MIDDLEBURG FINANCIAL CORP - FORM 8-K - EX-99.1 - EARNINGS RELEASE

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8-K - FORM 8-K - MIDDLEBURG FINANCIAL CORP	f8kmbrg013112.htm

Exhibit 99.1

E A R N I N G S R E L E A S E

Press Contacts:	Gary R. Shook, President & CEO	540-687-4801 or
		pres@middleburgbank.com

	Raj Mehra, EVP & CFO	540-687-4816 or
		cfo@middleburgbank.com


	Jeffrey H. Culver, EVP & COO	703-737-3470 or

MIDDLEBURG FINANCIAL CORPORATION ANNOUNCES FOURTH QUARTER 2011 RESULTS

MIDDLEBURG, VA. – January 31, 2012 – Middleburg Financial Corporation (the “Company”) (Nasdaq: MBRG), today announced net income of $1.1 million for the quarter ending December 31, 2011 and $5.0 million in net income for the year 2011.

"We are certainly gratified by the forward progress of Middleburg Financial Corporation in 2011 on a number of fronts. Our net income of $5.0 million for the year demonstrates the continued positive benefit derived from the actions taken in 2010. But just as important, our ability to grow our capital, open a full service financial services office in Richmond and continue to invest in our future by hiring top quality talent, positions this company very well as we look toward the future," commented Gary R. Shook, president and chief executive officer of Middleburg Financial Corporation. He continued, "while we would have liked to see a net profit from each of our subsidiaries, we did see both the Bank and Middleburg Investment Group, post positive net income. While Southern Trust Mortgage did not post positive net income, substantial investments made during 2011, especially in the contiguous markets of Northern Virginia, position both the Bank and STM to benefit from the synergies that exist between the two entities as we move out of the current economic environment."

Fourth Quarter 2011 Highlights:

Net income of $1.1 million or $0.16 per diluted share;

Net interest margin of 3.67%, compared to 3.60% for the fourth quarter of 2010;

Total revenue of $17.8 million, up 5.3% compared to the fourth quarter of 2010;

Loan growth of 1.8% for the year;

Total assets of $1.2 billion, an increase of 8.0% over December 31, 2010;

Deposits increased by $39.6 million or 4.4% during the year;

Provision for loan losses declined by 51.3% compared to fourth quarter of 2010; and

Capital ratios continue to be strong: Tangible Common Equity Ratio of 8.4%, Total Risk-Based Capital Ratio of 14.7%, Tier 1 Risk-Based Capital Ratio of 13.5%, and a Tier 1 Leverage Ratio of 8.8% at December 31, 2011.

Total Revenue

Total revenue was $17.8 million in the quarter ended December 31, 2011 compared to $17.2 million in the previous quarter and $16.9 million in the quarter ended December 31, 2010, representing an increase of 3.5% and 5.3%, respectively.

Net interest income was $10.0 million during the three months ended December 31, 2011, which was 3.1% higher than the previous quarter and an increase of 10.5% compared to the quarter ended December 31, 2010. The yield on average earning assets was 4.55% for the quarter ended December 31, 2011 compared to 4.66% for the previous quarter and 4.78% for the quarter ended December 31, 2010, representing a decrease of 11 basis points from the previous quarter and a decrease of 23 basis points from the quarter ended December 31, 2010. The decrease in the yield on earning assets from the previous quarter reflected a 20 basis point decrease in the yield on the loan portfolio and a decrease of 9 basis points in the yield on the securities portfolio. Average earning assets increased 3.4% compared to the previous quarter. Loan growth and an increase in investment securities drove the increase in earning assets during the fourth quarter of 2011.

The average cost of interest bearing liabilities was 1.07% for the quarter ended December 31, 2011, compared to 1.21% in the previous quarter, and 1.41% for the quarter ended December 31, 2010, representing a decrease of 14 basis points from the previous quarter and a decrease of 34 basis points from the quarter ended December 31, 2010. Costs for wholesale borrowings decreased by 10 basis points during the quarter, while costs for retail deposits decreased by 19 basis points during the same period. The decline in the cost of retail deposits during the quarter ended December 31, 2011, compared to the previous quarter, was driven by reductions in interest expenses across the board: cost of time deposits declined 22 basis points, savings account interest expense declined 25 basis points, money market interest expense declined 26 basis points and interest checking costs decreased 18 basis points. Cost of funds is calculated by dividing annualized total interest expense by the sum of average interest bearing liabilities and average demand deposits. Cost of funds was 0.92% for the quarter ended December 31, 2011 compared to 1.06% for the quarter ended September 30, 2011, a decrease of 14 basis points from the previous quarter.

The net interest margin for the three months ended December 31, 2011 was 3.67%, compared to 3.64% for the previous quarter, and 3.60% for the quarter ended December 31, 2010, representing an increase of 3 basis points from the previous quarter and an increase of 7 basis points compared to the quarter ended December 31, 2010.

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 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%. Details on the calculation of the net interest margin are included in the “Key Statistics” table.

Non-interest income increased by $296,000 or 3.9% when comparing the quarter ended December 31, 2011 to the previous quarter and decreased by $92,000 or 1.2% compared to the quarter ended December 30, 2010. The primary reasons for the higher non-interest income in the fourth quarter of 2011 relative to the prior quarter were higher gain-on-sale revenues from the Company’s mortgage operations, higher commissions on investment sales, and increased gains from sales of securities during the quarter.

Southern Trust Mortgage originated $212.2 million in mortgage loans during the quarter ended December 31, 2011 compared to $180.4 million originated during the previous quarter, an increase of 17.6%, and $227.1 million originated during the quarter ended December 31, 2010, a decrease of 6.6% when comparing calendar quarters. Gains on mortgage loan sales increased by 3.7% when comparing the quarter ended December 31,

2011 to the previous quarter. Gains on mortgage loan sales increased by 3.0% when comparing the quarter ended December 31, 2011 to the quarter ended December 31, 2010.

The revenues and expenses of Southern Trust Mortgage for the three month and twelve month periods ended December 31, 2010 and December 31, 2011 are reflected in the Company’s financial statements on a consolidated basis following generally accepted accounting principles in the United States. The outstanding equity interest not held by the Company is reported on the Company’s balance sheet as “Non-controlling interest in consolidated subsidiary” and the earnings or loss attributable to the non-controlling interest is reported on the Company’s statement of operations as “Net (income) / loss attributable to non-controlling interest.”

Trust and investment advisory service fees earned by Middleburg Trust Company (“MTC”) decreased by 2.3% when comparing the quarter ended December 31, 2011 to the previous quarter, and increased by 8.7% compared to the quarter ended December 31, 2010. Trust and investment advisory fees are based primarily upon the market value of the accounts under administration. Total consolidated assets under administration by MTC were at $1.2 billion at December 31, 2011, an increase of 1.9% relative to September 30, 2011 and unchanged relative to December 31, 2010.

Net securities gains were $197,000 during the quarter ended December 31, 2011 compared to net securities gains of $141,000 during the previous quarter and net securities gains of $109,000 during the quarter ended December 31, 2010.

Non-Interest Expense

Non-interest expense in the fourth quarter of 2011 increased by 15.9% compared to the previous quarter and by 15.1% compared to the quarter ended December 31, 2010.

Salaries and employee benefit expenses increased by $1.3 million or 14.7% when comparing the fourth quarter of 2011 to the previous quarter, primarily due to an increase in commission and recruiting expenses for mortgage loan officers. Expenses related to Other Real Estate Owned (OREO) increased by $236,000 or 34.3% when comparing the fourth quarter of 2011 to the previous quarter. Advertising expenses increased by $66,000 or 14.8% during the quarter as a result of expenses for bank-wide campaigns related to business loans and advertising at the mortgage company. Other operating expenses, which include expenses such as supplies, travel and entertainment expenses, increased by $383,000 or 27.1% when comparing the quarter ended December 31, 2011 to the previous quarter.

The Company’s efficiency ratio which is represented by the ratio of non-interest expense to the sum of tax equivalent net interest income and non-interest income, excluding securities gains and losses, was 90.4% for the fourth quarter of 2011, compared to an efficiency ratio of 80.9% in the quarter ending September 30, 2011 and 81.4% for the fourth quarter of 2010.

Asset Quality and Provision for Loan Losses

The provision for loan losses in the quarter ended December 31, 2011 was $319,000 compared to a provision of $1.0 million in the previous quarter and a provision of $655,000 in the quarter ended December 31, 2010, representing a decrease of 68.8% from the previous quarter and a decrease of 51.3% from the quarter ended December 31, 2010.

The Allowance for Loan and Lease Losses (ALLL) at December 31, 2011 was $14.6 million representing 2.18% of total portfolio loans outstanding versus 2.24% at September 30, 2011 and 2.27% of total portfolio loans at December 31, 2010.

Loans that were delinquent for more than 90 days and still accruing were $2.4 million as of December 31, 2011 compared to $1.6 million as of September 30, 2011, representing an increase of 50.0% during the quarter.

Non-accrual loans were $25.4 million at the end of the fourth quarter compared to $30.5 million as of September 30, 2011, representing a decrease of 16.7% during the fourth quarter of 2011. Troubled debt restructurings that were performing as agreed were $3.8 million at the end of the fourth quarter compared to $404,000 as of September 30, 2011. Other Real Estate Owned (OREO) was $8.5 million as of December 31, 2011 compared to $6.1 million as of September 30, 2011, representing an increase of 39.3% during the fourth quarter. Non-performing assets were $40.1 million or 3.3% of total assets at December 31, 2011, compared to $38.5 million or 3.3% of total assets as of September 30, 2011.

Total Consolidated Assets

Total assets at December 31, 2011 were $1.2 billion, an increase of $39.4 million or 3.4% compared to total assets at September 30, 2011.

Total portfolio loans declined by $4.4 million or 0.65% for the fourth quarter. The securities portfolio increased by $5.2 million or 1.7% in the fourth quarter relative to the previous quarter. Balances of mortgages held for sale increased by $25.6 million or 38.2% in the fourth quarter of 2011. Cash balances and deposits at other banks increased by 24.0% in the fourth quarter of 2011.

Deposits and Other Borrowings

Total deposits increased by $20.1 million or 2.2% in the fourth quarter. Brokered deposits, including CDARS program funds, were $96.9 million at December 31, 2011, up 5.4% from September 30, 2011. FHLB advances were $82.9 million at December 31, 2011, up $5.0 million from September 30, 2011, or an increase of 6.4%.

Equity and Capital

Total shareholders’ equity at December 31, 2011 was $105.9 million, compared to shareholders’ equity of $105.3 million as of September 30, 2011. Retained earnings at December 31, 2011 were $41.1 million compared to $40.4 million at September 30, 2011. The book value of the Company’s common stock at December 31, 2011 was $15.13 per share.

The Company’s total risk-based capital ratio increased to 14.7% at December 31, 2011 from 14.1% at December 31, 2010. The Tier 1 risk-based capital ratio increased from 12.8% to 13.5% from December 31, 2010 to December 31, 2011 and the Tier 1 Leverage Ratio decreased from 9.0% to 8.8% from December 31, 2010 to December 31, 2011.

As depicted in the following table, the Company’s risk-based capital ratios remain well above regulatory minimum capital ratios:


MIDDLEBURG FINANCIAL CORPORATION
Risk-Based Capital Ratios
December 31, 2011

		(1)		MFC
		Regulatory		Excess
		Minimum	MFC	over
		Requirement	Ratios	Minimum

	Tier 1 Leverage Ratio	4.0%	8.8%	4.8%

	Tier 1 Risk-Based Capital Ratio	4.0%	13.5%	9.5%

	Total Risk-Based Capital Ratio	8.0%	14.7%	6.7%

	(1) Under the regulatory framework for prompt corrective action.

Caution about Forward Looking Statements

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, 2010, and other filings with the Securities and Exchange Commission.

About Middleburg Financial Corporation

Middleburg Financial Corporation is headquartered in Middleburg, Virginia and has two wholly owned subsidiaries, Middleburg Bank and Middleburg Investment Group, Inc. Middleburg Bank serves communities in Virginia with financial centers in Ashburn, Gainesville, Leesburg, Marshall, Middleburg, Purcellville, Reston, Richmond, Warrenton and Williamsburg. Middleburg Investment Group owns Middleburg Trust Company, which is headquartered in Richmond, Virginia with offices in Middleburg, Alexandria and Williamsburg. Middleburg Financial Corporation is also the majority owner of Southern Trust Mortgage, which is based in Virginia Beach and provides mortgages through 17 offices in 11 states.

MIDDLEBURG FINANCIAL CORPORATION
Consolidated Balance Sheets
(In thousands, except for share and per share data)

	(Unaudited)		(Unaudited)
	December 31,		September 30,		December 31,
	2011		2011		2010
ASSETS
Cash and due from banks	$	6,163	$	5,334	$	21,955
Interest-bearing deposits with other institutions		45,107		36,024		42,769
Total cash and cash equivalents		51,270		41,358		64,724
Securities available for sale		308,242		303,014		252,042
Loans held for sale		92,514		66,910		59,361
Restricted securities, at cost		7,117		7,227		6,296
Loans receivable, net of allowance for loan losses of $14,623 at Dec. 31,
2011, $15,124 at Sept.30, 2011, and $14,967 at December 31, 2010		656,770		660,689		644,345
Premises and equipment, net		21,306		21,464		21,112
Goodwill and identified intangibles		6,201		6,244		6,360
Other real estate owned, net of valuation allowance of $1,522 at Dec. 31,
2011, $1,057 at Sept. 30, 2011, and $1,486 at December 31, 2010		8,535		6,096		8,394
Prepaid federal deposit insurance		3,993		4,227		5,154
Accrued interest receivable and other assets		36,912		36,427		36,779

TOTAL ASSETS	$	1,192,860	$	1,153,656	$	1,104,567

LIABILITIES
Deposits:
Non-interest-bearing demand deposits	$	143,398	$	145,393	$	130,488
Savings and interest-bearing demand deposits		460,576		455,893		436,718
Time deposits		325,895		308,410		323,100
Total deposits		929,869		909,696		890,306
Securities sold under agreements to repurchase		31,686		31,286		25,562
Short-term borrowings		28,331		12,864		13,320
FHLB borrowings		82,912		77,912		62,912
Subordinated notes		5,155		5,155		5,155
Accrued interest payable and other liabilities		6,894		9,170		7,319
Commitments and contingent liabilities		-		-		-
TOTAL LIABILITIES		1,084,847		1,046,083		1,004,574

SHAREHOLDERS' EQUITY
Common stock ($2.50 par value; 20,000,000 shares authorized,
7,000,824 issued; 6,996,932, 6,996,932, and 6,925,437 outstanding at
Dec. 31, 2011, Sept. 30, 2011, and December 31, 2010, respectively)		17,331		17,331		17,314
Capital surplus		43,498		43,274		43,058
Retained earnings		41,157		40,373		37,593
Accumulated other comprehensive income (loss)		3,926		4,327		(1,012	)
Total Middleburg Financial Corporation shareholders' equity		105,912		105,305		96,953
Non-controlling interest in consolidated subsidiary		2,101		2,268		3,040

TOTAL SHAREHOLDERS' EQUITY		108,013		107,573		99,993


TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	1,192,860	$	1,153,656	$	1,104,567

MIDDLEBURG FINANCIAL CORPORATION
Consolidated Statements of Operations
(In thousands, except for per share data)


	Unaudited						Unaudited
	For the Year						For the Three Months
	Ended December 31,						Ended December 31,
	2011			2010			2011			2010
INTEREST AND DIVIDEND INCOME
Interest and fees on loans	$	39,392		$	40,548		$	10,014		$	9,887
Interest and dividends on securities available for sale
Taxable		6,627			4,733			1,750			1,539
Tax-exempt		2,363			2,514			606			600
Dividends		144			105			36			30
Interest on deposits in banks and federal funds sold		110			131			20			32
Total interest and dividend income		48,636			48,031			12,426			12,088

INTEREST EXPENSE
Interest on deposits		8,867			12,033			1,940			2,623
Interest on securities sold under agreements to
repurchase		293			205			84			61
Interest on short-term borrowings		318			393			144			148
Interest on FHLB borrowings and other debt		1,213			1,544			299			246
Total interest expense		10,691			14,175			2,467			3,078

NET INTEREST INCOME		37,945			33,856			9,959			9,010
Provision for loan losses		2,884			12,005			319			655

NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES		35,061			21,851			9,640			8,355

NONINTEREST INCOME
Service charges on deposit accounts		2,095			1,884			542			488
Trust services income		3,636			3,335			911			838
Gains on loans held for sale		17,992			17,158			5,706			5,537
Gains on securities available for sale, net		460			866			197			109
Total other-than-temporary impairment gains (losses)		(27	)		(901	)		6			(44	)
Portion of (gain) loss recognized in other
comprehensive income		2			(202	)		(9	)		(85	)
Net other than temporary impairment losses		(25	)		(1,103	)		(3	)		(129	)
Commissions on investment sales		755			622			203			169
Fees on mortgages held for sale		333			1,881			8			570
Other service charges, commissions and fees		452			467			105			114
Bank-owned life insurance		486			503			101			112
Other operating income		226			390			115			169
Total noninterest income		26,410			26,003			7,885			7,977

NONINTEREST EXPENSE
Salaries and employees' benefits		33,821			29,594			9,984			7,748
Net occupancy and equipment expense		6,748			6,249			1,732			1,598
Advertising		1,399			1,071			512			386
Computer operations		1,501			1,324			428			316
Other real estate owned		2,564			2,468			925			842
Other taxes		812			798			205			200
Federal deposit insurance expense		1,260			1,907			251			386
Other operating expenses		7,354			9,331			2,244			2,670
Total noninterest expense		55,459			52,742			16,281			14,146

Income (loss) before income taxes		6,012			(4,888	)		1,244			2,186
Income tax expense (benefit)		1,350			(2,562	)		278			573

NET INCOME (LOSS)		4,662			(2,326	)		966			1,613
Net (income) loss attributable to non-
controlling interest		298			(362	)		170			(51	)
Net income (loss) attributable to Middleburg
Financial Corporation	$	4,960		$	(2,688	)	$	1,136		$	1,562

Earnings (loss) per share:
Basic	$	0.71		$	(0.39	)	$	0.16		$	0.23
Diluted	$	0.71		$	(0.39	)	$	0.16		$	0.23
Dividends per common share	$	0.20		$	0.35		$	0.05		$	0.05

QUARTERLY SUMMARY STATEMENTS OF INCOME
MIDDLEBURG FINANCIAL CORPORATION
(Unaudited. Dollars in thousands except per share data)
	For the Three Months Ended
	Dec. 31, 2011			Sep. 30, 2011			Jun. 30, 2011		Mar. 31, 2011			Dec. 31, 2010
Interest and Dividend Income
Interest and fees on loans	$	10,014		$	9,912		$	9,731	$	9,735		$	9,887
Interest and dividends on securities available for sale
Taxable		1,750			1,727			1,751		1,399			1,539
Tax Exempt		606			592			604		561			600
Dividends		36			36			36		36			30
Interest on deposits in banks and federal funds sold		20			30			33		27			32
Total interest and dividend income	$	12,426		$	12,297		$	12,155	$	11,758		$	12,088
Interest Expense
Interest on deposits	$	1,940		$	2,287		$	2,332	$	2,308		$	2,623
Interest on securities sold under agreements to repurchase		84			84			69		56			61
Interest on short-term borrowings		144			58			53		63			148
Interest on FHLB borrowings and other debt		299			312			306		296			246
Total interest expense	$	2,467		$	2,741		$	2,760	$	2,723		$	3,078
Net interest income	$	9,959		$	9,556		$	9,395	$	9,035		$	9,010
Provision for loan losses		319			1,024			1,087		454			655
Net interest income after provision
for loan losses	$	9,640		$	8,532		$	8,308	$	8,581		$	8,355
Non-Interest Income
Trust services income	$	911		$	932		$	926	$	867		$	838
Service charges on deposit accounts		542			538			526		489			488
Net gains on securities available for sale		197			141			87		35			109
Total other-than-temporary impairment gain (loss) on securities		6			(16	)		-		(17	)		(44	)
Portion of (gain) loss recognized in other comprehensive income		(9	)		(5	)		-		16			(85	)
Net other-than-temporary impairment loss		(3	)		(21	)		-		(1	)		(129	)
Commissions on investment sales		203			187			185		180			169
Bank owned life insurance		101			123			139		123			112
Gains on loans held for sale		5,706			5,501			3,938		2,847			5,537
Fees on mortgages held for sale		8			84			87		154			570
Other operating income		220			104			79		209			283
Total non-interest income	$	7,885		$	7,589		$	5,967	$	4,903		$	7,977
Non-Interest Expense
Salaries and employee benefits	$	9,984		$	8,708		$	7,813	$	7,316		$	7,748
Net occupancy and equipment expense		1,732			1,700			1,640		1,676			1,598
Other taxes		205			205			205		197			200
Advertising		512			446			285		156			386
Computer operations		428			365			343		365			316
Other real estate owned		925			689			606		344			842
Audits and examinations		279			103			156		126			219
Legal fees		168			172			176		89			50
Federal deposit insurance expense		251			244			358		407			386
Other operating expenses		1,797			1,414			1,314		1,494			2,401
Total non-interest expense	$	16,281		$	14,046		$	12,896	$	12,170		$	14,146

Income before income taxes	$	1,244		$	2,075		$	1,379	$	1,314		$	2,186
Income tax expense		278			454			301		317			573
Net income	$	966		$	1,621		$	1,078	$	997		$	1,613
Less: Net (income) loss attributable to non-controlling interest		170			(223	)		121		230			(51	)
Net income attributable to Middleburg Financial Corporation	$	1,136		$	1,398		$	1,199	$	1,227		$	1,562

Net income per common share, basic	$	0.16		$	0.20		$	0.17	$	0.18		$	0.23
Net income per common share, diluted	$	0.16		$	0.20		$	0.17	$	0.18		$	0.23
Dividends per common share	$	0.05		$	0.05		$	0.05	$	0.05		$	0.05

MIDDLEBURG FINANCIAL CORPORATION
KEY STATISTICS
(Unaudited. Dollars in thousands except per share data)	For the Three Months Ended
	Dec 31, 2011			Sep 30, 2011			Jun 30, 2011			Mar 31, 2011			Dec 31, 2010

Net income	$	1,136		$	1,398		$	1,199		$	1,227		$	1,562
Earnings per share, basic	$	0.16		$	0.20		$	0.17		$	0.18		$	0.23
Earnings per share, diluted	$	0.16		$	0.20		$	0.17		$	0.18		$	0.23
Dividend per share	$	0.05		$	0.05		$	0.05		$	0.05		$	0.05

Return on average total assets - Year to Date		0.44	%		0.46	%		0.45	%		0.46	%		-0.25	%
Return on average total equity - Year to Date		4.87	%		5.07	%		4.95	%		5.11	%		-2.71	%
Dividend payout ratio		30.80	%		25.00	%		29.41	%		27.78	%		22.21	%
Non-interest revenue to total revenue (1)		43.57	%		43.90	%		38.72	%		35.02	%		39.82	%

Net interest margin (2)		3.67	%		3.64	%		3.78	%		3.80	%		3.60	%
Yield on average earning assets		4.55	%		4.66	%		4.86	%		4.91	%		4.78	%
Yield on average interest-bearing liabilities		1.07	%		1.21	%		1.26	%		1.30	%		1.41	%
Net interest spread		3.48	%		3.45	%		3.60	%		3.61	%		3.37	%

Non-interest income to average assets (3)		2.69	%		2.67	%		2.17	%		1.82	%		2.88	%
Non-interest expense to average assets (3)		5.54	%		4.93	%		4.67	%		4.53	%		5.09	%

Efficiency ratio - QTD (Tax Equiv) (4)		90.39	%		80.89	%		82.79	%		84.96	%		81.42	%

(1)	Excludes securities gains and losses including OTTI adjustments.
(2)	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%. 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. This calculation excludes net securities gains and losses.
(3)	Ratios are computed by dividing annualized income and expense amounts by quarterly average assets.
(4)	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%. The Company calculates this ratio in order to evaluate its overhead structure or how effectively it is operating.

MIDDLEBURG FINANCIAL CORPORATION
SELECTED FINANCIAL DATA BY QUARTER
(Unaudited. Dollars in thousands except per share data)	Dec 31, 2011			Sep 30, 2011			Jun 30, 2011			Mar 31, 2011			Dec 31, 2010
BALANCE SHEET RATIOS
Loans to deposits (Including HFS)		82.15	%		81.65	%		80.02	%		80.53	%		80.72	%
Portfolio loans to deposits		72.20	%		74.29	%		74.66	%		76.56	%		74.05	%
Average interest-earning assets to
average-interest bearing liabilities		121.22	%		119.85	%		117.42	%		117.58	%		118.50	%
PER SHARE DATA
Dividends	$	0.05		$	0.05		$	0.05		$	0.05		$	0.05
Book value (MFC Shareholders)	$	15.13		$	15.04		$	14.68		$	14.18		$	14.02
Tangible book value (3)	$	14.24		$	14.15		$	13.78		$	13.27		$	13.10
SHARE PRICE DATA
Closing price	$	14.25		$	15.00		$	14.94		$	17.75		$	14.26
Diluted earnings multiple (1)		22.27			18.75			21.97			24.65			15.50
Book value multiple(2)		0.94			1.00			1.02			1.25			1.02

COMMON STOCK DATA
Outstanding shares at end of period		7,000,824			7,000,824			6,996,932			6,942,315			6,925,437
Weighted average shares O/S Basic - QTD		6,996,932			6,996,932			6,977,503			6,940,154			6,937,801
Weighted average shares O/S, diluted - QTD		6,998,019			6,998,494			6,980,331			6,943,189			6,938,359
CAPITAL RATIOS
Capital to Assets - Common shareholders		8.88	%		9.13	%		8.97	%		9.08	%		8.79	%
Capital to Assets - with Noncontrolling Interest		9.05	%		9.32	%		9.16	%		9.33	%		9.05	%
Tangible common equity ratio (4)		8.40	%		8.63	%		8.47	%		8.54	%		8.26	%
Total risk based capital ratio		14.72	%		14.13	%		14.16	%		14.52	%		14.10	%
Tier 1 risk based capital ratio		13.46	%		12.87	%		12.90	%		13.26	%		12.84	%
Leverage ratio		8.81	%		8.97	%		9.12	%		9.38	%		9.04	%
CREDIT QUALITY
Net charge-offs to average loans		0.11	%		0.13	%		0.08	%		0.12	%		0.22	%
Total non-performing loans to total portfolio loans		4.53	%		4.80	%		5.25	%		5.36	%		4.66	%
Total non-performing assets to total assets		3.27	%		3.34	%		3.66	%		3.99	%		3.54	%
Non-accrual loans to:
total loans		3.78	%		4.51	%		4.76	%		4.17	%		4.46	%
total assets		2.12	%		2.64	%		2.82	%		2.55	%		2.66	%
Allowance for loan losses to:
total portfolio loans		2.18	%		2.24	%		2.22	%		2.20	%		2.27	%
non-performing assets		37.53	%		39.24	%		35.98	%		33.65	%		38.29	%
non-accrual loans		57.69	%		49.61	%		46.67	%		52.74	%		50.93	%
NON-PERFORMING ASSETS:
Loans delinquent over 90 days and still accruing	$	1,233		$	1,561		$	3,230		$	6,593		$	909
Non-accrual loans		25,346			30,485			32,298			27,638			29,385
Restructured Loans		3,853			404			112			1,254			1,254
Other real estate owned and repossessed assets		8,535			6,096			6,255			7,825			8,394
Total non-performing assets	$	38,967		$	38,546		$	41,895		$	43,310		$	39,942
NET LOAN CHARGE-OFFS:
Loans charged off	$	893		$	1,017		$	621		$	933		$	1,600
Recoveries		(73	)		(44	)		(32	)		(87	)		(42	)
Net charge-offs	$	820		$	973		$	589		$	846		$	1,558
PROVISION FOR LOAN LOSSES	$	319		$	1,024		$	1,087		$	454		$	655
ALLOWANCE FOR LOAN LOSS SUMMARY
Balance at the beginning of period	$	15,124		$	15,073		$	14,575		$	14,967		$	15,870
Provision		319			1,024			1,087			454			655
Net charge-offs		(820	)		(973	)		(589	)		(846	)		(1,558	)
Balance at the end of period	$	14,623		$	15,124		$	15,073		$	14,575		$	14,967

(1)	The diluted earnings multiple is calculated by dividing the period’s closing market price per share by the annualized diluted earnings per share for the period. The diluted earnings multiple is a measure of how much an investor may be willing to pay for $1.00 of the Company’s earnings.
(2)	The book value multiple (or price to book ratio) is calculated by dividing the period’s closing market price per share by the period’s book value per share. The book value multiple is a measure used to compare the Company’s market value per share to its book value per share.
(3)	Tangible book value is not a measurement under accounting principles generally accepted in the United States. It is computed by subtracting identified intangible assets and goodwill from total Middleburg Financial Corporation shareholders’ equity and then dividing the result by the number of shares of common stock issued and outstanding at the end of the accounting period.
(4)	The tangible common equity ratio is not a measurement under accounting principles generally accepted in the United States. It is computed by subtracting identified intangible assets and goodwill from total Middleburg Financial Corporation shareholders’ equity and total assets and then dividing the adjusted shareholders’ equity balance by the adjusted total asset balance.

	MIDDLEBURG FINANCIAL CORPORATION
	Average Balances, Income and Expenses, Yields and Rates
	Three months ended December 31,
				2011								2010
	Average			Income/		Yield/			Average			Income/		Yield/
	Balance			Expense		Rate (2)			Balance			Expense		Rate (3)
	(Dollars in thousands)
Assets :
Securities:
Taxable	$	253,949		$	1,786		2.79	%	$	201,278		$	1,569		3.09	%
Tax-exempt (1)		59,921			918		6.08	%		58,396			910		6.18	%
Total securities	$	313,870		$	2,704		3.42	%	$	259,674		$	2,479		3.79	%
Total loans (3)		759,962			10,014		5.23	%		724,063			9,886		5.42	%
Interest bearing deposits in
other financial institutions		36,256			20		0.22	%		44,715			32		0.28	%
Total earning assets	$	1,110,088		$	12,738		4.55	%	$	1,028,452		$	12,397		4.78	%
Less: allowances for credit losses		(15,007	)							(15,207	)
Total nonearning assets		79,471								97,522
Total assets	$	1,174,552							$	1,110,767

Liabilities:
Interest-bearing deposits:
Checking	$	291,332		$	377		0.51	%	$	286,407		$	544		0.75	%
Regular savings		101,178			116		0.45	%		84,372			181		0.85	%
Money market savings		59,621			60		0.40	%		57,661			105		0.72	%
Time deposits:
$100,000 and over		138,170			588		1.69	%		150,217			790		2.09	%
Under $100,000		185,710			799		1.71	%		185,238			1,001		2.14	%
Total interest-bearing deposits	$	776,011		$	1,940		0.99	%	$	763,895		$	2,621		1.36	%

Short-term borrowings		20,042			144		2.85	%		14,487			148		4.05	%
Securities sold under agreements
to repurchase		34,058			84		0.98	%		28,018			62		0.88	%
FHLB borrowings and other debt		85,621			299		1.39	%		61,437			246		1.59	%
Federal funds purchased		-			-		-			54			-		0.00	%
Total interest-bearing liabilities	$	915,732		$	2,467		1.07	%	$	867,891		$	3,077		1.41	%
Non-interest bearing liabilities
Demand deposits		144,181								143,492
Other liabilities		7,334								7,432
Total liabilities	$	1,067,247							$	1,018,815
Non-controlling interest		2,079								3,161
Shareholders' equity		105,226								88,791
Total liabilities and shareholders'
equity	$	1,174,552							$	1,110,767

Net interest income				$	10,271							$	9,320

Interest rate spread							3.48	%							3.37	%
Cost of Funds							0.92	%							1.21	%
Interest expense as a percent of
average earning assets							0.88	%							1.19	%
Net interest margin							3.67	%							3.60	%

(1) Income and yields are reported on tax equivalent basis assuming a federal tax rate of 34%.
(2) All yields and rates have been annualized on a 365 day year.
(3) Total average loans include loans on non-accrual status.

	MIDDLEBURG FINANCIAL CORPORATION
	Average Balances, Income and Expenses, Yields and Rates
	Twelve Months Ended December 31,
				2011								2010
	Average			Income/		Yield/			Average			Income/		Yield/
	Balance			Expense		Rate (2)			Balance			Expense		Rate (3)
	(Dollars in thousands)
Assets :
Securities:
Taxable	$	231,893		$	6,771		2.92	%	$	159,326		$	4,838		3.04	%
Tax-exempt (1)		56,793			3,580		6.30	%		59,654			3,810		6.39	%
Total securities	$	288,686		$	10,351		3.59	%	$	218,980		$	8,648		3.95	%
Total loans (3)		720,633			39,392		5.47	%		707,135			40,547		5.73	%
Interest bearing deposits in
other financial institutions		43,469			110		0.25	%		47,836			131		0.27	%
Total earning assets	$	1,052,788		$	49,853		4.74	%	$	973,951		$	49,326		5.06	%
Less: allowances for credit losses		(14,835	)							(11,119	)
Total nonearning assets		87,410								94,005
Total assets	$	1,125,363							$	1,056,837

Liabilities:
Interest-bearing deposits:
Checking	$	294,660		$	1,883		0.64	%	$	283,294		$	2,294		0.81	%
Regular savings		96,725			683		0.71	%		77,864			725		0.93	%
Money market savings		59,356			353		0.59	%		53,894			427		0.79	%
Time deposits:
$100,000 and over		136,526			2,419		1.77	%		160,063			4,298		2.69	%
Under $100,000		172,815			3,529		2.04	%		161,338			4,289		2.66	%
Total interest-bearing deposits	$	760,082		$	8,867		1.17	%	$	736,453		$	12,033		1.63	%

Short-term borrowings		9,555			318		3.33	%		10,419			393		3.77	%
Securities sold under agreements
to repurchase		33,162			293		0.88	%		25,314			205		0.81	%
FHLB borrowings and other debt		81,300			1,213		1.49	%		55,303			1,544		2.79	%
Federal Funds Purchased		42			-		0.00	%		25			-		0.00	%
Total interest-bearing liabilities	$	884,141		$	10,691		1.21	%	$	827,514		$	14,175		1.71	%
Non-interest bearing liabilities
Demand Deposits		130,565								120,475
Other liabilities		6,628								6,850
Total liabilities	$	1,021,334							$	954,839
Non-controlling interest		2,241								2,876
Shareholders' equity		101,788								99,122
Total liabilities and shareholders'
equity	$	1,125,363							$	1,056,837

Net interest income				$	39,162							$	35,151

Interest rate spread							3.53	%							3.51	%
Cost of Funds							1.05	%							1.50	%
Interest expense as a percent of
average earning assets							1.02	%							1.46	%
Net interest margin							3.72	%							3.61	%
(1) All yields and rates have been annualized on a 365 day year.
(2) Income and yields are reported on tax equivalent basis assuming a federal tax rate of 34%.
(3) All yields and rates have been annualized on a 365 day year.
(4) Total average loans include loans on non-accrual status.

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