38,348 | 22 | 0.23 | % | 63,905 | 38 | 0.24 | % | |||||||||||||
Total earning assets | $ | 1,214,563 | $ | 10,761 | 3.52 | % | $ | 1,144,613 | $ | 10,738 | 3.72 | % | |||||||||
Less: allowance for loan losses | (11,733 | ) | (11,482 | ) | |||||||||||||||||
Total nonearning assets | 79,695 | 76,475 | |||||||||||||||||||
Total assets | $ | 1,282,525 | $ | 1,209,606 | |||||||||||||||||
Liabilities: | |||||||||||||||||||||
Interest-bearing deposits: | |||||||||||||||||||||
Checking | $ | 345,525 | $ | 177 | 0.20 | % | $ | 332,419 | $ | 163 | 0.19 | % | |||||||||
Regular savings | 125,947 | 59 | 0.19 | % | 113,316 | 53 | 0.19 | % | |||||||||||||
Money market savings | 78,918 | 40 | 0.20 | % | 71,222 | 34 | 0.19 | % | |||||||||||||
Time deposits: | |||||||||||||||||||||
$100,000 and over | 144,440 | 320 | 0.88 | % | 128,478 | 294 | 0.91 | % | |||||||||||||
Under $100,000 | 102,586 | 286 | 1.11 | % | 123,814 | 389 | 1.25 | % | |||||||||||||
Total interest-bearing deposits | $ | 797,416 | $ | 882 | 0.44 | % | $ | 769,249 | $ | 933 | 0.48 | % | |||||||||
Securities sold under agreements to repurchase | 28,663 | — | — | % | 37,541 | 79 | 0.83 | % | |||||||||||||
FHLB borrowings and other debt | 66,677 | 174 | 1.03 | % | 50,372 | 160 | 1.26 | % | |||||||||||||
Total interest-bearing liabilities | $ | 892,756 | $ | 1,056 | 0.47 | % | $ | 857,162 | $ | 1,172 | 0.54 | % | |||||||||
Non-interest bearing liabilities: | |||||||||||||||||||||
Demand deposits | 248,536 | 216,402 | |||||||||||||||||||
Other liabilities | 15,016 | 14,359 | |||||||||||||||||||
Total liabilities | $ | 1,156,308 | $ | 1,087,923 | |||||||||||||||||
Non-controlling interest | — | — | |||||||||||||||||||
Shareholders' equity | 126,217 | 121,683 | |||||||||||||||||||
Total liabilities and shareholders' equity | $ | 1,282,525 | $ | 1,209,606 | |||||||||||||||||
Net interest income | $ | 9,705 | $ | 9,566 | |||||||||||||||||
Interest rate spread | 3.05 | % | 3.18 | % | |||||||||||||||||
Cost of Funds | 0.37 | % | 0.43 | % | |||||||||||||||||
Interest expense as a percent of average earning assets | 0.34 | % | 0.41 | % | |||||||||||||||||
Net interest margin | 3.17 | % | 3.31 | % | |||||||||||||||||
(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 11
MIDDLEBURG FINANCIAL CORPORATION AND SUBSIDIARIES Average Balances, Income and Expenses, Yields and Rates (Unaudited) | |||||||||||||||||||||
Year ended December 31, | |||||||||||||||||||||
2015 | 2014 | ||||||||||||||||||||
Average Balance | Income/ Expense | Yield/ Rate (2) | Average Balance | Income/ Expense | Yield/ Rate (2) | ||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||
Assets: | |||||||||||||||||||||
Securities: | |||||||||||||||||||||
Taxable | $ | 319,705 | $ | 7,893 | 2.47 | % | $ | 282,198 | $ | 7,193 | 2.55 | % | |||||||||
Tax-exempt (1) | 51,732 | 2,732 | 5.28 | % | 56,729 | 3,238 | 5.71 | % | |||||||||||||
Total securities | $ | 371,437 | $ | 10,625 | 2.86 | % | $ | 338,927 | $ | 10,431 | 3.08 | % | |||||||||
Loans: | |||||||||||||||||||||
Taxable | $ | 771,207 | $ | 32,457 | 4.21 | % | $ | 741,028 | $ | 33,810 | 4.56 | % | |||||||||
Tax-exempt (1) | 609 | 33 | 5.42 | % | 643 | 34 | 5.29 | % | |||||||||||||
Total loans (3) | $ | 771,816 | $ | 32,490 | 4.21 | % | $ | 741,671 | $ | 33,844 | 4.56 | % | |||||||||
Interest on deposits with other banks and federal funds sold | 49,201 | 106 | 0.22 | % | 71,275 | 162 | 0.23 | % | |||||||||||||
Total earning assets | $ | 1,192,454 | $ | 43,221 | 3.62 | % | $ | 1,151,873 | $ | 44,437 | 3.86 | % | |||||||||
Less: allowance for loan losses | (11,853 | ) | (12,241 | ) | |||||||||||||||||
Total nonearning assets | 77,456 | 77,834 | |||||||||||||||||||
Total assets | $ | 1,258,057 | $ | 1,217,466 | |||||||||||||||||
Liabilities: | |||||||||||||||||||||
Interest-bearing deposits: | |||||||||||||||||||||
Checking | $ | 343,026 | $ | 693 | 0.20 | % | $ | 339,996 | $ | 651 | 0.19 | % | |||||||||
Regular savings | 119,989 | 223 | 0.19 | % | 113,363 | 212 | 0.19 | % | |||||||||||||
Money market savings | 70,239 | 136 | 0.19 | % | 73,232 | 139 | 0.19 | % | |||||||||||||
Time deposits: | |||||||||||||||||||||
$100,000 and over | 138,860 | 1,220 | 0.88 | % | 125,904 | 1,232 | 0.98 | % | |||||||||||||
Under $100,000 | 106,023 | 1,190 | 1.12 | % | 129,021 | 1,655 | 1.28 | % | |||||||||||||
Total interest-bearing deposits | $ | 778,137 | $ | 3,462 | 0.44 | % | $ | 781,516 | $ | 3,889 | 0.50 | % | |||||||||
Securities sold under agreements to repurchase | 30,095 | 64 | 0.21 | % | 36,899 | 318 | 0.86 | % | |||||||||||||
FHLB borrowings and other debt | 68,977 | 681 | 0.99 | % | 70,141 | 1,036 | 1.48 | % | |||||||||||||
Federal funds purchased | 1 | — | — | % | 1 | — | — | % | |||||||||||||
Total interest-bearing liabilities | $ | 877,210 | $ | 4,207 | 0.48 | % | $ | 888,557 | $ | 5,243 | 0.59 | % | |||||||||
Non-interest bearing liabilities: | |||||||||||||||||||||
Demand deposits | 241,996 | 199,273 | |||||||||||||||||||
Other liabilities | 13,602 | 11,059 | |||||||||||||||||||
Total liabilities | $ | 1,132,808 | $ | 1,098,889 | |||||||||||||||||
Non-controlling interest | — | — | |||||||||||||||||||
Shareholders' equity | 125,249 | 118,577 | |||||||||||||||||||
Total liabilities and shareholders' equity | $ | 1,258,057 | $ | 1,217,466 | |||||||||||||||||
Net interest income | $ | 39,014 | $ | 39,194 | |||||||||||||||||
Interest rate spread | 3.14 | % | 3.27 | % | |||||||||||||||||
Cost of Funds | 0.38 | % | 0.48 | % | |||||||||||||||||
Interest expense as a percent of average earning assets | 0.35 | % | 0.46 | % | |||||||||||||||||
Net interest margin | 3.27 | % | 3.40 | % | |||||||||||||||||
(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 12