U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 2004
or
[ ] Transition Report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from ____________ to _____________
Commission file number: 0-24159
MIDDLEBURG FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Virginia (State or other jurisdiction of incorporation or organization) | 54-1696103 (I.R.S. Employer Identification No.) |
111 West Washington Street Middleburg, Virginia (Address of principal executive offices) | 20117 (Zip Code) |
(703) 777-6327
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes | X | No |
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes | No | X |
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
3,803,702 shares of common stock, par value $2.50 per share,
outstanding as of August 10, 2004
MIDDLEBURG FINANCIAL CORPORATION
INDEX
Part I. Financial Information
Page No.
Item 1.
Financial Statements
Consolidated Balance Sheets
3
Consolidated Statements of Income
4
Consolidated Statements of Changes in Shareholders’ Equity
5
Consolidated Statements of Cash Flows
6
Notes to Consolidated Financial Statements
7
Item 2.
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
13
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
22
Item 4. Controls and Procedures
24
Part II. Other Information
Item 1.
Legal Proceedings
25
Item 2.
Change in Securities, Use of Proceeds and Issuer
Purchases of Equity Securities
25
Item 3.
Defaults upon Senior Securities
25
Item 4.
Submission of Matters to a Vote of Security Holders
25
Item 5.
Other Information
25
Item 6.
Exhibits and Reports on Form 8-K
26
Signatures
27
2
PART I. FINANCIAL INFORMATION
Item 1.
FINANCIAL STATEMENTS
MIDDLEBURG FINANCIAL CORPORATION
Consolidated Balance Sheets
(In Thousands, Except Share Data)
(Unaudited) | ||||
June 30, | December 31, | |||
2004 | 2003 | |||
Assets: | ||||
Cash and due from banks | $ 10,832 | $ 10,668 | ||
Interest-bearing balances in banks | 645 | 423 | ||
Temporary investments: | ||||
Federal funds sold | 14,200 | - | ||
Money market investments | - | 740 | ||
Securities (fair value: June 30, 2004, | ||||
$179,606, December 31, 2003, $194,793) | 179,473 | 194,581 | ||
Loans held for sale | 22,456 | 11,192 | ||
Loans, net of allowance for loan losses of $2,906 in 2004 | ||||
and $2,605 in 2003 | 284,488 | 258,112 | ||
Bank premises and equipment, net | 12,509 | 11,261 | ||
Other assets | 22,629 | 21,962 | ||
| ||||
Total assets | $ 547,232 | $ 508,939 | ||
Liabilities and Shareholders' Equity: | ||||
Liabilities: | ||||
Deposits: | ||||
Non-interest bearing demand deposits | $ 124,636 | $ 103,845 | ||
Savings and interest-bearing demand deposits | 192,844 | 161,963 | ||
Time deposits | 100,412 | 104,178 | ||
Total deposits | $ 417,892 | $ 369,986 | ||
Federal funds purchased | - | 1,500 | ||
Securities sold under agreements to | ||||
repurchase | 26,679 | 13,535 | ||
Federal Home Loan Bank advances | - | 27,250 | ||
Long-term debt | 38,500 | 31,000 | ||
Trust preferred capital notes | 15,000 | 15,000 | ||
Other liabilities | 2,357 | 3,341 | ||
Total liabilities | $ 500,428 | $ 461,612 | ||
Shareholders' Equity: | ||||
Common stock, par value $2.50 per | ||||
share, authorized 20,000,000 shares; | ||||
issued and outstanding at June 30, 2004 - 3,803,552 | ||||
issued and outstanding at December 31, 2003 - 3,803,102 | $ 9,509 | $ 9,508 | ||
Capital surplus | 5,545 | 5,541 | ||
Retained earnings | 33,029 | 30,798 | ||
Accumulated other comprehensive income, net | (1,279) | 1,480 | ||
Total shareholders' equity | $ 46,804 | $ 47,327 | ||
Total liabilities and shareholders' equity | $ 547,232 | $ 508,939 |
See Accompanying Notes to Consolidated Financial Statements.
3
MIDDLEBURG FINANCIAL CORPORATION
Consolidated Statements of Income
(In Thousands, Except Per Share Data)
Unaudited |
| Unaudited | |||||
For the Six Months | For the Quarter | ||||||
Ended June 30, | Ended June 30, | ||||||
2004 | 2003 | 2004 | 2003 | ||||
Interest and Dividend Income | |||||||
Interest and fees on loans | $ 8,614 | $ 8,092 | $ 4,421 | $ 4,068 | |||
Interest on investment securities | |||||||
Taxable | 1 | 1 | - | 1 | |||
Exempt from federal income taxes | 90 | 103 | 43 | 50 | |||
Interest on securities available for sale | |||||||
Taxable | 3,182 | 3,041 | 1,551 | 1,531 | |||
Exempt from federal income taxes | 761 | 776 | 368 | 387 | |||
Dividends | 97 | 142 | 44 | 77 | |||
Interest on federal funds sold and other | 19 | 28 | 15 | 18 | |||
Total interest income | $ 12,764 | $ 12,183 | $ 6,442 | $ 6,132 | |||
Interest Expense | |||||||
Interest on deposits | $ 1,443 | $ 1,713 | $ 741 | $ 831 | |||
Interest on long-term debt | 1,255 | 854 | 624 | 546 | |||
Interest on short-term borrowings | 160 | 310 | 47 | 47 | |||
Total interest expense | $ 2,858 | $ 2,877 | $ 1,412 | $ 1,424 | |||
Net interest income | $ 9,906 | $ 9,306 | $ 5,030 | $ 4,708 | |||
Provision for loan losses | 219 | 300 | 110 | 225 | |||
Net interest income after provision | |||||||
for loan losses | $ 9,687 | $ 9,006 | $ 4,920 | $ 4,483 | |||
Other Income | |||||||
Trust and investment advisory fee income | $ 1,873 | $ 1,688 | $ 934 | $ 842 | |||
Service charges on deposits | 742 | 838 | 392 | 418 | |||
Net gains (losses) on securities | |||||||
available for sale | 79 | 441 | (102) | 146 | |||
Fees on loans held for resale | - | 900 | - | 266 | |||
Commissions on investment sales | 344 | 645 | 169 | 342 | |||
Equity in earnings of affiliate | 879 | 764 | 418 | 764 | |||
Other service charges, commissions and fees | 206 | 343 | 117 | 170 | |||
Other operating income | 75 | 37 | 46 | 37 | |||
Total other income | $ 4,198 | $ 5,656 | $ 1,974 | $ 2,985 | |||
Other Expense | |||||||
Salaries and employee benefits | $ 5,096 | $ 5,126 | $ 2,517 | $ 2,486 | |||
Net occupancy expense of premises | 1,104 | 1,125 | 528 | 546 | |||
Advertising | 183 | 140 | 104 | 78 | |||
Computer operations | 352 | 300 | 182 | 161 | |||
Other operating expenses | 1,918 | 1,812 | 1,061 | 913 | |||
Total other expense | $ 8,653 | $ 8,503 | $ 4,392 | $ 4,184 | |||
| |||||||
Income before income taxes | $ 5,232 | $ 6,159 | $ 2,502 | $ 3,284 | |||
Income taxes | 1,556 | 1,847 | 774 | 982 | |||
Net income | $ 3,676 | $ 4,312 | $ 1,728 | $ 2,302 | |||
Net income per share, basic | $ 0.97 | $ 1.15 | $ 0.45 | $ 0.61 | |||
Net income per share, diluted | $ 0.94 | $ 1.13 | $ 0.44 | $ 0.60 | |||
Dividends per share | $ 0.38 | $ 0.31 | $ 0.19 | $ 0.16 | |||
See Accompanying Notes to Consolidated Financial Statements.
4
MIDDLEBURG FINANCIAL CORPORATION
Consolidated Statements of Changes in Shareholders’ Equity
For the Six Months Ended June 30, 2004 and 2003
(In Thousands, Except Share Data)
(Unaudited)
Accumulated | |||||||||||
Other | |||||||||||
Common | Capital | Retained | Comprehensive | Comprehensive | |||||||
Stock | Surplus | Earnings | Income | Income | Total | ||||||
Balances - December 31, 2002 | $ 9,263 | $ 3,644 | $ 25,184 | $ 3,319 | $ 41,410 | ||||||
Comprehensive Income | |||||||||||
Net income | 4,312 | $ 4,312 | 4,312 | ||||||||
Issuance of common stock (89,168 shares) | 223 | 1,783 | 2,006 | ||||||||
Other comprehensive income | |||||||||||
net of tax: | |||||||||||
Unrealized holding losses arising during the | |||||||||||
period (net of tax $258) | 500 | ||||||||||
Reclassification adjustment for | |||||||||||
gains realized in net income (net of tax $150) | (291) | ||||||||||
Other comprehensive income (net of tax $108) | 209 | $ 209 | 209 | ||||||||
Total comprehensive income | $ 4,521 | ||||||||||
Cash dividends declared | (1,162) | (1,162) | |||||||||
Balances - June 30, 2003 | $ 9,486 | $ 5,427 | $ 28,334 | $ 3,528 | $ 46,775 | ||||||
Balances - December 31, 2003 | $ 9,508 | $ 5,541 | $ 30,798 | $ 1,480 | $ 47,327 | ||||||
Comprehensive Income | |||||||||||
Net income | 3,676 | $ 3,676 | 3,676 | ||||||||
Other comprehensive income | |||||||||||
net of tax: | |||||||||||
Unrealized holding gains arising during the | |||||||||||
period (net of tax $1,395) | (2,707) | ||||||||||
Reclassification adjustment for | |||||||||||
gains realized in net income (net of tax $27) | (52) | ||||||||||
Other comprehensive income (net of tax $1,422) | (2,759) | $ (2,759) | (2,759) | ||||||||
Total comprehensive income | $ 917 | ||||||||||
Cash dividends declared | (1,445) | (1,445) | |||||||||
Issuance of common stock (450 shares) | 1 | 4 | 5 | ||||||||
Balances - June 30, 2004 | $ 9,509 | $ 5,545 | $ 33,029 | $ (1,279) | $ 46,804 | ||||||
See Accompanying Notes to Consolidated Financial Statements.
5
MIDDLEBURG FINANCIAL CORPORATION
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
Unaudited | |||
For the Six Months Ended | |||
June 30, | June 30, | ||