Middleburg Financial Corporation Announces Fourth Quarter 2016 Results

MIDDLEBURG, Va., Jan. 30, 2017

"On October 24, 2016,  the Company announced a Definitive Agreement of a strategic merger of equals with Access National Corporation (NASDAQ: ANCX). We believe that this combination will result in Virginia's premier bank, with enhanced scale, improved efficiency and a well-diversified business model. The two companies have highly complementary businesses and geographic footprints with a greater market reach which creates significant opportunities for growth.  Our strategic focus mirrors the attributes of the high net worth northern and central Virginia market and bodes well for us as we move forward," said Gary R. Shook, President and CEO of Middleburg Financial Corporation. "While the fourth quarter had some bumpiness from significant merger related expenses, we did see quality loan growth accompanied by a lower cost of funds and an expanded net interest margin.  Loan growth came from all of our markets with a diversity of loan types. For the second year in a row Middleburg Investment Group ("MIG") produced record earnings of $1.2 million.  With approximately $2 billion in assets under administration, MIG has the scale that will continue to drive increased profitability."

Fourth quarter and full year 2016 highlights :

• The pending strategic merger with Access National Corporation is on track to close during the second quarter of 2017.
• Net income was $1.09 million, or $0.15 per diluted share, compared to $2.26 million, or $0.32 per diluted share, for the previous quarter and $781,000, or $0.11 per diluted share, for the same period in 2015.
• Total revenue was $13.53 million for the fourth quarter of 2016, higher by 14.09% compared to the previous quarter and an increase of 14.41% relative to the same period in 2015.
• The net interest margin expanded by 6 basis points to 3.17%, compared to 3.11% for the previous quarter and was unchanged relative to the same period in 2015.
• Cost of funds declined by 2 basis points to 36 basis points during the fourth quarter compared to 38 basis points for the previous quarter. The cost of funds for the full year 2016 was 38 basis points unchanged relative to the full year 2015.
• Reported earnings reflect merger related expenses of $1.05 million for the fourth quarter of 2016 and $1.29 million for the full year 2016.
• Loans held-for-investment increased by $14.21 million or 6.68% on an annualized basis during the fourth quarter of 2016.
• Deposits grew by 1.18% in 2016 to $1.05 billion at December 31, 2016, while non-interest bearing demand deposits grew by 5.37% during 2016.
• A loan loss provision of $1.80 million was recognized in the current quarter which resulted in a ratio of loan loss reserves to total loans of 1.33% and the ratio of reserves to nonaccrual loans was 179.90% at December 31, 2016.

TOTAL REVENUE

Total revenue, which is composed of net interest income and non-interest income (before any provision for loan losses), was $13.53 million for the fourth quarter of 2016, higher by 14.09% compared to the previous quarter and by 14.41% compared to the same period in 2015.

Net Interest Income

The Company recorded net interest income of $9.62 million for the fourth quarter of 2016, relatively unchanged compared to the previous quarter and higher by 1.53% compared to the same period in 2015.  The net interest margin in the fourth quarter of 2016 was 3.17%, higher by 6 basis points ("bp") compared to the previous quarter and unchanged compared to the same period in 2015.