The Middleburg Bank's (the "Bank") business is highly dependent on technology, which in turn is highly vulnerable to the Year 2000 problem. Its data processing systems include various software packages licensed by the Bank from third party vendors, a mainframe processing system, and numerous computer workstations, which are all linked and run on in-house computer networks. All of these systems are potentially vulnerable to the Year 2000 issue and may fail or malfunction unless repaired or replaced. Although the actual magnitude and effect of the issue cannot be reasonably determined in advance, the Bank has given it high priority.

The Middleburg Bank is comprehensively addressing this problem through its Year 2000 Plan, as well as through the establishment of a Year 2000 Project Team. Moreover, this problem has the attention of the Bank's Senior Management. Because of the focus on Year 2000 issues, we have set forth below answers to frequently asked questions that we have received.

Current Year 2000 Status

Q Is The Middleburg Bank currently Year 2000 compliant?
A One of the key distinctions to be made in determining Year 2000 "compliance" is between a business' internal systems and the systems of those businesses with which it shares information (external systems).

The Bank believes that the remediation and testing of its internal systems will be substantially completed and tested by the first quarter of 1999. Externally, we continue to work diligently with our business partners to determine their Year 2000 readiness. Unfortunately, we cannot ensure that these external systems will be compliant, but we can and do have procedures in place for testing, review, and - if necessary - replacement of those systems. All of these issues are part of our overall Year 2000 Plan.

Overall Year 2000 Plan

Q Does The Middleburg Bank have a Year 2000 Plan?
A The Middleburg Bank's Year 2000 Plan was adopted in 1997 and is a comprehensive approach to the Year 2000 problem. The Bank's Year 2000 plan is subject to guidelines promulgated by the Federal Financial Institutions Examination Council ("FFIEC"). The Federal Reserve Bank of Richmond periodically measures the status of the Bank's plans and progress, as outlined in the FFIEC guidelines. The focus points of the Bank's plan are :

Inventory and Assessment. In 1997, the Bank initiated a review and assessment of all hardware and software to confirm that it will function properly in the year 2000. We have now inventoried our information technology systems and other date-sensitive hardware, including our mainframe hardware, personal computers and networks, and the software applications on which Middleburg Bank relies for its routine operations. We have used the resulting inventories to assess mission critical systems to be targeted, as well as the required resources to identify and resolve Year 2000 issues.

Remediation. The Middleburg Bank currently has various remediation processes underway. We are pleased with the progress of the remediation effort and expect this to be completed in a timely and effective manner.

Third Party Coordination. The Middleburg Bank has identified numerous third-party business partners upon which the Bank substantially depends for the provision of its own services, including technology vendors, loan and deposit customers, utility and service providers, other financial institutions, and facilities management. As part of its Year 2000 Plan, it is working closely with all such parties to identify and remedy potential Year 2000 non-compliance issues. For core application providers, Middleburg Bank has developed contingency plans in the event those providers fail to achieve Year 2000 readiness sufficiently in advance of the Year 2000.

Implementation and Testing. The Middleburg Bank began the implementation and testing phase of its Year 2000 Plan in 1998, and expects to complete this phase in early 1999. The Bank will continuously work with its business partners on any interfacing of systems, however, the timing of external system compliance cannot currently be predicted with accuracy because the implementation of Year 2000 readiness will vary from one company to another.

Q Is The Middleburg Bank's senior management and Board of Directors aware of and involved in effort to address the Year 2000 problem?
A Yes. The Board of Directors has addressed the Year 2000 issue and identified the seriousness of the challenge. It receives regular reports from management so as to monitor the Bank's progress in it preparation for Year 2000 readiness.

Q What is the projected timeframe for implementation for The Middleburg Bank's Year 2000 Plan?
A The Bank expects to have substantially completed both the internal and external plans by December 31, 1998 and to further test its computer systems during 1999 to confirm compliance with Year 2000 data processing standards. The Bank considers its current state of readiness in addressing the Year 2000 problem to be adequate and fully expects to meet the timetable.

Q Has The Middleburg Bank established and approved realistic budget and staffing support for dealing with the Year 2000 issue?
A Yes. The total cost of remediation and testing is estimated to be between $250,000 and $350,000 with a majority of the costs being incurred during 1998. This estimate included some costs, such as the purchase of computer hardware and software, that qualifies as depreciable or amortizable assets for accounting purposes, with the related depreciation or amortization recognized over the estimated lives of the related assets.

External Issues

Q Has The Middleburg Bank contacted its major business partners to insure their continued ability to provide services into and beyond the Year 2000?
A Part of our Year 2000 plan requires that we contact each of our business partners to determine their Year 2000 readiness. Additionally, where we are communicating electronically with these partners and exchanging information that is date sensitive we have and will continue to conduct remediation and rigorous testing of those electronic systems. This will ensure that the data being exchanged is Year 2000 compliant and can safely be used in our systems.

Existing borrowers have been evaluated to determine the risk that Year 2000 poses to their respective cash flow capacities or other related factors that may impact their ability to repay their loans.

Customer Impact

Q How will The Middleburg Bank's customers and business partners be affected by the Bank's Year 2000 activities?
A The Bank will endeavor to make its Year 2000 conversion as seamless as possible for its customers as well as its business partners. Periodically, customers and business partners should receive updated status reports regarding the Bank's year 2000 efforts.

Q What guarantees do I have that the Middleburg Bank will be compliant before and through the Year 2000?
A At this time, the Company believes that the most likely worst case Year 2000 scenario would not have a material effect on the Company's results of operations, liquidity and financial condition for the year ending December 31, 2000. Unfortunately, there are no guarantees that every transaction will be problem free. However, we have established a thorough and comprehensive Year 2000 Plan, and will continue to implement it diligently and fully throughout its execution. In addition, to ensure smooth operation the Bank is in the process of developing its contingency plans for areas deemed "mission critical" for continued operation. The contingency plan considers the likelihood of problem occurrences based on test results. The Bank's contingency plan addresses operational issues, including communication links with other entities and the utility and availability of alternative sources among key vendor relationships. The Bank anticipates completing its contingency plan throughout 1998 and 1999 with constant monitoring of the status of each item.

In order to facilitate communication on this issue, we request that you direct all future inquiries to our Year 2000 Team Leader:

Ms Lisa E Kilgour
The Middleburg Bank
111W Washington Street
Middleburg, VA, 20117

lek@middleburgbank.com

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