Middleburg Financial Corp. in Virginia said Thursday that it expects to take a $5 million noncash impairment charge this quarter related to its investment in Southern Trust Mortgage LLC of Virginia Beach.
The $840 million-asset Middleburg, which owns a 41.8% stake in the mortgage company, said a recent independent valuation of its investment concluded that an impairment charge would be necessary under generally accepted accounting principles. The investment's value has declined as Southern Trust's mortgage volume has slowed and loan-loss reserves have increased, Middleburg said.
"While we are positive in our long-term view of Southern Mortgage …taking this writedown at this juncture was the conservative and prudent action to take," Middleburg's chairman and chief executive, Joseph L. Boling, said in a press release.
Also Thursday, Middleburg said that it would guarantee up to $15 million of Southern Trust's bank debt. In doing so, it expects the mortgage company to able to continue tapping its line of credit.
