EX-99 3 ex99.htm EXHIBIT Exhibit 99

Exhibit 99

[ex99001.jpg]

Middleburg Financial Corporation Announces

Third Quarter 2003 Earnings


Contact:  

Joseph L. Boling, Chairman & CEO

540-687-6377 or

   jboling@middleburgbank.com


Alice P. Frazier, EVP & CFO

540-687-4801 or

  afrazier@middleburgbank.com


MIDDLEBURG, VIRGINIA (October  17, 2003) –Middleburg Financial Corporation (NASDAQ SM – MBRG) reported net income of $6.4 million, or $3.33 per diluted share, for the nine months ended September 30, 2003.  This is a 32.2% increase over the $4.8 million, or $2.61 per diluted share, for the nine months ended September 30, 2002.   The return on average assets and average equity were 1.89% and 19.50%, respectively, for the nine months ended September 30, 2003.   Consolidated assets grew 14.5% since September 30, 2002 to  $481.7 million at September 30, 2003.  


Net income was $2.1 million or $1.07 per diluted share for the quarter ended September 30, 2003, an increase of 27.2% compared to $1.6 million or $.87 per diluted share for the same quarter in 2002.  


 

     For the Quarter Ended

 

For the Nine Months Ended

 

September 30,

 

September 30,

 

2003

 

2002

 

2003

 

2002

        

Core Operations

 $           1.12

 

 $       0.94

 

 $         3.29

 

 $       2.73

Security Gains (Losses)

             (0.02)

 

        (0.02)

 

            0.13

 

         (0.03)

Amortization Expenses

             (0.03)

 

        (0.05)

 

          (0.09)

 

         (0.09)

    Net Income per Diluted Share

 $           1.07

 

 $       0.87

 

 $         3.33

 

 $       2.61


Net Interest Income


Net interest income increased 10.7% from $12.8 million for the nine months ended September 30, 2002 to $14.2 million for the same time period in 2003.  Interest income increased 3.9% while interest expense decreased 15.4% when comparing the first nine months of 2003 to the same period in 2002.   The net interest margin was 4.75% for the nine month period ended September 30, 2003 compared to 5.09% for the same period in 2002. Average earning assets increased 18.3% to $417.5 million at September 30, 2003.  


The Company remains neutral to rising or falling interest rates over the next 12 months.  Based upon internal interest rate risk models, net interest income could be expected to decrease 2.11%, or approximately $400,000, should interest rates rise 200 basis points over the next 12 month period.

Non Interest Income


Non interest income increased 48.8% to $7.5 million for the nine months ended September 30, 2003 compared to $5.1 million for the nine months ended September 30, 2002.  Equity in earnings from affiliate of $719,000 is the result of the 40% interest in Southern Trust Mortgage, LLC (STM), which  Middleburg acquired on April 15, 2003.  As part of the acquisition of STM, Middleburg’s mortgage banking department was transferred to STM.  All earnings of that department after April 30, 2003 are being reported within the equity in earnings from affiliate.  


The equity earnings in STM added $.25 per diluted share for the quarter ended September 30, 2003 and $.51 per diluted share for the nine months ended September 30, 2003.  STM closed $365 million in loans during the third quarter with 51.2% of its production attributable to refinancings.  STM also originated and closed $13.2 million in new construction loans during that same period.  STM expects that production attributable to refinancings, which are leveling off, will decrease in the fourth quarter.  This  production decrease, and any decreases associated with the seasonality of fourth quarter home sales, expected to be offset slightly by an increase in purchase money financings and new construction loans.  STM began measures in August 2003 to cut expenses in effort to maintain efficiencies.


Service charges which includes both deposit fees and certain loan fees related to mortgage banking increased 22.9% to $1.7 million for the nine months ended September 30, 2003 compared to $1.3 million for the nine months ended September 30, 2002.  Investment advisory fees of $1.6 million for the nine months ended September 30, 2003 are from Gilkison Patterson Investment Advisors (GPIA), a wholly owned subsidiary of Middleburg.    GPIA, a registered investment advisor,  was acquired on April 1, 2002 and currently manages approximately $600 million in assets.   Tredegar Trust Company, a wholly owned trust subsidiary, produced  fiduciary fees that increased 10.3% to $1.0 million for the nine months ended September 30, 2003, compared to $903,000 for the same period in 2002.  Fiduciary fees are based primarily upon the market value of the accounts under administration.


Components of non interest income are presented in the table below:


 

     For the Quarter Ended

 

 For the Nine Months Ended

 

September 30,

 

September 30,

(in thousands)

2003

 

2002

 

2003

 

2002

        

Mortgage Banking Income

 $               -   

 

 $        564

 

 $          889

 

 $     1,310

Service Charges

               470

 

           522

 

          1,651

 

        1,344

Fiduciary Fees

               347

 

           266

 

             996

 

           903

Investment Advisory Fees

               534

 

           530

 

          1,574

 

        1,031

Investment Sales Fees

               201

 

           172

 

             845

 

           424

Equity in Earnings from Affiliate

               719

 

             -   

 

          1,484

 

              -   

Other Income

                 42

 

               7

 

               88

 

             48

     Non Interest Income

 $         2,313

 

 $     2,061

 

 $       7,527

 

 $     5,060

Non Interest Expense


Non interest expense increased 15.3% to $12.6 million for the nine months ended September 30, 2003 compared to $10.9 million for the same period in 2002.   Salaries and employee benefits increased by 13.8% when comparing September 30, 2003 to September 30, 2002.   Additions to staff to support business development, branching and the formation of a wealth management group have contributed to the increase in salaries and employee benefits.  Commission expense continues to rise in proportion to the increase in the investment sales fees.  Net occupancy and equipment expenses increased 35.2% to $1.7 million for the nine months ended September 30, 2003, compared to $1.2 million for the same period in 2002.  The building expansion program, which includes the operations center and Leesburg branch, affected net occupancy and equipment expense year over year.  The operations center opened in late June 2002 and a second full service branch in Leesburg, Virginia opened in July 2002.  


There were no significant non recurring expenses in the third quarter of 2003.  The components of the non interest expense are presented in the table below.




 

     For the Quarter Ended

 

For the Nine Months Ended

 

September 30,

 

September 30,

(in thousands)

2003

 

2002

 

2003

 

2002

        

Salaries and Employee Benefits

 $         2,288

 

 $     2,201

 

 $       6,746

 

 $     5,930

Sales Commissions

               101

 

           286

 

             769

 

           688

Net Occupancy and Equipment

               558

 

           510

 

          1,683

 

        1,245

Advertising

                 49

 

             89

 

             189

 

           327

Other Operating Expenses

            1,065

 

           972

 

          3,176

 

        2,707

        

     Non Interest Expense

 $         4,061

 

 $     4,058

 

 $     12,563

 

 $   10,897


Consolidated Assets


Total assets increased 16.3% to $481.7 million at September 30, 2003 from $414.2 million at September 30, 2002.  Total loans, net of allowance for loan losses increased 18.9% since September 30, 2002 to $246.5 million at September 30, 2003.  The factors that contributed to the strong loan growth were a strong image advertising campaign that focuses on Middleburg’s commercial lenders and the addition of two commercial lenders with experience in the Loudoun County market.


Non-performing loans were $481,000 at September 30, 2003, compared to $633,000 at September 30, 2002.  Loans past due 90 days or greater were $11,000 at September 30, 2003.  The loan loss provision was $125,000 for the third quarter of 2003.  Net charge-offs were $14,000 for the three months ended September 30, 2003.   Increased growth in the loan portfolio caused the $50,000 increase in provision during the second quarter of 2003.  The allowance for loan losses was $2.5 million or 1.0% of total loans outstanding at September 30, 2003.  Net charge-offs were $252,000 for the nine months ended September 30, 2003, compared to $46,000 for the same period in 2002.  

Deposits increased 16.1% to $367.8 million at September 30, 2003 from $315.9 million at September 30, 2002. Securities sold under agreement to repurchase  with commercial checking account customers totaled $11.5 million at September 30, 2003.  Federal Home Loan Bank advances were $46.0 million at September 30, 2003.  


Shareholders’ equity was $45.6 million at September 30, 2003, an increase of  14.5% over the September 30, 2002 balance of $39.8 million.  During the second quarter of 2003, Middleburg issued $2.0 million in common stock to the principals of STM.   The book value of Middleburg at September 30, 2003 was $24.23 per common share.  Total common shares outstanding at September 30, 2003 were 1,897,776.  


The board of directors announced a $.38 per common share cash dividend for shareholders of record as of October 1, 2003 and payable on October 17, 2003.  The board of directors also announced a two for one stock split for shareholders of record as of October 2, 2003 and payable on October 17, 2003.


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 are generally identified by phrases such as “the Company expects,” “the Company believes” or words of similar import.   Such forward-looking statements involve known and unknown risks including, but not limited to, changes in general economic and business conditions, seasonality in the mortgage banking business, interest rate fluctuations, competition within and from outside the banking industry, new products and services in the banking industry, risks inherent in making loans such as repayment risks and fluctuating collateral values, the ability to hire and retain quality staff, changing trends in customer profiles and changes in laws and regulations applicable to the Company.  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.


Middleburg Financial Corporation is headquartered in Middleburg, Virginia and has three wholly owned subsidiaries, Middleburg Bank, Tredegar Trust Company and Gilkison Patterson Investment Advisors, Inc.  Middleburg Bank serves Loudoun County and western Fauquier County, Virginia with five branches.  Middleburg Bank also owns 40% of Southern Trust Mortgage, LLC which has 14 branch offices in  five states.  Tredegar Trust Company is headquartered in Richmond, Virginia with a branch office in Middleburg, Virginia.  Gilkison Patterson Investment Advisors, Inc. is a registered investment advisor located in Alexandria, Virginia.  





(dollars in thousands, except per

       For the Quarter Ended

   

             Nine Months Ended

  

 share data)

            September 30,

 

 

 

               September 30,  

 

 

     

%

     

%

 

2003

 

2002

 

Change

 

2003

 

2002

 

Change

SUMMARY OF OPERATIONS

           
            
            

Interest Income - Loans

 $           4,256

 

 $           4,131

 

3.0%

 

 $       12,348

 

 $       12,153

 

1.6%

Interest Income - Investment & Other

              2,038

 

              1,898

 

7.4%

 

            6,129

 

            5,612

 

9.2%

Interest Expense - Deposits

                 805

 

                 922

 

-12.7%

 

            2,558

 

            3,188

 

-19.8%

Interest Expense - Other Borrowings

                 587

 

                 716

 

-18.0%

 

            1,711

 

            1,740

 

-1.7%

   Net Interest Income

 $           4,903

 

 $           4,391

 

11.7%

 

 $       14,209

 

 $       12,837

 

10.7%

Provision for loan losses

                 125

 

                   75

 

66.7%

 

               425

 

               225

 

88.9%

   Net Interest Income After Provision  

           

      for loan losses

 $           4,778

 

 $           4,316

 

10.7%

 

 $       13,784

 

 $       12,612

 

9.3%

Non-Interest Income

              2,313

 

              2,061

 

12.2%

 

            7,527

 

            5,060

 

48.8%

Net Securities Gains (Losses)

                  (54)

 

                  (31)

   

               387

 

               (78)

  

Non-Interest Expense

              4,061

 

              4,058

 

0.1%

 

          12,563

 

          10,897

 

15.3%

   Income Before Taxes

 $           2,975

 

 $           2,288

 

30.0%

 

 $         9,134

 

 $         6,697

 

36.4%

Income Taxes

                 886

 

                 646

 

37.2%

 

            2,733

 

            1,855

 

47.3%

Net Income

 $           2,089

 

 $           1,642

 

27.2%

 

 $         6,401

 

 $         4,842

 

32.2%

            

PER SHARE DATA

           

Net Income - Basic

 $             1.10

 

 $             0.89

   

 $           3.40

 

 $           2.68

 

27.3%

Net Income - Diluted

 $             1.07

 

 $             0.87

   

 $           3.33

 

 $           2.61

 

27.5%

Cash Dividends

 $             0.38

 

 $             0.30

   

 $           1.00

 

 $           0.90

 

11.1%

Book Value

      

 $         24.23

 

 $         21.71

  

Common Shares Outstanding

       1,897,776

 

       1,852,682

   

     1,897,776

 

     1,852,682

  

Average Shares Outstanding, Basic

       1,897,391

 

       1,852,602

   

     1,880,312

 

     1,810,415

  

Average Shares Outstanding, Diluted

       1,952,338

 

       1,884,827

   

     1,923,468

 

     1,854,835

  
            

PROFITABILITY RATIOS

           

Return on Average Assets

1.89%

 

1.65%

   

1.89%

 

1.70%

  

Return on Average Equity

19.50%

 

16.83%

   

19.50%

 

18.25%

  

Net Interest Margin (tax equivalent basis)

4.61%

 

5.01%

   

4.75%

 

5.09%

  

Efficiency Ratio

54.55%

 

60.69%

   

56.03%

 

58.57%

  

Dividend Payout

34.51%

 

33.83%

   

29.37%

 

33.64%

  
            

CAPITAL RATIOS

           

Leverage Ratio

      

10.47%

 

9.81%

  

Risk-Based Capital Ratios

           

   Tier 1 Capital Ratio

      

14.85%

 

14.76%

  

   Total Capital Ratio

      

15.61%

 

15.59%

  

Equity to Assets

      

9.46%

 

9.60%

  

Tangible Equity to Tangible Assets

      

8.19%

 

8.05%

  

Loans to Deposits

      

67.43%

 

66.33%

  
            

ASSET QUALITY

           

Non-Performing Loans

      

 $            481

 

 $            633

 

-24.0%

Loans Past Due 90 Days or More

      

                 11

 

                 21

 

-46.7%

Allowance for Loan Losses

      

            2,481

 

            2,240

 

10.8%

Net Charge-offs

                   14

 

                   35

 

-60.0%

 

               252

 

                 46

 

447.8%

Non-Performing Loans to Loans

      

0.19%

 

0.30%

 

-35.6%

Allowance for Loan Losses to Loans

      

1.00%

 

1.07%

 

-6.2%

Net Charge-offs to Average Loans

0.01%

 

0.02%

   

0.11%

 

0.02%

 

-50.0%

Allowance for Loan Losses to  

           

   Non-Performing Loans

      

515.80%

 

354.00%

 

45.7%

            

AVERAGE BALANCES

           

Investment Securities Portfolio

 $       167,583

 

 $       147,855

 

13.34%

 

 $     164,508

 

 $     135,389

 

21.51%

Loans

          243,660

 

          211,143

 

15.40%

 

        230,004

 

        212,417

 

8.28%

Earning Assets

          437,183

 

          363,987

 

20.11%

 

        417,493

 

        352,932

 

18.29%

Assets

          481,969

 

          397,837

 

21.15%

 

        458,432

 

        380,582

 

20.46%

Deposits

          367,881

 

          299,388

 

22.88%

 

        348,868

 

        288,723

 

20.83%

Stockholders' Equity

            45,332

 

            39,021

 

16.17%

 

          44,406

 

          35,379

 

25.52%

            

SELECTED FINANCIAL DATA AT PERIOD END

           

Investment Securities Portfolio

      

        167,006

 

        145,453

 

14.82%

Loans, net of allowance for loan losses

      

        246,502

 

        207,278

 

18.92%

Earning Assets

      

        435,594

 

        375,852

 

15.90%

Assets

      

        481,717

 

        414,200

 

16.30%

Deposits

      

        366,799

 

        315,876

 

16.12%

Stockholders' Equity

      

          45,556

 

          39,779

 

14.52%