EX-99 2 ex991.htm Exhibit 99.1

Exhibit 99.1



[ex991001.jpg]


Middleburg Financial Corporation Announces First Quarter 2007 Earnings



Contact:  

Joseph L. Boling, Chairman & CEO

540-687-6377 or

 

 

ceo@middleburgbank.com

 

 

 

 

Alice P. Frazier, EVP & CFO

540-687-4801 or

 

 

cfo@middleburgbank.com

 

 

 

 

Kate J. Chappell, SVP & CAO

540-687-4816 or

 

 

cao@middleburgbank.com


MIDDLEBURG, VIRGINIA (April 26, 2007) – Middleburg Financial Corporation (NASDAQ – MBRG)

reported net income of $2.1 million for the quarter ended March 31, 2007.  This amount was a 4.7% increase over net income of $2.0 million for the quarter ended March 31, 2006.  Earnings per share for the quarter ended March 31, 2007 were $0.47 per diluted share, compared to earnings per share for the quarter ended March 31, 2006 of $0.52 per diluted share. Total consolidated assets grew by $15.5 million from December 31, 2006, to $787.8 million at March 31, 2007.  The return on average assets and return on average equity were 1.09% and 10.70%, respectively, for the quarter ended March 31, 2007.  


Joseph L. Boling, Chairman and CEO stated, “Even though our financial performance is not as strong as we would like for it to be, we are pleased to have an increase in overall earnings given the current market conditions. Our focus continues to be on providing quality client service and services to our existing and new clients through our business model that ultimately increases the financial relationship with the client. We will continue to look for opportunities to improve our efficiencies and contain costs as we grow the business. ”

 

The components of net income per diluted share are summarized below:


 

For the Three Months Ended

 

March 31,

 

2007

 

2006

 

Net

 

Diluted Earnings

 

Net

 

Diluted Earnings

 

Income

 

Per Share

 

Income

 

Per Share

Core Banking

 $         2,000,058 

 

 $                    0.44 

 

 $         1,843,387 

 

 $                0.47 

Mortgage

34,121 

 

0.01 

 

67,990 

 

0.02 

Wealth Management

111,352 

 

0.02 

 

136,462 

 

0.03 

 

 $         2,145,531 

 

 $                    0.47 

 

 $         2,047,839 

 

 $                0.52 



Diluted earnings per share for the quarter ended March 31, 2007 decreased by 9.6% or $0.05 when compared to the quarter ended March 31, 2006.  This decrease resulted mostly from the increase in the weighted average diluted shares outstanding

 

at March 31, 2007.  The increase in weighted average diluted shares outstanding resulted from the July 2006 issuance of 676,552 shares of the Company’s common stock in an underwritten public offering, including the exercise of the underwriter’s over-allotment option.


Net income from core banking operations increased $157,000 to $2.0 million for the quarter ended March 31, 2007 compared to $1.8 million for the quarter ended March 31, 2006.  Much of the increase in net income is associated with decreased interest expense on trust preferred debt that was retired in December 2006.  The decrease in diluted earnings per share from core banking operations was associated to the increase in weighted average diluted shares outstanding.  


The Company also experienced decreases in net income and diluted earnings per share from mortgage banking and wealth management operations.  When comparing the quarter ended March 31, 2007 to the quarter ended March 31, 2006, diluted earnings per share from mortgage banking decreased by $0.01.  Mortgage banking operations  were  negatively impacted by slightly narrowed margins resulting from shifts in the mix of retail and wholesale loan volume and operational expenses related to hiring two large volume producers in the Virginia market.  


Earnings from Middleburg Investment Group, the subsidiary for wealth management operations, declined to $0.02 per diluted share for the quarter ended March 31, 2007 when compared to $0.03 per diluted share for the quarter ended March 31, 2006.  Middleburg Investment Group generates revenues from trust and investment advisory activities through Middleburg Trust Company (MTC), a wholly owned trust subsidiary, Middleburg Investment Advisors, Inc. (MIA), a wholly owned registered investment advisor, and Middleburg Bank Investment Sales, which is a division of Middleburg Bank. Middleburg Bank Investment Sales net income decreased 50% or $7,000 when comparing the quarter ended March 31, 2006 to March 31, 2007 due to decreased sales resulting from the loss of a key producer in July 2007.  In early April 2007, an additional sales consultant with significant experience joined the Company.  


MTC’s net income decreased 13.0% or $6,500 when comparing the quarter ended March 31, 2007 to the quarter ended March 31, 2006.  MIA’s net income decreased 21.8%  or $18,000 when comparing the quarter ended March 31, 2007 to the same period in 2006.   Both MTC and MIA have incurred increased operating expenses, particularly in the legal and audit/advisory category.  Also, MTC hired an additional business development officer in January 2007.    


Net Interest Income and Net Interest Margin


The net interest margin declined from 4.05% for the quarter ended March 31, 2006 to 4.02% for the quarter ended March 31, 2007. The decrease was due to the flattening yield curve and intense competition for loans and deposits in the Company’s markets.  Although the yield on average earnings assets increased by 38 basis points when comparing the quarter ended March 31 2006 to the same time period in 2007, the lack of growth in overall deposits and a shift in the composition of the Company’s deposits resulted in an overall negative impact to the net interest margin. Average balances in money market, savings accounts and interest checking decreased by $24.9 million when comparing the quarter ended March 31, 2006 to the same time in 2007.  The weighted average cost of these accounts for the quarters ended March 31, 2007 and 2006 was 2.07% and 1.78%, respectively.  Conversely, the average balance of certificates of deposits increased $51.1 million when comparing the quarter ended March 31, 2006 to the quarter ended March 31, 2007. The weighted average cost of the Company’s certificates of deposits was 4.68% and 3.73% for the quarters ended March 31, 2007 and 2006, respectively.  


The net interest margin was 3.97% for the year ended December 31, 2006 and 3.94% for the fourth quarter of 2006.   Compared to those number, the increase in net interest margin during the first quarter of 2007 is directly

 

related to the retirement of $10 million of trust preferred debt at a rate of 9.17%.  The debt was retired at par in December 2006 with funds from the stock issuance in July 2006.     


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 average total earning assets.  Tax equivalent net interest income is calculated by grossing up interest income for the amounts that are non-taxable (i.e., municipal bond income), then subtracting interest expense. The tax rate utilized is 34%. Details on the calculation of the net interest margin are included in footnote (1) following the “Key Statistics” table below.


Net interest income increased 3.0% from $6.6 million for the quarter ended March 31, 2006 to $6.8 million for the quarter ended March 31, 2007.  Interest income increased 10.3%, while interest expense increased 22.3%, when comparing the quarters ended March 31, 2007 and March 31, 2006. Interest income from loans increased $1.1 million or 12.6% when comparing the quarter ended March 31, 2007 to the same time period in 2006.  While the average yield on the loan portfolio had increased by 29 basis points when comparing the quarter ended March 31, 2006 to the quarter ended March 31, 2007, the majority of the increase in loan interest income was attributed to the growth of the loan portfolio. Average loans increased 7.9% or $41.9 million when comparing the quarter ended March 31, 2006 to the quarter ended March 31, 2007. Interest income from the investment portfolio remained relatively unchanged when comparing the quarter ended March 31, 2006 in spite of the average balance decrease of 10.0% from the quarter ended March 31, 2006 to the quarter ended March 31, 2006.   The average yield increased 57 basis points when comparing the same periods.

    

Non Interest Income


Non interest income decreased $34,000 or 1.6% when comparing the quarter ended March 31, 2006 to the quarter ended  March 31, 2007.


Trust and investment advisory fees earned by MTC and MIA increased 3.2% or $34,000 when comparing the quarter ended March 31, 2007 to the quarter ended March 31, 2006. Trust and investment advisory fees are based primarily upon the market value of the accounts under administration/management.  Total assets under administration by MTC and MIA remained relatively unchanged at $1.1 billion at March 31, 2007 and 2006.  


Service charges on deposits increased $30,000 or 6.9% when comparing the quarter ended March 31, 2007 to the quarter ended March 31, 2006.  A significant amount of the increase was related to ATM/Visa check card exchange fees and resulted from an increase in activity.


Investment sales fees decreased 34.2% to $127,000 for the quarter ended March 31, 2007, compared to $193,000 for the quarter ended March 31, 2006.  The decrease in sales fees resulted from the loss of a key producer in July 2006.  


Equity in earnings from affiliate, which reflects the 41.8% ownership interest in Southern Trust Mortgage, decreased 49.5% or $51,000 from $103,000 for the quarter ended March 31, 2006 to $52,000 for the quarter ended March 31, 2007.  STM closed $215.3 million in loans for the quarter ended March 31, 2007, with 52.7% of its production attributable to purchase money financings.  For the quarter ended March 31, 2006, STM closed $213.8 million in loans, with 62.2% of its production attributable to purchase money financings.  Mortgage banking operations  were  negatively impacted by slightly narrowed margins resulting from shifts in the mix of retail and wholesale loan volume and operational expenses related to hiring two large volume producers in the Virginia market.  

 

Income earned from the Company’s $10.8 million investment in Bank Owned Life Insurance (BOLI) contributed $109,000 and $104,000 for the quarters ended March 31, 2007 and 2006, respectively.  


Other service charges, including fees from loans and other service fees, increased $10,000 or 6.3% when comparing the quarter ended March 31, 2006 to the quarter ended March 31, 2007.   This increase was driven by increases in loan processing fees.  The Company had increased its fees related to loan documentation services.  

 

Non Interest Expense


Non interest expense increased $173,000 or 3.1% to $5.7 million for the quarter ended March 31, 2007, compared to $5.5 million for the same time period in 2006.  


Salary and employee benefit expense decreased 3.9% or $137,000 when comparing the quarter ended March 31, 2006 to the quarter ended March 31, 2007.  Much of this decrease resulted from both the cost savings recognized in employee life and health insurance expense with a change in insurance plans that was offered to employees by the Company for 2007 and a decrease in commission expense related to investment sales ended March 31, 2007 compared to the same time period in 2006.  


Net occupancy and equipment expense increased by $77,000 or 10.4% to $818,000 for the quarter ended March 31, 2007, compared to $741,000 for the quarter ended March 31, 2006.  


Other taxes, which is comprised of mostly bank franchise tax, increased 24.8% or $31,000 when comparing the quarter ended March 31, 2006 to the quarter ended March 31, 2007.  The Virginia bank franchise tax assessment is equal to one percent of a bank’s net capital, as defined by the Commonwealth of Virginia.  With the  issuance of 676,552 shares of its common stock in an underwritten public offering in July 2006, the Company increased its capital level by $19.7 million and subsequently transferred $19.0 million to the banking subsidiary, resulting in the increase in bank franchise tax for the quarter ended March 31, 2007.  


Computer operations expense increased $25,000 or 10.7% when comparing the quarter ended March 31, 2006 to the quarter ended March 31, 2007. This increase was related to normal increases in software maintenance costs of in-house core operating and support systems resulting mostly from the Company’s growth, as well as increased coverage for the new customer relationship management software, which had been installed in April 2006.


Other operating expenses increased 18.3% or $178,000 to $1.1 million for the quarter ended March 31, 2007 from $970,000 for the quarter ended March 31, 2006. The year over year increase resulted from increases in various expense categories, predominantly accounting/audit expense and legal fees.  


Total Consolidated Assets


Total assets increased 3.4% to $787.8 million at March 31, 2007 from $762.0 million at March 31, 2006.  Total loans, net of allowance for loan losses, increased 6.7% or $36.2 million to $579.6 million at March 31, 2007 from $543.4 million at March 31, 2006.  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 that it has added to the loan portfolio.  Additional staff, a solid local economy, the relationship with STM, and the success of the business model, which focuses on high quality financial solutions to clients and increasing client introductions across business lines, are all believed to have contributed to the loan growth experienced.  At March 31, 2007, the tax equivalent yield on the loan portfolio was 7.06%.

 


At March 31, 2007, there were no non performing loans, representing a decrease of $11,000 from March 31, 2006. There were $22,000 in total loans past due 90 days or more at March 31, 2007, representing an increase of $17,000 from March 31, 2006. At March 31, 2007, total loans greater than 30 days past due totaled $1.7 million. It is anticipated that approximately $500,000 of those loan balances could be placed on non-accrual status during the second quarter of 2007.  However, at this time, no loss is expected from the past due loans.


The loan loss provision was $152,000 for the quarter ended March 31, 2007.  The allowance for loan losses was $5.7 million or 0.98% of total loans outstanding at March 31, 2007.  Net charge offs were $6,000 for the quarter ended March 31, 2007, compared to net charge offs of $23,000 for the same time period in 2006. Based upon internal analysis by the Company’s credit administration department, which factors, among other things, the credit quality of the portfolio, the allowance for loan losses was deemed adequate.


The investment portfolio decreased $15.9 million or 10.6% to $134.0 million at March 31, 2007, compared to $150.0 million at March 31, 2006.  During 2006, management elected to utilize cash received from principal pay downs, maturities and calls in its investment portfolio to fund loan growth rather than re-invest into the investment portfolio.  This strategy decreased the size of the investment portfolio. In anticipation of rising interest rates, the Company has also held to an investment strategy that focuses on keeping the portfolio relatively short by purchasing securities with weighted average lives that typically do not exceed three years.  At March 31, 2007, the tax equivalent yield on the investment portfolio was 5.87%.


Deposits and Other Borrowings

Total deposits, which includes brokered deposits, increased 2.1% to $556.8 million at March 31, 2007 from $545.8 million at March 31, 2006.  Total retail deposits, which excludes brokered deposits, decreased 0.04% from $531.9 million at March 31, 2006 to $531.7 million at March 31, 2007. At March 31, 2007, $25.1 million of the brokered certificates were outstanding.  The Company had $13.9 million in brokered certificates of deposits at March 31, 2006.  


Securities sold under agreements to repurchase with commercial checking account clients increased by $5.0 million or 14.4% from March 31, 2006 to $39.9 million at March 31, 2007.  Federal Home Loan Bank advances and overnight borrowings decreased $7.3 million or 6.8% to $99.0 million at March 31, 2007 from $106.3 million at March 31, 2006.  


Equity


In July 2006, the Company issued 676,552 shares of its common stock in an underwritten public offering, including the exercise of the underwriter’s over-allotment option.  The public price of $31.00 per share, less the underwriters’ commissions and expenses of the offering, resulted in net proceeds of $19.7 million to the Company.  The Company used the proceeds to increase its equity and to provide additional equity capital to the Bank to support the growth of operations.


Shareholders’ equity increased 45.5% from $54.5 million at March 31, 2006 to $79.3 million at March 31, 2007.   The book value of the Company at March 31, 2007 was $17.61 per common share.  Total common shares outstanding were 4,505,605 at March 31, 2006.


On March 21, 2007, the board of directors declared a $0.19 per common share cash dividend for shareholders of record as of  April 4, 2007 and payable on April 27, 2007.  


 

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, 2006, 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 Investment Group owns Middleburg Trust Company and Middleburg Investment Advisors, Inc.  Middleburg Bank serves Loudoun, Fairfax, and Fauquier Counties in Virginia with seven financial service centers.  Middleburg Trust Company is headquartered in Richmond, Virginia with a branch office in Middleburg. Middleburg Investment Advisors, Inc. is a SEC registered investment advisor located in Alexandria, Virginia.  























 


MIDDLEBURG FINANCIAL CORPORATION

 

 

 

 

 

 

 

 

 

 

SUMMARY INCOME STATEMENT

 

 

 

 

 

 

 

 

 

 

( Unaudited, dollars in thousands)

 

For the Three Months Ended

 

 

 

1Q07

 

4Q06

 

3Q06

 

2Q06

 

1Q06

 

 

 

 

 

 

 

 

 

 

 

 

INTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

Interest and fees on loans

 

 $      9,983 

 

 $      9,944 

 

 $      9,843 

 

 $      9,508 

 

 $      8,866 

 

Interest on investment securities

 

         1,770 

 

         1,806 

 

         1,850 

 

         1,794 

 

         1,787 

 

Interest on short term investments

 

               - 

 

               - 

 

               - 

 

               - 

 

               - 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL INTEREST INCOME

 

 $    11,753 

 

 $    11,751 

 

 $    11,692 

 

 $    11,302 

 

 $    10,653 

 

 

 

 

 

 

 

 

 

 

 

 

INTEREST EXPENSE

 

 

 

 

 

 

 

 

 

 

 

Interest on deposits

 

 $      3,518 

 

 $      3,374 

 

 $      3,154 

 

 $      2,641 

 

 $      2,525 

 

Interest on borrowings

 

         1,426 

 

         1,580 

 

         1,753 

 

         1,945 

 

         1,516 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL INTEREST EXPENSE

 

 $      4,944 

 

 $      4,953 

 

 $      4,907 

 

 $      4,586 

 

 $      4,041 

 

 

 

 

 

 

 

 

 

 

 

 

NET INTEREST INCOME

 

 $      6,809 

 

 $      6,797 

 

 $      6,785 

 

 $      6,716 

 

 $      6,612 

 

 

 

 

 

 

 

 

 

 

 

 

PROVISION FOR LOAN LOSSES

 

            152 

 

              82 

 

              55 

 

            113 

 

            250 

 

 

 

 

 

 

 

 

 

 

 

 

NET INTEREST INCOME AFTER PROVISION

 

 

 

 

 

 

 

 

 

 

 

FOR LOAN LOSSES

 

 $      6,657 

 

 $      6,716 

 

 $      6,731 

 

 $      6,603 

 

 $      6,362 

 

 

 

 

 

 

 

 

 

 

 

 

NON INTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

Trust and investment advisory fee income

 

 $      1,105 

 

 $      1,054 

 

 $         985 

 

 $      1,004 

 

 $      1,071 

 

Service charges on deposits

 

            466 

 

            488 

 

            471 

 

            474 

 

            436 

 

Net gains on securities available for sale

 

               - 

 

           (305)

 

               - 

 

                1 

 

               - 

 

Commissions on investment sales

 

            127 

 

              93 

 

            102 

 

            167 

 

            193 

 

Equity in earnings from affiliate

 

              52 

 

           (109)

 

            358 

 

            328 

 

            103 

 

Bank owned life insurance

 

            109 

 

            112 

 

            111 

 

            109 

 

            104 

 

Other service charges, commissions and fees

 

            170 

 

            155 

 

            140 

 

            153 

 

            160 

 

Other operating income

 

              28 

 

              72 

 

              46 

 

              16 

 

              24 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL NON INTEREST INCOME

 

 $      2,057 

 

 $      1,560 

 

 $      2,213 

 

 $      2,252 

 

 $      2,091 

 

 

 

 

 

 

 

 

 

 

 

 

NON INTEREST EXPENSE

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 $      3,340 

 

 $      3,495 

 

 $      3,371 

 

 $      3,347 

 

 $      3,477 

 

Net occupancy expense of premises

 

            818 

 

            750 

 

            743 

 

            790 

 

            741 

 

Other taxes

 

            156 

 

            125 

 

            125 

 

            125 

 

            125 

 

Computer operations

 

            258 

 

            257 

 

            257 

 

            235 

 

            233 

 

Other operating expenses

 

         1,148 

 

         1,579 

 

         1,093 

 

         1,372 

 

            970 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL NON INTEREST EXPENSE

 

 $      5,719 

 

 $      6,206 

 

 $      5,589 

 

 $      5,869 

 

 $      5,546 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME BEFORE TAXES

 

 $      2,994 

 

 $      2,069 

 

 $      3,354 

 

 $      2,987 

 

 $      2,907 

 

Income tax expense

 

            849 

 

            537 

 

         1,019 

 

            885 

 

            858 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME

 

 

 $      2,146 

 

 $      1,532 

 

 $      2,336 

 

 $      2,101 

 

 $      2,049 


 

 

MIDDLEBURG FINANCIAL CORPORATION

 

 

 

 

 

 

 

 

 

BALANCE SHEET

 

 

 

 

 

 

 

 

 

(dollars in thousands)

Unaudited

 

Unaudited

 

Unaudited

 

Unaudited

 

Unaudited

 

3/31/2007

 

12/31/2006

 

9/30/2006

 

6/30/2006

 

3/31/2006

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

   Cash and due from banks

 $        15,668 

 

 $        18,391 

 

 $        14,624 

 

 $         17,551 

 

 $        13,813 

   Interest-bearing balances in banks

                394 

 

                164 

 

                273 

 

                 563 

 

                288 

   Securities at fair value

         134,048 

 

         135,435 

 

         144,540 

 

          145,910 

 

         149,967 

   Loans, net of allowance for loan losses

         579,604 

 

         564,750 

 

         557,803 

 

          551,825 

 

         543,399 

   Bank premises and equipment, net

           18,884 

 

           18,429 

 

           18,214 

 

            18,402 

 

           18,638 

   Other assets

           39,171 

 

           35,136 

 

           37,099 

 

            36,772 

 

           35,912 

  

 

 

 

 

 

 

 

 

 

         Total assets

 $      787,767 

 

 $      772,305 

 

 $      772,553 

 

 $       771,024 

 

 $      762,017 

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders' Equity:

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

   Deposits:

 

 

 

 

 

 

 

 

 

      Non-interest bearing demand deposits

 $      117,684 

 

 $      128,300 

 

 $      123,508 

 

 $       140,019 

 

 $      121,809 

      Savings and interest-bearing demand deposits

         259,855 

 

         250,747 

 

         249,246 

 

          256,182 

 

         287,881 

      Time deposits

         179,293 

 

         191,551 

 

         187,235 

 

          165,367 

 

         136,138 

           Total deposits

 $      556,833 

 

 $      570,598 

 

 $      559,989 

 

 $       561,568 

 

 $      545,828 

 

 

 

 

 

 

 

 

 

 

   Federal funds purchased

                   - 

 

                   - 

 

                   - 

 

                    - 

 

                   - 

   Securities sold under agreements to repurchase

           39,922 

 

           38,474 

 

           32,906 

 

            36,939 

 

           34,902 

   Federal Home Loan Bank advances

           64,000 

 

           34,000 

 

           26,700 

 

            44,000 

 

           51,275 

   Long-term debt

           35,000 

 

           40,000 

 

           55,000 

 

            55,000 

 

           55,000 

   Trust preferred capital notes

             5,155 

 

             5,155 

 

           15,465 

 

            15,465 

 

           15,465 

   Other liabilities

             7,527 

 

             6,179 

 

             4,894 

 

              3,372 

 

             5,014 

   Commitment and contingent liabilities

                   - 

 

                   - 

 

                   - 

 

                    - 

 

                   - 

          Total liabilities

 $      708,437 

 

 $      694,406 

 

 $      694,954 

 

 $       716,344 

 

 $      707,484 

 

 

 

 

 

 

 

 

 

 

Shareholders' Equity:

 

 

 

 

 

 

 

 

 

  Common stock, par value $2.50 per share

 $        11,264 

 

 $        11,264 

 

 $        11,264 

 

 $           9,523 

 

 $          9,523 

  Capital surplus

           23,519 

 

           23,503 

 

           23,667 

 

              5,459 

 

             5,459 

  Retained earnings

           45,429 

 

           44,139 

 

           43,463 

 

            41,984 

 

           40,605 

  Accumulated other comprehensive income (loss), net

              (882)

 

           (1,008)

 

              (796)

 

             (2,285)

 

           (1,054)

           Total shareholders' equity

 $        79,329 

 

 $        77,898 

 

 $        77,598 

 

 $         54,681 

 

 $        54,533 

 

 

 

 

 

 

 

 

 

 

Total liabilities and shareholders' equity

 $      787,767 

 

 $      772,305 

 

 $      772,553 

 

 $       771,024 

 

 $      762,017 


 

MIDDLEBURG FINANCIAL CORPORATION

 

 

 

 

 

 

 

 

 

 

KEY STATISTICS

 

For the Three Months Ended

 

 

 

1Q07

 

4Q06

 

3Q06

 

2Q06

 

1Q06

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income (dollars in thousands)

 

 $    2,146 

 

 $    1,532 

 

 $    2,336 

 

 $      2,101 

 

 $      2,049 

 

Earnings per share, basic

 

 $      0.48 

 

 $      0.34 

 

 $      0.53 

 

 $        0.55 

 

 $        0.54 

 

Earnings per share, diluted

 

 $      0.47 

 

 $      0.33 

 

 $      0.52 

 

 $        0.54 

 

 $        0.52 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on average total assets

 

1.09%

 

0.92%

 

1.21%

 

1.11%

 

1.11%

 

Return on average total equity

 

10.70%

 

9.21%

 

12.47%

 

15.17%

 

15.17%

 

Dividend payout ratio

 

39.90%

 

55.87%

 

35.75%

 

34.43%

 

35.33%

 

Fee revenue as a percent of total revenue

 

14.89%

 

11.72%

 

15.91%

 

16.62%

 

16.41%

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest margin(1)

 

4.02%

 

3.94%

 

3.93%

 

3.96%

 

4.05%

 

Yield on average earning assets

 

6.83%

 

6.72%

 

6.69%

 

6.59%

 

6.45%

 

Yield on average interest-bearing liabilities

 

3.50%

 

3.49%

 

3.46%

 

3.21%

 

2.94%

 

Net interest spread

 

3.33%

 

3.23%

 

3.24%

 

3.38%

 

3.51%

 

Tax equivalent adjustment to net interest income (dollars in thousands)

 $       251 

 

 $       216 

 

 $       195 

 

 $         191 

 

 $         192 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-interest income to average assets

 

1.07%

 

0.80%

 

1.15%

 

1.18%

 

1.13%

 

Non-interest expense to average assets

 

2.99%

 

3.20%

 

2.91%

 

3.09%

 

2.93%

 

 

 

 

 

 

 

 

 

 

 

 

 

Efficiency ratio(2)

 

62.35%

 

69.46%

 

60.42%

 

63.71%

 

61.95%

  




(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%. For the quarters ended March 31, 2007 and 2006, net interest income on a tax equivalent basis was $7.1 million and $6.8 million, respectively.    See the table below for a reconciliation of net interest income to tax equivalent net interest income. The Company’s net interest margin is a common measure used by the financial service industry to determine how profitably earning assets are funded.  Because the Company earns a fair amount of non taxable interest income due to the mix of securities in its investment security portfolio, net interest income for the ratio is calculated on a tax equivalent basis as described above.


(2)

The efficiency ratio is not a measurement under accounting principles generally accepted in the United States.  It is calculated by dividing non interest expense by the sum of tax equivalent net interest income and non interest income excluding gains and losses on the investment portfolio.  The tax rate utilized is 34%. For the quarters ended March 31, 2007 and 2006, tax equivalent net interest income was $7.1 million and $6.8 million, respectively.  See the table below for a reconciliation of net interest income to tax equivalent net interest income. Total non interest income, excluding gains and losses on the investment portfolio, for the quarters ended March 31, 2007 and 2006, was $2.1 million.  The Company calculates this ratio in order to evaluate its overhead structure or how effectively it is operating.  An increase in the ratio from period to period indicates the Company is losing a larger percentage of its income to expenses.  The Company believes that the efficiency ratio is a reasonable measure of profitability.

 


MIDDLEBURG FINANCIAL CORPORATION

 

 

 

 

 

 

 

 

 

 

SELECTED FINANCIAL DATA BY QUARTER

 

 

 

 

 

 

 

 

 

 

 

 

 

1Q07

 

4Q06

 

3Q06

 

2Q06

 

1Q06

BALANCE SHEET RATIOS

 

 

 

 

 

 

 

 

 

 

 

Loans to deposits

 

111.53%

 

105.25%

 

100.59%

 

99.24%

 

100.54%

 

Average interest-earning assets to

 

 

 

 

 

 

 

 

 

 

 

    average-interest bearing liabilities

 

124.49%

 

123.82%

 

123.22%

 

122.27%

 

122.35%

 

 

 

 

 

 

 

 

 

 

 

 

PER SHARE DATA

 

 

 

 

 

 

 

 

 

 

 

Dividends

 

 $             0.19 

 

 $             0.19 

 

 $             0.19 

 

 $             0.19 

 

 $             0.19 

 

Book value

 

 $           17.61 

 

 $           17.29 

 

 $           17.22 

 

 $           14.36 

 

 $           14.32 

 

Tangible book value

 

 $           16.39 

 

 $           16.06 

 

 $           15.97 

 

 $           12.85 

 

 $           12.79 

 

 

 

 

 

 

 

 

 

 

 

 

SHARE PRICE DATA

 

 

 

 

 

 

 

 

 

 

 

Closing price

 

 $           32.80 

 

 $           36.99 

 

 $           34.05 

 

 $           30.83 

 

 $           35.00 

 

Diluted earnings multiple

 

                1.90 

 

                2.00 

 

                1.80 

 

                2.31 

 

                2.51 

 

Book value multiple

 

                1.86 

 

                2.14 

 

                1.98 

 

                2.15 

 

                2.44 

 

 

 

 

 

 

 

 

 

 

 

 

COMMON STOCK DATA

 

 

 

 

 

 

 

 

 

 

 

Outstanding shares at end of period

 

       4,505,605 

 

       4,505,605 

 

       4,505,605 

 

       3,809,053 

 

       3,809,053 

 

Weighted average shares outstanding

 

       4,505,605 

 

       4,505,605 

 

       4,394,724 

 

       3,809,053 

 

       3,807,786 

 

Weighted average shares outstanding, diluted

 

       4,590,422 

 

       4,596,195 

 

       4,482,970 

 

       3,899,198 

 

       3,904,965 

 

 

 

 

 

 

 

 

 

 

 

 

CAPITAL RATIOS

 

 

 

 

 

 

 

 

 

 

 

Total equity to total assets

 

10.07%

 

10.09%

 

10.04%

 

7.09%

 

7.16%

 

Total risk based capital ratio

 

13.57%

 

13.70%

 

15.20%

 

11.74%

 

11.70%

 

Tier 1 risk based capital ratio

 

12.65%

 

12.79%

 

14.30%

 

10.85%

 

10.80%

 

Leverage ratio

 

10.30%

 

10.26%

 

11.52%

 

8.75%

 

8.76%

 

 

 

 

 

 

 

 

 

 

 

 

CREDIT QUALITY

 

 

 

 

 

 

 

 

 

 

 

Net charge-offs to average loans

 

0.00%

 

0.00%

 

0.00%

 

0.01%

 

0.01%

 

Total non-performing loans to total loans

 

0.00%

 

0.00%

 

0.00%

 

0.00%

 

0.00%

 

Total non-performing assets to total assets

 

 

 

 

 

 

 

 

 

 

 

Non-accrual loans to:

 

 

 

 

 

 

 

 

 

 

 

      total loans

 

0.00%

 

0.00%

 

0.00%

 

0.05%

 

0.00%

 

      total assets

 

0.00%

 

0.00%

 

0.00%

 

0.03%

 

0.00%

 

Allowance for loan losses to:

 

 

 

 

 

 

 

 

 

 

 

      total loans

 

0.98%

 

0.98%

 

0.98%

 

0.98%

 

0.98%

 

     non-performing loans

 

0.00%

 

0.00%

 

0.00%

 

2130.08%

 

33562.50%

 

     non-accrual loans

 

0.00%

 

0.00%

 

0.00%

 

2138.43%

 

48818.18%

 

 

 

 

 

 

 

 

 

 

 

 

NON-PERFORMING ASSETS:

 

 

 

 

 

 

 

 

 

 

(dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

    Loans delinquent over 90 days

 

 $                22 

 

 $                19 

 

 $                 - 

 

 $                  1 

 

 $                  5 

 

    Non-accrual loans    

 

                    - 

 

                    - 

 

                    - 

 

                 255 

 

                   11 

 

 

 

 

 

 

 

 

 

 

 

 

NET LOAN CHARGE-OFFS (RECOVERIES):

 

 

 

 

 

 

 

 

 

 

(dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

    Loans charged off

 

 $                26 

 

 $                16 

 

 $                14 

 

 $                36 

 

 $                47 

 

    (Recoveries)

 

                 (20)

 

                   (4)

 

                 (19)

 

                   (6)

 

                 (24)

 

Net charge-offs (recoveries)

 

                     6 

 

                   12 

 

                   (5)

 

                   30 

 

                   23 

 

 

 

 

 

 

 

 

 

 

 

 

PROVISION FOR LOAN LOSSES (dollars in thousands)

 

 $              152 

 

 $                81 

 

 $                55 

 

 $              113 

 

 $              250 

 

 

 

 

 

 

 

 

 

 

 

 

ALLOWANCE FOR LOAN LOSS SUMMARY

 

 

 

 

 

 

 

 

 

 

(dollars in thousands)

 

 

 

 

 

 

 

 

 

 

Balance at the beginning of period

 

 $           5,582 

 

 $           5,513 

 

 $           5,453 

 

 $           5,370 

 

 $           5,143 

 

Provision

 

                 152 

 

                   81 

 

                   55 

 

                 113 

 

                 250 

 

Net charge-offs (recoveries)

 

                     6 

 

                   12 

 

                   (5)

 

                   30 

 

                   23 

 

Balance at the end of period

 

              5,728 

 

              5,582 

 

              5,513 

 

              5,453 

 

              5,370 

 

 

Average Balances, Income and Expenses, Yields and Rates

 

 Three Months Ended March 31,

 

 

 

2007

 

 

 

 

 

2006

 

 

 

 Average

 

 Income/

 

Yield/

 

 Average

 

 Income/

 

Yield/

 

 Balance

 

 Expense

 

Rate  (3)

 

 Balance

 

 Expense

 

Rate  (3)

 

 

 

 

 

(Dollars in thousands)

 

 

Assets :

 

 

 

 

 

 

 

 

 

 

 

Securities:

 

 

 

 

 

 

 

 

 

 

 

   Taxable

 $      93,377 

 

 $         1,223 

 

5.31%

 

 $    118,683 

 

 $         1,405 

 

4.80%

   Tax-exempt (1) (2)

         41,182 

 

               737 

 

7.26%

 

         30,899 

 

               563 

 

7.39%

       Total securities

 $    134,559 

 

 $         1,960 

 

5.91%

 

 $    149,582 

 

 $         1,968 

 

5.34%

Loans

 

 

 

 

 

 

 

 

 

 

 

   Taxable

 $    573,281 

 

 $         9,983 

 

7.06%

 

 $    531,275 

 

 $         8,865 

 

6.77%

   Tax-exempt  (1)

                20 

 

                 - 

 

0.00%

 

              101 

 

                   2 

 

8.03%

       Total loans

 $    573,301 

 

 $         9,983 

 

7.06%

 

 $    531,376 

 

 $         8,867 

 

6.77%

Federal funds sold

           4,351 

 

                 54 

 

5.03%

 

              731 

 

                   8 

 

4.44%

Interest on money market investments

                 - 

 

                 - 

 

- 

 

                 - 

 

                 - 

 

- 

Interest bearing deposits in

 

 

 

 

 

 

 

 

 

 

 

      other financial institutions

              568 

 

                   6 

 

4.28%

 

              108 

 

                   1 

 

3.76%

       Total earning assets

 $    712,779 

 

 $       12,003 

 

6.83%

 

 $    681,797 

 

 $       10,844 

 

6.45%

Less: allowances for credit losses

          (5,608)

 

 

 

 

 

          (5,161)

 

 

 

 

Total nonearning assets

         68,787 

 

 

 

 

 

         68,589 

 

 

 

 

Total assets

 $    775,958 

 

 

 

 

 

 $    745,225 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing deposits:

 

 

 

 

 

 

 

 

 

 

 

    Checking

 $    146,104 

 

 $            918 

 

2.55%

 

 $    148,390 

 

 $            813 

 

2.22%

    Regular savings

         51,020 

 

               231 

 

1.84%

 

         59,518 

 

               254 

 

1.73%

    Money market savings

         60,101 

 

               162 

 

1.09%

 

         74,193 

 

               173 

 

0.95%

    Time deposits:

 

 

 

 

 

 

 

 

 

 

 

       $100,000 and over

       128,192 

 

            1,582 

 

5.00%

 

         80,212 

 

               776 

 

3.92%

       Under $100,000

         62,846 

 

               624 

 

4.03%

 

         59,684 

 

               509 

 

3.46%

       Total interest-bearing deposits

 $    448,263 

 

 $         3,517 

 

3.18%

 

 $    421,997 

 

 $         2,525 

 

2.43%

 

 

 

 

 

 

 

 

 

 

 

 

Federal Home Loan Bank Advances

         36,417 

 

               426 

 

4.74%

 

         28,158 

 

               333 

 

4.80%

Securities sold under agreements

 

 

 

 

 

 

 

 

 

 

 

    to repurchase

         45,596 

 

               506 

 

4.50%

 

         35,487 

 

               323 

 

3.69%

Long-term debt

         41,766 

 

               487 

 

4.73%

 

         70,521 

 

               851 

 

4.89%

Federal Funds Purchased

              519 

 

                   8 

 

6.25%

 

              942 

 

                 10 

 

4.31%

    Total interest-bearing liabilities

 $    572,561 

 

 $         4,944 

 

3.50%

 

 $    557,105 

 

 $         4,042 

 

2.94%

Non-interest bearing liabilities

 

 

 

 

 

 

 

 

 

 

 

    Demand Deposits

       117,498 

 

 

 

 

 

       129,177 

 

 

 

 

    Other liabilities

           6,920 

 

 

 

 

 

           3,904 

 

 

 

 

Total liabilities

 $    696,979 

 

 

 

 

 

 $    690,186 

 

 

 

 

Shareholders' equity

         78,978 

 

 

 

 

 

         55,040 

 

 

 

 

Total liabilities and shareholders'

 

 

 

 

 

 

 

 

 

 

 

   equity

 $    775,957 

 

 

 

 

 

 $    745,226 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

 

 $         7,059 

 

 

 

 

 

 $         6,802 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate spread

 

 

 

 

3.33%

 

 

 

 

 

3.51%

Interest expense as a percent of

 

 

 

 

 

 

 

 

 

 

 

    average earning assets

 

 

 

 

2.81%

 

 

 

 

 

2.40%

Net interest margin

 

 

 

 

4.02%

 

 

 

 

 

4.05%

 

 

 

 

 

 

 

 

 

 

 

 

(1) Income and yields are reported on tax equivalent basis assuming a federal tax rate of 34%

(2) Income and yields include dividends on preferred bonds which are 70% excludable for tax purposes.

(3) All yields and rates have been annualized on a 365 day year.

 

MIDDLEBURG FINANCIAL CORPORATION

 

 

 

 

 

 

 

 

 

RECONCILIATION OF NET INTEREST INCOME TO

 

 

 

 

 

 

 

 

 

TAX EQUIVALENT NET INTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FOR THE FISCAL YEAR-TO-DATE PERIOD ENDED

 

 

 

 

 

 

 

 

 

(dollars in thousands)

3/31/2007

 

12/31/2006

 

9/30/2006

 

6/30/2006

 

3/31/2006

GAAP measures:

 

 

 

 

 

 

 

 

 

  Interest Income - Loans

 $      9,983 

 

 $    38,161 

 

 $    28,217 

 

 $    18,374 

 

 $      8,867 

  Interest Income - Investments & Other

         1,770 

 

         7,237 

 

         5,431 

 

         3,581 

 

         1,786 

  Interest Expense - Deposits

         3,518 

 

       11,694 

 

         8,320 

 

         5,166 

 

         2,525 

  Interest Expense - Other Borrowings

         1,426 

 

         6,794 

 

         5,214 

 

         3,461 

 

         1,517 

Total Net Interest Income

 $      6,809 

 

 $    26,910 

 

 $    20,114 

 

 $    13,328 

 

 $      6,611 

Plus:

 

 

 

 

 

 

 

 

 

NON-GAAP measures:

 

 

 

 

 

 

 

 

 

  Tax Benefit Realized on Non- Taxable Interest Income - Loans

 $             1 

 

 $             2 

 

 $             1 

 

 $             1 

 

 $             1 

  Tax Benefit Realized on Non- Taxable Interest Income - Municipal Securities

            250 

 

            792 

 

            577 

 

            382 

 

            191 

  Tax Benefit Realized on Non- Taxable Interest Income - Corporate Securities

               - 

 

               - 

 

               - 

 

               - 

 

               - 

Total Tax Benefit Realized on Non- Taxable Interest Income  

 $         251 

 

 $         794 

 

 $         578 

 

 $         383 

 

 $         192 

 

 

 

 

 

 

 

 

 

 

Total Tax Equivalent Net Interest Income

 $      7,059 

 

 $    27,704 

 

 $    20,692 

 

 $    13,711 

 

 $      6,803