Middleburg Financial Corp., Middleburg, Va., saw its fourth- quarter 2007 earnings drop by nearly two-thirds in a year-over-year comparison, due mostly to an impairment charge related to the company's investment in Southern Trust Mortgage LCC. Middleburg recorded a noncash impairment charge of $5 million related to its investment in STM. The lender reported net income of $3.1 million ($0.67 per share) for 2007, which represents a 61.8% decrease from $8 million ($1.90 per share) in 2006. Earnings from mortgage banking have been hurt by decreased production levels and narrowed margins resulting from shifts in the mix of retail and wholesale loan volume, Middleburg reported. Additionally, along with the higher expense associated with adjusting STM's allowance for loan losses, other expenses increased with the hiring of several loan producers and support staff with the objective of increasing future loan production levels.

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