ex99-1.htm

EX-99.1 2 ex99-1.htm PRESS RELEASE ex99-1.htm

Exhibit 99.1

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

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

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

	Jeffrey H. Culver, EVP & COO	703-737-3470 or
		coo@middleburgbank.com

MIDDLEBURG FINANCIAL CORPORATION ANNOUNCES FIRST QUARTER 2013 RESULTS

MIDDLEBURG, VA. – May 1, 2013 – Middleburg Financial Corporation (the “Company”) (Nasdaq: MBRG), today announced net income of $1.3 million or $0.19 per diluted share for the first quarter of 2013.

“The real story for Middleburg in the first quarter relates to the significant drop in non-accrual loans and total non-performing assets,” commented Gary R. Shook, president and CEO of Middleburg Financial Corporation. “Non-accrual loans dropped 10% and total non-performing assets as a percentage of total assets fell to 2.77%. Both of these metrics are continued evidence of the positive trend that began to take hold in early 2012.” Mr. Shook continued, “Another positive for the quarter was the stabilization of the net interest margin. While the current monetary policy of quantitative easing can contribute to margin compression, our management team is very focused on maintaining our margins with particular emphasis on cost of funds and loan yields.”

First Quarter 2013 Highlights:

·	Net income of $1.3 million or $0.19 per diluted share, compared to $1.6 million or $0.23 per diluted share for the first quarter of 2012, a decrease of 19.0% when comparing calendar quarters;

·	Net interest margin of 3.45%, compared to 3.42% for the previous quarter and 3.69% for the first quarter of 2012;

·	Total revenue of $15.3 million, a decrease of 2.5% compared to the first quarter of 2012;

·	Total assets of $1.2 billion, a decrease of 1.9% compared to December 31, 2012;

·	Deposits decreased by $15.8 million or 1.6% since December 31, 2012;

·	Loans held-for-investment increased by $5.1 million or 0.7% since December 31, 2012;

·	Credit quality improved with Non Accrual Loans declining 7.6% since December 31, 2012;

·	The ratio of Non Performing Assets to Total Assets was 2.77% as of March 31, 2013 compared to 3.05% at December 31, 2012 and 3.21% at March 31, 2012;

·	Capital ratios continue to be strong: Tangible Common Equity Ratio of 9.0%, Total Risk-Based Capital Ratio of 15.6%, Tier 1 Risk-Based Capital Ratio of 14.4%, and a Tier 1 Leverage Ratio of 9.1% at March 31, 2013.

Total Revenue

Total revenue which is comprised of Net Interest Income (before a provision for loan losses) and Non Interest Income was $15.3 million in the quarter ended March 31, 2013, representing a decrease of 12.4% compared to the previous quarter and a decrease of $392,000 or 2.5% from the quarter ended March 31, 2012.

The net interest margin for the three months ended March 31, 2013 was 3.45%, compared to 3.42% for the previous quarter, and 3.69% for the quarter ended March 31, 2012, representing an increase of 3 basis points from the previous quarter and a decrease of 24 basis points compared to the quarter ended March 31, 2012.

Net interest income was $9.4 million during the three months ended March 31, 2013, which was 1.2% lower than the quarter ended December 31, 2012 and a decrease of 3.4% compared to the quarter ended March 31, 2012. The yield on average earning assets was 4.08% for the quarter ended March 31, 2013 unchanged from the previous quarter and 4.56% for the quarter ended March 31, 2012, representing no change from the previous quarter and a decrease of 48 basis points from the quarter ended March 31, 2012. Loan yields decreased by 4 basis points while the yield for the securities portfolio increased by 14 basis points from the previous quarter.

The average annualized cost of interest bearing liabilities was 0.78% for the quarter ended March 31, 2013, compared to 0.82% in the previous quarter, and 1.06% for the quarter ended March 31, 2012, representing a decrease of 4 basis points from the previous quarter and a decrease of 28 basis points from the quarter ended March 31, 2012. Annualized costs for interest bearing retail deposits decreased by 3 basis points from the previous quarter to 0.69% from 0.72% and decreased by 28 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 due to reduced interest expenses broadly across deposit categories, including interest checking, savings and time deposits. An annualized cost for wholesale borrowings (excluding brokered deposits) was 1.47%, unchanged compared to the previous quarter and higher by 11 basis points compared to the quarter ended March 31, 2012.

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 0.66% for the quarter ended March 31, 2013 compared to 0.69% for the quarter ended December 31, 2012, a decrease of 3 basis points. Cost of funds decreased 25 basis points compared to the quarter ended March 31, 2012.

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 34.0%. Details on the calculation of the net interest margin are included in the “Key Statistics” table.

Non-interest income decreased by $2 million or 25.7% when comparing the quarter ended March 31, 2013 to the previous quarter and decreased by 0.9% compared to the quarter ended March 31, 2012. Gains on mortgage loan sales decreased by 34.3% when comparing the quarter ended March 31, 2013 to the previous quarter and increased by 1.1% when compared to the quarter ended March 31, 2012. 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 closed $191.1 million in mortgage loans during the quarter ended March 31, 2013 compared to $249.2 million closed during the previous quarter, and $210.8 million closed during the quarter ended March 31, 2012, a decrease of 23.3% compared to the previous quarter and a decrease of 9.3% when comparing the same calendar quarters.

The revenues and expenses of Southern Trust Mortgage 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”) was $1.0 million for the quarter ended March 31, 2013 unchanged from the previous quarter and $1.1 million in the quarter ended March 31, 2012. 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 $1.5 billion at March 31, 2013, an increase of 6% relative to March 31, 2012.

Net securities gains were $47,000 during the quarter ended March 31, 2013 compared to losses of $7,000 during the previous quarter and gains of $140,000 during the quarter ended March 31, 2012.

The following table presents dollar and percentage changes in components of non-interest income for the periods ended March 31, 2013 and March 31, 2012:

MIDDLEBURG FINANCIAL CORPORATION
Non-Interest Income
(in thousands)


	For the three months ended				Dollar			Percent
	3/31/2013		3/31/2012		Change			Change

Service charges on deposit accounts	$	534	$	530	$	4			0.8	%
Trust services income		960		921		39			4.2	%
Net gains on loans held for sale		3,893		3,852		41			1.1	%
Net gains on securities available for sale		47		140		(93	)		-66.4	%
Net commissions on investment sales		94		147		(53	)		-36.1	%
Other service charges, commissions and fees		130		150		(20	)		-13.3	%
Bank-owned life insurance		120		122		(2	)		-1.6	%
Other operating income		150		122		28			23.1	%
Total non-interest income	$	5,928	$	5,984	$	(56	)		-0.9	%

Non-Interest Expense

Total non-interest expense in the first quarter of 2013 was 1% higher compared to the previous quarter and increased by $614,000 or 4.6% compared to the quarter ended March 31, 2012.

Salaries and employee benefit expenses decreased by $479,000 or 5.8% when comparing the first quarter of 2013 to the previous quarter. Salaries and employee benefits increased by $442,000 or 6.0% versus the first quarter of 2012. The increase in salaries and employee benefit expenses was primarily due to staffing expenses for the financial service center in Richmond which opened in the fourth quarter of 2012.

Expenses related to Other Real Estate Owned (“OREO”) increased by $765,000 when comparing the first quarter of 2013 to the previous quarter and increased by $534,000 versus the quarter ended March 31, 2012. The increase in this expense was primarily related to losses incurred on the sale of two large OREO properties during the first quarter. The liquidation of these properties reduced non-performing assets by approximately $2.0 million and contributed to the decline in the Company’s non-performing assets ratio from 3.05% at December 31, 2012 to 2.77% at March 31, 2013.

Advertising expense was lower by 57.8% compared to the previous quarter and decreased by $32,000 or 10.7% from the quarter ended March 31, 2012. Advertising expenses in the fourth quarter of 2012 were impacted by costs for promotions related to the Richmond financial service center.

Other operating expenses decreased by $429,000 or 15.6% from the quarter ended March 31, 2012 primarily due to lower mortgage banking related expenses.

The following table presents dollar and percentage changes in components of non-interest expense for the periods ended March 31, 2013 and March 31, 2012:

MIDDLEBURG FINANCIAL CORPORATION
Non-Interest Expense
(in thousands)

	For the three months ended				Dollar			Percent
	3/31/2013		3/31/2012		Change			Change

Salaries and employees' benefits	$	7,799	$	7,357	$	442			6.0	%
Net occupancy and equipment expense		1,805		1,778		27			1.5	%
Advertising		268		300		(32	)		-10.7	%
Computer operations		461		385		76			19.7	%
Other real estate owned		820		286		534			186.7	%
Other taxes		192		203		(11	)		-5.4	%
Federal deposit insurance expense		265		258		7			2.7	%
Other operating expenses		2,318		2,747		(429	)		-15.6	%
Total non-interest expense	$	13,928	$	13,314	$	614			4.6	%

The Company’s efficiency ratio was 80.9% for the first quarter of 2013, compared to an efficiency ratio of 77.2% for the first quarter of 2012. 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.

Asset Quality and Provision for Loan Losses

Non Performing Asset balances have decreased by 11.0% since December 31, 2012 while net charge-offs have declined in three consecutive quarters beginning in the quarter ended September 30, 2012. Substantially all of the net charge-offs during the first quarter were fully reserved at December 31, 2012. As a result of the drop in non-performing assets and charge-offs, the Company recorded a negative loan loss provision of $188,000 for the quarter ended March 31, 2013 versus $792,000 for the quarter ended March 31, 2012. The negative provision allowed the reserve ratio to decrease to 1.89% of portfolio loans at March 31, 2013 from 2.02% at December 31, 2012. After this quarter’s reserve decrease, the coverage ratio for non-performing assets (allowance for loan losses balance divided by non-performing assets) increased to 40.2% of nonperforming assets from 37.9% at December 31, 2012.

The Allowance for Loan and Lease Losses (ALLL) was $13.5 million representing 1.89% of loans held for investment at March 31, 2013 compared to $14.3 million representing 2.02% of loans held for investment at December 31, 2012. The decrease in the ALLL balance as a percentage of loans held for investment occurred primarily due to an increase in the balance of loans held for investment and lower loss reserves resulting from improved credit quality over three consecutive quarters beginning in the quarter ended September 30, 2012.

Loans that were delinquent for more than 90 days and still accruing were $812,000 as of March 31, 2013 compared to $1.0 million as of December 31, 2012, and $167,000 as of March 31, 2012, representing a decrease of 22.2% compared to the previous quarter and a 386.2% increase compared to the quarter ended March 31, 2012.

Non-accrual loans were $20.0 million at the end of the first quarter of 2013 compared to $21.7 million as of December 31, 2012 and $22.2 million at March 31, 2012, representing a decrease of 7.6% during the first quarter of 2013 and a decrease of 10.0% since March 31, 2012. Troubled debt restructurings that were performing as agreed were $4.9 million at the end of the first quarter of 2013, compared to $5.1 million for the quarter ended December 31, 2012, representing a decrease of 5.4% during the quarter. Other Real Estate Owned (OREO) was $7.9 million as of March 31, 2013 compared to $9.9 million as of December 31, 2012, representing a decrease of 20.4% during the first quarter of 2013. Total non-performing assets were $33.6 million or 2.77% of total assets at March 31, 2013, compared to $37.8 million or 3.05% of total assets as of December 31, 2012 and $38.6 million or 3.21% of total assets as of March 31, 2012.

The net loan charge-offs during the first quarter of 2013 were $615,000 compared to net charge-offs of $911,000 for the previous quarter and $554,000 in net loan charge-offs for the quarter ended March 31, 2012.

Total Consolidated Assets

Total assets at March 31, 2013 were $1.2 billion, lower by $23.0 million or 1.9% from December 31, 2012 and an increase of 0.9% from March 31, 2012.

Total loans held for investment increased by $5.1 million or 0.7% in the first quarter of 2013 from the end of the fourth quarter of 2012. Loans held for investment increased by $32.2 million or 4.7% from March 31, 2012. The securities portfolio (excluding restricted stock) increased by $12.2 million or 3.8% in the first quarter of 2013 relative to the previous quarter and increased by $8.1 million or 2.5% from March 31, 2012. Balances of mortgages held for sale decreased by $33.4 million or 40.7% at March 31, 2013 compared to the previous quarter end balance. Cash balances and deposits at other banks decreased by 7.3% at the end of the first quarter of 2013 compared to the previous quarter end and increased by $5.4 million or 12.0% from the balances at March 31, 2012.

Deposits and Other Borrowings

Total deposits decreased by $15.8 million or 1.6% from December 31, 2012 to March 31, 2013 and increased by $14.3 million or 1.5% from March 31, 2012. Brokered deposits, including CDARS program funds, were $64.2 million at March 31, 2013, down 1.4% from December 31, 2012. FHLB advances were $85.0 million at March 31, 2013, an increase of $7.1 million compared to December 31, 2012.

Equity and Capital

Shareholders’ equity attributable to Middleburg Financial Corporation shareholders at March 31, 2013 was $114.8 million, compared to $113.9 million as of December 31, 2012 and $107.9 million at March 31, 2012. Retained earnings at March 31, 2013 were $47.2 million compared to $46.2 million at December 31, 2012 and $42.4 million at March 31, 2012. The book value of the Company’s common stock at March 31, 2013 was $16.28 per share versus $16.15 per share at December 31, 2012.

The Company’s total risk-based capital ratio increased to 15.6% as of March 31, 2013 from 15.3% at December 31, 2012. The Tier 1 risk-based capital ratio also increased from 14.0% at December 31, 2012 to 14.4% at March 31, 2013. The Tier 1 Leverage Ratio remained unchanged from December 31, 2012 to March 31, 2013 at 9.1%.

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
March 31, 2013

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

	Tier 1 Leverage Ratio	4.0%	9.1%	5.1%

	Tier 1 Risk-Based Capital Ratio	4.0%	14.4%	10.4%

	Total Risk-Based Capital Ratio	8.0%	15.6%	7.6%

	(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, 2012, 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 offices in Virginia, Maryland, Georgia, North Carolina, and South Carolina.

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

	(Unaudited)		(Audited)
	March 31,		December 31,
	2013		2012
ASSETS
Cash and due from banks	$	6,697	$	7,139
Interest-bearing deposits with other institutions		43,753		47,276
Total cash and cash equivalents		50,450		54,415
Securities available for sale		331,650		319,457
Loans held for sale		48,721		82,114
Restricted securities, at cost		7,005		6,990
Loans receivable, net of allowance for loan losses of $13,508 at
March 31, 2013 and $14,311 at December 31, 2012		701,078		695,166
Premises and equipment, net		20,418		20,587
Goodwill and identified intangibles		5,975		6,017
Other real estate owned, net of valuation allowance of $348 at
March 31, 2013, and $1,707 at December 31, 2012		7,904		9,929
Prepaid federal deposit insurance		2,768		3,015
Accrued interest receivable and other assets		37,787		39,091

TOTAL ASSETS	$	1,213,756	$	1,236,781

LIABILITIES
Deposits:
Non-interest-bearing demand deposits	$	163,611	$	167,137
Savings and interest-bearing demand deposits		515,082		522,740
Time deposits		287,383		292,023
Total deposits		966,076		981,900
Securities sold under agreements to repurchase		31,880		33,975
Short-term borrowings		519		11,873
FHLB borrowings		85,000		77,912
Subordinated notes		5,155		5,155
Accrued interest payable and other liabilities		7,426		8,844
Commitments and contingent liabilities		-		-
TOTAL LIABILITIES		1,096,056		1,119,659

SHAREHOLDERS' EQUITY
Common stock ($2.50 par value; 20,000,000 shares authorized,
7,051,587 and 7,052,554 issued and outstanding at
March 31, 2013, and December 31, 2012, respectively)		17,365		17,357
Capital surplus		43,946		43,869
Retained earnings		47,209		46,235
Accumulated other comprehensive income		6,260		6,467
Total Middleburg Financial Corporation shareholders' equity		114,780		113,928
Non-controlling interest in consolidated subsidiary		2,920		3,194

TOTAL SHAREHOLDERS' EQUITY		117,700		117,122


TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	1,213,756	$	1,236,781

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


	Unaudited
	For the Three Months
	Ended March 31,
	2013			2012
INTEREST AND DIVIDEND INCOME
Interest and fees on loans	$	8,964		$	9,782
Interest and dividends on securities available for sale
Taxable		1,531			1,735
Tax-exempt		631			607
Dividends		56			44
Interest on deposits in other banks		30			24
Total interest and dividend income		11,212			12,192

INTEREST EXPENSE
Interest on deposits		1,373			1,893
Interest on securities sold under agreements to
repurchase		80			83
Interest on short-term borrowings		29			148
Interest on long-term debt		295			297
Total interest expense		1,777			2,421

NET INTEREST INCOME		9,435			9,771
Provision for (recovery of) loan losses		(188	)		792

NET INTEREST INCOME AFTER PROVISION
FOR (RECOVERY OF) LOAN LOSSES		9,623			8,979

NONINTEREST INCOME
Service charges on deposit accounts		534			530
Trust services income		960			921
Net gains on loans held for sale		3,893			3,852
Net gains on securities available for sale		47			140
Total other-than-temporary impairment loss on securities		-			(10	)
Portion of loss recognized in other
comprehensive income		-			10
Net impairment loss on securities		-			-
Net commissions on investment sales		94			147
Fees on mortgages held for sale		17			42
Other service charges, commissions and fees		130			150
Bank-owned life insurance		120			122
Other operating income		133			80
Total noninterest income		5,928			5,984

NONINTEREST EXPENSE
Salaries and employees' benefits		7,799			7,357
Net occupancy and equipment expense		1,805			1,778
Advertising		268			300
Computer operations		461			385
Other real estate owned		820			286
Other taxes		192			203
Federal deposit insurance expense		265			258
Other operating expenses		2,318			2,747
Total noninterest expense		13,928			13,314

Income before income taxes		1,623			1,649
Income tax expense		363			416

NET INCOME		1,260			1,233
Net loss attributable to non-controlling interest		67			349
Net income attributable to Middleburg
Financial Corporation	$	1,327		$	1,582

Earnings per share:
Basic	$	0.19		$	0.23
Diluted	$	0.19		$	0.23
Dividends per common share	$	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
	Mar. 31, 2013			Dec. 31, 2012			Sep. 30, 2012			June 30, 2012			Mar. 31, 2012
Interest and Dividend Income
Interest and fees on loans	$	8,964		$	9,330		$	9,189		$	9,594		$	9,782
Interest and dividends on securities available for sale
Taxable		1,531			1,432			1,537			1,704			1,735
Tax Exempt		631			604			596			596			607
Dividends		56			58			46			45			44
Interest on deposits in other banks		30			36			39			25			24
Total interest and dividend income	$	11,212		$	11,460		$	11,407		$	11,964		$	12,192
Interest Expense
Interest on deposits	$	1,373		$	1,449		$	1,728		$	1,846		$	1,893
Interest on securities sold under agreements to repurchase		80			82			83			84			83
Interest on short-term borrowings		29			81			74			89			148
Interest on FHLB borrowings and other debt		295			295			305			287			297
Total interest expense	$	1,777		$	1,907		$	2,190		$	2,306		$	2,421
Net interest income	$	9,435		$	9,553		$	9,217		$	9,658		$	9,771
Provision for (recovery of) loan losses		(188	)		1,281			635			730			792
Net interest income after provision
for (recovery of) loan losses	$	9,623		$	8,272		$	8,582		$	8,928		$	8,979
Non-Interest Income
Trust services income	$	960		$	923		$	928		$	979		$	921
Service charges on deposit accounts		534			572			557			538			530
Net gains (losses) on securities available for sale		47			(7	)		164			148			140
Total other-than-temporary impairment loss on securities		-			-			-			(36	)		(10	)
Portion of loss recognized in other comprehensive income		-			-			-			36			10
Net other-than-temporary impairment loss		-			-			-			-			-
Commissions on investment sales		94			129			117			125			147
Bank owned life insurance		120			96			118			123			122
Gains on loans held for sale		3,893			5,926			6,161			5,075			3,852
Fees on mortgages held for sale		17			43			37			64			42
Other operating income		263			299			236			119			230
Total non-interest income	$	5,928		$	7,981		$	8,318		$	7,171		$	5,984
Non-Interest Expense
Salaries and employee benefits	$	7,799		$	8,278		$	7,276		$	7,506		$	7,357
Net occupancy and equipment expense		1,805			1,785			1,732			1,755			1,778
Other taxes		192			202			203			205			203
Advertising		268			635			652			447			300
Computer operations		461			471			322			394			385
Other real estate owned		820			55			1,506			874			286
Federal deposit insurance expense		265			269			262			261			258
Other operating expenses		2,318			2,103			1,883			1,869			2,747
Total non-interest expense	$	13,928		$	13,798		$	13,836		$	13,311		$	13,314

Income before income taxes	$	1,623		$	2,455		$	3,064		$	2,788		$	1,649
Income tax expense		363			387			565			598			416
Net income	$	1,260		$	2,068		$	2,499		$	2,190		$	1,233
Less: Net (income) loss attributable to non-controlling interest		67			(647	)		(785	)		(421	)		349
Net income attributable to Middleburg Financial Corporation	$	1,327		$	1,421		$	1,714		$	1,769		$	1,582

Net income per common share, basic	$	0.19		$	0.20		$	0.24		$	0.25		$	0.23
Net income per common share, diluted	$	0.19		$	0.20		$	0.24		$	0.25		$	0.23
Dividends per common share	$	0.05		$	0.05		$	0.05		$	0.05		$	0.05

MIDDLEBURG FINANCIAL CORPORATION
KEY STATISTICS
(Unaudited. Dollars in thousands except per share data)	For the Three Months Ended
	Mar 31, 2013			Dec 31, 2012			Sep 30, 2012			Jun 30, 2012			Mar 31, 2012

Net income	$	1,327		$	1,421		$	1,714		$	1,769		$	1,582
Earnings per share, basic	$	0.19		$	0.20		$	0.24		$	0.25		$	0.23
Earnings per share, diluted	$	0.19		$	0.20		$	0.24		$	0.25		$	0.23
Dividend per share	$	0.05		$	0.05		$	0.05		$	0.05		$	0.05

Return on average total assets - QTD		0.44	%		0.46	%		0.55	%		0.60	%		0.54	%
Return on average total equity - QTD		4.71	%		4.96	%		6.11	%		6.50	%		5.95	%
Dividend payout ratio		26.57	%		24.82	%		20.53	%		19.87	%		22.11	%
Non-interest revenue to total revenue (1)		38.40	%		45.54	%		46.94	%		41.97	%		36.47	%

Net interest margin (2)		3.45	%		3.42	%		3.28	%		3.57	%		3.69	%
Yield on average earning assets		4.08	%		4.08	%		4.03	%		4.40	%		4.56	%
Cost of average interest-bearing liabilities		0.78	%		0.82	%		0.93	%		1.00	%		1.06	%
Net interest spread		3.30	%		3.26	%		3.10	%		3.40	%		3.50	%

Non-interest income to average assets (3)		1.93	%		2.62	%		2.66	%		2.35	%		1.93	%
Non-interest expense to average assets (3)		4.57	%		4.53	%		4.52	%		4.47	%		4.50	%

Efficiency ratio - QTD (Tax Equiv) (4)		80.96	%		76.51	%		69.27	%		72.68	%		77.24	%

(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 non taxable interest income due to the mix in its investment and loan portfolios, 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 including OTTI adjustments.

(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.

MIDDLEBURG FINANCIAL CORPORATION
SELECTED FINANCIAL DATA BY QUARTER
(Unaudited. Dollars in thousands except per share data)	Mar. 31, 2013			Dec. 31, 2012			Sep. 30, 2012			June 30, 2012			Mar. 31, 2012
BALANCE SHEET RATIOS
Loans to deposits (Including HFS)		79.01	%		80.62	%		79.73	%		77.30	%		80.21	%
Portfolio loans to deposits		73.97	%		72.26	%		70.33	%		70.33	%		71.69	%
Average interest-earning assets to
average-interest bearing liabilities		123.60	%		124.17	%		123.02	%		121.73	%		120.99	%
PER SHARE DATA
Dividends	$	0.05		$	0.05		$	0.05		$	0.05		$	0.05
Book value (MFC Shareholders)	$	16.28		$	16.15		$	15.96		$	15.57		$	15.40
Tangible book value (3)	$	15.41		$	15.30		$	15.10		$	14.71		$	14.52
SHARE PRICE DATA
Closing price	$	19.41		$	17.66		$	17.76		$	17.00		$	15.71
Diluted earnings multiple (1)		25.54			22.08			18.50			17.00			17.08
Book value multiple(2)		1.19			1.09			1.11			1.09			1.02

COMMON STOCK DATA
Outstanding shares at end of period		7,051,587			7,052,554			7,052,554			7,052,554			7,005,315
Weighted average shares O/S Basic - QTD		7,051,009			7,052,554			7,036,536			7,030,639			6,994,858
Weighted average shares O/S, diluted - QTD		7,082,354			7,069,603			7,051,860			7,042,111			7,000,169
CAPITAL RATIOS
Capital to Assets - Common shareholders		9.46	%		9.21	%		9.10	%		9.02	%		8.97	%
Capital to Assets - with Noncontrolling Interest		9.70	%		9.47	%		9.34	%		9.19	%		9.11	%
Tangible common equity ratio (4)		9.01	%		8.77	%		8.66	%		8.56	%		8.50	%
Leverage ratio		9.11	%		9.10	%		8.92	%		8.99	%		8.89	%
Tier 1 risk based capital ratio		14.35	%		14.09	%		13.98	%		13.66	%		13.57	%
Total risk based capital ratio		15.60	%		15.35	%		15.23	%		14.92	%		14.83	%
CREDIT QUALITY
Net charge-offs to average total loans		0.08	%		0.12	%		0.22	%		0.08	%		0.07	%
Total non-performing loans to total portfolio loans		3.59	%		3.92	%		4.02	%		3.57	%		3.88	%
Total non-performing assets to total assets		2.77	%		3.05	%		3.22	%		3.10	%		3.21	%
Non-accrual loans to:
total portfolio loans		2.80	%		3.05	%		3.28	%		2.74	%		3.26	%
total assets		1.65	%		1.75	%		1.84	%		1.54	%		1.85	%
Allowance for loan losses to:
total portfolio loans		1.89	%		2.02	%		2.01	%		2.18	%		2.18	%
non-performing assets		40.22	%		37.89	%		35.05	%		39.56	%		38.53	%
non-accrual loans		67.48	%		66.06	%		61.46	%		79.61	%		66.80	%
NON-PERFORMING ASSETS:
Loans delinquent over 90 days and still accruing	$	812		$	1,044		$	860		$	1,372		$	167
Non-accrual loans		20,019			21,664			22,683			18,802			22,247
Restructured loans (Not in non accrual)		4,854			5,132			4,302			4,334			4,056
Other real estate owned and repossessed assets		7,904			9,929			11,933			13,335			12,095
Total non-performing assets	$	33,589		$	37,769		$	39,778		$	37,843		$	38,565
NET LOAN CHARGE-OFFS:
Loans charged off (QTD)	$	721		$	1,060		$	1,817		$	694		$	700
Recoveries (QTD)		(106	)		(149	)		(154	)		(72	)		(146	)
Net charge-offs (QTD)	$	615		$	911		$	1,663		$	622		$	554
PROVISION FOR (RECOVERY OF) LOAN LOSSES	$	(188	)	$	1,281		$	635		$	730		$	792
ALLOWANCE FOR LOAN LOSS SUMMARY
Balance at the beginning of period	$	14,311		$	13,941		$	14,969		$	14,861		$	14,623
Provision		(188	)		1,281			635			730			792
Net charge-offs		(615	)		(911	)		(1,663	)		(622	)		(554	)
Balance at the end of period	$	13,508		$	14,311		$	13,941		$	14,969		$	14,861

(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 March 31,
				2013								2012
	Average			Income/		Yield/			Average			Income/		Yield/
	Balance			Expense		Rate (2)			Balance			Expense		Rate (2)
	(Dollars in thousands)
Assets :
Securities:
Taxable	$	265,972		$	1,587		2.42	%	$	263,408		$	1,779		2.72	%
Tax-exempt (1)		67,252			956		5.77	%		61,802			920		5.99	%
Total securities	$	333,224		$	2,543		3.09	%	$	325,210		$	2,699		3.34	%
Loans
Taxable	$	756,317		$	8,958		4.80	%	$	744,776		$	9,782		5.36	%
Tax-exempt (1)		687			9		5.31	%		-			-		0.00	%
Total loans (3)	$	757,004		$	8,967		4.80	%	$	744,776		$	9,782		5.36	%
Interest bearing deposits in
other financial institutions		57,904			30		0.21	%		46,111			24		0.21	%
Total earning assets	$	1,148,132		$	11,540		4.08	%	$	1,116,097		$	12,505		4.56	%
Less: allowances for credit losses		(14,213	)							(14,871	)
Total nonearning assets		84,974								81,699
Total assets	$	1,218,893							$	1,182,925

Liabilities:
Interest-bearing deposits:
Checking	$	333,028		$	234		0.28	%	$	303,641		$	383		0.51	%
Regular savings		108,755			61		0.23	%		105,010			115		0.44	%
Money market savings		78,085			47		0.24	%		56,624			58		0.41	%
Time deposits:
$100,000 and over		147,457			507		1.39	%		142,688			572		1.61	%
Under $100,000		143,379			524		1.48	%		180,176			765		1.71	%
Total interest-bearing deposits	$	810,704		$	1,373		0.69	%	$	788,139		$	1,893		0.97	%

Short-term borrowings		2,658			29		4.42	%		12,379			148		4.81	%
Securities sold under agreements
to repurchase		34,103			80		0.95	%		34,125			83		0.99	%
FHLB borrowings and other debt		81,416			295		1.47	%		87,792			297		1.36	%
Total interest-bearing liabilities	$	928,881		$	1,777		0.78	%	$	922,435		$	2,421		1.06	%
Non-interest bearing liabilities
Demand Deposits		164,613								144,188
Other liabilities		7,632								7,322
Total liabilities	$	1,101,126							$	1,073,945
Non-controlling interest		3,471								2,023
Shareholders' equity		114,296								106,957
Total liabilities and shareholders'
equity	$	1,218,893							$	1,182,925

Net interest income				$	9,763							$	10,084

Interest rate spread							3.30	%							3.50	%
Cost of Funds							0.66	%							0.91	%
Interest expense as a percent of
average earning assets							0.63	%							0.87	%
Net interest margin							3.45	%							3.69	%

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