Online Banking

forgot password?

Middleburg Financial Corporation Announces 3Q 2009 Results

Middleburg Financial Corporation parent company of Middleburg Bank and Middleburg Investment Group, Inc., reported its financial results for the third quarter of 2009.


MIDDLEBURG, VIRGINIA (October 28, 2009) – Middleburg Financial Corporation (the “Company”), (NASDAQ – MBRG), parent company of Middleburg Bank (the “Bank”) and Middleburg Investment Group, Inc., today reported its financial results for the third quarter of 2009.

Third Quarter 2009 Highlights
For the Quarter:

For the Year:

“This economic cycle continues to create a negative environment for our communities and thus for the financial services sector” commented Joseph L. Boling, Chairman and CEO of Middleburg Financial Corporation.  “While we don’t foresee an immediate broader economic recovery, we do see positive signs in the portfolio of Middleburg Bank. Our Balance Sheet continues to strengthen with the addition of $19.3 million in capital raised during the third quarter, as well as the continued growth in deposits of nearly $43 million, year to date. Additionally, our non performing assets, although higher than our traditional levels, do continue to track at levels significantly less than our peers.”  Mr. Boling continued, “We also used surplus cash generated from our deposit base during the third quarter to materially reduce the Company’s  wholesale funding levels.”


Net Interest Income and Net Interest Margin

Interest and fees on loans was $12.0 million during the three months ended September 30, 2009, compared to $12.9 million during the three months ended June 30, 2009.  Loan fees decreased $1.0 million when comparing the quarter ended September 30, 2009 to the quarter ended June 30, 2009, while interest on real estate loans increased $247,000 for the same periods.  During the third quarter, loan production at Southern Trust Mortgage decreased 37.5% from the record high of $316.9 million at the end of the second quarter.  Loans, net of the allowance for loan losses increased $410,000 at September 30, 2009 from the June 30, 2009 balance of $642.9 million.  For the quarter ended September 30, 2009, tax equivalent yield on loans was 6.83% or 26 basis points lower than for the quarter ended June 30, 2009. 

Interest income from the investment portfolio, which includes securities available for sale, federal funds sold and other interest bearing deposits, increased $8,000 from the three months ended June 30, 2009 to the three months ended September 30, 2009.  The average balance of securities available for sale increased $3.0 million to $168.3 million during the three months ended September 30, 2009, when compared to the three months ended June 30, 2009.  During the third quarter, the Company reinvested the proceeds of maturities and principal payments of securities into available for sale securities as part of its investment strategy.  The average balance of federal funds sold decreased $2.1 million during the third quarter to $29.6 million.  During the three months ended September 30, 2009, the Company invested excess cash into an interest-bearing deposit account at the Federal Reserve Bank of Richmond, as a precaution against the current economic uncertainties.  For the quarter ended September 30, 2009, the tax equivalent yield on the securities available for sale decreased 15 basis points when compared to the quarter ended June 30, 2009, to 5.56%.

Total interest expense for the three months ended September 30, 2009 decreased $335,000 when compared to the three months ended June 30, 2009.  Interest expense on short-term borrowings decreased $138,000 as a result of decreases in short-term interest rates, when comparing the three months ended September 30, 2009 to the three months ended June 30, 2009.  Interest expense on long-term debt decreased $107,000 as the result of maturities during the third quarter, when compared the second quarter of 2009.  The total average cost of interest bearing liabilities decreased 15 basis points to 2.35%, during the quarter ended September 30, 2009, when compared to the prior quarter.  The costs of savings and interest-bearing demand deposits within certain categories was relatively unchanged, while increases in the average balances resulted in increases in interest expense of $88,000, when comparing the third quarter to the second quarter.  Interest expense related to time deposits decreased $181,000 as a result of decreases in the average balances, when comparing the third quarter to the second quarter.  The total average balance of interest bearing liabilities decreased $16.2 million during the quarter ended September 30, 2009.

The net interest margin decreased from 4.36% for the quarter ended June 30, 2009 to 4.13% for the quarter ended September 30, 2009.  The decrease in the net interest margin was mostly attributable to the decreases in interest and fees on loans.

The Company’s net interest margin is not a measurement under accounting principles generally accepted in the United States, but it is a common measure used by the financial services industry to determine how profitably earning assets are funded.  The Company’s net interest margin is calculated by dividing tax equivalent net interest income by total average earning assets.  Tax equivalent net interest income is calculated by grossing up interest income for the amounts that are non-taxable (i.e., municipal income) then subtracting interest expense. The tax rate utilized is 34%.  Details on the calculation of the net interest margin are included in footnote (3) following the “Key Statistics” table below.

Asset Quality and Provision for Loan Losses

Provisions for loan losses were $964,000 for the three months ended September 30, 2009, compared to $1.6 million for the three months ended June 30, 2009.  Although the Company experienced a decrease in portfolio loans during 2009, it has recognized certain loans for charge-off and given the level of problem loans, continued uncertainty in the economy, and the current nationwide credit crisis, the Company deemed it prudent to maintain its allowance for loan losses at Middleburg Bank at 1.34% of total loans.  Southern Trust Mortgage recognized net charge-offs of $1.4 million related to several problem loans in its loan portfolio during 2009.  The Company had specific allowances for loan losses related to these loans.  As a result of these charge-offs and the corresponding decrease in the loan portfolio, the Company decreased the allowance at Southern Trust Mortgage to 16.7% from 26.6% of total portfolio loans at June 30, 2009.

Non-performing assets, including loans past due more that 90 days, decreased from $20.4 million or 1.96% of total assets at June 30, 2009 to $18.8 million or 1.88% of total assets at September 30, 2009.  This change was mostly a result of the decrease in non-accrual loans held by Middleburg Bank.  During the third quarter of 2009, non-accrual loans at Middleburg Bank decreased by $4.0 million to $8.8 million.  Non-accrual loans at Southern Trust Mortgage were $202,000 at September 30, 2009.  Total other real estate owned increased by $1.1 million to $8.5 million at September 30, 2009.  Loans past due more than 90 days were $1.2 million at September 30, 2009.  Given the current economic environment, it is anticipated there could be an increase in non-performing loans.

There were no loans past due more than 90 days at June 30, 2009 compared to $1.2 million at September 30, 2009.  The Company realized $1.2 million in net charge-offs for the quarter ended September 30, 2009 versus $1.9 million for the prior quarter.  Additional past dues and credit losses are expected due to the current economic forecast.

Non-Interest Income

Including net losses on securities available for sale, consolidated non-interest income decreased by $2.1 million or 33.8% when comparing the quarter ended September 30, 2009 to the quarter ended June 30, 2009.  Gains on the sale of loans decreased $971,000 to $2.4 million for the quarter ended September 30, 2009, when compared to the prior quarter.  The Company recognized two asset-backed securities for other than temporary impairment during the quarter ended September 30, 2009.  The recognized loss of $533,000 is included in net losses on securities available for sale. 

Trust and investment advisory fees earned by Middleburg Trust Company (“MTC”) and Middleburg Investment Advisors (“MIA”) increased $21,000 when comparing the quarter ended September 30, 2009 to the quarter ended June 30, 2009.  Trust and investment advisory fees are based primarily upon the market value of the accounts under administration/management.  For the quarter ended September 30, 2009, MTC’s consolidated fees increased 4.7% or $22,000 when compared to the quarter ended June 30, 2009.  MIA’s consolidated fees decreased by 0.4% or $1,000 when comparing the three months ended June 30, 2009 to the three months ended September 30, 2009.  Total consolidated assets under administration by MTC and MIA were at $1.1 billion at September 30, 2009, an increase of $79.4 million or 7.6% from the $1.0 billion under administration at June 30, 2009.  The increase is the result of growth in new accounts at MTC.  The Bank holds a large portion of its investment portfolio in custody with MTC and is included in assets under administration.

Service charges on deposits decreased by $16,000 or 3.3% from the quarter ended June 30, 2009 to the quarter ended September 30, 2009.  Fees related to overdrafts decreased $13,000 from the previous quarter. 

Commissions on investment sales decreased $24,000 from the quarter ended June 30, 2009 to the quarter ended September 30, 2009.

Gains on the sale of loans were $2.4 million for the quarter ended September 30, 2009 and $3.4 million for the prior quarter.  Southern Trust Mortgage closed $198.1 million in loans for the three months ended September 30, 2009 and $316.9 million in loans for the three months ended June 30, 2009.

Net losses on the sale of securities were $258,000 for the quarter ended September 30, 2009, including an other than temporary impairment loss of $533,000 on two asset-backed securities.  Asset-backed securities were $2.8 million and reflected a market value of $583,000 at September 30, 2009.  The Company will continue to monitor the credit quality of its securities portfolio for impairment.  The Company sold $20.7 million in securities available for sale during the three months ended September 30, 2009 as part of its investment strategy of shortening the weighted average life of its investment portfolio and improve its liquidity.

Equity earnings in unconsolidated subsidiaries represent Southern Trust Mortgage’s equity earnings from its unconsolidated mortgage affiliates.  For the quarter ended September 30, 2009, the Company recognized income of $23,000 on these investments, compared to $92,000 for the previous quarter.

Income earned from the Bank’s $11.3 million investment in Bank Owned Life Insurance (BOLI) was $123,000 and $130,000 for the quarters ended September 30, 2009 and June 30, 2009, respectively.  The Company purchased $10.8 million in BOLI in 2004 and $485,000 in BOLI in 2007 to help subsidize increasing employee benefit costs and expenses related to the restructure of its supplemental retirement plans.

Other service charges, including fees from loans, mortgages held for sale and other service fees, decreased $152,000 or 33.8% when comparing the three months ended September 30, 2009 to the three months ended June 30, 2009.  Safe deposit box fees decreased $41,000 from the quarter ended June 30, 2009 to the quarter ended September 30, 2009.  Middleburg Bank collects the majority of its safe deposit box fees in the second quarter of each year.  Brokerage fees provided by Southern Trust Mortgage decreased $109,000 during the three months ended September 30, 2009 when compared to the previous quarter.  The decrease is related to the decreases in loan production.

Non-Interest Expense

Non-interest expense decreased $1.1 million or 8.6% from the quarter ended June 30, 2009 to the quarter ended September 30, 2009.  The decrease was primarily due to decreases in salary and employee benefits and decreases in net occupancy expenses.

Salaries and employee benefit expenses decreased $745,000 or 9.7% when comparing the quarter ended June 30, 2009 to the quarter ended September 30, 2009.  The decrease, when compared to the prior quarter, is impacted by decreased commissions paid to mortgage originators and corresponds to decreased loan production.

Net occupancy expense decreased $111,000 when comparing the quarter ended June 30, 2009 to the quarter ended September 30, 2009.  The decrease is the result of decreases in depreciation of fixed assets and decreases in rental expense and property taxes.  As growth efforts continue to progress, the Company anticipates higher levels of occupancy expense to be incurred. 

Other taxes of $148,000 were relatively unchanged for the quarter ended September 30, 2009, when compared to the previous quarter.  Other taxes includes franchise taxes paid by Middleburg Bank and Middleburg Trust Company and is based on total capital of each company, respectively, net of certain adjustments.

Computer operations decreased $75,000 from the quarter ended June 30, 2009 to the quarter ended September 30, 2009.

Advertising and marketing expense decreased $32,000 when comparing the quarter ended June 30, 2009 to the quarter ended September 30, 2009.  The Company decreased the amount of advertising during the three months ended September 30, 2009, compared to the three months ended June 30, 2009.

Other operating expenses decreased $154,000 or 5.0% when comparing the quarter ended June 30, 2009 to the quarter ended September 30, 2009.  The decrease is the result of a one time expense related to FDIC insurance which was recognized in the second quarter.

Total Consolidated Assets

Total consolidated assets were $997.8 million at September 30, 2009.  This is a decrease of $46.8 million from $1,044.6 million at June 30, 2009.  Cash and cash equivalents decreased $14.4 million.  The Company focused on maintaining liquidity while simultaneously reducing risk by investing more of its excess cash in deposits with the Federal Reserve Bank as a safer alternative to federal funds sold.  Cash and due from banks was $80.6 million at September 30, 2009 compared to $39.7 million at June 30, 2009.  Federal funds sold decreased $54.6 million from June 30, 2009 to September 30, 2009.

The investment portfolio increased $5.7 million or 3.7% to $168.0 million at September 30, 2009 compared June 30, 2009.  The Company continued its effort to shorten the weighted average life of its investment portfolio and improve its liquidity through sales and purchases of securities.  At September 30, 2009, the tax equivalent yield on the investment portfolio was 5.56%, compared to 5.71% at June 30, 2009.

Loans, net of allowance for loan losses, increased by $410,000 when comparing June 30, 2009 to September 30, 2009.  Considering the current interest rate and competitive market environment, the Company has been diligent about maintaining its credit quality and thereby cautious about the growth it has permitted in the loan portfolio.

Mortgages held for resale decreased 50.5% or $37.5 million to $36.8 million when comparing the September 30, 2009 balance to that at June 30, 2009.  Production during the second quarter of 2009 was $198.1 million compared to $316.9 million during the second quarter of 2009.  An agreement between Middleburg Bank and Southern Trust Mortgage provides for participation of mortgages held for resale as a funding source.  Southern Trust Mortgage also has a long standing line of credit with a regional bank that is primarily used to fund its mortgages held for sale.

Premises and equipment, net of accumulated depreciation, increased $126,000 to $22.8 million at September 30, 2009 from $22.7 million at June 30, 2009.
 
Deposits and Other Borrowings

Total deposits, which include brokered deposits, decreased $22.5 million or 2.8% to $787.6 million at September 30, 2009 from $810.1 million at June 30, 2009.  Brokered deposits decreased $19.9 million, as a result of maturities, to $87.6 million at September 30, 2009 from $107.5 million at June 30, 2009.  Non-interest bearing demand deposits decreased $18.8 million to $105.6 million at September 30, 2009 when compared to June 30, 2009.  Savings and interest-bearing demand deposits increased $33.0 million, from $347.6 million at June 30, 2009.  In particular, interest checking increased $21.6 million when comparing September 30, 2009 to June 30, 2009.  Money market and savings deposits increased to $11.4 million at September 30, 2009 from $96.3 million at June 30, 2009.  Time deposits, excluding brokered certificates of deposit, decreased $17.4 million to $204.6 million at September 30, 2009.

Short term borrowings, which include Southern Trust Mortgage’s line of credit with a regional bank, were $7.1 million at September 30, 2009 and $21.3 million at June 30, 2009.

Equity

Total shareholders’ equity, which includes non-controlling interest as required by the Consolidation Topic of the FASB Accounting Standards Codification, at September 30, 2009 and June 30, 2009, was $125.2 million and $103.5 million, respectively.  In the third quarter, the Company raised $19.3 million through the issuance of  1,908,598 shares of common stock.  The Company expects to use the proceeds for general corporate purposes, including the redemption of all or a portion of our Preferred Stock and warrants issued to the U.S. Treasury as part of the Capital Purchase Program.  Middleburg Financial Corporation’s shareholders’ equity at September 30, 2009 and June 30, 2009 was $122.4 million and $100.5 million, respectively.  The book value available to common shareholders at September 30, 2009 was $14.61 per common share.  Total common shares outstanding were 6,901,843 at September 30, 2009.


Certain information contained in this discussion may include “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  These forward-looking statements relate to the Company’s future operations and are generally identified by phrases such as “the Company expects,” “the Company believes” or words of similar import.  Although the Company believes that its expectations with respect to the forward-looking statements are based upon reliable assumptions within the bounds of its knowledge of its business and operations, there can be no assurance that actual results, performance or achievements of the Company will not differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. For details on factors that could affect expectations, see the risk factors and other cautionary language included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008, and other filings with the Securities and Exchange Commission. 

Middleburg Financial Corporation is headquartered in Middleburg, Virginia and has two wholly owned subsidiaries, Middleburg Bank and Middleburg Investment Group, Inc.  Middleburg Bank serves Loudoun, Fairfax, and Fauquier Counties in Virginia with eight financial service centers.  Middleburg Investment Group owns Middleburg Trust Company and Middleburg Investment Advisors, Inc. Middleburg Trust Company are headquartered in Richmond, Virginia with a branch office in Middleburg and Williamsburg. Middleburg Investment Advisors, Inc. is an SEC registered investment advisor located in Alexandria, Virginia.
 

 

 

 

 

 

 

 

 

 

Chat Button
Our representatives are standing by
to assist you. Click to chat.