Exhibit 99.1
Middleburg Financial Corporation Announces First Quarter 2007 Earnings
Contact: | Joseph L. Boling, Chairman & CEO | 540-687-6377 or |
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| ceo@middleburgbank.com |
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| Alice P. Frazier, EVP & CFO | 540-687-4801 or |
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| cfo@middleburgbank.com |
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| Kate J. Chappell, SVP & CAO | 540-687-4816 or |
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| 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 |
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SUMMARY INCOME STATEMENT |
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( Unaudited, dollars in thousands) |
| For the Three Months Ended | |||||||||
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| 1Q07 |
| 4Q06 |
| 3Q06 |
| 2Q06 |
| 1Q06 |
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INTEREST INCOME |
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| 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 |
| - |
| - |
| - |
| - |
| - |
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TOTAL INTEREST INCOME |
| $ 11,753 |
| $ 11,751 |
| $ 11,692 |
| $ 11,302 |
| $ 10,653 | |
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INTEREST EXPENSE |
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| 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 |
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TOTAL INTEREST EXPENSE |
| $ 4,944 |
| $ 4,953 |
| $ 4,907 |
| $ 4,586 |
| $ 4,041 | |
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NET INTEREST INCOME |
| $ 6,809 |
| $ 6,797 |
| $ 6,785 |
| $ 6,716 |
| $ 6,612 | |
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PROVISION FOR LOAN LOSSES |
| 152 |
| 82 |
| 55 |
| 113 |
| 250 | |
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NET INTEREST INCOME AFTER PROVISION |
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| FOR LOAN LOSSES |
| $ 6,657 |
| $ 6,716 |
| $ 6,731 |
| $ 6,603 |
| $ 6,362 |
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NON INTEREST INCOME |
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| 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 |
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TOTAL NON INTEREST INCOME |
| $ 2,057 |
| $ 1,560 |
| $ 2,213 |
| $ 2,252 |
| $ 2,091 | |
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NON INTEREST EXPENSE |
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| 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 |
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TOTAL NON INTEREST EXPENSE |
| $ 5,719 |
| $ 6,206 |
| $ 5,589 |
| $ 5,869 |
| $ 5,546 | |
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INCOME BEFORE TAXES |
| $ 2,994 |
| $ 2,069 |
| $ 3,354 |
| $ 2,987 |
| $ 2,907 | |
| Income tax expense |
| 849 |
| 537 |
| 1,019 |
| 885 |
| 858 |
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NET INCOME |
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| $ 2,146 |
| $ 1,532 |
| $ 2,336 |
| $ 2,101 |
| $ 2,049 |
MIDDLEBURG FINANCIAL CORPORATION |
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BALANCE SHEET |
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(dollars in thousands) | Unaudited |
| Unaudited |
| Unaudited |
| Unaudited |
| Unaudited |
| 3/31/2007 |
| 12/31/2006 |
| 9/30/2006 |
| 6/30/2006 |
| 3/31/2006 |
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Assets: |
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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 |
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Total assets | $ 787,767 |
| $ 772,305 |
| $ 772,553 |
| $ 771,024 |
| $ 762,017 |
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Liabilities and Shareholders' Equity: |
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Liabilities: |
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Deposits: |
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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 |
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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 |
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Shareholders' Equity: |
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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 |
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Total liabilities and shareholders' equity | $ 787,767 |
| $ 772,305 |
| $ 772,553 |
| $ 771,024 |
| $ 762,017 |
MIDDLEBURG FINANCIAL CORPORATION |
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KEY STATISTICS |
| For the Three Months Ended | |||||||||
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| 1Q07 |
| 4Q06 |
| 3Q06 |
| 2Q06 |
| 1Q06 |
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| 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 |
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| 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% |
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| 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 | |
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| 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% |
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| 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 |
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SELECTED FINANCIAL DATA BY QUARTER |
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| 1Q07 |
| 4Q06 |
| 3Q06 |
| 2Q06 |
| 1Q06 |
BALANCE SHEET RATIOS |
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| Loans to deposits |
| 111.53% |
| 105.25% |
| 100.59% |
| 99.24% |
| 100.54% |
| Average interest-earning assets to |
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| average-interest bearing liabilities |
| 124.49% |
| 123.82% |
| 123.22% |
| 122.27% |
| 122.35% |
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PER SHARE DATA |
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| 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 |
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SHARE PRICE DATA |
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| 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 |
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COMMON STOCK DATA |
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| 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 |
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CAPITAL RATIOS |
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| 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% |
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CREDIT QUALITY |
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| 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 |
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| Non-accrual loans to: |
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| 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: |
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| 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% |
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NON-PERFORMING ASSETS: |
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(dollars in thousands) |
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| Loans delinquent over 90 days |
| $ 22 |
| $ 19 |
| $ - |
| $ 1 |
| $ 5 |
| Non-accrual loans |
| - |
| - |
| - |
| 255 |
| 11 |
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NET LOAN CHARGE-OFFS (RECOVERIES): |
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(dollars in thousands) |
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| Loans charged off |
| $ 26 |
| $ 16 |
| $ 14 |
| $ 36 |
| $ 47 |
| (Recoveries) |
| (20) |
| (4) |
| (19) |
| (6) |
| (24) |
| Net charge-offs (recoveries) |
| 6 |
| 12 |
| (5) |
| 30 |
| 23 |
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PROVISION FOR LOAN LOSSES (dollars in thousands) |
| $ 152 |
| $ 81 |
| $ 55 |
| $ 113 |
| $ 250 | |
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ALLOWANCE FOR LOAN LOSS SUMMARY |
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(dollars in thousands) |
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| 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, | ||||||||||
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| 2007 |
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| 2006 |
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| Average |
| Income/ |
| Yield/ |
| Average |
| Income/ |
| Yield/ |
| Balance |
| Expense |
| Rate (3) |
| Balance |
| Expense |
| Rate (3) |
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| (Dollars in thousands) |
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Assets : |
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Securities: |
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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 |
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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 |
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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) |
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| (5,161) |
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Total nonearning assets | 68,787 |
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| 68,589 |
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Total assets | $ 775,958 |
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| $ 745,225 |
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Liabilities: |
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Interest-bearing deposits: |
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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: |
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$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% |
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Federal Home Loan Bank Advances | 36,417 |
| 426 |
| 4.74% |
| 28,158 |
| 333 |
| 4.80% |
Securities sold under agreements |
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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 |
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Demand Deposits | 117,498 |
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| 129,177 |
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Other liabilities | 6,920 |
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| 3,904 |
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Total liabilities | $ 696,979 |
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| $ 690,186 |
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Shareholders' equity | 78,978 |
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| 55,040 |
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Total liabilities and shareholders' |
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equity | $ 775,957 |
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| $ 745,226 |
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Net interest income |
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| $ 7,059 |
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| $ 6,802 |
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Interest rate spread |
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| 3.33% |
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| 3.51% |
Interest expense as a percent of |
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average earning assets |
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| 2.81% |
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| 2.40% |
Net interest margin |
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| 4.02% |
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| 4.05% |
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(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 |
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RECONCILIATION OF NET INTEREST INCOME TO |
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TAX EQUIVALENT NET INTEREST INCOME |
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FOR THE FISCAL YEAR-TO-DATE PERIOD ENDED |
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(dollars in thousands) | 3/31/2007 |
| 12/31/2006 |
| 9/30/2006 |
| 6/30/2006 |
| 3/31/2006 |
GAAP measures: |
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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: |
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NON-GAAP measures: |
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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 |
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Total Tax Equivalent Net Interest Income | $ 7,059 |
| $ 27,704 |
| $ 20,692 |
| $ 13,711 |
| $ 6,803 |