Middleburg Financial Corporation Announces Third Quarter 2012 Results

    Middleburg Financial Corporation Announces Third Quarter 2012 Results

PR Newswire

MIDDLEBURG, Va., Oct. 31, 2012

MIDDLEBURG, Va., Oct. 31, 2012 /PRNewswire/ --Middleburg Financial
Corporation (the "Company") (Nasdaq: MBRG), today announced net income of $1.7
million or $0.24 per share for the third quarter of 2012.

"We are pleased with the contributions received from our subsidiary
businesses, Southern Trust Mortgage and Middleburg Investment Group. Both
entities as well as Middleburg Bank saw improvements in most performance
metrics in the Third Quarter," commented Gary R. Shook, president and CEO of
Middleburg Financial Corporation. He continued, "Additionally, we continue to
find buyers for our other real estate owned properties which bodes well for
future earnings. While we will continue to see bumps up and down in our
non-performing assets, a consistent trend of improvement has certainly emerged
over the past several quarters."

Third Quarter 2012 Highlights:

  oNet income of $1.7 million or $0.24 per diluted share, compared to $1.4
    million or $0.20 per diluted share for the third quarter of 2011;
  oNet interest margin of 3.28%, compared to 3.57% for the previous quarter
    and3.64% for the third quarter of 2011;
  oGain-on-sale fee income from mortgages increased 60.2% compared to the
    third quarter of 2011;
  oTotal revenue of $17.5 million, an increase of 14.3% over the third
    quarter of 2011;
  oTotal assets of $1.2 billion, an increase of 3.6% over December 31, 2011;
  oDeposits increased by $54.6 million or 5.9% since December 31, 2011;
  oLoans held-for-investment increased by $21.0 million or 3.1% since
    December 31, 2011;
  oProvision for loan losses decreased by 38.0% compared to third quarter of
    2011; and
  oCapital ratios continue to be strong: Tangible Common Equity Ratio of
    8.7%, Total Risk-Based Capital Ratio of 15.2%, Tier 1 Risk-Based Capital
    Ratio of 14.0%, and a Tier 1 Leverage Ratio of 8.9% at September 30, 2012.

Total Revenue

Total revenue was $17.5 million in the quarter ended September 30, 2012
representing an increase of $706,000 or 4.2% over the previous quarter and an
increase of $2.2 million or 14.3% over the quarter ended September 30, 2011.
Although, the lower yield environment during the quarter led to a decline in
net interest income, the lower net interest income was more than offset by an
increase in non-interest income, primarily stemming from our mortgage banking
operations. This balance between spread and fee income enables the Company to
grow revenues in challenging low yield environments.

The net interest margin for the three months ended September 30, 2012 was
3.28%, compared to 3.57% for the previous quarter, and 3.64% for the quarter
ended September 30, 2011, representing a decrease of 29 basis points from the
previous quarter and a decrease of 36 basis points compared to the quarter
ended September 30, 2011. The drop in net interest margin for the quarter
ended September 30, 2012 compared to the previous quarter was principally due
to a reduction in net interest income coupled with an increase in average
earning assets during the quarter.

Net interest income was $9.2 million during the three months ended September
30, 2012, which was 4.8% lower than the quarter ended June 30, 2012 and a
decrease of 2.9% compared to the quarter ended September 30, 2011. The yield
on average earning assets was 4.03% for the quarter ended September 30, 2012
compared to 4.40% for the previous quarter and 4.66% for the quarter ended
September 30, 2011, representing a decrease of 37 basis points from the
previous quarter and a decrease of 63 basis points from the quarter ended
September 30, 2011. Loan yields decreased by 35 basis points while the yield
for the securities portfolio decreased by 24 basis points from the previous
quarter. Yields on earning assets were also pressured due to higher average
balances of cash deposits at the Federal Reserve.

The decline in loan yields was primarily related to the following factors:

  oA one time reversal of accrued interest income during the quarter for
    certain loans that were placed on non accrual. We estimate the reduction
    in annualized total yield on loans for the quarter due to this one time
    reversal to be 9.5 basis points.
  oBalances of lower yielding held-for-sale mortgage loans increased more
    than did balances of commercial loans which tend to have higher yields.
    This lowered the overall weighted average loan yield for the quarter.
  oAccelerated premium amortizations for purchased loans due to faster
    prepayments during the quarter.

The decline in yield for securities was related to the following factors:

  oLower yields on very short duration investments that were purchased during
    the quarter
  oAccelerated amortizations of premiums on mortgage and asset backed
    securities during the quarter due to faster prepayments.
  oWe also sold some securities during the quarter in a continuing effort to
    rebalance the investment portfolio. We recognized gains on the sale of the
    securities but since the proceeds were not immediately reinvested back
    into the portfolio, the net effect was a decline in yield for the
    securities portfolio.

We also took actions during the third quarter to reduce our cost of funds.
Rates paid on interest bearing deposits were reduced. Furthermore, we paid
off brokered time deposits that either matured or were callable during the
third quarter. While those actions reduced interest expense, most of the
maturities and calls of brokered time deposits occurred in the last month of
the quarter. Since the rate reductions were not in effect for the entire
quarter, the reduction in interest expense was somewhat muted.

Specifically, the average annualized cost of interest bearing liabilities was
0.93% for the quarter ended September 30, 2012, compared to 1.00% in the
previous quarter, and 1.21% for the quarter ended September 30, 2011,
representing a decrease of 7 basis points from the previous quarter and a
decrease of 28 basis points from the quarter ended September 30, 2011.
Annualized costs for interest bearing retail deposits decreased by 9 basis
points from the previous quarter to 0.84% from 0.93% and decreased by 34 basis
points from the same quarter last year. The decline in the annualized cost of
interest bearing retail deposits from both the previous quarter and the same
quarter last year was primarily due to a decrease of 8 and 36 basis points
respectively in the annualized cost of interest bearing non maturity
deposits. The annualized cost of interest bearing time deposits was
essentially flat from the previous quarter but decreased 20 basis points from
the quarter ended September 30, 2011 to 1.70% from 1.90%. Annualized costs for
wholesale borrowings (excluding brokered deposits) increased by 8 basis points
to 1.52% from 1.44% from both the previous quarter and from the quarter ended
September 30, 2011. The average rate on wholesale borrowings (excluding
brokered deposits) increased during the quarter, even as the balances of
wholesale borrowings (excluding brokered deposits) declined, as we paid off
maturing short term FHLB advances. Since the rate on the short term advances
was lower than the rates on the remaining longer term advances, the removal of
the short term advance resulted in a higher average rate for the remaining
portfolio of advances.

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 0.79% for the quarter ended September 30, 2012 compared to
0.86% for the quarter ended June 30, 2012, a decrease of 7 basis points. Cost
of funds decreased 27 basis points compared to the quarter ended September 30,
2011.

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 $1.2 million or 16.0% when comparing the
quarter ended September 30, 2012 to the previous quarter and increased by $2.5
million or 42.3% compared to the quarter ended September 30, 2011. The primary
reason for the higher non-interest income for both the third quarter of 2012
and the same quarter last year was higher gain-on-sale revenues from the
Company's mortgage operations. Gains on mortgage loan sales increased by
21.4% when comparing the quarter ended September 30, 2012 to the previous
quarter and by 60.2% when compared to the quarter ended September 30, 2011.
Gains on mortgage loan sales included in the accompanying statements of income
are presented net of originator commissions incurred to originate the loans.

Southern Trust Mortgage originated $251.2 million in mortgage loans during the
quarter ended September 30, 2012 compared to $233.4 million originated during
the previous quarter, and $212.2 million originated during the quarter ended
September 30, 2011, an increase of 7.6% compared to the previous quarter and
an increase of 18.4% when comparing the same calendar quarters.

The revenues and expenses of Southern Trust Mortgage for the three month
periods ended September 30, 2012 and September 30, 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 sheets
as "Non-controlling interest in consolidated subsidiary" and the earnings or
loss attributable to the non-controlling interest is reported on the Company's
statements of income as "Net (income) / loss attributable to non-controlling
interest."

Total revenue generated by our wealth management group, Middleburg Investment
Group ("MIG") increased to $1.2 million for the quarter ended September 30,
2012 and to $3.3 million on a year-to-date basis. Net income generated from
this group increased more than ten-fold when comparing the quarter ended
September 30, 2012 to the quarter ended September 30, 2011. The increase in
earnings was attributed to expense control and an increase in revenue during
the period. Middleburg Investment Group is comprised of Middleburg Trust
Company, a wholly owned subsidiary of the Company and Middleburg Investment
Services, which is a division of Middleburg Bank. Fee income is based
primarily upon the market value of the accounts under administration. Total
consolidated assets under administration by MIG were at $1.5 billion at
September 30, 2012, an increase of 15.3% relative to September 30, 2011.

Net securities gains were $164,000 during the quarter ended September 30, 2012
compared to $148,000 during the previous quarter and $141,000 during the
quarter ended September 30, 2011.

Non-Interest Expense

Total non-interest expense in the third quarter of 2012 increased by $525,000
or 3.9% versus the previous quarter and increased by $1.6 million or 13.1%
compared to the quarter ended September 30, 2011.

Salaries and employee benefit expenses decreased by $230,000 or 3.1% when
comparing the third quarter of 2012 to the previous quarter. Salaries and
employee benefits increased by $376,000 or 5.4% versus the third quarter of
2011.

Expenses related to Other Real Estate Owned ("OREO") increased by $632,000 or
72.3% when comparing the third quarter of 2012 to the previous quarter and by
$817,000 or 118.6% versus the quarter ended September 30, 2011. The increase
in OREO expenses during the quarter resulted primarily from valuation
adjustments on two OREO properties.

Advertising expenses increased by $205,000 or 45.9% during the quarter and by
$206,000 or 46.2% from the quarter ended September 30, 2011. The increase
between the third quarter of 2012 and the previous quarter was timing related.
Advertising expenses are a byproduct of campaigns and promotions which do not
always occur uniformly throughout the year. The increase in advertising
expenses between the third quarter of 2012 and the same quarter last year was
primarily due to expenses related to promotions and campaigns in 2012.

The Company's efficiency ratio was 69.3% for the third quarter of 2012,
compared to an efficiency ratio of 73.9% for the third quarter of 2011. The
efficiency ratio is not a measurement under accounting principles generally
accepted in the United States. The Company calculates its efficiency ratio by
dividing non interest expense (adjusted for amortization of intangibles, other
real estate expenses, and non-recurring one-time charges) 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 in calculating tax
equivalent amounts is 34%. The Company calculates and reviews this ratio as a
means of evaluating operational efficiency. Prior to March 31, 2012, the
Company did not exclude amortization of intangibles and other real estate
expenses from total non-interest expense. The efficiency ratios for the
periods ended December 31, 2011 and prior and included in tables in this
release have been restated for consistent presentation.

Asset Quality and Provision for Loan Losses

The provision for loan losses in the quarter ended September 30, 2012 was
$635,000 compared to a provision of $730,000 in the previous quarter and a
provision of $1.0 million in the quarter ended September 30, 2011,
representing a decrease of 13.0% from the previous quarter and a decrease of
38.0% from the quarter ended September 30, 2011.

The Allowance for Loan and Lease Losses (ALLL) was $13.9 million representing
2.01% of total portfolio loans outstanding at September 30, 2012 and 2.18% at
December 31, 2011. The decrease in the ALLL balance as a percentage of
portfolio loans occurred primarily as a result of an increase in the balance
of loans held for investment and the net result of loans charged off during
the period versus the provision for loan losses during the period. Loans held
for investment increased approximately $21.0 million from December 31, 2011 to
September 30, 2012.

Loans that were delinquent for more than 90 days and still accruing were
$860,000 as of September 30, 2012 compared to $1.4 million as of June 30,
2012, representing a decrease of 37.3%. The decrease in delinquent loans
during the quarter resulted primarily from the transfer of a single large loan
to Other Real Estate Owned ("OREO")

Non-accrual loans were $22.7 million at the end of the third quarter compared
to $18.8 million as of June 30, 2012, representing an increase of 20.7% during
the third quarter of 2012. Troubled debt restructurings that were performing
as agreed were $4.3 million at the end of the third quarter, essentially
unchanged from the quarter ended June 30, 2012. Other Real Estate Owned (OREO)
was $11.9 million as of September 30, 2012 compared to $13.3 million as of
June 30, 2012, representing a decrease of 10.5% during the third quarter.
Total non-performing assets were $39.8 million or 3.2% of total assets at
September 30, 2012, compared to $37.8 million or 3.1% of total assets as of
June 30, 2012.

Total Consolidated Assets

Total assets at September 30, 2012 were $1.2 billion, an increase of 1.4% from
June 30, 2012 and 3.6% from December 31, 2011.

Total loans held for investment increased by $6.4 million or 0.94% in the
third quarter of 2012 from the end of the second quarter. Loans held for
investment increased by $21.0 million or 3.1% from December 31, 2011. The
securities portfolio (excluding restricted stock) decreased by $6.2 million or
2.0% in the third quarter relative to the previous quarter and remained
essentially flat from the December 31, 2011 balance of $308.2 million.
Balances of mortgages held for sale increased by $24.5 million or 36.1% at
September 30, 2012 compared to the previous quarter end balance but remained
essentially flat from the December 31, 2011 balance of $92.5 million. Cash
balances and deposits at other banks decreased by 9.3% at the end of the third
quarter of 2012 compared to the previous quarter end and increased $20.3
million or 39.5% from the balances at December 31, 2011.

Deposits and Other Borrowings

Total deposits increased by $9.2 million or 0.9% from June 30, 2012 to
September 30, 2012 and by $54.6 million or 5.9% from December 31, 2011.
Brokered deposits, including CDARS program funds, were $69.1 million at
September 30, 2012, down 25.3% from June 30, 2012. FHLB advances were $72.9
million at September 30, 2012, compared to $77.9 million in advances at June
30, 2012.

Equity and Capital

Shareholders' equity attributable to Middleburg Financial Corporation
shareholders at September 30, 2012 was $112.5 million, compared to $109.9
million as of June 30, 2012 and $105.9 million at December 31, 2011. Retained
earnings at September 30, 2012 were $45.2 million compared to $43.8 million at
June 30, 2012 and $41.2 million at December 31, 2011. The book value of the
Company's common stock at September 30, 2012 was $15.96 per share versus
$15.57 per share at June 30, 2012.

The Company's total risk-based capital ratio continued to increase to 15.2% as
of September 30, 2012 from 14.9% at June 30, 2012 and 14.7% at December 31,
2011. The Tier 1 risk-based capital ratio also increased from 13.5% at
December 31, 2011 to 14.0% at September 30, 2012 and the Tier 1 Leverage Ratio
increased to 8.9% from 8.8% at 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
September 30, 2012
                                 (1)                     MFC
                                 Regulatory              Excess
                                 Minimum        MFC      over
                                 Requirement    Ratios   Minimum
Tier 1 Leverage Ratio            4.0%           8.9%     4.9%
Tier 1 Risk-Based Capital Ratio  4.0%           14.0%    10.0%
Total Risk-Based Capital Ratio   8.0%           15.2%    7.2%
(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, 2011, 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)
                                    September30,   June 30,      December31,
                                    2012            2012          2011
ASSETS
 Cash and due from banks       $ 8,550         $ 5,934       $ 6,163
 Interest-bearing deposits       62,973          72,877        45,107
with other institutions
 Total cash and cash         71,523          78,811        51,270
equivalents
 Securities available for sale   308,374         314,530       308,242
 Loans held for sale             92,501          67,965        92,514
 Restricted securities, at       6,765           7,167         7,117
cost
 Loans receivable, net of
allowance for loan losses of
$13,941 at Sept. 30, 2012,          678,423         670,941       656,770
$14,969 at June 30, 2012, and
$14,623 at December 31, 2011
 Premises and equipment, net     20,618          21,021        21,306
 Goodwill and identified         6,060           6,103         6,189
intangibles
 Other real estate owned, net
of valuation allowance of $3,138
at Sept. 30, 2012, $1,982 at June   11,933          13,335        8,535
30, 2012, and $1,522 at December
31, 2011
 Prepaid federal deposit         3,266           3,510         3,993
insurance
 Accrued interest receivable     36,498          35,467        36,924
and other assets
 TOTAL ASSETS          $ 1,235,961     $ 1,218,850   $ 1,192,860
LIABILITIES
 Deposits:
 Non-interest-bearing      $ 176,522       $ 154,838     $ 143,398
demand deposits
 Savings and                 512,780         509,291       460,576
interest-bearing demand deposits
 Time deposits               295,145         311,156       325,895
 Total deposits          984,447         975,285       929,869
 Securities sold under           32,767          33,034        31,686
agreements to repurchase
 Short-term borrowings           17,657          8,393         28,331
 FHLB borrowings                 72,912          77,912        82,912
 Subordinated notes              5,155           5,155         5,155
 Accrued interest payable and    7,590           7,066         6,894
other liabilities
 Commitments and contingent      -               -             -
liabilities
 TOTAL LIABILITIES       1,120,528       1,106,845     1,084,847
SHAREHOLDERS' EQUITY
 Common stock ($2.50 par
value; 20,000,000 shares
authorized,7,052,554, 7,052,554    
and 6,996,932 issued and                            17,364        17,331
outstanding atSept. 30, 2012,      17,357
June 30, 2012, and December 31,
2011, respectively)
 Capital surplus                 43,746          43,616        43,498
 Retained earnings               45,168          43,805        41,157
 Accumulated other               6,264           5,100         3,926
comprehensive income
 Total Middleburg
Financial Corporation               112,535         109,885       105,912
shareholders' equity
 Non-controlling interest in     2,898           2,120         2,101
consolidated subsidiary
 TOTAL SHAREHOLDERS'     115,433         112,005       108,013
EQUITY
 TOTAL LIABILITIES AND $ 1,235,961     $ 1,218,850   $ 1,192,860
SHAREHOLDERS' EQUITY





MIDDLEBURG FINANCIAL CORPORATION
Consolidated Statements of Income
(In thousands, except for per share data)
                                   
                               Unaudited                  Unaudited
                               For the Nine Months         For the Three
                                                           Months
                               Ended September 30,         Ended September 30,
                               2012           2011         2012        2011
INTEREST AND DIVIDEND INCOME
 Interest and fees on loans    $          $        $       $   
                               28,565        29,378       9,189      9,846
 Interest and dividends on
 securities available for sale
    Taxable                   4,976          4,877        1,537       1,727
    Tax-exempt                 1,799          1,757        596         592
    Dividends                  135            108          46          36
 Interest on deposits in banks 88             90           39          30
 and federal funds sold
     Total interest and     35,563         36,210       11,407      12,231
    dividend income
INTEREST EXPENSE
 Interest on deposits          5,467          6,927        1,728       2,287
 Interest on securities sold                                        
 under agreements
 torepurchase                 250            209          83          84
 Interest on short-term        311            174          74          58
 borrowings
 Interest on FHLB borrowings   889            914          305         312
 and other debt
     Total interest expense 6,917          8,224        2,190       2,741
NET INTEREST INCOME            28,646         27,986       9,217       9,490
 Provision for loan losses     2,156          2,565        635         1,024
NET INTEREST INCOME AFTER
PROVISION
 FOR LOAN LOSSES               26,490         25,421       8,582       8,466
NONINTEREST INCOME
 Service charges on deposit    1,625          1,553        557         538
 accounts
 Trust services income         2,828          2,725        928         932
 Gains on loans held for sale  15,088         8,373        6,161       3,846
 Gains on securities available 452            263          164         141
 for sale, net
 Total other-than-temporary    (46)           (33)         -           (16)
 impairment losses
 Portion of loss recognized in                                      
 othercomprehensive income
                               46             11           -           (5)
 Net other than temporary      -              (22)         -           (21)
 impairment losses
 Commissions on investment     389            293          117         100
 sales
 Fees on mortgages held for    143            325          37          84
 sale
 Other service charges,        391            347          120         98
 commissions and fees
 Bank-owned life insurance     363            385          118         123
 Other operating income        194            45           116         6
 (expense)
     Total noninterest      21,473         14,287       8,318       5,847
    income
NONINTEREST EXPENSE                                        -
 Salaries and employees'       22,139         19,665       7,276       6,900
 benefits
 Net occupancy and equipment   5,265          5,016        1,732       1,700
 expense
 Advertising                   1,399          887          652         446
 Computer operations           1,101          1,073        322         365
 Other real estate owned       2,666          1,639        1,506       689
 Other taxes                   611            607          203         205
 Federal deposit insurance     781            1,009        262         244
 expense
 Other operating expenses      6,501          5,044        1,883       1,689
     Total noninterest      40,463         34,940       13,836      12,238
    expense
Income before income taxes     7,500          4,768        3,064       2,075
Income tax expense             1,578          1,072        565         454
 NET INCOME                    5,922          3,696        2,499       1,621
 Net (income) loss
 attributable to               (856)          128          (785)       (223)
 non-controlling interest
 Net income attributable to                                $       $ 
 Middleburg Financial          $   5,066    $  3,824    1,714       1,398
 Corporation
Earnings per share:
 Basic                         $    0.72   $   0.55  $       $  
                                                            0.24      0.20
 Diluted                       $    0.72   $   0.55  $       $  
                                                            0.24      0.20
 Dividends per common share    $    0.15   $   0.15  $       $  
                                                            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
                         Sep. 30,     June 30,    Mar. 31,  Dec. 31,  Sep. 30,
                         2012         2012        2012      2011      2011
Interest and Dividend
Income
 Interest and fees on   $ 9,189      $ 9,594     $ 9,782   $ 9,839   $ 9,846
loans
 Interest and dividends
on securities available
for sale
 Taxable            1,537        1,704       1,735     1,750     1,727
 Tax Exempt          596          596         607       606       592
 Dividends           46           45          44        36        36
 Interest on deposits
in banks and federal     39           25          24        20        30
funds sold
 Total interest and $11,407      $11,964     $12,192   $12,251   $12,231
dividend income
Interest Expense
 Interest on deposits   $ 1,728     $ 1,846     $ 1,893   $ 1,940   $ 
                                                                      2,287
 Interest on securities
sold under agreements to 84           84          83        84        84
repurchase
 Interest on short-term 89           89          133       144       58
borrowings
 Interest on FHLB
borrowings and other     289          287         312       299       312
debt
 Total interest     $  2,190    $ 2,306    $        $        $ 
expense                                           2,421     2,467     2,741
 Net interest       $  9,217    $ 9,658    $        $        $ 
income                                            9,771     9,784     9,490
Provision for loan       635          730         792       319       1,024
losses
 Net interest
income after provision   $ 8,582     $ 8,928     $ 8,979  $ 9,465  $ 8,466
for loan losses
Non-Interest Income
Trust services income   $ 928       $ 979      $ 921    $ 911    $  932
Service charges on      557          538         530       542       538
deposit accounts
Net gains on securities 164          148         140       197       141
available for sale (1)
Total
other-than-temporary     -            (36)        (10)      6         (16)
impairment gain (loss)
on securities
 Portion of (gain)
loss recognized in other -            36          10        (9)       (5)
comprehensive income
Net
other-than-temporary     -            -           -         (3)       (21)
impairment loss
Commissions on          117          125         147       101       100
investment sales (1)
Bank owned life         118          123         122       101       123
insurance
Gains on loans held for 6,161        5,075       3,852     4,469     3,846
sale
Fees on mortgages held  37           64          42        8         84
for sale
Other operating income  236          119         230       220       104
 Total             $ 8,318     $ 7,171    $ 5,984  $ 6,546  $ 5,847
non-interest income
Non-Interest Expense
 Salaries and employee  $ 7,276     $ 7,506    $ 7,357  $ 8,470  $ 6,900
benefits (2)
 Net occupancy and      1,732        1,755       1,778     1,732     1,700
equipment expense
 Other taxes            203          205         203       205       205
 Advertising            652          447         300       512       446
 Computer operations    322          394         385       428       365
 Other real estate      1,506        874         286       925       689
owned
 Federal deposit        262          261         258       251       244
insurance expense
 Other operating        1,883        1,869       2,747     2,244     1,689
expenses
 Total             $ 13,836     $ 13,311    $ 13,314  $ 14,767  $ 12,238
non-interest expense
 Income before     $ 3,064     $ 2,788    $ 1,649  $ 1,244  $ 2,075
income taxes
 Income tax        565          598         416       278       454
expense
 Net income        $ 2,499     $ 2,190    $ 1,233  $ 966    $ 1,621
Less: Net (income) loss
attributable to          (785)        (421)       349       170       (223)
non-controlling interest
 Net income
attributable to          $ 1,714     $ 1,769    $ 1,582  $ 1,136  $ 1,398
Middleburg Financial
Corporation
Net income per common    $ 0.24      $ 0.25     $  0.23  $  0.16  $  0.20
share, basic
Net income per common    $ 0.24      $ 0.25     $  0.23  $  0.16  $  0.20
share, diluted
Dividends per common     $ 0.05      $ 0.05     $  0.05  $  0.05  $  0.05
share
(1) As of March 31, 2012, amounts presented are net of commissions paid to
generate these revenue sources. Prior periods have been restated to conform to
this presentation.
(2) As of March 31, 2012, salaries and employee benefit expenses exclude
commissions paid on mortgage loan originations and investment sales. These
commissions are netted against their respective revenue amounts in the
statements of income. Prior periods have been restated to reflect this
presentation.





MIDDLEBURG FINANCIAL CORPORATION
KEY STATISTICS
(Unaudited. Dollars in thousands except per share data)
                             For the Three Months Ended
                             Sep 30,    Jun 30,    Mar 31,   Dec 31,  Sep 30,
                             2012       2012       2012       2011     2011
                            $        $        $        $      $  
                             1,714     1,769     1,582     1,136   1,398
Net income
Earnings per share, basic    $       $       $       $     $   
                             0.24       0.25       0.23       0.16     0.20
Earnings per share, diluted  $       $       $       $     $   
                             0.24       0.25       0.23       0.16     0.20
Dividend per share           $       $       $       $     $   
                             0.05       0.05       0.05       0.05     0.05
Return on average total      0.56%      0.57%      0.54%      0.44%    0.46%
assets - Year to Date
Return on average total      6.18%      6.21%      5.95%      4.87%    5.07%
equity - Year to Date
Dividend payout ratio        20.53%     19.87%     22.11%     30.80%   25.00%
Non-interest revenue to     46.94%     41.97%     36.47%     38.27%   37.12%
total revenue (1)
Net interest margin (2)      3.28%      3.57%      3.69%      3.67%    3.64%
Yield on average earning     4.03%      4.40%      4.56%      4.55%    4.66%
assets
Yield on average             0.93%      1.00%      1.06%      1.07%    1.21%
interest-bearing liabilities
Net interest spread          3.10%      3.40%      3.50%      3.48%    3.45%
Non-interest income to       2.66%      2.35%      1.93%      2.10%    1.97%
average assets(3)
Non-interest expense to      4.52%      4.47%      4.50%      5.03%    4.28%
average assets(3)
Efficiency ratio - QTD (Tax  69.27%     72.68%     77.24%     83.64%   73.92%
Equiv) (4)
(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. Excludes securities gains and losses.
(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 (adjusted for amortization of intangibles, other real
estate expenses, and non-recurring one-time charges) 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 in calculating tax
equivalent amounts is 34%. The Company calculates and reviews this ratio as a
means of evaluating operational efficiency. Prior to March 31, 2012, the
Company did not exclude amortization of intangibles and other real estate
expenses from total non-interest expense. The efficiency ratios for the
periods ended December 31, 2011 and prior have been restated for consistency
of presentation purposes.





MIDDLEBURG FINANCIAL CORPORATION
SELECTED FINANCIAL DATA BY QUARTER
(Unaudited. Dollars in thousands except per share data)
                        Sep. 30,    June 30,   Mar. 31,  Dec. 31,   Sep. 30,
                        2012        2012       2012       2011       2011
BALANCE SHEET RATIOS
   Loans to deposits    79.73%      77.30%     80.21%     82.15%     81.65%
   (Including HFS)
   Portfolio loans to   70.33%      70.33%     71.69%     72.20%     74.29%
   deposits
   Average
   interest-earning                                              
   assets to
                        123.02%     121.73%    120.99%    121.22%    119.85%
   average-interest
   bearing liabilities
PER SHARE DATA
                        $       $      $      $      $    
   Dividends               0.05                            
                                    0.05       0.05       0.05       0.05
   Book value (MFC      $       $      $      $      $    
   Shareholders)          15.96     15.57    15.40    15.13    15.04
   Tangible book value  $       $      $      $      $    
   (3)                    15.10     14.71    14.52    14.24    14.15
SHARE PRICE DATA
   Closing price        $       $      $      $      $    
                          17.76     17.00    15.71    14.25    15.00
   Diluted earnings     18.50       17.00      17.08      22.27      18.75
   multiple (1)
   Book value           1.11        1.09       1.02       0.94       1.00
   multiple(2)
COMMON STOCK DATA
   Outstanding shares   7,052,554   7,052,554  7,005,315  6,996,932  6,996,932
   at end of period
   Weighted average
   shares O/S Basic -  7,036,536   7,030,639  6,994,858  6,996,932  6,996,932
   QTD
   Weighted average
   shares O/S, diluted  7,051,860   7,042,111  7,000,169  6,998,019  6,998,494
   - QTD
CAPITAL RATIOS
   Capital to Assets -  9.10%       9.02%      8.97%      8.88%      9.13%
   Common shareholders
   Capital to Assets -
   with Noncontrolling  9.34%       9.19%      9.11%      9.05%      9.32%
   Interest
   Tangible common      8.66%       8.56%      8.50%      8.40%      8.63%
   equity ratio (4)
   Leverage ratio       8.92%       8.99%      8.89%      8.81%      8.97%
   Tier 1 risk based    13.98%      13.66%     13.57%     13.46%     12.87%
   capital ratio
   Total risk based     15.23%      14.92%     14.83%     14.72%     14.13%
   capital ratio
CREDIT QUALITY
   Net charge-offs to   0.22%       0.08%      0.07%      0.11%      0.13%
   average total loans
   Total non-performing
   loans to total       4.02%       3.57%      3.88%      4.53%      4.80%
   portfolio loans
   Total non-performing
   assets to total      3.22%       3.10%      3.21%      3.27%      3.34%
   assets
   Non-accrual loans
   to:
    total          3.28%       2.74%      3.26%      3.78%      4.51%
   portfolio loans
    total assets   1.84%       1.54%      1.85%      2.12%      2.64%
   Allowance for loan
   losses to:
    total          2.01%       2.18%      2.18%      2.18%      2.24%
   portfolio loans
    non-performing 35.05%      39.56%     38.53%     37.53%     39.24%
   assets
    non-accrual    61.46%      79.61%     66.80%     57.69%     49.61%
   loans
NON-PERFORMING ASSETS:
    Loans delinquent $       $      $      $      $    
   over 90 days and        860    1,372            1,233    1,561
   still accruing                              167
    Non-accrual      22,683      18,802     22,247     25,346     30,485
   loans
    Restructured
   loans (Not in non    4,302       4,334      4,056      3,853      404
   accrual)
    Other real
   estate owned and     11,933      13,335     12,095     8,535      6,096
   repossessed assets
   Total non-performing $       $      $      $      $    
   assets               39,778     37,843    38,565    38,967    38,546
NET LOAN CHARGE-OFFS:
    Loans charged    $       $      $      $      $    
   off (QTD)              1,817                             1,017
                                    694       700       893
    Recoveries (QTD) (154)       (72)       (146)      (73)       (44)
   Net charge-offs     $       $      $      $      $    
   (QTD)                  1,663                             
                                    622       554       820       973
PROVISION FOR LOAN      $       $      $      $      $    
LOSSES                    635                            1,024
                                    730       792       319
ALLOWANCE FOR LOAN LOSS
SUMMARY
   Balance at the       $       $      $      $      $    
   beginning of period   14,969     14,861    14,623    15,124    15,073
   Provision            635         730        792        319        1,024
   Net charge-offs      (1,663)     (622)      (554)      (820)      (973)
   Balance at the end   $       $      $      $      $    
   of period             13,941     14,969    14,861    14,623    15,124
(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 September 30,
                    2012                          2011
                    Average  Income/  Yield/  Average  Income/  Yield/
                    Balance  Expense  Rate   Balance  Expense  Rate
                                          (2)                           (2)
                    (Dollars in thousands)
Assets :
Securities:
 Taxable          $         $      2.38%   $         $      2.88%
                    264,234   1,583              242,906   1,764
 Tax-exempt (1)   62,175     903        5.78%   57,800     897        6.16%
 Total        $         $      3.03%   $         $      3.51%
securities          326,409   2,486              300,706   2,661
 Total loans  $         $      4.81%   $         $      5.43%
(3)                 760,442   9,189              724,450   9,912
Interest bearing
deposits in
 other
financial           69,802     39         0.22%   48,355     30         0.25%
institutions
 Total        $          $       4.03%   $          $       4.66%
earning assets      1,156,653  11,714             1,073,511  12,603
Less: allowances    (15,202)                      (14,956)
for credit losses
Total nonearning    84,082                        84,315
assets
Total assets        $                             $
                    1,225,533                     1,142,870
Liabilities:
Interest-bearing
deposits:
 Checking        $         $      0.35%   $         $      0.69%
                    342,360    299             305,761    530
 Regular savings 105,716    79         0.30%   99,344     175        0.70%
 Money market    66,859     50         0.30%   58,903     98         0.66%
savings
 Time deposits:
 $100,000 and 144,566    535        1.47%   137,483    593        1.71%
over
 Under        159,693    765        1.91%   169,087    892        2.09%
$100,000
 Total        $         $              $         $    
interest-bearing    819,194   1,728      0.84%   770,578   2,288      1.18%
deposits
Short-term          6,531      74         4.51%   5,576      58         4.13%
borrowings
Securities sold
under agreements
 to repurchase   34,805     84         0.96%   36,241     84         0.92%
FHLB borrowings and 79,697     304        1.52%   83,067     312        1.49%
other debt
Federal funds       -          -          -       239        -          0.00%
purchased
 Total           $         $              $         $    
interest-bearing    940,227   2,190      0.93%   895,701   2,742      1.21%
liabilities
Non-interest
bearing liabilities
 Demand deposits 164,261                       133,365
 Other           6,600                         7,376
liabilities
Total liabilities   $                             $
                    1,111,088                     1,036,442
Non-controlling     2,920                         2,189
interest
Shareholders'       111,525                       104,239
equity
Total liabilities
and shareholders'
 equity           $                             $
                    1,225,533                     1,142,870
Net interest income            $                         $    
                               9,524                         9,861
Interest rate                             3.10%                         3.44%
spread
Cost of Funds                             0.79%                         1.06%
Interest expense as
a percent of
 average earning                       0.75%                         1.01%
assets
Net interest margin                       3.28%                         3.64%
(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 366 day year.
(3) Total average loans include loans on non-accrual status.





                    MIDDLEBURG FINANCIAL CORPORATION
                    Average Balances, Income and Expenses, Yields and Rates
                    Nine Months Ended September 30,
                    2012                          2011
                    Average  Income/  Yield/  Average  Income/  Yield/
                    Balance  Expense  Rate   Balance  Expense  Rate
                                          (2)                           (2)
                    (Dollars in thousands)
Assets :
Securities:
 Taxable          $         $      2.59%   $         $      2.97%
                    263,981   5,111              224,461   4,986
 Tax-exempt (1)   61,867     2,726      5.89%   55,739     2,662      6.39%
 Total        $         $      3.21%   $         $      3.65%
securities          325,848   7,837              280,200   7,648
 Total loans  $         $       5.07%   $         $       5.56%
(3)                 751,943   28,565             706,995   29,378
Interest bearing
deposits in
 other
financial           54,772     88         0.21%   45,819     89         0.26%
institutions
 Total        $          $       4.30%   $          $       4.80%
earning assets      1,132,563  36,490             1,033,014  37,115
Less: allowances    (15,071)                      (14,816)
for credit losses
Total nonearning    83,114                        91,379
assets
Total assets        $                             $
                    1,200,606                     1,109,577
Liabilities:
Interest-bearing
deposits:
 Checking        $         $      0.43%   $         $      0.68%
                    318,841   1,017              295,782   1,506
 Regular savings 105,816    290        0.37%   95,224     567        0.80%
 Money market    60,373     156        0.35%   59,266     293        0.66%
savings
 Time deposits:
 $100,000 and 142,503    1,666      1.56%   135,973    1,831      1.80%
over
 Under        173,559    2,338      1.80%   168,470    2,730      2.17%
$100,000
 Total        $         $              $         $    
interest-bearing    801,092   5,467      0.91%   754,715   6,927      1.23%
deposits
Short-term          9,195      311        4.52%   5,687      173        4.07%
borrowings
Securities sold
under agreements
 to repurchase   33,736     250        0.99%   32,859     210        0.85%
FHLB borrowings and 84,965     889        1.40%   79,844     914        1.53%
other debt
 Total           $         $              $         $    
interest-bearing    928,989   6,917      0.99%   873,161   8,224      1.26%
liabilities
Non-interest
bearing liabilities
 Demand Deposits 153,069                       125,979
 Other           6,557                         7,081
liabilities
Total liabilities   $                             $
                    1,088,615                     1,006,221
Non-controlling     2,504                         2,458
interest
Shareholders'       109,487                       100,898
equity
Total liabilities
and shareholders'
 equity           $                             $
                    1,200,606                     1,109,577
Net interest income            $                          $   
                               29,573                        28,891
Interest rate                             3.31%                         3.54%
spread
Cost of Funds                             0.85%                         1.10%
Interest expense as                                                    
a percent of
average earning                           0.82%                         1.06%
assets
Net interest margin                       3.49%                         3.74%
(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 366 day year.
(3) Total average loans include loans on non-accrual status.





SOURCE Middleburg Financial Corporation

Website: http://www.middleburgbank.com
Contact: Gary R. Shook, President & CEO 540-687-4801, pres@middleburgbank.com
or Raj Mehra, EVP & CFO 540-687-4816, cfo@middleburgbank.com or Jeffrey H.
Culver, EVP & COO 703-737-3470, coo@middleburgbank.com
 
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