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Middleburg Financial Corporation Announces Fourth Quarter Earnings And 2009 Earnings

MIDDLEBURG, Va., Feb. 1 /PRNewswire-FirstCall/ -- Middleburg Financial Corporation (the "Company"), (Nasdaq: MBRG), parent company of Middleburg Bank (the "Bank"), today reported its financial results for the fourth quarter of 2009 and the year ended 2009.

Fourth Quarter and 2009 Highlights:

  • Net income of $1.1 million for quarter and $3.5 million for full year, up 57% from 2008.
  • Quarter-to-date diluted earnings per share of $0.07 and full year earnings per share of $0.40
  • Non performing Assets to Total Assets were 1.64% at year end, versus 1.88% at end of 3 rd quarter.
  • Total deposit growth of $60.8 million or 8.17% for the year
  • Closed $990 million in mortgage loans in 2009, up 48% from 2008
  • Addition of $24.3 million in new capital, redeemed US Treasury preferred stock in full
  • Tier I capital of 13.88%, leverage ratio of 10.42%

"All things considered, we are happy 2009 is behind us and that we turned in a profit of approximately $3.5 million," commented Joseph L. Boling, chairman and CEO of Middleburg Financial Corporation.  He continued, "The regulatory, political and economic climates made for a challenging year on all fronts but nevertheless the company continued to show improvements in its performance.  We were especially gratified with the strong support from the capital markets in 2009 with our raising $24.3 million in new capital and our subsequent redemption of the TARP Capital Purchase Program (CPP) preferred stock and the return of those funds to the Government.  The CPP dividends previously paid to the United States Treasury will now inure to the benefit of our common shareholders."

Net Interest Income and Net Interest Margin

Net interest income increased $4.46 million in 2009, up 13.4% from 2008, largely driven by growth in earning assets and reduced funding costs. Interest income and fees from loans and investments increased 1.47% during 2009 .  We reduced our costs for deposits as well as for borrowings in 2009. The average cost of interest bearing liabilities in 2009 decreased to 2.43%, down 71 bp relative to 2008. As a result, interest expense decreased $3.6 million in 2009 or 16% from the year ending December  31, 2008 to the year ending December 31. 2009.

The net interest margin for the twelve months ended December 31, 2009 was 4.17%, up 17 bp from 2008.    

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.

Asset Quality and Provision for Loan Losses

Provisions for loan losses were $4.5 million for the year ended December 31, 2009, compared to $5.3 million for the same period in 2008, a decline of 15%.   We aggressively recognized losses on non-performing loans and expenses related to other-real-estate owned (OREO) increased by $1.95 million or 217% during 2009. Given continued uncertainty in the economy, and the current nationwide credit crisis, the Company deemed it prudent to maintain its ratio of allowance for loan losses to total loans at 1.37%.

Non performing assets decreased from $18.8 million or 1.9% of total assets at September 30, 2009 to $16.0 million or 1.6% of total assets as of December 31, 2009. Given the current economic environment, it is anticipated there could be an increase in non performing loans, but we do not believe that  the increase will be as dramatic as that experienced in 2009.

Non-Interest Income

Non-interest income increased $4.0 million or 23.7% when comparing the year ended December 31, 2009 to the same period in 2008, largely driven by increases in gain on sale of mortgage loans originated by Southern Trust Mortgage, our majority owned subsidiary, and gains on sales of securities.   Southern Trust Mortgage closed $990 million in mortgage loans in 2009, up 48% from 2008. Gain on sale of mortgage loans increased $3.2 million or 37% from the year ending December 31, 2008 to the year ending December 31, 2009. Net gains on securities sold were $998,000 in 2009, versus a net loss of $913,000 in 2008, an increase of $1.9 million from the year prior.

The revenues and expenses of Southern Trust Mortgage for each of the three month periods ended March 31, June 30, September 30 and December 31, 2009 are reflected in the Company's financial statements on a consolidated basis, with the outstanding interest not held by the Company reported as "Net Income(Loss) Attributable to Non-controlling Interest."

Trust and investment advisory fees earned by Middleburg Trust Company ("MTC") and Middleburg Investment Advisors ("MIA") was relatively unchanged when comparing the quarter ended December 31, 2009 to the quarter ended September 30, 2009 and decreased 13.7% or $526,000 when comparing the year ended December 31, 2009 to December 31, 2008.  Trust and investment advisory fees are based primarily upon the market value of the accounts under administration/management.  Total consolidated assets under administration by MTC and MIA were at $1.085 billion at December 31, 2009, an increase of $191.3 million or 21.4% from the $893.7 million under administration at December 31, 2008.  The Bank holds a large portion of its investment portfolio in custody with MTC.  MTC's assets under administration were $771.5 million at December 31, 2009 and $485 million at December 31, 2008.  MIA's assets under administration were $313.5 million at December 31, 2009 and $408.6 million at December 31, 2008.  

Non-Interest Expense

Non-interest expense in 2009 increased $6.26 million, up 14.7% from 2008., driven primarily by commissions related to the increased production at Southern Trust Mortgage, increased FDIC insurance expense and increased legal and OREO expenses.

Salaries and employee benefit expenses increased $3.3 million during 2009, primarily due to higher commissions related to Southern Trust Mortgage. Other operating expenses increased by $4.2 million in 2009, due to increases in various other expense categories including FDIC special assessments, legal fees, and expenses associated with other real estate owned.

Total Consolidated Assets

Total assets at December 31, 2009 were $976 million, down $9 million or 0.9% relative to one year prior.

Total loans, net of allowance for loan losses, decreased by $27 million, or 4.1% when comparing December 31, 2008 to December 31, 2009.  Slower loan demand was the primary reason for this decrease as loan runoff was comparable with previous years. Mortgages held for resale increased $5 million or 12.5% from December 31, 2008 to December 31, 2009.

In 2009, the Company increased its cash liquidity position by investing the proceeds of maturities and principal payments of securities into federal funds sold as a precaution against the economic uncertainties and the resulting volatility that occurred in the securities markets. As a result, cash and due from banks on December 31, 2009 increased $17 million from the year prior.  The investment portfolio was at $179 million at December 31, 2009, an increase of $11 million compared to September 30, 2009 and a decline of $2 million from a year prior.  

Deposits and Other Borrowings

Total deposits were at $805.6 million at December 31, 2009, up $60.8 million or 8.17% from the year prior, primarily due to an increase in savings and interest bearing demand deposits. Time deposits, including brokered deposits decreased $31 million or 9.2% when comparing December 31, 2008 to December 31, 2009. The Company has been paying off FHLB advances and brokered deposits as they mature. Brokered deposits were $64 million at December 31, 2009, down $43 million or 40% from the year prior . Long term borrowings were at $35 million at December 31, 2009, down $49 million or 58% from the year prior.  

Equity

Shareholders' equity at December 31, 2009 was $103 million, an increase of  $27 million or 35% from the year prior. The book value of the Company at December 31, 2009 was $14.52 per common share .   New capital of $24.3 million was raised in 2009,  and in December of 2009,  the proceeds were used to redeem the TARP preferred stock issued to the Treasury in full. Subsequent to its redemption of the TARP preferred stock, the Company had the right to notify the Treasury within 15 days from the date of redemption whether it would make an offer to repurchase the warrant or allow the Treasury to liquidate the warrant in the open market.  The Company determined that it was in its best interests not to make an offer to repurchase the warrant. As of December 31, 2009, the Tier 1 risk-based capital ratio was 13.88%, the total risk-based capital ratio was 15.07% and the leverage ratio was 10.42%

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, 2008, 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 Bank serves Loudoun, Fairfax, and Fauquier Counties in Virginia with eight financial service centers.  Middleburg Investment Group owns Middleburg Trust Company and Middleburg Investment Advisors, Inc. Middleburg Trust Company is headquartered in Richmond, Virginia with a branch office in Middleburg and Williamsburg. Middleburg Investment Advisors, Inc. is an SEC registered investment advisor located in Alexandria, Virginia.

    
    
    
    MIDDLEBURG FINANCIAL CORPORATION
    
    SUMMARY INCOME STATEMENT             For the Three Months Ended
    (Unaudited, dollars in thousands)
    
                                     Dec 31,       Sep 30,       Jun 30,
                                       2009          2009          2009
                                   --------      --------      --------
    INTEREST INCOME
    Interest and fees on loans      $11,041       $11,973       $12,870
    Interest on investment
     securities                       1,883         1,998         1,990
    
    
    TOTAL INTEREST INCOME           $12,924       $13,971       $14,860
                                    -------       -------       -------
    
    INTEREST EXPENSE
    Interest on deposits             $3,633        $3,866        $3,959
    Interest on borrowings              577           749           991
    
    
    TOTAL INTEREST EXPENSE           $4,210        $4,615        $4,950
                                     ------        ------        ------
    
    NET INTEREST INCOME              $8,714        $9,356        $9,910
    
    PROVISION FOR LOAN LOSSES           967           964         1,583
                                        ---           ---         -----
    
    NET INTEREST INCOME AFTER
     PROVISION
    FOR LOAN LOSSES                  $7,747        $8,392        $8,327
                                     ------        ------        ------
    
    NON INTEREST INCOME
    Trust and investment advisory
     fee income                        $816          $813          $792
    Service charges on deposits         487           474           490
    Gain on the sale of loans         3,283         2,407         3,378
    Net gains (losses) on
     securities available for
     sale                               365          (258)          661
    Commissions on investment
     sales                              174           148           172
    Equity earnings in
     unconsolidated subsidiaries         40            23            92
    Bank owned life insurance           109           123           130
    Other service charges,
     commissions and fees               429           298           450
    Other operating income (loss)        36            29           (36)
    
    
    TOTAL NON INTEREST INCOME        $5,739        $4,057        $6,129
                                     ------        ------        ------
    
    NON INTEREST EXPENSE
    Salaries and employee
     benefits                        $6,187        $6,925        $7,670
    Net occupancy expense of
     premises                         1,499         1,455         1,566
    Other taxes                         150           148           145
    Computer operations                 344           285           360
    Advertising and marketing           211           184           216
    Other operating expenses          3,716         2,908         3,062
    
    
    TOTAL NON INTEREST EXPENSE      $12,107       $11,905       $13,019
                                    -------       -------       -------
    
    INCOME BEFORE TAXES              $1,379          $544        $1,437
    
    Income tax (benefit) expense         (5)          (92)           21
                                        ---           ---           ---
    NET INCOME                       $1,374          $636
                                                                 $1,416
    LESS: NET (INCOME) /LOSS
     ATTRIBUTABLE TO NON-
     CONTROLLING INTEREST              (270)          (26)         (603)
                                       ====           ===          ====
    MIDDLEBURG FINANCIAL
     CORPORATION NET INCOME          $1,104          $610          $813
    AMORTIZATION OF DISCOUNT ON
     WARRANTS                           378            19            19
    DIVIDEND ON PREFERRED STOCK         253           275           275
    NET INCOME AVAILABLE TO
     COMMON SHAREHOLDERS               $473          $316          $519
    
    
                                               Mar 31,
                                                 2009      2008
                                               ------      ----
    INTEREST INCOME
    Interest and fees on loans                $12,950   $48,088
    Interest on investment securities           2,041     7,834
    
    
    TOTAL INTEREST INCOME                     $14,991   $55,922
                                              -------   -------
    
    INTEREST EXPENSE
    Interest on deposits                       $4,156   $15,492
    Interest on borrowings                      1,151     7,227
    
    
    TOTAL INTEREST EXPENSE                     $5,307   $22,719
                                               ------   -------
    
    NET INTEREST INCOME                        $9,684   $33,203
    
    PROVISION FOR LOAN LOSSES                   1,037     5,261
                                                -----     -----
    
    NET INTEREST INCOME AFTER PROVISION
     FOR LOAN LOSSES                           $8,647   $27,942
                                               ------   -------
    
    NON INTEREST INCOME
    Trust and investment advisory
     fee income                                  $797    $3,737
    Service charges on deposits                   455     1,922
    Gain on the sale of loans                   2,792     8,656
    Net gains (losses) on
     securities available for sale                230      (913)
    Commissions on investment sales                85       433
    Equity earnings in
     unconsolidated subsidiaries                  111         -
    Bank owned life insurance                     127       469
    Other service charges,
     commissions and fees                         374     1,985
    Other operating income (loss)                  16       615
    
    
    TOTAL NON INTEREST INCOME                  $4,987   $16,904
                                               ------   -------
    
    NON INTEREST EXPENSE
    Salaries and employee benefits             $7,260   $25,376
    Net occupancy expense of premises           1,384     5,826
    Other taxes                                   145       642
    Computer operations                           301     1,110
    Advertising and marketing                     149       917
    Other operating expenses                    2,593     8,728
    
    
    TOTAL NON INTEREST EXPENSE                $11,832   $42,599
                                              -------   -------
    
    INCOME BEFORE TAXES                        $1,802    $2,247
    
    Income tax (benefit) expense                  140       444
                                                  ---       ---
    NET INCOME                                 $1,662    $1,803
    LESS: NET (INCOME) /LOSS
     ATTRIBUTABLE TO NON-
     CONTROLLING INTEREST                        (678)      757
                                                 ====       ===
    MIDDLEBURG FINANCIAL
     CORPORATION NET INCOME                      $984    $2,560
    AMORTIZATION OF DISCOUNT ON WARRANTS           13         -
    DIVIDEND ON PREFERRED STOCK                   183         -
    NET INCOME AVAILABLE TO
     COMMON SHAREHOLDERS                         $788    $2,560
    
    (1)  On January 1, 2009, Middleburg Financial Corporation adopted
         Statement of Financial Accounting Standards No. 160 (SFAS No. 160),
         "Non-controlling Interests in Consolidated Financial Statements –
         an amendment of ARB No. 51," (Codified within ASC 810) the
         provisions of which, among others, requires that minority interests
         be renamed non-controlling interests and that a company present a
         consolidated net income (loss) measure that includes the amount
         attributable to such non-controlling interests for all periods
         presented.
    
    
    
    
    MIDDLEBURG FINANCIAL CORPORATION
    BALANCE SHEET
    
    (dollars in thousands)        Unaudited   Unaudited   Unaudited
                                 12/31/2009   9/30/2009   6/30/2009
                                 ----------   ---------   ---------
    
    Assets:
       Cash and due from banks      $41,494     $80,646     $39,721
       Interest-bearing
        balances in banks             1,716       2,214       2,958
       Federal funds sold                 -           -      54,600
       Securities at fair value     178,924     168,049     162,355
       Loans, net of allowance
        for loan losses             635,094     643,293     642,883
       Mortgages held for resale     45,010      36,826      74,346
       Premises and equipment,
        net                          23,506      22,848      22,722
       Other assets                  50,629      43,902      44,975
                                     ------      ------      ------
    
             Total assets          $976,373    $997,777  $1,044,560
                                   ========    ========  ==========
    
    Liabilities and
     Shareholders' Equity:
    Liabilities:
       Deposits:
          Non-interest bearing
           demand deposits         $106,459    $105,648    $124,472
          Savings and interest-
           bearing demand
           deposits                 396,294     380,527     347,561
          Time deposits             302,895     301,453     338,100
                                    -------     -------     -------
               Total deposits      $805,648    $787,628    $810,133
    
       Securities sold under
        agreements to repurchase     17,199      19,808      19,505
       Short term borrowings          3,538       7,112      21,278
       Long-term debt                35,000      43,000      74,000
       Trust preferred capital
        notes                         5,155       5,155       5,155
       Other liabilities              6,474       9,853      10,981
                                      -----       -----      ------
              Total liabilities    $873,014    $872,556    $941,052
                                   --------    --------    --------
    
    Shareholders' Equity:
      Preferred stock, par value 
       $1,000.00 per share                -     $21,622     $21,603
      Common stock, par value
       $2.50 per share               17,273      17,255      12,483
      Capital surplus                42,807      42,702      28,310
      Retained earnings              42,706      43,051      43,235
      Accumulated other
       comprehensive loss, net       (2,474)     (2,202)     (5,156)
                                     ------      ------      ------
    Total Middleburg Financial      
     Corporation shareholders'
     equity                        $100,312    $122,428    $100,475
    Non-Controlling interest          3,047       2,793       3,033
                                      -----       -----       -----
    
    Total shareholders' equity      103,359     125,221     103,508
                                    -------     -------     -------
    Total liabilities and
     shareholders' equity          $976,373    $997,777  $1,044,560
    
    
    (dollars in thousands)           Unaudited         Audited
                                     3/31/2009         12/31/2008
                                     ---------         ----------
    
    Assets:
       Cash and due from banks         $21,059            $23,980
       Interest-bearing
        balances in banks                1,725              2,400
       Federal funds sold               24,500              9,000
       Securities at fair value        165,921            181,312
       Loans, net of allowance
        for loan losses                650,600            662,375
       Mortgages held for resale        66,439             40,301
       Premises and equipment, net      22,920             22,987
       Other assets                     45,099             42,836
                                        ------             ------
    
             Total assets             $998,263           $985,191
                                      ========           ========
    
    Liabilities and
     Shareholders' Equity:
    Liabilities:
       Deposits:
          Non-interest bearing
           demand deposits            $113,130           $110,537
          Savings and interest-
           bearing demand deposits     329,042            300,006
          Time deposits                331,075            334,239
                                       -------            -------
               Total deposits         $773,247           $744,782
    
       Securities sold under
        agreements to repurchase        18,989             22,678
       Short term borrowings            15,340             40,944
       Long-term debt                   74,000             84,000
       Trust preferred capital notes     5,155              5,155
       Other liabilities                10,833              9,636
                                        ------              -----
              Total liabilities       $897,564           $907,195
                                      --------           --------
    
    Shareholders' Equity:
      Preferred stock, par value                     
        $1,000.00 per share            $21,584                  -
      Common stock, par value
       $2.50 per share                  11,826             11,336
      Capital surplus                   26,083             23,967
      Retained earnings                 43,665             43,555
      Accumulated other
       comprehensive loss, net          (5,026)            (3,181)
                                        ------             ------
    Total Middleburg Financial              
     Corporation shareholders' equity  $98,132            $75,677
    Non-Controlling interest             2,567              2,319
                                         -----              -----
    
    Total shareholders' equity         100,699             77,996
                                       -------             ------
    Total liabilities and
     shareholders' equity             $998,263           $985,191
    
    
    
    
    
    MIDDLEBURG FINANCIAL CORPORATION
    KEY STATISTICS
     
                                         4Q09     3Q09     2Q09     1Q09
                                         ----     ----     ----     ----
    
    Net Income (dollars in thousands)  $1,114     $610     $813     $984
    Earnings per share, basic           $0.07    $0.05    $0.11    $0.17
    Earnings per share,
     diluted                            $0.07    $0.05    $0.11    $0.17
    
    Return on average total
     assets                             0.35%    0.29%    0.19%    0.35%
    Return on average total
     equity                             2.82%    2.51%    1.88%    3.81%
    Dividend payout ratio             142.86%  200.00%  172.73%  111.76%
    Fee revenue as a percent
     of total revenue(1)               29.37%   23.60%   26.90%   24.09%
    
    Net interest margin(2)              3.83%    4.13%    4.36%    4.45%
    Yield on average earning
     assets                             5.61%    6.08%    6.46%    6.79%
    Yield on average interest-
     bearing liabilities                2.16%    2.35%    2.50%    2.73%
    Net interest spread                 3.45%    3.73%    3.96%    4.06%
    
    Non-interest income to
     average assets                     2.10%    1.71%    2.15%    1.93%
    Non-interest expense to
     average assets                     4.74%    4.71%    5.12%    4.80%
    Efficiency ratio(3)                83.48%   84.26%   82.25%   79.50%
    
    
    (1) Excludes gains and losses on securities available for sale
    
    (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.
    
    (3) 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.  An increase
        in the ratio from period to period indicates the Company is losing a
        larger percentage of its income to expenses.
    
    
    
    
    
    MIDDLEBURG FINANCIAL CORPORATION
    SELECTED FINANCIAL DATA BY QUARTER
    
                                       4Q09       3Q09       2Q09       1Q09
                                       ----       ----       ----       ----
    BALANCE SHEET RATIOS
    Loans to deposits                80.00%     81.67%     79.36%     84.14%
    Average interest-
     earning assets  
     to average-interest
     bearing liabilities            121.36%    120.32%    119.05%    116.57%
    PER SHARE DATA
    Dividends                         $0.10      $0.10      $0.19      $0.19
    Book value                       $14.52     $14.61     $15.80     $16.14
    Tangible book value              $13.57     $13.65     $14.47     $14.74
    SHARE PRICE DATA
    Closing price                    $14.59     $13.05     $13.76     $11.47
    Diluted earnings multiple(1)       0.97       0.67       0.66       0.53
    Book value multiple(2)             1.00       0.89       0.87       0.55
    COMMON STOCK DATA
    Outstanding shares at end    
     of period                    6,909,293  6,901,843  4,993,245  4,730,317
    Weighted average shares   
     outstanding                  5,635,687  5,208,624  4,675,849  4,536,495
    Weighted average shares                 
     outstanding, diluted         6,906,429  6,267,267  4,822,365  4,538,598
    
     CAPITAL RATIOS
    Total risk based
     capital ratio                   15.07%     18.22%     14.73%     14.51%
    Tier 1 risk based
     capital ratio                   13.88%     16.97%     13.54%     13.28%
    Leverage ratio                   10.42%     12.50%     10.58%     10.52%
    CREDIT QUALITY
    Net charge-offs to
     average loans                    0.18%      0.17%      0.26%      0.19%
    Total non-performing loans       
     to total loans                   1.48%      1.57%      1.99%      1.35%
    Total non-performing assets    
     to total assets                  1.64%      1.88%      1.96%      1.73%
    Non-accrual loans to:
          total loans                 1.34%      1.38%      1.99%      1.35%
          total assets                0.88%      0.90%      1.24%      0.89%
    Allowance for loan
     losses to:
          total loans                 1.37%      1.41%      1.45%      1.48%
        non-performing assets        55.92%     49.21%     46.14%     56.16%
        non-accrual loans           104.11%    102.43%     72.62%    109.21%
    NON-PERFORMING ASSETS:
    (dollars in thousands)
        Loans delinquent over
         90 days                       $908     $1,206         $-        $31
        Non-accrual loans             8,608      9,008     12,985      8,888
        Other real estate owned
         and repossessed assets       6,511      8,537      7,455      8,367
    NET LOAN CHARGE-OFFS (RECOVERIES):
    (dollars in thousands)
        Loans charged off            $1,280     $1,216     $1,866     $1,369
        (Recoveries)                    (48)       (49)        (6)       (19)
    Net charge-offs (recoveries)      1,232      1,167      1,860      1,350
    PROVISION FOR LOAN LOSSES          $967       $964     $1,583     $1,037
    (dollars in thousands)
    ALLOWANCE FOR LOAN LOSS SUMMARY
    (dollars in thousands)
    Balance at the
     beginning of period             $9,227     $9,430     $9,707    $10,020
    STM allowance at
     beginning of period                  -          -          -          -
    Provision                           967        964      1,583      1,037
    Net charge-offs (recoveries)      1,232      1,167      1,860      1,350
    Balance at the end of period     $8,962     $9,227     $9,430     $9,707
    
    
    (1) The diluted earnings multiple (or price earnings ratio) is
        calculated by dividing the period's closing market price per share
        by total equity per  weighted average shares outstanding, diluted
        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.
    
    
    
    
                      Middleburg Financial Corporation
    
          Average Balances, Income and Expenses, Yields and Rates
    
                       Three Months Ended December 31,
    
                                                     2009
                                                     ----
                                       Average      Income/      Yield/
                                       Balance      Expense      Rate (3)
                                       -------      -------      -------
                                            (Dollars in thousands)
    Assets :
    Securities:
      Taxable                         $105,503       $1,145        4.31%
      Tax-exempt (1) (2)                63,902        1,055        6.55%
                                        ------        -----
        Total securities              $169,405       $2,200        5.15%
    Loans
      Taxable                         $694,603      $11,041        6.31%
      Tax-exempt (1)                         -            -
                                           ---          ---
        Total loans                   $694,603      $11,041        6.31%
    Federal funds sold                       -            -
    Interest bearing deposits in
     other financial institutions       75,089           42        0.22%
                                        ------          ---
        Total earning assets          $939,097      $13,283        5.61%
    Less: allowances for
     credit losses                      (9,177)
    Total nonearning assets             86,153
                                        ------
    Total assets                    $1,016,073
                                    ==========
    
    Liabilities:
    Interest-bearing deposits:
      Checking                        $270,939         $666        0.98%
      Regular savings                   64,959          183        1.12%
      Money market savings              50,796          137        1.07%
      Time deposits:
        $100,000 and over              140,727        1,105        3.12%
        Under $100,000                 166,898        1,542        3.67%
                                       -------        -----
        Total interest-
         bearing deposits             $694,319       $3,633        2.08%
    
    Short-term borrowings               12,662           74        2.32%
    Securities sold under agreements
     to repurchase                      20,259            8        0.16%
    Long-term debt                      46,590          495        4.22%
    Federal funds purchased                  -            -
                                           ---          ---
      Total interest-
       bearing liabilities            $773,830       $4,210        2.16%
    Non-interest bearing liabilities
      Demand deposits                  107,160
      Other liabilities                 10,341
                                        ------
    Total liabilities                 $891,331
    Non-controlling interest             3,020
    Shareholders' equity               121,722
    
    
      Total liabilities and 
       shareholders' equity         $1,016,073
                                    ==========
    
    
    Net interest income                              $9,073
                                                     ======
    
    Interest rate spread                                           3.45%
    Interest expense as a percent of
     average earning assets                                        1.78%
    Net interest margin                                            3.83%
    Return on average assets                                       0.35%
    Return on average equity                                       2.82%
    
    
    
                                                     2008
                                                     ----
                                       Average      Income/      Yield/
                                       Balance      Expense      Rate (3)
                                       -------      -------      -------
                                            (Dollars in thousands)
    
    Assets :
    Securities:
      Taxable                         $111,809       $1,291        4.59%
      Tax-exempt (1) (2)                54,139          991        7.28%
                                        ------          ---
        Total securities              $165,948       $2,282        5.47%
    Loans
      Taxable                         $694,132      $12,036        6.90%
      Tax-exempt (1)                         5            -        0.00%
                                           ---          ---
        Total loans                   $694,137      $12,036        6.90%
    Federal funds sold                  10,790           18        0.66%
    Interest bearing deposits in
     other financial institutions        4,452           41        3.66%
                                         -----          ---
        Total earning assets          $875,327      $14,377        6.53%
    Less: allowances for credit
     losses                            (10,057)
    Total nonearning assets             82,952
                                        ------
    Total assets                      $948,222
                                      ========
    
    Liabilities:
    Interest-bearing deposits:
      Checking                        $207,411         $944        1.81%
      Regular savings                   49,461          187        1.50%
      Money market savings              37,009          117        1.26%
      Time deposits:
        $100,000 and over              120,034        1,081        3.58%
        Under $100,000                 194,513        1,933        3.95%
                                       -------        -----
        Total interest-bearing
         deposits                     $608,428       $4,262        2.79%
    
    Short-term borrowings               29,162          277        3.78%
    Securities sold under agreements
     to repurchase                      24,457           47        0.76%
    Long-term debt                      92,090          990        4.28%
    Federal funds purchased                 31            -        0.00%
                                           ---          ---
        Total interest-
         bearing liabilities          $754,168       $5,576        2.94%
    Non-interest bearing liabilities
      Demand deposits                  112,013
      Other liabilities                  6,142
                                         -----
    Total liabilities                 $872,323
    Non-controlling interest             2,418
    Shareholders' equity                73,481
    
    
      Total liabilities and
       shareholders' equity           $948,222
                                      ========
    
    
    Net interest income                              $8,801
                                                     ======
    
    Interest rate spread                                           3.59%
    Interest expense as a percent of
     average earning assets                                        2.53%
    Net interest margin                                            4.00%
    Return on average assets                                       0.21%
    Return on average equity                                       2.66%
    
    
    (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
    
            Average Balances, Income and Expenses, Yields and Rates
    
                        Twelve Months Ended December 31,
    
                                                     2009
                                                     ----
                                       Average      Income/      Yield/
                                       Balance      Expense      Rate (3)
                                       -------      -------      -------
                                            (Dollars in thousands)
    
    Assets :
    Securities:
      Taxable                         $105,765       $4,830        4.57%
      Tax-exempt (1) (2)                64,305        4,461        6.94%
                                        ------        -----
        Total securities              $170,070       $9,291        5.46%
    Loans
      Taxable                         $710,745      $48,834        6.87%
      Tax-exempt  (1)                        1            -           0%
                                           ---          ---
        Total loans                   $710,746      $48,834        6.87%
    Federal funds sold                  20,607           42        0.20%
    Interest bearing deposits in
     other financial institutions       38,485           95        0.25%
                                        ------          ---
        Total earning assets          $939,908      $58,262        6.20%
    Less: allowances for
     credit losses                      (9,160)
    Total nonearning assets             83,697
                                        ------
    Total assets                    $1,014,445
                                    ==========
    
    Liabilities:
    Interest-bearing deposits:
      Checking                        $251,781       $3,091        1.23%
      Regular savings                   57,669          738        1.28%
      Money market savings              42,985          473        1.10%
      Time deposits:
        $100,000 and over              135,149        4,342        3.21%
        Under $100,000                 188,623        6,969        3.69%
                                       -------        -----
        Total interest-bearing  
         deposits                     $676,207      $15,613        2.31%
    
    Short-term borrowings               19,424          593        3.05%
    Securities sold under agreements
     to repurchase                      21,122           40        0.19%
    Long-term debt                      69,407        2,835        4.08%
    Federal Funds Purchased                  -            -
                                           ---          ---
      Total interest-bearing
       liabilities                    $786,160      $19,081        2.43%
    Non-interest bearing liabilities
      Demand Deposits                  107,936
      Other liabilities                 10,537
                                        ------
    Total liabilities                 $904,633
    Non-controlling interest             2,774
    Shareholders' equity               107,038
    
    
      Total liabilities and
       shareholders' equity         $1,014,445
                                    ==========
    
    
    Net interest income                             $39,181
                                                    =======
    
    Interest rate spread                                           3.77%
    Interest expense as a percent of
     average earning assets                                        2.03%
    Net interest margin                                            4.17%
    Return on average assets                                       0.35%
    Return on average equity                                       3.21%
    
    
    
    
                                                     2008
                                                     ----
                                       Average      Income/      Yield/
                                       Balance      Expense      Rate (3)
                                       -------      -------      -------
                                            (Dollars in thousands)
    
    Assets :
    Securities:
      Taxable                         $108,482       $5,348         4.93%
      Tax-exempt (1) (2)                47,975        3,306         6.89%
                                        ------        -----
        Total securities              $156,457       $8,654         5.53%
    Loans
      Taxable                         $689,210      $48,087         6.98%
      Tax-exempt  (1)                        9            1        11.11%
                                           ---          ---
        Total loans                   $689,219      $48,088         6.98%
    Federal funds sold                   7,604          139         1.83%
    Interest bearing deposits in
     other financial institutions        4,097          165         4.03%
                                         -----          ---
        Total earning assets          $857,377      $57,046         6.65%
    Less: allowances for credit
     losses                             (9,251)
    Total nonearning asset  s           77,029
                                        ------
    Total assets                      $925,155
                                      ========
    
    Liabilities:
    Interest-bearing deposits:
      Checking                        $188,886       $3,755         1.99%
      Regular savings                   53,223          939         1.76%
      Money market savings              39,267          465         1.18%
      Time deposits: 
        $100,000 and over              127,398        5,021         3.94%
        Under $100,000                 128,781        5,311         4.12%
                                       -------        -----
        Total interest-bearing
         deposits                     $537,555      $15,491         2.88%
    
    Short-term borrowings               44,983        1,988         4.42%
    Securities sold under agreements
     to repurchase                      40,924          831         2.03%
    Long-term debt                     100,308        4,398         4.38%
    Federal Funds Purchased                397           11         2.77%
                                           ---          ---
      Total interest-bearing 
       liabilities                    $724,167      $22,719         3.14%
    Non-interest bearing liabilities
      Demand Deposits                  114,466
      Other liabilities                  7,328
                                         -----
    Total liabilities                 $845,961
    Non-controlling interest             3,232
    Shareholders' equity                75,961
    
    
      Total liabilities and
       shareholders' equity           $925,154
                                      ========
    
    
    Net interest income                             $34,327
                                                    =======
    
    Interest rate spread                                           3.52%
    Interest expense as a percent of
     average earning assets                                        2.65%
    Net interest margin                                            4.00%
    Return on average assets                                       0.28%
    Return on average equity                                       3.37%
    
    
    (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.
    

SOURCE Middleburg Financial Corporation

Copyright 2009 PR Newswire. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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