10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 For the fiscal year ended December 31, 2016

 Commission file number 0-24159

MIDDLEBURG FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

Virginia (State or other jurisdiction of incorporation or organization)	54-1696103 (I.R.S. Employer Identification No.)
111 West Washington Street Middleburg, Virginia (Address of principal executive offices)	20117 (Zip Code)

Registrant’s telephone number, including area code (703) 777-6327

 Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, par value $2.50 per share	Nasdaq Stock Market

Securities registered pursuant to Section 12(g) of the Act:

 None

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes  ¨    No  þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section  15(d) of the Act.  Yes  ¨    No  þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every interactive data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  þ  No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ¨	Accelerated filer  þ
Non-accelerated filer  ¨ (Do not check if a smaller reporting company)	Smaller reporting company  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes  ¨    No  þ

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter.  $193,158,000

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.  7,200,194 shares of Common Stock as of March 15, 2017.

DOCUMENTS INCORPORATED BY REFERENCE

The information required by Part III of this Form 10-K will be included in the registrant’s definitive proxy statement and incorporated herein by reference or in an amendment to this Form 10-K filed within 120 days after the end of the fiscal year covered by this Form 10-K.

TABLE OF CONTENTS

			Page
PART I
ITEM 1.	BUSINESS		3
ITEM 1A.	RISK FACTORS		13
ITEM 1B.	UNRESOLVED STAFF COMMENTS		19
ITEM 2.	PROPERTIES		19
ITEM 3.	LEGAL PROCEEDINGS		20
ITEM 4.	MINE SAFETY DISCLOSURES		20
PART II
ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED
		STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
		EQUITY SECURITIES	20
ITEM 6.	SELECTED FINANCIAL DATA		22
ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
		CONDITION AND RESULTS OF OPERATIONS	23
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
		MARKET RISK	41
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA		42
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
		ON ACCOUNTING AND FINANCIAL DISCLOSURE	42
ITEM 9A.	CONTROLS AND PROCEDURES		42
ITEM 9B.	OTHER INFORMATION		43
PART III
ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
		GOVERNANCE	43
ITEM 11.	EXECUTIVE COMPENSATION		43
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
		OWNERS AND MANAGEMENT AND RELATED
		STOCKHOLDER MATTERS	44
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,
		AND DIRECTOR INDEPENDENCE	44
ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES		44
PART IV
ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES		44

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PART I

ITEM 1. BUSINESS

General

Middleburg Financial Corporation (the “Company”) is a bank holding company that was incorporated under Virginia law in 1993.  The Company conducts its primary operations through two wholly owned subsidiaries, Middleburg Bank and Middleburg Investment Group, Inc., both of which are chartered under Virginia law.  The Company has one other wholly owned subsidiary, MFC Capital Trust II, which is a Delaware Business Trust that the Company formed in connection with the issuance of trust preferred debt in December 2003. This trust is an unconsolidated subsidiary of the Company and its principal assets are $5.2 million of the Company's subordinated debt securities (referred to herein as "subordinated notes") that are reported as liabilities of the Company.  

Middleburg Bank has one wholly owned subsidiary, Middleburg Bank Service Corporation, incorporated under the laws of the Commonwealth of Virginia, which is a partner in two limited liability companies, Bankers Title Shenandoah, LLC, which sells title insurance through its members, and Bankers Insurance, LLC, which acts as a broker for insurance sales for its member banks. 

The Company operates in a decentralized manner in three principal business activities: (1) commercial and retail banking services through Middleburg Bank, (2) wealth management services through Middleburg Investment Group, Inc. and (3) mortgage banking services. The following general business discussion focuses on the activities within each of these segments. Refer to Note 22 "Segment Reporting", included in the Company's consolidated financial statements for additional discussion.

Middleburg Bank and the Company have assets in custody with Middleburg Trust Company and accordingly pay Middleburg Trust Company a monthly fee.  Middleburg Bank also pays interest to Middleburg Trust Company on deposit accounts it has with Middleburg Bank.  

Merger between the Company and Access National Corporation ("Access")

On October 24, 2016, the Company and Access National Corporation (“Access”) announced a definitive agreement to combine in a strategic merger (the “Merger Agreement”) pursuant to which the Company will merge with and into Access (the “Merger”). Upon consummation of the Merger, the holders of shares of the Company's common stock will receive 1.3314 shares of Access common stock for each share of the Company's common stock held immediately prior to the effective date of the Merger. The transaction is expected to be completed in the second quarter of 2017, subject to approval of both companies' shareholders, regulatory approvals and other customary closing conditions.

Commercial and Retail Banking Services

Middleburg Bank opened for business on July 1, 1924 and has continuously offered banking products and services to surrounding communities since that date.  Middleburg Bank has twelve full service facilities.  The main office is located at 111 West Washington Street, Middleburg, Virginia 20117.  Middleburg Bank has two full service facilities in Leesburg, Virginia.  Other full service facilities are located in Ashburn, Gainesville, Marshall, Purcellville, Reston, Richmond, Warrenton, and Williamsburg, Virginia.  

Middleburg Bank serves the Virginia counties of Loudoun, Fairfax, Fauquier and western Prince William as well as the City of Williamsburg and the City of Richmond.  

Loudoun, Fairfax, Fauquier and western Prince William counties are located in northwestern Virginia and included in the Washington-Baltimore metropolitan statistical area.    The local economy of these counties is driven by service industries, including but not limited to, professional and technical services requiring a high skill level; federal, state and local government; construction; agriculture and retail trade. According to the latest available U.S. Census Bureau data, the estimated population in these counties was:

• Loudoun County - 375,629

• Fairfax County - 1,142,234

• Fauquier County - 68,782

• Prince William County - 451,721

The City of Williamsburg is located in the Tidewater region of Virginia and has an estimated population of 15,052 according to the U.S. Census Bureau, while the surrounding area (James City County) has an estimated population of 73,147.

The City of Richmond has an estimated population of 220,289 according to the U.S. Census Bureau while the Richmond metropolitan statistical area has a population of 1,269,129.

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Revenue from commercial and retail banking activities consists primarily of interest earned on loans and investment securities and service charges on deposit accounts. At December 31, 2016, assets of the commercial and retail banking segment totaled $1.4 billion. For the year ended December 31, 2016, the net income for this segment totaled $7.1 million.

Wealth Management Services

Middleburg Investment Group is a non-bank holding company that was formed in 2005.  It has one wholly-owned subsidiary, Middleburg Trust Company.

Middleburg Trust Company is chartered under Virginia law and opened for business in January 1994.  Its main office is located at 1600 Forest Avenue, Henrico, Virginia 23229.  Middleburg Trust Company serves the greater Richmond area including the counties of Henrico, Chesterfield, Hanover, Goochland and Powhatan.  In 2008, Middleburg Trust Company opened an office in Williamsburg, Virginia. Middleburg Trust Company also serves the counties of Fairfax, Fauquier and Loudoun with staff available in several of Middleburg Bank's financial service centers.

Revenue from wealth management activities is comprised mostly of fees based upon the market value of the accounts under administration as well as commissions on investment transactions. The wealth management services are conducted by Middleburg Trust Company. At December 31, 2016, assets of the wealth management services segment totaled $12.5 million. For the year ended December 31, 2016, the net income for this segment totaled $1.0 million.

Mortgage Banking Services

On May 15, 2014, Middleburg Financial Corporation, through its banking subsidiary, Middleburg Bank, sold all of its majority interest in Southern Trust Mortgage LLC, which originated and sold mortgages secured by personal residences primarily in the southeastern United States.

Prior to the date of sale, mortgage banking activities were conducted through a business arrangement with Southern Trust Mortgage whereby the Bank acted as an investor in purchasing loans originated by Southern Trust Mortgage. Subsequent to the sale date, mortgage banking activity for the Company is included with the results of the retail banking segment.

Products and Services

The Company, through its subsidiaries, offers a wide range of banking, fiduciary and investment management services to both individuals and small businesses.  Middleburg Bank’s services include various types of checking and savings deposit accounts, and the origination of business, real estate, development, mortgage, home equity, automobile and other installment, demand and term loans.  Also, Middleburg Bank offers ATMs at twelve facilities and at two off-site locations.  Additional banking services available to the Company’s clients include, but are not limited to, ACH, Internet banking, safe deposit box rentals, notary public and wire services.  

Middleburg Investment Group offers wealth management services through Middleburg Trust Company and through the investment services department of Middleburg Bank.  Middleburg Trust Company provides a variety of investment management and fiduciary services including trust and estate settlement.  Middleburg Trust Company can also serve as escrow agent, attorney-in-fact, and guardian of property or trustee of Individual Retirement Accounts (IRA).  Middleburg Investment Services provides investment brokerage services for the Company’s clients.

Employees

As of December 31, 2016, the Company and its subsidiaries had a total of 189 full time equivalent employees.  The Company considers relations with its employees to be excellent.  The Company’s employees are not represented by a collective bargaining unit.

U.S. Securities and Exchange Commission Filings

The Company maintains an Internet website at www.middleburgbank.com.  Shareholders of the Company and the public may access the Company’s periodic and current reports (including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and any amendments to those reports) filed with or furnished to the SEC pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, through the “Shareholder Relations” section of the Company’s website. The reports are made available on this website as soon as practical following the filing of the reports with the SEC. The information is free of charge and may be reviewed, downloaded and printed from the website at any time.

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Competition

The Company’s commercial and retail banking segment faces significant competition for both loans and deposits.  Competition for loans comes from commercial banks, savings and loan associations and savings banks, mortgage banking subsidiaries of regional commercial banks, subsidiaries of national mortgage bankers, insurance companies, and other institutional lenders.  Its most direct competition for deposits comes from commercial banks, credit unions, savings banks, savings and loan associations and other financial institutions. Based upon total deposits at June 30, 2016, as reported to the Federal Deposit Insurance Corporation (the “FDIC”), the Company had:

• 13.19% of the nearly $6.1 billion in deposits in Loudoun County.  

• 1.24% of the nearly $5.0 billion in deposits in the Reston market.  

• 6.55% of the nearly $1.5 billion in deposits in Fauquier County. 

• 3.81% of the nearly $1.3 billion in deposits in James City County.

• 0.52% of the nearly $4.3 billion in deposits in Prince William County.

• 0.09% of the nearly $19.2 billion in deposits in the City of Richmond.

The Company also faces competition for deposits from short-term money market mutual funds and other corporate and government securities funds.

The Company’s wealth management segment faces competition on several fronts.  Middleburg Trust Company competes for clients and accounts with banks, other financial institutions and money managers.  Even though many of these institutions have been engaged in the trust or investment management business for a considerably longer period of time than Middleburg Trust Company and have significantly greater resources, Middleburg Trust Company has grown through its commitment to providing quality trust and investment management services and a community focused approach to business.  

Competition for the Company’s mortgage banking business was largely from other mortgage banking entities.  Traditional financial institutions, investment banking companies and Internet sources for mortgages also add to the competitive market for mortgages.

Lending Activities

Credit Policies

The principal risk associated with each of the categories of loans in Middleburg Bank’s portfolio is the creditworthiness of its borrowers, which can vary depending on prevailing economic conditions, market employment levels, consumer confidence, fluctuations in the value of real estate and other conditions that affect the ability of borrowers to repay indebtedness.  

In an effort to manage risk, Middleburg Bank has written policies and procedures, which include approval limits assigned to individual loan officers based on their position and level of experience. Middleburg Bank also utilizes an outside third party loan review process that includes regular portfolio reviews to assess exposure to loan losses and to ascertain compliance with Middleburg Bank’s loan policy.

Middleburg Bank has three levels of lending authority.  Individual loan officers are the first level and are limited to their lending authority.  The second level is the Officers Loan Committee, which is composed of five senior officers of Middleburg Bank. The Officers Loan Committee approves loans that exceed the individual loan officers’ lending authority and reviews loans to be presented to the Directors Loan Committee.  The Directors Loan Committee is composed of six Directors, of which four are independent Directors.  The Directors Loan Committee approves new, modified and renewed credits that exceed Officer Loan Committee lending authorities.  A quorum is reached when four committee members are present, of which at least three must be independent Directors.  The approval of an application will be met with a majority of the members present, but no less than three votes. In addition, the Directors Loan Committee reports all new loans that were reviewed and approved to Middleburg Bank’s Board of Directors on a monthly basis.  Monthly reports provided to the Directors Loan Committee include, but are not limited to, all new credits in excess of $12,500 or which had been extended; a watch list including names, current balances, risk rating and payment status; nonaccruals and recommended charge-offs and a list of overdrafts in excess of $1,500 which have been overdrawn for more than five days.  The Directors Loan Committee also reviews lending policies that are proposed by management.

Construction Lending

The Company originates local construction loans, primarily residential, and land acquisition and development loans.  The construction loans are primarily secured by units under construction and the underlying land for which the loan was obtained.  The average life of a typical construction loan is approximately twelve months and will reprice monthly to meet the market, generally the Wall Street Journal prime rate plus one percent.  Because the interest rate charged on these loans floats with the market, these loans help the Company in managing its interest rate risk.  Construction lending entails significant additional risks, compared with residential mortgage lending.  Construction loans often involve larger loan balances concentrated with single borrowers or groups

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of related borrowers.  Another risk involved in construction lending is attributable to loan funds being advanced upon the security of the land or home under construction, which value is estimated prior to the completion of construction.  Thus, it is more difficult to evaluate accurately the funds that are required to complete a project and related loan-to-value ratios.  To mitigate the risks associated with construction lending, the Company generally limits loan amounts to 75% to 85% of appraised value, in addition to analyzing the creditworthiness of its borrowers.  The Company also obtains a first lien on the property as security for its construction loans and typically requires personal guarantees from the borrowing entity’s principal owners.

Commercial Business Loans

Commercial business loans generally have a higher degree of risk than residential mortgage loans, but have higher yields.  To manage these risks, the Company generally obtains appropriate collateral and personal guarantees from the borrowing entity’s principal owners and monitors the financial condition of its business borrowers.  Commercial business loans typically are made on the basis of the borrower’s ability to make repayment from cash flow from its business and are secured by business assets, such as accounts receivable, equipment and inventory.  As a result, the availability of funds for the repayment of commercial business loans is substantially dependent on the success of the business itself.  Furthermore, the collateral for commercial business loans may depreciate over time and generally cannot be appraised with as much precision as residential real estate. 

Commercial Real Estate Lending

Commercial real estate loans are secured by various types of commercial real estate in the Company's market area, including multi-family residential buildings, commercial buildings and offices, small shopping centers and churches.  

In its underwriting of commercial real estate, the Company may lend, in accordance with internal policy, up to 80% of the secured property’s appraised value. Commercial real estate lending entails significant additional risk, as compared to residential mortgage lending.  Commercial real estate loans typically involve larger loan balances concentrated with single borrowers or groups of related borrowers.  Additionally, the payment experience on loans secured by income producing properties is typically dependent on the successful operation of a business or a real estate project and thus may be subject, to a greater extent, to adverse conditions in the real estate market or in the economy. The Company's commercial real estate loan underwriting criteria require an examination of debt service coverage ratios and the borrower’s creditworthiness, prior credit history and reputation.  The Company also evaluates the location of the security property and typically requires personal guarantees or endorsements of the borrowing entity’s principal owners.

1 - 4 Family Residential Real Estate Lending

Residential lending activity may be generated by loan originator solicitation, referrals by real estate professionals, existing or new clients and purchases of whole loans.  As part of the loan application process, information is gathered on income, employment and credit history of the applicant.  Loan originations are underwritten using Middleburg Bank’s underwriting guidelines.  Security for the majority of residential lending is in the form of owner occupied 1- 4 family dwellings. The valuation of residential collateral is provided by independent appraisers who have been approved by the Company's Board of Directors. In connection with residential real estate loans, the Company requires title insurance, hazard insurance and, if required, flood insurance.  Flood determination letters with life of loan tracking are obtained on all federally related transactions with improvements serving as security for the transaction.

Consumer Lending

The Company offers various secured and unsecured consumer loans, including unsecured personal loans and lines of credit, automobile loans, deposit account loans, installment and demand loans.  The Company currently originates all of its consumer loans in its geographic market area.  Most of the consumer loans are tied to the Wall Street Journal prime rate and reprice monthly.

Consumer loans may entail greater risk than residential mortgage loans, particularly in the case of loans which are unsecured, such as lines of credit, or secured by rapidly depreciating assets such as automobiles.  In such cases, any repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment of the outstanding loan balance as a result of the greater likelihood of damage, loss or depreciation.  The remaining deficiency often does not warrant further substantial collection efforts against the borrower.  In addition, consumer loan collections are dependent on the borrower’s continuing financial stability, and thus are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy.  Furthermore, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount which can be recovered on such loans.  Consumer loan delinquencies often increase over time as the loans age.

The underwriting standards for consumer loans include a determination of the applicant’s payment history on other debts and an assessment of the applicant's ability to meet existing obligations and payments on the proposed loan.  The stability of the applicant’s monthly income may be determined by verification of gross monthly income from primary employment, and additionally from any verifiable secondary income.  Although creditworthiness of the applicant is of primary consideration, the underwriting process also includes an analysis of the value of the security in relation to the proposed loan amount.

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Supervision and Regulation

General

As a bank holding company, the Company is subject to regulation under the Bank Holding Company Act of 1956, as amended (the "Bank Holding Company Act"), and the examination and reporting requirements of the Board of Governors of the Federal Reserve System (the "Federal Reserve").  As a state-chartered commercial bank, Middleburg Bank is subject to regulation, supervision and examination by the Virginia State Corporation Commission’s Bureau of Financial Institutions.  It is also subject to regulation, supervision and examination by the Federal Reserve.  Other federal and state laws, including various consumer and compliance laws, govern the activities of Middleburg Bank, the investments that it makes and the aggregate amount of loans that it may grant to one borrower.

The following description summarizes the significant federal and state laws applicable to the Company and its subsidiaries.  To the extent that statutory or regulatory provisions are described, the description is qualified in its entirety by reference to that particular statutory or regulatory provision.

The Bank Holding Company Act

Under the Bank Holding Company Act, the Company is subject to periodic examination by the Federal Reserve and is required to file periodic reports regarding its operations and any additional information that the Federal Reserve may require.  The Bank Holding Company Act limits activities at the bank holding company level to:

• banking and managing or controlling banks;

• furnishing services to or performing services for its subsidiaries; and

• engaging in other activities that the Federal Reserve has determined by regulation or order to be so closely related to banking as to be a proper incident to these activities.

Some of the activities that the Federal Reserve Board has determined by regulation to be proper incidents to the business of a bank holding company include making or servicing loans and specific types of leases, performing specific data processing services and acting in some circumstances as a fiduciary, investment, or financial adviser.

With some limited exceptions, the Bank Holding Company Act requires every bank holding company to obtain the prior approval of the Federal Reserve before:

• acquiring substantially all the assets of any bank;

• acquiring direct or indirect ownership or control of any voting shares of any bank if after such acquisition it would own or control more than 5% of the voting shares of such bank (unless it already owns or controls the majority of such shares); or

• merging or consolidating with another bank holding company.

In addition, and subject to some exceptions, the Bank Holding Company Act and the Change in Bank Control Act, together with their regulations, require Federal Reserve approval prior to any person or company acquiring 25% or more of any class of voting securities of a bank or bank holding company.  Prior notice to the Federal Reserve is required if a person acquires 10% or more, but less than 25%, of any class of voting securities of a bank or bank holding company and either the institution has registered securities under Section 12 of the Securities Exchange Act of 1934 (the “Exchange Act”) or no other person owns a greater percentage of that class of voting securities immediately after the transaction.

Payment of Dividends

The Company is a legal entity separate and distinct from its banking and non-banking subsidiaries.  The majority of the Company’s revenues are from dividends paid to the Company by its subsidiaries.  The Company and Middleburg Bank are subject to laws and regulations that limit the amount of dividends it can pay, including requirements to maintain capital at or above regulatory minimums.  Banking regulators have indicated that banking organizations should generally pay dividends only if the organization’s net income available to common shareholders is sufficient to fully fund the dividends and the prospective rate of earnings retention appears consistent with the organization’s capital needs, asset quality and overall financial condition.  The Company does not expect that any of these laws, regulations or policies will materially affect the ability of Middleburg Bank to pay dividends.  During the year ended December 31, 2016, Middleburg Bank and Middleburg Investment Group paid $5.9 million and $1.0 million, respectively, in dividends to the Company.

The FDIC has the general authority to limit the dividends paid by insured banks if the payment is deemed an unsafe and unsound practice.  The FDIC has indicated that paying dividends that deplete a bank’s capital base to an inadequate level would be an unsafe and unsound banking practice.

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Insurance of Accounts, Assessments and Regulation by the FDIC

The deposits of Middleburg Bank are insured by the FDIC up to the limits set forth under applicable law.  Middleburg Bank pays deposit insurance assessments of the Deposit Insurance Fund (“DIF”) of the FDIC.

The FDIC has implemented a risk-based deposit insurance assessment system under which the assessment rate for an insured institution may vary according to regulatory capital levels of the institution and other factors, including supervisory evaluations.  In addition to being influenced by the risk profile of the particular depository institution, FDIC premiums are also influenced by the size of the FDIC insurance fund in relation to total deposits in FDIC insured banks.  An institution’s assessment base is its consolidated total assets less its average tangible equity as defined by the FDIC.  The FDIC has authority to impose special assessments from time to time.

The FDIC is authorized to prohibit any DIF-insured institution from engaging in any activity that the FDIC determines by regulation or order to pose a serious threat to the respective insurance fund.  Also, the FDIC may initiate enforcement actions against banks, after first giving the institution’s primary regulatory authority an opportunity to take such action.  The FDIC may terminate the deposit insurance of any depository institution if it determines, after a hearing, that the institution has engaged or is engaging in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, order or any condition imposed in writing by the FDIC.  It also may suspend deposit insurance temporarily during the hearing process for the permanent termination of insurance, if the institution has no tangible capital.  If deposit insurance is terminated, the deposits at the institution at the time of termination, less subsequent withdrawals, shall continue to be insured for a period from six months to two years, as determined by the FDIC.  The Company is not aware of any existing circumstances that could result in termination of any of Middleburg Bank’s deposit insurance.

Capital Requirements

The Federal Reserve Board and the FDIC have adopted rules to implement the Basel III capital framework as outlined by the Basel Committee on Banking Supervision and standards for calculating risk-weighted assets and risk-based capital measurements (collectively, the Basel III Final Rules) that apply to banking organizations they supervise. For the purposes of these capital rules, (i) common equity tier 1 capital (CET1) consists principally of common stock (including surplus) and retained earnings; (ii) Tier 1 capital consists principally of CET1 plus non-cumulative preferred stock and related surplus, and certain grandfathered cumulative preferred stocks and trust preferred securities; and (iii) Tier 2 capital consists principally of Tier 1 capital plus qualifying subordinated debt and preferred stock, and limited amounts of the allowance for loan losses. Each regulatory capital classification is subject to certain adjustments and limitations, as implemented by the Basel III Final Rules. The Basel III Final Rules also establish risk weightings that are applied to many classes of assets held by community banks, importantly including applying higher risk weightings to certain commercial real estate loans.

The Basel III Final Rules were effective January 1, 2015, and the Basel III Final Rules capital conservation buffer will be phased in from 2015 to 2019.

When fully phased in, the Basel III Final Rules require banks to maintain (i) a minimum ratio of CET1 to risk-weighted assets of at least 4.5%, plus a 2.5% “capital conservation buffer” (which is added to the 4.5% CET1 ratio as that buffer is phased in, effectively resulting in a minimum ratio of CET1 to risk-weighted assets of at least 7%), (ii) a minimum ratio of Tier 1 capital to risk-weighted assets of at least 6.0%, plus the capital conservation buffer (which is added to the 6.0% Tier 1 capital ratio as that buffer is phased in, effectively resulting in a minimum Tier 1 capital ratio of 8.5% upon full implementation), (iii) a minimum ratio of total (that is, Tier 1 plus Tier 2) capital to risk-weighted assets of at least 8.0%, plus the capital conservation buffer (which is added to the 8.0% total capital ratio as that buffer is phased in, effectively resulting in a minimum total capital ratio of 10.5% upon full implementation) and (iv) a minimum leverage ratio of 4%, calculated as the ratio of Tier 1 capital to balance sheet exposures plus certain off-balance sheet exposures (computed as the average for each quarter of the month-end ratios for the quarter).

The Basel III Final Rules provide deductions from and adjustments to regulatory capital measures, primarily to CET1, including deductions and adjustments that were not applied to reduce CET1 under historical regulatory capital rules. For example, mortgage servicing rights, deferred tax assets, dependent upon future taxable income, and significant investments in non-consolidated financial entities must be deducted from CET1 to the extent that any one such category exceeds 10% of CET1 or all such categories in the aggregate exceed 15% of CET1. These deductions from and adjustments to regulatory capital will generally be phased in beginning in 2015 through 2018.

The Basel III Final Rules permanently includes in Tier 1 capital trust preferred securities issued prior to May 19, 2010 by bank holding companies with less than $15 billion in total assets, subject to a limit of 25% of Tier 1 capital. The Company expects that its trust preferred securities will be included in Tier 1 capital until their maturity.

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The Basel III Final Rules also implement a “countercyclical capital buffer,” generally designed to absorb losses during periods of economic stress and to be imposed when national regulators determine that excess aggregate credit growth becomes associated with a buildup of systemic risk. This buffer is a CET1 add-on to the capital conservation buffer in the range of 0% to 2.5% when fully implemented (potentially resulting in total buffers of between 2.5% and 5%).

Other Safety and Soundness Regulations

There are a number of obligations and restrictions imposed on bank holding companies and their depository institution subsidiaries by federal law and regulatory policy that are designed to reduce potential loss exposure to the depositors of such depository institutions and to the FDIC insurance funds in the event that the depository institution is insolvent or is in danger of becoming insolvent.  For example, under the requirements of the Federal Reserve Board with respect to bank holding company operations, a bank holding company is required to serve as a source of financial strength to its subsidiary depository institutions and to commit resources to support such institutions in circumstances where it might not do so otherwise.  In addition, the “cross-guarantee” provisions of federal law require insured depository institutions under common control to reimburse the FDIC for any loss suffered or reasonably anticipated by the FDIC as a result of the insolvency of commonly controlled insured depository institutions or for any assistance provided by the FDIC to commonly controlled insured depository institutions in danger of failure.  The FDIC may decline to enforce the cross-guarantee provision if it determines that a waiver is in the best interests of the deposit insurance funds.  The FDIC’s claim for reimbursement under the cross guarantee provisions is superior to claims of shareholders of the insured depository institution or its holding company but is subordinate to claims of depositors, secured creditors and non-affiliated holders of subordinated debt of the commonly controlled insured depository institutions.

Monetary Policy

The commercial banking business is affected not only by general economic conditions but also by the monetary policies of the Federal Reserve Board.  The instruments of monetary policy employed by the Federal Reserve Board include open market operations in United States government securities, changes in the discount rate on member bank borrowings and changes in reserve requirements against deposits held by all federally insured banks.  The Federal Reserve Board’s monetary policies have had a significant effect on the operating results of commercial banks in the past and are expected to continue to do so in the future.  In view of changing conditions in the national and international economy and in the money markets, as well as the effect of actions by monetary fiscal authorities, including the Federal Reserve Board, no prediction can be made as to possible future changes in interest rates, deposit levels, loan demand of Middleburg Bank or the business and earnings of the Company.

Federal Reserve System

In 1980, Congress enacted legislation that imposed reserve requirements on all depository institutions that maintain transaction accounts or non-personal time deposits.  NOW accounts, money market deposit accounts and other types of accounts that permit payments or transfers to third parties fall within the definition of transaction accounts and are subject to these reserve requirements, as are any non-personal time deposits at an institution.  For net transaction accounts for final weekly reporting period in the year ended December 31, 2016, the first $15.2 million will be exempt from reserve requirements.  A 3% reserve ratio will be assessed on net transaction accounts over $15.2 million up to and including $95.0 million.  A 10% reserve ratio will be applied above $95.0 million.  These percentages are subject to adjustment by the Federal Reserve Board.  Because required reserves must be maintained in the form of vault cash or in a non-interest-bearing account at, or on behalf of, a Federal Reserve Bank, the effect of the reserve requirement is to reduce the amount of the institution’s interest-earning assets.

Transactions with Affiliates

Transactions between banks and their affiliates are governed by Sections 23A and 23B of the Federal Reserve Act.  An affiliate of a bank is any bank or entity that controls, is controlled by or is under common control with such bank.  Generally, Sections 23A and 23B:

• limit the extent to which a bank or its subsidiaries may engage in “covered transactions” with any one affiliate to an amount equal to 10% of such institution’s capital stock and surplus, and maintain an aggregate limit on all such transactions with affiliates to an amount equal to 20% of such capital stock and surplus; and

• require that all such transactions be on terms substantially the same, or at least as favorable, to the association or subsidiary as those provided to a non-affiliate.

The term “covered transaction” includes the making of loans, purchase of assets, issuance of a guarantee and similar other types of transactions.

Transactions with Insiders

The Federal Reserve Act and related regulations impose specific restrictions on loans to directors, executive officers and principal shareholders of banks.  Under Section 22(h) of the Federal Reserve Act, loans to a director, an executive officer and to a principal shareholder of a bank, and some affiliated entities of any of the foregoing, may not exceed, together with all other outstanding loans to such person and affiliated entities, the bank’s loan-to-one borrower limit.  Loans in the aggregate to insiders and their

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related interests as a class may not exceed two times the bank’s unimpaired capital and unimpaired surplus until the bank’s total assets equal or exceed $100 million, at which time the aggregate is limited to the bank’s unimpaired capital and unimpaired surplus.  Section 22(h) also prohibits loans, above amounts prescribed by the appropriate federal banking agency, to directors, executive officers and principal shareholders of a bank or bank holding company, and their respective affiliates, unless such loan is approved in advance by a majority of the board of directors of the bank with any “interested” director not participating in the voting.  The FDIC has prescribed the loan amount, which includes all other outstanding loans to such person, as to which such prior board of director approval is required, as being the greater of $25,000 or 5% of capital and surplus (up to $500,000).  Section 22(h) requires that loans to directors, executive officers and principal shareholders be made on terms and underwriting standards substantially the same as offered in comparable transactions to other persons.

Community Reinvestment Act

Under the Community Reinvestment Act and related regulations, depository institutions have an affirmative obligation to assist in meeting the credit needs of their market areas, including low and moderate-income areas, consistent with safe and sound banking practices.  The Community Reinvestment Act requires the adoption by each institution of a Community Reinvestment Act statement for each of its market areas describing the depository institution’s efforts to assist in its community’s credit needs.  Depository institutions are periodically examined for compliance with the Community Reinvestment Act and are periodically assigned ratings in this regard.  Banking regulators consider a depository institution’s Community Reinvestment Act rating when reviewing applications to establish new branches, undertake new lines of business, and/or acquire part or all of another depository institution.  An unsatisfactory rating can significantly delay or even prohibit regulatory approval of a proposed transaction by a bank holding company or its depository institution subsidiaries.

The Gramm-Leach-Bliley Act ("GLBA") and federal bank regulators have made various changes to the Community Reinvestment Act.  Among other changes, Community Reinvestment Act agreements with private parties must be disclosed and annual reports must be made to a bank’s primary federal regulator.  A bank holding company will not be permitted to become a financial holding company and no new activities authorized under the GLBA may be commenced by a holding company or by a bank financial subsidiary if any of its bank subsidiaries received less than a “satisfactory” rating in its latest Community Reinvestment Act examination.

Fair Lending; Consumer Laws

In addition to the Community Reinvestment Act, other federal and state laws regulate various lending and consumer aspects of the banking business.  Governmental agencies, including the Department of Housing and Urban Development, the Federal Trade Commission and the Department of Justice, have become concerned that prospective borrowers experience discrimination in their efforts to obtain loans from depository and other lending institutions.  These agencies have brought litigation against depository institutions alleging discrimination against borrowers.  Many of these suits have been settled, in some cases for material sums, short of a full trial.

These governmental agencies have clarified what they consider to be lending discrimination and have specified various factors that they will use to determine the existence of lending discrimination under the Equal Credit Opportunity Act and the Fair Housing Act, including evidence that a lender discriminated on a prohibited basis, evidence that a lender treated applicants differently based on prohibited factors in the absence of evidence that the treatment was the result of prejudice or a conscious intention to discriminate, and evidence that a lender applied an otherwise neutral non-discriminatory policy uniformly to all applicants, but the practice had a discriminatory effect, unless the practice could be justified as a business necessity.

Banks and other depository institutions also are subject to numerous consumer-oriented laws and regulations.  These laws, which include the Truth in Lending Act, the Truth in Savings Act, the Real Estate Settlement Procedures Act, the Electronic Funds Transfer Act, the Equal Credit Opportunity Act, and the Fair Housing Act, require compliance by depository institutions with various disclosure requirements and requirements regulating the availability of funds after deposit or the making of some loans to customers.

Gramm-Leach-Bliley Act of 1999

The GLBA covers a broad range of issues, including a repeal of most of the restrictions on affiliations among depository institutions, securities firms and insurance companies.  The following description summarizes some of its significant provisions.

The GLBA permits unrestricted affiliations between banks and securities firms.  It also permits bank holding companies to elect to become financial holding companies.  A financial holding company may engage in or acquire companies that engage in a broad range of financial services, including securities activities such as underwriting, dealing, investment, merchant banking, insurance underwriting, sales and brokerage activities.  In order to become a financial holding company, a bank holding company and all of its affiliated depository institutions must be well-capitalized, well-managed and have at least a satisfactory Community Reinvestment Act rating.

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The GLBA provides that the states continue to have the authority to regulate insurance activities, but prohibits the states in most instances from preventing or significantly interfering with the ability of a bank, directly or through an affiliate, to engage in insurance sales, solicitations or cross-marketing activities.  Although the states generally must regulate bank insurance activities in a nondiscriminatory manner, the states may continue to adopt and enforce rules that specifically regulate bank insurance activities in specific areas identified under the law.  Under the new law, the federal bank regulatory agencies adopted insurance consumer protection regulations that apply to sales practices, solicitations, advertising and disclosures.

The GLBA adopts a system of functional regulation under which the Federal Reserve Board is designated as the umbrella regulator for financial holding companies, but financial holding company affiliates are principally regulated by functional regulators such as the FDIC for state nonmember bank affiliates, the SEC for securities affiliates, and state insurance regulators for insurance affiliates.  It repeals the broad exemption of banks from the definitions of “broker” and “dealer” for purposes of the Exchange Act, as amended.  It also identifies a set of specific activities, including traditional bank trust and fiduciary activities, in which a bank may engage without being deemed a “broker,” and a “dealer.”  Additionally, the new law makes conforming changes in the definitions of “broker” and “dealer” for purposes of the Investment Company Act of 1940, as amended, and the Investment Advisers Act of 1940, as amended.

The GLBA contains extensive customer privacy protection provisions.  Under these provisions, a financial institution must provide to its customers, both at the inception of the customer relationship and on an annual basis, the institution’s policies and procedures regarding the handling of customers’ nonpublic personal financial information.  The law provides that, except for specific limited exceptions, an institution may not provide such personal information to unaffiliated third parties unless the institution discloses to the customer that such information may be so provided and the customer is given the opportunity to opt out of such disclosure.  An institution may not disclose to a non-affiliated third party, other than to a consumer reporting agency, customer account numbers or other similar account identifiers for marketing purposes.  The GLBA also provides that the states may adopt customer privacy protections that are stricter than those contained in the Act.

Bank Secrecy Act

Under the Bank Secrecy Act, a financial institution is required to have systems in place to detect certain transactions, based on the size and nature of the transaction.  Financial institutions are generally required to report cash transactions involving more than $10,000 to the United States Treasury.  In addition, financial institutions are required to file suspicious activity reports for transactions that involve more than $5,000 and which the financial institution knows, suspects or has reason to suspect, the transactions involves illegal funds, is designed to evade the requirements of the BSA or has no lawful purpose.  The USA PATRIOT Act of 2001, enacted in response to the September 11, 2001 terrorist attacks, requires bank regulators to consider a financial institution’s compliance with the BSA when reviewing applications from a financial institution.  As part of its BSA program, the USA PATRIOT Act also requires a financial institution to follow customer identification procedures when opening accounts for new customers and to review lists of individuals who and entities which are prohibited from opening accounts at financial institutions.

Dodd-Frank Act

The Dodd-Frank Act implemented far-reaching changes across the financial regulatory landscape, including changes that have affected or may affect all bank holding companies and banks, including the Company and the Bank. Provisions that significantly affect the business of the Company and the Bank include the following:

• Insurance of Deposit Accounts. The Dodd-Frank Act changed the assessment base for federal deposit insurance from the amount of insured deposits to consolidated assets less tangible capital. The Dodd-Frank Act also made permanent the $250,000 limit for federal deposit insurance and increased the cash limit of Securities Investor Protection Corporation protection from $100,000 to $250,000.

• Payment of Interest on Demand Deposits. The Dodd-Frank Act repealed the federal prohibitions on the payment of interest on demand deposits, thereby permitting depository institutions to pay interest on business transaction and other accounts.

• Creation of the Consumer Financial Protection Bureau. The Dodd-Frank Act centralized significant aspects of consumer financial protection by creating a new agency, the CFPB, which is discussed in more detail below.

• Debit Card Interchange Fees. The Dodd-Frank Act amended the Electronic Fund Transfer Act (EFTA) to, among other things, require that debit card interchange fees be reasonable and proportional to the actual cost incurred by the issuer with respect to the transaction. The Federal Reserve Board adopted regulations setting the maximum permissible interchange fee as the sum of $0.21 per transaction and 5 basis points multiplied by the value of the transaction, with an additional adjustment of up to $0.01 per transaction if the issuer implements additional fraud-prevention standards. Although issuers that have assets of less than $10 billion are exempt from the Federal Reserve Board’s regulations that set maximum interchange fees, these regulations could significantly affect the interchange fees that financial institutions with less than $10 billion in assets are able to collect.

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In addition, the Dodd-Frank Act implements other far-reaching changes to the financial regulatory landscape, including provisions that:

• Restrict the preemption of state law by federal law and disallow subsidiaries and affiliates of national banks from availing themselves of such preemption.

• Impose comprehensive regulation of over-the-counter derivatives market, subject to significant rulemaking processes, which would include certain provisions that would effectively prohibit insured depository institutions from conducting certain derivatives businesses in the institution itself.

• Require depository institutions with total consolidated assets of more than $10 billion to conduct regular stress tests and require large, publicly traded bank holding companies to create a risk committee responsible for the oversight of enterprise risk management.

• Require loan originators to retain 5% of any loan sold or securitized, unless it is a “qualified residential mortgage,” subject to certain exceptions.

• Prohibit banks and their affiliates from engaging in proprietary trading and investing in and sponsoring certain unregistered investment companies (the Volcker Rule).

• Implement corporate governance revisions that apply to all public companies not just financial institutions.

Many aspects of the Dodd-Frank Act remain subject to future rulemaking, making it difficult to anticipate the overall financial impact on the Company, its subsidiaries, its customers or the financial industry more generally. Some of the rules that have been proposed and, in some cases, adopted to comply with the Dodd-Frank Act's mandates are discussed further below.

Consumer Protection

The Dodd-Frank Act created the CFPB, a federal regulatory agency that is responsible for implementing, examining and enforcing compliance with federal consumer financial laws for institutions with more than $10 billion of assets and, to a lesser extent, smaller institutions. The Dodd-Frank Act gives the CFPB authority to supervise and regulate providers of consumer financial products and services, and establishes the CFPB’s power to act against unfair, deceptive or abusive practices, and gives the CFPB rulemaking authority in connection with numerous federal consumer financial protection laws (for example, but not limited to, the Truth-in-Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA)).

As a smaller institution (i.e., with assets of $10 billion or less), most consumer protection aspects of the Dodd-Frank Act will continue to be applied to the Company and to the Bank by the Federal Reserve Board. However, the CFPB may include its own examiners in regulatory examinations by a small institution’s principal regulators and may require smaller institutions to comply with certain CFPB reporting requirements. In addition, regulatory positions taken by the CFPB and administrative and legal precedents established by CFPB enforcement activities, including in connection with supervision of larger bank holding companies, could influence how the Federal Reserve Board apply consumer protection laws and regulations to financial institutions that are not directly supervised by the CFPB. The precise effect of the CFPB’s consumer protection activities on the Company and the Bank cannot be determined with certainty.

Mortgage Lending

The CFPB implemented certain sections of the Dodd-Frank Act requiring creditors to make a reasonable, good faith determination of a consumer’s ability to repay any closed-end consumer credit transaction secured by a 1-4 family dwelling. The rule also established certain protections from liability under this requirement to ensure a borrower’s ability to repay for loans that meet the definition of “qualified mortgage.” Loans that satisfy this “qualified mortgage” safe harbor will be presumed to have complied with the new ability-to-repay standard.

Volcker Rule

The Volcker Rule generally would prohibit banking entities from:

• engaging in short-term proprietary trading of securities, derivatives, commodity futures and options on these instruments for their own account;

• owning, sponsoring, or having certain relationships with hedge funds or private equity funds, referred to as “covered funds”.

On January 14, 2014, an adjustment to the final rule was made allowing banks to keep certain collateralized debt obligations (“CDOs”) acquired before the Volcker Rule was finalized, if the CDO was established before May 2010 and is backed primarily by trust preferred securities issued by banks with less than $15 billion in assets. The final rules were effective April 1, 2014; however, the Federal Reserve Board has extended the conformance period until July 21, 2017. We believe that we are in full compliance with the Rule.

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Future Regulatory Uncertainty

Because federal regulation of financial institutions changes regularly and is the subject of constant legislative debate, the Company cannot forecast how federal regulation of financial institutions may change in the future and impact its operations.  Although Congress, in recent years, has sought to reduce the regulatory burden on financial institutions with respect to the approval of specific transactions, the Company fully expects that the financial institution industry will remain heavily regulated in the near future and additional laws or regulations may be adopted further regulating specific banking practices.

Middleburg Trust Company

Middleburg Trust Company is subject to supervision and regulation by the Virginia State Corporation Commission’s Bureau of Financial Institutions and the Federal Reserve Board.

State and federal regulators have substantial discretion and latitude in the exercise of their supervisory and regulatory authority over Middleburg Trust Company, including the statutory authority to promulgate regulations affecting the conduct of its business and operations of Middleburg Trust Company.  They also have the ability to exercise substantial remedial powers with respect to Middleburg Trust Company in the event that it determines that Middleburg Trust Company is not in compliance with applicable laws, orders or regulations governing its operations, is operating in an unsafe or unsound manner, or is engaging in any irregular practices.

ITEM 1A. RISK FACTORS

The Company is subject to various risks, including the risks described below.  The Company’s (“We” or “Our”) operations, financial condition, performance and, the market value of our securities could be materially adversely affected by any of these risks or additional risks not presently known or risks that we currently deem immaterial.

Risks Related to the Merger with Access National Corporation

Combining Access and the Company may be more difficult, costly or time-consuming than we expect.

The success of the Merger will depend, in part, on the ability of Access to realize the anticipated benefits and cost savings from combining the businesses of Access and the Company in a manner that permits growth opportunities and cost savings to be realized without materially disrupting the existing customer relationships of the Company or decreasing revenues due to loss of customers. However, to realize these anticipated benefits and cost savings, Access must successfully combine the businesses of Access and the Company. If Access is not able to achieve these objectives, the anticipated benefits and cost savings of the Merger may not be realized fully or at all or may take longer to realize than expected.

Access and the Company have operated, and, until the completion of the Merger, will continue to operate, independently. The success of the Merger will depend, in part, on the ability of Access to successfully combine the businesses of Access and the Company. To realize these anticipated benefits, after the completion of the Merger, Access expects to integrate the Company’s business into its own. The integration process in the Merger could result in the loss of key employees, the disruption of each party’s ongoing business, inconsistencies in standards, controls, procedures and policies that affect adversely either party’s ability to maintain relationships with customers and employees or achieve the anticipated benefits of the Merger. The loss of key employees could adversely affect the ability of Access to successfully conduct its business in the markets in which the Company now operates, which could have an adverse effect on the financial results of Access and to the value of its common stock. If Access experiences difficulties with the integration process, the anticipated benefits of the Merger may not be realized fully or at all, or may take longer to realize than expected. As with any merger of financial institutions, there also may be disruptions that cause Access and the Company to lose customers or cause customers to withdraw their deposits, or other unintended consequences that could have a material adverse effect on Access’s results of operations or financial condition after the Merger. These integration matters could have an adverse effect on the Company during this transition period and on Access for an undetermined period after consummation of the Merger.

The Merger may distract management of the Company from its other responsibilities.

The Merger could cause the management of the Company to focus its time and energies on matters related to the Merger that otherwise would be directed to its business and operations. Any such distraction on the part of the Company’s management, if significant, could affect its ability to service existing business and develop new business and adversely affect the business and earnings of the Company before the Merger, or the business and earnings of Access after the Merger.

Termination of the Merger Agreement could negatively impact the Company.

Each of the Company’s and Access’s obligation to consummate the Merger remains subject to a number of conditions, and there can be no assurance that all of the conditions will be satisfied, or that the Merger will be completed on the proposed terms, within the expected time frame, or at all. Any delay in completing the Merger could cause us not to realize some or all of the benefits

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that we expect to achieve if the Merger is successfully completed within its expected time frame. If the Merger Agreement is terminated, the Company’s business may be impacted adversely by the failure to pursue other beneficial opportunities due to the focus of management on the Merger, without realizing any of the anticipated benefits of completing the Merger. Additionally, if the Merger Agreement is terminated, the market price of the Company’s common stock could decline to the extent that the current market prices reflect a market assumption that the Merger will be completed. If the Merger Agreement is terminated under certain circumstances, including circumstances involving a change in recommendation by the Company's board of directors, the Company may be required to pay to Access a termination fee of $9.9 million.

In addition, the Company has incurred and will incur substantial expenses in connection with the negotiation and completion of the transactions contemplated by the Merger Agreement. If the Merger is not completed, we would have to recognize these expenses and our management would have committed substantial time and resources without realizing the expected benefits of the Merger. Additionally, failure to consummate the Merger may result in negative reactions from the financial markets or from our customers, vendors and employees. If the Merger is not completed, these risks may materialize and could have a material adverse effect on our stock price, business and cash flows, financial condition and results of operations.

The Merger Agreement limits the ability of the Company to pursue alternatives to the Merger.

The Merger Agreement contains “no-shop” provisions that, with limited exceptions, limit the ability of the Company to discuss, facilitate or commit to competing third-party proposals to acquire all or a significant part of the Company. In addition, under certain circumstances, if the Merger Agreement is terminated and the Company, subject to certain restrictions, consummates a similar transaction other than the Merger, the Company must pay to Access a termination fee of $9.9 million. These provisions might discourage a potential competing acquiror who might have an interest in acquiring all or a significant part of the Company from considering or proposing the acquisition even if it were prepared to pay consideration, with respect to the Company, a higher share price than that proposed in the Merger.

The Company will be subject to business uncertainties and contractual restrictions while the Merger is pending.

Uncertainty about the effect of the Merger on employees and customers may have an adverse effect on the Company. These uncertainties may impair the Company’s ability to attract, retain and motivate key personnel until the Merger is completed, and could cause customers and others that deal with the Company to seek to change existing business relationships with the Company. Retention of certain employees by the Company may be challenging while the Merger is pending, as certain employees may experience uncertainty about their future roles with the Company or the combined company following the Merger. If key employees depart because of issues relating to the uncertainty and difficulty of integration or a desire to not remain with the Company or the combined company following the Merger, the Company’s business, or the business of the combined company following the Merger, could be harmed. In addition, the Company has agreed to operate its business in the ordinary course prior to the closing of the Merger and from taking certain specified actions until the Merger is completed, and the merger agreement restricts us from taking other specified actions until the Merger occurs without the consent of Access. These restrictions may prevent us from pursuing attractive business opportunities that may arise prior to the completion of the merger.

Our ability to complete the Merger with Access is subject to the receipt of consents and approvals from regulatory agencies which may impose conditions that could adversely affect us or cause the Merger to be abandoned.

Before the Merger may be completed, we must obtain various approvals or consents from the Federal Reserve Board and various bank regulatory and other authorities. These regulators may impose conditions on the completion of the Merger or require changes to the terms of the Merger. Although Access and the Company do not currently expect that any such conditions or changes would be imposed, there can be no assurance that they will not be, and such conditions or changes could have the effect of delaying completion of the Merger or imposing additional costs on or limiting the revenues of Access following the Merger. There can be no assurance as to whether the regulatory approvals will be received, the timing of those approvals, or whether any conditions will be imposed.

Fluctuations in market prices of Access common stock will affect the value that our shareholders receive for their shares of our common stock.

Under the terms of the Merger, each share of the Company's common stock will be converted into the right to receive 1.3314 shares of Access common stock (such ratio, the "Exchange Ratio"), the value of which will depend upon the price of Access common stock at the effective date of the Merger. The market price of Access common stock as of the effective date of the Merger may vary from its price at the date the fixed Exchange Ratio was established. Such variations in the market price of Access common stock may result from changes in the business, operations or prospects of Access, regulatory considerations, general market and economic conditions, and other factors. At the time of the special meetings, shareholders of Access and the Company will not know the exact value of the consideration to be paid by Access when the Merger is completed.

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We may not be able to successfully manage our growth or implement our growth strategies, which may adversely affect our results of operations and financial condition.

A key aspect of our business strategy is our continued growth and expansion.  Our ability to continue to grow depends, in part, is based upon our ability to:

• open new financial service centers;

• attract deposits to those locations; and

• identify attractive loan and investment opportunities.

We may not be able to successfully implement our growth strategy if we are unable to identify attractive markets, locations or opportunities to expand in the future.  Our ability to manage our growth successfully also will depend on whether we can maintain capital levels adequate to support our growth, maintain cost controls and asset quality and successfully integrate any new financial service centers into our organization.

As we continue to implement our growth strategy by opening new financial service centers, we expect to incur construction costs and increased personnel, occupancy and other operating expenses.  We generally must absorb those higher expenses while we begin to generate new deposits, and there is a further time lag involved in redeploying new deposits into attractively priced loans and other higher yielding earning assets.  Thus, our plans to grow could depress our earnings in the short run, even if we efficiently execute this growth.

Our future success is dependent on our ability to compete effectively in the highly competitive banking industry.

Our banking subsidiary faces vigorous competition from banks and other financial institutions, including savings and loan associations, savings banks, finance companies and credit unions for deposits, loans and other financial services in our market area.  A number of these banks and other financial institutions are significantly larger than we are and have substantially greater access to capital and other resources, as well as larger lending limits and branch systems, and offer a wider array of banking services.  Our non-banking subsidiary faces competition from money managers and investment brokerage firms.

To a limited extent, our banking subsidiary also competes with other providers of financial services, such as money market mutual funds, brokerage firms, consumer finance companies, insurance companies and governmental organizations which may offer more favorable financing than we can.  Many of our non-bank competitors are not subject to the same extensive regulations that govern us.  As a result, these non-bank competitors have advantages over us in providing certain services.  This competition may reduce or limit our margins and our market share and may adversely affect our results of operations and financial condition.

CFPB regulations could restrict our ability to originate loans.

Pursuant to the Dodd-Frank Act, the CFPB rules requiring mortgage lenders to make a reasonable and good faith determination based on verified and documented information that a consumer applying for a mortgage loan has a reasonable ability to repay the loan according to its terms, or to originate “qualified mortgages” that meet specific requirements with respect to terms, pricing and fees. The rule also contains disclosure requirements at origination and in monthly statements. These requirements require significant personnel resources and could have a material adverse effect on our operations.

We may incur losses if we are unable to successfully manage interest rate risk.

Our profitability will depend upon the spread between the interest rates earned on investments and loans and interest rates paid on deposits and other interest-bearing liabilities.  Changes in interest rates will affect our operating performance and financial condition in diverse ways including the pricing of securities, loans and deposits, the volume of loan originations and the value we can recognize on the sale of mortgage and home equity loans in the secondary market.  We attempt to minimize our exposure to interest rate risk, but we will be unable to eliminate it.  Our net interest spread will depend on many factors that are partly or entirely outside of our control, including competition, federal economic, monetary and fiscal policies, and economic conditions generally.

New regulations could adversely impact our earnings due to, among other things, increased compliance costs or costs due to noncompliance.

The CFPB issued a rule designed to clarify for lenders how they can avoid monetary damages under the Dodd-Frank Act, which would hold lenders accountable for ensuring a borrower’s ability to repay a mortgage. Loans that satisfy this “qualified mortgage” safe-harbor will be presumed to have complied with the ability-to-repay standard. Under the CFPB’s rule, a “qualified mortgage” must not contain certain specified features, including but not limited to:

• excessive upfront points and fees (those exceeding 3% of the total loan amount, less “bona fide discount points” for prime loans);

• interest-only payments;

• negative-amortization; and

• terms longer than 30 years.

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Also, to qualify as a “qualified mortgage,” a borrower’s total monthly debt-to-income ratio may not exceed 43%. Lenders must also verify and document the income and financial resources relied upon to qualify the borrower for the loan and underwrite the loan based on a fully amortizing payment schedule and maximum interest rate during the first five years, taking into account all applicable taxes, insurance and assessments. The CFPB’s rule on qualified mortgages could limit our ability or desire to make certain types of loans or loans to certain borrowers, or could make it more expensive and/or time consuming to make these loans, which could adversely impact our growth or profitability.

Our concentration in loans secured by real estate may increase our credit losses, which would negatively affect our financial results.

We offer a variety of secured loans, including commercial lines of credit, commercial term loans, real estate, construction, home equity, consumer and other loans.  Many of our loans are secured by real estate (both residential and commercial) in our market area.  A major change in the real estate market, such as deterioration in the value of collateral, or in the local or national economy, could adversely affect our clients’ ability to repay these loans, which in turn could negatively impact us.  While we are in one of the fastest growing real estate markets in the United States, risk of loan defaults and foreclosures are unavoidable in the banking industry, and we try to limit our exposure to this risk by monitoring our extensions of credit carefully.  We cannot fully eliminate credit risk, and as a result credit losses may occur in the future.

We may be adversely affected by deterioration of economic conditions in our market area.

Our banking operations are located primarily in the Virginia counties of Loudoun, Fairfax, Fauquier and Prince William and also in the City of Williamsburg and the City of Richmond.  Because our lending is concentrated in this market, we will be affected by the general economic conditions in these areas.  Changes in the economy may influence the growth rate of our loans and deposits, the quality of the loan portfolio and loan and deposit pricing.  A decline in general economic conditions caused by inflation, recession, unemployment or other factors beyond our control would impact the demand for banking products and services generally, which could negatively affect our financial condition and performance.

A loss of our senior officers could impair our relationship with our customers and adversely affect our business.

Many community banks attract customers based on the personal relationships that the banks’ officers and customers establish with each other and the confidence that the customers have in the officers.  We depend on the performance of our senior officers.  These officers have many years of experience in the banking industry and have numerous contacts in our market area.  The loss of the services of any of our senior officers, or the failure of any of them to perform management functions in the manner anticipated by our board of directors, could have a material adverse effect on our business.  Our success will be dependent upon the board’s ability to attract and retain quality personnel, including these individuals.  We do not carry key man life insurance on our senior officers.

If we need additional capital in the future to continue our growth, we may not be able to obtain it on terms that are favorable.

Our business strategy calls for continued growth.  We anticipate that we will be able to support this growth through the generation of additional deposits at new branch locations as well as investment opportunities.  However, we may need to raise additional capital in the future to support our continued growth and to maintain our capital levels.  Our ability to raise capital through the sale of additional securities will depend primarily upon our financial condition and the condition of financial markets at that time.  We may not be able to obtain additional capital in the amounts or on terms satisfactory to us. Our growth may be constrained if we are unable to raise additional capital as needed. This could negatively affect our performance and the value of our common stock.

Our profitability and the value of your investment may suffer because of rapid and unpredictable changes in the highly regulated environment in which we operate.

We are subject to extensive supervision by several governmental regulatory agencies at the federal and state levels.  Recently enacted, proposed and future banking legislation and regulations have had, and will continue to have, or may have a significant impact on the financial services industry.  These regulations, which are intended to protect depositors and not our shareholders, and the interpretation and application of them by federal and state regulators, are beyond our control, may change rapidly and unpredictably and can be expected to influence our earnings and growth.  Our success depends on our continued ability to maintain compliance with these regulations.  Some of these regulations may increase our costs and thus place other financial institutions that are not subject to similar regulation in stronger, more favorable competitive positions.

Banking regulators have broad enforcement power, but regulations are meant to protect depositors, and not investors.

Bank regulations, and the interpretation and application of them by regulators, are beyond our control, may change rapidly and unpredictably and can be expected to influence earnings and growth.  In addition, these regulations may limit the Company’s growth and the return to investors by restricting activities such as the payment of dividends, mergers with, or acquisitions by, other institutions, investments, loans and interest rates, interest rates paid on depositors and the creation of financial service centers.  Information on the regulations that impact the Company are included in Item 1., “Business – Supervision and

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Regulation”.  Although these regulations impose costs on the Company, they are intended to protect depositors, and should not be assumed to protect the interest of shareholders.  The regulations to which we are subject may not always be in the best interest of investors.

Trading in our common stock has been sporadic and volume has been light.  

Although our common stock trades on the Nasdaq Capital Market and a number of brokers offer to make a market in common stock on a regular basis, trading volume to date has been limited and there can be no assurance that an active and liquid market for the common stock will develop. As a result, shareholders may not be able to quickly and easily sell their common stock.

Our directors and officers have significant voting power.

Our directors and executive officers beneficially own approximately 5.00% of our common stock and may purchase additional shares of our common stock by exercising vested stock options.  By voting against a proposal submitted to shareholders, the directors and officers may be able to make approval more difficult for proposals requiring the vote of shareholders such as mergers, share exchanges, asset sales and amendment to the Company’s articles of incorporation.

Significant sales of our common stock, or the perception that significant sales may occur in the future, could adversely affect the market price for our common stock.

The sale of substantial amounts of our common stock could adversely affect the price of these securities. Sales of substantial amounts of our common stock in the public market, and the availability of shares for future sale, could cause the market price of our common stock to be lower.

As of January 17, 2017, one of our shareholders owned 29.19% of our outstanding common stock, of which 6.3% of our outstanding shares are covered by a resale registration statement with the SEC.  In addition, these shares may be sold in certain private transactions or, subject to certain volume limitations, pursuant to Rule 144 under the Securities Act.  If a large amount of our common stock was sold in a short period of time, or other investors perceive such sales to be imminent, the market price of our common stock could drop.  The existence of this “market overhang” could have a negative impact on the market for our common stock.

The Company depends on the accuracy and completeness of information about clients and counterparties, and its financial condition could be adversely affected if it relies on misleading information.

In deciding whether to extend credit or to enter into other transactions with clients and counterparties, the Company may rely on information furnished to it by or on behalf of clients and counterparties, including financial statements and other financial information, which the Company does not independently verify. The Company also may rely on representations of clients and counterparties as to the accuracy and completeness of that information and, with respect to financial statements, on reports of independent auditors. For example, in deciding whether to extend credit to clients, the Company may assume that a customer’s audited financial statements conform to GAAP and present fairly, in all material respects, the financial condition, results of operations, and cash flows of the customer. The Company’s financial condition and results of operations could be negatively impacted to the extent it relies on financial statements that do not comply with GAAP or are materially misleading.

An inadequate allowance for loan losses would reduce our earnings.

Our earnings are significantly affected by our ability to properly originate, underwrite and service loans.  We maintain an allowance for loan losses based upon many factors, including the following:

• actual loan loss history;

• volume, growth, and composition of the loan portfolio;

• the amount of nonperforming loans and the value of their related collateral;

• the effect of changes in the local real estate market on collateral values;

• the effect of current economic conditions on a borrower’s ability to pay; and

• other factors deemed relevant by management.

These determinations are based upon estimates that are inherently subjective, and their accuracy depends on the outcome of future events; therefore, realized losses may differ from current estimates.  Changes in economic, operating, and other conditions, including changes in interest rates, which are generally beyond our control, could increase actual loan losses significantly.  As a result, actual losses could exceed our current allowance estimate.  We cannot provide assurance that our allowance for loan losses is sufficient to cover actual loan losses should such losses differ significantly from the current estimates.

In addition, there can be no assurance that our methodology for assessing our asset quality will succeed in properly identifying impaired loans or calculating an appropriate loan loss allowance.  We could sustain losses if we incorrectly assess the creditworthiness of our borrowers or fail to detect or respond to deterioration in asset quality in a timely manner.  If our assumptions and judgments prove to be incorrect and the allowance for loan losses is inadequate to absorb losses, or if bank regulatory authorities

17

require us to increase the allowance for loan losses as a part of their examination process, our earnings and capital could be significantly and adversely affected.

The soundness of other financial institutions could adversely affect us.

Our ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other financial institutions.  Financial services institutions are interrelated as a result of trading, clearing, counterparty or other relationships.  We have exposure to many different industries and counterparties, and we routinely execute transactions with counterparties in the financial industry.  As a result, defaults by, or even rumors or questions about, one or more financial services institutions, or the financial services industry generally, have led to market-wide liquidity problems and could lead to losses or defaults by us or by other institutions.  Many of these transactions expose us to credit risk in the event of default of our counterparty or client.  In addition, our credit risk may be exacerbated when the collateral held by us cannot be realized upon or is liquidated at prices not sufficient to recover the full amount of the financial instrument exposure due us.  There is no assurance that any such losses would not materially and adversely affect our results of operations.

Government measures to regulate the financial industry, including the Dodd-Frank Act, subject us to increased regulation and could aversely affect us.

As a financial institution, we are heavily regulated at the state and federal levels.  As a result of the financial crisis and related global economic downturn that began in 2007, we have faced, and expect to continue to face, increased public and legislative scrutiny as well as stricter and more comprehensive regulation of our financial services practices.  The Dodd-Frank Act includes significant changes in the financial regulatory landscape and will impact all financial institutions, including the Company and the Bank.  Because the ultimate impact of the Dodd-Frank Act will depend on future regulatory rulemaking and interpretation, we cannot predict the full effect of this legislation on our businesses, financial condition or results of operations.  Among other things, the Dodd-Frank Act and the regulations implemented thereunder limit debit card interchange fees, restrict ownership of covered funds, increase FDIC assessments, impose new requirements on mortgage lending, and establish more stringent capital requirements on bank holding companies.  As a result of these and other provisions in the Dodd-Frank Act, we will experience additional costs, restrictions on allowable investments, as well as limitations on the products and services we offer and on our ability to efficiently pursue business opportunities, which may adversely affect our businesses, financial condition or results of operations.

The Basel III capital framework will require higher levels of capital and liquid assets, which could adversely affect the Company's net income and return on equity.

The Basel III capital framework represents the most comprehensive overhaul of the U.S. banking capital framework in over two decades. This new capital framework and related changes to the standardized calculations of risk-weighted assets are complex and create additional compliance burdens, especially for community banks. The Basel III Capital Rules require bank holding companies and their subsidiaries, to maintain significantly more capital and adopted more demanding regulatory capital risk weightings and calculations. As a result of the Basel III Capital Rules, many community banks could be forced to limit banking operations and activities, and growth of loan portfolios, in order to focus on retention of earnings to improve capital levels. The Company believes that it maintains sufficient levels of Tier 1 and Common Equity Tier 1 capital to comply with the Basel III Final Rules. However, increased capital requirements imposed by the Basel III Capital Rules may require the Company to limit its banking operations, retain net income or reduce dividends to improve regulatory capital levels, which could negatively affect our business, financial condition and results of operations.

Our ability to pay dividends is limited and we may be unable to pay future dividends.  

Our ability to pay dividends is limited by regulatory restrictions and the need to maintain sufficient capital in the Company and in our subsidiaries. The ability of our bank subsidiary to pay dividends to us is limited by the bank’s obligations to maintain sufficient capital, earnings and liquidity and by other restrictions on their dividends under federal and state bank regulatory requirements. We cannot be certain as to when, if ever, the dividend may be increased, nor can we be certain that future reductions of the dividend will not be made.

In addition, as a bank holding company, our ability to declare and pay dividends is subject to the guidelines of the Board of Governors of the Federal Reserve System regarding capital adequacy and dividends. The Federal Reserve guidelines require us to review the effects of the cash payment of dividends on common stock and other Tier 1 capital instruments (i.e., perpetual preferred stock and trust preferred debt) on our financial condition. These guidelines also require that we review our net income and our projected rate of earnings retention.

Under the Federal Reserve’s policy, the board of directors of a bank holding company should also consider different factors to ensure that its dividend level is prudent relative to the organization’s financial position and is not based on overly optimistic earnings scenarios such as any potential events that may occur before the payment date that could affect its ability to pay while still maintaining a strong financial position. As a general matter, the Federal Reserve has indicated that the board of directors of a bank holding company should consult with the Federal Reserve and eliminate, defer, or significantly reduce the bank holding

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company’s dividends if: (i) its net income available to shareholders for the current period is not sufficient to fully fund the dividends; (ii) its prospective rate of earnings retention is not consistent with the its capital needs and overall current and prospective financial condition; or (iii) it will not meet, or is in danger of not meeting, its minimum regulatory capital adequacy ratios. If we do not satisfy these regulatory requirements or the Federal Reserve’s policies, we will be unable to pay dividends on our common stock.

The Basel III rules require us to maintain a capital conservation buffer above well capitalized capital levels. If we fail to maintain the capital conservation buffer, we may be subject to restrictions on discetionary payouts including the payment of dividends.

Further, we cannot pay any dividends on the common stock, or acquire any shares of common stock, if any distributions on our trust preferred securities are in arrears.

Increases in FDIC insurance premiums may cause our earnings to decrease.

The FDIC has implemented a new methodology by which it will assess deposit insurance premium amounts.  The FDIC adopted a final rule in 2011, to change the FDIC’s assessment rates as well as providing that the assessment base will be the institution’s average consolidated total assets less its average tangible equity. Although the burden of replenishing the DIF will be placed primarily on institutions with assets greater than $10 billion, we expect higher annual deposit insurance assessments than we historically incurred before the financial crisis began several years ago. Any future increases in required deposit insurance premiums or special assessments could have a significant adverse impact on our financial condition and results of operations.

The Company’s operations may be adversely affected by cyber security risks.

In the ordinary course of business, the Company collects and stores sensitive data, including proprietary business information and personally identifiable information of its customers and employees in systems and on networks. The secure processing, maintenance and use of this information is critical to operations and the Company’s business strategy. The Company has invested in accepted technologies, and continually reviews processes and practices that are designed to protect its networks, computers and data from damage or unauthorized access. Despite these security measures, the Company’s computer systems and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions. A breach of any kind could compromise systems and the information stored there could be accessed, damaged or disclosed. A breach in security could result in legal claims, regulatory penalties, disruption in operations, and damage to the Company’s reputation, which could adversely affect our business.

We could be subject to changes in tax laws, regulations and interpretations or challenges to our income tax provision.

We compute our income tax provision based on enacted tax rates in the jurisdictions in which we operate. Any change in enacted tax laws, rules or regulatory or judicial interpretations, or any change in the pronouncements relating to accounting for income taxes could adversely affect our effective tax rate, tax payments and results of operations. The taxing authorities in the jurisdictions in which we operate may challenge our tax positions, which could increase our effective tax rate and harm our financial position and results of operations. We are subject to audit and review by U.S. federal and state tax authorities. Any adverse outcome of such a review or audit could have a negative effect on our financial position and results of operations. In addition, changes in enacted tax laws, such as adoption of a lower income tax rate in any of the jurisdictions in which we operate, could impact our ability to obtain the future tax benefits represented by our deferred tax assets and our investments in low income housing tax credits. In addition, the determination of our provision for income taxes and other liabilities requires significant judgment by management. Although we believe that our estimates are reasonable, the ultimate tax outcome may differ from the amounts recorded in our financial statements and could have a material adverse effect on our financial results in the period or periods for which such determination is made.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

The Company’s corporate headquarters, and that of Middleburg Bank, is located at 111 West Washington Street, Middleburg, Virginia 20117.  The Company’s subsidiaries own or lease various other offices in the counties and municipalities in which they operate.  At December 31, 2016, Middleburg Bank operated twelve branches in the Virginia communities of Ashburn, Gainesville, Leesburg, Marshall, Middleburg, Purcellville, Reston, Richmond, Warrenton and Williamsburg. All of the offices of Middleburg Trust Company are leased.  Additionally, Middleburg Bank owns an operations center building located at 106 Catoctin Circle, SE, Leesburg, Virginia 20175.  See Note 1 “Nature of Banking Activities and Significant Accounting Policies” and Note 5 “Premises and Equipment, Net” in the “Notes to the Consolidated Financial Statements” of this Form 10-K for information with respect to the amounts at which bank premises and equipment are carried and commitments under long-term leases.

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All of the Company’s properties are well maintained, are in good operating condition and are adequate for the Company’s present and anticipated future needs.

ITEM 3. LEGAL PROCEEDINGS

There are no material pending legal proceedings to which the Company is a party or of which the property of the Company is subject.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Shares of the Company’s Common Stock trade on the Nasdaq Capital Market under the symbol “MBRG.”  The high and low sale prices per share for the Company’s Common Stock for each quarter of 2016 and 2015, and the amount of cash dividends per share in each quarter, are set forth in the table below.

Market Price and Dividends

		Sales Price ($)				Dividends ($)
		High		Low
2016:	1st quarter	$	22.35	$	18.02	$	0.13
	2nd quarter	27.69		22.00		0.13
	3rd quarter	29.24		26.47		0.13
	4th quarter	36.66		27.18		0.13
2015:	1st quarter	$	18.50	$	17.90	$	0.10
	2nd quarter	18.90		17.41		0.10
	3rd quarter	18.67		16.60		0.13
	4th quarter	18.89		17.20		0.13

As of March 8, 2017, the Company had approximately 450 shareholders of record.

The Company historically has paid cash dividends on a quarterly basis.  The final determination of the timing, amount and payment of dividends on the Common Stock is at the discretion of the Company’s Board of Directors and will depend upon the earnings of the Company and its subsidiaries, principally Middleburg Bank, the financial condition of the Company and other factors, including general economic conditions and applicable governmental regulations and policies as discussed above in Item 1. “Business – Supervision and Regulation – Payment of Dividends”.

Issuer Purchases of Equity Securities

On September 15, 2015, the Company's Board of Directors authorized the repurchase of up to $10 million of the Company’s common stock. The repurchase program was effective immediately and runs through December 31, 2017. This program replaces the previous repurchase program adopted in 1999, pursuant to which the Company had 24,084 shares remaining eligible for repurchase. Repurchases may be made through privately-negotiated transactions, or open-market transactions.

The following table summarizes repurchases of the Corporation's common stock that occurred during the year ended December 31, 2016.

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(Dollars in thousands, except for per share amounts)	Total number of shares purchased	Average price paid per share ($)		Total number of shares purchased as part of a publicly announced plan	Approximate value of shares that may yet be purchased under the plan
January 1, 2016 - January 31, 2016	26,800	$	18.29	26,800	$	8,088,000

The following graph compares the cumulative total return to the shareholders of the Company for the last five fiscal years with the total return on the NASDAQ Composite Index and the SNL $1B-$5B Bank Index as reported by SNL Financial LC, assuming an investment of $100 in shares of Common Stock on December 31, 2011 and the reinvestment of dividends.

	Period Ending December 31,
Index	2011	2012	2013	2014	2015	2016
Middleburg Financial Corporation	100.00	125.47	129.77	131.96	138.84	266.27
NASDAQ Composite	100.00	117.45	164.57	188.84	201.98	219.89
SNL Bank $1B-$5B	100.00	123.31	179.31	187.48	209.86	301.92

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ITEM 6. SELECTED FINANCIAL DATA

The following consolidated summary sets forth the Company’s selected financial data that has been derived from the Company's audited financial statements for each of the periods and at the dates indicated.  

	Years Ended December 31,
(In thousands, except per share data)	2016			2015			2014			2013			2012
Balance Sheet Data:
Assets	$	1,272,643		$	1,294,863		$	1,222,857		$	1,227,753		$	1,236,781
Loans, net	848,693			794,635			743,060			715,160			695,166
Loans held for sale	—			—			—			33,175			82,114
Securities	316,792			385,189			355,042			335,203			326,447
Deposits	1,053,058			1,040,800			989,080			982,396			981,900
Shareholders’ equity	126,679			123,554			122,034			115,073			117,122
Average shares outstanding, basic	7,107			7,147			7,106			7,074			7,032
Average shares outstanding, diluted	7,151			7,167			7,127			7,107			7,043
Income Statement Data:
Interest income	$	43,375		$	42,281		$	43,325		$	44,272		$	47,023
Interest expense	4,424			4,207			5,243			6,567			8,824
Net interest income	38,951			38,074			38,082			37,705			38,199
Provision for loan losses	1,853			2,293			1,960			109			3,438
Net Interest income after provision for loan losses	37,098			35,781			36,122			37,596			34,761
Non-interest income	9,184			9,481			14,080			24,121			29,009
Securities gains	1,554			140			186			418			445
Non-interest expense	36,959			34,857			40,561			54,041			54,259
Income before income taxes and non-controlling interest in consolidated subsidiary	10,877			10,545			9,827			8,094			9,956
Income taxes	2,813			2,715			2,341			1,931			1,966
Non-controlling interest in consolidated subsidiary (income) loss	—			—			98			(9		)	(1,504		)
Net income	8,064			7,830			7,584			6,154			6,486
Per Share Data:
Net income, basic	$	1.13		$	1.10		$	1.07		$	0.87		$	0.92
Net income, diluted	1.13			1.09			1.06			0.87			0.92
Cash dividends	0.52			0.46			0.34			0.24			0.20
Book value	17.58			17.44			17.11			15.90			16.15
Tangible book value (2)	17.10			16.93			16.58			15.14			15.30
Asset Quality Ratios:
Nonperforming loans to total loans	2.51		%	2.62		%	1.89		%	3.46		%	3.92		%
Nonperforming assets to total assets	2.16			1.97			1.59			2.33			3.05
Net charge-offs to average loans	0.18			0.39			0.46			0.15			0.54
Allowance for loan losses to gross loans	1.33			1.37			1.56			1.83			2.02
Selected Ratios:
Return on average assets	0.61		%	0.62		%	0.62		%	0.51		%	0.54		%
Return on average equity	6.34			6.25			6.40			5.40			5.86
Dividend payout	46.02			42.20			32.08			27.60			21.70
Efficiency ratio (1)	73.80			70.86			75.10			82.12			73.86
Equity to assets (including non-controlling interest in consolidated subsidiary)	9.95			9.54			9.98			9.37			9.47
Tier 1 risk-based capital ratio	16.61			16.27			15.70			14.64			14.09
Common equity tier 1 capital ratio	15.97			15.61			N/A			N/A			N/A
Total risk-based capital ratio	17.86			17.52			16.95			15.89			15.35
Leverage ratio	9.95			9.59			9.90			9.43			9.10

⁽¹⁾  The ratio 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.

⁽²⁾  Tangible book value 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.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITON AND RESULTS OF OPERATIONS

The following discussion provides information about the major components of the results of operations and financial condition, liquidity, and capital resources of the Company.  This discussion and analysis should be read in conjunction with the Company’s Consolidated Financial Statements and Notes to Consolidated Financial Statements.  It should also be read in conjunction with the “Caution About Forward Looking Statements” section at the end of this discussion.

Overview

The Company is headquartered in Middleburg, Virginia and conducts its primary operations through two wholly owned subsidiaries, Middleburg Bank and Middleburg Investment Group, Inc. Middleburg Bank is a community bank serving the Virginia counties of Prince William, Loudoun, Fairfax, Fauquier, the City of Williamsburg and the City of Richmond with twelve financial service centers.  Middleburg Investment Group is a non-bank holding company with one wholly owned subsidiary, Middleburg Trust Company.  Middleburg Trust Company is a trust company headquartered in Richmond, Virginia, and maintains offices in Williamsburg, Virginia and in several of Middleburg Bank’s facilities.    

The Company generates a significant amount of its income from the net interest income earned by Middleburg Bank.  Net interest income is the difference between interest income and interest expense.  Interest income depends on the amount of interest earning assets outstanding during the period and the interest rates earned thereon.  Middleburg Bank’s cost of money is a function of the average amount of deposits and borrowed money outstanding during the period and the interest rates paid thereon.  The quality of the assets further influences the amount of interest income lost on nonaccrual loans and the amount of additions to the allowance for loan losses or potential other-than-temporary impairment of securities.  Middleburg Investment Group’s subsidiary, Middleburg Trust Company, generates fee income by providing investment management and trust services to its clients.  Investment management and trust fees are generally based upon the value of assets under management, and, therefore can be significantly affected by fluctuations in the values of securities caused by changes in the capital markets.  

At December 31, 2016, total assets were $1.3 billion, a decrease of 1.72% when compared to December 31, 2015.  Total gross loans increased by $54.4 million from $805.7 million at December 31, 2015 to $860.1 million at December 31, 2016.  Total deposits increased by $12.3 million or 1.18% to $1.1 billion at December 31, 2016 from $1.0 billion at December 31, 2015.  Non-interest bearing demand, savings and interest bearing demand deposits increased by $31.2 million or 3.9% from December 31, 2015 to $827.4 million at December 31, 2016.  Time deposits decreased by 7.7% or $18.9 million from December 31, 2015 to $225.6 million at December 31, 2016.  The net interest margin, a non-GAAP measure more fully described in the “Results of Operations” section below, was 3.20% for the full year 2016, lower by 7 basis points compared to 3.27% for the year ended December 31, 2015. The provision for loan losses decreased by $440,000 for the year ended December 31, 2016 to $1.9 million compared to $2.3 million for the same period in 2015. Total non-interest income increased by $1.1 million for the year ended December 31, 2016, compared to the same period in 2015.  Non-interest expense in 2016 increased by $2.1 million compared to 2015 due primarily to expenses associated with the merger with Access National Corporation. The Company remains well capitalized with all regulatory capital ratios exceeding the regulatory minimums.

On October 24, 2016, the Company and Access National Corporation (“Access”) announced a definitive agreement to combine in a strategic merger (the “Merger Agreement”) pursuant to which the Company will merge with and into Access (the “Merger”). Upon consummation of the Merger, the holders of shares of the Company's common stock will receive 1.3314 shares of Access common stock for each share of the Company's common stock held immediately prior to the effective date of the Merger. The transaction is expected to be completed in the second quarter of 2017, subject to approval of both companies' shareholders, regulatory approvals and other customary closing conditions.

The Company is not aware of any current recommendations by any regulatory authorities that, if they were implemented, would have a material effect on the registrant’s liquidity, capital resources or results of operations.

Critical Accounting Policies

General

The financial condition and results of operations presented in the Consolidated Financial Statements, the accompanying Notes to the Consolidated Financial Statements and this section are, to some degree, dependent upon the accounting policies of the Company.  The selection and application of these accounting policies involve judgments, estimates, and uncertainties that are susceptible to change.

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Presented below is discussion of those accounting policies that management believes are the most important (“Critical Accounting Policies”) to the portrayal and understanding of Middleburg Financial Corporation’s financial condition and results of operations.  The Critical Accounting Policies require management’s most difficult, subjective and complex judgments about matters that are inherently uncertain.  In the event that different assumptions or conditions were to prevail, and depending upon the severity of such changes, the possibility of materially different financial condition or results of operations is a reasonable likelihood.

Allowance for Loan Losses

Middleburg Bank monitors and maintains an allowance for loan losses to absorb an estimate of probable losses inherent in the loan portfolio.  Middleburg Bank maintains policies and procedures that address the systems of controls over the following areas of the allowance:  the systematic methodology used to determine the appropriate level of the allowance to provide assurance they are maintained in accordance with U.S. generally accepted accounting principles ("GAAP"); the accounting policies for loan charge-offs and recoveries; the assessment and measurement of impairment in the loan portfolio; and the loan grading system.

Middleburg Bank evaluates various loans individually for impairment as required by applicable accounting standards.  Loans evaluated individually for impairment include nonperforming loans, such as loans on nonaccrual, loans past due by 90 days or more, troubled debt restructurings and other loans selected by management.  The evaluations are based upon discounted cash flows or collateral valuations.  If the evaluation shows that a loan is individually impaired, then a specific reserve is established for the amount of impairment.  If a loan evaluated individually is not impaired, then the loan is assessed for impairment with a group of loans that have similar characteristics.

For loans without individual measures of impairment, Middleburg Bank makes estimates of losses for groups of loans as required by applicable accounting standards.  Loans are grouped by similar characteristics, including the type of loan, the assigned loan grade and the general collateral type.  A loss rate reflecting the expected loss inherent in a group of loans is derived based upon estimates of default rates for a given loan grade, the predominant collateral type for the group and the terms of the loan.  The resulting estimate of losses for groups of loans are adjusted for relevant environmental factors and other conditions of the portfolio of loans, including:  borrower and industry concentrations; levels and trends in delinquencies, charge-offs and recoveries; changes in underwriting standards and risk selection; level of experience, ability and depth of lending management; and national and local economic conditions.

The amount of estimated impairment for individually evaluated loans and groups of unimpaired loans is added together for a total estimate of loan losses.  This estimate of losses is compared to the allowance for loan losses of Middleburg Bank as of the evaluation date and, if the estimate of losses is greater than the allowance, an additional provision to the allowance would be made.  If the estimate of losses is less than the allowance, the degree to which the allowance exceeds the estimate is evaluated to determine whether the allowance falls outside a range of estimates.  If the estimate of losses is below the range of reasonable estimates, the allowance would be reduced by way of a credit to the provision for loan losses.  Middleburg Bank recognizes the inherent imprecision in estimates of losses due to various uncertainties and variability related to the factors used, and therefore a reasonable range around the estimate of losses is derived and used to ascertain whether the allowance is too high.  If different assumptions or conditions were to prevail and it is determined that the allowance is not adequate to absorb the new estimate of probable losses, an additional provision for loan losses would be made, which amount may be material to the consolidated financial statements.

Goodwill and Intangibles

With the adoption of Accounting Standards Update 2011-08, "Intangible-Goodwill and Other-Testing Goodwill for Impairment", the Company is no longer required to perform a test for impairment unless, based on an assessment of qualitative factors related to goodwill, we determine that it is more likely than not that the fair value of each applicable reporting unit is less than its carrying amount. If the likelihood of impairment is more than 50%, the Company must perform a test for impairment and may be required to record impairment charges. The first step of the goodwill impairment test, used to identify potential impairment, compares the fair value of a reporting unit with its carrying amount, including goodwill. If the carrying amount of a reporting unit is greater than zero and its fair value exceeds its carrying amount, goodwill of the reporting unit is considered not impaired; thus, the second step of the impairment test is unnecessary. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test shall be performed to measure the amount of impairment loss, if any. The second step of the goodwill impairment test, used to measure the amount of impairment loss, compares the implied fair value of reporting unit goodwill with the carrying amount of that goodwill. If the carrying amount of reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss shall be recognized in an amount equal to that excess. The loss recognized cannot exceed the carrying amount of goodwill. After a goodwill impairment loss is recognized, the adjusted carrying amount of goodwill shall be its new accounting basis. Subsequent reversal of a previously recognized goodwill impairment loss is prohibited once the measurement of that loss is recognized.

Management estimates fair value utilizing multiple methodologies which include discounted cash flows, third-party sale and assets under management analysis. Determining the fair value of the Company’s reporting units requires management to make judgments

24

and assumptions related to various items, including estimates of future operating results, allocations of indirect expenses, and discount rates.  Management believes its estimates and assumptions are reasonable; however, the fair value of each reporting unit could be different in the future if actual results or market conditions differ from the estimates and assumptions used.

The Company’s forecasted cash flows for its reporting units assume a stable economic environment and consistent long-term growth in assets under management over the projected periods.  Additionally, expenses are assumed to be consistently correlated with projected asset and revenue growth over the time periods projected.  Although we believe the key assumptions underlying the financial forecasts to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties that are beyond the control of the Company.  Accordingly, there can be no assurance that the forecasted results will be realized and variations from the forecast may be material.  If weak economic conditions continue or worsen for a prolonged period of time, or if the reporting unit loses key personnel, the fair value of the reporting unit may be adversely affected which may result in impairment of goodwill or other intangible assets in the future.  Any changes in the key management estimates or judgments could result in an impairment charge, and such a charge could have an adverse effect on the Company’s financial condition and results of operations.

Middleburg Investment Group has intangible assets in the form of certain customer relationships that were acquired in 2002. We amortize those intangible assets on a straight line basis over their estimated useful life.

Other-Than-Temporary Impairment (OTTI) for Securities

Impairment of securities occurs when the fair value of a security is less than its amortized cost. For debt securities, impairment is considered other-than-temporary and recognized in its entirety in net income if either (i) we intend to sell the security or (ii) it is more-likely-than-not that we will be required to sell the security before recovery of its amortized cost basis. If, however, we do not intend to sell the security and it is not more-likely-than-not that we will be required to sell the security before recovery, we must determine what portion of the impairment is attributable to a credit loss, which occurs when the amortized cost basis of the security exceeds the present value of the cash flows expected to be collected from the security. If there is no credit loss, there is no other-than-temporary impairment. If there is a credit loss, other-than-temporary impairment exists, and the credit loss must be recognized in net income and the remaining portion of impairment must be recognized in other comprehensive income (loss). For equity securities, impairment is considered to be other-than-temporary based on our ability and intent to hold the investment until a recovery of fair value. Other-than-temporary impairment of an equity security results in a write-down that must be included in net income. We regularly review each investment security for other-than-temporary impairment based on criteria that includes the extent to which cost exceeds market price, the duration of that market decline, the financial health of and specific prospects for the issuer, our best estimate of the present value of cash flows expected to be collected from debt securities, our intention with regard to holding the security to maturity and the likelihood that we would be required to sell the security before recovery.

Other Real Estate Owned (OREO)

Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value less costs to sell at the date of foreclosure. Subsequent to foreclosure, management periodically performs valuations of the foreclosed assets based on updated appraisals, general market conditions, recent sales of similar properties, length of time the properties have been held, and our ability and intention with regard to continued ownership of the properties. The Company may incur additional write-downs of foreclosed assets to fair value less costs to sell if valuations indicate a further deterioration in market conditions.

Results of Operations

The Company's net income in 2016 was $8.1 million compared to $7.8 million in 2015, an increase of $234,000 on a year-over-year basis. For 2016, the earnings per diluted share were $1.13 compared to earnings per diluted share of $1.09 for 2015.

Return on average assets (“ROA”) measures how effectively the Company employs its assets to produce net income.  The ROA for the Company was 0.61% for the year ended December 31, 2016 compared to 0.62% for the years ended December 31, 2015, and 2014.  Return on average equity (“ROE”), another measure of earnings performance, indicates the amount of net income earned in relation to the average equity capital invested.  ROE was 6.34%, 6.25%, and 6.40% for the years ended December 31, 2016, 2015 and 2014, respectively.

The following table reflects an analysis of the Company’s net interest income using the daily average balances of the Company’s assets and liabilities as of December 31.  

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	Years Ended December 31,
	2016							2015							2014
(Dollars in thousands)	Average Balance			Income/ Expense		Yield/ Rate (2)		Average Balance			Income/ Expense		Yield/ Rate (2)		Average Balance			Income/ Expense		Yield/ Rate (2)
Assets:
Securities:
Taxable	$	320,250		$	7,716	2.41	%	$	319,705		$	7,893	2.47	%	$	282,198		$	7,193	2.55	%
Tax-exempt (1)	50,373			2,576		5.11	%	51,732			2,732		5.28	%	56,729			3,238		5.71	%
Total securities	$	370,623		$	10,292	2.78	%	$	371,437		$	10,625	2.86	%	$	338,927		$	10,431	3.08	%
Loans:
Taxable	$	834,810		$	33,773	4.05	%	$	771,207		$	32,457	4.21	%	$	741,028		$	33,810	4.56	%
Tax-exempt (1)	604			33		5.46	%	609			33		5.42	%	643			34		5.29	%
Total loans (3)	$	835,414		$	33,806	4.05	%	$	771,816		$	32,490	4.21	%	$	741,671		$	33,844	4.56	%
Interest-bearing deposits with other institutions	40,672			164		0.40	%	49,201			106		0.22	%	71,275			162		0.23	%
Total earning assets	$	1,246,709		$	44,262	3.55	%	$	1,192,454		$	43,221	3.62	%	$	1,151,873		$	44,437	3.86	%
Less: allowances for loan losses	(11,311		)					(11,853		)					(12,241		)
Total non-earning assets	80,980							77,456							77,834
Total assets	$	1,316,378						$	1,258,057						$	1,217,466
Liabilities:
Interest-bearing deposits:
Checking	$	351,764		$	767	0.22	%	$	343,026		$	693	0.20	%	$	339,996		$	651	0.19	%
Regular savings	130,357			241		0.18	%	119,989			223		0.19	%	113,363			212		0.19	%
Money market savings	77,763			185		0.24	%	70,239			136		0.19	%	73,232			139		0.19	%
Time deposits:
$100,000 and over	146,406			1,290		0.88	%	138,860			1,220		0.88	%	125,904			1,232		0.98	%
Under $100,000	111,097			1,052		0.95	%	106,023			1,190		1.12	%	129,021			1,655		1.28	%
Total interest-bearing deposits	$	817,387		$	3,535	0.43	%	$	778,137		$	3,462	0.44	%	$	781,516		$	3,889	0.50	%
Securities sold under agreements to repurchase	31,076			3		0.01	%	30,095			64		0.21	%	36,899			318		0.86	%
FHLB borrowings and subordinated debt	79,751			886		1.11	%	68,977			681		0.99	%	70,141			1,036		1.48	%
Federal funds purchased	15			—		—		1			—		—		1			—		—
Total interest-bearing liabilities	$	928,229		$	4,424	0.48	%	$	877,210		$	4,207	0.48	%	$	888,557		$	5,243	0.59	%
Non-interest bearing liabilities
Demand deposits	247,214							241,996							199,273
Other liabilities	13,832							13,602							11,059
Total liabilities	$	1,189,275						$	1,132,808						$	1,098,889
Shareholders’ equity	127,103							125,249							118,577
Total liabilities and Shareholders’ equity	$	1,316,378						$	1,258,057						$	1,217,466
Net interest income (1)				$	39,838						$	39,014						$	39,194
Interest rate spread						3.07	%						3.14	%						3.27	%
Interest expense as a percent of average earning assets						0.35	%						0.35	%						0.46	%
Net interest margin						3.20	%						3.27	%						3.40	%

⁽¹⁾  Income and yields are reported on a tax equivalent basis assuming a federal tax rate of 34%.

⁽²⁾  Yields and rates have been annualized on a 366 day year for 2016 and a 365 day year for 2015 and 2014.

⁽³⁾  Total average loans include loans on nonaccrual status.

Net Interest Income

Net interest income represents the principal source of earnings for the Company.  Net interest income is the amount by which interest generated from earning assets exceeds the expense of funding those assets.  Changes in volume and mix of interest earning

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assets and interest bearing liabilities, as well as their respective yields and rates, have a significant impact on the level of net interest income.

Net interest income was $39.0 million for the year ended December 31, 2016 compared to $38.1 million for the year ended December 31, 2015 and 2014. The net interest margin of 3.20% for 2016 was 7 basis points lower than the net interest margin for 2015 and 20 basis points lower than the net interest margin for 2014. The net interest margin is calculated by dividing tax equivalent net interest income by total average earning assets.  Because a portion of interest income earned by the Company is nontaxable, the tax equivalent net interest income is considered in the calculation of this ratio.  The tax rate utilized in calculating the tax benefit for each of the reported periods is 34%.  The reconciliation of tax equivalent net interest income, which is not a measurement under GAAP, to net interest income is reflected in the table below.

	For the Years Ended December 31,
(Dollars in thousands)	2016		2015		2014
GAAP measures:
Interest income - loans	$	33,795	$	32,479	$	33,833
Interest income - investments & other	9,580		9,802		9,492
Interest expense - deposits	3,535		3,462		3,889
Interest expense - other borrowings	889		745		1,354
Net Interest Income	$	38,951	$	38,074	$	38,082
Plus:
Non-GAAP measures:
Tax Benefit Realized on:
Non-taxable interest income - municipal securities	$	876	$	929	$	1,101
Non-taxable interest income - loans	11		11		11
Tax Benefit Realized on Non-Taxable Interest Income	$	887	$	940	$	1,112
Tax Equivalent Net Interest Income	$	39,838	$	39,014	$	39,194

Net interest income for 2016 increased slightly by 2.3% when compared to 2015 and 2014 due to an increase in interest income, primarily stemming from loan growth of 6.8% in 2016. The cost of interest bearing liabilities for 2016 remained unchanged at 0.48% when compared to 2015 and declined by 11 basis points when compared to 2014.

The yield on the loan portfolio decreased by 16 basis points to 4.05% for 2016 compared to 4.21% for 2015 and decreased by 51 basis points compared to 4.56% for 2014. The decrease was primarily due to lower yields on newly originated loans as well as the repricing of existing loans at lower rates. Interest income from loans, on a tax-equivalent basis, increased by $1.3 million or 4.1% from the year ended December 31, 2015 and remained relatively unchanged when compared to 2014.

The average balance in the securities portfolio decreased by $814,000 and increased by $31.7 million compared to 2015 and 2014, respectively. The tax-equivalent yield on securities was 2.78% at December 31, 2016, lower by 8 basis points and lower by 30 basis points compared to 2015 and 2014, respectively.

The average balance of total interest-bearing deposits increased to $817.4 million at December 31, 2016, from $778.1 million at December 31, 2015 and $781.5 million at December 31, 2014. These increases were the result of strong growth in both business and retail deposit accounts.  The average balances in total time deposits increased by $12.6 million compared to 2015 and increased by $2.6 million compared to 2014 even as we redeemed maturing brokered deposits and experienced run off in core time deposits. The cost of total interest bearing deposits remained relatively unchanged when compared to 2015 and decreased by 7 basis points compared to 2014. The decline in the cost of total interest bearing deposits was primarily the result of reductions in rates for time deposits as maturing certificates of deposit rolled to lower rates.

The Company increased average FHLB borrowings by $10.8 million during 2016 compared to 2015 and increased borrowings by $9.6 million compared to 2014. Total interest expense for 2016 was $4.4 million, an increase of $217,000 and a decrease of $819,000 compared to 2015 and 2014, respectively. The cost of interest-bearing liabilities was unchanged from the year ended December 31, 2015, and decreased by 11 basis points from 2014 primarily due to reductions in rates on time deposits and wholesale borrowings.

Management believes that the net interest margin could decline slightly during 2017.  Based on conservative internal interest rate risk models and the assumption of a sustained low rate environment, the Company expects net interest income to trend downward throughout the next 12 months as loans and securities reprice and the decline in funding costs slows.  Targeted growth in earning assets and liability repricing opportunities may not fully mitigate the impact to the Company’s net interest margin.  The Asset/Liability Management Committee continues to focus on various strategies to manage the net interest margin.

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The following table analyzes changes in net interest income attributable to changes in the volume of interest-earning assets and interest-bearing liabilities compared to changes in interest rates, on a tax equivalent basis.  The change in interest due to both volume and rate has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each.  Nonaccrual loans are included in the average outstanding loans.

	Years Ended December 31,
(Dollars in thousands)	2016 vs. 2015 Increase (Decrease) Due to Changes in:									2015 vs. 2014 Increase (Decrease) Due to Changes in:
	Volume			Rate			Total			Volume			Rate			Total
Earning Assets:
Securities:
Taxable	$	14		$	(191	)	$	(177	)	$	917		$	(217	)	$	700
Tax-exempt (1)	(71		)	(85		)	(156		)	(274		)	(232		)	(506		)
Loans:
Taxable	2,481			(1,165		)	1,316			1,495			(2,848		)	(1,353		)
Tax-exempt (1)	—			—			—			(2		)	1			(1		)
Interest bearing deposits with other institutions	(14		)	72			58			(48		)	(8		)	(56		)
Total earning assets	$	2,410		$	(1,369	)	$	1,041		$	2,088		$	(3,304	)	$	(1,216	)
Interest-Bearing Liabilities:
Checking	$	18		$	56		$	74		$	6		$	36		$	42
Regular savings	19			(1		)	18			12			(1		)	11
Money market savings	16			33			49			(6		)	3			(3		)
Time deposits:
$100,000 and over	66			4			70			127			(139		)	(12		)
Under $100,000	61			(199		)	(138		)	(273		)	(192		)	(465		)
Total interest-bearing deposits	$	180		$	(107	)	$	73		$	(134	)	$	(293	)	$	(427	)
Securities sold under agreements to repurchase	2			(63		)	(61		)	(50		)	(204		)	(254		)
FHLB borrowings and subordinated debt	114			91			205			(17		)	(338		)	(355		)
Total interest-bearing liabilities	$	296		$	(79	)	$	217		$	(201	)	$	(835	)	$	(1,036	)
Change in net interest income	$	2,114		$	(1,290	)	$	824		$	2,289		$	(2,469	)	$	(180	)

⁽¹⁾           Income and yields are reported on tax equivalent basis assuming a federal tax rate of 34%.

Provision for Loan Losses

The Company’s loan loss provision during 2016, 2015 and 2014 were $1.9 million, $2.3 million and $2.0 million, respectively.  The decrease in provision during 2016 compared to 2015 was due to certain loans that were charged-off in 2016 which had been specifically reserved for in prior periods. The increase in provision during 2015 was due to certain loans that were charged-off in 2015 which had not been specifically reserved for in prior periods.

Non-interest Income

Non-interest income has been and will continue to be an important factor for increasing profitability.  Management continues to review opportunities to increase non-interest income.  Non-interest income was $10.7 million for the year ended December 31, 2016 compared to $9.6 million for 2015 and $14.3 million for 2014.  The primary reason for the increase in non-interest income for 2016 was the result of net gains recognized on the sales of available for sale securities totaling $1.6 million for 2016 compared to $140,000 for 2015. The decrease in non-interest income when compared to 2014 was due to the Company's sale of its majority interest in Southern Trust Mortgage during the second quarter of 2014, which resulted in minimal revenue from the sale of residential mortgage loans in 2015. The following table depicts the changes in non-interest income:

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(Dollars in thousands)	Years Ended December 31,
	2016		2015			2014
Service charges on deposit accounts	$	1,154	$	1,061		$	1,163
Trust services income	4,643		4,785			4,362
ATM fee income, net	762		797			739
Gains (losses) on sales of loans held for sale, net	32		(1		)	4,860
Gains on sales of securities available for sale, net	1,554		140			186
Commissions on investment sales	555		547			611
Bank owned life insurance	652		656			662
Gain on sale of majority interest in consolidated subsidiary	—		—			24
Other operating income	1,386		1,636			1,659
Total non-interest income	$	10,738	$	9,621		$	14,266

Revenues and expenses for Southern Trust Mortgage, through May 15, 2014, are reflected in the Company’s consolidated financial statements. Accordingly, gains on loans held for sale and fees on mortgages held for sale generated by Southern Trust Mortgage were being reported as part of the consolidated non-interest income. The decline in gains on loans held for sale was the result of the Company's sale of its majority interest in Southern Trust Mortgage on May 15, 2014, as noted above.  

Income from the wealth management segment is produced by Middleburg Trust Company and Middleburg Investment Services. Middleburg Trust Company produced fees of $4.6 million, $4.8 million and $4.4 million for the years ended December 31, 2016, 2015 and 2014, respectively. Assets under management were $1.93 billion at December 31, 2016, unchanged when compared to December 31, 2015 and and increase from $1.87 billion at December 31, 2014. Commissions on investment sales increased to $555,000 for the year ended December 31, 2016, compared to $547,000 for the year ended December 31, 2015 and decreased when compared to $611,000 for 2014. Middleburg Investment Group continues to expand the integration of Middleburg Trust Company and Middleburg Investment Services into a focused wealth management program for all of the Company’s clients.  Wealth management services are available at each of the Company's financial service centers. 

Net gains on the sales of securities available for sale increased to $1.6 million for the year ended December 31, 2016 compared to $140,000 and $186,000 for the years ended December 31, 2015 and 2014, respectively. Securities were sold in order to fund loan originations and pay off borrowings and high cost maturing time deposits.

Other operating income was $1.4 million for the year ended December 31, 2016, compared to $1.6 million and $1.7 million for the same period in 2015 and 2014.  These decreases are primarily the result of income received from a large recovery of expenses in the first quarters of 2015 and 2014 related to a loan that had been charged off prior to 2014.

Non-interest Expense

Non-interest expense increased to $37.0 million for the year ended December 31, 2016, compared to $34.9 million for 2015 and $40.6 million for 2014.  Non-interest expense as a percentage of total average assets was 2.8% for the years ended December 31, 2016 and 2015 and 3.3% for the year ended December 31, 2014. Non-interest expenses increased for 2016 as a result of increased expenses related to the pending merger with Access National Corporation. Total merger related expenses for 2016 were $1.29 million, of which $1.2 million were legal and advisory fees. The primary reasons for the decline in non-interest expense for 2015 compared to 2014 were expense reduction initiatives at the Company and the Company's sale of its majority interest in Southern Trust Mortgage during the second quarter of 2014. The following table depicts the changes in non-interest expense:

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(Dollars in thousands)	Years Ended December 31,
	2016		2015		2014
Salaries and employee benefits	$	18,757	$	18,435	$	22,601
Occupancy and equipment	4,881		5,106		6,177
Advertising	200		288		365
Amortization	1,211		1,001		791
Computer operations	2,582		2,337		1,893
Other real estate owned, net	363		284		256
Other taxes	947		915		849
Federal deposit insurance	748		786		899
Audits and exams	589		585		630
Legal and advisory fees	1,202		1,029		1,324
Merger related expenses	1,289		—		—
Other operating expenses	4,190		4,091		4,776
Total non-interest expense	$	36,959	$	34,857	$	40,561

Salaries and employee benefits increased by $322,000 to $18.8 million when comparing the year ended December 31, 2016 to 2015, and decreased by 17.0% when compared to 2014. The increase when comparing 2016 to 2015 was due to higher incentive accruals in 2016 as we aligned compensation to income and growth targets. The decrease when comparing 2016 to 2014 was primarily the result of the sale of the Company's majority interest in Southern Trust Mortgage in the second quarter of 2014.

Occupancy and equipment expenses decreased to $4.9 million for the year ended December 31, 2016, compared to $5.1 million for the same period in 2015 and decreased by 21.0% compared to 2014.  The primary reason for the lower expenses in this category was the sale of Southern Trust Mortgage in the second quarter of 2014.

Amortization expense increased to $1.2million compared to $1.0 million in 2015 and increased by 53.1% compared to 2014.   The increase in amortization expenses in 2016 compared to 2015 and 2014 was largely due to the Company's fourth investment in low income housing tax credit funds.

Computer operations expense increased to $2.6 million for the year ended December 31, 2016 from $2.3 million and $1.9 million for the years ended December 31, 2015 and 2014, respectively. The primary reasons for the increase in expenses were costs related to conversion to a new on-line banking platform.

Expenses relating to other real estate owned (OREO) increased to $363,000 for the year ended December 31, 2016 compared to $284,000 for the year ended December 31, 2015 and $256,000 for the year ended December 31, 2014. Changes in the level of OREO related expenses are determined by the volume of OREO properties recorded during the periods, adjustments based on fair value of existing properties, the condition and maintenance of properties held during the periods and gains and losses incurred on the sale of properties. OREO valuation adjustments were $310,000, $79,000 and ($3,000) for the years ended December 31, 2016, 2015 and 2014, respectively. Net gains of $66,000 were recognized on OREO sales for the year ended December 31, 2016 compared to net losses of $100,000 and $14,000 for the years ended December 31, 2015 and 2014, respectively.

Legal and advisory fees increased in 2016 to $1.2 million compared to $1.0 million and $1.3 million for the years ended December 31, 2015 and 2014, respectively.  The primary reason for this increase when compared to the prior year is the result of legal and advisory fees related to existing problem loan relationships.

Income Taxes

Reported income tax expense was $2.8 million for the year ended December 31, 2016, compared to $2.7 million for the year ended December 31, 2015 and $2.3 million for the year ended December 31, 2014. The effective tax rate was 25.9%, 25.7%, and 23.8% for 2016, 2015 and 2014, respectively. The primary reason for the changes in the effective tax rates was related to the proportion of tax-exempt income and low income housing tax credits to pre-tax income. Note 10 of the Company’s consolidated financial statements provides a reconciliation between the amount of income tax expense computed using the federal statutory rate and the Company’s actual income tax expense.  

Summary of Financial Results by Quarter

The following table summarizes the major components of the Company’s results of operations for each quarter of the last three fiscal years.

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	2016 Quarter Ended
(Dollars in thousands except per share data)	March 31		June 30		September 30		December 31
Net interest income	$	9,749	$	9,969	$	9,617	$	9,616
Net interest income after provision for loan losses	9,449		9,919		9,914		7,816
Other income	2,045		2,160		2,106		2,873
Net securities gains	163		210		138		1,043
Other expense	9,014		8,751		9,174		10,020
Income before income taxes	2,643		3,538		2,984		1,712
Net income	$	2,055	$	2,653	$	2,264	$	1,092
Diluted earnings per common share	$	0.29	$	0.37	$	0.32	$	0.15
Dividends per common share	0.13		0.13		0.13		0.13

	2015 Quarter Ended
(Dollars in thousands except per share data)	March 31		June 30		September 30		December 31
Net interest income	$	9,631	$	9,313	$	9,659	$	9,471
Net interest income after provision for loan losses	9,181		9,738		10,091		6,771
Other income	2,754		2,201		2,171		2,355
Net securities gains	101		37		—		2
Other expense	8,748		8,881		9,090		8,138
Income before income taxes	3,289		3,095		3,171		990
Net income	$	2,448	$	2,280	$	2,321	$	781
Diluted earnings per common share	$	0.34	$	0.32	$	0.32	$	0.11
Dividends per common share	0.10		0.10		0.13		0.13

	2014 Quarter Ended
(Dollars in thousands except per share data)	March 31		June 30			September 30		December 31
Net interest income	$	9,711	$	9,510		$	9,545	$	9,316
Net interest income after provision for loan losses	8,823		9,438			8,995		8,866
Other income	5,687		4,073			2,108		2,212
Net securities gains	63		66			12		45
Other expense	12,004		10,997			8,231		9,329
Income before income taxes	2,569		2,580			2,884		1,794
Net income	1,820		1,913			2,121		1,632
Net (income) loss attributable to non-controlling interest	157		(59		)	—		—
Net income attributable to Middleburg Financial Corporation	$	1,977	$	1,854		$	2,121	$	1,632
Diluted earnings per common share	$	0.28	$	0.26		$	0.30	$	0.22
Dividends per common share	0.07		0.07			0.10		0.10

Financial Condition

The Company’s total assets were $1.3 billion at December 31, 2016, a decrease of 1.72% compared to December 31, 2015.  Securities decreased by $66.5 million or 17.6% from 2015 to 2016, excluding restricted securities.  Net loans increased by $54.1 million or 6.8% from 2015 to 2016.  Total liabilities were $1.1 billion as of December 31, 2016, a decrease of 2.2% compared to December 31, 2015.  Total shareholders’ equity at year end 2016 and 2015 was $126.7 million and $123.6 million, respectively.

Loans

Total outstanding loans were 69.0% of average earning assets with a tax equivalent yield of 4.05% at December 31, 2016. Nonaccrual loans and loans past due more than 90 days and still accruing were 1.1% of average loans at December 31, 2016.  The Company is focused on originating and maintaining high credit quality loans as a principal means to increase revenue.  

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	Years Ended December 31,
(Dollars in thousands)	2016		2015		2014		2013		2012
Real estate loans:
Construction	$	35,627	$	39,673	$	33,050	$	36,025	$	50,218
Secured by farmland	16,768		19,062		19,708		16,578		11,876
Secured by 1-4 family residential	314,045		280,096		265,216		273,384		260,620
Other real estate loans	283,613		258,035		255,236		260,333		254,930
Commercial loans	190,767		190,482		163,269		129,554		118,573
Consumer loans	19,277		18,333		18,367		12,606		13,260
Total gross loans	860,097		805,681		754,846		728,480		709,477
Less allowance for loan losses	11,404		11,046		11,786		13,320		14,311
Net loans	$	848,693	$	794,635	$	743,060	$	715,160	$	695,166

Changes in the loan portfolio at December 31, 2016 compared to December 31, 2015 were as follows:

• Total loans were $860.1 million, an increase of 6.8% from $805.7 million as of December 31, 2015. 

• Real estate construction loans consisted primarily of pre-sold 1-4 family residential loans and a marginal amount of commercial construction loans.  These loans represented 4.1% of total loans, a decrease of approximately $4.0 million from $39.7 million.  

• Loans secured by farmland decreased by $2.3 million from $19.1 million to $16.8 million.

• Loans secured by 1-4 family residential real estate represented 36.5% of total loans, an increase of $33.9 million.  

• Other real estate loans are typically non-farm, non-residential real estate loans which are, in most cases, owner-occupied commercial buildings.  Other real estate loans represented 33.0% of total loans, an increase of $25.6 million.

• Commercial loans, which consist of secured and unsecured loans to small businesses, increased by $285,000.

• Consumer loans increased by $944,000 compared to 2015.

Consistent with its focus of providing community-based financial services, the Company generally does not extend loans outside its principal market area.  The Company’s market area for its lending services encompasses Fairfax, Fauquier and Loudoun and Prince William counties, as well as, the City of Williamsburg and the City of Richmond where it operates full service financial centers.

At December 31, 2016, the Company did not have loans in any one industry in excess of 25% of its total loan portfolio.  However, because of the nature of the Company’s market, loan collateral is predominantly real estate.

The following table reflects the remaining maturity distribution of selected loan categories at December 31, 2016:

(Dollars in thousands)	Commercial, Financial and Agricultural		Real Estate Construction
Within 1 year	$	3,602	$	4,626
Variable Rate:
1-5 years	28,474		10,006
After 5 years	70,337		10,302
Total	98,811		20,308
Fixed Rate:
1-5 years	14,337		7,654
After 5 years	74,017		3,039
Total	$	88,354	$	10,693
Total Maturities	$	190,767	$	35,627

Asset Quality

The Company has policies and procedures designed to control credit risk and to maintain the quality of its loan portfolio.  These include underwriting standards for new originations and ongoing monitoring and reporting of asset quality and the adequacy of the allowance for loan losses.  As of December 31, 2016, we had $27.5 million in total nonperforming assets, which consist of loans more than 90 days past due and still accruing, nonaccrual loans, performing restructured loans and foreclosed and repossessed assets.  This is an increase of $2.0 million when compared to December 31, 2015.  Other real estate owned increased by 51.7% to $5.1 million at December 31, 2016, compared to $3.3 million at December 31, 2015.  Loans more than 90 days past due and still accruing were $781,000 at December 31, 2016 compared to $278,000 at December 31, 2015.

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The Company sold $4.3 million and $1.0 million in loans on a non-recourse basis in 2016 and 2015, respectively, of which $1.2 million were on nonaccrual status and $1.0 million were on nonaccrual and TDR status, respectively, at the time of sale. Specific reserves associated with these loans were $339,000 at December 31, 2016 compared to no specific reserves for these loans at December 31, 2015.

Nonperforming Assets

Loans are placed on nonaccrual status when collection of principal and interest is doubtful, generally when a loan becomes 90 days past due.  There are three negative implications for earnings when a loan is placed on nonaccrual. 

• All interest accrued but unpaid at the date the loan is placed on nonaccrual is either deducted from interest income or written-off as a loss.  

• Accruals of interest are discontinued until it becomes certain that both principal and interest can be repaid.  

• There may be actual losses that require additional provisions for loan losses to be charged against earnings.  

For real estate loans, upon foreclosure, the balance of the loan is transferred to “Other Real Estate Owned” (“OREO”) and carried at fair market value based on current appraisals and other current market trends, less estimated selling costs.  If a write-down is necessary at the time of foreclosure, the amount is charged-off against the allowance for loan losses.  A review of the recorded property value for OREO is performed in accordance with policy standards, and if market conditions indicate that the recorded value exceeds the fair market value, additional write-downs of the property value are charged directly to operations.

The table below summarizes nonperforming assets at December 31 of each of the past five years.

	Years ended December 31,
(Dollars in thousands)	2016			2015			2014			2013			2012
Nonaccrual loans	$	8,359		$	8,784		$	9,944		$	19,752		$	21,664
Restructured loans (1)	12,410			12,058			4,295			4,674			5,132
Accruing loans greater than 90 days past due	781			278			30			808			1,044
Total nonperforming loans	$	21,550		$	21,120		$	14,269		$	25,234		$	27,840
Other real estate owned	5,073			3,345			4,051			3,424			9,929
Repossessed Assets	843			1,043			1,132			—			—
Total nonperforming assets	$	27,466		$	25,508		$	19,452		$	28,658		$	37,769
Allowance for loan losses	$	11,404		$	11,046		$	11,786		$	13,320		$	14,311
Nonperforming loans to gross loans	2.5		%	2.6		%	1.9		%	3.5		%	3.9		%
Allowance for loan losses to nonperforming loans	52.9		%	52.3		%	82.6		%	52.8		%	51.4		%
Nonperforming assets to total assets	2.2		%	2.0		%	1.6		%	2.3		%	3.1		%

⁽¹⁾ Amount reflects restructured loans that are not included in nonaccrual loans.

Nonperforming loans increased by $430,000, or 2.0%, from December 31, 2015 while the allowance for loan losses balance increased by $358,000, or 3.2%, during the same period. Specific reserves on impaired loans at December 31, 2016 were $3.8 million, an increase of 44.1% when compared to December 31, 2015.  

Also included in nonperforming loans are troubled debt restructurings (“TDRs”). The total balance of TDRs at December 31, 2016 was $14.4 million of which $2.0 million was included in the Company’s nonaccrual loan totals at that date and $12.4 million represented loans performing as agreed. This compares with $15.5 million in total TDRs at December 31, 2015, a decrease of $1.1 million.  The amount of the valuation allowance related to TDRs was $1.1 million and $1.6 million as of December 31, 2016 and 2015, respectively.

During the year ended December 31, 2016, the Company modified five loans considered to be TDRs, which totaled $2.1 million, compared to seven modifications considered to be TDRs, which totaled $14.8 million during 2015. There were no outstanding commitments to lend additional amounts to TDR related borrowers at December 31, 2016.

The Company requires six timely consecutive monthly payments be made and future payments reasonably assured, before a restructured loan that has been placed on nonaccrual can be returned to accrual status.  The Company does not utilize formal modification programs or packages when loans are considered for restructuring.  Any loan restructuring is based on the borrower’s circumstances and may include modifications to more than one of the terms and conditions of the loan.

The Company has not performed any commercial real estate or other type of loan workout whereby the existing loan would have been structured into multiple new loans.

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Allowance For Loan Losses

The allowance for loan losses was 1.33% and 1.37% of gross loans at December 31, 2016 and 2015, respectively.

The allowance for loan losses was 52.9% of nonperforming loans at December 31, 2016 compared to 52.3% at December 31, 2015 and 82.6% at December 31, 2014. The lower coverage ratio from 2014 to 2015 was because of an increase in TDRs in 2015 resulting from the restructuring of two loans that are part of a single relationship. One of these loans was downgraded which resulted in an increase in accruing TDRs. While this loan was restructured and downgraded in 2015, the Company had properly classified the loan as impaired at December 31, 2014, and as a result, no additional reserves were required in 2015 for this loan. Management evaluates nonperforming loans relative to their collateral value and makes appropriate reductions in the carrying value of those loans based on that review.

Loans past due 90 days or greater increased $5.6 million from $1.4 million at December 31, 2015 to $7.0 million at December 31, 2016. The majority of this increase was related to existing impaired loans that had become past due as of December 31, 2016. One loan of approximately $1.9 million was identified as impaired in the prior year and one loan of approximately $2.0 million arose during the current year, both were individually evaluated for impairment and appropriately reserved for at December 31, 2016. Specific reserves related to impaired loans increased $1.2 million from $2.7 million at December 31, 2015 to $3.8 million at December 31, 2016. This increase, offset in part by our measured historical loss experience, attributed to the net increase in the allowance for loan losses from $11.0 million at December 31, 2015 to $11.4 million at December 31, 2016.

For a discussion of the Company’s accounting policies with respect to the allowance for loan losses, see “Critical Accounting Policies – Allowance for Loan Losses”.

The following table depicts the transactions, in summary form, related to the allowance for loan losses in each year presented:

	Years Ended December 31,
(Dollars in thousands)	2016			2015			2014			2013			2012
Balance, beginning of year	$	11,046		$	11,786		$	13,320		$	14,311		$	14,623
Adjustment for the sale of majority interest in consolidated subsidiary	$	—		$	—		$	(95	)	$	—		$	—
Provision for loan losses	$	1,853		$	2,293		$	1,960		$	109		$	3,438
Charge-offs:
Real estate loans:
Construction	$	388		$	—		$	1,186		$	394		$	2,152
Secured by 1-4 family residential	1,021			344			1,380			785			893
Other real estate loans	126			9			747			97			760
Commercial loans	639			3,281			959			75			394
Consumer loans	20			57			36			30			72
Total charge-offs	$	2,194		$	3,691		$	4,308		$	1,381		$	4,271
Recoveries:
Real estate loans:
Construction	$	129		$	246		$	258		$	68		$	2
Secured by 1-4 family residential	395			359			342			140			388
Other real estate loans	32			28			110			37			86
Commercial loans	85			14			104			9			12
Consumer loans	58			11			95			27			33
Total recoveries	$	699		$	658		$	909		$	281		$	521
Net charge-offs	$	1,495		$	3,033		$	3,399		$	1,100		$	3,750
Balance, end of year	$	11,404		$	11,046		$	11,786		$	13,320		$	14,311
Allowance for loan losses to gross loans	1.33		%	1.37		%	1.56		%	1.83		%	2.02		%
Net charge-offs to average loans	0.18		%	0.39		%	0.46		%	0.15		%	0.54		%

Late in the fourth quarter of 2015, the Company recognized a loan charge-off of $3.0 million related to a participation totaling $4.0 million secured by receivables and inventory. The Company was notified by the lead lender, another community bank in Virginia, that the loan relationship had become impaired. The impairment was related to false accounts receivable reports by the borrower to the lead lender which led to advances by the lead lender that were largely unsecured.

The allocation of the allowance (dollars in thousands) at December 31 for the years indicated and the ratio of related outstanding loan balances to total loans were:

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	Real Estate Construction				Real Estate Secured by Farmland				1-4 Family Residential				Other Real Estate Loans				Commercial				Consumer
	Balance		% Total Loans		Balance		% Total Loans		Balance		% Total Loans		Balance		% Total Loans		Balance		% Total Loans		Balance		% Total Loans
2016	$	939	4.1	%	$	127	2.0	%	$	2,262	36.5	%	$	3,167	33.0	%	$	3,933	22.2	%	$	976	2.2	%
2015	905		4.9		192		2.4		3,341		34.8		3,761		32.0		1,706		23.6		1,141		2.3
2014	550		4.4		179		2.6		3,966		35.1		3,916		33.8		2,354		21.6		821		2.5
2013	847		5.0		166		2.3		6,734		37.5		3,506		35.7		1,890		17.8		177		1.7
2012	1,258		7.1		135		1.7		6,276		36.7		4,348		35.9		2,098		16.8		196		1.8

The Company has allocated the allowance according to the amount deemed reasonably necessary to provide for the possibility of losses being incurred within each loan category.  The allocation of the allowance should not be interpreted as an indication that loan losses in future years will occur in the same proportions that they may have in prior years or that the allocation indicates future loan loss trends.  Additionally, the proportion allocated to each loan category is not the total amount that may be available for future losses that could occur within such categories since the total allowance is a general allowance applicable to the total portfolio.

Securities

The Company manages its investment securities portfolio consistent with established policies that include guidelines for earnings, rate sensitivity, liquidity and pledging needs. 

The Company accounts for securities under applicable accounting standards.  These standards require classification of investments into three categories, “held to maturity” (“HTM”), “available for sale” (“AFS”), or “trading,” as further defined in Note 1 to the Company’s consolidated financial statements.  The Company does not maintain a trading account and has classified no securities in this category.  HTM securities are required to be carried at amortized cost.  The HTM classification places restrictions on the Company’s ability to sell securities or to transfer securities into other categories.  AFS securities are carried at fair value.  The unrealized gains or losses, net of deferred income taxes, are reflected in shareholders’ equity.  

The carrying value of the securities portfolio, excluding restricted securities, was $312.3 million at December 31, 2016, a decrease of $66.5 million from the carrying value of $378.8 million at December 31, 2015.  The unrealized gains and losses on the AFS securities were $2.3 million and $4.8 million at December 31, 2016, respectively.

The securities portfolio represented approximately 25.0%, 31.8%, and 30.4% of the average earning assets of the Company at December 31, 2016, 2015 and 2014, respectively.   The carrying values of securities available for sale at the dates indicated were:

Available for Sale	Years Ended December 31,
(Dollars in thousands)	2016		2015		2014
U.S. government agency securities	$	73,184	$	78,940	$	41,397
Obligations of states and political subdivisions	63,373		75,593		57,740
Mortgage-backed securities	107,984		144,438		201,336
Other securities	57,026		75,600		47,790
	$	301,567	$	374,571	$	348,263

The carrying values of securities held to maturity at the dates indicated were:

Held to Maturity	Years Ended December 31,
(Dollars in thousands)	2016		2015		2014
Obligations of states and political subdivisions	$	6,433	$	1,457	$	1,500
Corporate securities	4,250		2,750		—
	$	10,683	$	4,207	$	1,500

For the periods represented above, there were no losses related to other-than-temporary impairment (OTTI).

The portfolio is managed primarily to provide superior returns without sacrificing interest rate, market and credit risk.  Through the asset/liability process, the Company considers the securities portfolio as a liquidity source in the event that funding is needed quickly within a 30-day period of time. The Company holds in its securities portfolio investments that adjust or float according to changes in benchmark rates such as the London InterBank Offered Rate ("LIBOR").  These holdings are not considered speculative but instead necessary for good asset/liability management. The following table describes the maturity distribution

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and yields of the Company's securities portfolio, on a tax equivalent basis, at December 31, 2016. This table excludes Federal Reserve Stock of $1.7 million and Federal Home Loan Bank Stock of $2.8 million.

	Due in 1 year or less				Due after 1 year through 5 years				Due after 5 years through 10 years				Due after 10 years and Equities				Total
(Dollars in thousands)	Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield
Securities available for sale
U.S. government agencies	$	340	46.47	%	$	1,050	2.34	%	$	6,765	2.43	%	$	65,029	2.18	%	$	73,184	1.85	%
Mortgage-backed securities	—		—	%	4,641		3.01	%	513		3.84	%	102,830		2.29	%	107,984		2.29	%
Other (2)	100		1.30	%	7,651		2.61	%	20,564		2.54	%	52,204		309.00	%	80,519		2.54	%
Total taxable	$	440	15.92	%	$	13,342	2.65	%	$	27,842	2.93	%	$	220,063	2.52	%	$	261,687	2.23	%
Tax-exempt securities (1)	337		1.50	%	520		2.88	%	5,330		2.67	%	33,693		3.57	%	39,880		2.43	%
Total securities available for sale	$	777	12.32	%	$	13,862	2.71	%	$	33,172	2.87	%	$	253,756	2.78	%	$	301,567	2.28	%
Securities held to maturity
Tax-exempt securities (1)	$	—	—	%	$	—	—	%	$	—	—	%	$	6,433	2.58	%	$	6,433	2.58	%
Other (2)	—		—	%	—		—	%	4,250		6.13	%	—		—	%	4,250		6.13	%
Total securities held to maturity	$	—	—	%	$	—	—	%	$	4,250	6.13	%	$	6,433	2.58	%	$	10,683	3.99	%

⁽¹⁾  Yields on tax-exempt securities, which includes tax-exempt obligations of states and political subdivisions have been computed on a tax-equivalent basis assuming a federal tax rate of 34%.

⁽²⁾  Includes corporate securities, asset-backed securities and taxable obligations of states and political subdivisions.

Goodwill and Other Intangible Assets

As of December 31, 2016, the Company recognized one consolidated subsidiary, Middleburg Investment Group ("MIG"), for the purpose of goodwill evaluation and reporting.   MIG is the parent company of Middleburg Trust Company.  

The carrying value of goodwill was $3.5 million at December 31, 2016, a decrease of $171,000 from $3.6 million at December 31, 2015.  Identifiable intangible assets were $44,000 and $215,000 at December 31, 2016 and 2015, respectively. Identifiable intangible assets are amortized over the period of expected benefit, which is 15 years. At December 31,2016, the remaining amortization expense of identifiable intangible assets was $44.000.

Based on the results of the Company's impairment evaluation of goodwill, the estimated fair value of MIG exceeds the carrying value as of December 31, 2016, therefore no goodwill impairment charge was recorded.

Deposits

Deposits continue to be an important funding source and primary supply of the Company’s growth.  The Company’s strategy has been to increase its core deposits at the same time that it is controlling its cost of funds.  The maturity of the branch network, as well as increased advertising campaigns, have contributed to the growth in deposits over the last several years.  By monitoring interest rates within the local market and that of alternative funding sources, the Company is able to price the deposits effectively to develop a core base of deposits in each market.

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The following table is a summary of average deposits and average rates paid on those deposits:

	Years Ended December 31,
	2016				2015				2014
(Dollars in thousands)	Amount		Rate		Amount		Rate		Amount		Rate
Non-interest-bearing deposits	$	247,214			$	241,996			$	199,273
Interest-bearing deposits:
Checking	$	351,764	0.22	%	$	343,026	0.20	%	$	339,996	0.19	%
Regular savings	130,357		0.18	%	119,989		0.19	%	113,363		0.19	%
Money market savings	77,763		0.24	%	70,239		0.19	%	73,232		0.19	%
Time deposits:
$ 100,000 and over	146,406		0.88	%	138,860		0.88	%	125,904		0.98	%
Under $ 100,000	111,097		0.95	%	106,023		1.12	%	129,021		1.28	%
Total interest-bearing deposits	$	817,387	0.43	%	$	778,137	0.44	%	$	781,516	0.50	%
Total	$	1,064,601			$	1,020,133			$	980,789

Average total deposits increased by 4.4% during 2016, by 4.0% during 2015 and by 1.6% during 2014.  At December 31, 2016, the average balance of non-interest bearing deposits increased by 2.2% and 21.4% compared to December 31, 2016 and 2015, respectively.  

The Company will continue to focus on core deposit growth as the primary source of liquidity and stability.  The Company offers individuals and small to medium-sized businesses a variety of deposit accounts, including demand and interest checking, money market, savings and time deposit accounts.  The Company also had $36.5 million in brokered deposits as of December 31, 2016 compared to $38.7 million in brokered deposits as of December 31, 2015. This is reflected in the balance of total time deposits.

The following table is a summary of the maturity distribution of certificates of deposit equal to or greater than $100,000 as of December 31, 2016:

Within three months		Three to six months		Six to twelve months		Over one year		Total		Percent of total deposits
(Dollars in thousands)
$	19,064	$	35,897	$	63,886	$	16,058	$	134,905	12.8	%

Financial Instruments with Off-Balance Sheet Risk and Credit Risk and Contractual Obligations

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers and to reduce its own exposure to fluctuations in interest rates.  These financial instruments include commitments to extend credit, standby letters of credit and interest rate swaps.  Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheet.  The contract or notional amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments.

The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments.  The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

A summary of the Company’s exposure to off-balance sheet risk as of December 31, 2016 and 2015 is as follows:

(Dollars in thousands)	2016		2015
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit	$	132,669	$	153,806
Standby letters of credit	4,998		3,718

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.  Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.  Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.  The Company evaluates each customer’s credit worthiness on a case-by-case basis.  The amount of collateral obtained, if deemed necessary upon extension of credit, is based on management’s credit evaluation of the counterparty.  Collateral held varies but may include accounts receivable, inventory, property and equipment, and income-producing commercial properties.

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Unfunded commitments under lines of credit are commitments for possible future extensions of credit to existing customers.  Those lines of credit may not be drawn upon to the total extent to which the Company is committed.

Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party.  Those guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing, and similar transactions.  The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.  The Company holds certificates of deposit, deposit accounts, and real estate as collateral supporting those commitments for which collateral is deemed necessary.

The Company utilizes derivative financial instruments as a part of its asset-liability management program to control exposure to interest rate changes and resulting fluctuations in market values and cash flows associated with certain financial instruments. The Company accounts for derivatives in accordance with ASC 815, "Derivatives and Hedging". Under current guidance, derivative transactions are classified as either cash flow hedges or fair value hedges or they are not designated as hedging instruments. The Company designates each transaction at its inception.

The Company documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions.  This process includes linking all derivatives that are designated as fair value hedges or cash flow hedges to specific assets or liabilities on the balance sheet.  The Company also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are effective in offsetting changes in fair values or cash flows of hedged items.

As of December 31, 2016, the Company had cash flow hedges on its balance sheet as well as derivative financial instruments that have not been designated as hedging instruments.  The derivatives are reported at their fair values as of each balance sheet date. For designated cash flow hedges, the effective portions of changes in the fair value of the derivative are recorded in other comprehensive income (loss) and are recognized on the income statement when the hedged item affects earnings.  Ineffective portions of changes in the fair value of cash flow hedges are recognized in earnings as are changes in market value of derivatives not designated as hedging instruments.

Information concerning each of the Company's categories of derivatives as of December 31, 2016 and 2015 is presented in Note 24 to the consolidated financial statements.

A summary of the Company’s contractual obligations at December 31, 2016 is as follows:

(Dollars in thousands)	Payment due by period
	Total		Less than 1 year		1 - 3 years		3 - 5 years		More than 5 years
Time deposits	$	225,640	$	151,293	$	63,864	$	10,483	$	—
Securities sold under agreements to repurchase	34,864		34,864		—		—		—
Federal Home Loan Bank borrowings	39,500		29,500		10,000		—		—
Operating leases	21,147		1,666		4,685		1,408		13,388
Subordinated notes	5,155		—		—		—		5,155
Total Obligations	$	326,306	$	217,323	$	78,549	$	11,891	$	18,543

The Company does not have any capital lease obligations, as classified under applicable FASB statements, or other purchase or long-term obligations.

Capital Resources and Dividends

The Company has an ongoing strategic objective of maintaining a capital base that supports the pursuit of profitable business opportunities, provides resources to absorb risks inherent in its activities and meets or exceeds all regulatory requirements.

The Federal Reserve Board has established minimum regulatory capital standards for bank holding companies and state member banks.  The regulatory capital standards categorize assets and off-balance sheet items into categories that weigh balance sheet assets according to risk, requiring more capital for holding higher risk assets.  

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The Company's capital ratios at December 31, 2016 and 2015 were:

• Total capital to risk-weighted assets was 17.9% and 17.5%, respectively.

• Tier 1 capital to risk-weighted assets was 16.6% and 16.3%, respectively.

• Common equity Tier 1 capital to risk weighted assets was 16.0% and 15.6%, respectively.

• Tier 1 capital to average assets (leverage ratio) was 10.0% and 9.6%, respectively.

These ratios include the trust-preferred securities in Tier 1 capital for regulatory capital adequacy determination purposes. These ratios exceed the minimum capital requirements adopted by the federal banking regulatory agencies.

Regulatory capital levels for the Company meet those established for well-capitalized institutions. While we are currently considered well-capitalized, we may from time-to-time find it necessary to access the capital markets to meet our growth objectives or capitalize on specific business opportunities.

Shareholders' equity was $126.7 million at year end 2016 compared with $123.6 million at year end 2015. During 2016, the Company declared common stock dividends of $0.52 per share, compared to $0.46 per share in 2015 and $0.34 per share in 2014. The dividend payout ratio, based on net income available to common shareholders, was 46.0% in 2016, 42.2% in 2015 and 32.1% in 2014.

The primary source of funds for dividends paid by the Company to its shareholders is the dividends received from its subsidiaries.  Federal regulatory agencies impose certain restrictions on the payment of dividends and the transfer of assets from the banking subsidiaries to the holding company.  Historically, these restrictions have not had an adverse impact on the Company’s dividend policy.

On September 15, 2015, the Company's Board of Directors authorized the repurchase of up to $10 million of the Company’s common stock. The repurchase program was effective immediately and runs through December 31, 2017. This program replaces the previous repurchase program adopted in 1999, pursuant to which the Company had 24,084 shares remaining eligible for repurchase. As of December 31, 2016, the Company had executed and settled transactions to repurchase 104,300 shares, totaling $1.9 million, for an average price of $18.34, of which 26,800 shares totaling $489,000 were executed and settled during the first quarter of 2016 at an average price of $18.29.

Short-term Borrowings

The Company has various unused lines of credit available from certain correspondent banks in the aggregate amount of $45.0 million and a borrowing capacity of $33.4 million with the Federal Reserve Bank of Richmond.  These lines of credit, which bear interest at prevailing market rates, permit the Company to borrow funds in the overnight market, and are renewable annually subject to certain conditions.  All repurchase agreements entered into by the Company are accounted for as collateralized financings.  No repurchase agreements are accounted for as sales.

The following table shows the distribution of the Company’s short-term borrowings at the end of each of the last three years. 

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(Dollars in thousands)	Securities sold under agreements to repurchase
At December 31:
2016	$	34,864
2015	26,869
2014	38,551
Weighted-average interest rate at year-end:
2016	0.01		%
2015	0.01
2014	0.80
Maximum amount outstanding at any month's end:
2016	$	35,660
2015	34,253
2014	43,989
Average amount outstanding during the year:
2016	$	31,076
2015	30,095
2014	37,035
Weighted-average interest rate during the year:
2016	0.01		%
2015	0.21
2014	0.86

Liquidity

Liquidity represents an institution’s ability to meet present and future financial obligations through either the sale or maturity of existing assets or the acquisition of additional funds through liability management.  Liquid assets include cash, interest-bearing deposits with banks, federal funds sold, short-term investments, securities classified as available for sale and loans and securities maturing within one year.  As a result of the Company’s management of liquid assets and the ability to generate liquidity through liability funding, management believes the Company maintains overall liquidity sufficient to satisfy its depositors’ requirements and meet its customers’ credit needs.

The Company also maintains additional sources of liquidity through a variety of borrowing arrangements.  Middleburg Bank maintains federal funds lines with large regional and money-center banking institutions.  These available lines total approximately $45.0 million, none of which were outstanding at December 31, 2016.  Middleburg Bank is also able to borrow from the discount window of the Federal Reserve Bank of Richmond.  Available borrowing capacity from this source at December 31, 2016 was $33.4 million.  At December 31, 2016 and 2015, Middleburg Bank had $34.9 million and $26.9 million, respectively, of outstanding borrowings pursuant to securities sold under agreements to repurchase transactions (“Repo Accounts”), with maturities of one day.  The Repo Accounts are long-term commercial checking accounts with average balances that typically exceed $100,000.  At December 31, 2014, the Company had $12.2 million of outstanding borrowings pursuant to securities sold under agreement to repurchase transactions with remaining maturities of greater than one year, of which, both matured and were repaid in full during 2015.

As of December 31, 2016, Middleburg Bank had remaining credit availability in the amount of $334.3 million at the Federal Home Loan Bank of Atlanta ("FHLB").  This line may be utilized for short and/or long-term borrowing. As of December 31, 2016, Middleburg Bank also had a letter of credit in the amount of $25.0 million with the FHLB. This letter of credit was issued as collateral for public fund depository accounts and is reflected in the remaining credit availability. 

At December 31, 2016, cash, interest-bearing deposits with financial institutions, federal funds sold, short-term investments and unencumbered securities available for sale were 21.1% of total deposits and 19.4% to total liabilities.

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 are generally identified by phrases such as “the Company expects,” “the Company believes” or words of similar import.

40

Such forward-looking statements involve known and unknown risks including, but not limited to, the following factors:

• ability to obtain regulatory approvals and meet other closing conditions to the pending merger with Access;

• delays in closing the merger with Access;

• the inability to recognize cost savings or revenues or to implement integration plans associated with the merger with Access;

• deposit attrition, operating costs, customer losses and business disruption in connection with the merger, including adverse effects on relationships with employees;

• termination of the merger agreement, or failure to complete the merger, could negatively impact our stock price and our future business and financial results;

• further adverse changes in general economic and business conditions in the Company’s market area;

• changes in banking and other laws and regulations applicable to the Company;

• maintaining asset qualities;

• the ability to properly identify risks in our loan portfolio and calculate an adequate loan loss allowance;

• risks inherent in making loans such as repayment risks and fluctuating collateral values;

• concentration in loans secured by real estate;

• changing trends in customer profiles and behavior;

• changes in interest rates and interest rate policies;

• maintaining cost controls as the Company opens or acquires new facilities;

• competition with other banks and financial institutions, and companies outside of the banking industry, including those companies that have substantially greater access to capital and other resources;

• the ability to continue to attract low cost core deposits to fund asset growth;

• the ability to successfully manage the Company’s growth or implement its growth strategies if it is unable to identify attractive markets, locations or opportunities to expand in the future;

• reliance on the Company’s management team, including its ability to attract and retain key personnel;

• demand, development and acceptance of new products and services;

• problems with technology utilized by the Company;

• maintaining capital levels adequate to support the Company’s growth; and

• other factors described in Item 1A, “Risk Factors,” above.

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.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of loss in a financial instrument arising from adverse changes in market rates or prices such as interest rates, foreign currency exchange rates, commodity prices and equity prices.  The Company’s primary market risk exposure is interest rate risk, though it should be noted that the assets under management by Middleburg Trust Company are affected by equity price risk.  The ongoing monitoring and management of this risk is an important component of the Company’s asset/liability management process, which is governed by policies established by its Board of Directors that are reviewed and approved every three years baring any significant changes.  The Board of Directors delegates responsibility for carrying out asset/liability management policies to the Asset/Liability Committee (“ALCO”) of Middleburg Bank.  In this capacity, ALCO develops guidelines and strategies that govern the Company’s asset/liability management related activities, based upon estimated market risk sensitivity, policy limits and overall market interest rate levels and trends.

Interest rate risk represents the sensitivity of earnings to changes in market interest rates.  As interest rates change, the interest income and expense streams associated with the Company’s financial instruments also change, affecting net interest income, the primary component of the Company’s earnings.  ALCO uses the results of a detailed and dynamic simulation model to quantify the estimated exposure of net interest income to sustained interest rate changes.  While ALCO routinely monitors simulated net interest income sensitivity over a rolling two-year horizon, it also employs additional tools to monitor potential longer-term interest rate risk.  

The simulation model captures the impact of changing interest rates on the interest income received and interest expense paid on all assets and liabilities reflected on the Company’s balance sheet.  The simulation model is prepared and updated four times during each year.  This sensitivity analysis is compared to ALCO policy limits, which specify a maximum tolerance level for net interest income exposure over a one-year horizon, assuming no balance sheet growth, given a 200 basis point (bp) upward shift and a 200 basis point downward shift in interest rates.  The following reflects the range of the Company’s net interest income sensitivity analysis during the fiscal years of 2016 and 2015 as compared to the Board approved limits of negative 10%.

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Estimated Net Interest Income Sensitivity
Rate Change	December 31, 2016	December 31, 2015
+ 200 bps	4.5%	(2.7)%
- 200 bps	(14.9)%	(13.4)%

At the end of 2016, the Company’s interest rate risk model indicated that in a rate environment of an immediate 200 basis points increase, net interest income could increase by 4.5% over a 12-month period.  For the same time period, the interest rate risk model indicated that, in a rate environment of an immediate 200 basis points decrease, net interest income could decrease by 14.9% over a 12-month period.  Down rate scenarios were not meaningful in the interest rate environment that prevailed as of December 31, 2016 or December 31, 2015. While these numbers are subjective based upon the parameters used within the model, management believes the balance sheet is very balanced and is working to minimize risks to rising rates in the future.

The Company’s specific goal is to lower, where possible, the cost of its borrowed funds.

The preceding sensitivity analysis does not represent the Company's forecast and should not be relied upon as being indicative of expected operating results.  These hypothetical estimates are based upon numerous assumptions, including the nature and timing of interest rate levels including yield curve shape, prepayments on loans and securities, deposit decay rates, pricing decisions on loans and deposits, reinvestment or replacement of asset and liability cash flows.  While assumptions are developed based upon current economic and local market conditions, the Company cannot make any assurances about the predictive nature of these assumptions, including how customer preferences or competitor influences might change.

Also, as market conditions vary from those assumed in the sensitivity analysis, actual results will also differ due to factors such as prepayment and refinancing levels likely deviating from those assumed, the varying impact of interest rate change, caps or floors on adjustable rate assets, the potential effect of changing debt service levels on customers with adjustable rate loans, depositor early withdrawals and product preference changes, and other internal and external variables.  Furthermore, the sensitivity analysis does not reflect actions that ALCO might take in response to or anticipation of changes in interest rates.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The following financial statements are filed as a part of this report following Item 15 below:

• Reports of Independent Registered Public Accounting Firm;

• Consolidated Balance Sheets as of December 31, 2016 and 2015;

• Consolidated Statements of Income for the Years Ended December 31, 2016, 2015 and 2014;

• Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2016, 2015 and 2014

• Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended December 31, 2016, 2015 and 2014;

• Consolidated Statements of Cash Flows for the Years Ended December 31, 2016, 2015 and 2014; and

• Notes to Consolidated Financial Statements.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

There were no changes in or disagreements with accountants on accounting and financial disclosure during the last two fiscal years.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company maintains “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, that are designed to ensure that information required to be disclosed in reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC’s rules and forms, and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Based on their evaluation as of the end of the period covered by this Annual Report on Form 10-K, the Chief Executive Officer and Chief Financial Officer have concluded that the disclosure controls and procedures were effective.

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Management’s Report on Internal Control over Financial Reporting

The management of the Company is responsible for the preparation, integrity and fair presentation of the Company’s financial statements for the year ended December 31, 2016.  The financial statements have been prepared in conformity with U.S. generally accepted accounting principles and reflect management’s judgments and estimates concerning the effects of events and transactions that are accounted for or disclosed.

Management is also responsible for establishing and maintaining an effective internal control structure over financial reporting.  The Company’s internal control over financial reporting includes those policies and procedures that pertain to the Company’s ability to record, process, summarize and report reliable financial data.  The internal control system contains monitoring mechanisms, and appropriate actions are taken to correct identified deficiencies.  Management believes that internal controls over financial reporting, which are subject to scrutiny by management and the Company’s internal auditors, support the integrity and reliability of the financial statements.  Management recognizes that there are inherent limitations in the effectiveness of any internal control system, including the possibility of human error and the circumvention or overriding of internal controls.  Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation.  In addition, because of changes in conditions and circumstances, the effectiveness of internal control over financial reporting may vary over time.

In order to ensure that the Company’s internal control structure over financial reporting is effective, management assessed these controls as they conformed to U.S. generally accepted accounting principles and related call report instructions as of December 31, 2016.  This assessment was based on criteria for effective internal control over financial reporting as described in “2013 Internal Control - Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, management believes that the Company maintained effective internal controls over financial reporting as of December 31, 2016.  Management’s assessment did not determine any material weakness within the Company’s internal control structure.

The financial statements for the year ended December 31, 2016 have been audited by the independent registered public accounting firm of Yount, Hyde & Barbour, P.C.  Personnel from that firm were given unrestricted access to all financial records and related data, including minutes of all meetings of the Board of Directors and Committees thereof.

Management believes that all representations made to the independent registered public accounting firm  were valid and appropriate.  The resulting report from Yount, Hyde & Barbour, P.C accompanies the financial statements.

Yount, Hyde & Barbour, P.C. has also issued an attestation report on the effectiveness of the Company’s internal controls over financial reporting.  That report has also been made a part of the consolidated financial statements of the Company.  See Item 8, “Financial Statements and Supplementary Data,” above for more information.

Changes in Internal Control over Financial Reporting

There were no changes in the internal control over financial reporting that occurred during the quarter ended December 31, 2016 that has materially affected, or is reasonably likely to materially affect, the internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this item will be included in the registrant’s definitive proxy statement and incorporated herein by reference or in an amendment to this Form 10-K filed within 120 days after the end of the fiscal year covered by this Form 10-K.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this item will be included in the registrant’s definitive proxy statement and incorporated herein by reference or in an amendment to this Form 10-K filed within 120 days after the end of the fiscal year covered by this Form 10-K.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this item will be included in the registrant’s definitive proxy statement and incorporated herein by reference or in an amendment to this Form 10-K filed within 120 days after the end of the fiscal year covered by this Form 10-K.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this item will be included in the registrant’s definitive proxy statement and incorporated herein by reference or in an amendment to this Form 10-K filed within 120 days after the end of the fiscal year covered by this Form 10-K.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by this item will be included in the registrant’s definitive proxy statement and incorporated herein by reference or in an amendment to this Form 10-K filed within 120 days after the end of the fiscal year covered by this Form 10-K.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) (1) and (2).  The response to this portion of Item 15 is submitted as a separate section of this report.

(3). Exhibits:

2.1	Agreement and Plan of Reorganization, dated as of October 21, 2016, between Access National Corporation and Middleburg Financial Corporation, attached as Exhibit 2.1 to the current report and Form 8-K, filed October 25, 2016, incorporated herein by reference.
3.1	Amended and Restated Articles of Incorporation of the Company, attached as Exhibit 3.1 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2008, incorporated herein by reference.
3.2	Articles of Amendment to the Articles of Incorporation of the Company, attached as Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed with the Commission on February 4, 2009, incorporated herein by reference.
3.3	Bylaws of the Company (restated in electronic format as of July 27, 2016), attached as Exhibit 3.1 to the Company's current report on Form 8-K filed July 28, 2016, incorporated herein by reference.
4.1	Warrant to Purchase Shares of Common Stock, dated January 30, 2009, attached as Exhibit 4.1 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2009, incorporated herein by reference.
10.1	Agreement, dated as of July 18, 2011, between the Company and Joseph L. Boling, attached as Exhibit 10.1 to the Company’s current Form 8-K filed with the Commission on July 20, 2011, incorporated herein by reference.*
10.2	Middleburg Financial Corporation 2006 Equity Compensation Plan, as amended, attached as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Commission on April 26, 2006, incorporated herein by reference.*
10.3	Middleburg Financial Corporation Form of Performance Share Award Agreement, attached as Exhibit 10.3 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008, incorporated herein by reference.*
10.4	Middleburg Financial Corporation Form of Restricted Share Award Agreement, attached as Exhibit 10.4 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008, incorporated herein by reference.*
10.5	Middleburg Financial Corporation Form of Non-Qualified Stock Option Agreement, attached as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Commission on March 20, 2009, incorporated herein by reference.*
10.6	Middleburg Financial Corporation 2006 Management Incentive Plan, attached as Exhibit 10.3 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2005, incorporated herein by reference .*
10.7	Employment Agreement, dated as of April 28, 2010, between the Company and Gary R. Shook, attached as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Commission on April 28, 2010, incorporated herein by reference.*
10.8	Employment Agreement, dated as of May 7, 2010, between the Company and Raj Mehra, attached as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Commission on May 13, 2010, incorporated herein by reference.*

44

10.9	Executive Retirement Plan, as amended and restated through April 28,, 2010, attached as Exhibit 10.1 to the Company’s Current Report on Form 8-K/A, Filed with the commission on October 14, 2010, incorporated herein by reference*
10.1	Supplemental Benefit Plan, as amended and restated effective November 17, 2010, attached as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Commission on November 22, 2010, incorporated herein by reference.*
10.11	Stock Purchase Agreement, dated March 27, 2009, between the Company and David L. Sokol, attached as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Commission on March 31, 2009, incorporated herein by reference.*
10.12 10.13	First Amendment to Stock Purchase Agreement, dated October 27, 2010, between the Company and David L. Sokol, attached as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Commission on October 28, 2010, incorporated herein by reference. Second Amendment to Stock Purchase Agreement, dated April 28, 2014, between the Company and David L. Sokol, attached as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Commission on April 30, 2014, incorporated herein by reference.
10.14	Employment Agreement, dated as of April 28, 2010, between the Company and Jeffrey H. Culver, attached as Exhibit 10.14 to the Company's Annual Report on Form 10-K for the year ended December 31, 2010, incorporated herein by reference.*
21.1	Subsidiaries of the Company.
23.1	Consent of Yount, Hyde & Barbour, P.C.
24.1	Power of Attorney
31.1	Rule 13a-14(a) Certification of Chief Executive Officer
31.2	Rule 13a-14(a) Certification of Chief Financial Officer.
32.1	Statement of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. § 1350.
101	The following materials from the Middleburg Financial Corporation Annual Report on Form 10-K for the year ended December 31, 2016 formatted in Extensible Business reporting Language (XBRL):  (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Changes in Shareholders’ Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements.

* Management contracts and compensatory plans and arrangements.

(All exhibits not incorporated herein by reference are attached as exhibits to the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the Securities and Exchange Commission.)

(b) Exhibits

The response to this portion of Item 15 as listed in Item 15(a)(3) above is submitted as a separate section of this report.

(c) Financial Statement Schedules

The response to this portion of Item 15 is submitted as a separate section of this report.

45

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

MIDDLEBURG FINANCIAL CORPORATION
Date:	March 15, 2017	By:	/s/ Gary R. Shook
			Gary R. Shook
			Chief Executive Officer
Date:	March 15, 2017	By:	/s/ Raj Mehra
			Raj Mehra
			Chief Financial Officer
Date:	March 15, 2017	By:	/s/ Tammy P. Frazier
			Tammy P. Frazier
			Chief Accounting Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ John C. Lee, IV*	Chairman of the Board and Director	March 15, 2017
John C. Lee, IV
/s/ Gary R. Shook	Chief Executive Officer and President	March 15, 2017
Gary R. Shook	(Principal Executive Officer)
/s/ Raj Mehra	Executive Vice President and Chief Financial Officer	March 15, 2017
Raj Mehra	(Principal Financial Officer)
/s/ Tammy P. Frazier	Senior Vice President and Chief Accounting Officer	March 15, 2017
Tammy P. Frazier	(Principal Accounting Officer)
/s/ Howard M. Armfield*	Director	March 15, 2017
Howard M. Armfield
/s/ Henry F. Atherton, III*	Director	March 15, 2017
Henry F. Atherton, III
/s/ Childs F. Burden*	Director	March 15, 2017
Childs F. Burden
/s/ John Rust*	Director	March 15, 2017
John Rust
/s/ Alexander G. Green, III*	Director	March 15, 2017
Alexander G. Green, III

/s/ Gary D. LeClair*	Director	March 15, 2017
Gary D. LeClair
/s/ Keith W. Meurlin*	Director	March 15, 2017
Keith W. Meurlin
/s/ Janet A. Neuharth*	Director	March 15, 2017
Janet A. Neuharth
/s/ Mary Leigh McDaniel*	Director	March 15, 2017
Mary Leigh McDaniel

*          Tammy P. Frazier, by signing her name hereto, signs this document on behalf of each of the persons indicated by an asterisk above pursuant to the powers of attorney duly executed by such persons and filed with the SEC as Exhibit 24.1 to this Annual Report on Form 10-K.

/s/ Tammy P. Frazier

Tammy P. Frazier        March 15, 2017

Exhibit Index

Exhibit No.	Description
2.1	Agreement and Plan of Reorganization, dated as of October 21, 2016, between Access National Corporation and Middleburg Financial Corporation, attached as Exhibit 2.1 to the current report and Form 8-K, filed October 25, 2016, incorporated herein by reference.
3.1	Amended and Restated Articles of Incorporation of the Company, attached as Exhibit 3.1 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2008, incorporated herein by reference.
3.2	Articles of Amendment to the Articles of Incorporation of the Company, attached as Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed with the Commission on February 4, 2009, incorporated herein by reference.
3.3	Bylaws of the Company (restated in electronic format as of July 27, 2016), attached as Exhibit 3.1 to the Company's current report on Form 8-K filed July 28, 2016, incorporated herein by reference.
4.1	Warrant to Purchase Shares of Common Stock, dated January 30, 2009, attached as Exhibit 4.1 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2009, incorporated herein by reference.
10.1	Agreement, dated as of July 18, 2011, between the Company and Joseph L. Boling, attached as Exhibit 10.1 to the Company’s current Form 8-K filed with the Commission on July 20, 2011, incorporated herein by reference.*
10.2	Middleburg Financial Corporation 2006 Equity Compensation Plan, as amended, attached as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Commission on April 26, 2006, incorporated herein by reference.*
10.3	Middleburg Financial Corporation Form of Performance Share Award Agreement, attached as Exhibit 10.3 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008, incorporated herein by reference.*
10.4	Middleburg Financial Corporation Form of Restricted Share Award Agreement, attached as Exhibit 10.4 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008, incorporated herein by reference.*
10.5	Middleburg Financial Corporation Form of Non-Qualified Stock Option Agreement, attached as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Commission on March 20, 2009, incorporated herein by reference.*
10.6	Middleburg Financial Corporation 2006 Management Incentive Plan, attached as Exhibit 10.3 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2005, incorporated herein by reference .*
10.7	Employment Agreement, dated as of April 28, 2010, between the Company and Gary R. Shook, attached as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Commission on April 28, 2010, incorporated herein by reference.*
10.8	Employment Agreement, dated as of May 7, 2010, between the Company and Raj Mehra, attached as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Commission on May 13, 2010, incorporated herein by reference.*

10.9	Executive Retirement Plan, as amended and restated through April 28,, 2010, attached as Exhibit 10.1 to the Company’s Current Report on Form 8-K/A, Filed with the commission on October 14, 2010, incorporated herein by reference*
10.10	Supplemental Benefit Plan, as amended and restated effective November 17, 2010, attached as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Commission on November 22, 2010, incorporated herein by reference.*
10.11	Stock Purchase Agreement, dated March 27, 2009, between the Company and David L. Sokol, attached as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Commission on March 31, 2009, incorporated herein by reference.*
10.12 10.13	First Amendment to Stock Purchase Agreement, dated October 27, 2010, between the Company and David L. Sokol, attached as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Commission on October 28, 2010, incorporated herein by reference. Second Amendment to Stock Purchase Agreement, dated April 28, 2014, between the Company and David L. Sokol, attached as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Commission on April 30, 2014, incorporated herein by reference.
10.14	Employment Agreement, dated as of April 28, 2010, between the Company and Jeffrey H. Culver, attached as Exhibit 10.14 to the Company's Annual Report on Form 10-K for the year ended December 31, 2010, incorporated herein by reference.*
21.1	Subsidiaries of the Company.
23.1	Consent of Yount, Hyde & Barbour, P.C.
24.1	Power of Attorney
31.1	Rule 13a-14(a) Certification of Chief Executive Officer
31.2	Rule 13a-14(a) Certification of Chief Financial Officer.
32.1	Statement of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. § 1350.
101	The following materials from the Middleburg Financial Corporation Annual Report on Form 10-K for the year ended December 31, 2016 formatted in Extensible Business reporting Language (XBRL):  (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Changes in Shareholders’ Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements.

* Management contracts and compensatory plans and arrangements.

MIDDLEBURG FINANCIAL CORPORATION AND SUBSIDIARIES

Middleburg, Virginia

FINANCIAL REPORT

DECEMBER 31, 2016

C O N T E N T S

	Page
REPORTS OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM	3
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets	5
Consolidated Statements of Income	6
Consolidated Statements of Comprehensive Income	7
Consolidated Statements of Changes in Shareholders' Equity	8
Consolidated Statements of Cash Flows	9
Notes to Consolidated Financial Statements	10

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders

Middleburg Financial Corporation

Middleburg, Virginia

We have audited the accompanying consolidated balance sheets of Middleburg Financial Corporation and subsidiaries as of December 31, 2016 and 2015, and the related consolidated statements of income, comprehensive income, changes in shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2016. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Middleburg Financial Corporation and subsidiaries as of December 31, 2016 and 2015, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2016, in conformity with U.S. generally accepted accounting principles.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Middleburg Financial Corporation and subsidiaries’ internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013, and our report dated March 15, 2017 expressed an unqualified opinion on the effectiveness of Middleburg Financial Corporation and subsidiaries’ internal control over financial reporting.

/s/ Yount, Hyde & Barbour, P.C.

Winchester, Virginia

March 15, 2017

3

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders

Middleburg Financial Corporation

Middleburg, Virginia

We have audited Middleburg Financial Corporation and subsidiaries’ internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. Middleburg Financial Corporation and subsidiaries’ management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (a) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (b) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (c) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Middleburg Financial Corporation and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets as of December 31, 2016 and 2015 and the related consolidated statements of income, comprehensive income, changes in shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2016 of Middleburg Financial Corporation and subsidiaries, and our report dated March 15, 2017 expressed an unqualified opinion.

/s/ Yount, Hyde & Barbour, P.C.

Winchester, Virginia

March 15, 2017

4

MIDDLEBURG FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except for share and per share data)
	December 31,
	2016			2015
ASSETS
Cash and due from banks	$	6,989		$	5,489
Interest bearing deposits with other banks	21,555			33,739
Total cash and cash equivalents	28,544			39,228
Securities held to maturity, fair value of $10,095 and $4,163, respectively	10,683			4,207
Securities available for sale, at fair value	301,567			374,571
Restricted securities, at cost	4,542			6,411
Loans, net of allowance for loan losses of $11,404 and $11,046, respectively	848,693			794,635
Premises and equipment, net	19,021			19,531
Goodwill and identified intangibles, net	3,465			3,636
Other real estate owned, net of valuation allowance	5,073			3,345
Bank owned life insurance	23,925			23,273
Accrued interest receivable and other assets	27,130			26,026
TOTAL ASSETS	$	1,272,643		$	1,294,863
LIABILITIES
Deposits:
Non-interest bearing demand deposits	$	248,567		$	235,897
Savings and interest bearing demand deposits	578,851			560,328
Time deposits	225,640			244,575
Total deposits	1,053,058			1,040,800
Securities sold under agreements to repurchase	34,864			26,869
Federal Home Loan Bank borrowings	39,500			85,000
Subordinated notes	5,155			5,155
Accrued interest payable and other liabilities	13,387			13,485
TOTAL LIABILITIES	1,145,964			1,171,309
Commitments and contingencies
SHAREHOLDERS' EQUITY
Common stock ($2.50 par value; 20,000,000 shares authorized; 7,205,066 and 7,085,217 issued and outstanding, respectively)	17,636			17,330
Capital surplus	45,688			44,155
Retained earnings	64,755			60,392
Accumulated other comprehensive income (loss), net	(1,400		)	1,677
TOTAL SHAREHOLDERS' EQUITY	126,679			123,554
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	1,272,643		$	1,294,863

See accompanying notes to the consolidated financial statements.

5

MIDDLEBURG FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except for per share data)
	Years Ended December 31,
	2016		2015			2014
INTEREST INCOME
Interest and fees on loans	$	33,795	$	32,479		$	33,833
Interest and dividends on securities
Taxable	7,406		7,628			6,900
Tax-exempt	1,700		1,803			2,137
Dividends	310		265			293
Interest on deposits with other banks and federal funds sold	164		106			162
Total interest and dividend income	43,375		42,281			43,325
INTEREST EXPENSE
Interest on deposits	3,535		3,462			3,889
Interest on securities sold under agreements to repurchase	3		64			318
Interest on FHLB borrowings and other debt	886		681			1,036
Total interest expense	4,424		4,207			5,243
NET INTEREST INCOME	38,951		38,074			38,082
Provision for loan losses	1,853		2,293			1,960
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	37,098		35,781			36,122
NON-INTEREST INCOME
Service charges on deposit accounts	1,154		1,061			1,163
Trust services income	4,643		4,785			4,362
ATM fee income, net	762		797			739
Gains (losses) on sales of loans held for sale, net	32		(1		)	4,860
Gains on sales of securities available for sale, net	1,554		140			186
Commissions on investment sales	555		547			611
Bank owned life insurance	652		656			662
Gain on sale of majority interest in consolidated subsidiary	—		—			24
Other operating income	1,386		1,636			1,659
Total non-interest income	10,738		9,621			14,266
NON-INTEREST EXPENSE
Salaries and employee benefits	18,757		18,435			22,601
Occupancy and equipment	4,881		5,106			6,177
Advertising	200		288			365
Amortization	1,211		1,001			791
Computer operations	2,582		2,337			1,893
Other real estate owned, net	363		284			256
Other taxes	947		915			849
Federal deposit insurance	748		786			899
Audits and exams	589		585			630
Legal and advisory fees	1,202		1,029			1,324
Merger related expenses	1,289		—			—
Other operating expenses	4,190		4,091			4,776
Total non-interest expense	36,959		34,857			40,561
Income before income taxes	10,877		10,545			9,827
Income tax expense	2,813		2,715			2,341
NET INCOME	8,064		7,830			7,486
Net loss attributable to non-controlling interest	—		—			98
Net income attributable to Middleburg Financial Corporation	$	8,064	$	7,830		$	7,584
Earnings per share:
Basic	$	1.13	$	1.10		$	1.07
Diluted	$	1.13	$	1.09		$	1.06

See accompanying notes to the consolidated financial statements. 

6

MIDDLEBURG FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands)
	Years Ended December 31,
	2016			2015			2014
Net income	$	8,064		$	7,830		$	7,486
Other comprehensive income (loss), net of tax:
Unrealized holding gains (losses) arising during the period, net of tax of $1,091, $1,037, and ($1,979), respectively	(2,116		)	(2,015		)	3,841
Reclassification adjustment for gains included in net income, net of tax of $528, $48, and $63, respectively	(1,026		)	(92		)	(123		)
Unrealized gains (losses) on interest rate swaps, net of tax of ($34), $3, and $82, respectively	65			(6		)	(160		)
Reclassification adjustment for (gain) loss on interest rate swap ineffectiveness included in net income, net of tax of $0, $2 and ($2), respectively	—			(4		)	4
Total other comprehensive income (loss)	(3,077		)	(2,117		)	3,562
Total comprehensive income	4,987			5,713			11,048
Comprehensive loss attributable to non-controlling interest	—			—			98
Comprehensive income attributable to Middleburg Financial Corporation	$	4,987		$	5,713		$	11,146

See accompanying notes to the consolidated financial statements.

7

MIDDLEBURG FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Dollars in thousands, except for share and per share data)
	Common Stock			Capital Surplus			Retained Earnings			Accumulated Other Comprehensive Income (Loss), Net			Non-Controlling Interest			Total
Balance December 31, 2013	$	17,403		$	44,251		$	50,689		$	232		$	2,498		$	115,073
Net income	—			—			7,584			—			(98		)	7,486
Other comprehensive income, net of tax	—			—			—			3,562			—			3,562
Cash dividends – ($0.34 per share)	—			—			(2,419		)	—			—			(2,419		)
Sale of majority interest in consolidated subsidiary	—			—			—			—			(2,400		)	(2,400		)
Restricted stock vesting (15,425 shares)	39			(39		)	—			—			—			—
Repurchase of restricted stock (4,732 shares)	(12		)	(113		)	—			—			—			(125		)
Exercise of stock options (25,501 shares)	64			330			—			—			—			394
Share-based compensation	—			463			—			—			—			463
Balance December 31, 2014	$	17,494		$	44,892		$	55,854		$	3,794		$	—		$	122,034
Net income	—			—			7,830			—			—			7,830
Other comprehensive loss, net of tax	—			—			—			(2,117		)	—			(2,117		)
Cash dividends – ($0.46 per share)	—			—			(3,292		)	—			—			(3,292		)
Restricted stock vesting (16,359 shares)	41			(41		)	—			—			—			—
Repurchase of restricted stock (4,576 shares)	(11		)	(72		)	—			—			—			(83		)
Share-based compensation	—			605			—			—			—			605
Repurchase of common stock (77,500 shares)	(194		)	(1,229		)	—			—			—			(1,423		)
Balance December 31, 2015	$	17,330		$	44,155		$	60,392		$	1,677		$	—		$	123,554
Net income	—			—			8,064			—			—			8,064
Other comprehensive loss, net of tax	—			—			—			(3,077		)	—			(3,077		)
Cash dividends – ($0.52 per share)	—			—			(3,701		)	—			—			(3,701		)
Restricted stock vesting (53,908 shares)	135			(135		)	—			—			—			—
Repurchase of restricted stock (15,351 shares)	(38		)	(315		)	—			—			—			(353		)
Share-based compensation	—			939			—			—			—			939
Exercise of stock options (6,650 shares)	16			76			—			—			—			92
Exercise of stock warrant (104,101 shares)	260			1,390			—			—			—			1,650
Repurchase of common stock (26,800 shares)	(67		)	(422		)	—			—			—			(489		)
Balance December 31, 2016	$	17,636		$	45,688		$	64,755		$	(1,400	)	$	—		$	126,679

See accompanying notes to the consolidated financial statements.

8

MIDDLEBURG FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Years Ended December 31,
(Dollars in thousands)	2016			2015			2014
Cash Flows From Operating Activities
Net income	$	8,064		$	7,830		$	7,486
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	2,584			2,352			2,339
Provision for loan losses	1,853			2,293			1,960
Gains on sales of securities available for sale, net	(1,554		)	(140		)	(186		)
Loss on disposal of assets, net	115			67			59
Originations of mortgage loans held for sale	(3,346		)	(1,597		)	—
Proceeds from sales of mortgage loans held for sale	3,378			1,596			38,035
(Gains) losses on sales of mortgage loans held for sale, net	(32		)	1			(4,860		)
Premium amortization on securities, net	4,956			4,042			2,981
Deferred income tax expense	746			109			1,181
Gain on sale of majority interest in consolidated subsidiary	—			—			(24		)
Share-based compensation	925			605			426
(Gains) losses on sales of other real estate owned, net	(66		)	100			14
Valuation adjustments on other real estate owned	310			79			(3		)
Valuation adjustments on other assets held for sale	200			—			200
Increase in bank owned life insurance cash surrender value	(652		)	(656		)	(662		)
Changes in assets and liabilities:
Increase in other assets	(1,406		)	(4,826		)	(2,604		)
Increase (decrease) in other liabilities	(98		)	448			2,447
Net cash provided by operating activities	$	15,977		$	12,303		$	48,789
Cash Flows from Investing Activities
Proceeds from maturity, calls, principal repayments and sales of securities available for sale	155,485			106,154			132,286
Proceeds from maturity, calls, and principal repayments of held to maturity	44			43			—
Purchases of securities held to maturity	(6,520		)	(2,750		)	(1,500		)
Purchases of securities available for sale	(90,644		)	(139,556		)	(149,287		)
(Purchases) redemptions of restricted stock, net	1,869			(1,132		)	1,501
(Purchases) sales of bank premises and equipment, net	(978		)	(2,137		)	321
Loan originations, net	(26,687		)	(13,941		)	(5,748		)
Proceeds from sales of loans	4,412			1,124			5,492
Purchases of loans	(36,321		)	(42,035		)	(34,042		)
Proceeds from sale of majority interest in consolidated subsidiary, net	—			—			3,618
Proceeds from sale of other real estate owned and repossessed assets	713			893			2,666
Net cash provided by (used in) investing activities	$	1,373		$	(93,337	)	$	(44,693	)
Cash Flows from Financing Activities
Increase in demand, interest-bearing demand and savings deposits	$	31,193		$	56,083		$	25,686
Decrease in certificates of deposit	(18,935		)	(4,363		)	(19,002		)
Increase (decrease) in securities sold under agreements to repurchase	7,995			(11,682		)	4,012
Increase (decrease) in FHLB borrowings	(45,500		)	30,000			(25,000		)
Payment of dividends on common stock	(3,701		)	(3,292		)	(2,419		)
Proceeds from exercise of options and warrant	1,742			—			394
Excess tax benefit on share-based compensation	14			—			37
Repurchases of common stock	(842		)	(1,506		)	(125		)
Net cash provided by (used in) provided by financing activities	$	(28,034	)	$	65,240		$	(16,417	)
Decrease in cash and cash equivalents	(10,684		)	(15,794		)	(12,321		)
Cash and cash equivalents at beginning of year	39,228			55,022			67,343
Cash and cash equivalents at end of year	$	28,544		$	39,228		$	55,022
Supplemental Disclosures of Cash Flow Information
Interest paid	$	4,447		$	4,200		$	5,341
Income taxes	$	1,525		$	3,710		$	800
Supplemental Disclosure of Non-Cash Transactions
Unrealized gains (losses) on securities available for sale	$	(4,761	)	$	(3,192	)	$	5,634
Change in market value of interest rate swaps	$	99		$	(15	)	$	(236	)
Transfer of loans to other real estate owned and repossessed assets	$	2,645		$	984		$	4,438
Transfer of other real estate owned to premises and equipment	$	—		$	697		$	—

See accompanying notes to the consolidated financial statements.

9

MIDDLEBURG FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 1. Nature of Banking Activities and Significant Accounting Policies

Middleburg Financial Corporation (the “Company”) is a bank holding company and through its banking subsidiary, Middleburg Bank, grants commercial, financial, agricultural, residential and consumer loans to customers principally in Loudoun County, Fauquier County and Fairfax County, Virginia as well as the City of Williamsburg and the City of Richmond.  The loan portfolio is well diversified and generally is collateralized by assets of the borrowers.  The loans are expected to be repaid from cash flow or proceeds from the sale of selected assets of the borrowers.  Middleburg Trust Company is a non-banking subsidiary of Middleburg Financial Corporation which offers a comprehensive range of fiduciary and investment management services to individuals and businesses.  On May 15, 2014, Middleburg Financial Corporation, through its banking subsidiary, Middleburg Bank, sold all of its majority interest in Southern Trust Mortgage LLC, which originated and sold mortgages secured by personal residences primarily in the southeastern United States.

The accounting and reporting policies of the Company conform to U. S. generally accepted accounting principles and to accepted practices within the banking industry.

Pending Merger with Access National Corporation

On October 24, 2016, the Company and Access National Corporation (“Access”) announced a definitive agreement to combine in a strategic merger (the “Merger Agreement”) pursuant to which the Company will merge with and into Access (the “Merger”). As a result of the Merger, the holders of shares of the Company's common stock will receive 1.3314 shares of Access common stock for each share of the Company's common stock held immediately prior to the effective date of the Merger. The transaction is expected to be completed in the second quarter of 2017, subject to approval of both companies' shareholders, regulatory approvals and other customary closing conditions.

Principles of Consolidation

The consolidated financial statements of Middleburg Financial Corporation and its wholly owned subsidiaries, Middleburg Bank, Middleburg Investment Group, Inc., Middleburg Trust Company and Middleburg Bank Service Corporation include the accounts of all companies.  Through May 15, 2014, the Company owned 62.3% of the issued and outstanding membership interest units of Southern Trust Mortgage, through its subsidiary, Middleburg Bank.  Accounting Standards Codification Topic 810, Consolidation, requires that the Company no longer eliminate through consolidation the equity investment in MFC Capital Trust II, which was $155,000 at December 31, 2016 and 2015.  The subordinated debt of the trust preferred entity is reflected as a liability of the Company.  All material intercompany balances and transactions have been eliminated in consolidation.

Securities

Certain debt securities that management has the positive intent and ability to hold until maturity are classified as "held-to-maturity" and recorded at amortized cost. Securities not classified as held-to-maturity, including equity securities with readily determinable fair values, are classified as "available-for-sale" and recorded at fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive income (loss). Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities. Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.

Equity investments in the Federal Home Loan Bank of Atlanta ("FHLB") and the Federal Reserve Bank of Richmond ("FRB") are separately classified as restricted securities and are carried at cost.  

Impairment of securities occurs when the fair value of a security is less than its amortized cost.  For debt securities, impairment is considered other-than-temporary and recognized in its entirety in net income if either (i) the intent is to sell the security or (ii) it is more likely than not that it will be necessary to sell the security prior to recovery of its amortized cost.  If, however, management’s intent is not to sell the security and it is not more than likely that management will be required to sell the security before recovery, management must determine what portion of the impairment is attributable to credit loss, which occurs when the amortized cost of the security exceeds the present value of the cash flows expected to be collected from the security.  If there is no credit loss, there is no other-than-temporary impairment.  If there is a credit loss, other-than-temporary impairment exists and the credit loss must be recognized in net income and the remaining portion of impairment must be recognized in other comprehensive income (loss).

For equity securities carried at cost as restricted securities, impairment is considered to be other-than-temporary based on our ability and intent to hold the investment until a recovery of fair value.  Other-than-temporary impairment of an equity security

10

results in a write-down that must be included in income.  We regularly review each security for other-than-temporary impairment based on criteria that includes the extent to which cost exceeds market price, the duration of that market decline, the financial health of and specific prospects for the issuer, our best estimate of the present value of cash flows expected to be collected from debt securities, the intention with regards to holding the security to maturity and the likelihood that we would be required to sell the security before recovery.

Loans

The Company grants mortgage, commercial, and consumer loans to clients.  The loan portfolio is segmented into commercial loans, real estate loans, and consumer loans.  Real estate loans are further divided into the following classes:  construction; farmland; 1-4 family residential; and other real estate loans.  Descriptions of the Company’s loan classes are as follows:

Commercial Loans: Commercial loans are typically secured with non-real estate commercial property.  The Company makes commercial loans primarily to middle market businesses located within our market area.

Real Estate Loans – Construction: The Company originates construction loans for the acquisition and development of land and construction of condominiums, townhomes, and 1-4 family residences. This class also includes acquisition, development and construction loans for retail and other commercial purposes, primarily in our market areas.

Real Estate Loans- Farmland:  Loans secured by agricultural property and not included in Real Estate – Other.

Real Estate Loans – 1-4 Family:  This class of loans includes loans secured by 1-4 family homes.  The Company’s general practice is to sell the majority of its newly originated fixed-rate residential real estate loans in the secondary mortgage market, and to hold in its portfolio adjustable rate residential real estate loans and loans in close proximity to its financial service centers.

Real Estate Loans – Other: This loan class consists primarily of loans secured by multi-unit residential property and owner and non-owner occupied commercial and industrial property.  This class also includes loans secured by real estate which do not fall into other classifications.

Consumer Loans: Consumer loans include all loans made to individuals for consumer or personal purposes.  They include new and used auto loans, unsecured loans, and lines of credit.

The ability of the debtors to honor their contracts is dependent upon the real estate and general economic conditions in this area.

For all classes of loans, the Company considers loans to be past due when a payment is not received by the payment due date according to the contractual terms of the loan.  The Company monitors past due loans according to the following categories: less than 30 days past due, 30 – 59 days past due, 60 – 89 days past due, and 90 days or greater past due. The accrual of interest on all classes of loans is discontinued at the time the loans are 90 days delinquent unless they are well-secured and in the process of collection.

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off generally are reported at their outstanding unpaid principal balances adjusted for charge-offs, the allowance for loan losses, and any deferred fees or costs on originated loans.  Deferred fees and costs include discounts and premiums on syndicated and guaranteed loans purchased. Interest income is accrued on the unpaid principal balance.  Loan origination and commitment fees, net of certain direct loan origination costs, are deferred and recognized as an adjustment of the loan yield over the life of the related loan.

All interest accrued but not collected for loans that are placed on nonaccrual or charged-off is reversed against interest income.  The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual.  Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Allowance for Loan Losses

The allowance for loan losses reflects management’s judgment of probable loan losses inherent in the portfolio at the balance sheet date.  Management uses a disciplined process and methodology to establish the allowance for loan losses each quarter.  To determine the total allowance for loan losses, the Company estimates the reserves needed for each segment of the portfolio, including loans analyzed individually and loans analyzed on a pooled basis.  The allowance for loan losses consists of amounts applicable to:  (i) the commercial loan portfolio; (ii) the real estate portfolio; and (iii) the consumer loan portfolio.

To determine the allowance for loan losses, loans are pooled by portfolio segment and losses are modeled using historical experience, and quantitative and other mathematical techniques over the loss emergence period.  Each class of loan requires exercising significant judgment to determine the estimation that fits the credit risk characteristics of its portfolio segment.  The Company

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uses internally developed models in this process.  Management must use judgment in establishing additional input metrics for the modeling processes.  The models and assumptions used to determine the allowance are reviewed to ensure that their theoretical foundation, assumptions, data integrity, computational processes, reporting practices, and end user controls are appropriate and properly documented.

The establishment of the allowance for loan losses relies on a consistent process that requires multiple layers of management review and judgment and responds to changes in economic conditions, customer behavior, and collateral value, among other influences.  From time to time, events or economic factors may affect the loan portfolio, causing management to provide additional amounts to or release balances from the allowance for loan losses.  Qualitative factors considered in the allowance for loan losses evaluation include the levels and trends in delinquencies and nonperforming loans, trends in volume and terms of loans, the effects of any changes in lending policies, the experience, ability, and depth of management, national and local economic trends and conditions, concentrations of credit, the quality of the Company’s loan review system, competition and regulatory requirements.  The Company’s allowance for loan losses is sensitive to risk ratings, economic assumptions and delinquency trends driving statistically modeled reserves.  Individual loan risk ratings are evaluated based on each situation by experienced senior credit officers.

Management monitors differences between estimated and actual incurred loan losses.  This monitoring process includes periodic assessments by senior management of loan portfolios and the models used to estimate incurred losses in those portfolios.  Additions to the allowance for loan losses are made by charges to the provision for loan losses.  Credit exposures deemed to be uncollectible are charged against the allowance for loan losses.  Recoveries of previously charged-off amounts are credited to the allowance for loans losses.

Loan Charge-off Policies

Commercial and consumer loans are generally charged off when: 

•they are 90 days past due;

•the collateral is repossessed; or

•the borrower has filed bankruptcy.

All classes of real estate loans are charged down to the net realizable value when the Company determines that the sole source of repayment is liquidation of the collateral.

Impaired Loans

For all classes of loans, a loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement.  Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due.  Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired.  Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.

For all classes of loans, impairment is measured on a loan-by-loan basis by comparing the loan balance to either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent. Any variance in values is charged-off when determined.

Troubled Debt Restructurings

A troubled debt restructuring ("TDR") occurs in situations where, for economic or legal reasons related to a borrower’s financial condition, management may grant a concession to the borrower that it would not otherwise consider. Management strives to identify borrowers in financial difficulty early and work with them to modify their loan to more affordable terms before their loan reaches nonaccrual status.  These modified terms may include rate reductions, principal forgiveness, payment forbearance and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral.  In cases where borrowers are granted new terms that provide for a reduction of either interest or principal, management measures any impairment on the restructuring as noted above for impaired loans. All identified TDRs are considered to be impaired loans.

Management considers troubled debt restructurings and subsequent defaults of restructured loans in the determination of the adequacy of the Company's allowance for loan losses. When identified as a TDR, a loan is evaluated for potential loss as noted above for impaired loans. Loans identified as TDRs frequently are on nonaccrual status at the time of the restructuring and, in some cases, partial charge-offs may have already been taken against the loan and a specific reserve may have already been established for the loan. As a result of any modification as a TDR, the specific reserve associated with the loan may be increased.

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Additionally, loans modified in a TDR are closely monitored for delinquency as an early indicator of possible future defaults. If loans modified in a TDR subsequently default, the Company evaluates them for possible further impairment. As a result, any specific reserve may be increased, adjustments may be made in the allocation of the total allowance balance, or partial charge-offs may be taken to further write-down the carrying value of the loan. Management exercises significant judgment in developing estimates for potential losses associated with TDRs.

Mortgage Loans Held for Sale

Mortgage loans held for sale are carried at the lower of aggregate cost or fair value. The fair value of mortgage loans held for sale is determined using current secondary market prices for loans with similar coupons, maturities, and credit quality and fair value of loans committed at year-end.

Premises and Equipment

Land is carried at cost.  Premises and equipment are stated at cost less accumulated depreciation.  Depreciation of property and equipment is computed principally on the straight-line method over the following estimated useful lives:

	Years
Buildings and improvements	10-40
Furniture and equipment	3-15

Maintenance and repairs of property and equipment are charged to operations and major improvements are capitalized.  Upon retirement, sale, or other disposition of property and equipment, the cost and accumulated depreciation are eliminated from the accounts and gain or loss is included in income.

Other Real Estate Owned and Repossessed Assets

Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value less costs to sell at the date of foreclosure. Subsequent to foreclosure, management periodically performs valuations of the foreclosed assets based on updated appraisals, general market conditions, recent sales of like properties, length of time the properties have been held, and our ability and intention with regard to continued ownership of the properties. The Company may incur additional write-downs of foreclosed assets to fair value less costs to sell if valuations indicate a further deterioration in market conditions. Revenue and expenses from operations and changes in the property valuations are included in net expenses from foreclosed assets and improvements are capitalized.

Goodwill and Intangible Assets

With the adoption of Accounting Standards Update (ASU) 2011-08, "Intangible-Goodwill and Other-Testing Goodwill for Impairment", the Company is no longer required to perform a test for impairment unless, based on an assessment of qualitative factors related to goodwill, the Company determines that it is more likely than not that the fair value is less than its carrying amount. If the likelihood of impairment is more than 50%, the Company must perform a test for impairment and may be required to record impairment charges.

Additionally, acquired intangible assets (customer relationships) are separately recognized and amortized over their useful life of 15 years.

Bank-Owned Life Insurance

The Company owns insurance on the lives of a certain group of key employees. The policies were purchased to help offset increases in the costs of various fringe benefit plans, including healthcare. The cash surrender value of these policies is included as an asset on the consolidated balance sheets, and any increase in cash surrender value is recorded as non-interest income on the consolidated statements of income. In the event of the death of an insured individual under these policies, the Company would receive a death benefit which would be recorded as other income.

Income Taxes

Deferred income tax assets and liabilities are determined using the balance sheet method. Under this method, the net deferred tax asset or liability is determined based on the tax effects of the temporary differences between the book and tax bases of the various balance sheet assets and liabilities and gives current recognition to changes in tax rates and laws.

When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained.  The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination,

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including the resolution of appeals or litigation processes, if any.  Tax positions taken are not offset or aggregated with other positions.  Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50% likely of being realized upon settlement with the applicable taxing authority.  The portion of the benefits associated with tax positions taken that exceeds the amount measured, as described above, is reflected as a liability for unrecognized tax benefits in the accompanying consolidated balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination.  Interest and penalties associated with unrecognized tax benefits are classified as additional income taxes in the consolidated statements of income. No liabilities for unrecognized tax benefits have been recognized as of December 31, 2016 or 2015.

Trust Company Assets

Securities and other properties held by Middleburg Trust Company in a fiduciary or agency capacity are not assets of the Company and are not included in the accompanying consolidated financial statements.

Earnings Per Share

Basic earnings per share represents income available to common shareholders divided by the weighted-average number of common shares outstanding during the period.  Nonvested restricted shares are included in basic earnings per share because of dividend participation rights. Diluted earnings per share reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance.  As of December 31, 2016 potential common shares that may be issued by the Company relate solely to outstanding stock options and are determined using the treasury stock method.

Cash and Cash Equivalents

For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from other banks and federal funds sold. Generally, federal funds are sold and purchased for one-day periods.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.  Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, impairment of goodwill and intangible assets, valuation of other real estate owned, and other-than-temporary impairment of securities.

Advertising Costs

The Company follows the policy of charging the costs of advertising to expense as incurred.

Comprehensive Income

Accounting principles generally require that recognized revenue, expenses, gains, and losses be included in net income.  Although certain changes in assets and liabilities, such as unrealized gains and losses on available for sale securities, and changes in the fair value of interest rate swaps, are reported as a separate component of the equity section of the consolidated balance sheets, such items, along with net income, are components of comprehensive income.

Securities Sold Under Agreements to Repurchase

Securities sold under agreements to repurchase are reflected at the amount of cash received in connection with the transaction.  The Company does not account for repurchase agreement transactions as sales.  All repurchase agreement transactions entered into by the Company are accounted for as collateralized financings. The Company may be required to provide additional collateral based on the fair value of the underlying securities.

Derivative Financial Instruments

The Company utilizes derivative financial instruments as a part of its asset-liability management program to control exposure to interest rate changes and fluctuations in market values and cash flows associated with certain financial instruments. The Company accounts for derivatives in accordance with ASC 815, "Derivatives and Hedging". Under current guidance, derivative transactions are classified as either cash flow hedges or fair value hedges or they are not designated as hedging instruments. The Company designates each transaction at its inception.

The Company documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions.  This process includes linking all derivatives that are designated as fair value hedges or cash flow hedges to specific assets or liabilities on the balance sheet.  The Company also formally assesses, both

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at the hedge’s inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are effective in offsetting changes in fair values or cash flows of hedged items.

As of December 31, 2016, the Company had both fair value and cash flow hedges on its balance sheet as well as derivative financial instruments that have not been designated as hedging instruments.  The derivatives are reported at fair value as of each balance sheet date. For designated cash flow hedges, the effective portions of changes in the fair value of the derivative are recorded in other comprehensive income (loss) and are recognized in the income statement when the hedged item affects earnings.  Ineffective portions of changes in the fair value of cash flow hedges are recognized in earnings as are changes in market value of derivatives not designated as hedging instruments.

Information concerning each of the Company's categories of derivatives as of December 31, 2016 and 2015 is presented in Note 24 to the consolidated financial statements.

Reclassifications

Certain reclassifications have been made to the prior year financial statements to conform to the current year presentation. No reclassifications were significant and there was no effect on net income.

Transfers of Financial Assets

Transfers of financial assets are accounted for as sales when control over the assets has been surrendered.  Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Share-Based Employee Compensation Plan

At December 31, 2016, the Company had a share-based employee compensation plan which is described more fully in Note 8 to the consolidated financial statements. Compensation cost relating to share-based payment transactions is recognized in the consolidated financial statements.  That cost is measured based on the fair value of the equity instruments issued and recognized over the applicable vesting period.  The Company recognized $925,000, $605,000, and $426,000 in compensation expense during 2016, 2015, and 2014, respectively.

Recent Accounting Pronouncements

In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” This update is intended to provide guidance about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. Management is required under the new guidance to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date the financial statements are issued when preparing financial statements for each interim and annual reporting period. If conditions or events are identified, the ASU specifies the process that must be followed by management and also clarifies the timing and content of going concern footnote disclosures in order to reduce diversity in practice. The amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2016. Early adoption is permitted. The Company does not expect the adoption of ASU 2014-15 to have a material impact on its consolidated financial statements.

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.” The amendments in ASU 2016-01, among other things: 1) Requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. 2) Requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes. 3) Requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables). 4) Eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost. The amendments in this ASU are effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently assessing the impact that ASU 2016-01 will have on its consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” Among other things, in the amendments in ASU 2016-02, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (1) A lease liability, which is a lessee‘s obligation to make lease payments arising from a lease, measured

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on a discounted basis; and (2) A right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align, where necessary, lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted upon issuance. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. The Company is currently assessing the impact that ASU 2016-02 will have on its consolidated financial statements.

During March 2016, the FASB issued ASU No. 2016-05, “Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships.” The amendments in this ASU clarify that a change in the counterparty to a derivative instrument that has been designated as the hedging instrument does not, in and of itself, require dedesignation of that hedging relationship provided that all other hedge accounting criteria remain intact. The amendments are effective for public business entities for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The Company does not expect the adoption of ASU 2016-05 to have a material impact on its consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-07, “Investments - Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting.” The amendments in this ASU eliminate the requirement that when an investment qualifies for use of the equity method as a result of an increase in the level of ownership interest or degree of influence, an investor must adjust the investment, results of operations, and retained earnings retroactively on a step-by-step basis as if the equity method had been in effect during all previous periods that the investment had been held. The amendments require that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor’s previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. Therefore, upon qualifying for the equity method of accounting, no retroactive adjustment of the investment is required. In addition, the amendments in this ASU require that an entity that has an available-for-sale equity security that becomes qualified for the equity method of accounting recognize through earnings the unrealized holding gain or loss in accumulated other comprehensive income (loss) at the date the investment becomes qualified for use of the equity method. The amendments are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. The amendments should be applied prospectively upon their effective date to increases in the level of ownership interest or degree of influence that result in the adoption of the equity method. Early adoption is permitted. The Company does not expect the adoption of ASU 2016-07 to have a material impact on its consolidated financial statements.

During March 2016, the FASB issued ASU No. 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” The amendments in this ASU simplify several aspects of the accounting for share-based payment award transactions including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. The amendments are effective for public companies for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company is currently assessing the impact that ASU 2016-09 will have on its consolidated financial statements.

During June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” The amendments in this ASU, among other things, require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The amendments in this ASU are effective for SEC filers for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company is currently assessing the impact that ASU 2016-13 will have on its consolidated financial statements.

During August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments”, to address diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The amendments should be applied using a retrospective transition method to each period presented. If retrospective application is impractical for some of the issues addressed by the update, the amendments for those issues would be applied prospectively as of the earliest date practicable. Early adoption is permitted, including adoption

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in an interim period. The Company does not expect the adoption of ASU 2016-15 to have a material impact on its consolidated financial statements.

During January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business”. The amendments in this ASU clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Under the current implementation guidance in Topic 805, there are three elements of a business-inputs, processes, and outputs. While an integrated set of assets and activities (collectively referred to as a “set”) that is a business usually has outputs, outputs are not required to be present. In addition, all the inputs and processes that a seller uses in operating a set are not required if market participants can acquire the set and continue to produce outputs. The amendments in this ASU provide a screen to determine when a set is not a business. If the screen is not met, the amendments (1) require that to be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output and (2) remove the evaluation of whether a market participant could replace missing elements. The ASU provides a framework to assist entities in evaluating whether both an input and a substantive process are present. The amendments in this ASU are effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods. The amendments in this ASU should be applied prospectively on or after the effective date. No disclosures are required at transition. The Company does not expect the adoption of ASU 2017-01 to have a material impact on its consolidated financial statements.

During January 2017, the FASB issued ASU No. 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment”. The amendments in this ASU simplify how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Instead, under the amendments in this ASU, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. Public business entities that are U.S. Securities and Exchange Commission (SEC) filers should adopt the amendments in this ASU for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Public business entities that are not SEC filers should adopt the amendments in this ASU for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2020. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not expect the adoption of ASU 2017-04 to have a material impact on its consolidated financial statements.

Note 2. Securities

Amortized costs and fair values of securities being held to maturity as of December 31, 2016 and 2015, are summarized as follows:

	December 31, 2016
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Held to Maturity
Obligations of states and political subdivisions	$	6,433	$	—	$	(594	)	$	5,839
Corporate securities	4,250		21		(15		)	4,256
Total	$	10,683	$	21	$	(609	)	$	10,095

	December 31, 2015
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Held to Maturity
Obligations of states and political subdivisions	$	1,457	$	—	$	(38	)	$	1,419
Corporate securities	2,750		24		(30		)	2,744
Total	$	4,207	$	24	$	(68	)	$	4,163

The amortized cost and fair value of securities being held to maturity as of December 31, 2016, by contractual maturity are shown below. 

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	December 31, 2016
(Dollars in thousands)	Amortized Cost		Fair Value
Held to Maturity
Due after five years through ten years	$	4,250	$	4,256
Due after ten years	6,433		5,839
Total	$	10,683	$	10,095

Amortized costs and fair values of securities available for sale as of December 31, 2016 and 2015, are summarized as follows:

	December 31, 2016
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available for Sale
U.S. government agencies	$	73,546	$	209	$	(571	)	$	73,184
Obligations of states and political subdivisions	62,896		1,019		(542		)	63,373
Mortgage-backed securities:
Agency	98,549		646		(1,144		)	98,051
Non-agency	9,991		16		(74		)	9,933
Other asset backed securities	41,860		361		(616		)	41,605
Corporate securities	16,648		—		(1,227		)	15,421
Total	$	303,490	$	2,251	$	(4,174	)	$	301,567

	December 31, 2015
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available for Sale
U.S. government agencies	$	79,005	$	315	$	(380	)	$	78,940
Obligations of states and political subdivisions	74,071		1,956		(434		)	75,593
Mortgage-backed securities:
Agency	129,360		3,046		(745		)	131,661
Non-agency	12,782		33		(38		)	12,777
Other asset backed securities	58,958		426		(603		)	58,781
Corporate securities	17,557		22		(760		)	16,819
Total	$	371,733	$	5,798	$	(2,960	)	$	374,571

The amortized cost and fair value of securities available for sale as of December 31, 2016, by contractual maturity are shown below.  Maturities may differ from contractual maturities in corporate and mortgage-backed securities because the securities and mortgages underlying the securities may be called or repaid without any penalties.  Therefore, these securities are not included in the maturity categories in the following maturity summary.

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	December 31, 2016
(Dollars in thousands)	Amortized Cost		Fair Value
Available for Sale
Due in one year or less	$	777	$	777
Due after one year through five years	9,020		9,219
Due after five years through ten years	25,004		24,174
Due after ten years	118,289		117,808
Mortgage-backed securities	108,540		107,984
Other asset backed securities	41,860		41,605
Total	$	303,490	$	301,567

Proceeds from sales of securities available for sale during 2016, 2015, and 2014 were $79.3 million, $11.6 million, and $58.9 million, respectively.  Proceeds from calls and principal repayments of securities available for sale during 2016, 2015, and 2014 were $76.2 million, $89.9 million and $73.4 million, respectively. Gross gains on sales and calls of securities available for sale were $1.5 million, and $49,000 in 2016, respectively, $172,000 and $5,000 in 2015, respectively and $770,000 and none in 2014, respectively. Gross losses on sales and calls of securities available for sale were $28,000, and $9,000 in 2016, respectively, $37,000 and none in 2015, respectively and $584,000 and none in 2014 respectively. There were no losses recognized for impaired securities in 2016, 2015, and 2014. The tax expense applicable to these net realized gains amounted to $528,000, $48,000, and $63,000, for 2016, 2015 and 2014, respectively.

The carrying value of securities pledged to qualify for fiduciary powers, to secure public monies and for other purposes as required by law amounted to $115.7 million and $113.1 million at December 31, 2016 and 2015, respectively.

At December 31, 2016 and 2015, investments in an unrealized loss position that are temporarily impaired are as follows:

(Dollars in thousands)	Less than Twelve Months					Twelve Months or Greater					Total
2016	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Held to Maturity
Obligations of states and political subdivisions	$	5,839	$	(594	)	$	—	$	—		$	5,839	$	(594	)
Corporate securities	1,485		(15		)	—		—			1,485		(15		)
Total	$	7,324	$	(609	)	$	—	$	—		$	7,324	$	(609	)
Available for Sale
U.S. government agencies	$	46,700	$	(495	)	$	7,174	$	(76	)	$	53,874	$	(571	)
Obligations of states and political subdivisions	12,670		(257		)	6,968		(285		)	19,638		(542		)
Mortgage-backed securities:
Agency	51,018		(634		)	13,020		(510		)	64,038		(1,144		)
Non-agency	5,379		(68		)	1,944		(6		)	7,323		(74		)
Other asset backed securities	7,007		(284		)	16,388		(332		)	23,395		(616		)
Corporate securities	5,912		(241		)	9,262		(986		)	15,174		(1,227		)
Total	$	128,686	$	(1,979	)	$	54,756	$	(2,195	)	$	183,442	$	(4,174	)

19

(Dollars in thousands)	Less than Twelve Months					Twelve Months or Greater					Total
2015	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Held to Maturity
Obligations of states and political subdivisions	$	1,419	$	(38	)	$	—	$	—		$	1,419	$	(38	)
Corporate securities	1,970		(30		)	—		—			1,970		(30		)
Total	$	3,389	$	(68	)	$	—	$	—		$	3,389	$	(68	)
Available for Sale
U.S. government agencies	$	46,000	$	(304	)	$	4,223	$	(76	)	$	50,223	$	(380	)
Obligations of states and political subdivisions	16,559		(324		)	1,082		(110		)	17,641		(434		)
Mortgage-backed securities:
Agency	27,627		(402		)	9,911		(343		)	37,538		(745		)
Non-agency	7,842		(37		)	671		(1		)	8,513		(38		)
Other asset backed securities	25,399		(276		)	12,037		(327		)	37,436		(603		)
Corporate securities	10,740		(378		)	4,866		(382		)	15,606		(760		)
Total	$	134,167	$	(1,721	)	$	32,790	$	(1,239	)	$	166,957	$	(2,960	)

A total of 256 securities have been identified by the Company as temporarily impaired at December 31, 2016.  Of the 256 securities, 251 are investment grade and five are speculative grade.  Market prices change daily and are affected by conditions beyond the control of the Company.  Although the Company has the ability to hold these securities until the temporary loss is recovered, decisions by management may necessitate a sale before the loss is fully recovered.  No such sales were anticipated or required as of December 31, 2016.  Investment decisions reflect the strategic asset/liability objectives of the Company.  The investment portfolio is analyzed frequently by the Company and managed to provide an overall positive impact to the Company’s income statement and balance sheet.

Other-than-temporary impairment losses

At December 31, 2016, the Company evaluated the investment portfolio for possible other-than-temporary impairment losses and concluded that no adverse change in cash flows occurred and did not consider any portfolio securities to be other-than-temporarily impaired.  Based on this analysis and because the Company does not intend to sell securities in an unrealized loss position and it is more likely than not the Company will not be required to sell any securities before recovery of amortized cost basis, which may be at maturity, the Company does not consider any portfolio securities to be other-than-temporarily impaired. For debt securities related to corporate securities, the Company determined that there was no other adverse change in the cash flows as viewed by a market participant; therefore, the Company does not consider the investments in these assets to be other-than-temporarily impaired at December 31, 2016.  However, there is a risk that the Company’s continuing reviews could result in recognition of other-than-temporary impairment charges in the future. For the years ended December 31, 2016, 2015, and 2014, no credit related impairment losses were recognized by the Company.

Restricted securities

The Company’s investment in FHLB stock totaled $2.8 million and $4.7 million at December 31, 2016 and 2015, respectively.  FHLB stock is generally viewed as a long-term investment and as a restricted security which is carried at cost because there is no market for the stock other than the FHLB or member institutions.  Therefore, when evaluating FHLB stock for impairment, its value is based on the ultimate recoverability of the par value rather than by recognizing temporary declines in value.  The Company does not consider this investment to be other-than-temporarily impaired at December 31, 2016, and no impairment has been recognized.  FHLB stock is shown in restricted securities on the consolidated balance sheets and is not part of the available for sale portfolio.

The Company also had an investment in FRB stock which totaled $1.7 million at December 31, 2016 and 2015, respectively. The investment in FRB stock is a required investment and is carried at cost since there is no ready market. The Company does not consider this investment to be other-than-temporarily impaired at December 31, 2016 and no impairment has been recognized. FRB stock is shown in the restricted securities line item on the consolidated balance sheets and is not part of the available for sale securities portfolio.

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Note 3. Loans, Net

The Company segregates its loan portfolio into three primary loan segments:  Real Estate Loans, Commercial Loans, and Consumer Loans.  Real estate loans are further segregated into the following classes: construction loans, loans secured by farmland, loans secured by 1-4 family residential real estate, and other real estate loans.  Other real estate loans include commercial real estate loans.  The consolidated loan portfolio was composed of the following:

	2016				2015
(Dollars in thousands)	Outstanding Balance		Percent of Total Portfolio		Outstanding Balance		Percent of Total Portfolio
Real estate loans:
Construction	$	35,627	4.1	%	$	39,673	4.9	%
Secured by farmland	16,768		2.0		19,062		2.4
Secured by 1-4 family residential	314,045		36.5		280,096		34.8
Other real estate loans	283,613		33.0		258,035		32.0
Commercial loans	190,767		22.2		190,482		23.6
Consumer loans	19,277		2.2		18,333		2.3
Total Gross Loans (1)	860,097		100.0	%	805,681		100.0	%
Less allowance for loan losses	11,404				11,046
Net loans	$	848,693			$	794,635

⁽¹⁾  Includes net deferred loan costs and premiums of $3.3 million and $3.5 million, respectively.

The Company had no mortgages held for sale at December 31, 2016 and 2015.

During the year ended December 31, 2016, net proceeds received on the sale of $4.3 million in four problem loans totaled $4.4 million, resulting in a net recovery of $127,000 of amounts previously charged-off related to those loans. These loans were sold on a non-recourse basis. Of this amount, $1.2 million were on nonaccrual status, as well as 28 loans with no outstanding recorded investment as they had been fully charged-off in prior periods. There were $339,000 in specific reserves associated with these loans. During the year ended December 31, 2015, the Company received net proceeds of $1.1 million on the sale of $1.0 million in portfolio loans on a non-recourse basis, resulting in a net recovery of $100,000 of amounts previously charged-off related to those loans. Of this amount, $1.0 million were on nonaccrual status and were classified as TDRs. There were no specific reserves associated with these loans.

The following tables present a contractual aging of the recorded investment in past due loans by class of loans as of December 31, 2016 and December 31, 2015, respectively:

	December 31, 2016
(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days Or Greater		Total Past Due		Current		Total Loans
Real estate loans:
Construction	$	—	$	—	$	—	$	—	$	35,627	$	35,627
Secured by farmland	—		199		—		199		16,569		16,768
Secured by 1-4 family residential	—		—		514		514		313,531		314,045
Other real estate loans	312		—		2,104		2,416		281,197		283,613
Commercial loans	146		10		2,518		2,674		188,093		190,767
Consumer loans	88		4		1,871		1,963		17,314		19,277
Total	$	546	$	213	$	7,007	$	7,766	$	852,331	$	860,097

21

	December 31, 2015
(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days Or Greater		Total Past Due		Current		Total Loans
Real estate loans:
Construction	$	69	$	—	$	—	$	69	$	39,604	$	39,673
Secured by farmland	—		—		—		—		19,062		19,062
Secured by 1-4 family residential	259		—		1,117		1,376		278,720		280,096
Other real estate loans	325		—		248		573		257,462		258,035
Commercial loans	1,242		15		31		1,288		189,194		190,482
Consumer loans	4		17		—		21		18,312		18,333
Total	$	1,899	$	32	$	1,396	$	3,327	$	802,354	$	805,681

The following table presents the recorded investment in nonaccrual loans and loans past due ninety days or more and still accruing by class of loans as of December 31, 2016 and 2015, respectively:

	2016				2015
(Dollars in thousands)	Nonaccrual		Past due 90 days or more and still accruing		Nonaccrual		Past due 90 days or more and still accruing
Real estate loans:
Construction	$	29	$	—	$	204	$	—
Secured by 1-4 family residential	296		303		4,460		—
Other real estate loans	1,976		128		1,186		248
Commercial loans	4,187		350		1,036		30
Consumer loans	1,871		—		1,898		—
Total	$	8,359	$	781	$	8,784	$	278

If interest on nonaccrual loans had been accrued, such income would have approximated $362,000, $342,000, and $544,000 for the years ended December 31, 2016, 2015, and 2014, respectively. The Company sold $4.3 million and $1.0 million in loans during 2016 and 2015, respectively, of which, $1.2 million and $1.0 million were on nonaccrual status, respectively.

The Company utilizes an internal asset classification system as a means of measuring and monitoring credit risk in the loan portfolio.  Under the Company’s classification system, problem and potential problem loans are classified as “Special Mention”, “Substandard”, and “Doubtful”.

Special Mention:  Loans with potential weaknesses that deserve management’s close attention.  If left uncorrected, the potential weaknesses may result in the deterioration of the repayment prospects for the credit.

Substandard:  Loans with well-defined weaknesses that jeopardize the liquidation of the debt.  Either the paying capacity of the borrower or the value of the collateral may be inadequate to protect the Company from potential losses.

Doubtful:  Loans with a very high possibility of loss.  However, because of important and reasonably specific pending factors, classification as a loss is deferred until a more exact status may be determined.

Loss: Loans are deemed uncollectible and are charged off immediately.

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The following tables present the recorded investment in loans by class of loan that have been classified according to the internal classification system as of December 31, 2016 and 2015, respectively:

December 31, 2016
(Dollars in thousands)	Real Estate Construction		Real Estate Secured by Farmland		Real Estate Secured by 1-4 Family Residential		Other Real Estate Loans		Commercial		Consumer		Total
Pass	$	30,065	$	8,796	$	310,233	$	274,591	$	185,030	$	17,342	$	826,057
Special Mention	5,534		—		932		2,287		1,390		25		10,168
Substandard	28		7,972		2,584		4,759		2,179		1,909		19,431
Doubtful	—		—		125		1,976		2,168		—		4,269
Loss	—		—		171		—		—		1		172
Ending Balance	$	35,627	$	16,768	$	314,045	$	283,613	$	190,767	$	19,277	$	860,097

December 31, 2015
(Dollars in thousands)	Real Estate Construction		Real Estate Secured by Farmland		Real Estate Secured by 1-4 Family Residential		Other Real Estate Loans		Commercial		Consumer		Total
Pass	$	30,114	$	10,566	$	271,721	$	243,768	$	183,532	$	16,347	$	756,048
Special Mention	9,024		—		896		7,254		3,638		42		20,854
Substandard	535		8,496		6,818		5,827		2,301		1,943		25,920
Doubtful	—		—		661		1,186		1,011		—		2,858
Loss	—		—		—		—		—		1		1
Ending Balance	$	39,673	$	19,062	$	280,096	$	258,035	$	190,482	$	18,333	$	805,681

The following tables present loans individually evaluated for impairment by class of loan as of and for the year ended December 31, 2016 and 2015:

	December 31, 2016
(Dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Real estate loans:
Construction	$	28	$	28	$	—	$	28	$	—
Secured by farmland	7,972		7,972		—		7,951		239
Secured by 1-4 family residential	72		108		—		72		2
Other real estate loans	1,976		1,976		—		1,976		—
Commercial loans	585		3,585		—		706		16
Consumer loans	—		—		—		—		—
Total with no related allowance	$	10,633	$	13,669	$	—	$	10,733	$	257
With an allowance recorded:
Real estate loans:
Construction	$	—	$	—	$	—	$	—	$	—
Secured by farmland	—		—		—		—		—
Secured by 1-4 family residential	1,275		1,326		251		1,239		49
Other real estate loans	2,971		2,971		206		2,975		151
Commercial loans	4,019		4,019		2,539		5,088		—
Consumer loans	1,871		1,871		842		1,871		—
Total with a related allowance	$	10,136	$	10,187	$	3,838	$	11,173	$	200
Total	$	20,769	$	23,856	$	3,838	$	21,906	$	457

23

	December 31, 2015
(Dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Real estate loans:
Construction	$	100	$	100	$	—	$	106	$	—
Secured by farmland	7,903		7,903		—		7,903		237
Secured by 1-4 family residential	701		736		—		703		—
Other real estate loans	—		—		—		—		—
Commercial loans	458		493		—		490		17
Consumer loans	—		—		—		—		—
Total with no related allowance	$	9,162	$	9,232	$	—	$	9,202	$	254
With an allowance recorded:
Real estate loans:
Construction	$	103	$	103	$	53	$	109	$	—
Secured by farmland	—		—		—		—		—
Secured by 1-4 family residential	4,426		4,478		1,120		4,547		27
Other real estate loans	4,196		4,196		464		4,224		157
Commercial loans	1,059		4,059		27		2,315		100
Consumer loans	1,898		1,898		1,000		2,449		—
Total with a related allowance	$	11,682	$	14,734	$	2,664	$	13,644	$	284
Total	$	20,844	$	23,966	$	2,664	$	22,846	$	538

The “Recorded Investment” amounts in the table above represent the outstanding principal balance net of charge-offs and nonaccrual payments of interest applied to principal on each loan represented in the table.  The “Unpaid Principal Balance” represents the outstanding principal balance on each loan represented in the table plus any amounts that have been charged-off on each loan and nonaccrual payments applied to principal.

Included in certain loan categories of impaired loans are troubled debt restructurings (“TDRs”). The total balance of TDRs at December 31, 2016 was $14.4 million of which $2.0 million were included in the Company’s nonaccrual loan totals at that date and $12.4 million represented loans performing as agreed according to the restructured terms. This compares with $15.5 million in total restructured loans at December 31, 2015.  The amount of the valuation allowance related to TDRs was $1.1 million and $1.6 million as of December 31, 2016 and 2015 respectively.

Loan modifications that were classified as TDRs during the years ended December 31, 2016 and 2015 were as follows:

	Year Ended December 31,
(Dollars in thousands)	2016					2015
Class of Loan	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Real estate loans:
Construction	1	$	38	$	38	—	$	—	$	—
Secured by farmland	—	—		—		1	7,903		7,903
Secured by 1-4 family residential	2	809		806		—	—		—
Other real estate loans	2	1,240		1,240		4	4,283		3,872
Total real estate loans	5	2,087		2,084		5	12,186		11,775
Commercial loans	—	—		—		1	50		46
Consumer loans	—	—		—		1	3,000		3,000
Total	5	$	2,087	$	2,084	7	$	15,236	$	14,821

The interest only payment terms were extended for one of the contracts and the maturity dates were extended for four of the contracts classified as TDRs during 2016. There were no outstanding commitments to lend additional amounts to troubled debt restructured borrowers at December 31, 2016.

24

There were no TDR payment defaults as of December 31, 2016 and December 31, 2015. For purposes of this disclosure, a TDR payment default occurs when, within 12 months of the original TDR modification, either a full or partial charge-off occurs or a TDR becomes 90 days or more past due.

Note 4. Allowance for Loan Losses

The following table presents the total allowance for loan losses, the allowance by impairment methodology (individually evaluated for impairment or collectively evaluated for impairment), the total loans and loans by impairment methodology (individually evaluated for impairment or collectively evaluated for impairment).

	December 31, 2016
(Dollars in thousands)	Real Estate Construction			Real Estate Secured by Farmland			Real Estate Secured by 1-4 Family Residential			Other Real Estate Loans			Commercial			Consumer			Total
Allowance for loan losses:
Balance December 31, 2015	$	905		$	192		$	3,341		$	3,761		$	1,706		$	1,141		$	11,046
Charge-offs	(388		)	—			(1,021		)	(126		)	(639		)	(20		)	(2,194		)
Recoveries	129			—			395			32			85			58			699
Provision	293			(65		)	(453		)	(500		)	2,781			(203		)	1,853
Balance December 31, 2016	$	939		$	127		$	2,262		$	3,167		$	3,933		$	976		$	11,404
Ending allowance:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	—		$	—		$	251		$	206		$	2,539		$	842		$	3,838
Collectively evaluated for impairment	939			127			2,011			2,961			1,394			134			7,566
Total ending allowance balance	$	939		$	127		$	2,262		$	3,167		$	3,933		$	976		$	11,404
Loans:
Individually evaluated for impairment	$	28		$	7,972		$	1,347		$	4,947		$	4,604		$	1,871		$	20,769
Collectively evaluated for impairment	35,599			8,796			312,698			278,666			186,163			17,406			839,328
Total ending loans balance	$	35,627		$	16,768		$	314,045		$	283,613		$	190,767		$	19,277		$	860,097

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	December 31, 2015
(Dollars in thousands)	Real Estate Construction		Real Estate Secured by Farmland		Real Estate Secured by 1-4 Family Residential			Other Real Estate Loans			Commercial			Consumer			Total
Allowance for loan losses:
Balance at December 31, 2014	$	550	$	179	$	3,966		$	3,916		$	2,354		$	821		$	11,786
Charge-offs	—		—		(344		)	(9		)	(3,281		)	(57		)	(3,691		)
Recoveries	246		—		359			28			14			11			658
Provision	109		13		(640		)	(174		)	2,619			366			2,293
Balance at December 31, 2015	$	905	$	192	$	3,341		$	3,761		$	1,706		$	1,141		$	11,046
Ending allowance:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	53	$	—	$	1,120		$	464		$	27		$	1,000		$	2,664
Collectively evaluated for impairment	852		192		2,221			3,297			1,679			141			8,382
Total ending allowance balance	$	905	$	192	$	3,341		$	3,761		$	1,706		$	1,141		$	11,046
Loans:
Individually evaluated for impairment	$	203	$	7,903	$	5,127		$	4,196		$	1,517		$	1,898		$	20,844
Collectively evaluated for impairment	39,470		11,159		274,969			253,839			188,965			16,435			784,837
Total ending loans balance	$	39,673	$	19,062	$	280,096		$	258,035		$	190,482		$	18,333		$	805,681

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	December 31, 2014
(Dollars in thousands)	Real Estate Construction			Real Estate Secured by Farmland		Real Estate Secured by 1-4 Family Residential			Other Real Estate Loans			Commercial			Consumer			Total
Allowance for loan losses:
Balance at December 31, 2013	$	847		$	166	$	6,734		$	3,506		$	1,890		$	177		$	13,320
Adjustment for the sale of majority interest in consolidated subsidiary	—			—		(95		)	—			—			—			(95		)
Charge-offs	(1,186		)	—		(1,380		)	(747		)	(959		)	(36		)	(4,308		)
Recoveries	258			—		342			110			104			95			909
Provision	631			13		(1,635		)	1,047			1,319			585			1,960
Balance at December 31, 2014	$	550		$	179	$	3,966		$	3,916		$	2,354		$	821		$	11,786
Ending allowance:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	66		$	—	$	1,370		$	294		$	292		$	647		$	2,669
Collectively evaluated for impairment	484			179		2,596			3,622			2,062			174			9,117
Total ending allowance balance	$	550		$	179	$	3,966		$	3,916		$	2,354		$	821		$	11,786
Loans:
Individually evaluated for impairment	$	246		$	7,903	$	5,613		$	4,531		$	846		$	3,019		$	22,158
Collectively evaluated for impairment	32,804			11,805		259,603			250,705			162,423			15,348			732,688
Total ending loans balance	$	33,050		$	19,708	$	265,216		$	255,236		$	163,269		$	18,367		$	754,846

Note 5. Premises and Equipment, Net

Premises and equipment consists of the following: 

(Dollars in thousands)	2016			2015
Land	$	2,068		$	2,068
Facilities	22,873			22,849
Furniture, fixtures, and equipment	11,729			11,676
Construction in process and deposits on equipment and land	1,842			1,455
	38,512			38,048
Less accumulated depreciation	(19,491		)	(18,517		)
Total	$	19,021		$	19,531

Depreciation expense was $1.4 million for the year ended December 31, 2016, $1.3 million for the year ended December 31, 2015, and $1.5 million for the year ended December 31, 2014.

Pursuant to the terms of non-cancelable lease agreements in effect at December 31, 2016, pertaining to banking premises, future minimum rent commitments under various operating leases are as follows:

27

(Dollars in thousands)	December 31, 2016
2017	$	1,666
2018	1,617
2019	1,624
2020	1,444
2021	1,408
Thereafter	13,388
	$	21,147

Rent expense was $1.8 million, $2.0 million, and $2.8 million for the years ended December 31, 2016, 2015, and 2014, respectively, and is included in occupancy and equipment expense on the consolidated statements of income.

Note 6. Deposits

The Company has developed an interest bearing product that integrates the use of the cash within client accounts at Middleburg Trust Company for overnight funding at Middleburg Bank. The overall balance of this product was $43.2 million and $34.0 million at December 31, 2016 and 2015, respectively.

The aggregate amount of jumbo time deposits, each with a minimum denomination of $250,000, was approximately $84.5 million and $91.0 million at December 31, 2016 and 2015, respectively.

At December 31, 2016, the scheduled maturities of time deposits are as follows:

(Dollars in thousands)	December 31, 2016
2017	$	151,293
2018	38,370
2019	25,494
2020	7,115
2021	3,368
	$	225,640

At December 31, 2016 and 2015, overdraft demand deposits reclassified to loans totaled $142,000 and $358,000, respectively.

Middleburg Bank obtains certain deposits through the efforts of third-party brokers.  At December 31, 2016 and 2015, brokered deposits totaled $36.5 million and $38.7 million, respectively, and were included in time deposits.

Note 7. Borrowings

As of December 31, 2016, Middleburg Bank had remaining credit availability in the amount of $334.3 million at the Federal Home Loan Bank of Atlanta ("FHLB").  This line may be utilized for short and/or long-term borrowing.  Advances on the line are secured by all of the Company’s first lien residential real estate loans on 1-4 unit, single-family dwellings; home equity lines of credit; and eligible commercial real estate loans.   The amount of the available credit is limited to a percentage of the estimated market value of the loans as determined periodically by the FHLB. Any borrowings in excess of the qualifying collateral require pledging of additional assets. As of December 31, 2016, Middleburg Bank also had a letter of credit in the amount of $25.0 million with the FHLB. This letter of credit was issued as collateral for public fund depository accounts and is reflected in the remaining credit availability.

The Company had $39.5 million of FHLB advances outstanding as of December 31, 2016.  The interest rates on these advances ranged from 0.63% to 0.93% and the weighted-average rate was 0.78%.  The Company’s FHLB advances totaled $85.0 million at December 31, 2015.  The weighted-average interest rate on these advances at December 31, 2015 was 0.66%.

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The contractual maturities of the Company’s long-term debt are as follows:

(Dollars in thousands)	December 31, 2016
Due in 2017	$	29,500
Due in 2018	10,000
Total	$	39,500

Securities sold under agreements to repurchase consist of secured transactions with customers which generally mature the day following the day sold totaling $34.9 million and $26.9 million at December 31, 2016 and December 31, 2015, respectively.

The outstanding balances and related information for securities sold under agreements to repurchase are summarized as follows:

(Dollars in thousands)	Securities sold under agreements to repurchase
At December 31:
2016	$	34,864
2015	26,869
Weighted-average interest rate at year-end:
2016	0.01		%
2015	0.01
Maximum amount outstanding at any month's end:
2016	$	35,660
2015	34,253
Average amount outstanding during the year:
2016	$	31,076
2015	30,095
Weighted-average interest rate during the year:
2016	0.01		%
2015	0.21

The Company also has a line of credit with the Federal Reserve Bank of Richmond of $33.4 million of which there was no outstanding balance at December 31, 2016.

The Company has an additional $45.0 million in lines of credit available from other institutions at December 31, 2016.

Note 8. Share-Based Compensation Plan

The Company sponsored one share-based compensation plan, the 2006 Equity Compensation Plan, which provided for the granting of stock options, stock appreciation rights, stock awards, performance share awards, incentive awards, and stock units.  The 2006 Equity Compensation Plan was approved by the Company’s shareholders at the Annual Meeting held on April 26, 2006, and has succeeded the Company’s 1997 Stock Incentive Plan. The plan expired by its own terms in February 2016, before which, the Company granted share-based compensation to its directors, officers, employees, and other persons the Company determined to have contributed to the profits or growth of the Company.  The number of shares reserved for issuance totaled 430,000 shares.

The Company granted 49,100 shares of restricted stock during 2016 to certain employees and executive officers. Of the 49,100 shares, 31,750 shares are in the form of performance-accelerated restricted stock and 17,350 shares are in the form of time-based restricted stock. During 2016, the Company's board of directors also awarded 11 directors 400 shares of restricted stock for a total of 4,400 restricted shares. These shares will vest at 100% in April 2017.

For the performance-accelerated restricted stock granted to certain employees and executive officers, in order for a recipient to earn and have vested 100% of granted shares, the Company must achieve certain financial performance targets during predefined monitoring periods as compared to a selected peer group and the recipient must be employed by the Company or one of its subsidiaries at the end of the predefined vesting period. Vested shares are distributed to recipients immediately after performance targets are certified. Partial share vesting may be achieved for interim periods during the predefined monitoring periods, however no vesting may occur before the end of 2018. If any shares remain unvested, 50% of the unvested shares will be forfeited. Any remaining shares vest at the end of the predefined monitoring period provided that the recipient remained employed by the Company or one of its subsidiaries over the entire performance and vesting period.

For the time-based restricted stock granted to certain employees and executive officers, in order for a recipient to earn and have vested 100% of the granted shares, the recipient must be employed by the Company or one of its subsidiaries at the time of vesting.

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For the years ended December 31, 2016, 2015, and 2014, the Company recorded $925,000, $605,000, and $426,000, respectively, in share-based compensation expense related to restricted stock and option grants.  The total income tax benefit related to share-based compensation was $5,000, $117,000, and $63,000 in 2016, 2015, and 2014, respectively.

The following table summarizes restricted stock awarded under the 2006 Equity Compensation Plan:

	December 31,
	2016						2015						2014
(Dollars in thousands)	Shares		Weighted-Average Grant Date Fair Value		Aggregate Value		Shares		Weighted-Average Grant Date Fair Value		Aggregate Value		Shares		Weighted-Average Grant Date Fair Value		Aggregate Value
Non-vested at the beginning of the year	153,399		$	17.17			134,108		$	16.66			119,250		$	16.39
Granted	53,500		20.76				36,150		18.50				41,533		17.65
Vested	(53,908	)	16.88				(16,359	)	15.91				(15,425	)	15.59
Forfeited or expired	(2,250	)	19.91				(500	)	18.07				(11,250	)	16.05
Non-vested at end of the year	150,741		$	18.50	$	5,238	153,399		$	17.17	$	2,835	134,108		$	16.66	$	2,415

The weighted-average remaining contractual term for non-vested grants at December 31, 2016, 2015, and 2014 was 2.5 , 2.7, and 3.5 years, respectively.  As of December 31, 2016, there was $1.6 million of total unrecognized compensation expense related to the non-vested service awards granted under the 2006 Equity Compensation Plan.

Stock options may be granted periodically to certain officers and employees under the Company’s share-based compensation plan at prices equal to the market value of the stock on the date the options are granted.  Options granted vest over a three-year time period over which 25% vests on each of the first and second anniversaries of the grant and 50% on the third anniversary of the grant. As of December 31, 2016, all outstanding option awards were vested and, accordingly, there was no unrecognized compensation expense related to unvested stock-based option awards. Shares issued in connection with stock option exercises may be issued from available treasury shares or from market purchases. There were no stock option awards granted during the years ended December 31, 2016, 2015 or 2014.

The following table summarizes options outstanding under the 2006 Equity Compensation Plan at the end of the reportable periods:  

	2016				2015			2014
	Shares		Weighted- Average Exercise Price		Shares	Weighted- Average Exercise Price		Shares		Weighted- Average Exercise Price
Outstanding at beginning of year	30,012		$	14.00	30,012	$	14.00	58,513		$	15.30
Granted	—		—		—	—		—		—
Exercised	(6,650	)	14.00		—	—		(25,501	)	14.00
Forfeited or expired	—		—		—	—		(3,000	)	39.40
Outstanding at end of year	23,362		$	14.00	30,012	$	14.00	30,012		$	14.00
Options exercisable at year end	23,362		$	14.00	30,012	$	14.00	30,012		$	14.00

The total intrinsic value of options exercised was $88,000 and $126,500 during 2016 and 2014, respectively. There were no options exercised during 2015. There was $484,800, $134,500, and $120,300 aggregate intrinsic value of options outstanding at December 31, 2016, 2015 and 2014, respectively.

The aggregate intrinsic value represents the amount by which the current market value of the underlying stock exceeds the exercise price. This amount changes based on changes in the market value of the Company’s common stock.

As of December 31, 2016, options outstanding and exercisable are summarized as follows:

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Range of Exercise Prices		Options Outstanding	Weighted-Average Remaining Contractual Life (years)	Options Exercisable
$	14.00	18,362	2.22	18,362
$	14.00	5,000	2.85	5,000
$	14.00	23,362	2.36	23,362

Note 9. Employee Benefit Plans

401(k) Plan

The Company has a 401(k) plan whereby a majority of employees participate in the plan.  Employees may contribute up to 100% of their compensation subject to certain limits based on federal tax laws.  The Company makes matching contributions equal to 50% of the first 6% of an employee’s compensation contributed to the plan.  Matching contributions vest to the employee equally over a five year period.  For the years ended December 31, 2016, 2015, and 2014, expense attributable to the plan amounted to $364,000, $351,000 and $340,000, respectively.

Money Purchase Pension Plan (MPPP)

The Middleburg Financial Corporation Defined Benefit Pension Plan was replaced by a Money Purchase Pension Plan effective on January 1, 2010. Employees who have attained age 21 and completed one year of service are eligible to participate in the plan as of the first day of the month following the completion of such eligibility provisions. Employees earn a year of service if they complete one thousand hours of service in a plan year. Service with Middleburg Financial Corporation and its subsidiaries prior to the effective date of the Plan counts toward a participant's initial eligibility to participate in the plan.

Each year, a participant receives an allocation of an employer contribution equal to 3.00% of total compensation (up to the statutory maximum) plus an additional contribution of 2.75% of compensation in excess of the Social Security taxable wage base (up to the statutory maximum). To receive an allocation, the participant must complete one thousand hours of service in the plan year and be employed on the last day of the plan year. The requirement to be employed on the last day of the plan year does not apply if a participant dies, retires, or becomes disabled during the plan year.

Participants become vested in their employer contributions according to a schedule which allows for graduated vesting and full vesting after five years of service. Service with Middleburg Financial Corporation and its subsidiaries prior to the effective date of the Plan count toward a participant's vested percentage.

Assets are held in a pooled investment account managed by Middleburg Trust Company, a wholly owned subsidiary of the Company. Distributions may be made upon termination of employment, death or disability.

The plan is administered by the Benefits Committee of the Company. The plan may be amended from time to time by the Board or its delegate and may be terminated by the Board at any time for any reason.

For the years ended December 31, 2016, 2015, and 2014 expense attributable to the plan was $545,000, $926,000, and $898,000, respectively.

Deferred Compensation Plans

The Company has adopted several deferred compensation plans; including a defined benefit SERP, an elective deferral plan for the former Chairman, and a defined contribution SERP for certain executive officers.  The two plans for the former Chairman made installment payouts in 2016, 2015 and 2014.  The defined contribution SERP for executive officers includes a vesting schedule, and is currently credited at a rate using the 10-year treasury plus 1.5%.  The deferred compensation expense for 2016, 2015, and 2014, was $245,000, $226,000, and $222,000, respectively. The plans are unfunded; however, life insurance has been acquired on the life of the executive officers in amounts sufficient to help meet the costs of the obligations.

Note 10. Income Taxes

The Company files income tax returns in the U.S. federal jurisdiction and the state of Virginia and various other states.  With few exceptions, the Company is no longer subject to U.S. federal or state income tax examinations by tax authorities for years prior to 2013.

The Company believes it is more likely than not that the benefit of deferred tax assets will be realized.  Consequently, no valuation allowance for deferred tax assets was deemed necessary at December 31, 2016 and 2015.

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Net deferred tax assets consist of the following components as of December 31, 2016 and 2015:

(Dollars in thousands)	2016		2015
Deferred tax assets:
Allowance for loan losses	$	3,877	$	3,756
Deferred compensation	687		647
Interest rate swap	67		99
Other real estate owned	288		257
Securities available for sale	654		—
Property and equipment	—		49
Other	1,427		2,028
Total deferred tax assets	$	7,000	$	6,836
Deferred tax liabilities:
Deferred loan costs, net	$	526	$	317
Securities available for sale	—		965
Property and equipment	79		—
Total deferred tax liabilities	$	605	$	1,282
Net deferred tax assets	$	6,395	$	5,554

The provision for income taxes charged to operations for the years ended December 31, 2016, 2015, and 2014, consists of the following:

(Dollars in thousands)	2016		2015		2014
Current tax expense	$	2,067	$	2,606	$	1,160
Deferred tax expense	746		109		1,181
Total income tax expense	$	2,813	$	2,715	$	2,341

The income tax provision differs from the amount of income tax determined by applying the U.S. federal income tax rate to pretax income for the years ended December 31, 2016, 2015, and 2014, due to the following:

(Dollars in thousands)	2016			2015			2014
Computed "expected" tax expense	$	3,698		$	3,585		$	3,374
Increase (decrease) in income taxes resulting from:
Tax-exempt income	(796		)	(829		)	(959		)
Low income housing tax credits	(408		)	(120		)	(211		)
Merger related expenses	267			—			—
Other, net	52			79			137
	$	2,813		$	2,715		$	2,341

Note 11. Related Party Transactions

The Company’s commercial and retail banking segment has, and may be expected to have in the future, banking transactions in the ordinary course of business with principal owners, directors, principal officers, their immediate families and affiliated companies in which they are principal stockholders, commonly referred to as related parties.  Any loans made to related parties were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time of origination for comparable loans with persons not related to the lender; and did not involve more than the normal risk of collectability or present other unfavorable features. Loans outstanding to directors and executive officers at December 31, 2016 and 2015 were:

(Dollars in thousands)	2016			2015
Balance, January 1	$	1,369		$	3,804
Decrease due to status changes	—			(2,375		)
Principal additions	352			439
Principal payments	(130		)	(499		)
Balance, December 31	$	1,591		$	1,369

Additionally, unused commitments to extend credit to related parties were $1.1 million at December 31, 2016 and $2.3 million at December 31, 2015.

Related party deposits totaled $5.0 million and $5.9 million at December 31, 2016 and 2015, respectively.

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Note 12. Contingent Liabilities and Commitments

In the normal course of business, there are various outstanding commitments and contingent liabilities, which are not reflected in the accompanying consolidated financial statements.  The Company does not anticipate any material loss as a result of these transactions.

See Note 15 with respect to financial instruments with off-balance sheet risk.

The Company must maintain a reserve against its deposits in accordance with Regulation D of the Federal Reserve Act.  For the final weekly reporting period in the years ended December 31, 2016 and 2015, the aggregate amount of gross daily average required reserves was approximately $3.5 million and $3.1 million, respectively.

Note 13. Earnings Per Share

The following shows the weighted-average number of shares used in computing earnings per share and the effect on weighted-average number of shares of diluted potential common stock. Nonvested restricted shares are included in basic earnings per share because of dividend participation rights. Potential dilutive common stock had no effect on income available to common stockholders.

	2016			2015			2014
	Shares	Per Share Amount		Shares	Per Share Amount		Shares	Per Share Amount
Earnings per share, basic	7,107,403	$	1.13	7,147,390	$	1.10	7,106,171	$	1.07
Effect of dilutive securities:
Stock options	11,461			6,805			6,939
Warrant (See note 23)	32,026			13,192			13,491
Earnings per share, diluted	7,150,890	$	1.13	7,167,387	$	1.09	7,126,601	$	1.06

In 2016, 2015, and 2014, there were no shares that would have been considered anti-dilutive. 

On September 15, 2015, the Company's Board of Directors authorized the repurchase of up to $10 million of the Company’s common stock. The repurchase program was effective immediately and runs through December 31, 2017. This program replaces the previous repurchase program adopted in 1999, pursuant to which the Company had 24,084 shares remaining eligible for repurchase. As of December 31, 2016, the Company had executed and settled transactions to repurchase 104,300 shares, totaling $1.9 million, for an average price of $18.34, of which 26,800 shares totaling $489,000 were executed and settled during the first quarter of 2016 at an average price of $18.29.

Note 14. Retained Earnings

Transfers of funds from the banking subsidiary to the Parent Company in the form of loans, advances, and cash dividends are restricted by federal and state regulatory authorities.  Federal regulations limit the payment of dividends to the sum of a bank’s current net retained income and retained net income of the two prior years.  As of December 31, 2016, the subsidiary bank had approximately $12.9 million in excess of regulatory limitations available for transfer to the Parent Company.

Note 15. Financial Instruments With Off-Balance Sheet Risk and Credit Risk

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers and to reduce its own exposure to fluctuations in interest rates.  These financial instruments include commitments to extend credit, standby letters of credit, and interest rate swaps.  Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheet.  The contract or notional amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments.  See Note 24 for more information regarding the Company’s use of derivatives.

The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments.  The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

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A summary of the contract amount of the Company's exposure to off-balance sheet risk as of December 31, 2016 and 2015, is as follows:

(Dollars in thousands)	2016		2015
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit	$	132,669	$	153,806
Standby letters of credit	4,998		3,718

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.  Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.  Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.  The Company evaluates each customer's creditworthiness on a case-by-case basis.  The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management's credit evaluation of the counterparty.  Collateral held varies but may include accounts receivable, inventory, property and equipment, and income producing commercial properties.

Unfunded commitments under lines of credit are commitments for possible future extensions of credit to existing customers.  Those lines of credit may not be drawn upon to the total extent to which the Company is committed.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party.  Those guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing, and similar transactions.  The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.  The Company holds certificates of deposit, deposit accounts, and real estate as collateral supporting those commitments for which collateral is deemed necessary.

The Company had approximately $3.4 million in deposits in financial institutions in excess of amounts insured by the Federal Deposit Insurance Corporation (FDIC) at December 31, 2016.

Note 16. Fair Value Measurements

The Company follows ASC 820, "Fair Value Measurements" to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures.  ASC 820 clarifies that fair value of certain assets and liabilities is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

ASC 820 specifies a hierarchy of valuation techniques based on whether the inputs are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions.  The three levels of the fair value hierarchy under ASC 820 based on these two types of inputs are as follows:

Level I. Quoted prices are available in active markets for identical assets or liabilities as of the reported date.

Level II. Pricing inputs are other than the quoted prices in active markets, which are either directly or indirectly observable as of the reported date.  The nature of these assets and liabilities includes items for which quoted prices are available but traded less frequently and items that are fair-valued using other financial instruments, the parameters of which can be directly observed.

Level III. Assets and liabilities that have little to no pricing observability as of the reported date.  These items do not have two-way markets and are measured using management’s best estimate of fair value, where the inputs into the determination of fair value require significant management judgment or estimation.

Measured on a recurring basis

The following describes the valuation techniques and inputs used by the Company in determining the fair value of certain assets recorded at fair value on a recurring basis in the financial statements.

Securities Available for Sale

The Company primarily values its investment portfolio using Level II fair value measurements, but may also use Level I or Level III measurements if required by the composition of the portfolio. If quoted market prices are not available, fair values are measured utilizing independent valuation techniques of identical or similar securities for which significant assumptions are derived primarily from or corroborated by observable market data. Third party vendors compile prices from various sources and may determine the

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fair value of identical or similar securities by using pricing models that consider observable market data (Level II). In certain cases where there is limited activity or less transparency around inputs to the valuation, securities are classified as Level III of the valuation hierarchy.

Interest Rate Swaps and Interest Rate Cap

Interest rate swaps and cap are recorded at fair value based on third party vendors who compile prices from various sources and may determine fair value of identical or similar instruments by using pricing models that consider observable market data (Level II).

The following tables present the balances of financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2016 and 2015.

(Dollars in thousands)	December 31, 2016
Description	Total		Level I		Level II		Level III
Assets:
U.S. government agencies	$	73,184	$	—	$	73,184	$	—
Obligations of states and political subdivisions	63,373		—		63,373		—
Mortgage-backed securities:
Agency	98,051		—		98,051		—
Non-agency	9,933		—		9,933		—
Other asset backed securities	41,605		—		41,605		—
Corporate securities	15,421		—		15,421		—
Interest rate swaps	44		—		44		—
Interest rate cap	9		—		9		—
Liabilities:
Interest rate swaps	242		—		242		—

(Dollars in thousands)	December 31, 2015
Description	Total		Level I		Level II		Level III
Assets:
U.S. government agencies	$	78,940	$	—	$	78,940	$	—
Obligations of states and political subdivisions	75,593		—		75,593		—
Mortgage-backed securities:
Agency	131,661		—		131,661		—
Non-agency	12,777		—		12,777		—
Other asset backed securities	58,781		—		58,781		—
Corporate securities	16,819		—		16,819		—
Interest rate swaps	73		—		73		—
Interest rate cap	39		—		39		—
Liabilities:
Interest rate swaps	370		—		370		—

Measured on nonrecurring basis

The Company may be required, from time to time, to measure and recognize certain other assets at fair value on a nonrecurring basis in accordance with GAAP. The following describes the valuation techniques and inputs used by the Company in determining the fair value of certain assets recorded at fair value on a nonrecurring basis in the financial statements.

Impaired Loans

Loans are designated as impaired when, in the judgment of management based on current information and events, it is probable that all amounts due according to the contractual terms of the loan agreement will not be collected when due. The measurement of loss associated with impaired loans can be based on either the observable market price of the loan or the fair value of the collateral. Collateral may be in the form of real estate or business assets including equipment, inventory, and accounts receivable. Any given loan may have multiple types of collateral. The vast majority of the collateral is real estate. The value of real estate collateral is determined utilizing a market valuation approach based on an appraisal conducted by an independent, licensed appraiser outside of the Company using observable market data (Level II). However, if the collateral value is significantly adjusted due to differences in the comparable properties, or is discounted by the Company because of marketability, then the fair value is considered Level III. The value of business equipment is based upon an outside appraisal if deemed significant, or the net book value on the

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applicable business’ financial statements if not considered significant. Likewise, values for inventory and accounts receivables collateral are based on financial statement balances or aging reports (Level III). Impaired loans allocated to the allowance for loan losses are measured at fair value on a nonrecurring basis. Any fair value adjustments are recorded in the period incurred as provision for loan losses on the consolidated statements of income.

Other Real Estate Owned ("OREO")

OREO is measured at fair value less estimated costs to sell, based on an appraisal conducted by an independent, licensed appraiser outside of the Company. If the collateral value is significantly adjusted due to differences in the comparable properties, or is discounted by the Company because of marketability, then the fair value is considered Level III. The initial fair value of OREO is based on an appraisal done at the time of foreclosure. Subsequent fair value adjustments are recorded in the period incurred and included in non-interest expense on the consolidated statements of income.

Repossessed Assets

The value of repossessed assets is determined by the Company based on marketability and other factors and is considered Level III.

The following table summarizes the Company’s non-financial assets that were measured at fair value on a nonrecurring basis during the period.

(Dollars in thousands)	December 31, 2016
	Total		Level I		Level II		Level III
Assets:
Impaired loans	$	6,298	$	—	$	—	$	6,298
Other real estate owned	$	5,073	$	—	$	—	$	5,073
Repossessed assets	$	843	$	—	$	—	$	843
(Dollars in thousands)	December 31, 2015
	Total		Level I		Level II		Level III
Assets:
Impaired loans	$	9,018	$	—	$	—	$	9,018
Other real estate owned	$	3,345	$	—	$	—	$	3,345
Repossessed assets	$	1,043	$	—	$	—	$	1,043

The following table presents quantitative information as of December 31, 2016 and 2015 about Level III fair value measurements for assets measured at fair value on a nonrecurring basis:

2016	Fair Value (in thousands)		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Impaired loans	$	1,134	Appraisals	Discount to reflect current market conditions and estimated selling costs	0% - 100% (14%)
Impaired loans	$	5,164	Present value of cash flows	Discount rate	6% - 8% (6%)
Other real estate owned	$	5,073	Appraisals	Discount to reflect current market conditions and estimated selling costs	10%
Repossessed assets	$	843	Market analysis	Discount to reflect current market conditions and estimated selling costs	70%

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2015	Fair Value (in thousands)		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Impaired loans	$	5,434	Appraisals	Discount to reflect current market conditions and estimated selling costs	0% - 100% (17%)
Impaired loans	$	3,584	Present value of cash flows	Discount rate	6% - 8% (7%)
Other real estate owned	$	3,345	Appraisals	Discount to reflect current market conditions and estimated selling costs	10%
Repossessed assets	$	1,043	Market analysis	Historical sales activity	50%

The fair value of a financial instrument is the current amount that would be exchanged between willing parties, other than in a forced liquidation.  Fair value is best determined based upon quoted market prices.  However, in many instances, there are no quoted market prices for the Company’s various financial instruments.  In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques.  Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows.  Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.  U.S. generally accepted accounting principles excludes certain financial instruments and all non-financial instruments from its disclosure requirements.  Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.

The following methods and assumptions were used to estimate the fair value of each class of financial instruments (not previously described) for which it is practicable to estimate that value:

Cash and Cash Equivalents

For cash and cash equivalents, the carrying amount is a reasonable estimate of fair value.

Securities held to maturity

Certain debt securities that management has the positive intent and ability to hold until maturity are recorded at amortized cost. Fair values are determined in a manner that is consistent with securities available for sale.

Restricted Securities

The restricted security category is comprised of FHLB and Federal Reserve Bank stock. These stocks are classified as restricted securities because their ownership is restricted to certain types of entities and they lack a market. When the FHLB or Federal Reserve Bank repurchases stock, they repurchase at the stock's book value. Therefore, the carrying amounts of restricted securities approximate fair value.

Loans, Net

For variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values.  For fixed rate loans, the fair value is estimated by discounting future cash flows using current market inputs at which loans with similar terms and qualities would be made to borrowers of similar credit quality.  Where quoted market prices were available, primarily for certain residential mortgage loans, such market rates were utilized as estimates for fair value. Fair value for impaired loans is described above.

Bank Owned Life Insurance

The carrying amount of bank owned life insurance is a reasonable estimate of fair value.

Accrued Interest Receivable and Payable

The carrying amounts of accrued interest approximate fair values.

Deposits

The fair value of demand deposits, savings accounts, and certain money market deposits is the amount payable on demand at the reporting date.  For all other deposits, the fair value is determined using the discounted cash flow method.  The discount rate is equal to the rate currently offered on similar products.

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Securities Sold Under Agreements to Repurchase

The carrying amounts approximate fair values.

FHLB Borrowings and Subordinated Debt

For variable rate long-term debt, fair values are based on carrying values.  For fixed rate debt, fair values are estimated based on observable market prices and discounted cash flow analysis using interest rates for borrowings of similar remaining maturities and characteristics.  The fair values of the Company's Subordinated Debentures are estimated using discounted cash flow analysis based on the Company's current incremental borrowing rates for similar types of borrowing arrangements.

Off-Balance Sheet Financial Instruments

The fair value of commitments to extend credit is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties.  For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates.  The fair value of standby letters of credit is based on fees currently charged for similar agreements or on the estimated cost to terminate them or otherwise settle the obligations with the counterparties at the reporting date.  At December 31, 2016 and 2015, the fair values of loan commitments and standby letters of credit were deemed immaterial; therefore, they have not been included in the tables below.

Fair Value of Financial Instruments

The estimated fair values, and related carrying amounts, of the Company's financial instruments are as follows:

(Dollars in thousands)	December 31, 2016
					Fair value measurements using:
	Carrying Amount		Total Fair Value		Level I		Level II		Level III
Financial assets:
Cash and cash equivalents	$	28,544	$	28,544	$	28,544	$	—	$	—
Securities held to maturity	10,683		10,095		—		10,095		—
Securities available for sale	301,567		301,567		—		301,567		—
Loans, net	848,693		852,280		—		—		852,280
Bank owned life insurance	23,925		23,925		—		23,925		—
Accrued interest receivable	5,093		5,093		—		5,093		—
Interest rate swaps	44		44		—		44		—
Interest rate cap	9		9		—		9		—
Financial liabilities:
Deposits	$	1,053,058	$	1,051,245	$	—	$	1,051,245	$	—
Securities sold under agreements to repurchase	34,864		34,864		—		34,864		—
FHLB borrowings	39,500		39,530		—		39,530		—
Subordinated notes	5,155		5,159		—		5,159		—
Accrued interest payable	387		387		—		387		—
Interest rate swaps	242		242		—		242		—

38

(Dollars in thousands)	December 31, 2015
					Fair value measurements using:
	Carrying Amount		Total Fair Value		Level I		Level II		Level III
Financial assets:
Cash and cash equivalents	$	39,228	$	39,228	$	39,228	$	—	$	—
Securities held to maturity	4,207		4,163		—		4,163		—
Securities available for sale	374,571		374,571		—		374,571		—
Loans, net	794,635		802,535		—		—		802,535
Bank owned life insurance	23,273		23,273		—		23,273		—
Accrued interest receivable	5,204		5,204		—		5,204		—
Interest rate swaps	73		73		—		73		—
Interest rate cap	39		39		—		39		—
Financial liabilities:
Deposits	$	1,040,800	$	1,040,016	$	—	$	1,040,016	$	—
Securities sold under agreements to repurchase	26,869		26,869		—		26,869		—
FHLB borrowings	85,000		85,033		—		85,033		—
Subordinated notes	5,155		5,157		—		5,157		—
Accrued interest payable	410		410		—		410		—
Interest rate swaps	370		370		—		370		—

The Company assumes interest rate risk as a result of its normal operations.  As a result, the fair values of the Company's financial instruments will change when interest rate levels change, which may be either favorable or unfavorable to the Company.  Management attempts to match maturities of assets and liabilities to the extent believed necessary to minimize interest rate risk.  However, borrowers with fixed rate obligations are less likely to prepay in a rising rate environment and more likely to prepay in a falling rate environment.  Conversely, depositors who are receiving fixed rates are more likely to withdraw funds before maturity in a rising rate environment and less likely to do so in a falling rate environment.  Management monitors rates and maturities of assets and liabilities and attempts to minimize interest rate risk by adjusting terms of new loans and deposits and by investing in securities with terms that mitigate the Company's overall interest rate risk.

Note 17. Capital Requirements

The Company, on a consolidated basis, and Middleburg Bank are subject to various regulatory capital requirements administered by the federal banking agencies.  Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s and Bank’s financial statements.  Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and Middleburg Bank must meet specific capital guidelines that involve quantitative measures of the Company's and Middleburg Bank’s assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices.  The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.  Prompt corrective action provisions are not applicable to bank holding companies.

Quantitative measures established by regulation to ensure capital adequacy require the Company and Middleburg Bank to maintain minimum amounts and ratios, as set forth in the table below.  Management believes, as of December 31, 2016 and 2015, that the Company and Middleburg Bank meet all capital adequacy requirements to which they are subject.

As of December 31, 2016, the most recent notification from the Federal Reserve Bank categorized Middleburg Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, an institution must maintain minimum capital requirements as set forth in the table.  There are no conditions or events since that notification that management believes have changed the institution's category.

The Company’s and Middleburg Bank’s actual capital amounts and ratios are also presented in the following table.

39

	Actual			Minimum Capital Requirement			Minimum To Be Well Capitalized Under Prompt Corrective Action Provisions
(Dollars in thousands)	Amount		Ratio	Amount		Ratio	Amount		Ratio
As of December 31, 2016
Total Capital (to Risk- Weighted Assets):
Consolidated	$	139,419	17.9%	$	62,436	8.0%	N/A		N/A
Middleburg Bank	131,725		17.0%	61,994		8.0%	$	77,492	10.0%
Tier 1 Capital (to Risk- Weighted Assets):
Consolidated	$	129,642	16.6%	$	46,827	6.0%	N/A		N/A
Middleburg Bank	122,016		15.8%	46,495		6.0%	$	61,994	8.0%
Common Equity Tier 1 Capital (to Risk-Weighted Assets):
Consolidated	$	124,642	16.0%	$	35,121	4.5%	N/A		N/A
Middleburg Bank	122,016		15.8%	34,872		4.5%	$	50,370	6.5%
Tier 1 Capital (to Average Assets):
Consolidated	$	129,642	10.0%	$	52,142	4.0%	N/A		N/A
Middleburg Bank	122,016		9.4%	51,909		4.0%	$	64,886	5.0%
As of December 31, 2015
Total Capital (to Risk- Weighted Assets):
Consolidated	$	132,481	17.5%	$	60,495	8.0%	N/A		N/A
Middleburg Bank	127,418		17.0%	60,055		8.0%	$	75,068	10.0%
Tier 1 Capital (to Risk- Weighted Assets):
Consolidated	$	123,008	16.3%	$	45,371	6.0%	N/A		N/A
Middleburg Bank	118,013		15.7%	45,041		6.0%	$	60,055	8.0%
Common Equity Tier 1 Capital (to Risk-Weighted Assets):
Consolidated	$	118,008	15.6%	$	34,028	4.5%	N/A		N/A
Middleburg Bank	118,013		15.7%	33,781		4.5%	$	48,794	6.5%
Tier 1 Capital (to Average Assets):
Consolidated	$	123,008	9.6%	$	51,301	4.0%	N/A		N/A
Middleburg Bank	118,013		9.2%	51,067		4.0%	$	63,834	5.0%

In addition to the minimum regulatory capital required for capital adequacy purposes included in the table above, the Company is required to maintain a minimum Capital Conservation Buffer, in the form of common equity, in order to avoid restrictions on capital distributions and discretionary bonuses. The required amount of the Capital Conservation Buffer was 0.625% on January 1, 2016 and will increase by 0.625% each year until it reaches 2.5% on January 1, 2019. The Capital Conservation Buffer is applicable to all ratios except the leverage ratio, which is noted above as Tier 1 Capital to Average Assets.

On January 1, 2015, the Company and the Bank applied changes to the regulatory capital framework that were approved on July 9, 2013 by the federal banking agencies (the Basel III Final Rule). The regulatory risk-based capital amounts presented above include: (1) common equity tier 1 capital (CET1) which consists principally of common stock (including surplus) and retained earnings with adjustments for goodwill, intangible assets and deferred tax assets; (2) Tier 1 capital which consists principally of CET1 plus the Company’s “grandfathered” trust preferred securities; and (3) Tier 2 capital which consists principally of Tier 1 capital plus a limited amount of the allowance for loan losses. In addition, the Company has made the one-time irrevocable election to continue treating accumulated other comprehensive income (loss) under regulatory standards that were in place prior to the Basel III Final Rule in order to eliminate volatility of regulatory capital that can result from fluctuations in accumulated other comprehensive income (loss) and the inclusion of accumulated other comprehensive income (loss) in regulatory capital, as would otherwise be required under the Basel III Capital Rule. The table above also reflects the minimum regulatory and certain prompt corrective action capital levels that began on January 1, 2015.

Note 18. Goodwill and Intangibles Assets

As of December 31, 2016 and 2015, goodwill and intangible assets relate to the Company’s acquisition of Middleburg Trust Company and Middleburg Investment Advisors. On May 15, 2014, the Company sold all of its majority interest in Southern Trust Mortgage and on this date the related goodwill was eliminated.

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Goodwill is not amortized and the Company is no longer required to perform a test for impairment unless, based on an assessment of qualitative factors related to goodwill, the Company determines that it is more likely than not that the fair value is less than its carrying amount. If the likelihood of impairment is more than 50%, the Company must perform a test for impairment and may be required to record impairment charges.

Identifiable intangible assets are being amortized over the period of expected benefit, which is 15 years.  

Information concerning goodwill and intangible assets is presented in the following table:

	December 31, 2016				December 31, 2015
(Dollars In thousands)	Gross Carrying Value		Accumulated Amortization		Gross Carrying Value		Accumulated Amortization
Identifiable intangibles	$	3,734	$	3,690	$	3,734	$	3,519
Unamortizable goodwill	3,421		—		3,421		—

Amortization expense of intangible assets for each of the three years ended December 31, 2016, and 2015, and 2014 totaled $171,000.  Estimated amortization expense of identifiable intangibles for the years ended December 31 follows:

(Dollars in thousands)
2017	$	44
	$	44

Note 19. Subordinated Notes

On December 12, 2003, MFC Capital Trust II, a wholly owned subsidiary of the Company, was formed for the purpose of issuing redeemable Capital Securities.  On December 19, 2003, $5.0 million of trust-preferred securities were issued through a pooled underwriting totaling approximately $344 million.  The securities have a LIBOR-indexed floating rate of interest.

During 2016, the interest rates ranged from 3.17% to 3.74%.  For the year ended December 31, 2016, the weighted-average interest rate was 3.54%.  The securities have a mandatory redemption date of January 23, 2034, and are subject to varying call provisions beginning January 23, 2009. The principal asset of the trust is $5.2 million of the Company’s junior subordinated debt securities with like maturities and like interest rates to the Capital Securities.  See Note 24 for information regarding an interest rate swap entered into by the Company to manage the cash flows associated with these trust preferred securities.

The trust preferred securities may be included in Tier 1 capital for regulatory capital adequacy determination purposes up to 25% of Tier 1 Capital after its inclusion.  The portion of the trust preferred securities not considered as Tier 1 Capital may be included in Tier 2 Capital.  On December 31, 2016, all of the Company’s trust preferred securities are included in Tier I Capital.

The obligations of the Company with respect to the issuance of the Capital Securities constitute a full and unconditional guarantee by the Company of the trusts’ obligations with respect to the Capital Securities.

Subject to certain exceptions and limitations, the Company may elect from time to time to defer interest payments on the junior subordinated debt securities, which would result in a deferral of distribution payments on the related Capital Securities. There were no deferred interest payments on our junior subordinated debt securities at December 31, 2016, 2015 and 2014.

Note 20. Ownership of Southern Trust Mortgage

In May 2008, Middleburg Bank acquired the membership interest units of one of the partners of Southern Trust Mortgage for $1.6 million.  As a result, the Company’s ownership interest exceeded 50% of the issued and outstanding membership units.  Prior to the sale, the Company owned 62.3% of the issued and outstanding membership interest units of Southern Trust Mortgage, through its subsidiary, Middleburg Bank. On May 15, 2014, the Company sold 100% of its ownership interest in Southern Trust Mortgage.

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Note 21. Condensed Financial Information – Parent Corporation Only

BALANCE SHEETS
	December 31,
(Dollars in thousands)	2016			2015
ASSETS
Cash on deposit with subsidiary bank	$	2,154		$	1,403
Investment in subsidiaries	126,694			125,900
Other assets	3,199			1,686
TOTAL ASSETS	$	132,047		$	128,989
LIABILITIES
Subordinated notes	$	5,155		$	5,155
Other liabilities	213			280
TOTAL LIABILITIES	5,368			5,435
SHAREHOLDERS' EQUITY
Common stock	17,636			17,330
Capital surplus	45,688			44,155
Retained earnings	64,755			60,392
Accumulated other comprehensive income (loss), net	(1,400		)	1,677
TOTAL SHAREHOLDERS' EQUITY	126,679			123,554
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	132,047		$	128,989

STATEMENTS OF INCOME
	Year End December 31,
(Dollars in thousands)	2016			2015			2014
INCOME:
Dividends from subsidiaries	$	6,870		$	5,383		$	3,440
Interest and dividends from investments	—			—			15
Other income	2			17			—
Total income	6,872			5,400			3,455
EXPENSES:
Salaries and employee benefits	1,240			919			746
Legal and advisory fees	1,506			164			91
Directors fees	352			274			280
Interest expense	280			279			279
Other	426			416			366
Total expenses	3,804			2,052			1,762
Income before allocated tax benefits and undistributed income of subsidiaries	3,068			3,348			1,693
Income tax benefit	(1,081		)	(715		)	(753		)
Income before equity in undistributed income of subsidiaries	4,149			4,063			2,446
Equity in undistributed income of subsidiaries	3,915			3,767			5,138
Net income	$	8,064		$	7,830		$	7,584

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STATEMENTS OF CASH FLOWS
	December 31,
(Dollars in thousands)	2016			2015			2014
Cash Flows from Operating Activities
Net income	$	8,064		$	7,830		$	7,584
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in undistributed earnings of subsidiaries	(3,915		)	(3,767		)	(5,138		)
Share-based compensation	925			605			426
(Increase) decrease in other assets	(1,469		)	957			(1,099		)
(Decrease) increase in other liabilities	(67		)	13			213
Net cash provided by operating activities	3,538			5,638			1,986
Cash Flows from Investing Activities
Proceeds from sales, calls and maturities of available for sale securities	—			—			44
Net cash provided by investing activities	—			—			44
Cash Flows from Financing Activities
Net proceeds from issuance of common stock	1,742			—			394
Cash dividends paid on common stock	(3,701		)	(3,292		)	(2,419		)
Repurchases of stock	(828		)	(1,506		)	(88		)
Net cash used in financing activities	(2,787		)	(4,798		)	(2,113		)
Increase (decrease) in cash and cash equivalents	751			840			(83		)
Cash and Cash Equivalents at beginning of year	1,403			563			646
Cash and Cash Equivalents at end of year	$	2,154		$	1,403		$	563

Note 22. Segment Reporting

The Company operates its principal business activities of retail banking services and wealth management services in a decentralized fashion. Revenue from retail banking activity consists primarily of interest and fees earned on loans, including mortgage banking activity, interest earned on investment securities and service charges on deposit accounts. Revenue from the wealth management activities is comprised of fees based upon the market value of the accounts under administration as well as commissions on investment transactions.

Middleburg Bank and the Company have assets in custody with Middleburg Trust Company and accordingly pay Middleburg Trust Company a monthly fee. Middleburg Bank also pays interest to Middleburg Trust Company on deposit accounts with Middleburg Bank. Middleburg Trust Company pays rental and other miscellaneous occupancy expenses to Middleburg Bank. Transactions related to these relationships are eliminated to reach consolidated totals.

In 2014, revenue from the mortgage banking activities is comprised of interest earned on loans and fees received as a result of the mortgage origination process. The Company recognized gains on the sale of loans as part of other income. On May 15, 2014, the Company sold all of its majority interest in Southern Trust Mortgage and as a result, any mortgage banking activity for the Company subsequent to the sale date is included with the results of the retail banking segment. Mortgage banking activities for the twelve months ended December 31, 2014 are the result of Southern Trust Mortgage activity that was consolidated with the Company through the date of sale. In 2014, Middleburg Bank provided a warehouse line, office space, data processing and accounting services to Southern Trust Mortgage for which it received income. Transactions related to these relationships are eliminated to reach consolidated totals.

Information about reportable segments and reconciliation to the consolidated financial statements follows:

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	2016
(Dollars in thousands)	Commercial & Retail Banking		Wealth Management		Mortgage Banking		Intercompany Eliminations			Consolidated
Revenues:
Interest income	$	43,365	$	10	$	—	$	—		$	43,375
Trust services income	—		4,806		—		(163		)	4,643
Other income	6,204		—		—		(109		)	6,095
Total operating income	49,569		4,816		—		(272		)	54,113
Expenses:
Interest expense	4,424		—		—		—			4,424
Salaries and employee benefits	16,473		2,284		—		—			18,757
Provision for loan losses	1,853		—		—		—			1,853
Other expense	17,556		918		—		(272		)	18,202
Total operating expenses	40,306		3,202		—		(272		)	43,236
Income before income taxes	9,263		1,614		—		—			10,877
Income tax expense	2,203		610		—		—			2,813
Net income	$	7,060	$	1,004	$	—	$	—		$	8,064
Total assets	$	1,270,222	$	6,693	$	—	$	(4,272	)	$	1,272,643
Capital expenditures	$	978	$	—	$	—	$	—		$	978
Goodwill and other intangibles	$	—	$	3,465	$	—	$	—		$	3,465

	2015
(Dollars in thousands)	Commercial & Retail Banking		Wealth Management		Mortgage Banking		Intercompany Eliminations			Consolidated
Revenues:
Interest income	$	42,270	$	11	$	—	$	—		$	42,281
Trust services income	—		4,951		—		(166		)	4,785
Other income	5,605		—		—		—			5,605
Total operating income	47,875		4,962		—		(166		)	52,671
Expenses:
Interest expense	4,207		—		—		—			4,207
Salaries and employee benefits	16,130		2,305		—		—			18,435
Provision for loan losses	2,293		—		—		—			2,293
Other expense	16,237		1,120		—		(166		)	17,191
Total operating expenses	38,867		3,425		—		(166		)	42,126
Income before income taxes	9,008		1,537		—		—			10,545
Income tax expense	2,131		584		—		—			2,715
Net income	$	6,877	$	953	$	—	$	—		$	7,830
Total assets	$	1,291,708	$	6,700	$	—	$	(3,545	)	$	1,294,863
Capital expenditures	$	2,137	$	—	$	—	$	—		$	2,137
Goodwill and other intangibles	$	—	$	3,636	$	—	$	—		$	3,636

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	2014
(Dollars in thousands)	Commercial & Retail Banking		Wealth Management		Mortgage Banking			Intercompany Eliminations			Consolidated
Revenues:
Interest income	$	43,149	$	14	$	450		$	(288	)	$	43,325
Trust services income	—		4,516		—			(154		)	4,362
Other income	5,349		—		5,121			(46		)	10,424
Total operating income	48,498		4,530		5,571			(488		)	58,111
Expenses:
Interest expense	5,227		—		304			(288		)	5,243
Salaries and employee benefits	16,567		2,262		3,772			—			22,601
Provision for loan losses	1,926		—		34			—			1,960
Other expense	15,818		1,140		1,722			(200		)	18,480
Total operating expenses	39,538		3,402		5,832			(488		)	48,284
Income before income taxes and non-controlling interest	8,960		1,128		(261		)	—			9,827
Income tax expense	1,894		447		—			—			2,341
Net income	7,066		681		(261		)	—			7,486
Non-controlling interest in consolidated subsidiary	—		—		98			—			98
Net income attributable to Middleburg Financial Corporation	$	7,066	$	681	$	(163	)	$	—		$	7,584
Total assets	$	1,218,452	$	7,152	$	—		$	(2,747	)	$	1,222,857
Capital expenditures	$	911	$	6	$	3		$	—		$	920
Goodwill and other intangibles	$	—	$	3,807	$	—		$	—		$	3,807

Note 23. Capital Purchase Program and Stock Warrant

On January 30, 2009, as part of the Capital Purchase Program established by the U.S. Department of the Treasury (the “Treasury”) under the Emergency Economic Stabilization Act of 2008, the Company entered into a Letter Agreement and Securities Purchase Agreement—Standard Terms (collectively, the “Purchase Agreement”) with the Treasury, pursuant to which the Company sold (i) 22,000 shares of Fixed Rate Cumulative Perpetual Preferred Stock, Series A, par value $2.50 per share, having a liquidation preference of $1,000 per share (the “Preferred Stock”) and (ii) a warrant (the “Warrant”) to purchase 208,202 shares of the Company’s common stock, par value $2.50 per share, at an initial exercise price of $15.85 per share. As a result of the completion of a public stock offering in 2009, the number of shares of common stock underlying the Warrant was reduced by one-half to 104,101 and the Company redeemed all 22,000 shares of Preferred Stock pursuant to the Purchase Agreement. During 2011, the Warrant was sold by the U.S. Treasury at public auction and, on November 3, 2016, was exercised in full for a total cash consideration of $1.65 million.

Note 24. Derivatives

The Company utilizes derivative instruments as a part of its asset-liability management program to control fluctuation of market values and cash flows to changes in interest rates associated with certain financial instruments. The Company accounts for derivatives in accordance with ASC 815, "Derivatives and Hedging". Under current guidance, derivative transactions are classified as either cash flow hedges or fair value hedges or they are not designated as hedging instruments. The Company designates each derivative instrument at the inception of the derivative transaction in accordance with this guidance. Information concerning each of the Company's categories of derivatives as of December 31, 2016 and 2015 is presented below.

Derivatives designated as cash flow hedges

During 2010, the Company entered into an interest rate swap agreement as part of the interest rate risk management process.  The swap was designated as a cash flow hedge intended to hedge the variability of cash flows associated with the Company’s trust preferred capital securities described in Note 19, “Subordinated Notes”.  The swap hedges the cash flow associated with the trust preferred capital notes wherein the Company receives a floating rate based on LIBOR from a counterparty and pays a fixed rate of 2.59% to the same counterparty.  The swap is calculated on a notional amount of $5.2 million.  The term of the swap is 10 years and commenced on October 23, 2010.  The Company has cash collateral reserved for this swap in the amount of $400,000 as of

45

December 31, 2016 and 2015, respectively. The swap was entered into with a counterparty that met the Company’s credit standards and the agreement contains collateral provisions protecting the at-risk party.  The Company believes that the credit risk inherent in the contract is not significant.

During 2013, the Company entered into an interest rate swap agreement as part of the interest rate risk management process.  The swap has been designated as a cash flow hedge intended to hedge the variability of cash flows associated with the Company’s FHLB borrowings described in Note 7, “Borrowings”.  The swap hedges the cash flows associated with the FHLB borrowings wherein the Company receives a floating rate based on LIBOR from a counterparty and pays a fixed rate of 1.43% to the same counterparty.  The swap is calculated on a notional amount of $10 million.  The term of the swap is 5 years and commenced on November 25, 2013.  The Company has cash collateral reserved for this swap in the amount of $600,000 and $300,000 as of December 31, 2016 and 2015, respectively. The swap was entered into with a counterparty that met the Company’s credit standards and the agreement contains collateral provisions protecting the at-risk party.  The Company believes that the credit risk inherent in the contract is not significant.

Amounts receivable or payable are recognized as accrued under the terms of the agreement, with the effective portion of the derivative’s unrealized gain or loss recorded as a component of other comprehensive income (loss).  The ineffective portion of the unrealized gain or loss, if any, would be recorded in other expense.  The Company has assessed the effectiveness of the hedging relationship by comparing the changes in cash flows on the designated hedged item.  As a result of this assessment, there was no hedge ineffectiveness identified during 2016 and 2015. At December 31, 2014, $6,000 of hedge ineffectiveness identified for this interest rate swap and was classified as other operating expenses on the consolidated statements of income.

The amounts included in accumulated other comprehensive income (loss) as unrealized losses (market value net of tax) were $130,000 and $195,000 as of December 31, 2016 and 2015, respectively.

Information concerning the derivatives designated as a cash flow hedges at December 31, 2016 and 2015 is presented in the following tables:

	December 31, 2016
(Dollars in thousands)	Positions (#)	Notional Amount		Asset		Liability		Receive Rate		Pay Rate		Life (Years)
Pay fixed - receive floating interest rate swap	1	$	5,155	$	—	$	160	0.87	%	2.59	%	3.8
Pay fixed - receive floating interest rate swap	1	$	10,000	$	—	$	38	0.60	%	1.43	%	2.0

	December 31, 2015
(Dollars in thousands)	Positions (#)	Notional Amount		Asset		Liability		Receive Rate		Pay Rate		Life (Years)
Pay fixed - receive floating interest rate swap	1	$	5,155	$	—	$	226	0.32	%	2.59	%	4.8
Pay fixed - receive floating interest rate swap	1	$	10,000	$	—	$	71	0.23	%	1.43	%	3.0

Derivatives not designated as hedging instruments

Two-way client loan swaps

During the fourth quarter of 2014 and 2012, the Company entered into certain interest rate swap contracts that are not designated as hedging instruments. These derivative contracts relate to transactions in which we enter into an interest rate swap with a customer while at the same time entering into an offsetting interest rate swap with another financial institution. In connection with each swap transaction, the Company agrees to pay interest to the customer on a notional amount at a variable interest rate and receive interest from the customer on an identical notional amount at a fixed interest rate. At the same time, the Company agrees to pay the counterparty the same fixed interest rate on the same notional amount and receive the same variable interest rate on the same notional amount. The transaction allows our clients to effectively convert a variable rate loan into a fixed rate loan. Because the Company acts as an intermediary for our customers, changes in the fair value of the underlying derivatives contracts offset each other and do not significantly impact our results of operations. The Company had no undesignated interest rate swaps at December 31, 2016 and December 31, 2015.

46

Certain additional risks arise from interest rate swap contracts in that the counterparties to the contracts may not be able to meet the terms of the contracts. We do not expect any counterparty to fail to meet its obligations.

Information concerning two-way client interest rate swaps not designated as either fair value or cash flow hedges is presented in the following table:

	December 31, 2016
(Dollars in thousands)	Positions (#)	Notional Amount		Asset		Liability		Receive Rate		Pay Rate		Life (Years)
Pay fixed - receive floating interest rate swap	1	$	3,508	$	15	$	—	1 month LIBOR plus 200 BP		3.90	%	10.9
Pay fixed - receive floating interest rate swap	1	1,663		—		29		1 month LIBOR plus 180 BP		4.09	%	7.9
Pay floating - receive fixed interest rate swap	1	3,508		—		15		3.90	%	1 month LIBOR plus 200 BP		10.9
Pay floating - receive fixed interest rate swap	1	1,663		29		—		4.09	%	1 month LIBOR plus 180 BP		7.9
Total derivatives not designated		$	10,342	$	44	$	44

	December 31, 2015
(Dollars in thousands)	Positions (#)	Notional Amount (in thousands)		Asset		Liability		Receive Rate		Pay Rate		Life (Years)
Pay fixed - receive floating interest rate swap	1	$	3,760	$	—	$	21	1 month LIBOR plus 200 BP		3.90	%	11.9
Pay fixed - receive floating interest rate swap	1	1,706		—		52		1 month LIBOR plus 180 BP		4.09	%	8.9
Pay floating - receive fixed interest rate swap	1	3,760		21		—		3.90	%	1 month LIBOR plus 200 BP		11.9
Pay floating - receive fixed interest rate swap	1	1,706		52		—		4.09	%	1 month LIBOR plus 180 BP		8.9
Total derivatives not designated		$	10,932	$	73	$	73

Rate Cap Transaction

At December 31, 2016, the Company had one derivative instrument in the form of an interest rate cap agreement with a notional amount of $10.0 million. The notional amount of the financial derivative instrument does not represent exposure to credit loss. The Company is exposed to credit loss only to the extent the counterparty defaults in its responsibility to pay interest under the terms of the agreement. The credit risk in derivative instruments is mitigated by entering into transactions with highly-rated counterparties that management believes to be creditworthy and by limiting the amount of exposure to each counterparty. We do not expect any counterparty to fail to meet its obligations.

The details of the interest rate cap agreement as of December 31, 2016 is summarized below:

47

December 31, 2016
(Dollars in thousands)
Notional Amount		Termination Date	3-Month LIBOR Strike Rate		Premium Paid		Unamortized Premium at December 31, 2016		Fair Value December 31, 2016		Cumulative Cash Flows Received
$	10,000	September 8, 2018	2.00	%	$	70	$	70	$	9	$	—

December 31, 2015
(Dollars in thousands)
Notional Amount		Termination Date	3-Month LIBOR Strike Rate		Premium Paid		Unamortized Premium at December 31, 2015		Fair Value December 31, 2015		Cumulative Cash Flows Received
$	10,000	September 8, 2018	2.00	%	$	70	$	70	$	39	—

In the third quarter of 2015, the interest rate cap agreement was purchased to limit the Company's exposure to rising interest rates. Under the terms of the agreement, the Company paid a premium of $70,000 for the right to receive cash flow payments if 3-month LIBOR rises above the cap of 2.00%, thus effectively ensuring interest expense is capped at a maximum rate of 2.00% for the duration of the agreement. The interest rate cap agreement is a derivative not designated as a hedging instrument.

At December 31, 2016 and December 31, 2015, the total fair value of the interest rate cap agreement was $9,000 and $39,000, respectively. The fair value of the interest rate cap agreement is included in other assets on the Company's consolidated balance sheets. Changes in fair value are recorded in earnings in other operating expenses. During the years ended December 31, 2016 and December 31, 2015, $30,000 and $31,000 was recognized in other operating expenses, respectively.

The premium paid on the interest rate cap agreement will be recognized as a decrease in interest income over the duration of the agreement using the caplet method. From the date of inception and through December 31, 2016, no premium amortization was required.

Note 25. Accumulated Other Comprehensive Income (Loss), Net

The following table presents information on changes in accumulated other comprehensive income for the periods indicated:

(Dollars in thousands)	Unrealized Gains (Losses) on Securities			Cash Flow Hedges			Accumulated Other Comprehensive Income (Loss), Net
Balance December 31, 2013	$	261		$	(29	)	$	232
Unrealized holding gains (net of tax, $1,979)	3,841			—			3,841
Reclassification adjustment (net of tax, $63)	(123		)	—			(123		)
Unrealized gains on interest rate swaps (net of tax, $82)	—			(160		)	(160		)
Reclassification adjustment (net of tax, $2)	—			4			4
Balance December 31, 2014	3,979			(185		)	3,794
Unrealized holding losses (net of tax, $1,037)	(2,015		)	—			(2,015		)
Reclassification adjustment (net of tax, $48)	(92		)	—			(92		)
Unrealized gains on interest rate swaps (net of tax, $3)	—			(6		)	(6		)
Reclassification adjustment (net of tax, $2)	—			(4		)	(4		)
Balance December 31, 2015	1,872			(195		)	1,677
Unrealized holding losses (net of tax, $1,091)	(2,116		)	—			(2,116		)
Reclassification adjustment (net of tax, $528)	(1,026		)	—			(1,026		)
Unrealized losses on interest rate swaps (net of tax, ($34))	—			65			65
Balance December 31, 2016	$	(1,270	)	$	(130	)	$	(1,400	)

48

The following table presents information related to reclassifications from accumulated other comprehensive income (loss):

Details about Accumulated Other Comprehensive Income (Loss)	Amount Reclassified from Accumulated Other Comprehensive Income (Loss)									Affected Line Item in the Consolidated Statements of Income
(Dollars in thousands)	2016			2015			2014
Securities available for sale (1):
Net securities gains reclassified into earnings	$	(1,554	)	$	(140	)	$	(186	)	Gains on sales of securities available for sale, net
Related income tax expense	528			48			63			Income tax expense
Derivatives (2):
(Gain) loss on interest rate swap ineffectiveness	—			(6		)	6			Other operating expense
Related income tax benefit	—			2			(2		)	Income tax expense
Net effect on accumulated other comprehensive income (loss) for the period	(1,026		)	(96		)	(119		)	Net of tax
Total reclassifications for the period	$	(1,026	)	$	(96	)	$	(119	)	Net of tax

⁽¹⁾    For more information related to unrealized gains on securities available for sale, see Note 2, "Securities".

⁽²⁾    For more information related to unrealized losses on derivatives, see Note 24, "Derivatives".

Note 26. Other Real Estate Owned ("OREO")

At December 31, 2016 and 2015, OREO balances were $5.1 million and $3.3 million, respectively. OREO is primarily comprised of residential properties and non-residential properties, and are located primarily in the state of Virginia. Changes in the balance for OREO, net of valuation allowances, are as follows:

(Dollars in thousands)	December 31, 2016			December 31, 2015
Balance at the beginning of year, net	$	3,345		$	4,051
Transfers from loans, net	2,645			287
Purchased loans	40			—
Sales proceeds	(713		)	(814		)
Gain (loss) on disposition	66			(100		)
Less valuation adjustments	(310		)	(79		)
Balance at the end of year, net	$	5,073		$	3,345

Net expenses applicable to OREO, were $363,000, $284,000 and $256,000 as of December 31, 2016, 2015 and 2014, respectively.

The major classifications of OREO in the consolidated balance sheets at December 31, 2016 and 2015 were as follows:

(Dollars in thousands)	December 31, 2016		December 31, 2015
Real estate loans:
Construction	$	946	$	853
Secured by 1-4 family residential	3,767		1,958
Other real estate loans	360		534
Total real estate loans	$	5,073	$	3,345

At December 31, 2016, the Company had no consumer mortgage loan secured by residential real estate for which foreclosure was in process. At December 31, 2015, the Company had one consumer mortgage loan secured by residential real estate for which foreclosure was in process. The amount of this loan was $533,000 at December 31, 2015.

Note 27. Low Income Housing Tax Credits

The Company invested in four separate housing equity funds at December 31, 2016 and 2015, respectively. The general purpose of these funds is to encourage and assist participants in investing in low-income residential rental properties located in the Commonwealth of Virginia, develop and implement strategies to maintain projects as low-income housing, deliver Federal Low

49

Income Housing Credits to investors, allocate tax losses and other possible tax benefits to investors, and to preserve and protect project assets. The investments in these funds are accounted for using the equity method and are recorded as other assets on the consolidated balance sheets. These investments totaled $8.4 million and $9.0 million at December 31, 2016 and 2015, respectively. The expected terms of these investments and the related tax benefits run through 2033. The net benefit recognized as a component of income tax expense related to tax credits and other tax benefits during the years ended December 31, 2016, 2015 and 2014 were $408,000, $120,000 and $211,000, respectively, related to these investments. Total projected tax credits to be received for 2016 are $441,000, which is based on the most recent quarterly estimates received from the funds. Additional capital calls expected for the funds totaled $8.2 million and $9.3 million at December 31, 2016 and 2015, respectively, and are included in other liabilities on the consolidated balance sheets.

50

EX-21.1

Exhibit 21.1

Subsidiaries of Middleburg Financial Corporation

Name of Subsidiary		State of Organization
MFC Capital Trust II		Delaware
Middleburg Bank		Virginia
	Middleburg Bank Service Corporation	Virginia
Middleburg Investment Group, Inc.		Virginia
	Middleburg Trust Company	Virginia

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statements (No. 333-206950, 333-160422 and 333-45962) on Form S-3 and Registration Statements (No. 333-192487 and 333-93447) on Form S-8 of Middleburg Financial Corporation of our reports dated March 15, 2017, relating to the consolidated financial statements of Middleburg Financial Corporation and the effectiveness of internal control over financial reporting of Middleburg Financial Corporation, which appear in this Annual Report on Form 10-K, of Middleburg Financial Corporation for the year ended December 31, 2016.

/s/ Yount, Hyde & Barbour, P.C.

Winchester, Virginia

March 15, 2017

EX-24.1

Exhibit 24.1

POWER OF ATTORNEY

Each of the undersigned hereby constitutes and appoints each of Tammy P. Frazier, Raj Mehra and Jeffrey H. Culver, as attorneys and agents, each acting alone, with full powers of substitution, for and in the name, place and stead, in any and all capacities, of the undersigned, to sign, execute and file the Annual Report on Form 10-K of Middleburg Financial Corporation (the “Company”) for the year ended December 31, 2016, and any amendments thereto, together with all exhibits and any and all documents required to be filed with respect thereto, with the Securities and Exchange Commission and all other appropriate regulatory authorities, granting unto said attorney and agents and each of them full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he himself might or could do in person, hereby ratifying and affirming all that said attorneys and agents, or each of them, may lawfully do or cause to be done by virtue hereof.

WITNESS the signatures and seals of the undersigned this 25th day of February, 2017.

/s/ John C. Lee, IV	/s/ Keith W. Meurlin
Name: John C. Lee, IV	Name: Keith W. Meurlin
/s/ Howard M. Armfield	/s/ Janet A. Neuharth
Name: Howard M. Armfield	Name: Janet A. Neuharth
/s/ Henry F. Atherton, III	/s/ John M. Rust
Name: Henry F. Atherton, III	Name: John M. Rust
/s/ Childs F. Burden	/s/ Gary R. Shook
Name: Childs F. Burden	Name: Gary R. Shook
/s/ Alexander G. Green, III	/s/ Mary Leigh McDaniel
Name: Alexander G. Green, III	Name: Mary Leigh McDaniel
/s/ Gary D. LeClair
Name: Gary D. LeClair

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Gary R. Shook, certify that:

1. I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2016 of Middleburg Financial Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	March 15, 2017	/s/ Gary R. Shook
		Gary R. Shook President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Raj Mehra, certify that:

1. I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2016 of Middleburg Financial Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)  Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)  Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	March 15, 2017	/s/ Raj Mehra
		Raj Mehra Executive Vice President & Chief Financial Officer

EX-32.1

Exhibit 32.1

STATEMENT OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the Annual Report on Form 10-K for the fiscal year ended December 31, 2016 (the “Form 10-K”) of Middleburg Financial Corporation (the “Company”), We, Gary R. Shook, Chief Executive Officer of the Company, and Raj Mehra, Chief Financial Officer of the Company, hereby certify pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to our knowledge:

(a) the Form 10-K fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and

(b) the information contained in the Form 10-K fairly presents, in all material respects, the consolidated financial condition and results of operations of the Company and its subsidiaries as of, and for, the periods presented in the Form 10-K.

Date:	March 15, 2017	By:	/s/ Gary R. Shook
			Gary R. Shook
			President and Chief Executive Officer

Date:	March 15, 2017	By:	/s/ Raj Mehra
			Raj Mehra
			Executive Vice President and Chief Financial Officer

XML

Document and Entity Information - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Mar. 15, 2017	Jun. 30, 2016
Document and Entity Information [Abstract]
Entity Registrant Name	MIDDLEBURG FINANCIAL CORP
Entity Central Index Key	0000914138
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Public Float			$ 193,158
Entity Common Stock, Shares Outstanding		7,200,194
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	FY
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2016

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
ASSETS
Cash and due from banks	$ 6,989	$ 5,489
Interest bearing deposits with other banks	21,555	33,739
Total cash and cash equivalents	28,544	39,228
Securities held to maturity, fair value of $10,095 and $4,163, respectively	10,683	4,207
Securities available for sale, at fair value	301,567	374,571
Restricted securities, at cost	4,542	6,411
Loans, net of allowance for loan losses of $11,404 and $11,046, respectively	848,693	794,635
Premises and equipment, net	19,021	19,531
Goodwill and identified intangibles, net	3,465	3,636
Other real estate owned, net of valuation allowance	5,073	3,345
Bank owned life insurance	23,925	23,273
Accrued interest receivable and other assets	27,130	26,026
TOTAL ASSETS	1,272,643	1,294,863
Deposits:
Non-interest bearing demand deposits	248,567	235,897
Savings and interest bearing demand deposits	578,851	560,328
Time deposits	225,640	244,575
Total deposits	1,053,058	1,040,800
Securities sold under agreements to repurchase	34,864	26,869
Federal Home Loan Bank borrowings	39,500	85,000
Subordinated notes	5,155	5,155
Accrued interest payable and other liabilities	13,387	13,485
TOTAL LIABILITIES	1,145,964	1,171,309
Commitments and contingencies
SHAREHOLDERS' EQUITY
Common stock ($2.50 par value; 20,000,000 shares authorized; 7,205,066 and 7,085,217 issued and outstanding, respectively)	17,636	17,330
Capital surplus	45,688	44,155
Retained earnings	64,755	60,392
Accumulated other comprehensive income (loss), net	(1,400)	1,677
TOTAL SHAREHOLDERS' EQUITY	126,679	123,554
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 1,272,643	$ 1,294,863

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Statement of Financial Position [Abstract]
Securities held to maturity, fair value	$ 10,095	$ 4,163
ASSETS
Loans, allowance for loan losses	$ 11,404	$ 11,046
SHAREHOLDERS' EQUITY
Common stock, par value (in dollars per share)	$ 2.50	$ 2.50
Common stock, shares authorized (in shares)	20,000,000	20,000,000
Common stock, shares issued (in shares)	7,205,066	7,085,217
Common stock, shares outstanding (in shares)	7,205,066	7,085,217

XML

CONSOLIDATED STATEMENTS OF INCOME - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
INTEREST INCOME
Interest and fees on loans	$ 33,795	$ 32,479	$ 33,833
Interest and dividends on securities
Taxable	7,406	7,628	6,900
Tax-exempt	1,700	1,803	2,137
Dividends	310	265	293
Interest on deposits with other banks and federal funds sold	164	106	162
Total interest and dividend income	43,375	42,281	43,325
INTEREST EXPENSE
Interest on deposits	3,535	3,462	3,889
Interest on securities sold under agreements to repurchase	3	64	318
Interest on FHLB borrowings and other debt	886	681	1,036
Total interest expense	4,424	4,207	5,243
NET INTEREST INCOME	38,951	38,074	38,082
Provision for loan losses	1,853	2,293	1,960
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	37,098	35,781	36,122
NON-INTEREST INCOME
Service charges on deposit accounts	1,154	1,061	1,163
Trust services income	4,643	4,785	4,362
ATM fee income, net	762	797	739
Gains (losses) on sales of loans held for sale, net	32	(1)	4,860
Gains on sales of securities available for sale, net	1,554	140	186
Commissions on investment sales	555	547	611
Bank owned life insurance	652	656	662
Gain on sale of majority interest in consolidated subsidiary	0	0	24
Other operating income	1,386	1,636	1,659
Total non-interest income	10,738	9,621	14,266
NON-INTEREST EXPENSE
Salaries and employee benefits	18,757	18,435	22,601
Occupancy and equipment	4,881	5,106	6,177
Advertising	200	288	365
Amortization	1,211	1,001	791
Computer operations	2,582	2,337	1,893
Other real estate owned, net	363	284	256
Other taxes	947	915	849
Federal deposit insurance	748	786	899
Audits and exams	589	585	630
Legal and advisory fees	1,202	1,029	1,324
Merger related expenses	1,289	0	0
Other operating expenses	4,190	4,091	4,776
Total non-interest expense	36,959	34,857	40,561
Income before income taxes	10,877	10,545	9,827
Income tax expense	2,813	2,715	2,341
NET INCOME	8,064	7,830	7,486
Net loss attributable to non-controlling interest	0	0	98
Net income attributable to Middleburg Financial Corporation	$ 8,064	$ 7,830	$ 7,584
Earnings per share:
Basic (in dollars per share)	$ 1.13	$ 1.10	$ 1.07
Diluted (in dollars per share)	$ 1.13	$ 1.09	$ 1.06

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Statement of Comprehensive Income [Abstract]
Net income	$ 8,064	$ 7,830	$ 7,486
Other comprehensive income (loss), net of tax:
Unrealized holding gains (losses) arising during the period, net of tax of $1,091, $1,037, and ($1,979), respectively	(2,116)	(2,015)	3,841
Reclassification adjustment for gains included in net income, net of tax of $528, $48, and $63, respectively	(1,026)	(92)	(123)
Unrealized gains (losses) on interest rate swaps, net of tax of ($34), $3, and $82, respectively	65	(6)	(160)
Reclassification adjustment for (gain) loss on interest rate swap ineffectiveness included in net income, net of tax of $0, $2 and ($2), respectively	0	(4)	4
Total other comprehensive income (loss)	(3,077)	(2,117)	3,562
Total comprehensive income	4,987	5,713	11,048
Comprehensive loss attributable to non-controlling interest	0	0	98
Comprehensive income attributable to Middleburg Financial Corporation	$ 4,987	$ 5,713	$ 11,146

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Other comprehensive income (loss), net of tax:
Unrealized holding gains arising during the period, tax	$ 1,091	$ 1,037	$ (1,979)
Reclassification adjustment for gains included in net income, tax	528	48	63
Unrealized gain (loss) on interest rate swap, tax	(34)	3	82
Reclassification adjustment for (gain) loss on interest rate swap ineffectiveness, tax	$ 0	$ 2	$ (2)

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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - USD ($) $ in Thousands	Total	Common Stock [Member]	Capital Surplus [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income (Loss), Net [Member]	Noncontrolling Interest [Member]
Balance at Dec. 31, 2013	$ 115,073	$ 17,403	$ 44,251	$ 50,689	$ 232	$ 2,498
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	7,486			7,584		(98)
Other comprehensive income (loss), net of tax	3,562				3,562
Cash dividends ($0.34, $0.46 and $0.52 for 2014, 2015 and 2016, respectively)	(2,419)			(2,419)
Sale of majority interest in consolidated subsidiary	(2,400)					(2,400)
Restricted stock vesting (15,425, 16,359 and 53,908 shares for 2014, 2015 and 2016, respectively)		39	(39)
Repurchase of restricted stock (4,732, 4,576 and 15,351 shares for 2014, 2015, and 2016, respectively)	(125)	(12)	(113)
Exercise of stock options (25,501 and 6,650 shares in 2014 and 2016 respectively)	394	64	330
Share-based compensation	463		463
Balance at Dec. 31, 2014	122,034	17,494	44,892	55,854	3,794	0
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	7,830			7,830		0
Other comprehensive income (loss), net of tax	(2,117)				(2,117)
Cash dividends ($0.34, $0.46 and $0.52 for 2014, 2015 and 2016, respectively)	(3,292)			(3,292)
Restricted stock vesting (15,425, 16,359 and 53,908 shares for 2014, 2015 and 2016, respectively)		41	(41)
Repurchase of restricted stock (4,732, 4,576 and 15,351 shares for 2014, 2015, and 2016, respectively)	(83)	(11)	(72)
Share-based compensation	605		605
Repurchase of common stock (77,500 and 26,800 shares in 2015 and 2016)	(1,423)	(194)	(1,229)
Balance at Dec. 31, 2015	123,554	17,330	44,155	60,392	1,677	0
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	8,064			8,064		0
Other comprehensive income (loss), net of tax	(3,077)				(3,077)
Cash dividends ($0.34, $0.46 and $0.52 for 2014, 2015 and 2016, respectively)	(3,701)			(3,701)
Restricted stock vesting (15,425, 16,359 and 53,908 shares for 2014, 2015 and 2016, respectively)	0	135	(135)
Repurchase of restricted stock (4,732, 4,576 and 15,351 shares for 2014, 2015, and 2016, respectively)	(353)	(38)	(315)
Exercise of stock options (25,501 and 6,650 shares in 2014 and 2016 respectively)	92	16	76
Exercise of stock warrant (104,101 shares)	1,650	260	1,390
Share-based compensation	939		939
Repurchase of common stock (77,500 and 26,800 shares in 2015 and 2016)	(489)	(67)	(422)
Balance at Dec. 31, 2016	$ 126,679	$ 17,636	$ 45,688	$ 64,755	$ (1,400)	$ 0

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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Parenthetical) - $ / shares	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Cash dividends:
Cash dividends, Common stock (in dollars per share)	$ 0.52	$ 0.46	$ 0.34
Restricted stock vesting (in shares)	53,908	16,359	15,425
Repurchase of restricted stock (in shares)	15,351	4,576	4,732
Exercise of stock options (in shares)	6,650	0	25,501
Exercise of stock warrant (in shares)	104,101
Repurchase of common stock (in shares)	26,800	77,500

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CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Cash Flows From Operating Activities
Net income	$ 8,064	$ 7,830	$ 7,486
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	2,584	2,352	2,339
Provision for loan losses	1,853	2,293	1,960
Gains on sales of securities available for sale, net	(1,554)	(140)	(186)
Loss on disposal of assets, net	115	67	59
Originations of mortgage loans held for sale	(3,346)	(1,597)	0
Proceeds from sales of mortgage loans held for sale	3,378	1,596	38,035
(Gains) losses on sales of mortgage loans held for sale, net	(32)	1	(4,860)
Premium amortization on securities, net	4,956	4,042	2,981
Deferred income tax expense	746	109	1,181
Gain on sale of majority interest in consolidated subsidiary	0	0	(24)
Share-based compensation	925	605	426
(Gains) losses on sales of other real estate owned, net	(66)	100	14
Valuation adjustments on other real estate owned	310	79	(3)
Valuation adjustments on other assets held for sale	200	0	200
Increase in bank owned life insurance cash surrender value	(652)	(656)	(662)
Changes in assets and liabilities:
Increase in other assets	(1,406)	(4,826)	(2,604)
Increase (decrease) in other liabilities	(98)	448	2,447
Net cash provided by operating activities	15,977	12,303	48,789
Cash Flows from Investing Activities
Proceeds from maturity, calls, principal repayments and sales of securities available for sale	155,485	106,154	132,286
Proceeds from maturity, calls, and principal repayments of held to maturity	44	43	0
Purchases of securities held to maturity	(6,520)	(2,750)	(1,500)
Purchases of securities available for sale	(90,644)	(139,556)	(149,287)
(Purchases) redemptions of restricted stock, net	1,869	(1,132)	1,501
(Purchases) sales of bank premises and equipment, net	(978)	(2,137)	321
Loan originations, net	(26,687)	(13,941)	(5,748)
Proceeds from sales of loans	4,412	1,124	5,492
Purchases of loans	(36,321)	(42,035)	(34,042)
Proceeds from sale of majority interest in consolidated subsidiary, net	0	0	3,618
Proceeds from sale of other real estate owned and repossessed assets	713	893	2,666
Net cash provided by (used in) investing activities	1,373	(93,337)	(44,693)
Cash Flows from Financing Activities
Increase in demand, interest-bearing demand and savings deposits	31,193	56,083	25,686
Decrease in certificates of deposit	(18,935)	(4,363)	(19,002)
Increase (decrease) in securities sold under agreements to repurchase	7,995	(11,682)	4,012
Increase (decrease) in FHLB borrowings	(45,500)	30,000	(25,000)
Payment of dividends on common stock	(3,701)	(3,292)	(2,419)
Proceeds from exercise of options and warrant	1,742	0	394
Excess tax benefit on share-based compensation	14	0	37
Repurchases of common stock	(842)	(1,506)	(125)
Net cash provided by (used in) provided by financing activities	(28,034)	65,240	(16,417)
Decrease in cash and cash equivalents	(10,684)	(15,794)	(12,321)
Cash and cash equivalents at beginning of year	39,228	55,022	67,343
Cash and cash equivalents at end of year	28,544	39,228	55,022
Supplemental Disclosures of Cash Flow Information
Interest paid	4,447	4,200	5,341
Income taxes	1,525	3,710	800
Supplemental Disclosure of Non-Cash Transactions
Unrealized gains (losses) on securities available for sale	(4,761)	(3,192)	5,634
Change in market value of interest rate swaps	99	(15)	(236)
Transfer of loans to other real estate owned and repossessed assets	2,645	984	4,438
Transfer of other real estate owned to premises and equipment	$ 0	$ 697	$ 0

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Nature of Banking Activities and Significant Accounting Policies

12 Months Ended

Dec. 31, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Nature of Banking Activities and Significant Accounting Policies

Nature of Banking Activities and Significant Accounting Policies

Middleburg Financial Corporation (the “Company”) is a bank holding company and through its banking subsidiary, Middleburg Bank, grants commercial, financial, agricultural, residential and consumer loans to customers principally in Loudoun County, Fauquier County and Fairfax County, Virginia as well as the City of Williamsburg and the City of Richmond.  The loan portfolio is well diversified and generally is collateralized by assets of the borrowers.  The loans are expected to be repaid from cash flow or proceeds from the sale of selected assets of the borrowers.  Middleburg Trust Company is a non-banking subsidiary of Middleburg Financial Corporation which offers a comprehensive range of fiduciary and investment management services to individuals and businesses.  On May 15, 2014, Middleburg Financial Corporation, through its banking subsidiary, Middleburg Bank, sold all of its majority interest in Southern Trust Mortgage LLC, which originated and sold mortgages secured by personal residences primarily in the southeastern United States.

The accounting and reporting policies of the Company conform to U. S. generally accepted accounting principles and to accepted practices within the banking industry.

Pending Merger with Access National Corporation

On October 24, 2016, the Company and Access National Corporation (“Access”) announced a definitive agreement to combine in a strategic merger (the “Merger Agreement”) pursuant to which the Company will merge with and into Access (the “Merger”). As a result of the Merger, the holders of shares of the Company's common stock will receive 1.3314 shares of Access common stock for each share of the Company's common stock held immediately prior to the effective date of the Merger. The transaction is expected to be completed in the second quarter of 2017, subject to approval of both companies' shareholders, regulatory approvals and other customary closing conditions.

Principles of Consolidation

The consolidated financial statements of Middleburg Financial Corporation and its wholly owned subsidiaries, Middleburg Bank, Middleburg Investment Group, Inc., Middleburg Trust Company and Middleburg Bank Service Corporation include the accounts of all companies.  Through May 15, 2014, the Company owned 62.3% of the issued and outstanding membership interest units of Southern Trust Mortgage, through its subsidiary, Middleburg Bank.  Accounting Standards Codification Topic 810, Consolidation, requires that the Company no longer eliminate through consolidation the equity investment in MFC Capital Trust II, which was $155,000 at December 31, 2016 and 2015.  The subordinated debt of the trust preferred entity is reflected as a liability of the Company.  All material intercompany balances and transactions have been eliminated in consolidation.

Securities

Certain debt securities that management has the positive intent and ability to hold until maturity are classified as "held-to-maturity" and recorded at amortized cost. Securities not classified as held-to-maturity, including equity securities with readily determinable fair values, are classified as "available-for-sale" and recorded at fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive income (loss). Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities. Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.

Equity investments in the Federal Home Loan Bank of Atlanta ("FHLB") and the Federal Reserve Bank of Richmond ("FRB") are separately classified as restricted securities and are carried at cost.  

Impairment of securities occurs when the fair value of a security is less than its amortized cost.  For debt securities, impairment is considered other-than-temporary and recognized in its entirety in net income if either (i) the intent is to sell the security or (ii) it is more likely than not that it will be necessary to sell the security prior to recovery of its amortized cost.  If, however, management’s intent is not to sell the security and it is not more than likely that management will be required to sell the security before recovery, management must determine what portion of the impairment is attributable to credit loss, which occurs when the amortized cost of the security exceeds the present value of the cash flows expected to be collected from the security.  If there is no credit loss, there is no other-than-temporary impairment.  If there is a credit loss, other-than-temporary impairment exists and the credit loss must be recognized in net income and the remaining portion of impairment must be recognized in other comprehensive income (loss).

For equity securities carried at cost as restricted securities, impairment is considered to be other-than-temporary based on our ability and intent to hold the investment until a recovery of fair value.  Other-than-temporary impairment of an equity security results in a write-down that must be included in income.  We regularly review each security for other-than-temporary impairment based on criteria that includes the extent to which cost exceeds market price, the duration of that market decline, the financial health of and specific prospects for the issuer, our best estimate of the present value of cash flows expected to be collected from debt securities, the intention with regards to holding the security to maturity and the likelihood that we would be required to sell the security before recovery.

Loans

The Company grants mortgage, commercial, and consumer loans to clients.  The loan portfolio is segmented into commercial loans, real estate loans, and consumer loans.  Real estate loans are further divided into the following classes:  construction; farmland; 1-4 family residential; and other real estate loans.  Descriptions of the Company’s loan classes are as follows:

Commercial Loans: Commercial loans are typically secured with non-real estate commercial property.  The Company makes commercial loans primarily to middle market businesses located within our market area.

Real Estate Loans – Construction: The Company originates construction loans for the acquisition and development of land and construction of condominiums, townhomes, and 1-4 family residences. This class also includes acquisition, development and construction loans for retail and other commercial purposes, primarily in our market areas.

Real Estate Loans- Farmland:  Loans secured by agricultural property and not included in Real Estate – Other.

Real Estate Loans – 1-4 Family:  This class of loans includes loans secured by 1-4 family homes.  The Company’s general practice is to sell the majority of its newly originated fixed-rate residential real estate loans in the secondary mortgage market, and to hold in its portfolio adjustable rate residential real estate loans and loans in close proximity to its financial service centers.

Real Estate Loans – Other: This loan class consists primarily of loans secured by multi-unit residential property and owner and non-owner occupied commercial and industrial property.  This class also includes loans secured by real estate which do not fall into other classifications.

Consumer Loans: Consumer loans include all loans made to individuals for consumer or personal purposes.  They include new and used auto loans, unsecured loans, and lines of credit.

The ability of the debtors to honor their contracts is dependent upon the real estate and general economic conditions in this area.

For all classes of loans, the Company considers loans to be past due when a payment is not received by the payment due date according to the contractual terms of the loan.  The Company monitors past due loans according to the following categories: less than 30 days past due, 30 – 59 days past due, 60 – 89 days past due, and 90 days or greater past due. The accrual of interest on all classes of loans is discontinued at the time the loans are 90 days delinquent unless they are well-secured and in the process of collection.

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off generally are reported at their outstanding unpaid principal balances adjusted for charge-offs, the allowance for loan losses, and any deferred fees or costs on originated loans.  Deferred fees and costs include discounts and premiums on syndicated and guaranteed loans purchased. Interest income is accrued on the unpaid principal balance.  Loan origination and commitment fees, net of certain direct loan origination costs, are deferred and recognized as an adjustment of the loan yield over the life of the related loan.

All interest accrued but not collected for loans that are placed on nonaccrual or charged-off is reversed against interest income.  The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual.  Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Allowance for Loan Losses

The allowance for loan losses reflects management’s judgment of probable loan losses inherent in the portfolio at the balance sheet date.  Management uses a disciplined process and methodology to establish the allowance for loan losses each quarter.  To determine the total allowance for loan losses, the Company estimates the reserves needed for each segment of the portfolio, including loans analyzed individually and loans analyzed on a pooled basis.  The allowance for loan losses consists of amounts applicable to:  (i) the commercial loan portfolio; (ii) the real estate portfolio; and (iii) the consumer loan portfolio.

To determine the allowance for loan losses, loans are pooled by portfolio segment and losses are modeled using historical experience, and quantitative and other mathematical techniques over the loss emergence period.  Each class of loan requires exercising significant judgment to determine the estimation that fits the credit risk characteristics of its portfolio segment.  The Company uses internally developed models in this process.  Management must use judgment in establishing additional input metrics for the modeling processes.  The models and assumptions used to determine the allowance are reviewed to ensure that their theoretical foundation, assumptions, data integrity, computational processes, reporting practices, and end user controls are appropriate and properly documented.

The establishment of the allowance for loan losses relies on a consistent process that requires multiple layers of management review and judgment and responds to changes in economic conditions, customer behavior, and collateral value, among other influences.  From time to time, events or economic factors may affect the loan portfolio, causing management to provide additional amounts to or release balances from the allowance for loan losses.  Qualitative factors considered in the allowance for loan losses evaluation include the levels and trends in delinquencies and nonperforming loans, trends in volume and terms of loans, the effects of any changes in lending policies, the experience, ability, and depth of management, national and local economic trends and conditions, concentrations of credit, the quality of the Company’s loan review system, competition and regulatory requirements.  The Company’s allowance for loan losses is sensitive to risk ratings, economic assumptions and delinquency trends driving statistically modeled reserves.  Individual loan risk ratings are evaluated based on each situation by experienced senior credit officers.

Management monitors differences between estimated and actual incurred loan losses.  This monitoring process includes periodic assessments by senior management of loan portfolios and the models used to estimate incurred losses in those portfolios.  Additions to the allowance for loan losses are made by charges to the provision for loan losses.  Credit exposures deemed to be uncollectible are charged against the allowance for loan losses.  Recoveries of previously charged-off amounts are credited to the allowance for loans losses.

Loan Charge-off Policies

Commercial and consumer loans are generally charged off when: 

•they are 90 days past due;

•the collateral is repossessed; or

•the borrower has filed bankruptcy.

All classes of real estate loans are charged down to the net realizable value when the Company determines that the sole source of repayment is liquidation of the collateral.

Impaired Loans

For all classes of loans, a loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement.  Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due.  Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired.  Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.

For all classes of loans, impairment is measured on a loan-by-loan basis by comparing the loan balance to either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent. Any variance in values is charged-off when determined.

Troubled Debt Restructurings

A troubled debt restructuring ("TDR") occurs in situations where, for economic or legal reasons related to a borrower’s financial condition, management may grant a concession to the borrower that it would not otherwise consider. Management strives to identify borrowers in financial difficulty early and work with them to modify their loan to more affordable terms before their loan reaches nonaccrual status.  These modified terms may include rate reductions, principal forgiveness, payment forbearance and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral.  In cases where borrowers are granted new terms that provide for a reduction of either interest or principal, management measures any impairment on the restructuring as noted above for impaired loans. All identified TDRs are considered to be impaired loans.

Management considers troubled debt restructurings and subsequent defaults of restructured loans in the determination of the adequacy of the Company's allowance for loan losses. When identified as a TDR, a loan is evaluated for potential loss as noted above for impaired loans. Loans identified as TDRs frequently are on nonaccrual status at the time of the restructuring and, in some cases, partial charge-offs may have already been taken against the loan and a specific reserve may have already been established for the loan. As a result of any modification as a TDR, the specific reserve associated with the loan may be increased. Additionally, loans modified in a TDR are closely monitored for delinquency as an early indicator of possible future defaults. If loans modified in a TDR subsequently default, the Company evaluates them for possible further impairment. As a result, any specific reserve may be increased, adjustments may be made in the allocation of the total allowance balance, or partial charge-offs may be taken to further write-down the carrying value of the loan. Management exercises significant judgment in developing estimates for potential losses associated with TDRs.

Mortgage Loans Held for Sale

Mortgage loans held for sale are carried at the lower of aggregate cost or fair value. The fair value of mortgage loans held for sale is determined using current secondary market prices for loans with similar coupons, maturities, and credit quality and fair value of loans committed at year-end.

Premises and Equipment

Land is carried at cost.  Premises and equipment are stated at cost less accumulated depreciation.  Depreciation of property and equipment is computed principally on the straight-line method over the following estimated useful lives:

	Years
Buildings and improvements	10-40
Furniture and equipment	3-15

Maintenance and repairs of property and equipment are charged to operations and major improvements are capitalized.  Upon retirement, sale, or other disposition of property and equipment, the cost and accumulated depreciation are eliminated from the accounts and gain or loss is included in income.

Other Real Estate Owned and Repossessed Assets

Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value less costs to sell at the date of foreclosure. Subsequent to foreclosure, management periodically performs valuations of the foreclosed assets based on updated appraisals, general market conditions, recent sales of like properties, length of time the properties have been held, and our ability and intention with regard to continued ownership of the properties. The Company may incur additional write-downs of foreclosed assets to fair value less costs to sell if valuations indicate a further deterioration in market conditions. Revenue and expenses from operations and changes in the property valuations are included in net expenses from foreclosed assets and improvements are capitalized.

Goodwill and Intangible Assets

With the adoption of Accounting Standards Update (ASU) 2011-08, "Intangible-Goodwill and Other-Testing Goodwill for Impairment", the Company is no longer required to perform a test for impairment unless, based on an assessment of qualitative factors related to goodwill, the Company determines that it is more likely than not that the fair value is less than its carrying amount. If the likelihood of impairment is more than 50%, the Company must perform a test for impairment and may be required to record impairment charges.

Additionally, acquired intangible assets (customer relationships) are separately recognized and amortized over their useful life of 15 years.

Bank-Owned Life Insurance

The Company owns insurance on the lives of a certain group of key employees. The policies were purchased to help offset increases in the costs of various fringe benefit plans, including healthcare. The cash surrender value of these policies is included as an asset on the consolidated balance sheets, and any increase in cash surrender value is recorded as non-interest income on the consolidated statements of income. In the event of the death of an insured individual under these policies, the Company would receive a death benefit which would be recorded as other income.

Income Taxes

Deferred income tax assets and liabilities are determined using the balance sheet method. Under this method, the net deferred tax asset or liability is determined based on the tax effects of the temporary differences between the book and tax bases of the various balance sheet assets and liabilities and gives current recognition to changes in tax rates and laws.

When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained.  The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any.  Tax positions taken are not offset or aggregated with other positions.  Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50% likely of being realized upon settlement with the applicable taxing authority.  The portion of the benefits associated with tax positions taken that exceeds the amount measured, as described above, is reflected as a liability for unrecognized tax benefits in the accompanying consolidated balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination.  Interest and penalties associated with unrecognized tax benefits are classified as additional income taxes in the consolidated statements of income. No liabilities for unrecognized tax benefits have been recognized as of December 31, 2016 or 2015.

Trust Company Assets

Securities and other properties held by Middleburg Trust Company in a fiduciary or agency capacity are not assets of the Company and are not included in the accompanying consolidated financial statements.

Earnings Per Share

Basic earnings per share represents income available to common shareholders divided by the weighted-average number of common shares outstanding during the period.  Nonvested restricted shares are included in basic earnings per share because of dividend participation rights. Diluted earnings per share reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance.  As of December 31, 2016 potential common shares that may be issued by the Company relate solely to outstanding stock options and are determined using the treasury stock method.

Cash and Cash Equivalents

For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from other banks and federal funds sold. Generally, federal funds are sold and purchased for one-day periods.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.  Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, impairment of goodwill and intangible assets, valuation of other real estate owned, and other-than-temporary impairment of securities.

Advertising Costs

The Company follows the policy of charging the costs of advertising to expense as incurred.

Comprehensive Income

Accounting principles generally require that recognized revenue, expenses, gains, and losses be included in net income.  Although certain changes in assets and liabilities, such as unrealized gains and losses on available for sale securities, and changes in the fair value of interest rate swaps, are reported as a separate component of the equity section of the consolidated balance sheets, such items, along with net income, are components of comprehensive income.

Securities Sold Under Agreements to Repurchase

Securities sold under agreements to repurchase are reflected at the amount of cash received in connection with the transaction.  The Company does not account for repurchase agreement transactions as sales.  All repurchase agreement transactions entered into by the Company are accounted for as collateralized financings. The Company may be required to provide additional collateral based on the fair value of the underlying securities.

Derivative Financial Instruments

The Company utilizes derivative financial instruments as a part of its asset-liability management program to control exposure to interest rate changes and fluctuations in market values and cash flows associated with certain financial instruments. The Company accounts for derivatives in accordance with ASC 815, "Derivatives and Hedging". Under current guidance, derivative transactions are classified as either cash flow hedges or fair value hedges or they are not designated as hedging instruments. The Company designates each transaction at its inception.

The Company documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions.  This process includes linking all derivatives that are designated as fair value hedges or cash flow hedges to specific assets or liabilities on the balance sheet.  The Company also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are effective in offsetting changes in fair values or cash flows of hedged items.

As of December 31, 2016, the Company had both fair value and cash flow hedges on its balance sheet as well as derivative financial instruments that have not been designated as hedging instruments.  The derivatives are reported at fair value as of each balance sheet date. For designated cash flow hedges, the effective portions of changes in the fair value of the derivative are recorded in other comprehensive income (loss) and are recognized in the income statement when the hedged item affects earnings.  Ineffective portions of changes in the fair value of cash flow hedges are recognized in earnings as are changes in market value of derivatives not designated as hedging instruments.

Information concerning each of the Company's categories of derivatives as of December 31, 2016 and 2015 is presented in Note 24 to the consolidated financial statements.

Reclassifications

Certain reclassifications have been made to the prior year financial statements to conform to the current year presentation. No reclassifications were significant and there was no effect on net income.

Transfers of Financial Assets

Transfers of financial assets are accounted for as sales when control over the assets has been surrendered.  Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Share-Based Employee Compensation Plan

At December 31, 2016, the Company had a share-based employee compensation plan which is described more fully in Note 8 to the consolidated financial statements. Compensation cost relating to share-based payment transactions is recognized in the consolidated financial statements.  That cost is measured based on the fair value of the equity instruments issued and recognized over the applicable vesting period.  The Company recognized $925,000, $605,000, and $426,000 in compensation expense during 2016, 2015, and 2014, respectively.

Recent Accounting Pronouncements

In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” This update is intended to provide guidance about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. Management is required under the new guidance to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date the financial statements are issued when preparing financial statements for each interim and annual reporting period. If conditions or events are identified, the ASU specifies the process that must be followed by management and also clarifies the timing and content of going concern footnote disclosures in order to reduce diversity in practice. The amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2016. Early adoption is permitted. The Company does not expect the adoption of ASU 2014-15 to have a material impact on its consolidated financial statements.

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.” The amendments in ASU 2016-01, among other things: 1) Requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. 2) Requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes. 3) Requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables). 4) Eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost. The amendments in this ASU are effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently assessing the impact that ASU 2016-01 will have on its consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” Among other things, in the amendments in ASU 2016-02, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (1) A lease liability, which is a lessee‘s obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) A right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align, where necessary, lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted upon issuance. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. The Company is currently assessing the impact that ASU 2016-02 will have on its consolidated financial statements.

During March 2016, the FASB issued ASU No. 2016-05, “Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships.” The amendments in this ASU clarify that a change in the counterparty to a derivative instrument that has been designated as the hedging instrument does not, in and of itself, require dedesignation of that hedging relationship provided that all other hedge accounting criteria remain intact. The amendments are effective for public business entities for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The Company does not expect the adoption of ASU 2016-05 to have a material impact on its consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-07, “Investments - Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting.” The amendments in this ASU eliminate the requirement that when an investment qualifies for use of the equity method as a result of an increase in the level of ownership interest or degree of influence, an investor must adjust the investment, results of operations, and retained earnings retroactively on a step-by-step basis as if the equity method had been in effect during all previous periods that the investment had been held. The amendments require that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor’s previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. Therefore, upon qualifying for the equity method of accounting, no retroactive adjustment of the investment is required. In addition, the amendments in this ASU require that an entity that has an available-for-sale equity security that becomes qualified for the equity method of accounting recognize through earnings the unrealized holding gain or loss in accumulated other comprehensive income (loss) at the date the investment becomes qualified for use of the equity method. The amendments are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. The amendments should be applied prospectively upon their effective date to increases in the level of ownership interest or degree of influence that result in the adoption of the equity method. Early adoption is permitted. The Company does not expect the adoption of ASU 2016-07 to have a material impact on its consolidated financial statements.

During March 2016, the FASB issued ASU No. 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” The amendments in this ASU simplify several aspects of the accounting for share-based payment award transactions including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. The amendments are effective for public companies for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company is currently assessing the impact that ASU 2016-09 will have on its consolidated financial statements.

During June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” The amendments in this ASU, among other things, require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The amendments in this ASU are effective for SEC filers for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company is currently assessing the impact that ASU 2016-13 will have on its consolidated financial statements.

During August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments”, to address diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The amendments should be applied using a retrospective transition method to each period presented. If retrospective application is impractical for some of the issues addressed by the update, the amendments for those issues would be applied prospectively as of the earliest date practicable. Early adoption is permitted, including adoption in an interim period. The Company does not expect the adoption of ASU 2016-15 to have a material impact on its consolidated financial statements.

During January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business”. The amendments in this ASU clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Under the current implementation guidance in Topic 805, there are three elements of a business-inputs, processes, and outputs. While an integrated set of assets and activities (collectively referred to as a “set”) that is a business usually has outputs, outputs are not required to be present. In addition, all the inputs and processes that a seller uses in operating a set are not required if market participants can acquire the set and continue to produce outputs. The amendments in this ASU provide a screen to determine when a set is not a business. If the screen is not met, the amendments (1) require that to be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output and (2) remove the evaluation of whether a market participant could replace missing elements. The ASU provides a framework to assist entities in evaluating whether both an input and a substantive process are present. The amendments in this ASU are effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods. The amendments in this ASU should be applied prospectively on or after the effective date. No disclosures are required at transition. The Company does not expect the adoption of ASU 2017-01 to have a material impact on its consolidated financial statements.

During January 2017, the FASB issued ASU No. 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment”. The amendments in this ASU simplify how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Instead, under the amendments in this ASU, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. Public business entities that are U.S. Securities and Exchange Commission (SEC) filers should adopt the amendments in this ASU for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Public business entities that are not SEC filers should adopt the amendments in this ASU for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2020. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not expect the adoption of ASU 2017-04 to have a material impact on its consolidated financial statements.

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Securities

12 Months Ended

Dec. 31, 2016

Investments, Debt and Equity Securities [Abstract]

Securities

Securities

Amortized costs and fair values of securities being held to maturity as of December 31, 2016 and 2015, are summarized as follows:

	December 31, 2016
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Held to Maturity
Obligations of states and political subdivisions	$	6,433	$	—	$	(594	)	$	5,839
Corporate securities	4,250		21		(15		)	4,256
Total	$	10,683	$	21	$	(609	)	$	10,095

	December 31, 2015
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Held to Maturity
Obligations of states and political subdivisions	$	1,457	$	—	$	(38	)	$	1,419
Corporate securities	2,750		24		(30		)	2,744
Total	$	4,207	$	24	$	(68	)	$	4,163

The amortized cost and fair value of securities being held to maturity as of December 31, 2016, by contractual maturity are shown below. 

	December 31, 2016
(Dollars in thousands)	Amortized Cost		Fair Value
Held to Maturity
Due after five years through ten years	$	4,250	$	4,256
Due after ten years	6,433		5,839
Total	$	10,683	$	10,095

Amortized costs and fair values of securities available for sale as of December 31, 2016 and 2015, are summarized as follows:

	December 31, 2016
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available for Sale
U.S. government agencies	$	73,546	$	209	$	(571	)	$	73,184
Obligations of states and political subdivisions	62,896		1,019		(542		)	63,373
Mortgage-backed securities:
Agency	98,549		646		(1,144		)	98,051
Non-agency	9,991		16		(74		)	9,933
Other asset backed securities	41,860		361		(616		)	41,605
Corporate securities	16,648		—		(1,227		)	15,421
Total	$	303,490	$	2,251	$	(4,174	)	$	301,567

	December 31, 2015
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available for Sale
U.S. government agencies	$	79,005	$	315	$	(380	)	$	78,940
Obligations of states and political subdivisions	74,071		1,956		(434		)	75,593
Mortgage-backed securities:
Agency	129,360		3,046		(745		)	131,661
Non-agency	12,782		33		(38		)	12,777
Other asset backed securities	58,958		426		(603		)	58,781
Corporate securities	17,557		22		(760		)	16,819
Total	$	371,733	$	5,798	$	(2,960	)	$	374,571

The amortized cost and fair value of securities available for sale as of December 31, 2016, by contractual maturity are shown below.  Maturities may differ from contractual maturities in corporate and mortgage-backed securities because the securities and mortgages underlying the securities may be called or repaid without any penalties.  Therefore, these securities are not included in the maturity categories in the following maturity summary.

	December 31, 2016
(Dollars in thousands)	Amortized Cost		Fair Value
Available for Sale
Due in one year or less	$	777	$	777
Due after one year through five years	9,020		9,219
Due after five years through ten years	25,004		24,174
Due after ten years	118,289		117,808
Mortgage-backed securities	108,540		107,984
Other asset backed securities	41,860		41,605
Total	$	303,490	$	301,567

Proceeds from sales of securities available for sale during 2016, 2015, and 2014 were $79.3 million, $11.6 million, and $58.9 million, respectively.  Proceeds from calls and principal repayments of securities available for sale during 2016, 2015, and 2014 were $76.2 million, $89.9 million and $73.4 million, respectively. Gross gains on sales and calls of securities available for sale were $1.5 million, and $49,000 in 2016, respectively, $172,000 and $5,000 in 2015, respectively and $770,000 and none in 2014, respectively. Gross losses on sales and calls of securities available for sale were $28,000, and $9,000 in 2016, respectively, $37,000 and none in 2015, respectively and $584,000 and none in 2014 respectively. There were no losses recognized for impaired securities in 2016, 2015, and 2014. The tax expense applicable to these net realized gains amounted to $528,000, $48,000, and $63,000, for 2016, 2015 and 2014, respectively.

The carrying value of securities pledged to qualify for fiduciary powers, to secure public monies and for other purposes as required by law amounted to $115.7 million and $113.1 million at December 31, 2016 and 2015, respectively.

At December 31, 2016 and 2015, investments in an unrealized loss position that are temporarily impaired are as follows:

(Dollars in thousands)	Less than Twelve Months					Twelve Months or Greater					Total
2016	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Held to Maturity
Obligations of states and political subdivisions	$	5,839	$	(594	)	$	—	$	—		$	5,839	$	(594	)
Corporate securities	1,485		(15		)	—		—			1,485		(15		)
Total	$	7,324	$	(609	)	$	—	$	—		$	7,324	$	(609	)
Available for Sale
U.S. government agencies	$	46,700	$	(495	)	$	7,174	$	(76	)	$	53,874	$	(571	)
Obligations of states and political subdivisions	12,670		(257		)	6,968		(285		)	19,638		(542		)
Mortgage-backed securities:
Agency	51,018		(634		)	13,020		(510		)	64,038		(1,144		)
Non-agency	5,379		(68		)	1,944		(6		)	7,323		(74		)
Other asset backed securities	7,007		(284		)	16,388		(332		)	23,395		(616		)
Corporate securities	5,912		(241		)	9,262		(986		)	15,174		(1,227		)
Total	$	128,686	$	(1,979	)	$	54,756	$	(2,195	)	$	183,442	$	(4,174	)

(Dollars in thousands)	Less than Twelve Months					Twelve Months or Greater					Total
2015	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Held to Maturity
Obligations of states and political subdivisions	$	1,419	$	(38	)	$	—	$	—		$	1,419	$	(38	)
Corporate securities	1,970		(30		)	—		—			1,970		(30		)
Total	$	3,389	$	(68	)	$	—	$	—		$	3,389	$	(68	)
Available for Sale
U.S. government agencies	$	46,000	$	(304	)	$	4,223	$	(76	)	$	50,223	$	(380	)
Obligations of states and political subdivisions	16,559		(324		)	1,082		(110		)	17,641		(434		)
Mortgage-backed securities:
Agency	27,627		(402		)	9,911		(343		)	37,538		(745		)
Non-agency	7,842		(37		)	671		(1		)	8,513		(38		)
Other asset backed securities	25,399		(276		)	12,037		(327		)	37,436		(603		)
Corporate securities	10,740		(378		)	4,866		(382		)	15,606		(760		)
Total	$	134,167	$	(1,721	)	$	32,790	$	(1,239	)	$	166,957	$	(2,960	)

A total of 256 securities have been identified by the Company as temporarily impaired at December 31, 2016.  Of the 256 securities, 251 are investment grade and five are speculative grade.  Market prices change daily and are affected by conditions beyond the control of the Company.  Although the Company has the ability to hold these securities until the temporary loss is recovered, decisions by management may necessitate a sale before the loss is fully recovered.  No such sales were anticipated or required as of December 31, 2016.  Investment decisions reflect the strategic asset/liability objectives of the Company.  The investment portfolio is analyzed frequently by the Company and managed to provide an overall positive impact to the Company’s income statement and balance sheet.

Other-than-temporary impairment losses

At December 31, 2016, the Company evaluated the investment portfolio for possible other-than-temporary impairment losses and concluded that no adverse change in cash flows occurred and did not consider any portfolio securities to be other-than-temporarily impaired.  Based on this analysis and because the Company does not intend to sell securities in an unrealized loss position and it is more likely than not the Company will not be required to sell any securities before recovery of amortized cost basis, which may be at maturity, the Company does not consider any portfolio securities to be other-than-temporarily impaired. For debt securities related to corporate securities, the Company determined that there was no other adverse change in the cash flows as viewed by a market participant; therefore, the Company does not consider the investments in these assets to be other-than-temporarily impaired at December 31, 2016.  However, there is a risk that the Company’s continuing reviews could result in recognition of other-than-temporary impairment charges in the future. For the years ended December 31, 2016, 2015, and 2014, no credit related impairment losses were recognized by the Company.

Restricted securities

The Company’s investment in FHLB stock totaled $2.8 million and $4.7 million at December 31, 2016 and 2015, respectively.  FHLB stock is generally viewed as a long-term investment and as a restricted security which is carried at cost because there is no market for the stock other than the FHLB or member institutions.  Therefore, when evaluating FHLB stock for impairment, its value is based on the ultimate recoverability of the par value rather than by recognizing temporary declines in value.  The Company does not consider this investment to be other-than-temporarily impaired at December 31, 2016, and no impairment has been recognized.  FHLB stock is shown in restricted securities on the consolidated balance sheets and is not part of the available for sale portfolio.

The Company also had an investment in FRB stock which totaled $1.7 million at December 31, 2016 and 2015, respectively. The investment in FRB stock is a required investment and is carried at cost since there is no ready market. The Company does not consider this investment to be other-than-temporarily impaired at December 31, 2016 and no impairment has been recognized. FRB stock is shown in the restricted securities line item on the consolidated balance sheets and is not part of the available for sale securities portfolio.

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Loans, Net

12 Months Ended

Dec. 31, 2016

Receivables [Abstract]

Loans, Net

Loans, Net

The Company segregates its loan portfolio into three primary loan segments:  Real Estate Loans, Commercial Loans, and Consumer Loans.  Real estate loans are further segregated into the following classes: construction loans, loans secured by farmland, loans secured by 1-4 family residential real estate, and other real estate loans.  Other real estate loans include commercial real estate loans.  The consolidated loan portfolio was composed of the following:

	2016				2015
(Dollars in thousands)	Outstanding Balance		Percent of Total Portfolio		Outstanding Balance		Percent of Total Portfolio
Real estate loans:
Construction	$	35,627	4.1	%	$	39,673	4.9	%
Secured by farmland	16,768		2.0		19,062		2.4
Secured by 1-4 family residential	314,045		36.5		280,096		34.8
Other real estate loans	283,613		33.0		258,035		32.0
Commercial loans	190,767		22.2		190,482		23.6
Consumer loans	19,277		2.2		18,333		2.3
Total Gross Loans (1)	860,097		100.0	%	805,681		100.0	%
Less allowance for loan losses	11,404				11,046
Net loans	$	848,693			$	794,635

⁽¹⁾  Includes net deferred loan costs and premiums of $3.3 million and $3.5 million, respectively.

The Company had no mortgages held for sale at December 31, 2016 and 2015.

During the year ended December 31, 2016, net proceeds received on the sale of $4.3 million in four problem loans totaled $4.4 million, resulting in a net recovery of $127,000 of amounts previously charged-off related to those loans. These loans were sold on a non-recourse basis. Of this amount, $1.2 million were on nonaccrual status, as well as 28 loans with no outstanding recorded investment as they had been fully charged-off in prior periods. There were $339,000 in specific reserves associated with these loans. During the year ended December 31, 2015, the Company received net proceeds of $1.1 million on the sale of $1.0 million in portfolio loans on a non-recourse basis, resulting in a net recovery of $100,000 of amounts previously charged-off related to those loans. Of this amount, $1.0 million were on nonaccrual status and were classified as TDRs. There were no specific reserves associated with these loans.

The following tables present a contractual aging of the recorded investment in past due loans by class of loans as of December 31, 2016 and December 31, 2015, respectively:

	December 31, 2016
(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days Or Greater		Total Past Due		Current		Total Loans
Real estate loans:
Construction	$	—	$	—	$	—	$	—	$	35,627	$	35,627
Secured by farmland	—		199		—		199		16,569		16,768
Secured by 1-4 family residential	—		—		514		514		313,531		314,045
Other real estate loans	312		—		2,104		2,416		281,197		283,613
Commercial loans	146		10		2,518		2,674		188,093		190,767
Consumer loans	88		4		1,871		1,963		17,314		19,277
Total	$	546	$	213	$	7,007	$	7,766	$	852,331	$	860,097

	December 31, 2015
(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days Or Greater		Total Past Due		Current		Total Loans
Real estate loans:
Construction	$	69	$	—	$	—	$	69	$	39,604	$	39,673
Secured by farmland	—		—		—		—		19,062		19,062
Secured by 1-4 family residential	259		—		1,117		1,376		278,720		280,096
Other real estate loans	325		—		248		573		257,462		258,035
Commercial loans	1,242		15		31		1,288		189,194		190,482
Consumer loans	4		17		—		21		18,312		18,333
Total	$	1,899	$	32	$	1,396	$	3,327	$	802,354	$	805,681

The following table presents the recorded investment in nonaccrual loans and loans past due ninety days or more and still accruing by class of loans as of December 31, 2016 and 2015, respectively:

	2016				2015
(Dollars in thousands)	Nonaccrual		Past due 90 days or more and still accruing		Nonaccrual		Past due 90 days or more and still accruing
Real estate loans:
Construction	$	29	$	—	$	204	$	—
Secured by 1-4 family residential	296		303		4,460		—
Other real estate loans	1,976		128		1,186		248
Commercial loans	4,187		350		1,036		30
Consumer loans	1,871		—		1,898		—
Total	$	8,359	$	781	$	8,784	$	278

If interest on nonaccrual loans had been accrued, such income would have approximated $362,000, $342,000, and $544,000 for the years ended December 31, 2016, 2015, and 2014, respectively. The Company sold $4.3 million and $1.0 million in loans during 2016 and 2015, respectively, of which, $1.2 million and $1.0 million were on nonaccrual status, respectively.

The Company utilizes an internal asset classification system as a means of measuring and monitoring credit risk in the loan portfolio.  Under the Company’s classification system, problem and potential problem loans are classified as “Special Mention”, “Substandard”, and “Doubtful”.

Special Mention:  Loans with potential weaknesses that deserve management’s close attention.  If left uncorrected, the potential weaknesses may result in the deterioration of the repayment prospects for the credit.

Substandard:  Loans with well-defined weaknesses that jeopardize the liquidation of the debt.  Either the paying capacity of the borrower or the value of the collateral may be inadequate to protect the Company from potential losses.

Doubtful:  Loans with a very high possibility of loss.  However, because of important and reasonably specific pending factors, classification as a loss is deferred until a more exact status may be determined.

Loss: Loans are deemed uncollectible and are charged off immediately.

The following tables present the recorded investment in loans by class of loan that have been classified according to the internal classification system as of December 31, 2016 and 2015, respectively:

December 31, 2016
(Dollars in thousands)	Real Estate Construction		Real Estate Secured by Farmland		Real Estate Secured by 1-4 Family Residential		Other Real Estate Loans		Commercial		Consumer		Total
Pass	$	30,065	$	8,796	$	310,233	$	274,591	$	185,030	$	17,342	$	826,057
Special Mention	5,534		—		932		2,287		1,390		25		10,168
Substandard	28		7,972		2,584		4,759		2,179		1,909		19,431
Doubtful	—		—		125		1,976		2,168		—		4,269
Loss	—		—		171		—		—		1		172
Ending Balance	$	35,627	$	16,768	$	314,045	$	283,613	$	190,767	$	19,277	$	860,097

December 31, 2015
(Dollars in thousands)	Real Estate Construction		Real Estate Secured by Farmland		Real Estate Secured by 1-4 Family Residential		Other Real Estate Loans		Commercial		Consumer		Total
Pass	$	30,114	$	10,566	$	271,721	$	243,768	$	183,532	$	16,347	$	756,048
Special Mention	9,024		—		896		7,254		3,638		42		20,854
Substandard	535		8,496		6,818		5,827		2,301		1,943		25,920
Doubtful	—		—		661		1,186		1,011		—		2,858
Loss	—		—		—		—		—		1		1
Ending Balance	$	39,673	$	19,062	$	280,096	$	258,035	$	190,482	$	18,333	$	805,681

The following tables present loans individually evaluated for impairment by class of loan as of and for the year ended December 31, 2016 and 2015:

	December 31, 2016
(Dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Real estate loans:
Construction	$	28	$	28	$	—	$	28	$	—
Secured by farmland	7,972		7,972		—		7,951		239
Secured by 1-4 family residential	72		108		—		72		2
Other real estate loans	1,976		1,976		—		1,976		—
Commercial loans	585		3,585		—		706		16
Consumer loans	—		—		—		—		—
Total with no related allowance	$	10,633	$	13,669	$	—	$	10,733	$	257
With an allowance recorded:
Real estate loans:
Construction	$	—	$	—	$	—	$	—	$	—
Secured by farmland	—		—		—		—		—
Secured by 1-4 family residential	1,275		1,326		251		1,239		49
Other real estate loans	2,971		2,971		206		2,975		151
Commercial loans	4,019		4,019		2,539		5,088		—
Consumer loans	1,871		1,871		842		1,871		—
Total with a related allowance	$	10,136	$	10,187	$	3,838	$	11,173	$	200
Total	$	20,769	$	23,856	$	3,838	$	21,906	$	457

	December 31, 2015
(Dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Real estate loans:
Construction	$	100	$	100	$	—	$	106	$	—
Secured by farmland	7,903		7,903		—		7,903		237
Secured by 1-4 family residential	701		736		—		703		—
Other real estate loans	—		—		—		—		—
Commercial loans	458		493		—		490		17
Consumer loans	—		—		—		—		—
Total with no related allowance	$	9,162	$	9,232	$	—	$	9,202	$	254
With an allowance recorded:
Real estate loans:
Construction	$	103	$	103	$	53	$	109	$	—
Secured by farmland	—		—		—		—		—
Secured by 1-4 family residential	4,426		4,478		1,120		4,547		27
Other real estate loans	4,196		4,196		464		4,224		157
Commercial loans	1,059		4,059		27		2,315		100
Consumer loans	1,898		1,898		1,000		2,449		—
Total with a related allowance	$	11,682	$	14,734	$	2,664	$	13,644	$	284
Total	$	20,844	$	23,966	$	2,664	$	22,846	$	538

The “Recorded Investment” amounts in the table above represent the outstanding principal balance net of charge-offs and nonaccrual payments of interest applied to principal on each loan represented in the table.  The “Unpaid Principal Balance” represents the outstanding principal balance on each loan represented in the table plus any amounts that have been charged-off on each loan and nonaccrual payments applied to principal.

Included in certain loan categories of impaired loans are troubled debt restructurings (“TDRs”). The total balance of TDRs at December 31, 2016 was $14.4 million of which $2.0 million were included in the Company’s nonaccrual loan totals at that date and $12.4 million represented loans performing as agreed according to the restructured terms. This compares with $15.5 million in total restructured loans at December 31, 2015.  The amount of the valuation allowance related to TDRs was $1.1 million and $1.6 million as of December 31, 2016 and 2015 respectively.

Loan modifications that were classified as TDRs during the years ended December 31, 2016 and 2015 were as follows:

	Year Ended December 31,
(Dollars in thousands)	2016					2015
Class of Loan	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Real estate loans:
Construction	1	$	38	$	38	—	$	—	$	—
Secured by farmland	—	—		—		1	7,903		7,903
Secured by 1-4 family residential	2	809		806		—	—		—
Other real estate loans	2	1,240		1,240		4	4,283		3,872
Total real estate loans	5	2,087		2,084		5	12,186		11,775
Commercial loans	—	—		—		1	50		46
Consumer loans	—	—		—		1	3,000		3,000
Total	5	$	2,087	$	2,084	7	$	15,236	$	14,821

The interest only payment terms were extended for one of the contracts and the maturity dates were extended for four of the contracts classified as TDRs during 2016. There were no outstanding commitments to lend additional amounts to troubled debt restructured borrowers at December 31, 2016.

There were no TDR payment defaults as of December 31, 2016 and December 31, 2015. For purposes of this disclosure, a TDR payment default occurs when, within 12 months of the original TDR modification, either a full or partial charge-off occurs or a TDR becomes 90 days or more past due.

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Allowance for Loan Losses

12 Months Ended

Dec. 31, 2016

Allowance for Loan Losses [Abstract]

Allowance for Loan Losses

Allowance for Loan Losses

The following table presents the total allowance for loan losses, the allowance by impairment methodology (individually evaluated for impairment or collectively evaluated for impairment), the total loans and loans by impairment methodology (individually evaluated for impairment or collectively evaluated for impairment).

	December 31, 2016
(Dollars in thousands)	Real Estate Construction			Real Estate Secured by Farmland			Real Estate Secured by 1-4 Family Residential			Other Real Estate Loans			Commercial			Consumer			Total
Allowance for loan losses:
Balance December 31, 2015	$	905		$	192		$	3,341		$	3,761		$	1,706		$	1,141		$	11,046
Charge-offs	(388		)	—			(1,021		)	(126		)	(639		)	(20		)	(2,194		)
Recoveries	129			—			395			32			85			58			699
Provision	293			(65		)	(453		)	(500		)	2,781			(203		)	1,853
Balance December 31, 2016	$	939		$	127		$	2,262		$	3,167		$	3,933		$	976		$	11,404
Ending allowance:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	—		$	—		$	251		$	206		$	2,539		$	842		$	3,838
Collectively evaluated for impairment	939			127			2,011			2,961			1,394			134			7,566
Total ending allowance balance	$	939		$	127		$	2,262		$	3,167		$	3,933		$	976		$	11,404
Loans:
Individually evaluated for impairment	$	28		$	7,972		$	1,347		$	4,947		$	4,604		$	1,871		$	20,769
Collectively evaluated for impairment	35,599			8,796			312,698			278,666			186,163			17,406			839,328
Total ending loans balance	$	35,627		$	16,768		$	314,045		$	283,613		$	190,767		$	19,277		$	860,097

	December 31, 2015
(Dollars in thousands)	Real Estate Construction		Real Estate Secured by Farmland		Real Estate Secured by 1-4 Family Residential			Other Real Estate Loans			Commercial			Consumer			Total
Allowance for loan losses:
Balance at December 31, 2014	$	550	$	179	$	3,966		$	3,916		$	2,354		$	821		$	11,786
Charge-offs	—		—		(344		)	(9		)	(3,281		)	(57		)	(3,691		)
Recoveries	246		—		359			28			14			11			658
Provision	109		13		(640		)	(174		)	2,619			366			2,293
Balance at December 31, 2015	$	905	$	192	$	3,341		$	3,761		$	1,706		$	1,141		$	11,046
Ending allowance:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	53	$	—	$	1,120		$	464		$	27		$	1,000		$	2,664
Collectively evaluated for impairment	852		192		2,221			3,297			1,679			141			8,382
Total ending allowance balance	$	905	$	192	$	3,341		$	3,761		$	1,706		$	1,141		$	11,046
Loans:
Individually evaluated for impairment	$	203	$	7,903	$	5,127		$	4,196		$	1,517		$	1,898		$	20,844
Collectively evaluated for impairment	39,470		11,159		274,969			253,839			188,965			16,435			784,837
Total ending loans balance	$	39,673	$	19,062	$	280,096		$	258,035		$	190,482		$	18,333		$	805,681

	December 31, 2014
(Dollars in thousands)	Real Estate Construction			Real Estate Secured by Farmland		Real Estate Secured by 1-4 Family Residential			Other Real Estate Loans			Commercial			Consumer			Total
Allowance for loan losses:
Balance at December 31, 2013	$	847		$	166	$	6,734		$	3,506		$	1,890		$	177		$	13,320
Adjustment for the sale of majority interest in consolidated subsidiary	—			—		(95		)	—			—			—			(95		)
Charge-offs	(1,186		)	—		(1,380		)	(747		)	(959		)	(36		)	(4,308		)
Recoveries	258			—		342			110			104			95			909
Provision	631			13		(1,635		)	1,047			1,319			585			1,960
Balance at December 31, 2014	$	550		$	179	$	3,966		$	3,916		$	2,354		$	821		$	11,786
Ending allowance:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	66		$	—	$	1,370		$	294		$	292		$	647		$	2,669
Collectively evaluated for impairment	484			179		2,596			3,622			2,062			174			9,117
Total ending allowance balance	$	550		$	179	$	3,966		$	3,916		$	2,354		$	821		$	11,786
Loans:
Individually evaluated for impairment	$	246		$	7,903	$	5,613		$	4,531		$	846		$	3,019		$	22,158
Collectively evaluated for impairment	32,804			11,805		259,603			250,705			162,423			15,348			732,688
Total ending loans balance	$	33,050		$	19,708	$	265,216		$	255,236		$	163,269		$	18,367		$	754,846

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Premises and Equipment, Net

12 Months Ended

Dec. 31, 2016

Property, Plant and Equipment [Abstract]

Premises and Equipment, Net

Premises and Equipment, Net

Premises and equipment consists of the following: 

(Dollars in thousands)	2016			2015
Land	$	2,068		$	2,068
Facilities	22,873			22,849
Furniture, fixtures, and equipment	11,729			11,676
Construction in process and deposits on equipment and land	1,842			1,455
	38,512			38,048
Less accumulated depreciation	(19,491		)	(18,517		)
Total	$	19,021		$	19,531

Depreciation expense was $1.4 million for the year ended December 31, 2016, $1.3 million for the year ended December 31, 2015, and $1.5 million for the year ended December 31, 2014.

Pursuant to the terms of non-cancelable lease agreements in effect at December 31, 2016, pertaining to banking premises, future minimum rent commitments under various operating leases are as follows:

(Dollars in thousands)	December 31, 2016
2017	$	1,666
2018	1,617
2019	1,624
2020	1,444
2021	1,408
Thereafter	13,388
	$	21,147

Rent expense was $1.8 million, $2.0 million, and $2.8 million for the years ended December 31, 2016, 2015, and 2014, respectively, and is included in occupancy and equipment expense on the consolidated statements of income.

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Deposits

12 Months Ended

Dec. 31, 2016

Banking and Thrift [Abstract]

Deposits

Deposits

The Company has developed an interest bearing product that integrates the use of the cash within client accounts at Middleburg Trust Company for overnight funding at Middleburg Bank. The overall balance of this product was $43.2 million and $34.0 million at December 31, 2016 and 2015, respectively.

The aggregate amount of jumbo time deposits, each with a minimum denomination of $250,000, was approximately $84.5 million and $91.0 million at December 31, 2016 and 2015, respectively.

At December 31, 2016, the scheduled maturities of time deposits are as follows:

(Dollars in thousands)	December 31, 2016
2017	$	151,293
2018	38,370
2019	25,494
2020	7,115
2021	3,368
	$	225,640

At December 31, 2016 and 2015, overdraft demand deposits reclassified to loans totaled $142,000 and $358,000, respectively.

Middleburg Bank obtains certain deposits through the efforts of third-party brokers.  At December 31, 2016 and 2015, brokered deposits totaled $36.5 million and $38.7 million, respectively, and were included in time deposits.

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Borrowings

12 Months Ended

Dec. 31, 2016

Debt Disclosure [Abstract]

Borrowings

Borrowings

As of December 31, 2016, Middleburg Bank had remaining credit availability in the amount of $334.3 million at the Federal Home Loan Bank of Atlanta ("FHLB").  This line may be utilized for short and/or long-term borrowing.  Advances on the line are secured by all of the Company’s first lien residential real estate loans on 1-4 unit, single-family dwellings; home equity lines of credit; and eligible commercial real estate loans.   The amount of the available credit is limited to a percentage of the estimated market value of the loans as determined periodically by the FHLB. Any borrowings in excess of the qualifying collateral require pledging of additional assets. As of December 31, 2016, Middleburg Bank also had a letter of credit in the amount of $25.0 million with the FHLB. This letter of credit was issued as collateral for public fund depository accounts and is reflected in the remaining credit availability.

The Company had $39.5 million of FHLB advances outstanding as of December 31, 2016.  The interest rates on these advances ranged from 0.63% to 0.93% and the weighted-average rate was 0.78%.  The Company’s FHLB advances totaled $85.0 million at December 31, 2015.  The weighted-average interest rate on these advances at December 31, 2015 was 0.66%.

The contractual maturities of the Company’s long-term debt are as follows:

(Dollars in thousands)	December 31, 2016
Due in 2017	$	29,500
Due in 2018	10,000
Total	$	39,500

Securities sold under agreements to repurchase consist of secured transactions with customers which generally mature the day following the day sold totaling $34.9 million and $26.9 million at December 31, 2016 and December 31, 2015, respectively.

The outstanding balances and related information for securities sold under agreements to repurchase are summarized as follows:

(Dollars in thousands)	Securities sold under agreements to repurchase
At December 31:
2016	$	34,864
2015	26,869
Weighted-average interest rate at year-end:
2016	0.01		%
2015	0.01
Maximum amount outstanding at any month's end:
2016	$	35,660
2015	34,253
Average amount outstanding during the year:
2016	$	31,076
2015	30,095
Weighted-average interest rate during the year:
2016	0.01		%
2015	0.21

The Company also has a line of credit with the Federal Reserve Bank of Richmond of $33.4 million of which there was no outstanding balance at December 31, 2016.

The Company has an additional $45.0 million in lines of credit available from other institutions at December 31, 2016.

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Share-Based Compensation Plan

12 Months Ended

Dec. 31, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Share-Based Compensation Plan

Share-Based Compensation Plan

The Company sponsored one share-based compensation plan, the 2006 Equity Compensation Plan, which provided for the granting of stock options, stock appreciation rights, stock awards, performance share awards, incentive awards, and stock units.  The 2006 Equity Compensation Plan was approved by the Company’s shareholders at the Annual Meeting held on April 26, 2006, and has succeeded the Company’s 1997 Stock Incentive Plan. The plan expired by its own terms in February 2016, before which, the Company granted share-based compensation to its directors, officers, employees, and other persons the Company determined to have contributed to the profits or growth of the Company.  The number of shares reserved for issuance totaled 430,000 shares.

The Company granted 49,100 shares of restricted stock during 2016 to certain employees and executive officers. Of the 49,100 shares, 31,750 shares are in the form of performance-accelerated restricted stock and 17,350 shares are in the form of time-based restricted stock. During 2016, the Company's board of directors also awarded 11 directors 400 shares of restricted stock for a total of 4,400 restricted shares. These shares will vest at 100% in April 2017.

For the performance-accelerated restricted stock granted to certain employees and executive officers, in order for a recipient to earn and have vested 100% of granted shares, the Company must achieve certain financial performance targets during predefined monitoring periods as compared to a selected peer group and the recipient must be employed by the Company or one of its subsidiaries at the end of the predefined vesting period. Vested shares are distributed to recipients immediately after performance targets are certified. Partial share vesting may be achieved for interim periods during the predefined monitoring periods, however no vesting may occur before the end of 2018. If any shares remain unvested, 50% of the unvested shares will be forfeited. Any remaining shares vest at the end of the predefined monitoring period provided that the recipient remained employed by the Company or one of its subsidiaries over the entire performance and vesting period.

For the time-based restricted stock granted to certain employees and executive officers, in order for a recipient to earn and have vested 100% of the granted shares, the recipient must be employed by the Company or one of its subsidiaries at the time of vesting.

For the years ended December 31, 2016, 2015, and 2014, the Company recorded $925,000, $605,000, and $426,000, respectively, in share-based compensation expense related to restricted stock and option grants.  The total income tax benefit related to share-based compensation was $5,000, $117,000, and $63,000 in 2016, 2015, and 2014, respectively.

The following table summarizes restricted stock awarded under the 2006 Equity Compensation Plan:

	December 31,
	2016						2015						2014
(Dollars in thousands)	Shares		Weighted-Average Grant Date Fair Value		Aggregate Value		Shares		Weighted-Average Grant Date Fair Value		Aggregate Value		Shares		Weighted-Average Grant Date Fair Value		Aggregate Value
Non-vested at the beginning of the year	153,399		$	17.17			134,108		$	16.66			119,250		$	16.39
Granted	53,500		20.76				36,150		18.50				41,533		17.65
Vested	(53,908	)	16.88				(16,359	)	15.91				(15,425	)	15.59
Forfeited or expired	(2,250	)	19.91				(500	)	18.07				(11,250	)	16.05
Non-vested at end of the year	150,741		$	18.50	$	5,238	153,399		$	17.17	$	2,835	134,108		$	16.66	$	2,415

The weighted-average remaining contractual term for non-vested grants at December 31, 2016, 2015, and 2014 was 2.5 , 2.7, and 3.5 years, respectively.  As of December 31, 2016, there was $1.6 million of total unrecognized compensation expense related to the non-vested service awards granted under the 2006 Equity Compensation Plan.

Stock options may be granted periodically to certain officers and employees under the Company’s share-based compensation plan at prices equal to the market value of the stock on the date the options are granted.  Options granted vest over a three-year time period over which 25% vests on each of the first and second anniversaries of the grant and 50% on the third anniversary of the grant. As of December 31, 2016, all outstanding option awards were vested and, accordingly, there was no unrecognized compensation expense related to unvested stock-based option awards. Shares issued in connection with stock option exercises may be issued from available treasury shares or from market purchases. There were no stock option awards granted during the years ended December 31, 2016, 2015 or 2014.

The following table summarizes options outstanding under the 2006 Equity Compensation Plan at the end of the reportable periods:  

	2016				2015			2014
	Shares		Weighted- Average Exercise Price		Shares	Weighted- Average Exercise Price		Shares		Weighted- Average Exercise Price
Outstanding at beginning of year	30,012		$	14.00	30,012	$	14.00	58,513		$	15.30
Granted	—		—		—	—		—		—
Exercised	(6,650	)	14.00		—	—		(25,501	)	14.00
Forfeited or expired	—		—		—	—		(3,000	)	39.40
Outstanding at end of year	23,362		$	14.00	30,012	$	14.00	30,012		$	14.00
Options exercisable at year end	23,362		$	14.00	30,012	$	14.00	30,012		$	14.00

The total intrinsic value of options exercised was $88,000 and $126,500 during 2016 and 2014, respectively. There were no options exercised during 2015. There was $484,800, $134,500, and $120,300 aggregate intrinsic value of options outstanding at December 31, 2016, 2015 and 2014, respectively.

The aggregate intrinsic value represents the amount by which the current market value of the underlying stock exceeds the exercise price. This amount changes based on changes in the market value of the Company’s common stock.

As of December 31, 2016, options outstanding and exercisable are summarized as follows:

Range of Exercise Prices		Options Outstanding	Weighted-Average Remaining Contractual Life (years)	Options Exercisable
$	14.00	18,362	2.22	18,362
$	14.00	5,000	2.85	5,000
$	14.00	23,362	2.36	23,362

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Employee Benefit Plans

12 Months Ended

Dec. 31, 2016

Compensation and Retirement Disclosure [Abstract]

Employee Benefit Plans

Employee Benefit Plans

401(k) Plan

The Company has a 401(k) plan whereby a majority of employees participate in the plan.  Employees may contribute up to 100% of their compensation subject to certain limits based on federal tax laws.  The Company makes matching contributions equal to 50% of the first 6% of an employee’s compensation contributed to the plan.  Matching contributions vest to the employee equally over a five year period.  For the years ended December 31, 2016, 2015, and 2014, expense attributable to the plan amounted to $364,000, $351,000 and $340,000, respectively.

Money Purchase Pension Plan (MPPP)

The Middleburg Financial Corporation Defined Benefit Pension Plan was replaced by a Money Purchase Pension Plan effective on January 1, 2010. Employees who have attained age 21 and completed one year of service are eligible to participate in the plan as of the first day of the month following the completion of such eligibility provisions. Employees earn a year of service if they complete one thousand hours of service in a plan year. Service with Middleburg Financial Corporation and its subsidiaries prior to the effective date of the Plan counts toward a participant's initial eligibility to participate in the plan.

Each year, a participant receives an allocation of an employer contribution equal to 3.00% of total compensation (up to the statutory maximum) plus an additional contribution of 2.75% of compensation in excess of the Social Security taxable wage base (up to the statutory maximum). To receive an allocation, the participant must complete one thousand hours of service in the plan year and be employed on the last day of the plan year. The requirement to be employed on the last day of the plan year does not apply if a participant dies, retires, or becomes disabled during the plan year.

Participants become vested in their employer contributions according to a schedule which allows for graduated vesting and full vesting after five years of service. Service with Middleburg Financial Corporation and its subsidiaries prior to the effective date of the Plan count toward a participant's vested percentage.

Assets are held in a pooled investment account managed by Middleburg Trust Company, a wholly owned subsidiary of the Company. Distributions may be made upon termination of employment, death or disability.

The plan is administered by the Benefits Committee of the Company. The plan may be amended from time to time by the Board or its delegate and may be terminated by the Board at any time for any reason.

For the years ended December 31, 2016, 2015, and 2014 expense attributable to the plan was $545,000, $926,000, and $898,000, respectively.

Deferred Compensation Plans

The Company has adopted several deferred compensation plans; including a defined benefit SERP, an elective deferral plan for the former Chairman, and a defined contribution SERP for certain executive officers.  The two plans for the former Chairman made installment payouts in 2016, 2015 and 2014.  The defined contribution SERP for executive officers includes a vesting schedule, and is currently credited at a rate using the 10-year treasury plus 1.5%.  The deferred compensation expense for 2016, 2015, and 2014, was $245,000, $226,000, and $222,000, respectively. The plans are unfunded; however, life insurance has been acquired on the life of the executive officers in amounts sufficient to help meet the costs of the obligations.

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Income Taxes

12 Months Ended

Dec. 31, 2016

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company files income tax returns in the U.S. federal jurisdiction and the state of Virginia and various other states.  With few exceptions, the Company is no longer subject to U.S. federal or state income tax examinations by tax authorities for years prior to 2013.

The Company believes it is more likely than not that the benefit of deferred tax assets will be realized.  Consequently, no valuation allowance for deferred tax assets was deemed necessary at December 31, 2016 and 2015.

Net deferred tax assets consist of the following components as of December 31, 2016 and 2015:

(Dollars in thousands)	2016		2015
Deferred tax assets:
Allowance for loan losses	$	3,877	$	3,756
Deferred compensation	687		647
Interest rate swap	67		99
Other real estate owned	288		257
Securities available for sale	654		—
Property and equipment	—		49
Other	1,427		2,028
Total deferred tax assets	$	7,000	$	6,836
Deferred tax liabilities:
Deferred loan costs, net	$	526	$	317
Securities available for sale	—		965
Property and equipment	79		—
Total deferred tax liabilities	$	605	$	1,282
Net deferred tax assets	$	6,395	$	5,554

The provision for income taxes charged to operations for the years ended December 31, 2016, 2015, and 2014, consists of the following:

(Dollars in thousands)	2016		2015		2014
Current tax expense	$	2,067	$	2,606	$	1,160
Deferred tax expense	746		109		1,181
Total income tax expense	$	2,813	$	2,715	$	2,341

The income tax provision differs from the amount of income tax determined by applying the U.S. federal income tax rate to pretax income for the years ended December 31, 2016, 2015, and 2014, due to the following:

(Dollars in thousands)	2016			2015			2014
Computed "expected" tax expense	$	3,698		$	3,585		$	3,374
Increase (decrease) in income taxes resulting from:
Tax-exempt income	(796		)	(829		)	(959		)
Low income housing tax credits	(408		)	(120		)	(211		)
Merger related expenses	267			—			—
Other, net	52			79			137
	$	2,813		$	2,715		$	2,341

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Related Party Transactions

12 Months Ended

Dec. 31, 2016

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions

The Company’s commercial and retail banking segment has, and may be expected to have in the future, banking transactions in the ordinary course of business with principal owners, directors, principal officers, their immediate families and affiliated companies in which they are principal stockholders, commonly referred to as related parties.  Any loans made to related parties were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time of origination for comparable loans with persons not related to the lender; and did not involve more than the normal risk of collectability or present other unfavorable features. Loans outstanding to directors and executive officers at December 31, 2016 and 2015 were:

(Dollars in thousands)	2016			2015
Balance, January 1	$	1,369		$	3,804
Decrease due to status changes	—			(2,375		)
Principal additions	352			439
Principal payments	(130		)	(499		)
Balance, December 31	$	1,591		$	1,369

Additionally, unused commitments to extend credit to related parties were $1.1 million at December 31, 2016 and $2.3 million at December 31, 2015.

Related party deposits totaled $5.0 million and $5.9 million at December 31, 2016 and 2015, respectively.

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Contingent Liabilities and Commitments

12 Months Ended

Dec. 31, 2016

Commitments and Contingencies Disclosure [Abstract]

Contingent Liabilities and Commitments

Contingent Liabilities and Commitments

In the normal course of business, there are various outstanding commitments and contingent liabilities, which are not reflected in the accompanying consolidated financial statements.  The Company does not anticipate any material loss as a result of these transactions.

See Note 15 with respect to financial instruments with off-balance sheet risk.

The Company must maintain a reserve against its deposits in accordance with Regulation D of the Federal Reserve Act.  For the final weekly reporting period in the years ended December 31, 2016 and 2015, the aggregate amount of gross daily average required reserves was approximately $3.5 million and $3.1 million, respectively.

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Earnings Per Share

12 Months Ended

Dec. 31, 2016

Earnings Per Share [Abstract]

Earnings Per Share

Earnings Per Share

The following shows the weighted-average number of shares used in computing earnings per share and the effect on weighted-average number of shares of diluted potential common stock. Nonvested restricted shares are included in basic earnings per share because of dividend participation rights. Potential dilutive common stock had no effect on income available to common stockholders.

	2016			2015			2014
	Shares	Per Share Amount		Shares	Per Share Amount		Shares	Per Share Amount
Earnings per share, basic	7,107,403	$	1.13	7,147,390	$	1.10	7,106,171	$	1.07
Effect of dilutive securities:
Stock options	11,461			6,805			6,939
Warrant (See note 23)	32,026			13,192			13,491
Earnings per share, diluted	7,150,890	$	1.13	7,167,387	$	1.09	7,126,601	$	1.06

In 2016, 2015, and 2014, there were no shares that would have been considered anti-dilutive. 

On September 15, 2015, the Company's Board of Directors authorized the repurchase of up to $10 million of the Company’s common stock. The repurchase program was effective immediately and runs through December 31, 2017. This program replaces the previous repurchase program adopted in 1999, pursuant to which the Company had 24,084 shares remaining eligible for repurchase. As of December 31, 2016, the Company had executed and settled transactions to repurchase 104,300 shares, totaling $1.9 million, for an average price of $18.34, of which 26,800 shares totaling $489,000 were executed and settled during the first quarter of 2016 at an average price of $18.29.

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Retained Earnings

12 Months Ended

Dec. 31, 2016

Equity [Abstract]

Retained Earnings

Retained Earnings

Transfers of funds from the banking subsidiary to the Parent Company in the form of loans, advances, and cash dividends are restricted by federal and state regulatory authorities.  Federal regulations limit the payment of dividends to the sum of a bank’s current net retained income and retained net income of the two prior years.  As of December 31, 2016, the subsidiary bank had approximately $12.9 million in excess of regulatory limitations available for transfer to the Parent Company.

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Financial Instruments With Off-Balance Sheet Risk and Credit Risk

12 Months Ended

Dec. 31, 2016

Risks and Uncertainties [Abstract]

Financial Instruments With Off-Balance Sheet Risk and Credit Risk

Financial Instruments With Off-Balance Sheet Risk and Credit Risk

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers and to reduce its own exposure to fluctuations in interest rates.  These financial instruments include commitments to extend credit, standby letters of credit, and interest rate swaps.  Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheet.  The contract or notional amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments.  See Note 24 for more information regarding the Company’s use of derivatives.

The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments.  The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

A summary of the contract amount of the Company's exposure to off-balance sheet risk as of December 31, 2016 and 2015, is as follows:

(Dollars in thousands)	2016		2015
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit	$	132,669	$	153,806
Standby letters of credit	4,998		3,718

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.  Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.  Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.  The Company evaluates each customer's creditworthiness on a case-by-case basis.  The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management's credit evaluation of the counterparty.  Collateral held varies but may include accounts receivable, inventory, property and equipment, and income producing commercial properties.

Unfunded commitments under lines of credit are commitments for possible future extensions of credit to existing customers.  Those lines of credit may not be drawn upon to the total extent to which the Company is committed.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party.  Those guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing, and similar transactions.  The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.  The Company holds certificates of deposit, deposit accounts, and real estate as collateral supporting those commitments for which collateral is deemed necessary.

The Company had approximately $3.4 million in deposits in financial institutions in excess of amounts insured by the Federal Deposit Insurance Corporation (FDIC) at December 31, 2016.

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Fair Value Measurements

12 Months Ended

Dec. 31, 2016

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

The Company follows ASC 820, "Fair Value Measurements" to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures.  ASC 820 clarifies that fair value of certain assets and liabilities is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

ASC 820 specifies a hierarchy of valuation techniques based on whether the inputs are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions.  The three levels of the fair value hierarchy under ASC 820 based on these two types of inputs are as follows:

Level I. Quoted prices are available in active markets for identical assets or liabilities as of the reported date.

Level II. Pricing inputs are other than the quoted prices in active markets, which are either directly or indirectly observable as of the reported date.  The nature of these assets and liabilities includes items for which quoted prices are available but traded less frequently and items that are fair-valued using other financial instruments, the parameters of which can be directly observed.

Level III. Assets and liabilities that have little to no pricing observability as of the reported date.  These items do not have two-way markets and are measured using management’s best estimate of fair value, where the inputs into the determination of fair value require significant management judgment or estimation.

Measured on a recurring basis

The following describes the valuation techniques and inputs used by the Company in determining the fair value of certain assets recorded at fair value on a recurring basis in the financial statements.

Securities Available for Sale

The Company primarily values its investment portfolio using Level II fair value measurements, but may also use Level I or Level III measurements if required by the composition of the portfolio. If quoted market prices are not available, fair values are measured utilizing independent valuation techniques of identical or similar securities for which significant assumptions are derived primarily from or corroborated by observable market data. Third party vendors compile prices from various sources and may determine the fair value of identical or similar securities by using pricing models that consider observable market data (Level II). In certain cases where there is limited activity or less transparency around inputs to the valuation, securities are classified as Level III of the valuation hierarchy.

Interest Rate Swaps and Interest Rate Cap

Interest rate swaps and cap are recorded at fair value based on third party vendors who compile prices from various sources and may determine fair value of identical or similar instruments by using pricing models that consider observable market data (Level II).

The following tables present the balances of financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2016 and 2015.

(Dollars in thousands)	December 31, 2016
Description	Total		Level I		Level II		Level III
Assets:
U.S. government agencies	$	73,184	$	—	$	73,184	$	—
Obligations of states and political subdivisions	63,373		—		63,373		—
Mortgage-backed securities:
Agency	98,051		—		98,051		—
Non-agency	9,933		—		9,933		—
Other asset backed securities	41,605		—		41,605		—
Corporate securities	15,421		—		15,421		—
Interest rate swaps	44		—		44		—
Interest rate cap	9		—		9		—
Liabilities:
Interest rate swaps	242		—		242		—

(Dollars in thousands)	December 31, 2015
Description	Total		Level I		Level II		Level III
Assets:
U.S. government agencies	$	78,940	$	—	$	78,940	$	—
Obligations of states and political subdivisions	75,593		—		75,593		—
Mortgage-backed securities:
Agency	131,661		—		131,661		—
Non-agency	12,777		—		12,777		—
Other asset backed securities	58,781		—		58,781		—
Corporate securities	16,819		—		16,819		—
Interest rate swaps	73		—		73		—
Interest rate cap	39		—		39		—
Liabilities:
Interest rate swaps	370		—		370		—

Measured on nonrecurring basis

The Company may be required, from time to time, to measure and recognize certain other assets at fair value on a nonrecurring basis in accordance with GAAP. The following describes the valuation techniques and inputs used by the Company in determining the fair value of certain assets recorded at fair value on a nonrecurring basis in the financial statements.

Impaired Loans

Loans are designated as impaired when, in the judgment of management based on current information and events, it is probable that all amounts due according to the contractual terms of the loan agreement will not be collected when due. The measurement of loss associated with impaired loans can be based on either the observable market price of the loan or the fair value of the collateral. Collateral may be in the form of real estate or business assets including equipment, inventory, and accounts receivable. Any given loan may have multiple types of collateral. The vast majority of the collateral is real estate. The value of real estate collateral is determined utilizing a market valuation approach based on an appraisal conducted by an independent, licensed appraiser outside of the Company using observable market data (Level II). However, if the collateral value is significantly adjusted due to differences in the comparable properties, or is discounted by the Company because of marketability, then the fair value is considered Level III. The value of business equipment is based upon an outside appraisal if deemed significant, or the net book value on the applicable business’ financial statements if not considered significant. Likewise, values for inventory and accounts receivables collateral are based on financial statement balances or aging reports (Level III). Impaired loans allocated to the allowance for loan losses are measured at fair value on a nonrecurring basis. Any fair value adjustments are recorded in the period incurred as provision for loan losses on the consolidated statements of income.

Other Real Estate Owned ("OREO")

OREO is measured at fair value less estimated costs to sell, based on an appraisal conducted by an independent, licensed appraiser outside of the Company. If the collateral value is significantly adjusted due to differences in the comparable properties, or is discounted by the Company because of marketability, then the fair value is considered Level III. The initial fair value of OREO is based on an appraisal done at the time of foreclosure. Subsequent fair value adjustments are recorded in the period incurred and included in non-interest expense on the consolidated statements of income.

Repossessed Assets

The value of repossessed assets is determined by the Company based on marketability and other factors and is considered Level III.

The following table summarizes the Company’s non-financial assets that were measured at fair value on a nonrecurring basis during the period.

(Dollars in thousands)	December 31, 2016
	Total		Level I		Level II		Level III
Assets:
Impaired loans	$	6,298	$	—	$	—	$	6,298
Other real estate owned	$	5,073	$	—	$	—	$	5,073
Repossessed assets	$	843	$	—	$	—	$	843
(Dollars in thousands)	December 31, 2015
	Total		Level I		Level II		Level III
Assets:
Impaired loans	$	9,018	$	—	$	—	$	9,018
Other real estate owned	$	3,345	$	—	$	—	$	3,345
Repossessed assets	$	1,043	$	—	$	—	$	1,043

The following table presents quantitative information as of December 31, 2016 and 2015 about Level III fair value measurements for assets measured at fair value on a nonrecurring basis:

2016	Fair Value (in thousands)		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Impaired loans	$	1,134	Appraisals	Discount to reflect current market conditions and estimated selling costs	0% - 100% (14%)
Impaired loans	$	5,164	Present value of cash flows	Discount rate	6% - 8% (6%)
Other real estate owned	$	5,073	Appraisals	Discount to reflect current market conditions and estimated selling costs	10%
Repossessed assets	$	843	Market analysis	Discount to reflect current market conditions and estimated selling costs	70%

2015	Fair Value (in thousands)		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Impaired loans	$	5,434	Appraisals	Discount to reflect current market conditions and estimated selling costs	0% - 100% (17%)
Impaired loans	$	3,584	Present value of cash flows	Discount rate	6% - 8% (7%)
Other real estate owned	$	3,345	Appraisals	Discount to reflect current market conditions and estimated selling costs	10%
Repossessed assets	$	1,043	Market analysis	Historical sales activity	50%

The fair value of a financial instrument is the current amount that would be exchanged between willing parties, other than in a forced liquidation.  Fair value is best determined based upon quoted market prices.  However, in many instances, there are no quoted market prices for the Company’s various financial instruments.  In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques.  Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows.  Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.  U.S. generally accepted accounting principles excludes certain financial instruments and all non-financial instruments from its disclosure requirements.  Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.

The following methods and assumptions were used to estimate the fair value of each class of financial instruments (not previously described) for which it is practicable to estimate that value:

Cash and Cash Equivalents

For cash and cash equivalents, the carrying amount is a reasonable estimate of fair value.

Securities held to maturity

Certain debt securities that management has the positive intent and ability to hold until maturity are recorded at amortized cost. Fair values are determined in a manner that is consistent with securities available for sale.

Restricted Securities

The restricted security category is comprised of FHLB and Federal Reserve Bank stock. These stocks are classified as restricted securities because their ownership is restricted to certain types of entities and they lack a market. When the FHLB or Federal Reserve Bank repurchases stock, they repurchase at the stock's book value. Therefore, the carrying amounts of restricted securities approximate fair value.

Loans, Net

For variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values.  For fixed rate loans, the fair value is estimated by discounting future cash flows using current market inputs at which loans with similar terms and qualities would be made to borrowers of similar credit quality.  Where quoted market prices were available, primarily for certain residential mortgage loans, such market rates were utilized as estimates for fair value. Fair value for impaired loans is described above.

Bank Owned Life Insurance

The carrying amount of bank owned life insurance is a reasonable estimate of fair value.

Accrued Interest Receivable and Payable

The carrying amounts of accrued interest approximate fair values.

Deposits

The fair value of demand deposits, savings accounts, and certain money market deposits is the amount payable on demand at the reporting date.  For all other deposits, the fair value is determined using the discounted cash flow method.  The discount rate is equal to the rate currently offered on similar products.

Securities Sold Under Agreements to Repurchase

The carrying amounts approximate fair values.

FHLB Borrowings and Subordinated Debt

For variable rate long-term debt, fair values are based on carrying values.  For fixed rate debt, fair values are estimated based on observable market prices and discounted cash flow analysis using interest rates for borrowings of similar remaining maturities and characteristics.  The fair values of the Company's Subordinated Debentures are estimated using discounted cash flow analysis based on the Company's current incremental borrowing rates for similar types of borrowing arrangements.

Off-Balance Sheet Financial Instruments

The fair value of commitments to extend credit is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties.  For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates.  The fair value of standby letters of credit is based on fees currently charged for similar agreements or on the estimated cost to terminate them or otherwise settle the obligations with the counterparties at the reporting date.  At December 31, 2016 and 2015, the fair values of loan commitments and standby letters of credit were deemed immaterial; therefore, they have not been included in the tables below.

Fair Value of Financial Instruments

The estimated fair values, and related carrying amounts, of the Company's financial instruments are as follows:

(Dollars in thousands)	December 31, 2016
					Fair value measurements using:
	Carrying Amount		Total Fair Value		Level I		Level II		Level III
Financial assets:
Cash and cash equivalents	$	28,544	$	28,544	$	28,544	$	—	$	—
Securities held to maturity	10,683		10,095		—		10,095		—
Securities available for sale	301,567		301,567		—		301,567		—
Loans, net	848,693		852,280		—		—		852,280
Bank owned life insurance	23,925		23,925		—		23,925		—
Accrued interest receivable	5,093		5,093		—		5,093		—
Interest rate swaps	44		44		—		44		—
Interest rate cap	9		9		—		9		—
Financial liabilities:
Deposits	$	1,053,058	$	1,051,245	$	—	$	1,051,245	$	—
Securities sold under agreements to repurchase	34,864		34,864		—		34,864		—
FHLB borrowings	39,500		39,530		—		39,530		—
Subordinated notes	5,155		5,159		—		5,159		—
Accrued interest payable	387		387		—		387		—
Interest rate swaps	242		242		—		242		—

(Dollars in thousands)	December 31, 2015
					Fair value measurements using:
	Carrying Amount		Total Fair Value		Level I		Level II		Level III
Financial assets:
Cash and cash equivalents	$	39,228	$	39,228	$	39,228	$	—	$	—
Securities held to maturity	4,207		4,163		—		4,163		—
Securities available for sale	374,571		374,571		—		374,571		—
Loans, net	794,635		802,535		—		—		802,535
Bank owned life insurance	23,273		23,273		—		23,273		—
Accrued interest receivable	5,204		5,204		—		5,204		—
Interest rate swaps	73		73		—		73		—
Interest rate cap	39		39		—		39		—
Financial liabilities:
Deposits	$	1,040,800	$	1,040,016	$	—	$	1,040,016	$	—
Securities sold under agreements to repurchase	26,869		26,869		—		26,869		—
FHLB borrowings	85,000		85,033		—		85,033		—
Subordinated notes	5,155		5,157		—		5,157		—
Accrued interest payable	410		410		—		410		—
Interest rate swaps	370		370		—		370		—

The Company assumes interest rate risk as a result of its normal operations.  As a result, the fair values of the Company's financial instruments will change when interest rate levels change, which may be either favorable or unfavorable to the Company.  Management attempts to match maturities of assets and liabilities to the extent believed necessary to minimize interest rate risk.  However, borrowers with fixed rate obligations are less likely to prepay in a rising rate environment and more likely to prepay in a falling rate environment.  Conversely, depositors who are receiving fixed rates are more likely to withdraw funds before maturity in a rising rate environment and less likely to do so in a falling rate environment.  Management monitors rates and maturities of assets and liabilities and attempts to minimize interest rate risk by adjusting terms of new loans and deposits and by investing in securities with terms that mitigate the Company's overall interest rate risk.

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Capital Requirements

12 Months Ended

Dec. 31, 2016

Regulatory Capital Requirements [Abstract]

Capital Requirements

Capital Requirements

The Company, on a consolidated basis, and Middleburg Bank are subject to various regulatory capital requirements administered by the federal banking agencies.  Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s and Bank’s financial statements.  Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and Middleburg Bank must meet specific capital guidelines that involve quantitative measures of the Company's and Middleburg Bank’s assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices.  The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.  Prompt corrective action provisions are not applicable to bank holding companies.

Quantitative measures established by regulation to ensure capital adequacy require the Company and Middleburg Bank to maintain minimum amounts and ratios, as set forth in the table below.  Management believes, as of December 31, 2016 and 2015, that the Company and Middleburg Bank meet all capital adequacy requirements to which they are subject.

As of December 31, 2016, the most recent notification from the Federal Reserve Bank categorized Middleburg Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, an institution must maintain minimum capital requirements as set forth in the table.  There are no conditions or events since that notification that management believes have changed the institution's category.

The Company’s and Middleburg Bank’s actual capital amounts and ratios are also presented in the following table.

	Actual			Minimum Capital Requirement			Minimum To Be Well Capitalized Under Prompt Corrective Action Provisions
(Dollars in thousands)	Amount		Ratio	Amount		Ratio	Amount		Ratio
As of December 31, 2016
Total Capital (to Risk- Weighted Assets):
Consolidated	$	139,419	17.9%	$	62,436	8.0%	N/A		N/A
Middleburg Bank	131,725		17.0%	61,994		8.0%	$	77,492	10.0%
Tier 1 Capital (to Risk- Weighted Assets):
Consolidated	$	129,642	16.6%	$	46,827	6.0%	N/A		N/A
Middleburg Bank	122,016		15.8%	46,495		6.0%	$	61,994	8.0%
Common Equity Tier 1 Capital (to Risk-Weighted Assets):
Consolidated	$	124,642	16.0%	$	35,121	4.5%	N/A		N/A
Middleburg Bank	122,016		15.8%	34,872		4.5%	$	50,370	6.5%
Tier 1 Capital (to Average Assets):
Consolidated	$	129,642	10.0%	$	52,142	4.0%	N/A		N/A
Middleburg Bank	122,016		9.4%	51,909		4.0%	$	64,886	5.0%
As of December 31, 2015
Total Capital (to Risk- Weighted Assets):
Consolidated	$	132,481	17.5%	$	60,495	8.0%	N/A		N/A
Middleburg Bank	127,418		17.0%	60,055		8.0%	$	75,068	10.0%
Tier 1 Capital (to Risk- Weighted Assets):
Consolidated	$	123,008	16.3%	$	45,371	6.0%	N/A		N/A
Middleburg Bank	118,013		15.7%	45,041		6.0%	$	60,055	8.0%
Common Equity Tier 1 Capital (to Risk-Weighted Assets):
Consolidated	$	118,008	15.6%	$	34,028	4.5%	N/A		N/A
Middleburg Bank	118,013		15.7%	33,781		4.5%	$	48,794	6.5%
Tier 1 Capital (to Average Assets):
Consolidated	$	123,008	9.6%	$	51,301	4.0%	N/A		N/A
Middleburg Bank	118,013		9.2%	51,067		4.0%	$	63,834	5.0%

In addition to the minimum regulatory capital required for capital adequacy purposes included in the table above, the Company is required to maintain a minimum Capital Conservation Buffer, in the form of common equity, in order to avoid restrictions on capital distributions and discretionary bonuses. The required amount of the Capital Conservation Buffer was 0.625% on January 1, 2016 and will increase by 0.625% each year until it reaches 2.5% on January 1, 2019. The Capital Conservation Buffer is applicable to all ratios except the leverage ratio, which is noted above as Tier 1 Capital to Average Assets.

On January 1, 2015, the Company and the Bank applied changes to the regulatory capital framework that were approved on July 9, 2013 by the federal banking agencies (the Basel III Final Rule). The regulatory risk-based capital amounts presented above include: (1) common equity tier 1 capital (CET1) which consists principally of common stock (including surplus) and retained earnings with adjustments for goodwill, intangible assets and deferred tax assets; (2) Tier 1 capital which consists principally of CET1 plus the Company’s “grandfathered” trust preferred securities; and (3) Tier 2 capital which consists principally of Tier 1 capital plus a limited amount of the allowance for loan losses. In addition, the Company has made the one-time irrevocable election to continue treating accumulated other comprehensive income (loss) under regulatory standards that were in place prior to the Basel III Final Rule in order to eliminate volatility of regulatory capital that can result from fluctuations in accumulated other comprehensive income (loss) and the inclusion of accumulated other comprehensive income (loss) in regulatory capital, as would otherwise be required under the Basel III Capital Rule. The table above also reflects the minimum regulatory and certain prompt corrective action capital levels that began on January 1, 2015.

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Goodwill and Intangibles Assets

12 Months Ended

Dec. 31, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangibles Assets

Goodwill and Intangibles Assets

As of December 31, 2016 and 2015, goodwill and intangible assets relate to the Company’s acquisition of Middleburg Trust Company and Middleburg Investment Advisors. On May 15, 2014, the Company sold all of its majority interest in Southern Trust Mortgage and on this date the related goodwill was eliminated.

Goodwill is not amortized and the Company is no longer required to perform a test for impairment unless, based on an assessment of qualitative factors related to goodwill, the Company determines that it is more likely than not that the fair value is less than its carrying amount. If the likelihood of impairment is more than 50%, the Company must perform a test for impairment and may be required to record impairment charges.

Identifiable intangible assets are being amortized over the period of expected benefit, which is 15 years.  

Information concerning goodwill and intangible assets is presented in the following table:

	December 31, 2016				December 31, 2015
(Dollars In thousands)	Gross Carrying Value		Accumulated Amortization		Gross Carrying Value		Accumulated Amortization
Identifiable intangibles	$	3,734	$	3,690	$	3,734	$	3,519
Unamortizable goodwill	3,421		—		3,421		—

Amortization expense of intangible assets for each of the three years ended December 31, 2016, and 2015, and 2014 totaled $171,000.  Estimated amortization expense of identifiable intangibles for the years ended December 31 follows:

(Dollars in thousands)
2017	$	44
	$	44

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Subordinated Notes

12 Months Ended

Dec. 31, 2016

Trust Preferred Capital Notes [Abstract]

Subordinated Notes

Subordinated Notes

On December 12, 2003, MFC Capital Trust II, a wholly owned subsidiary of the Company, was formed for the purpose of issuing redeemable Capital Securities.  On December 19, 2003, $5.0 million of trust-preferred securities were issued through a pooled underwriting totaling approximately $344 million.  The securities have a LIBOR-indexed floating rate of interest.

During 2016, the interest rates ranged from 3.17% to 3.74%.  For the year ended December 31, 2016, the weighted-average interest rate was 3.54%.  The securities have a mandatory redemption date of January 23, 2034, and are subject to varying call provisions beginning January 23, 2009. The principal asset of the trust is $5.2 million of the Company’s junior subordinated debt securities with like maturities and like interest rates to the Capital Securities.  See Note 24 for information regarding an interest rate swap entered into by the Company to manage the cash flows associated with these trust preferred securities.

The trust preferred securities may be included in Tier 1 capital for regulatory capital adequacy determination purposes up to 25% of Tier 1 Capital after its inclusion.  The portion of the trust preferred securities not considered as Tier 1 Capital may be included in Tier 2 Capital.  On December 31, 2016, all of the Company’s trust preferred securities are included in Tier I Capital.

The obligations of the Company with respect to the issuance of the Capital Securities constitute a full and unconditional guarantee by the Company of the trusts’ obligations with respect to the Capital Securities.

Subject to certain exceptions and limitations, the Company may elect from time to time to defer interest payments on the junior subordinated debt securities, which would result in a deferral of distribution payments on the related Capital Securities. There were no deferred interest payments on our junior subordinated debt securities at December 31, 2016, 2015 and 2014.

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Ownership of Southern Trust Mortgage

12 Months Ended

Dec. 31, 2016

Business Combinations [Abstract]

Ownership of Southern Trust Mortgage

Ownership of Southern Trust Mortgage

In May 2008, Middleburg Bank acquired the membership interest units of one of the partners of Southern Trust Mortgage for $1.6 million.  As a result, the Company’s ownership interest exceeded 50% of the issued and outstanding membership units.  Prior to the sale, the Company owned 62.3% of the issued and outstanding membership interest units of Southern Trust Mortgage, through its subsidiary, Middleburg Bank. On May 15, 2014, the Company sold 100% of its ownership interest in Southern Trust Mortgage.

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Condensed Financial Information - Parent Corporation Only

12 Months Ended

Dec. 31, 2016

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Condensed Financial Information - Parent Corporation Only

Condensed Financial Information – Parent Corporation Only

BALANCE SHEETS
	December 31,
(Dollars in thousands)	2016			2015
ASSETS
Cash on deposit with subsidiary bank	$	2,154		$	1,403
Investment in subsidiaries	126,694			125,900
Other assets	3,199			1,686
TOTAL ASSETS	$	132,047		$	128,989
LIABILITIES
Subordinated notes	$	5,155		$	5,155
Other liabilities	213			280
TOTAL LIABILITIES	5,368			5,435
SHAREHOLDERS' EQUITY
Common stock	17,636			17,330
Capital surplus	45,688			44,155
Retained earnings	64,755			60,392
Accumulated other comprehensive income (loss), net	(1,400		)	1,677
TOTAL SHAREHOLDERS' EQUITY	126,679			123,554
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	132,047		$	128,989

STATEMENTS OF INCOME
	Year End December 31,
(Dollars in thousands)	2016			2015			2014
INCOME:
Dividends from subsidiaries	$	6,870		$	5,383		$	3,440
Interest and dividends from investments	—			—			15
Other income	2			17			—
Total income	6,872			5,400			3,455
EXPENSES:
Salaries and employee benefits	1,240			919			746
Legal and advisory fees	1,506			164			91
Directors fees	352			274			280
Interest expense	280			279			279
Other	426			416			366
Total expenses	3,804			2,052			1,762
Income before allocated tax benefits and undistributed income of subsidiaries	3,068			3,348			1,693
Income tax benefit	(1,081		)	(715		)	(753		)
Income before equity in undistributed income of subsidiaries	4,149			4,063			2,446
Equity in undistributed income of subsidiaries	3,915			3,767			5,138
Net income	$	8,064		$	7,830		$	7,584

STATEMENTS OF CASH FLOWS
	December 31,
(Dollars in thousands)	2016			2015			2014
Cash Flows from Operating Activities
Net income	$	8,064		$	7,830		$	7,584
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in undistributed earnings of subsidiaries	(3,915		)	(3,767		)	(5,138		)
Share-based compensation	925			605			426
(Increase) decrease in other assets	(1,469		)	957			(1,099		)
(Decrease) increase in other liabilities	(67		)	13			213
Net cash provided by operating activities	3,538			5,638			1,986
Cash Flows from Investing Activities
Proceeds from sales, calls and maturities of available for sale securities	—			—			44
Net cash provided by investing activities	—			—			44
Cash Flows from Financing Activities
Net proceeds from issuance of common stock	1,742			—			394
Cash dividends paid on common stock	(3,701		)	(3,292		)	(2,419		)
Repurchases of stock	(828		)	(1,506		)	(88		)
Net cash used in financing activities	(2,787		)	(4,798		)	(2,113		)
Increase (decrease) in cash and cash equivalents	751			840			(83		)
Cash and Cash Equivalents at beginning of year	1,403			563			646
Cash and Cash Equivalents at end of year	$	2,154		$	1,403		$	563

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Segment Reporting

12 Months Ended

Dec. 31, 2016

Segment Reporting [Abstract]

Segment Reporting

Segment Reporting

The Company operates its principal business activities of retail banking services and wealth management services in a decentralized fashion. Revenue from retail banking activity consists primarily of interest and fees earned on loans, including mortgage banking activity, interest earned on investment securities and service charges on deposit accounts. Revenue from the wealth management activities is comprised of fees based upon the market value of the accounts under administration as well as commissions on investment transactions.

Middleburg Bank and the Company have assets in custody with Middleburg Trust Company and accordingly pay Middleburg Trust Company a monthly fee. Middleburg Bank also pays interest to Middleburg Trust Company on deposit accounts with Middleburg Bank. Middleburg Trust Company pays rental and other miscellaneous occupancy expenses to Middleburg Bank. Transactions related to these relationships are eliminated to reach consolidated totals.

In 2014, revenue from the mortgage banking activities is comprised of interest earned on loans and fees received as a result of the mortgage origination process. The Company recognized gains on the sale of loans as part of other income. On May 15, 2014, the Company sold all of its majority interest in Southern Trust Mortgage and as a result, any mortgage banking activity for the Company subsequent to the sale date is included with the results of the retail banking segment. Mortgage banking activities for the twelve months ended December 31, 2014 are the result of Southern Trust Mortgage activity that was consolidated with the Company through the date of sale. In 2014, Middleburg Bank provided a warehouse line, office space, data processing and accounting services to Southern Trust Mortgage for which it received income. Transactions related to these relationships are eliminated to reach consolidated totals.

Information about reportable segments and reconciliation to the consolidated financial statements follows:

	2016
(Dollars in thousands)	Commercial & Retail Banking		Wealth Management		Mortgage Banking		Intercompany Eliminations			Consolidated
Revenues:
Interest income	$	43,365	$	10	$	—	$	—		$	43,375
Trust services income	—		4,806		—		(163		)	4,643
Other income	6,204		—		—		(109		)	6,095
Total operating income	49,569		4,816		—		(272		)	54,113
Expenses:
Interest expense	4,424		—		—		—			4,424
Salaries and employee benefits	16,473		2,284		—		—			18,757
Provision for loan losses	1,853		—		—		—			1,853
Other expense	17,556		918		—		(272		)	18,202
Total operating expenses	40,306		3,202		—		(272		)	43,236
Income before income taxes	9,263		1,614		—		—			10,877
Income tax expense	2,203		610		—		—			2,813
Net income	$	7,060	$	1,004	$	—	$	—		$	8,064
Total assets	$	1,270,222	$	6,693	$	—	$	(4,272	)	$	1,272,643
Capital expenditures	$	978	$	—	$	—	$	—		$	978
Goodwill and other intangibles	$	—	$	3,465	$	—	$	—		$	3,465

	2015
(Dollars in thousands)	Commercial & Retail Banking		Wealth Management		Mortgage Banking		Intercompany Eliminations			Consolidated
Revenues:
Interest income	$	42,270	$	11	$	—	$	—		$	42,281
Trust services income	—		4,951		—		(166		)	4,785
Other income	5,605		—		—		—			5,605
Total operating income	47,875		4,962		—		(166		)	52,671
Expenses:
Interest expense	4,207		—		—		—			4,207
Salaries and employee benefits	16,130		2,305		—		—			18,435
Provision for loan losses	2,293		—		—		—			2,293
Other expense	16,237		1,120		—		(166		)	17,191
Total operating expenses	38,867		3,425		—		(166		)	42,126
Income before income taxes	9,008		1,537		—		—			10,545
Income tax expense	2,131		584		—		—			2,715
Net income	$	6,877	$	953	$	—	$	—		$	7,830
Total assets	$	1,291,708	$	6,700	$	—	$	(3,545	)	$	1,294,863
Capital expenditures	$	2,137	$	—	$	—	$	—		$	2,137
Goodwill and other intangibles	$	—	$	3,636	$	—	$	—		$	3,636

	2014
(Dollars in thousands)	Commercial & Retail Banking		Wealth Management		Mortgage Banking			Intercompany Eliminations			Consolidated
Revenues:
Interest income	$	43,149	$	14	$	450		$	(288	)	$	43,325
Trust services income	—		4,516		—			(154		)	4,362
Other income	5,349		—		5,121			(46		)	10,424
Total operating income	48,498		4,530		5,571			(488		)	58,111
Expenses:
Interest expense	5,227		—		304			(288		)	5,243
Salaries and employee benefits	16,567		2,262		3,772			—			22,601
Provision for loan losses	1,926		—		34			—			1,960
Other expense	15,818		1,140		1,722			(200		)	18,480
Total operating expenses	39,538		3,402		5,832			(488		)	48,284
Income before income taxes and non-controlling interest	8,960		1,128		(261		)	—			9,827
Income tax expense	1,894		447		—			—			2,341
Net income	7,066		681		(261		)	—			7,486
Non-controlling interest in consolidated subsidiary	—		—		98			—			98
Net income attributable to Middleburg Financial Corporation	$	7,066	$	681	$	(163	)	$	—		$	7,584
Total assets	$	1,218,452	$	7,152	$	—		$	(2,747	)	$	1,222,857
Capital expenditures	$	911	$	6	$	3		$	—		$	920
Goodwill and other intangibles	$	—	$	3,807	$	—		$	—		$	3,807

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Capital Purchase Program and Stock Warrant

12 Months Ended

Dec. 31, 2016

Stockholders' Equity Note [Abstract]

Capital Purchase Program and Stock Warrant

Capital Purchase Program and Stock Warrant

On January 30, 2009, as part of the Capital Purchase Program established by the U.S. Department of the Treasury (the “Treasury”) under the Emergency Economic Stabilization Act of 2008, the Company entered into a Letter Agreement and Securities Purchase Agreement—Standard Terms (collectively, the “Purchase Agreement”) with the Treasury, pursuant to which the Company sold (i) 22,000 shares of Fixed Rate Cumulative Perpetual Preferred Stock, Series A, par value $2.50 per share, having a liquidation preference of $1,000 per share (the “Preferred Stock”) and (ii) a warrant (the “Warrant”) to purchase 208,202 shares of the Company’s common stock, par value $2.50 per share, at an initial exercise price of $15.85 per share. As a result of the completion of a public stock offering in 2009, the number of shares of common stock underlying the Warrant was reduced by one-half to 104,101 and the Company redeemed all 22,000 shares of Preferred Stock pursuant to the Purchase Agreement. During 2011, the Warrant was sold by the U.S. Treasury at public auction and, on November 3, 2016, was exercised in full for a total cash consideration of $1.65 million.

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Derivatives

12 Months Ended

Dec. 31, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives

Derivatives

The Company utilizes derivative instruments as a part of its asset-liability management program to control fluctuation of market values and cash flows to changes in interest rates associated with certain financial instruments. The Company accounts for derivatives in accordance with ASC 815, "Derivatives and Hedging". Under current guidance, derivative transactions are classified as either cash flow hedges or fair value hedges or they are not designated as hedging instruments. The Company designates each derivative instrument at the inception of the derivative transaction in accordance with this guidance. Information concerning each of the Company's categories of derivatives as of December 31, 2016 and 2015 is presented below.

Derivatives designated as cash flow hedges

During 2010, the Company entered into an interest rate swap agreement as part of the interest rate risk management process.  The swap was designated as a cash flow hedge intended to hedge the variability of cash flows associated with the Company’s trust preferred capital securities described in Note 19, “Subordinated Notes”.  The swap hedges the cash flow associated with the trust preferred capital notes wherein the Company receives a floating rate based on LIBOR from a counterparty and pays a fixed rate of 2.59% to the same counterparty.  The swap is calculated on a notional amount of $5.2 million.  The term of the swap is 10 years and commenced on October 23, 2010.  The Company has cash collateral reserved for this swap in the amount of $400,000 as of December 31, 2016 and 2015, respectively. The swap was entered into with a counterparty that met the Company’s credit standards and the agreement contains collateral provisions protecting the at-risk party.  The Company believes that the credit risk inherent in the contract is not significant.

During 2013, the Company entered into an interest rate swap agreement as part of the interest rate risk management process.  The swap has been designated as a cash flow hedge intended to hedge the variability of cash flows associated with the Company’s FHLB borrowings described in Note 7, “Borrowings”.  The swap hedges the cash flows associated with the FHLB borrowings wherein the Company receives a floating rate based on LIBOR from a counterparty and pays a fixed rate of 1.43% to the same counterparty.  The swap is calculated on a notional amount of $10 million.  The term of the swap is 5 years and commenced on November 25, 2013.  The Company has cash collateral reserved for this swap in the amount of $600,000 and $300,000 as of December 31, 2016 and 2015, respectively. The swap was entered into with a counterparty that met the Company’s credit standards and the agreement contains collateral provisions protecting the at-risk party.  The Company believes that the credit risk inherent in the contract is not significant.

Amounts receivable or payable are recognized as accrued under the terms of the agreement, with the effective portion of the derivative’s unrealized gain or loss recorded as a component of other comprehensive income (loss).  The ineffective portion of the unrealized gain or loss, if any, would be recorded in other expense.  The Company has assessed the effectiveness of the hedging relationship by comparing the changes in cash flows on the designated hedged item.  As a result of this assessment, there was no hedge ineffectiveness identified during 2016 and 2015. At December 31, 2014, $6,000 of hedge ineffectiveness identified for this interest rate swap and was classified as other operating expenses on the consolidated statements of income.

The amounts included in accumulated other comprehensive income (loss) as unrealized losses (market value net of tax) were $130,000 and $195,000 as of December 31, 2016 and 2015, respectively.

Information concerning the derivatives designated as a cash flow hedges at December 31, 2016 and 2015 is presented in the following tables:

	December 31, 2016
(Dollars in thousands)	Positions (#)	Notional Amount		Asset		Liability		Receive Rate		Pay Rate		Life (Years)
Pay fixed - receive floating interest rate swap	1	$	5,155	$	—	$	160	0.87	%	2.59	%	3.8
Pay fixed - receive floating interest rate swap	1	$	10,000	$	—	$	38	0.60	%	1.43	%	2.0

	December 31, 2015
(Dollars in thousands)	Positions (#)	Notional Amount		Asset		Liability		Receive Rate		Pay Rate		Life (Years)
Pay fixed - receive floating interest rate swap	1	$	5,155	$	—	$	226	0.32	%	2.59	%	4.8
Pay fixed - receive floating interest rate swap	1	$	10,000	$	—	$	71	0.23	%	1.43	%	3.0

Derivatives not designated as hedging instruments

Two-way client loan swaps

During the fourth quarter of 2014 and 2012, the Company entered into certain interest rate swap contracts that are not designated as hedging instruments. These derivative contracts relate to transactions in which we enter into an interest rate swap with a customer while at the same time entering into an offsetting interest rate swap with another financial institution. In connection with each swap transaction, the Company agrees to pay interest to the customer on a notional amount at a variable interest rate and receive interest from the customer on an identical notional amount at a fixed interest rate. At the same time, the Company agrees to pay the counterparty the same fixed interest rate on the same notional amount and receive the same variable interest rate on the same notional amount. The transaction allows our clients to effectively convert a variable rate loan into a fixed rate loan. Because the Company acts as an intermediary for our customers, changes in the fair value of the underlying derivatives contracts offset each other and do not significantly impact our results of operations. The Company had no undesignated interest rate swaps at December 31, 2016 and December 31, 2015.

Certain additional risks arise from interest rate swap contracts in that the counterparties to the contracts may not be able to meet the terms of the contracts. We do not expect any counterparty to fail to meet its obligations.

Information concerning two-way client interest rate swaps not designated as either fair value or cash flow hedges is presented in the following table:

	December 31, 2016
(Dollars in thousands)	Positions (#)	Notional Amount		Asset		Liability		Receive Rate		Pay Rate		Life (Years)
Pay fixed - receive floating interest rate swap	1	$	3,508	$	15	$	—	1 month LIBOR plus 200 BP		3.90	%	10.9
Pay fixed - receive floating interest rate swap	1	1,663		—		29		1 month LIBOR plus 180 BP		4.09	%	7.9
Pay floating - receive fixed interest rate swap	1	3,508		—		15		3.90	%	1 month LIBOR plus 200 BP		10.9
Pay floating - receive fixed interest rate swap	1	1,663		29		—		4.09	%	1 month LIBOR plus 180 BP		7.9
Total derivatives not designated		$	10,342	$	44	$	44

	December 31, 2015
(Dollars in thousands)	Positions (#)	Notional Amount (in thousands)		Asset		Liability		Receive Rate		Pay Rate		Life (Years)
Pay fixed - receive floating interest rate swap	1	$	3,760	$	—	$	21	1 month LIBOR plus 200 BP		3.90	%	11.9
Pay fixed - receive floating interest rate swap	1	1,706		—		52		1 month LIBOR plus 180 BP		4.09	%	8.9
Pay floating - receive fixed interest rate swap	1	3,760		21		—		3.90	%	1 month LIBOR plus 200 BP		11.9
Pay floating - receive fixed interest rate swap	1	1,706		52		—		4.09	%	1 month LIBOR plus 180 BP		8.9
Total derivatives not designated		$	10,932	$	73	$	73

Rate Cap Transaction

At December 31, 2016, the Company had one derivative instrument in the form of an interest rate cap agreement with a notional amount of $10.0 million. The notional amount of the financial derivative instrument does not represent exposure to credit loss. The Company is exposed to credit loss only to the extent the counterparty defaults in its responsibility to pay interest under the terms of the agreement. The credit risk in derivative instruments is mitigated by entering into transactions with highly-rated counterparties that management believes to be creditworthy and by limiting the amount of exposure to each counterparty. We do not expect any counterparty to fail to meet its obligations.

The details of the interest rate cap agreement as of December 31, 2016 is summarized below:

December 31, 2016
(Dollars in thousands)
Notional Amount		Termination Date	3-Month LIBOR Strike Rate		Premium Paid		Unamortized Premium at December 31, 2016		Fair Value December 31, 2016		Cumulative Cash Flows Received
$	10,000	September 8, 2018	2.00	%	$	70	$	70	$	9	$	—

December 31, 2015
(Dollars in thousands)
Notional Amount		Termination Date	3-Month LIBOR Strike Rate		Premium Paid		Unamortized Premium at December 31, 2015		Fair Value December 31, 2015		Cumulative Cash Flows Received
$	10,000	September 8, 2018	2.00	%	$	70	$	70	$	39	—

In the third quarter of 2015, the interest rate cap agreement was purchased to limit the Company's exposure to rising interest rates. Under the terms of the agreement, the Company paid a premium of $70,000 for the right to receive cash flow payments if 3-month LIBOR rises above the cap of 2.00%, thus effectively ensuring interest expense is capped at a maximum rate of 2.00% for the duration of the agreement. The interest rate cap agreement is a derivative not designated as a hedging instrument.

At December 31, 2016 and December 31, 2015, the total fair value of the interest rate cap agreement was $9,000 and $39,000, respectively. The fair value of the interest rate cap agreement is included in other assets on the Company's consolidated balance sheets. Changes in fair value are recorded in earnings in other operating expenses. During the years ended December 31, 2016 and December 31, 2015, $30,000 and $31,000 was recognized in other operating expenses, respectively.

The premium paid on the interest rate cap agreement will be recognized as a decrease in interest income over the duration of the agreement using the caplet method. From the date of inception and through December 31, 2016, no premium amortization was required.

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Accumulated Other Comprehensive Income (Loss), Net

12 Months Ended

Dec. 31, 2016

Equity [Abstract]

Accumulated Other Comprehensive Income (Loss), Net

Accumulated Other Comprehensive Income (Loss), Net

The following table presents information on changes in accumulated other comprehensive income for the periods indicated:

(Dollars in thousands)	Unrealized Gains (Losses) on Securities			Cash Flow Hedges			Accumulated Other Comprehensive Income (Loss), Net
Balance December 31, 2013	$	261		$	(29	)	$	232
Unrealized holding gains (net of tax, $1,979)	3,841			—			3,841
Reclassification adjustment (net of tax, $63)	(123		)	—			(123		)
Unrealized gains on interest rate swaps (net of tax, $82)	—			(160		)	(160		)
Reclassification adjustment (net of tax, $2)	—			4			4
Balance December 31, 2014	3,979			(185		)	3,794
Unrealized holding losses (net of tax, $1,037)	(2,015		)	—			(2,015		)
Reclassification adjustment (net of tax, $48)	(92		)	—			(92		)
Unrealized gains on interest rate swaps (net of tax, $3)	—			(6		)	(6		)
Reclassification adjustment (net of tax, $2)	—			(4		)	(4		)
Balance December 31, 2015	1,872			(195		)	1,677
Unrealized holding losses (net of tax, $1,091)	(2,116		)	—			(2,116		)
Reclassification adjustment (net of tax, $528)	(1,026		)	—			(1,026		)
Unrealized losses on interest rate swaps (net of tax, ($34))	—			65			65
Balance December 31, 2016	$	(1,270	)	$	(130	)	$	(1,400	)

The following table presents information related to reclassifications from accumulated other comprehensive income (loss):

Details about Accumulated Other Comprehensive Income (Loss)	Amount Reclassified from Accumulated Other Comprehensive Income (Loss)									Affected Line Item in the Consolidated Statements of Income
(Dollars in thousands)	2016			2015			2014
Securities available for sale (1):
Net securities gains reclassified into earnings	$	(1,554	)	$	(140	)	$	(186	)	Gains on sales of securities available for sale, net
Related income tax expense	528			48			63			Income tax expense
Derivatives (2):
(Gain) loss on interest rate swap ineffectiveness	—			(6		)	6			Other operating expense
Related income tax benefit	—			2			(2		)	Income tax expense
Net effect on accumulated other comprehensive income (loss) for the period	(1,026		)	(96		)	(119		)	Net of tax
Total reclassifications for the period	$	(1,026	)	$	(96	)	$	(119	)	Net of tax

⁽¹⁾    For more information related to unrealized gains on securities available for sale, see Note 2, "Securities".

⁽²⁾    For more information related to unrealized losses on derivatives, see Note 24, "Derivatives".

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Other Real Estate Owned (OREO)

12 Months Ended

Dec. 31, 2016

Banking and Thrift [Abstract]

Other Real Estate Owned (OREO)

Other Real Estate Owned ("OREO")

At December 31, 2016 and 2015, OREO balances were $5.1 million and $3.3 million, respectively. OREO is primarily comprised of residential properties and non-residential properties, and are located primarily in the state of Virginia. Changes in the balance for OREO, net of valuation allowances, are as follows:

(Dollars in thousands)	December 31, 2016			December 31, 2015
Balance at the beginning of year, net	$	3,345		$	4,051
Transfers from loans, net	2,645			287
Purchased loans	40			—
Sales proceeds	(713		)	(814		)
Gain (loss) on disposition	66			(100		)
Less valuation adjustments	(310		)	(79		)
Balance at the end of year, net	$	5,073		$	3,345

Net expenses applicable to OREO, were $363,000, $284,000 and $256,000 as of December 31, 2016, 2015 and 2014, respectively.

The major classifications of OREO in the consolidated balance sheets at December 31, 2016 and 2015 were as follows:

(Dollars in thousands)	December 31, 2016		December 31, 2015
Real estate loans:
Construction	$	946	$	853
Secured by 1-4 family residential	3,767		1,958
Other real estate loans	360		534
Total real estate loans	$	5,073	$	3,345

At December 31, 2016, the Company had no consumer mortgage loan secured by residential real estate for which foreclosure was in process. At December 31, 2015, the Company had one consumer mortgage loan secured by residential real estate for which foreclosure was in process. The amount of this loan was $533,000 at December 31, 2015.

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Low Income Housing Tax Credits

12 Months Ended

Dec. 31, 2016

Federal Home Loan Banks [Abstract]

Low Income Housing Tax Credits

Low Income Housing Tax Credits

The Company invested in four separate housing equity funds at December 31, 2016 and 2015, respectively. The general purpose of these funds is to encourage and assist participants in investing in low-income residential rental properties located in the Commonwealth of Virginia, develop and implement strategies to maintain projects as low-income housing, deliver Federal Low Income Housing Credits to investors, allocate tax losses and other possible tax benefits to investors, and to preserve and protect project assets. The investments in these funds are accounted for using the equity method and are recorded as other assets on the consolidated balance sheets. These investments totaled $8.4 million and $9.0 million at December 31, 2016 and 2015, respectively. The expected terms of these investments and the related tax benefits run through 2033. The net benefit recognized as a component of income tax expense related to tax credits and other tax benefits during the years ended December 31, 2016, 2015 and 2014 were $408,000, $120,000 and $211,000, respectively, related to these investments. Total projected tax credits to be received for 2016 are $441,000, which is based on the most recent quarterly estimates received from the funds. Additional capital calls expected for the funds totaled $8.2 million and $9.3 million at December 31, 2016 and 2015, respectively, and are included in other liabilities on the consolidated balance sheets.

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Nature of Banking Activities and Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Principles of Consolidation

Principles of Consolidation

The consolidated financial statements of Middleburg Financial Corporation and its wholly owned subsidiaries, Middleburg Bank, Middleburg Investment Group, Inc., Middleburg Trust Company and Middleburg Bank Service Corporation include the accounts of all companies.  Through May 15, 2014, the Company owned 62.3% of the issued and outstanding membership interest units of Southern Trust Mortgage, through its subsidiary, Middleburg Bank.  Accounting Standards Codification Topic 810, Consolidation, requires that the Company no longer eliminate through consolidation the equity investment in MFC Capital Trust II, which was $155,000 at December 31, 2016 and 2015.  The subordinated debt of the trust preferred entity is reflected as a liability of the Company.  All material intercompany balances and transactions have been eliminated in consolidation.

Securities

Securities

Certain debt securities that management has the positive intent and ability to hold until maturity are classified as "held-to-maturity" and recorded at amortized cost. Securities not classified as held-to-maturity, including equity securities with readily determinable fair values, are classified as "available-for-sale" and recorded at fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive income (loss). Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities. Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.

Equity investments in the Federal Home Loan Bank of Atlanta ("FHLB") and the Federal Reserve Bank of Richmond ("FRB") are separately classified as restricted securities and are carried at cost.  

Impairment of securities occurs when the fair value of a security is less than its amortized cost.  For debt securities, impairment is considered other-than-temporary and recognized in its entirety in net income if either (i) the intent is to sell the security or (ii) it is more likely than not that it will be necessary to sell the security prior to recovery of its amortized cost.  If, however, management’s intent is not to sell the security and it is not more than likely that management will be required to sell the security before recovery, management must determine what portion of the impairment is attributable to credit loss, which occurs when the amortized cost of the security exceeds the present value of the cash flows expected to be collected from the security.  If there is no credit loss, there is no other-than-temporary impairment.  If there is a credit loss, other-than-temporary impairment exists and the credit loss must be recognized in net income and the remaining portion of impairment must be recognized in other comprehensive income (loss).

For equity securities carried at cost as restricted securities, impairment is considered to be other-than-temporary based on our ability and intent to hold the investment until a recovery of fair value.  Other-than-temporary impairment of an equity security results in a write-down that must be included in income.  We regularly review each security for other-than-temporary impairment based on criteria that includes the extent to which cost exceeds market price, the duration of that market decline, the financial health of and specific prospects for the issuer, our best estimate of the present value of cash flows expected to be collected from debt securities, the intention with regards to holding the security to maturity and the likelihood that we would be required to sell the security before recovery.

Loans

Loans

The Company grants mortgage, commercial, and consumer loans to clients.  The loan portfolio is segmented into commercial loans, real estate loans, and consumer loans.  Real estate loans are further divided into the following classes:  construction; farmland; 1-4 family residential; and other real estate loans.  Descriptions of the Company’s loan classes are as follows:

Commercial Loans: Commercial loans are typically secured with non-real estate commercial property.  The Company makes commercial loans primarily to middle market businesses located within our market area.

Real Estate Loans – Construction: The Company originates construction loans for the acquisition and development of land and construction of condominiums, townhomes, and 1-4 family residences. This class also includes acquisition, development and construction loans for retail and other commercial purposes, primarily in our market areas.

Real Estate Loans- Farmland:  Loans secured by agricultural property and not included in Real Estate – Other.

Real Estate Loans – 1-4 Family:  This class of loans includes loans secured by 1-4 family homes.  The Company’s general practice is to sell the majority of its newly originated fixed-rate residential real estate loans in the secondary mortgage market, and to hold in its portfolio adjustable rate residential real estate loans and loans in close proximity to its financial service centers.

Real Estate Loans – Other: This loan class consists primarily of loans secured by multi-unit residential property and owner and non-owner occupied commercial and industrial property.  This class also includes loans secured by real estate which do not fall into other classifications.

Consumer Loans: Consumer loans include all loans made to individuals for consumer or personal purposes.  They include new and used auto loans, unsecured loans, and lines of credit.

The ability of the debtors to honor their contracts is dependent upon the real estate and general economic conditions in this area.

For all classes of loans, the Company considers loans to be past due when a payment is not received by the payment due date according to the contractual terms of the loan.  The Company monitors past due loans according to the following categories: less than 30 days past due, 30 – 59 days past due, 60 – 89 days past due, and 90 days or greater past due. The accrual of interest on all classes of loans is discontinued at the time the loans are 90 days delinquent unless they are well-secured and in the process of collection.

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off generally are reported at their outstanding unpaid principal balances adjusted for charge-offs, the allowance for loan losses, and any deferred fees or costs on originated loans.  Deferred fees and costs include discounts and premiums on syndicated and guaranteed loans purchased. Interest income is accrued on the unpaid principal balance.  Loan origination and commitment fees, net of certain direct loan origination costs, are deferred and recognized as an adjustment of the loan yield over the life of the related loan.

All interest accrued but not collected for loans that are placed on nonaccrual or charged-off is reversed against interest income.  The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual.  Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Allowance for Loan Losses

Allowance for Loan Losses

The allowance for loan losses reflects management’s judgment of probable loan losses inherent in the portfolio at the balance sheet date.  Management uses a disciplined process and methodology to establish the allowance for loan losses each quarter.  To determine the total allowance for loan losses, the Company estimates the reserves needed for each segment of the portfolio, including loans analyzed individually and loans analyzed on a pooled basis.  The allowance for loan losses consists of amounts applicable to:  (i) the commercial loan portfolio; (ii) the real estate portfolio; and (iii) the consumer loan portfolio.

To determine the allowance for loan losses, loans are pooled by portfolio segment and losses are modeled using historical experience, and quantitative and other mathematical techniques over the loss emergence period.  Each class of loan requires exercising significant judgment to determine the estimation that fits the credit risk characteristics of its portfolio segment.  The Company uses internally developed models in this process.  Management must use judgment in establishing additional input metrics for the modeling processes.  The models and assumptions used to determine the allowance are reviewed to ensure that their theoretical foundation, assumptions, data integrity, computational processes, reporting practices, and end user controls are appropriate and properly documented.

The establishment of the allowance for loan losses relies on a consistent process that requires multiple layers of management review and judgment and responds to changes in economic conditions, customer behavior, and collateral value, among other influences.  From time to time, events or economic factors may affect the loan portfolio, causing management to provide additional amounts to or release balances from the allowance for loan losses.  Qualitative factors considered in the allowance for loan losses evaluation include the levels and trends in delinquencies and nonperforming loans, trends in volume and terms of loans, the effects of any changes in lending policies, the experience, ability, and depth of management, national and local economic trends and conditions, concentrations of credit, the quality of the Company’s loan review system, competition and regulatory requirements.  The Company’s allowance for loan losses is sensitive to risk ratings, economic assumptions and delinquency trends driving statistically modeled reserves.  Individual loan risk ratings are evaluated based on each situation by experienced senior credit officers.

Management monitors differences between estimated and actual incurred loan losses.  This monitoring process includes periodic assessments by senior management of loan portfolios and the models used to estimate incurred losses in those portfolios.  Additions to the allowance for loan losses are made by charges to the provision for loan losses.  Credit exposures deemed to be uncollectible are charged against the allowance for loan losses.  Recoveries of previously charged-off amounts are credited to the allowance for loans losses.

Loan Charge-off Policies

Loan Charge-off Policies

Commercial and consumer loans are generally charged off when: 

•they are 90 days past due;

•the collateral is repossessed; or

•the borrower has filed bankruptcy.

All classes of real estate loans are charged down to the net realizable value when the Company determines that the sole source of repayment is liquidation of the collateral.

Impaired Loans

Impaired Loans

For all classes of loans, a loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement.  Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due.  Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired.  Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.

For all classes of loans, impairment is measured on a loan-by-loan basis by comparing the loan balance to either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent. Any variance in values is charged-off when determined.

Troubled Debt Restructurings

Troubled Debt Restructurings

A troubled debt restructuring ("TDR") occurs in situations where, for economic or legal reasons related to a borrower’s financial condition, management may grant a concession to the borrower that it would not otherwise consider. Management strives to identify borrowers in financial difficulty early and work with them to modify their loan to more affordable terms before their loan reaches nonaccrual status.  These modified terms may include rate reductions, principal forgiveness, payment forbearance and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral.  In cases where borrowers are granted new terms that provide for a reduction of either interest or principal, management measures any impairment on the restructuring as noted above for impaired loans. All identified TDRs are considered to be impaired loans.

Management considers troubled debt restructurings and subsequent defaults of restructured loans in the determination of the adequacy of the Company's allowance for loan losses. When identified as a TDR, a loan is evaluated for potential loss as noted above for impaired loans. Loans identified as TDRs frequently are on nonaccrual status at the time of the restructuring and, in some cases, partial charge-offs may have already been taken against the loan and a specific reserve may have already been established for the loan. As a result of any modification as a TDR, the specific reserve associated with the loan may be increased. Additionally, loans modified in a TDR are closely monitored for delinquency as an early indicator of possible future defaults. If loans modified in a TDR subsequently default, the Company evaluates them for possible further impairment. As a result, any specific reserve may be increased, adjustments may be made in the allocation of the total allowance balance, or partial charge-offs may be taken to further write-down the carrying value of the loan. Management exercises significant judgment in developing estimates for potential losses associated with TDRs.

Mortgage Loans Held for Sale

Mortgage Loans Held for Sale

Mortgage loans held for sale are carried at the lower of aggregate cost or fair value. The fair value of mortgage loans held for sale is determined using current secondary market prices for loans with similar coupons, maturities, and credit quality and fair value of loans committed at year-end.

Premises and Equipment

Premises and Equipment

Land is carried at cost.  Premises and equipment are stated at cost less accumulated depreciation.  Depreciation of property and equipment is computed principally on the straight-line method over the following estimated useful lives:

	Years
Buildings and improvements	10-40
Furniture and equipment	3-15

Maintenance and repairs of property and equipment are charged to operations and major improvements are capitalized.  Upon retirement, sale, or other disposition of property and equipment, the cost and accumulated depreciation are eliminated from the accounts and gain or loss is included in income.

Other Real Estate Owned and Repossessed Assets

Other Real Estate Owned and Repossessed Assets

Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value less costs to sell at the date of foreclosure. Subsequent to foreclosure, management periodically performs valuations of the foreclosed assets based on updated appraisals, general market conditions, recent sales of like properties, length of time the properties have been held, and our ability and intention with regard to continued ownership of the properties. The Company may incur additional write-downs of foreclosed assets to fair value less costs to sell if valuations indicate a further deterioration in market conditions. Revenue and expenses from operations and changes in the property valuations are included in net expenses from foreclosed assets and improvements are capitalized.

Goodwill and Intangible Assets

Goodwill and Intangible Assets

With the adoption of Accounting Standards Update (ASU) 2011-08, "Intangible-Goodwill and Other-Testing Goodwill for Impairment", the Company is no longer required to perform a test for impairment unless, based on an assessment of qualitative factors related to goodwill, the Company determines that it is more likely than not that the fair value is less than its carrying amount. If the likelihood of impairment is more than 50%, the Company must perform a test for impairment and may be required to record impairment charges.

Additionally, acquired intangible assets (customer relationships) are separately recognized and amortized over their useful life of 15 years.

Bank-Owned Life Insurance

Bank-Owned Life Insurance

The Company owns insurance on the lives of a certain group of key employees. The policies were purchased to help offset increases in the costs of various fringe benefit plans, including healthcare. The cash surrender value of these policies is included as an asset on the consolidated balance sheets, and any increase in cash surrender value is recorded as non-interest income on the consolidated statements of income. In the event of the death of an insured individual under these policies, the Company would receive a death benefit which would be recorded as other income.

Income Taxes

Income Taxes

Deferred income tax assets and liabilities are determined using the balance sheet method. Under this method, the net deferred tax asset or liability is determined based on the tax effects of the temporary differences between the book and tax bases of the various balance sheet assets and liabilities and gives current recognition to changes in tax rates and laws.

When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained.  The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any.  Tax positions taken are not offset or aggregated with other positions.  Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50% likely of being realized upon settlement with the applicable taxing authority.  The portion of the benefits associated with tax positions taken that exceeds the amount measured, as described above, is reflected as a liability for unrecognized tax benefits in the accompanying consolidated balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination.  Interest and penalties associated with unrecognized tax benefits are classified as additional income taxes in the consolidated statements of income. No liabilities for unrecognized tax benefits have been recognized as of December 31, 2016 or 2015.

Trust Company Assets

Trust Company Assets

Securities and other properties held by Middleburg Trust Company in a fiduciary or agency capacity are not assets of the Company and are not included in the accompanying consolidated financial statements.

Earnings Per Share

Earnings Per Share

Basic earnings per share represents income available to common shareholders divided by the weighted-average number of common shares outstanding during the period.  Nonvested restricted shares are included in basic earnings per share because of dividend participation rights. Diluted earnings per share reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance.  As of December 31, 2016 potential common shares that may be issued by the Company relate solely to outstanding stock options and are determined using the treasury stock method.

Cash and Cash Equivalents

Cash and Cash Equivalents

For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from other banks and federal funds sold. Generally, federal funds are sold and purchased for one-day periods.

Use of Estimates

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.  Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, impairment of goodwill and intangible assets, valuation of other real estate owned, and other-than-temporary impairment of securities.

Advertising Costs

Advertising Costs

The Company follows the policy of charging the costs of advertising to expense as incurred.

Comprehensive Income

Comprehensive Income

Accounting principles generally require that recognized revenue, expenses, gains, and losses be included in net income.  Although certain changes in assets and liabilities, such as unrealized gains and losses on available for sale securities, and changes in the fair value of interest rate swaps, are reported as a separate component of the equity section of the consolidated balance sheets, such items, along with net income, are components of comprehensive income.

Securities Sold Under Agreements to Repurchase

Securities Sold Under Agreements to Repurchase

Securities sold under agreements to repurchase are reflected at the amount of cash received in connection with the transaction.  The Company does not account for repurchase agreement transactions as sales.  All repurchase agreement transactions entered into by the Company are accounted for as collateralized financings. The Company may be required to provide additional collateral based on the fair value of the underlying securities.

Derivative Financial Instruments

Derivative Financial Instruments

The Company utilizes derivative financial instruments as a part of its asset-liability management program to control exposure to interest rate changes and fluctuations in market values and cash flows associated with certain financial instruments. The Company accounts for derivatives in accordance with ASC 815, "Derivatives and Hedging". Under current guidance, derivative transactions are classified as either cash flow hedges or fair value hedges or they are not designated as hedging instruments. The Company designates each transaction at its inception.

The Company documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions.  This process includes linking all derivatives that are designated as fair value hedges or cash flow hedges to specific assets or liabilities on the balance sheet.  The Company also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are effective in offsetting changes in fair values or cash flows of hedged items.

As of December 31, 2016, the Company had both fair value and cash flow hedges on its balance sheet as well as derivative financial instruments that have not been designated as hedging instruments.  The derivatives are reported at fair value as of each balance sheet date. For designated cash flow hedges, the effective portions of changes in the fair value of the derivative are recorded in other comprehensive income (loss) and are recognized in the income statement when the hedged item affects earnings.  Ineffective portions of changes in the fair value of cash flow hedges are recognized in earnings as are changes in market value of derivatives not designated as hedging instruments.

Information concerning each of the Company's categories of derivatives as of December 31, 2016 and 2015 is presented in Note 24 to the consolidated financial statements.

Reclassifications

Reclassifications

Certain reclassifications have been made to the prior year financial statements to conform to the current year presentation. No reclassifications were significant and there was no effect on net income.

Transfers of Financial Assets

Transfers of Financial Assets

Transfers of financial assets are accounted for as sales when control over the assets has been surrendered.  Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Share-Based Employee Compensation Plan

Share-Based Employee Compensation Plan

At December 31, 2016, the Company had a share-based employee compensation plan which is described more fully in Note 8 to the consolidated financial statements. Compensation cost relating to share-based payment transactions is recognized in the consolidated financial statements.  That cost is measured based on the fair value of the equity instruments issued and recognized over the applicable vesting period. 

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” This update is intended to provide guidance about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. Management is required under the new guidance to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date the financial statements are issued when preparing financial statements for each interim and annual reporting period. If conditions or events are identified, the ASU specifies the process that must be followed by management and also clarifies the timing and content of going concern footnote disclosures in order to reduce diversity in practice. The amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2016. Early adoption is permitted. The Company does not expect the adoption of ASU 2014-15 to have a material impact on its consolidated financial statements.

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.” The amendments in ASU 2016-01, among other things: 1) Requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. 2) Requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes. 3) Requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables). 4) Eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost. The amendments in this ASU are effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently assessing the impact that ASU 2016-01 will have on its consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” Among other things, in the amendments in ASU 2016-02, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (1) A lease liability, which is a lessee‘s obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) A right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align, where necessary, lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted upon issuance. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. The Company is currently assessing the impact that ASU 2016-02 will have on its consolidated financial statements.

During March 2016, the FASB issued ASU No. 2016-05, “Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships.” The amendments in this ASU clarify that a change in the counterparty to a derivative instrument that has been designated as the hedging instrument does not, in and of itself, require dedesignation of that hedging relationship provided that all other hedge accounting criteria remain intact. The amendments are effective for public business entities for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The Company does not expect the adoption of ASU 2016-05 to have a material impact on its consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-07, “Investments - Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting.” The amendments in this ASU eliminate the requirement that when an investment qualifies for use of the equity method as a result of an increase in the level of ownership interest or degree of influence, an investor must adjust the investment, results of operations, and retained earnings retroactively on a step-by-step basis as if the equity method had been in effect during all previous periods that the investment had been held. The amendments require that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor’s previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. Therefore, upon qualifying for the equity method of accounting, no retroactive adjustment of the investment is required. In addition, the amendments in this ASU require that an entity that has an available-for-sale equity security that becomes qualified for the equity method of accounting recognize through earnings the unrealized holding gain or loss in accumulated other comprehensive income (loss) at the date the investment becomes qualified for use of the equity method. The amendments are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. The amendments should be applied prospectively upon their effective date to increases in the level of ownership interest or degree of influence that result in the adoption of the equity method. Early adoption is permitted. The Company does not expect the adoption of ASU 2016-07 to have a material impact on its consolidated financial statements.

During March 2016, the FASB issued ASU No. 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” The amendments in this ASU simplify several aspects of the accounting for share-based payment award transactions including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. The amendments are effective for public companies for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company is currently assessing the impact that ASU 2016-09 will have on its consolidated financial statements.

During June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” The amendments in this ASU, among other things, require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The amendments in this ASU are effective for SEC filers for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company is currently assessing the impact that ASU 2016-13 will have on its consolidated financial statements.

During August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments”, to address diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The amendments should be applied using a retrospective transition method to each period presented. If retrospective application is impractical for some of the issues addressed by the update, the amendments for those issues would be applied prospectively as of the earliest date practicable. Early adoption is permitted, including adoption in an interim period. The Company does not expect the adoption of ASU 2016-15 to have a material impact on its consolidated financial statements.

During January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business”. The amendments in this ASU clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Under the current implementation guidance in Topic 805, there are three elements of a business-inputs, processes, and outputs. While an integrated set of assets and activities (collectively referred to as a “set”) that is a business usually has outputs, outputs are not required to be present. In addition, all the inputs and processes that a seller uses in operating a set are not required if market participants can acquire the set and continue to produce outputs. The amendments in this ASU provide a screen to determine when a set is not a business. If the screen is not met, the amendments (1) require that to be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output and (2) remove the evaluation of whether a market participant could replace missing elements. The ASU provides a framework to assist entities in evaluating whether both an input and a substantive process are present. The amendments in this ASU are effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods. The amendments in this ASU should be applied prospectively on or after the effective date. No disclosures are required at transition. The Company does not expect the adoption of ASU 2017-01 to have a material impact on its consolidated financial statements.

During January 2017, the FASB issued ASU No. 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment”. The amendments in this ASU simplify how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Instead, under the amendments in this ASU, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. Public business entities that are U.S. Securities and Exchange Commission (SEC) filers should adopt the amendments in this ASU for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Public business entities that are not SEC filers should adopt the amendments in this ASU for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2020. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not expect the adoption of ASU 2017-04 to have a material impact on its consolidated financial statements.

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Nature of Banking Activities and Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Estimated useful lives of property and equipment

Depreciation of property and equipment is computed principally on the straight-line method over the following estimated useful lives:

	Years
Buildings and improvements	10-40
Furniture and equipment	3-15

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Securities (Tables)

12 Months Ended

Dec. 31, 2016

Investments, Debt and Equity Securities [Abstract]

Held to Maturity Securities

Amortized costs and fair values of securities being held to maturity as of December 31, 2016 and 2015, are summarized as follows:

	December 31, 2016
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Held to Maturity
Obligations of states and political subdivisions	$	6,433	$	—	$	(594	)	$	5,839
Corporate securities	4,250		21		(15		)	4,256
Total	$	10,683	$	21	$	(609	)	$	10,095

	December 31, 2015
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Held to Maturity
Obligations of states and political subdivisions	$	1,457	$	—	$	(38	)	$	1,419
Corporate securities	2,750		24		(30		)	2,744
Total	$	4,207	$	24	$	(68	)	$	4,163

The amortized cost and fair value of securities being held to maturity as of December 31, 2016, by contractual maturity are shown below. 

	December 31, 2016
(Dollars in thousands)	Amortized Cost		Fair Value
Held to Maturity
Due after five years through ten years	$	4,250	$	4,256
Due after ten years	6,433		5,839
Total	$	10,683	$	10,095

Amortized Costs and Fair Values of Securities Available for Sale

Amortized costs and fair values of securities available for sale as of December 31, 2016 and 2015, are summarized as follows:

	December 31, 2016
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available for Sale
U.S. government agencies	$	73,546	$	209	$	(571	)	$	73,184
Obligations of states and political subdivisions	62,896		1,019		(542		)	63,373
Mortgage-backed securities:
Agency	98,549		646		(1,144		)	98,051
Non-agency	9,991		16		(74		)	9,933
Other asset backed securities	41,860		361		(616		)	41,605
Corporate securities	16,648		—		(1,227		)	15,421
Total	$	303,490	$	2,251	$	(4,174	)	$	301,567

	December 31, 2015
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available for Sale
U.S. government agencies	$	79,005	$	315	$	(380	)	$	78,940
Obligations of states and political subdivisions	74,071		1,956		(434		)	75,593
Mortgage-backed securities:
Agency	129,360		3,046		(745		)	131,661
Non-agency	12,782		33		(38		)	12,777
Other asset backed securities	58,958		426		(603		)	58,781
Corporate securities	17,557		22		(760		)	16,819
Total	$	371,733	$	5,798	$	(2,960	)	$	374,571

Amortized Cost and Fair Value of Securities Available for Sale by Contractual Maturity

Therefore, these securities are not included in the maturity categories in the following maturity summary.

	December 31, 2016
(Dollars in thousands)	Amortized Cost		Fair Value
Available for Sale
Due in one year or less	$	777	$	777
Due after one year through five years	9,020		9,219
Due after five years through ten years	25,004		24,174
Due after ten years	118,289		117,808
Mortgage-backed securities	108,540		107,984
Other asset backed securities	41,860		41,605
Total	$	303,490	$	301,567

Investments in Continuous Unrealized Loss Position

At December 31, 2016 and 2015, investments in an unrealized loss position that are temporarily impaired are as follows:

(Dollars in thousands)	Less than Twelve Months					Twelve Months or Greater					Total
2016	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Held to Maturity
Obligations of states and political subdivisions	$	5,839	$	(594	)	$	—	$	—		$	5,839	$	(594	)
Corporate securities	1,485		(15		)	—		—			1,485		(15		)
Total	$	7,324	$	(609	)	$	—	$	—		$	7,324	$	(609	)
Available for Sale
U.S. government agencies	$	46,700	$	(495	)	$	7,174	$	(76	)	$	53,874	$	(571	)
Obligations of states and political subdivisions	12,670		(257		)	6,968		(285		)	19,638		(542		)
Mortgage-backed securities:
Agency	51,018		(634		)	13,020		(510		)	64,038		(1,144		)
Non-agency	5,379		(68		)	1,944		(6		)	7,323		(74		)
Other asset backed securities	7,007		(284		)	16,388		(332		)	23,395		(616		)
Corporate securities	5,912		(241		)	9,262		(986		)	15,174		(1,227		)
Total	$	128,686	$	(1,979	)	$	54,756	$	(2,195	)	$	183,442	$	(4,174	)

(Dollars in thousands)	Less than Twelve Months					Twelve Months or Greater					Total
2015	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Held to Maturity
Obligations of states and political subdivisions	$	1,419	$	(38	)	$	—	$	—		$	1,419	$	(38	)
Corporate securities	1,970		(30		)	—		—			1,970		(30		)
Total	$	3,389	$	(68	)	$	—	$	—		$	3,389	$	(68	)
Available for Sale
U.S. government agencies	$	46,000	$	(304	)	$	4,223	$	(76	)	$	50,223	$	(380	)
Obligations of states and political subdivisions	16,559		(324		)	1,082		(110		)	17,641		(434		)
Mortgage-backed securities:
Agency	27,627		(402		)	9,911		(343		)	37,538		(745		)
Non-agency	7,842		(37		)	671		(1		)	8,513		(38		)
Other asset backed securities	25,399		(276		)	12,037		(327		)	37,436		(603		)
Corporate securities	10,740		(378		)	4,866		(382		)	15,606		(760		)
Total	$	134,167	$	(1,721	)	$	32,790	$	(1,239	)	$	166,957	$	(2,960	)

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Loans, Net (Tables)

12 Months Ended

Dec. 31, 2016

Receivables [Abstract]

Consolidated loan portfolio

The consolidated loan portfolio was composed of the following:

	2016				2015
(Dollars in thousands)	Outstanding Balance		Percent of Total Portfolio		Outstanding Balance		Percent of Total Portfolio
Real estate loans:
Construction	$	35,627	4.1	%	$	39,673	4.9	%
Secured by farmland	16,768		2.0		19,062		2.4
Secured by 1-4 family residential	314,045		36.5		280,096		34.8
Other real estate loans	283,613		33.0		258,035		32.0
Commercial loans	190,767		22.2		190,482		23.6
Consumer loans	19,277		2.2		18,333		2.3
Total Gross Loans (1)	860,097		100.0	%	805,681		100.0	%
Less allowance for loan losses	11,404				11,046
Net loans	$	848,693			$	794,635

⁽¹⁾  Includes net deferred loan costs and premiums of $3.3 million and $3.5 million, respectively.

Past due loans by class of loans

The following tables present a contractual aging of the recorded investment in past due loans by class of loans as of December 31, 2016 and December 31, 2015, respectively:

	December 31, 2016
(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days Or Greater		Total Past Due		Current		Total Loans
Real estate loans:
Construction	$	—	$	—	$	—	$	—	$	35,627	$	35,627
Secured by farmland	—		199		—		199		16,569		16,768
Secured by 1-4 family residential	—		—		514		514		313,531		314,045
Other real estate loans	312		—		2,104		2,416		281,197		283,613
Commercial loans	146		10		2,518		2,674		188,093		190,767
Consumer loans	88		4		1,871		1,963		17,314		19,277
Total	$	546	$	213	$	7,007	$	7,766	$	852,331	$	860,097

	December 31, 2015
(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days Or Greater		Total Past Due		Current		Total Loans
Real estate loans:
Construction	$	69	$	—	$	—	$	69	$	39,604	$	39,673
Secured by farmland	—		—		—		—		19,062		19,062
Secured by 1-4 family residential	259		—		1,117		1,376		278,720		280,096
Other real estate loans	325		—		248		573		257,462		258,035
Commercial loans	1,242		15		31		1,288		189,194		190,482
Consumer loans	4		17		—		21		18,312		18,333
Total	$	1,899	$	32	$	1,396	$	3,327	$	802,354	$	805,681

The following table presents the recorded investment in nonaccrual loans and loans past due ninety days or more and still accruing by class of loans as of December 31, 2016 and 2015, respectively:

	2016				2015
(Dollars in thousands)	Nonaccrual		Past due 90 days or more and still accruing		Nonaccrual		Past due 90 days or more and still accruing
Real estate loans:
Construction	$	29	$	—	$	204	$	—
Secured by 1-4 family residential	296		303		4,460		—
Other real estate loans	1,976		128		1,186		248
Commercial loans	4,187		350		1,036		30
Consumer loans	1,871		—		1,898		—
Total	$	8,359	$	781	$	8,784	$	278

Summary of loan classifications by class of loan

The following tables present the recorded investment in loans by class of loan that have been classified according to the internal classification system as of December 31, 2016 and 2015, respectively:

December 31, 2016
(Dollars in thousands)	Real Estate Construction		Real Estate Secured by Farmland		Real Estate Secured by 1-4 Family Residential		Other Real Estate Loans		Commercial		Consumer		Total
Pass	$	30,065	$	8,796	$	310,233	$	274,591	$	185,030	$	17,342	$	826,057
Special Mention	5,534		—		932		2,287		1,390		25		10,168
Substandard	28		7,972		2,584		4,759		2,179		1,909		19,431
Doubtful	—		—		125		1,976		2,168		—		4,269
Loss	—		—		171		—		—		1		172
Ending Balance	$	35,627	$	16,768	$	314,045	$	283,613	$	190,767	$	19,277	$	860,097

December 31, 2015
(Dollars in thousands)	Real Estate Construction		Real Estate Secured by Farmland		Real Estate Secured by 1-4 Family Residential		Other Real Estate Loans		Commercial		Consumer		Total
Pass	$	30,114	$	10,566	$	271,721	$	243,768	$	183,532	$	16,347	$	756,048
Special Mention	9,024		—		896		7,254		3,638		42		20,854
Substandard	535		8,496		6,818		5,827		2,301		1,943		25,920
Doubtful	—		—		661		1,186		1,011		—		2,858
Loss	—		—		—		—		—		1		1
Ending Balance	$	39,673	$	19,062	$	280,096	$	258,035	$	190,482	$	18,333	$	805,681

Loans identified as impaired by class of loan

The following tables present loans individually evaluated for impairment by class of loan as of and for the year ended December 31, 2016 and 2015:

	December 31, 2016
(Dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Real estate loans:
Construction	$	28	$	28	$	—	$	28	$	—
Secured by farmland	7,972		7,972		—		7,951		239
Secured by 1-4 family residential	72		108		—		72		2
Other real estate loans	1,976		1,976		—		1,976		—
Commercial loans	585		3,585		—		706		16
Consumer loans	—		—		—		—		—
Total with no related allowance	$	10,633	$	13,669	$	—	$	10,733	$	257
With an allowance recorded:
Real estate loans:
Construction	$	—	$	—	$	—	$	—	$	—
Secured by farmland	—		—		—		—		—
Secured by 1-4 family residential	1,275		1,326		251		1,239		49
Other real estate loans	2,971		2,971		206		2,975		151
Commercial loans	4,019		4,019		2,539		5,088		—
Consumer loans	1,871		1,871		842		1,871		—
Total with a related allowance	$	10,136	$	10,187	$	3,838	$	11,173	$	200
Total	$	20,769	$	23,856	$	3,838	$	21,906	$	457

	December 31, 2015
(Dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Real estate loans:
Construction	$	100	$	100	$	—	$	106	$	—
Secured by farmland	7,903		7,903		—		7,903		237
Secured by 1-4 family residential	701		736		—		703		—
Other real estate loans	—		—		—		—		—
Commercial loans	458		493		—		490		17
Consumer loans	—		—		—		—		—
Total with no related allowance	$	9,162	$	9,232	$	—	$	9,202	$	254
With an allowance recorded:
Real estate loans:
Construction	$	103	$	103	$	53	$	109	$	—
Secured by farmland	—		—		—		—		—
Secured by 1-4 family residential	4,426		4,478		1,120		4,547		27
Other real estate loans	4,196		4,196		464		4,224		157
Commercial loans	1,059		4,059		27		2,315		100
Consumer loans	1,898		1,898		1,000		2,449		—
Total with a related allowance	$	11,682	$	14,734	$	2,664	$	13,644	$	284
Total	$	20,844	$	23,966	$	2,664	$	22,846	$	538

Loans modified in TDR by class of loan

Loan modifications that were classified as TDRs during the years ended December 31, 2016 and 2015 were as follows:

	Year Ended December 31,
(Dollars in thousands)	2016					2015
Class of Loan	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Real estate loans:
Construction	1	$	38	$	38	—	$	—	$	—
Secured by farmland	—	—		—		1	7,903		7,903
Secured by 1-4 family residential	2	809		806		—	—		—
Other real estate loans	2	1,240		1,240		4	4,283		3,872
Total real estate loans	5	2,087		2,084		5	12,186		11,775
Commercial loans	—	—		—		1	50		46
Consumer loans	—	—		—		1	3,000		3,000
Total	5	$	2,087	$	2,084	7	$	15,236	$	14,821

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Allowance for Loan Losses (Tables)

12 Months Ended

Dec. 31, 2016

Allowance for Loan Losses [Abstract]

Allowance for loan losses

The following table presents the total allowance for loan losses, the allowance by impairment methodology (individually evaluated for impairment or collectively evaluated for impairment), the total loans and loans by impairment methodology (individually evaluated for impairment or collectively evaluated for impairment).

	December 31, 2016
(Dollars in thousands)	Real Estate Construction			Real Estate Secured by Farmland			Real Estate Secured by 1-4 Family Residential			Other Real Estate Loans			Commercial			Consumer			Total
Allowance for loan losses:
Balance December 31, 2015	$	905		$	192		$	3,341		$	3,761		$	1,706		$	1,141		$	11,046
Charge-offs	(388		)	—			(1,021		)	(126		)	(639		)	(20		)	(2,194		)
Recoveries	129			—			395			32			85			58			699
Provision	293			(65		)	(453		)	(500		)	2,781			(203		)	1,853
Balance December 31, 2016	$	939		$	127		$	2,262		$	3,167		$	3,933		$	976		$	11,404
Ending allowance:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	—		$	—		$	251		$	206		$	2,539		$	842		$	3,838
Collectively evaluated for impairment	939			127			2,011			2,961			1,394			134			7,566
Total ending allowance balance	$	939		$	127		$	2,262		$	3,167		$	3,933		$	976		$	11,404
Loans:
Individually evaluated for impairment	$	28		$	7,972		$	1,347		$	4,947		$	4,604		$	1,871		$	20,769
Collectively evaluated for impairment	35,599			8,796			312,698			278,666			186,163			17,406			839,328
Total ending loans balance	$	35,627		$	16,768		$	314,045		$	283,613		$	190,767		$	19,277		$	860,097

	December 31, 2015
(Dollars in thousands)	Real Estate Construction		Real Estate Secured by Farmland		Real Estate Secured by 1-4 Family Residential			Other Real Estate Loans			Commercial			Consumer			Total
Allowance for loan losses:
Balance at December 31, 2014	$	550	$	179	$	3,966		$	3,916		$	2,354		$	821		$	11,786
Charge-offs	—		—		(344		)	(9		)	(3,281		)	(57		)	(3,691		)
Recoveries	246		—		359			28			14			11			658
Provision	109		13		(640		)	(174		)	2,619			366			2,293
Balance at December 31, 2015	$	905	$	192	$	3,341		$	3,761		$	1,706		$	1,141		$	11,046
Ending allowance:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	53	$	—	$	1,120		$	464		$	27		$	1,000		$	2,664
Collectively evaluated for impairment	852		192		2,221			3,297			1,679			141			8,382
Total ending allowance balance	$	905	$	192	$	3,341		$	3,761		$	1,706		$	1,141		$	11,046
Loans:
Individually evaluated for impairment	$	203	$	7,903	$	5,127		$	4,196		$	1,517		$	1,898		$	20,844
Collectively evaluated for impairment	39,470		11,159		274,969			253,839			188,965			16,435			784,837
Total ending loans balance	$	39,673	$	19,062	$	280,096		$	258,035		$	190,482		$	18,333		$	805,681

	December 31, 2014
(Dollars in thousands)	Real Estate Construction			Real Estate Secured by Farmland		Real Estate Secured by 1-4 Family Residential			Other Real Estate Loans			Commercial			Consumer			Total
Allowance for loan losses:
Balance at December 31, 2013	$	847		$	166	$	6,734		$	3,506		$	1,890		$	177		$	13,320
Adjustment for the sale of majority interest in consolidated subsidiary	—			—		(95		)	—			—			—			(95		)
Charge-offs	(1,186		)	—		(1,380		)	(747		)	(959		)	(36		)	(4,308		)
Recoveries	258			—		342			110			104			95			909
Provision	631			13		(1,635		)	1,047			1,319			585			1,960
Balance at December 31, 2014	$	550		$	179	$	3,966		$	3,916		$	2,354		$	821		$	11,786
Ending allowance:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	66		$	—	$	1,370		$	294		$	292		$	647		$	2,669
Collectively evaluated for impairment	484			179		2,596			3,622			2,062			174			9,117
Total ending allowance balance	$	550		$	179	$	3,966		$	3,916		$	2,354		$	821		$	11,786
Loans:
Individually evaluated for impairment	$	246		$	7,903	$	5,613		$	4,531		$	846		$	3,019		$	22,158
Collectively evaluated for impairment	32,804			11,805		259,603			250,705			162,423			15,348			732,688
Total ending loans balance	$	33,050		$	19,708	$	265,216		$	255,236		$	163,269		$	18,367		$	754,846

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Premises and Equipment, Net (Tables)

12 Months Ended

Dec. 31, 2016

Property, Plant and Equipment [Abstract]

Schedule of premises and equipment

Premises and equipment consists of the following: 

(Dollars in thousands)	2016			2015
Land	$	2,068		$	2,068
Facilities	22,873			22,849
Furniture, fixtures, and equipment	11,729			11,676
Construction in process and deposits on equipment and land	1,842			1,455
	38,512			38,048
Less accumulated depreciation	(19,491		)	(18,517		)
Total	$	19,021		$	19,531

Schedule of future minimum rent commitments under various operating leases

Pursuant to the terms of non-cancelable lease agreements in effect at December 31, 2016, pertaining to banking premises, future minimum rent commitments under various operating leases are as follows:

(Dollars in thousands)	December 31, 2016
2017	$	1,666
2018	1,617
2019	1,624
2020	1,444
2021	1,408
Thereafter	13,388
	$	21,147

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Deposits (Tables)

12 Months Ended

Dec. 31, 2016

Banking and Thrift [Abstract]

Scheduled maturities of time deposits

At December 31, 2016, the scheduled maturities of time deposits are as follows:

(Dollars in thousands)	December 31, 2016
2017	$	151,293
2018	38,370
2019	25,494
2020	7,115
2021	3,368
	$	225,640

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Borrowings (Tables)

12 Months Ended

Dec. 31, 2016

Debt Disclosure [Abstract]

Contractual maturities of the Company's long-term debt

The contractual maturities of the Company’s long-term debt are as follows:

(Dollars in thousands)	December 31, 2016
Due in 2017	$	29,500
Due in 2018	10,000
Total	$	39,500

Federal Funds Purchased, Securities Sold Under Agreements to Repurchase and Short-term Borrowings

The outstanding balances and related information for securities sold under agreements to repurchase are summarized as follows:

(Dollars in thousands)	Securities sold under agreements to repurchase
At December 31:
2016	$	34,864
2015	26,869
Weighted-average interest rate at year-end:
2016	0.01		%
2015	0.01
Maximum amount outstanding at any month's end:
2016	$	35,660
2015	34,253
Average amount outstanding during the year:
2016	$	31,076
2015	30,095
Weighted-average interest rate during the year:
2016	0.01		%
2015	0.21

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Share-Based Compensation Plan (Tables)

12 Months Ended

Dec. 31, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Restricted stock service awards awarded under the 2006 Equity Compensation Plan

The following table summarizes restricted stock awarded under the 2006 Equity Compensation Plan:

	December 31,
	2016						2015						2014
(Dollars in thousands)	Shares		Weighted-Average Grant Date Fair Value		Aggregate Value		Shares		Weighted-Average Grant Date Fair Value		Aggregate Value		Shares		Weighted-Average Grant Date Fair Value		Aggregate Value
Non-vested at the beginning of the year	153,399		$	17.17			134,108		$	16.66			119,250		$	16.39
Granted	53,500		20.76				36,150		18.50				41,533		17.65
Vested	(53,908	)	16.88				(16,359	)	15.91				(15,425	)	15.59
Forfeited or expired	(2,250	)	19.91				(500	)	18.07				(11,250	)	16.05
Non-vested at end of the year	150,741		$	18.50	$	5,238	153,399		$	17.17	$	2,835	134,108		$	16.66	$	2,415

Stock options outstanding activity

The following table summarizes options outstanding under the 2006 Equity Compensation Plan at the end of the reportable periods:  

	2016				2015			2014
	Shares		Weighted- Average Exercise Price		Shares	Weighted- Average Exercise Price		Shares		Weighted- Average Exercise Price
Outstanding at beginning of year	30,012		$	14.00	30,012	$	14.00	58,513		$	15.30
Granted	—		—		—	—		—		—
Exercised	(6,650	)	14.00		—	—		(25,501	)	14.00
Forfeited or expired	—		—		—	—		(3,000	)	39.40
Outstanding at end of year	23,362		$	14.00	30,012	$	14.00	30,012		$	14.00
Options exercisable at year end	23,362		$	14.00	30,012	$	14.00	30,012		$	14.00

Schedule of options outstanding and exercisable

As of December 31, 2016, options outstanding and exercisable are summarized as follows:

Range of Exercise Prices		Options Outstanding	Weighted-Average Remaining Contractual Life (years)	Options Exercisable
$	14.00	18,362	2.22	18,362
$	14.00	5,000	2.85	5,000
$	14.00	23,362	2.36	23,362

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2016

Income Tax Disclosure [Abstract]

Schedule of net deferred tax assets

Net deferred tax assets consist of the following components as of December 31, 2016 and 2015:

(Dollars in thousands)	2016		2015
Deferred tax assets:
Allowance for loan losses	$	3,877	$	3,756
Deferred compensation	687		647
Interest rate swap	67		99
Other real estate owned	288		257
Securities available for sale	654		—
Property and equipment	—		49
Other	1,427		2,028
Total deferred tax assets	$	7,000	$	6,836
Deferred tax liabilities:
Deferred loan costs, net	$	526	$	317
Securities available for sale	—		965
Property and equipment	79		—
Total deferred tax liabilities	$	605	$	1,282
Net deferred tax assets	$	6,395	$	5,554

Provision for income taxes charged to operations

The provision for income taxes charged to operations for the years ended December 31, 2016, 2015, and 2014, consists of the following:

(Dollars in thousands)	2016		2015		2014
Current tax expense	$	2,067	$	2,606	$	1,160
Deferred tax expense	746		109		1,181
Total income tax expense	$	2,813	$	2,715	$	2,341

Income tax provision differs from federal income tax rate to pretax income

The income tax provision differs from the amount of income tax determined by applying the U.S. federal income tax rate to pretax income for the years ended December 31, 2016, 2015, and 2014, due to the following:

(Dollars in thousands)	2016			2015			2014
Computed "expected" tax expense	$	3,698		$	3,585		$	3,374
Increase (decrease) in income taxes resulting from:
Tax-exempt income	(796		)	(829		)	(959		)
Low income housing tax credits	(408		)	(120		)	(211		)
Merger related expenses	267			—			—
Other, net	52			79			137
	$	2,813		$	2,715		$	2,341

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Related Party Transactions (Tables)

12 Months Ended

Dec. 31, 2016

Related Party Transactions [Abstract]

Loans outstanding to directors and executive officers

Loans outstanding to directors and executive officers at December 31, 2016 and 2015 were:

(Dollars in thousands)	2016			2015
Balance, January 1	$	1,369		$	3,804
Decrease due to status changes	—			(2,375		)
Principal additions	352			439
Principal payments	(130		)	(499		)
Balance, December 31	$	1,591		$	1,369

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Earnings Per Share (Tables)

12 Months Ended

Dec. 31, 2016

Earnings Per Share [Abstract]

Weighted-average number of shares used in computing earnings (loss) per share and the effect on weighted-average number of shares of diluted potential common stock

The following shows the weighted-average number of shares used in computing earnings per share and the effect on weighted-average number of shares of diluted potential common stock. Nonvested restricted shares are included in basic earnings per share because of dividend participation rights. Potential dilutive common stock had no effect on income available to common stockholders.

	2016			2015			2014
	Shares	Per Share Amount		Shares	Per Share Amount		Shares	Per Share Amount
Earnings per share, basic	7,107,403	$	1.13	7,147,390	$	1.10	7,106,171	$	1.07
Effect of dilutive securities:
Stock options	11,461			6,805			6,939
Warrant (See note 23)	32,026			13,192			13,491
Earnings per share, diluted	7,150,890	$	1.13	7,167,387	$	1.09	7,126,601	$	1.06

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Financial Instruments With Off-Balance Sheet Risk and Credit Risk (Tables)

12 Months Ended

Dec. 31, 2016

Risks and Uncertainties [Abstract]

Summary of the contract amount of the Company's exposure to off-balance-sheet risk

A summary of the contract amount of the Company's exposure to off-balance sheet risk as of December 31, 2016 and 2015, is as follows:

(Dollars in thousands)	2016		2015
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit	$	132,669	$	153,806
Standby letters of credit	4,998		3,718

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Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2016

Fair Value Disclosures [Abstract]

Financial assets and liabilities measured at fair value on a recurring basis

The following tables present the balances of financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2016 and 2015.

(Dollars in thousands)	December 31, 2016
Description	Total		Level I		Level II		Level III
Assets:
U.S. government agencies	$	73,184	$	—	$	73,184	$	—
Obligations of states and political subdivisions	63,373		—		63,373		—
Mortgage-backed securities:
Agency	98,051		—		98,051		—
Non-agency	9,933		—		9,933		—
Other asset backed securities	41,605		—		41,605		—
Corporate securities	15,421		—		15,421		—
Interest rate swaps	44		—		44		—
Interest rate cap	9		—		9		—
Liabilities:
Interest rate swaps	242		—		242		—

(Dollars in thousands)	December 31, 2015
Description	Total		Level I		Level II		Level III
Assets:
U.S. government agencies	$	78,940	$	—	$	78,940	$	—
Obligations of states and political subdivisions	75,593		—		75,593		—
Mortgage-backed securities:
Agency	131,661		—		131,661		—
Non-agency	12,777		—		12,777		—
Other asset backed securities	58,781		—		58,781		—
Corporate securities	16,819		—		16,819		—
Interest rate swaps	73		—		73		—
Interest rate cap	39		—		39		—
Liabilities:
Interest rate swaps	370		—		370		—

Estimated fair values and related carrying amounts of financial instruments

The estimated fair values, and related carrying amounts, of the Company's financial instruments are as follows:

(Dollars in thousands)	December 31, 2016
					Fair value measurements using:
	Carrying Amount		Total Fair Value		Level I		Level II		Level III
Financial assets:
Cash and cash equivalents	$	28,544	$	28,544	$	28,544	$	—	$	—
Securities held to maturity	10,683		10,095		—		10,095		—
Securities available for sale	301,567		301,567		—		301,567		—
Loans, net	848,693		852,280		—		—		852,280
Bank owned life insurance	23,925		23,925		—		23,925		—
Accrued interest receivable	5,093		5,093		—		5,093		—
Interest rate swaps	44		44		—		44		—
Interest rate cap	9		9		—		9		—
Financial liabilities:
Deposits	$	1,053,058	$	1,051,245	$	—	$	1,051,245	$	—
Securities sold under agreements to repurchase	34,864		34,864		—		34,864		—
FHLB borrowings	39,500		39,530		—		39,530		—
Subordinated notes	5,155		5,159		—		5,159		—
Accrued interest payable	387		387		—		387		—
Interest rate swaps	242		242		—		242		—

(Dollars in thousands)	December 31, 2015
					Fair value measurements using:
	Carrying Amount		Total Fair Value		Level I		Level II		Level III
Financial assets:
Cash and cash equivalents	$	39,228	$	39,228	$	39,228	$	—	$	—
Securities held to maturity	4,207		4,163		—		4,163		—
Securities available for sale	374,571		374,571		—		374,571		—
Loans, net	794,635		802,535		—		—		802,535
Bank owned life insurance	23,273		23,273		—		23,273		—
Accrued interest receivable	5,204		5,204		—		5,204		—
Interest rate swaps	73		73		—		73		—
Interest rate cap	39		39		—		39		—
Financial liabilities:
Deposits	$	1,040,800	$	1,040,016	$	—	$	1,040,016	$	—
Securities sold under agreements to repurchase	26,869		26,869		—		26,869		—
FHLB borrowings	85,000		85,033		—		85,033		—
Subordinated notes	5,155		5,157		—		5,157		—
Accrued interest payable	410		410		—		410		—
Interest rate swaps	370		370		—		370		—

The following table summarizes the Company’s non-financial assets that were measured at fair value on a nonrecurring basis during the period.

(Dollars in thousands)	December 31, 2016
	Total		Level I		Level II		Level III
Assets:
Impaired loans	$	6,298	$	—	$	—	$	6,298
Other real estate owned	$	5,073	$	—	$	—	$	5,073
Repossessed assets	$	843	$	—	$	—	$	843
(Dollars in thousands)	December 31, 2015
	Total		Level I		Level II		Level III
Assets:
Impaired loans	$	9,018	$	—	$	—	$	9,018
Other real estate owned	$	3,345	$	—	$	—	$	3,345
Repossessed assets	$	1,043	$	—	$	—	$	1,043

Quantitative information about Level III fair value measurements

The following table presents quantitative information as of December 31, 2016 and 2015 about Level III fair value measurements for assets measured at fair value on a nonrecurring basis:

2016	Fair Value (in thousands)		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Impaired loans	$	1,134	Appraisals	Discount to reflect current market conditions and estimated selling costs	0% - 100% (14%)
Impaired loans	$	5,164	Present value of cash flows	Discount rate	6% - 8% (6%)
Other real estate owned	$	5,073	Appraisals	Discount to reflect current market conditions and estimated selling costs	10%
Repossessed assets	$	843	Market analysis	Discount to reflect current market conditions and estimated selling costs	70%

2015	Fair Value (in thousands)		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Impaired loans	$	5,434	Appraisals	Discount to reflect current market conditions and estimated selling costs	0% - 100% (17%)
Impaired loans	$	3,584	Present value of cash flows	Discount rate	6% - 8% (7%)
Other real estate owned	$	3,345	Appraisals	Discount to reflect current market conditions and estimated selling costs	10%
Repossessed assets	$	1,043	Market analysis	Historical sales activity	50%

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Capital Requirements (Tables)

12 Months Ended

Dec. 31, 2016

Regulatory Capital Requirements [Abstract]

Schedule of actual capital amounts and ratios

The Company’s and Middleburg Bank’s actual capital amounts and ratios are also presented in the following table.

	Actual			Minimum Capital Requirement			Minimum To Be Well Capitalized Under Prompt Corrective Action Provisions
(Dollars in thousands)	Amount		Ratio	Amount		Ratio	Amount		Ratio
As of December 31, 2016
Total Capital (to Risk- Weighted Assets):
Consolidated	$	139,419	17.9%	$	62,436	8.0%	N/A		N/A
Middleburg Bank	131,725		17.0%	61,994		8.0%	$	77,492	10.0%
Tier 1 Capital (to Risk- Weighted Assets):
Consolidated	$	129,642	16.6%	$	46,827	6.0%	N/A		N/A
Middleburg Bank	122,016		15.8%	46,495		6.0%	$	61,994	8.0%
Common Equity Tier 1 Capital (to Risk-Weighted Assets):
Consolidated	$	124,642	16.0%	$	35,121	4.5%	N/A		N/A
Middleburg Bank	122,016		15.8%	34,872		4.5%	$	50,370	6.5%
Tier 1 Capital (to Average Assets):
Consolidated	$	129,642	10.0%	$	52,142	4.0%	N/A		N/A
Middleburg Bank	122,016		9.4%	51,909		4.0%	$	64,886	5.0%
As of December 31, 2015
Total Capital (to Risk- Weighted Assets):
Consolidated	$	132,481	17.5%	$	60,495	8.0%	N/A		N/A
Middleburg Bank	127,418		17.0%	60,055		8.0%	$	75,068	10.0%
Tier 1 Capital (to Risk- Weighted Assets):
Consolidated	$	123,008	16.3%	$	45,371	6.0%	N/A		N/A
Middleburg Bank	118,013		15.7%	45,041		6.0%	$	60,055	8.0%
Common Equity Tier 1 Capital (to Risk-Weighted Assets):
Consolidated	$	118,008	15.6%	$	34,028	4.5%	N/A		N/A
Middleburg Bank	118,013		15.7%	33,781		4.5%	$	48,794	6.5%
Tier 1 Capital (to Average Assets):
Consolidated	$	123,008	9.6%	$	51,301	4.0%	N/A		N/A
Middleburg Bank	118,013		9.2%	51,067		4.0%	$	63,834	5.0%

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Goodwill and Intangibles Assets (Tables)

12 Months Ended

Dec. 31, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of intangible assets and goodwill

Information concerning goodwill and intangible assets is presented in the following table:

	December 31, 2016				December 31, 2015
(Dollars In thousands)	Gross Carrying Value		Accumulated Amortization		Gross Carrying Value		Accumulated Amortization
Identifiable intangibles	$	3,734	$	3,690	$	3,734	$	3,519
Unamortizable goodwill	3,421		—		3,421		—

Estimated amortization expense of identifiable intangibles

Estimated amortization expense of identifiable intangibles for the years ended December 31 follows:

(Dollars in thousands)
2017	$	44
	$	44

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Condensed Financial Information - Parent Corporation Only (Tables)

12 Months Ended

Dec. 31, 2016

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

BALANCE SHEETS

BALANCE SHEETS
	December 31,
(Dollars in thousands)	2016			2015
ASSETS
Cash on deposit with subsidiary bank	$	2,154		$	1,403
Investment in subsidiaries	126,694			125,900
Other assets	3,199			1,686
TOTAL ASSETS	$	132,047		$	128,989
LIABILITIES
Subordinated notes	$	5,155		$	5,155
Other liabilities	213			280
TOTAL LIABILITIES	5,368			5,435
SHAREHOLDERS' EQUITY
Common stock	17,636			17,330
Capital surplus	45,688			44,155
Retained earnings	64,755			60,392
Accumulated other comprehensive income (loss), net	(1,400		)	1,677
TOTAL SHAREHOLDERS' EQUITY	126,679			123,554
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	132,047		$	128,989

STATEMENTS OF INCOME

STATEMENTS OF INCOME
	Year End December 31,
(Dollars in thousands)	2016			2015			2014
INCOME:
Dividends from subsidiaries	$	6,870		$	5,383		$	3,440
Interest and dividends from investments	—			—			15
Other income	2			17			—
Total income	6,872			5,400			3,455
EXPENSES:
Salaries and employee benefits	1,240			919			746
Legal and advisory fees	1,506			164			91
Directors fees	352			274			280
Interest expense	280			279			279
Other	426			416			366
Total expenses	3,804			2,052			1,762
Income before allocated tax benefits and undistributed income of subsidiaries	3,068			3,348			1,693
Income tax benefit	(1,081		)	(715		)	(753		)
Income before equity in undistributed income of subsidiaries	4,149			4,063			2,446
Equity in undistributed income of subsidiaries	3,915			3,767			5,138
Net income	$	8,064		$	7,830		$	7,584

STATEMENTS OF CASH FLOWS

STATEMENTS OF CASH FLOWS
	December 31,
(Dollars in thousands)	2016			2015			2014
Cash Flows from Operating Activities
Net income	$	8,064		$	7,830		$	7,584
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in undistributed earnings of subsidiaries	(3,915		)	(3,767		)	(5,138		)
Share-based compensation	925			605			426
(Increase) decrease in other assets	(1,469		)	957			(1,099		)
(Decrease) increase in other liabilities	(67		)	13			213
Net cash provided by operating activities	3,538			5,638			1,986
Cash Flows from Investing Activities
Proceeds from sales, calls and maturities of available for sale securities	—			—			44
Net cash provided by investing activities	—			—			44
Cash Flows from Financing Activities
Net proceeds from issuance of common stock	1,742			—			394
Cash dividends paid on common stock	(3,701		)	(3,292		)	(2,419		)
Repurchases of stock	(828		)	(1,506		)	(88		)
Net cash used in financing activities	(2,787		)	(4,798		)	(2,113		)
Increase (decrease) in cash and cash equivalents	751			840			(83		)
Cash and Cash Equivalents at beginning of year	1,403			563			646
Cash and Cash Equivalents at end of year	$	2,154		$	1,403		$	563

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Segment Reporting (Tables)

12 Months Ended

Dec. 31, 2016

Segment Reporting [Abstract]

Schedule of reportable segments and reconciliation to the consolidated financial statements

Information about reportable segments and reconciliation to the consolidated financial statements follows:

	2016
(Dollars in thousands)	Commercial & Retail Banking		Wealth Management		Mortgage Banking		Intercompany Eliminations			Consolidated
Revenues:
Interest income	$	43,365	$	10	$	—	$	—		$	43,375
Trust services income	—		4,806		—		(163		)	4,643
Other income	6,204		—		—		(109		)	6,095
Total operating income	49,569		4,816		—		(272		)	54,113
Expenses:
Interest expense	4,424		—		—		—			4,424
Salaries and employee benefits	16,473		2,284		—		—			18,757
Provision for loan losses	1,853		—		—		—			1,853
Other expense	17,556		918		—		(272		)	18,202
Total operating expenses	40,306		3,202		—		(272		)	43,236
Income before income taxes	9,263		1,614		—		—			10,877
Income tax expense	2,203		610		—		—			2,813
Net income	$	7,060	$	1,004	$	—	$	—		$	8,064
Total assets	$	1,270,222	$	6,693	$	—	$	(4,272	)	$	1,272,643
Capital expenditures	$	978	$	—	$	—	$	—		$	978
Goodwill and other intangibles	$	—	$	3,465	$	—	$	—		$	3,465

	2015
(Dollars in thousands)	Commercial & Retail Banking		Wealth Management		Mortgage Banking		Intercompany Eliminations			Consolidated
Revenues:
Interest income	$	42,270	$	11	$	—	$	—		$	42,281
Trust services income	—		4,951		—		(166		)	4,785
Other income	5,605		—		—		—			5,605
Total operating income	47,875		4,962		—		(166		)	52,671
Expenses:
Interest expense	4,207		—		—		—			4,207
Salaries and employee benefits	16,130		2,305		—		—			18,435
Provision for loan losses	2,293		—		—		—			2,293
Other expense	16,237		1,120		—		(166		)	17,191
Total operating expenses	38,867		3,425		—		(166		)	42,126
Income before income taxes	9,008		1,537		—		—			10,545
Income tax expense	2,131		584		—		—			2,715
Net income	$	6,877	$	953	$	—	$	—		$	7,830
Total assets	$	1,291,708	$	6,700	$	—	$	(3,545	)	$	1,294,863
Capital expenditures	$	2,137	$	—	$	—	$	—		$	2,137
Goodwill and other intangibles	$	—	$	3,636	$	—	$	—		$	3,636

	2014
(Dollars in thousands)	Commercial & Retail Banking		Wealth Management		Mortgage Banking			Intercompany Eliminations			Consolidated
Revenues:
Interest income	$	43,149	$	14	$	450		$	(288	)	$	43,325
Trust services income	—		4,516		—			(154		)	4,362
Other income	5,349		—		5,121			(46		)	10,424
Total operating income	48,498		4,530		5,571			(488		)	58,111
Expenses:
Interest expense	5,227		—		304			(288		)	5,243
Salaries and employee benefits	16,567		2,262		3,772			—			22,601
Provision for loan losses	1,926		—		34			—			1,960
Other expense	15,818		1,140		1,722			(200		)	18,480
Total operating expenses	39,538		3,402		5,832			(488		)	48,284
Income before income taxes and non-controlling interest	8,960		1,128		(261		)	—			9,827
Income tax expense	1,894		447		—			—			2,341
Net income	7,066		681		(261		)	—			7,486
Non-controlling interest in consolidated subsidiary	—		—		98			—			98
Net income attributable to Middleburg Financial Corporation	$	7,066	$	681	$	(163	)	$	—		$	7,584
Total assets	$	1,218,452	$	7,152	$	—		$	(2,747	)	$	1,222,857
Capital expenditures	$	911	$	6	$	3		$	—		$	920
Goodwill and other intangibles	$	—	$	3,807	$	—		$	—		$	3,807

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Derivatives (Tables)

12 Months Ended

Dec. 31, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative designated as a cash flow hedge

Information concerning the derivatives designated as a cash flow hedges at December 31, 2016 and 2015 is presented in the following tables:

	December 31, 2016
(Dollars in thousands)	Positions (#)	Notional Amount		Asset		Liability		Receive Rate		Pay Rate		Life (Years)
Pay fixed - receive floating interest rate swap	1	$	5,155	$	—	$	160	0.87	%	2.59	%	3.8
Pay fixed - receive floating interest rate swap	1	$	10,000	$	—	$	38	0.60	%	1.43	%	2.0

	December 31, 2015
(Dollars in thousands)	Positions (#)	Notional Amount		Asset		Liability		Receive Rate		Pay Rate		Life (Years)
Pay fixed - receive floating interest rate swap	1	$	5,155	$	—	$	226	0.32	%	2.59	%	4.8
Pay fixed - receive floating interest rate swap	1	$	10,000	$	—	$	71	0.23	%	1.43	%	3.0

Two-way client interest rate swaps not designated as either fair value or cash flow hedges

Information concerning two-way client interest rate swaps not designated as either fair value or cash flow hedges is presented in the following table:

	December 31, 2016
(Dollars in thousands)	Positions (#)	Notional Amount		Asset		Liability		Receive Rate		Pay Rate		Life (Years)
Pay fixed - receive floating interest rate swap	1	$	3,508	$	15	$	—	1 month LIBOR plus 200 BP		3.90	%	10.9
Pay fixed - receive floating interest rate swap	1	1,663		—		29		1 month LIBOR plus 180 BP		4.09	%	7.9
Pay floating - receive fixed interest rate swap	1	3,508		—		15		3.90	%	1 month LIBOR plus 200 BP		10.9
Pay floating - receive fixed interest rate swap	1	1,663		29		—		4.09	%	1 month LIBOR plus 180 BP		7.9
Total derivatives not designated		$	10,342	$	44	$	44

	December 31, 2015
(Dollars in thousands)	Positions (#)	Notional Amount (in thousands)		Asset		Liability		Receive Rate		Pay Rate		Life (Years)
Pay fixed - receive floating interest rate swap	1	$	3,760	$	—	$	21	1 month LIBOR plus 200 BP		3.90	%	11.9
Pay fixed - receive floating interest rate swap	1	1,706		—		52		1 month LIBOR plus 180 BP		4.09	%	8.9
Pay floating - receive fixed interest rate swap	1	3,760		21		—		3.90	%	1 month LIBOR plus 200 BP		11.9
Pay floating - receive fixed interest rate swap	1	1,706		52		—		4.09	%	1 month LIBOR plus 180 BP		8.9
Total derivatives not designated		$	10,932	$	73	$	73

Details of interest rate cap agreement

The details of the interest rate cap agreement as of December 31, 2016 is summarized below:

December 31, 2016
(Dollars in thousands)
Notional Amount		Termination Date	3-Month LIBOR Strike Rate		Premium Paid		Unamortized Premium at December 31, 2016		Fair Value December 31, 2016		Cumulative Cash Flows Received
$	10,000	September 8, 2018	2.00	%	$	70	$	70	$	9	$	—

December 31, 2015
(Dollars in thousands)
Notional Amount		Termination Date	3-Month LIBOR Strike Rate		Premium Paid		Unamortized Premium at December 31, 2015		Fair Value December 31, 2015		Cumulative Cash Flows Received
$	10,000	September 8, 2018	2.00	%	$	70	$	70	$	39	—

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Accumulated Other Comprehensive Income (Tables)

12 Months Ended

Dec. 31, 2016

Equity [Abstract]

Changes in accumulated other comprehensive income

The following table presents information on changes in accumulated other comprehensive income for the periods indicated:

(Dollars in thousands)	Unrealized Gains (Losses) on Securities			Cash Flow Hedges			Accumulated Other Comprehensive Income (Loss), Net
Balance December 31, 2013	$	261		$	(29	)	$	232
Unrealized holding gains (net of tax, $1,979)	3,841			—			3,841
Reclassification adjustment (net of tax, $63)	(123		)	—			(123		)
Unrealized gains on interest rate swaps (net of tax, $82)	—			(160		)	(160		)
Reclassification adjustment (net of tax, $2)	—			4			4
Balance December 31, 2014	3,979			(185		)	3,794
Unrealized holding losses (net of tax, $1,037)	(2,015		)	—			(2,015		)
Reclassification adjustment (net of tax, $48)	(92		)	—			(92		)
Unrealized gains on interest rate swaps (net of tax, $3)	—			(6		)	(6		)
Reclassification adjustment (net of tax, $2)	—			(4		)	(4		)
Balance December 31, 2015	1,872			(195		)	1,677
Unrealized holding losses (net of tax, $1,091)	(2,116		)	—			(2,116		)
Reclassification adjustment (net of tax, $528)	(1,026		)	—			(1,026		)
Unrealized losses on interest rate swaps (net of tax, ($34))	—			65			65
Balance December 31, 2016	$	(1,270	)	$	(130	)	$	(1,400	)

Reclassifications from accumulated other comprehensive income

The following table presents information related to reclassifications from accumulated other comprehensive income (loss):

Details about Accumulated Other Comprehensive Income (Loss)	Amount Reclassified from Accumulated Other Comprehensive Income (Loss)									Affected Line Item in the Consolidated Statements of Income
(Dollars in thousands)	2016			2015			2014
Securities available for sale (1):
Net securities gains reclassified into earnings	$	(1,554	)	$	(140	)	$	(186	)	Gains on sales of securities available for sale, net
Related income tax expense	528			48			63			Income tax expense
Derivatives (2):
(Gain) loss on interest rate swap ineffectiveness	—			(6		)	6			Other operating expense
Related income tax benefit	—			2			(2		)	Income tax expense
Net effect on accumulated other comprehensive income (loss) for the period	(1,026		)	(96		)	(119		)	Net of tax
Total reclassifications for the period	$	(1,026	)	$	(96	)	$	(119	)	Net of tax

⁽¹⁾    For more information related to unrealized gains on securities available for sale, see Note 2, "Securities".

⁽²⁾    For more information related to unrealized losses on derivatives, see Note 24, "Derivatives".

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Other Real Estate Owned (OREO) (Tables)

12 Months Ended

Dec. 31, 2016

Banking and Thrift [Abstract]

Changes in the Balance for OREO

Changes in the balance for OREO, net of valuation allowances, are as follows:

(Dollars in thousands)	December 31, 2016			December 31, 2015
Balance at the beginning of year, net	$	3,345		$	4,051
Transfers from loans, net	2,645			287
Purchased loans	40			—
Sales proceeds	(713		)	(814		)
Gain (loss) on disposition	66			(100		)
Less valuation adjustments	(310		)	(79		)
Balance at the end of year, net	$	5,073		$	3,345

Schedule of Real Estate Owned Classifications

The major classifications of OREO in the consolidated balance sheets at December 31, 2016 and 2015 were as follows:

(Dollars in thousands)	December 31, 2016		December 31, 2015
Real estate loans:
Construction	$	946	$	853
Secured by 1-4 family residential	3,767		1,958
Other real estate loans	360		534
Total real estate loans	$	5,073	$	3,345

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Nature of Banking Activities and Significant Accounting Policies - Principles of Consolidation Narrative (Details) $ in Thousands	Oct. 24, 2016	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)	May 14, 2014
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Merger share distribution (in shares)	1.3314
Ownership interest in Southern Trust Mortgage				62.30%
Investment in subsidiaries		$ 155	$ 155

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Nature of Banking Activities and Significant Accounting Policies - Estimated useful lives of property and equipment (Details)	12 Months Ended
	Dec. 31, 2016
Buildings and Improvements [Member] | Minimum [Member]
Premises and Equipment [Abstract]
Estimated useful life	10 years
Buildings and Improvements [Member] | Maximum [Member]
Premises and Equipment [Abstract]
Estimated useful life	40 years
Furniture and Equipment [Member] | Minimum [Member]
Premises and Equipment [Abstract]
Estimated useful life	3 years
Furniture and Equipment [Member] | Maximum [Member]
Premises and Equipment [Abstract]
Estimated useful life	15 years

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Nature of Banking Activities and Significant Accounting Policies - Goodwill and Intangible Assets Narrative (Details)	12 Months Ended
	Dec. 31, 2016
Customer Relationships [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Expected life of intangible assets	15 years

XML

Nature of Banking Activities and Significant Accounting Policies - Cash and Cash Equivalents Narrative (Details)	12 Months Ended
	Dec. 31, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Maturity period of federal funds sold and purchase	1 day

XML

Nature of Banking Activities and Significant Accounting Policies - Share-Based Employee Compensation Plan (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Share-based compensation	$ 925	$ 605	$ 426

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Securities - Held to Maturity Securities (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	$ 10,683	$ 4,207
Gross Unrealized Gains	21	24
Gross Unrealized Losses	(609)	(68)
Fair Value	10,095	4,163
Obligations of states and political subdivisions [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	6,433	1,457
Gross Unrealized Gains	0	0
Gross Unrealized Losses	(594)	(38)
Fair Value	5,839	1,419
Corporate Debt Securities [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	4,250	2,750
Gross Unrealized Gains	21	24
Gross Unrealized Losses	(15)	(30)
Fair Value	$ 4,256	$ 2,744

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Securities - Amortized cost and fair value of securities held to maturity by contractual maturity (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Amortized cost
Due after five years through ten years	$ 4,250
Due after ten years	6,433
Amortized Cost	10,683	$ 4,207
Fair value
Due after five years through ten years	4,256
Due after ten years	5,839
Fair Value	$ 10,095	$ 4,163

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Securities - Amortized costs and fair values of securities available for sale (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	$ 303,490	$ 371,733
Gross Unrealized Gains	2,251	5,798
Gross Unrealized Losses	(4,174)	(2,960)
Fair Value	301,567	374,571
U.S. government agencies [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	73,546	79,005
Gross Unrealized Gains	209	315
Gross Unrealized Losses	(571)	(380)
Fair Value	73,184	78,940
Obligations of states and political subdivisions [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	62,896	74,071
Gross Unrealized Gains	1,019	1,956
Gross Unrealized Losses	(542)	(434)
Fair Value	63,373	75,593
Mortgage-backed securities, Agency [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	98,549	129,360
Gross Unrealized Gains	646	3,046
Gross Unrealized Losses	(1,144)	(745)
Fair Value	98,051	131,661
Mortgage-backed securities, Non-agency [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	9,991	12,782
Gross Unrealized Gains	16	33
Gross Unrealized Losses	(74)	(38)
Fair Value	9,933	12,777
Other Asset Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	41,860	58,958
Gross Unrealized Gains	361	426
Gross Unrealized Losses	(616)	(603)
Fair Value	41,605	58,781
Corporate Debt Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	16,648	17,557
Gross Unrealized Gains	0	22
Gross Unrealized Losses	(1,227)	(760)
Fair Value	$ 15,421	$ 16,819

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Securities - Amortized cost and fair value of securities available for sale by contractual maturity (Details) $ in Thousands	Dec. 31, 2016 USD ($)
Amortized Cost [Abstract]
Due in one year or less	$ 777
Due after one year through five years	9,020
Due after five years through ten years	25,004
Due after ten years	118,289
Total	303,490
Fair Value [Abstract]
Due in one year or less	777
Due after one year through five years	9,219
Due after five years through ten years	24,174
Due after ten years	117,808
Total	301,567
Mortgage-backed securities [Member]
Amortized Cost [Abstract]
Total	108,540
Fair Value [Abstract]
Total	107,984
Other Asset Backed Securities [Member]
Amortized Cost [Abstract]
Total	41,860
Fair Value [Abstract]
Total	$ 41,605

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Securities - Investments in continuous unrealized loss position (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Schedule of Available-for-sale Securities [Line Items]
Held to Maturity, Fair Value, Less than Twelve Months	$ 7,324	$ 3,389
Held to Maturity, Gross Unrealized Losses, Less than Twelve Months	(609)	(68)
Held to Maturity, Fair Value, Twelve Months or Greater	0	0
Held to Maturity, Gross Unrealized Losses, Twelve Months or Greater	0	0
Held to Maturity, Fair Value	7,324	3,389
Held to Maturity, Gross Unrealized Losses, Total	(609)	(68)
Available for Sale, Fair Value, Less than Twelve Months	128,686	134,167
Available for Sale, Gross Unrealized Losses, Less than Twelve Months	(1,979)	(1,721)
Available for Sale, Fair Value, Twelve Months or Greater	54,756	32,790
Available for Sale, Gross Unrealized Losses, Twelve Months or Greater	(2,195)	(1,239)
Available for Sale, Fair Value, Total	183,442	166,957
Available for Sale, Gross Unrealized Losses, Total	(4,174)	(2,960)
U.S. government agencies [Member]
Schedule of Available-for-sale Securities [Line Items]
Available for Sale, Fair Value, Less than Twelve Months	46,700	46,000
Available for Sale, Gross Unrealized Losses, Less than Twelve Months	(495)	(304)
Available for Sale, Fair Value, Twelve Months or Greater	7,174	4,223
Available for Sale, Gross Unrealized Losses, Twelve Months or Greater	(76)	(76)
Available for Sale, Fair Value, Total	53,874	50,223
Available for Sale, Gross Unrealized Losses, Total	(571)	(380)
Obligations of states and political subdivisions [Member]
Schedule of Available-for-sale Securities [Line Items]
Held to Maturity, Fair Value, Less than Twelve Months	5,839	1,419
Held to Maturity, Gross Unrealized Losses, Less than Twelve Months	(594)	(38)
Held to Maturity, Fair Value, Twelve Months or Greater	0	0
Held to Maturity, Gross Unrealized Losses, Twelve Months or Greater	0	0
Held to Maturity, Fair Value	5,839	1,419
Held to Maturity, Gross Unrealized Losses, Total	(594)	(38)
Available for Sale, Fair Value, Less than Twelve Months	12,670	16,559
Available for Sale, Gross Unrealized Losses, Less than Twelve Months	(257)	(324)
Available for Sale, Fair Value, Twelve Months or Greater	6,968	1,082
Available for Sale, Gross Unrealized Losses, Twelve Months or Greater	(285)	(110)
Available for Sale, Fair Value, Total	19,638	17,641
Available for Sale, Gross Unrealized Losses, Total	(542)	(434)
Mortgage-backed securities, Agency [Member]
Schedule of Available-for-sale Securities [Line Items]
Available for Sale, Fair Value, Less than Twelve Months	51,018	27,627
Available for Sale, Gross Unrealized Losses, Less than Twelve Months	(634)	(402)
Available for Sale, Fair Value, Twelve Months or Greater	13,020	9,911
Available for Sale, Gross Unrealized Losses, Twelve Months or Greater	(510)	(343)
Available for Sale, Fair Value, Total	64,038	37,538
Available for Sale, Gross Unrealized Losses, Total	(1,144)	(745)
Mortgage-backed securities, Non-agency [Member]
Schedule of Available-for-sale Securities [Line Items]
Available for Sale, Fair Value, Less than Twelve Months	5,379	7,842
Available for Sale, Gross Unrealized Losses, Less than Twelve Months	(68)	(37)
Available for Sale, Fair Value, Twelve Months or Greater	1,944	671
Available for Sale, Gross Unrealized Losses, Twelve Months or Greater	(6)	(1)
Available for Sale, Fair Value, Total	7,323	8,513
Available for Sale, Gross Unrealized Losses, Total	(74)	(38)
Other Asset Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Available for Sale, Fair Value, Less than Twelve Months	7,007	25,399
Available for Sale, Gross Unrealized Losses, Less than Twelve Months	(284)	(276)
Available for Sale, Fair Value, Twelve Months or Greater	16,388	12,037
Available for Sale, Gross Unrealized Losses, Twelve Months or Greater	(332)	(327)
Available for Sale, Fair Value, Total	23,395	37,436
Available for Sale, Gross Unrealized Losses, Total	(616)	(603)
Corporate Debt Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Held to Maturity, Fair Value, Less than Twelve Months	1,485	1,970
Held to Maturity, Gross Unrealized Losses, Less than Twelve Months	(15)	(30)
Held to Maturity, Fair Value, Twelve Months or Greater	0	0
Held to Maturity, Gross Unrealized Losses, Twelve Months or Greater	0	0
Held to Maturity, Fair Value	1,485	1,970
Held to Maturity, Gross Unrealized Losses, Total	(15)	(30)
Available for Sale, Fair Value, Less than Twelve Months	5,912	10,740
Available for Sale, Gross Unrealized Losses, Less than Twelve Months	(241)	(378)
Available for Sale, Fair Value, Twelve Months or Greater	9,262	4,866
Available for Sale, Gross Unrealized Losses, Twelve Months or Greater	(986)	(382)
Available for Sale, Fair Value, Total	15,174	15,606
Available for Sale, Gross Unrealized Losses, Total	$ (1,227)	$ (760)

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Securities - Narrative (Details)	12 Months Ended
	Dec. 31, 2016 USD ($) Security	Dec. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)
Investments, Debt and Equity Securities [Abstract]
Proceeds from sales of securities	$ 79,300,000	$ 11,600,000	$ 58,900,000
Proceeds from maturity, calls, principal repayments and sales of securities available for sale	76,200,000	89,900,000	73,400,000
Gross gains realized on sale of securities	1,500,000	172,000	770,000
Gross loss realized on sale of securities	28,000	37,000	584,000
Net impairment losses	0	0	0
Tax expense related to realized gains	528,000	48,000	$ 63,000
Carrying value of securities pledged for fiduciary powers	$ 115,700,000	$ 113,100,000
Number of securities temporarily impaired | Security	256
Number of securities temporarily impaired in investment grade | Security	251
Number of securities temporarily impaired in speculative grade | Security	5

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Securities - Other-than temporary impairment losses Narrative (Details) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Investments, Debt and Equity Securities [Abstract]
Credit losses recognized in prior period earnings	$ 0	$ 0	$ 0
Investment in FHLB stock	2,800,000	4,700,000
Federal Reserve Bank Stock	$ 1,700,000	$ 1,700,000

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Loans, Net - Narrative (Details)	12 Months Ended
	Dec. 31, 2016 USD ($) loan_segment loan	Dec. 31, 2015 USD ($) loan	Dec. 31, 2014 USD ($)
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of loan segments | loan_segment	3
Mortgages held for sale	$ 0	$ 0
Nonaccrual	8,359,000	8,784,000
Provision for loan losses	1,853,000	2,293,000	$ 1,960,000
Interest on non-accrual loans foregone	362,000	342,000	$ 544,000
Total TDR	14,400,000	15,500,000
TDR included in nonaccrual loans	2,000,000
TDR performing as agreed	12,400,000
Valuation allowance related to total TDR	$ 1,100,000	$ 1,600,000
Number of loans for lowering interest | loan	1
Number of loans for extended terms | loan	4
Number of Loans | loan	0	0
Fund Mortgage Held For Sale [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Proceeds from held for sale loans	$ 4,300,000	$ 1,100,000
Portfolio loans	4,400,000	1,000,000
Net recovery	127,000	100,000
Nonaccrual	1,200,000	$ 1,000,000
Reserves for loan losses	$ 0
Loans Fully Written Off [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of loans | loan	28
Provision for loan losses	$ 339,000
Problem Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of loans | loan	4

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Loans, Net - Consolidated loan portfolio (Details) - USD ($) $ in Thousands		Dec. 31, 2016		Dec. 31, 2015		Dec. 31, 2014	Dec. 31, 2013
Consolidated Loan Portfolio [Abstract]
Total Loans		$ 860,097	[1]	$ 805,681	[1]	$ 754,846
Less allowance for loan losses		11,404		11,046		11,786	$ 13,320
Net loans		$ 848,693		$ 794,635
Percent of Total Portfolio	[1]	100.00%		100.00%
Net of deferred loan costs		$ 3,300		$ 3,500
Real Estate Loans Construction [Member]
Consolidated Loan Portfolio [Abstract]
Total Loans		35,627		39,673		33,050
Less allowance for loan losses		$ 939		$ 905		550	847
Percent of Total Portfolio		4.10%		4.90%
Real Estate Loans Secured by Farmland [Member]
Consolidated Loan Portfolio [Abstract]
Total Loans		$ 16,768		$ 19,062
Percent of Total Portfolio		2.00%		2.40%
Real Estate Loans Secured by 1 - 4 Family Residential [Member]
Consolidated Loan Portfolio [Abstract]
Total Loans		$ 314,045		$ 280,096		265,216
Less allowance for loan losses		$ 2,262		$ 3,341		3,966	6,734
Percent of Total Portfolio		36.50%		34.80%
Other Real Estate Loans [Member]
Consolidated Loan Portfolio [Abstract]
Total Loans		$ 283,613		$ 258,035		255,236
Less allowance for loan losses		$ 3,167		$ 3,761		3,916	3,506
Percent of Total Portfolio		33.00%		32.00%
Commercial Loans [Member]
Consolidated Loan Portfolio [Abstract]
Total Loans		$ 190,767		$ 190,482		163,269
Less allowance for loan losses		$ 3,933		$ 1,706		2,354	1,890
Percent of Total Portfolio		22.20%		23.60%
Consumer Loans [Member]
Consolidated Loan Portfolio [Abstract]
Total Loans		$ 19,277		$ 18,333		18,367
Less allowance for loan losses		$ 976		$ 1,141		$ 821	$ 177
Percent of Total Portfolio		2.20%		2.30%

[1] Includes net deferred loan costs and premiums of $3.3 million and $3.5 million, respectively.

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Loans, Net - Recorded investment in past due loans by class of loans (Details) - USD ($) $ in Thousands	Dec. 31, 2016		Dec. 31, 2015		Dec. 31, 2014
Past due loans by class of loans [Abstract]
Total Past Due	$ 7,766		$ 3,327
Current	852,331		802,354
Total Loans	860,097	[1]	805,681	[1]	$ 754,846
Real Estate Loans Construction [Member]
Past due loans by class of loans [Abstract]
Total Past Due	0		69
Current	35,627		39,604
Total Loans	35,627		39,673		33,050
Real Estate Loans Secured by Farmland [Member]
Past due loans by class of loans [Abstract]
Total Past Due	199		0
Current	16,569		19,062
Total Loans	16,768		19,062
Real Estate Loans Secured by 1 - 4 Family Residential [Member]
Past due loans by class of loans [Abstract]
Total Past Due	514		1,376
Current	313,531		278,720
Total Loans	314,045		280,096		265,216
Other Real Estate Loans [Member]
Past due loans by class of loans [Abstract]
Total Past Due	2,416		573
Current	281,197		257,462
Total Loans	283,613		258,035		255,236
Commercial Loans [Member]
Past due loans by class of loans [Abstract]
Total Past Due	2,674		1,288
Current	188,093		189,194
Total Loans	190,767		190,482		163,269
Consumer Loans [Member]
Past due loans by class of loans [Abstract]
Total Past Due	1,963		21
Current	17,314		18,312
Total Loans	19,277		18,333		$ 18,367
Financing Receivables, 30 to 59 Days Past Due [Member]
Past due loans by class of loans [Abstract]
Total Past Due	546		1,899
Financing Receivables, 30 to 59 Days Past Due [Member] | Real Estate Loans Construction [Member]
Past due loans by class of loans [Abstract]
Total Past Due	0		69
Financing Receivables, 30 to 59 Days Past Due [Member] | Real Estate Loans Secured by Farmland [Member]
Past due loans by class of loans [Abstract]
Total Past Due	0		0
Financing Receivables, 30 to 59 Days Past Due [Member] | Real Estate Loans Secured by 1 - 4 Family Residential [Member]
Past due loans by class of loans [Abstract]
Total Past Due	0		259
Financing Receivables, 30 to 59 Days Past Due [Member] | Other Real Estate Loans [Member]
Past due loans by class of loans [Abstract]
Total Past Due	312		325
Financing Receivables, 30 to 59 Days Past Due [Member] | Commercial Loans [Member]
Past due loans by class of loans [Abstract]
Total Past Due	146		1,242
Financing Receivables, 30 to 59 Days Past Due [Member] | Consumer Loans [Member]
Past due loans by class of loans [Abstract]
Total Past Due	88		4
Financing Receivables, 60 to 89 Days Past Due [Member]
Past due loans by class of loans [Abstract]
Total Past Due	213		32
Financing Receivables, 60 to 89 Days Past Due [Member] | Real Estate Loans Construction [Member]
Past due loans by class of loans [Abstract]
Total Past Due	0		0
Financing Receivables, 60 to 89 Days Past Due [Member] | Real Estate Loans Secured by Farmland [Member]
Past due loans by class of loans [Abstract]
Total Past Due	199		0
Financing Receivables, 60 to 89 Days Past Due [Member] | Real Estate Loans Secured by 1 - 4 Family Residential [Member]
Past due loans by class of loans [Abstract]
Total Past Due	0		0
Financing Receivables, 60 to 89 Days Past Due [Member] | Other Real Estate Loans [Member]
Past due loans by class of loans [Abstract]
Total Past Due	0		0
Financing Receivables, 60 to 89 Days Past Due [Member] | Commercial Loans [Member]
Past due loans by class of loans [Abstract]
Total Past Due	10		15
Financing Receivables, 60 to 89 Days Past Due [Member] | Consumer Loans [Member]
Past due loans by class of loans [Abstract]
Total Past Due	4		17
Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Past due loans by class of loans [Abstract]
Total Past Due	7,007		1,396
Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Real Estate Loans Construction [Member]
Past due loans by class of loans [Abstract]
Total Past Due	0		0
Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Real Estate Loans Secured by Farmland [Member]
Past due loans by class of loans [Abstract]
Total Past Due	0		0
Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Real Estate Loans Secured by 1 - 4 Family Residential [Member]
Past due loans by class of loans [Abstract]
Total Past Due	514		1,117
Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Other Real Estate Loans [Member]
Past due loans by class of loans [Abstract]
Total Past Due	2,104		248
Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Commercial Loans [Member]
Past due loans by class of loans [Abstract]
Total Past Due	2,518		31
Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Consumer Loans [Member]
Past due loans by class of loans [Abstract]
Total Past Due	$ 1,871		$ 0

[1] Includes net deferred loan costs and premiums of $3.3 million and $3.5 million, respectively.

XML

Loans, Net - Recorded investment in nonaccrual loans and loans past due and still accruing by class of loans (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual	$ 8,359	$ 8,784
Past due 90 days or more and still accruing	781	278
Real Estate Loans Construction [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual	29	204
Past due 90 days or more and still accruing	0	0
Real Estate Loans Secured by 1 - 4 Family Residential [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual	296	4,460
Past due 90 days or more and still accruing	303	0
Other Real Estate Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual	1,976	1,186
Past due 90 days or more and still accruing	128	248
Commercial Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual	4,187	1,036
Past due 90 days or more and still accruing	350	30
Consumer Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual	1,871	1,898
Past due 90 days or more and still accruing	$ 0	$ 0

XML

Loans, Net - Summary of loan classifications by class of loan (Details) - USD ($) $ in Thousands	Dec. 31, 2016		Dec. 31, 2015		Dec. 31, 2014
Summary of loan classifications by class of loan [Abstract]
Summary of loan quality by class of loan	$ 860,097	[1]	$ 805,681	[1]	$ 754,846
Pass [Member]
Summary of loan classifications by class of loan [Abstract]
Summary of loan quality by class of loan	826,057		756,048
Special Mention [Member]
Summary of loan classifications by class of loan [Abstract]
Summary of loan quality by class of loan	10,168		20,854
Substandard [Member]
Summary of loan classifications by class of loan [Abstract]
Summary of loan quality by class of loan	19,431		25,920
Doubtful [Member]
Summary of loan classifications by class of loan [Abstract]
Summary of loan quality by class of loan	4,269		2,858
Loss [Member]
Summary of loan classifications by class of loan [Abstract]
Summary of loan quality by class of loan	172		1
Real Estate Loans Construction [Member]
Summary of loan classifications by class of loan [Abstract]
Summary of loan quality by class of loan	35,627		39,673		33,050
Real Estate Loans Construction [Member] | Pass [Member]
Summary of loan classifications by class of loan [Abstract]
Summary of loan quality by class of loan	30,065		30,114
Real Estate Loans Construction [Member] | Special Mention [Member]
Summary of loan classifications by class of loan [Abstract]
Summary of loan quality by class of loan	5,534		9,024
Real Estate Loans Construction [Member] | Substandard [Member]
Summary of loan classifications by class of loan [Abstract]
Summary of loan quality by class of loan	28		535
Real Estate Loans Construction [Member] | Doubtful [Member]
Summary of loan classifications by class of loan [Abstract]
Summary of loan quality by class of loan	0		0
Real Estate Loans Construction [Member] | Loss [Member]
Summary of loan classifications by class of loan [Abstract]
Summary of loan quality by class of loan	0		0
Real Estate Loans Secured by Farmland [Member]
Summary of loan classifications by class of loan [Abstract]
Summary of loan quality by class of loan	16,768		19,062
Real Estate Loans Secured by Farmland [Member] | Pass [Member]
Summary of loan classifications by class of loan [Abstract]
Summary of loan quality by class of loan	8,796		10,566
Real Estate Loans Secured by Farmland [Member] | Special Mention [Member]
Summary of loan classifications by class of loan [Abstract]
Summary of loan quality by class of loan	0		0
Real Estate Loans Secured by Farmland [Member] | Substandard [Member]
Summary of loan classifications by class of loan [Abstract]
Summary of loan quality by class of loan	7,972		8,496
Real Estate Loans Secured by Farmland [Member] | Doubtful [Member]
Summary of loan classifications by class of loan [Abstract]
Summary of loan quality by class of loan	0		0
Real Estate Loans Secured by Farmland [Member] | Loss [Member]
Summary of loan classifications by class of loan [Abstract]
Summary of loan quality by class of loan	0		0
Real Estate Loans Secured by 1 - 4 Family Residential [Member]
Summary of loan classifications by class of loan [Abstract]
Summary of loan quality by class of loan	314,045		280,096		265,216
Real Estate Loans Secured by 1 - 4 Family Residential [Member] | Pass [Member]
Summary of loan classifications by class of loan [Abstract]
Summary of loan quality by class of loan	310,233		271,721
Real Estate Loans Secured by 1 - 4 Family Residential [Member] | Special Mention [Member]
Summary of loan classifications by class of loan [Abstract]
Summary of loan quality by class of loan	932		896
Real Estate Loans Secured by 1 - 4 Family Residential [Member] | Substandard [Member]
Summary of loan classifications by class of loan [Abstract]
Summary of loan quality by class of loan	2,584		6,818
Real Estate Loans Secured by 1 - 4 Family Residential [Member] | Doubtful [Member]
Summary of loan classifications by class of loan [Abstract]
Summary of loan quality by class of loan	125		661
Real Estate Loans Secured by 1 - 4 Family Residential [Member] | Loss [Member]
Summary of loan classifications by class of loan [Abstract]
Summary of loan quality by class of loan	171		0
Other Real Estate Loans [Member]
Summary of loan classifications by class of loan [Abstract]
Summary of loan quality by class of loan	283,613		258,035		255,236
Other Real Estate Loans [Member] | Pass [Member]
Summary of loan classifications by class of loan [Abstract]
Summary of loan quality by class of loan	274,591		243,768
Other Real Estate Loans [Member] | Special Mention [Member]
Summary of loan classifications by class of loan [Abstract]
Summary of loan quality by class of loan	2,287		7,254
Other Real Estate Loans [Member] | Substandard [Member]
Summary of loan classifications by class of loan [Abstract]
Summary of loan quality by class of loan	4,759		5,827
Other Real Estate Loans [Member] | Doubtful [Member]
Summary of loan classifications by class of loan [Abstract]
Summary of loan quality by class of loan	1,976		1,186
Other Real Estate Loans [Member] | Loss [Member]
Summary of loan classifications by class of loan [Abstract]
Summary of loan quality by class of loan	0		0
Commercial Loans [Member]
Summary of loan classifications by class of loan [Abstract]
Summary of loan quality by class of loan	190,767		190,482		163,269
Commercial Loans [Member] | Pass [Member]
Summary of loan classifications by class of loan [Abstract]
Summary of loan quality by class of loan	185,030		183,532
Commercial Loans [Member] | Special Mention [Member]
Summary of loan classifications by class of loan [Abstract]
Summary of loan quality by class of loan	1,390		3,638
Commercial Loans [Member] | Substandard [Member]
Summary of loan classifications by class of loan [Abstract]
Summary of loan quality by class of loan	2,179		2,301
Commercial Loans [Member] | Doubtful [Member]
Summary of loan classifications by class of loan [Abstract]
Summary of loan quality by class of loan	2,168		1,011
Commercial Loans [Member] | Loss [Member]
Summary of loan classifications by class of loan [Abstract]
Summary of loan quality by class of loan	0		0
Consumer Loans [Member]
Summary of loan classifications by class of loan [Abstract]
Summary of loan quality by class of loan	19,277		18,333		$ 18,367
Consumer Loans [Member] | Pass [Member]
Summary of loan classifications by class of loan [Abstract]
Summary of loan quality by class of loan	17,342		16,347
Consumer Loans [Member] | Special Mention [Member]
Summary of loan classifications by class of loan [Abstract]
Summary of loan quality by class of loan	25		42
Consumer Loans [Member] | Substandard [Member]
Summary of loan classifications by class of loan [Abstract]
Summary of loan quality by class of loan	1,909		1,943
Consumer Loans [Member] | Doubtful [Member]
Summary of loan classifications by class of loan [Abstract]
Summary of loan quality by class of loan	0		0
Consumer Loans [Member] | Loss [Member]
Summary of loan classifications by class of loan [Abstract]
Summary of loan quality by class of loan	$ 1		$ 1

[1] Includes net deferred loan costs and premiums of $3.3 million and $3.5 million, respectively.

XML

Loans, Net - Loans identified as impaired by class of loan (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Recorded Investment [Abstract]
With no related allowance recorded	$ 10,633	$ 9,162
With an allowance recorded	10,136	11,682
Total	20,769	20,844
Unpaid Principal Balance [Abstract]
With no related allowance recorded	13,669	9,232
With an allowance recorded	10,187	14,734
Total	23,856	23,966
Related Allowance [Abstract]
With no related allowance recorded	0	0
With an allowance recorded	3,838	2,664
Total	3,838	2,664
Average Recorded Investment [Abstract]
With no related allowance recorded	10,733	9,202
With an allowance recorded	11,173	13,644
Total	21,906	22,846
Interest Income Recognized [Abstract]
With no related allowance recorded	257	254
With an allowance recorded	200	284
Total	457	538
Real Estate Loans Construction [Member]
Recorded Investment [Abstract]
With no related allowance recorded	28	100
With an allowance recorded	0	103
Unpaid Principal Balance [Abstract]
With no related allowance recorded	28	100
With an allowance recorded	0	103
Related Allowance [Abstract]
With no related allowance recorded	0	0
With an allowance recorded	0	53
Average Recorded Investment [Abstract]
With no related allowance recorded	28	106
With an allowance recorded	0	109
Interest Income Recognized [Abstract]
With no related allowance recorded	0	0
With an allowance recorded	0	0
Real Estate Loans Secured by Farmland [Member]
Recorded Investment [Abstract]
With no related allowance recorded	7,972	7,903
With an allowance recorded	0	0
Unpaid Principal Balance [Abstract]
With no related allowance recorded	7,972	7,903
With an allowance recorded	0	0
Related Allowance [Abstract]
With no related allowance recorded	0	0
With an allowance recorded	0	0
Average Recorded Investment [Abstract]
With no related allowance recorded	7,951	7,903
With an allowance recorded	0	0
Interest Income Recognized [Abstract]
With no related allowance recorded	239	237
With an allowance recorded	0	0
Real Estate Loans Secured by 1 - 4 Family Residential [Member]
Recorded Investment [Abstract]
With no related allowance recorded	72	701
With an allowance recorded	1,275	4,426
Unpaid Principal Balance [Abstract]
With no related allowance recorded	108	736
With an allowance recorded	1,326	4,478
Related Allowance [Abstract]
With no related allowance recorded	0	0
With an allowance recorded	251	1,120
Average Recorded Investment [Abstract]
With no related allowance recorded	72	703
With an allowance recorded	1,239	4,547
Interest Income Recognized [Abstract]
With no related allowance recorded	2	0
With an allowance recorded	49	27
Other Real Estate Loans [Member]
Recorded Investment [Abstract]
With no related allowance recorded	1,976	0
With an allowance recorded	2,971	4,196
Unpaid Principal Balance [Abstract]
With no related allowance recorded	1,976	0
With an allowance recorded	2,971	4,196
Related Allowance [Abstract]
With no related allowance recorded	0	0
With an allowance recorded	206	464
Average Recorded Investment [Abstract]
With no related allowance recorded	1,976	0
With an allowance recorded	2,975	4,224
Interest Income Recognized [Abstract]
With no related allowance recorded	0	0
With an allowance recorded	151	157
Commercial Loans [Member]
Recorded Investment [Abstract]
With no related allowance recorded	585	458
With an allowance recorded	4,019	1,059
Unpaid Principal Balance [Abstract]
With no related allowance recorded	3,585	493
With an allowance recorded	4,019	4,059
Related Allowance [Abstract]
With no related allowance recorded	0	0
With an allowance recorded	2,539	27
Average Recorded Investment [Abstract]
With no related allowance recorded	706	490
With an allowance recorded	5,088	2,315
Interest Income Recognized [Abstract]
With no related allowance recorded	16	17
With an allowance recorded	0	100
Consumer Loans [Member]
Recorded Investment [Abstract]
With no related allowance recorded	0	0
With an allowance recorded	1,871	1,898
Unpaid Principal Balance [Abstract]
With no related allowance recorded	0	0
With an allowance recorded	1,871	1,898
Related Allowance [Abstract]
With no related allowance recorded	0	0
With an allowance recorded	842	1,000
Average Recorded Investment [Abstract]
With no related allowance recorded	0	0
With an allowance recorded	1,871	2,449
Interest Income Recognized [Abstract]
With no related allowance recorded	0	0
With an allowance recorded	$ 0	$ 0

XML

Loans, Net - Loans modified in TDR by class of loan (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2016 USD ($) loan	Dec. 31, 2015 USD ($) loan
Loans modified in a TDR by class of loan [Abstract]
Number of Contracts | loan	5	7
Pre-Modification Outstanding Recorded Investment	$ 2,087	$ 15,236
Post-Modification Outstanding Recorded Investment	$ 2,084	$ 14,821
Real Estate Loans Construction [Member]
Loans modified in a TDR by class of loan [Abstract]
Number of Contracts | loan	1	0
Pre-Modification Outstanding Recorded Investment	$ 38	$ 0
Post-Modification Outstanding Recorded Investment	$ 38	$ 0
Real Estate Loans Secured by Farmland [Member]
Loans modified in a TDR by class of loan [Abstract]
Number of Contracts | loan	0	1
Pre-Modification Outstanding Recorded Investment	$ 0	$ 7,903
Post-Modification Outstanding Recorded Investment	$ 0	$ 7,903
Real Estate Loans Secured by 1 - 4 Family Residential [Member]
Loans modified in a TDR by class of loan [Abstract]
Number of Contracts | loan	2	0
Pre-Modification Outstanding Recorded Investment	$ 809	$ 0
Post-Modification Outstanding Recorded Investment	$ 806	$ 0
Other Real Estate Loans [Member]
Loans modified in a TDR by class of loan [Abstract]
Number of Contracts | loan	2	4
Pre-Modification Outstanding Recorded Investment	$ 1,240	$ 4,283
Post-Modification Outstanding Recorded Investment	$ 1,240	$ 3,872
Real Estate Loans [Member]
Loans modified in a TDR by class of loan [Abstract]
Number of Contracts | loan	5	5
Pre-Modification Outstanding Recorded Investment	$ 2,087	$ 12,186
Post-Modification Outstanding Recorded Investment	$ 2,084	$ 11,775
Commercial Loans [Member]
Loans modified in a TDR by class of loan [Abstract]
Number of Contracts | loan	0	1
Pre-Modification Outstanding Recorded Investment	$ 0	$ 50
Post-Modification Outstanding Recorded Investment	$ 0	$ 46
Consumer Loans [Member]
Loans modified in a TDR by class of loan [Abstract]
Number of Contracts | loan	0	1
Pre-Modification Outstanding Recorded Investment	$ 0	$ 3,000
Post-Modification Outstanding Recorded Investment	$ 0	$ 3,000

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Allowance for Loan Losses (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2016		Dec. 31, 2015		Dec. 31, 2014
Allowance for loan losses [Roll Forward]
Beginning balance	$ 11,046	$ 11,786	$ 13,320
Adjustment for the sale of majority interest in consolidated subsidiary			(95)
Charge-offs	(2,194)	(3,691)	(4,308)
Recoveries	699	658	909
Provision	1,853	2,293	1,960
Ending balance	11,404	11,046	11,786
Financing Receivable Allowance For Credit Losses Individually And Collectively Evaluated For Impairment [Abstract]
Individually evaluated for impairment				$ 3,838		$ 2,664		$ 2,669
Collectively evaluated for impairment				7,566		8,382		9,117
Total ending allowance balance	11,046	11,786	13,320	11,404		11,046		11,786
Loans:
Individually evaluated for impairment				20,769		20,844		22,158
Collectively evaluated for impairment				839,328		784,837		732,688
Total Loans				860,097	[1]	805,681	[1]	754,846
Real Estate Loans Construction [Member]
Allowance for loan losses [Roll Forward]
Beginning balance	905	550	847
Adjustment for the sale of majority interest in consolidated subsidiary			0
Charge-offs	(388)	0	(1,186)
Recoveries	129	246	258
Provision	293	109	631
Ending balance	939	905	550
Financing Receivable Allowance For Credit Losses Individually And Collectively Evaluated For Impairment [Abstract]
Individually evaluated for impairment				0		53		66
Collectively evaluated for impairment				939		852		484
Total ending allowance balance	905	550	847	939		905		550
Loans:
Individually evaluated for impairment				28		203		246
Collectively evaluated for impairment				35,599		39,470		32,804
Total Loans				35,627		39,673		33,050
Real Estate Loans Secured by Farmland [Member]
Allowance for loan losses [Roll Forward]
Beginning balance	192	179	166
Adjustment for the sale of majority interest in consolidated subsidiary			0
Charge-offs	0	0	0
Recoveries	0	0	0
Provision	(65)	13	13
Ending balance	127	192	179
Financing Receivable Allowance For Credit Losses Individually And Collectively Evaluated For Impairment [Abstract]
Individually evaluated for impairment				0		0		0
Collectively evaluated for impairment				127		192		179
Total ending allowance balance	192	179	166	127		192		179
Loans:
Individually evaluated for impairment				7,972		7,903		7,903
Collectively evaluated for impairment				8,796		11,159		11,805
Total Loans				16,768		19,062		19,708
Real Estate Loans Secured by 1 - 4 Family Residential [Member]
Allowance for loan losses [Roll Forward]
Beginning balance	3,341	3,966	6,734
Adjustment for the sale of majority interest in consolidated subsidiary			(95)
Charge-offs	(1,021)	(344)	(1,380)
Recoveries	395	359	342
Provision	(453)	(640)	(1,635)
Ending balance	2,262	3,341	3,966
Financing Receivable Allowance For Credit Losses Individually And Collectively Evaluated For Impairment [Abstract]
Individually evaluated for impairment				251		1,120		1,370
Collectively evaluated for impairment				2,011		2,221		2,596
Total ending allowance balance	3,341	3,966	6,734	2,262		3,341		3,966
Loans:
Individually evaluated for impairment				1,347		5,127		5,613
Collectively evaluated for impairment				312,698		274,969		259,603
Total Loans				314,045		280,096		265,216
Other Real Estate Loans [Member]
Allowance for loan losses [Roll Forward]
Beginning balance	3,761	3,916	3,506
Adjustment for the sale of majority interest in consolidated subsidiary			0
Charge-offs	(126)	(9)	(747)
Recoveries	32	28	110
Provision	(500)	(174)	1,047
Ending balance	3,167	3,761	3,916
Financing Receivable Allowance For Credit Losses Individually And Collectively Evaluated For Impairment [Abstract]
Individually evaluated for impairment				206		464		294
Collectively evaluated for impairment				2,961		3,297		3,622
Total ending allowance balance	3,761	3,916	3,506	3,167		3,761		3,916
Loans:
Individually evaluated for impairment				4,947		4,196		4,531
Collectively evaluated for impairment				278,666		253,839		250,705
Total Loans				283,613		258,035		255,236
Commercial [Member]
Allowance for loan losses [Roll Forward]
Beginning balance	1,706	2,354	1,890
Adjustment for the sale of majority interest in consolidated subsidiary			0
Charge-offs	(639)	(3,281)	(959)
Recoveries	85	14	104
Provision	2,781	2,619	1,319
Ending balance	3,933	1,706	2,354
Financing Receivable Allowance For Credit Losses Individually And Collectively Evaluated For Impairment [Abstract]
Individually evaluated for impairment				2,539		27		292
Collectively evaluated for impairment				1,394		1,679		2,062
Total ending allowance balance	1,706	2,354	1,890	3,933		1,706		2,354
Loans:
Individually evaluated for impairment				4,604		1,517		846
Collectively evaluated for impairment				186,163		188,965		162,423
Total Loans				190,767		190,482		163,269
Consumer [Member]
Allowance for loan losses [Roll Forward]
Beginning balance	1,141	821	177
Adjustment for the sale of majority interest in consolidated subsidiary			0
Charge-offs	(20)	(57)	(36)
Recoveries	58	11	95
Provision	(203)	366	585
Ending balance	976	1,141	821
Financing Receivable Allowance For Credit Losses Individually And Collectively Evaluated For Impairment [Abstract]
Individually evaluated for impairment				842		1,000		647
Collectively evaluated for impairment				134		141		174
Total ending allowance balance	$ 1,141	$ 821	$ 177	976		1,141		821
Loans:
Individually evaluated for impairment				1,871		1,898		3,019
Collectively evaluated for impairment				17,406		16,435		15,348
Total Loans				$ 19,277		$ 18,333		$ 18,367

[1] Includes net deferred loan costs and premiums of $3.3 million and $3.5 million, respectively.

XML

Premises and Equipment, Net (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Property, Plant and Equipment [Line Items]
Premises and equipment, Gross	$ 38,512	$ 38,048
Less accumulated depreciation	(19,491)	(18,517)
Total	19,021	19,531
Depreciation expense	1,400	1,300	$ 1,500
Future minimum rent commitments under various operating leases [Abstract]
2017	1,666
2018	1,617
2019	1,624
2020	1,444
2021	1,408
Thereafter	13,388
Net Total	21,147
Rent expense	1,800	2,000	$ 2,800
Land [Member]
Property, Plant and Equipment [Line Items]
Premises and equipment, Gross	2,068	2,068
Facilities [Member]
Property, Plant and Equipment [Line Items]
Premises and equipment, Gross	22,873	22,849
Furniture, Fixtures, and Equipment [Member]
Property, Plant and Equipment [Line Items]
Premises and equipment, Gross	11,729	11,676
Construction in Process and Deposits on Equipment and Land [Member]
Property, Plant and Equipment [Line Items]
Premises and equipment, Gross	$ 1,842	$ 1,455

XML

Deposits (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Banking and Thrift [Abstract]
Interest bearing product for overnight funding	$ 43,200	$ 34,000
Time deposits of $250,000 or more	84,500	91,000
Scheduled maturities of time deposits [Abstract]
2017	151,293
2018	38,370
2019	25,494
2020	7,115
2021	3,368
Total	225,640	244,575
Overdraft demand deposits reclassified to loans	142	358
Brokered deposits	$ 36,500	$ 38,700

XML

Borrowings - Narrative (Details) - USD ($)	Dec. 31, 2016	Dec. 31, 2015
Line of Credit Facility [Line Items]
Remaining credit availability	$ 334,300,000
Letters of credit amount	25,000,000
Long-term debt	39,500,000
Federal Home Loan Bank borrowings	39,500,000	$ 85,000,000
Securities sold under agreements to repurchase, maturing the day following the day sold	34,900,000	$ 26,900,000
Federal Reserve Bank of Richmond [Member]
Line of Credit Facility [Line Items]
Line of credit, maximum credit limit	33,400,000.0
Revolving lines of credit, outstanding balance	0
Other Institutions [Member]
Line of Credit Facility [Line Items]
Line of credit, maximum credit limit	$ 45,000,000
Minimum [Member]
Line of Credit Facility [Line Items]
Federal Home Loan Bank advances, interest rate (in hundredths)	0.63%
Maximum [Member]
Line of Credit Facility [Line Items]
Federal Home Loan Bank advances, interest rate (in hundredths)	0.93%
Weighted Average [Member]
Line of Credit Facility [Line Items]
Federal Home Loan Bank advances, interest rate (in hundredths)	0.78%	0.66%

XML

Borrowings - Contractual maturities of the Company's long-term debt (Details) $ in Thousands	Dec. 31, 2016 USD ($)
Debt Disclosure [Abstract]
Due in 2017	$ 29,500
Due in 2018	10,000
Total	$ 39,500

XML

Borrowings - Federal Funds Purchased, Securities Sold Under Agreements to Repurchase and Short-term Borrowings (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Securities sold under agreements to repurchase
Securities sold under agreements to repurchase	$ 34,864	$ 26,869
Weighted-average interest rate at year-end	0.01%	0.01%
Maximum amount outstanding at any month's end	$ 35,660	$ 34,253
Average amount outstanding during the year	$ 31,076	$ 30,095
Weighted-average interest rate during the year	0.01%	0.21%

XML

Share-Based Compensation Plan - Narrative (Details)	12 Months Ended
	Dec. 31, 2016 USD ($) director share_based_compensation_plan shares	Dec. 31, 2015 USD ($) shares	Dec. 31, 2014 USD ($) shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of plans | share_based_compensation_plan	1
Share based compensation expense | $	$ 925,000	$ 605,000	$ 426,000
Total income tax benefit related to share-based compensation | $	5,000	$ 117,000	$ 63,000
Unrecognized compensation expense related to nonvested stock options awards | $	$ 0
Options granted (in shares)	0	0	0
Aggregate intrinsic value of options exercised | $	$ 88,000		$ 126,500
Exercise of stock options (in shares)	6,650	0	25,501
Aggregate intrinsic value of options outstanding | $	$ 484,800	$ 134,500	$ 120,300
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Service-based award vesting percentage	50.00%
Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	3 years
Options vesting percentage each on first and second anniversary	25.00%
Options vesting percentage on third anniversary	50.00%
2006 Equity Compensation Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized (in shares)	430,000
2006 Equity Compensation Plan [Member] | Executive Officer [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in shares)	49,100
2006 Equity Compensation Plan [Member] | Performance Based Restricted Stock [Member] | Executive Officer [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in shares)	31,750
2006 Equity Compensation Plan [Member] | Time Based Restricted Stock [Member] | Executive Officer [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in shares)	17,350
2006 Equity Compensation Plan [Member] | Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in shares)	53,500	36,150	41,533
Restricted stock nonvested outstanding, Weighted average remaining contractual terms	2 years 6 months	2 years 8 months 12 days	3 years 6 months
Unrecognized compensation expense related to nonvested restricted stock awards | $	$ 1,600,000
2006 Equity Compensation Plan [Member] | Restricted Stock [Member] | Director [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in shares)	4,400
Number of directors | director	11
Shares of restricted stock per director	400
Vesting percent (as a percent)	100.00%

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Share-Based Compensation Plan - Restricted stock service awards and performance awarded under the 2006 Equity Compensation Plan (Details) - 2006 Equity Compensation Plan [Member] - Restricted Stock [Member] - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
Non-vested at beginning of year (in shares)	153,399	134,108	119,250
Granted (in shares)	53,500	36,150	41,533
Vested (in shares)	(53,908)	(16,359)	(15,425)
Forfeited or expired (in shares)	(2,250)	(500)	(11,250)
Non-vested at end of period (in shares)	150,741	153,399	134,108
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Abstract]
Non-vested at beginning of year (in dollars per share)	$ 17.17	$ 16.66	$ 16.39
Granted (in dollars per share)	20.76	18.50	17.65
Vested (in dollars per share)	16.88	15.91	15.59
Forfeited or expired (in dollars per share)	19.91	18.07	16.05
Non-vested at end of period (in dollars per share)	$ 18.50	$ 17.17	$ 16.66
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Aggregate Intrinsic Value [Abstract]
Non-vested at end of period	$ 5,238	$ 2,835	$ 2,415

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Share-Based Compensation Plan - Stock options outstanding activity (Details) - $ / shares	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Shares [Roll Forward]
Outstanding at beginning of year (in shares)	30,012	30,012	58,513
Granted (in shares)	0	0	0
Exercised (in shares)	(6,650)	0	(25,501)
Forfeited or expired (in shares)	0	0	(3,000)
Outstanding at end of period (in shares)	23,362	30,012	30,012
Options exercisable at year end (in shares)	23,362	30,012	30,012
Weighted Average Exercise Price [Roll Forward]
Outstanding at beginning of year (in dollars per share)	$ 14.00	$ 14.00	$ 15.30
Granted (in dollars per share)	0.00	0.00	0.00
Exercised (in dollars per share)	14.00	0.00	14.00
Forfeited or expired (in dollars per share)	0.00	0.00	39.40
Outstanding at end of period (in dollars per share)	14.00	14.00	14.00
Options exercisable at year end (in dollars per share)	$ 14.00	$ 14.00	$ 14.00

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Share-Based Compensation Plan - Schedule of options outstanding and exercisable (Details) - $ / shares	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of Exercise Prices (in dollars per share)	$ 14.00	$ 14.00	$ 14.00	$ 15.30
Options Outstanding (in shares)	23,362	30,012	30,012	58,513
Options Exercisable (in shares)	23,362	30,012	30,012
14.00 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of Exercise Prices (in dollars per share)	$ 14.00
Options Outstanding (in shares)	18,362
Weighted-Average Remaining Contractual Life (years)	2 years 2 months 19 days
Options Exercisable (in shares)	18,362
14.00 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of Exercise Prices (in dollars per share)	$ 14.00
Options Outstanding (in shares)	5,000
Weighted-Average Remaining Contractual Life (years)	2 years 10 months 6 days
Options Exercisable (in shares)	5,000
14.00 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of Exercise Prices (in dollars per share)	$ 14.00
Options Outstanding (in shares)	23,362.000
Weighted-Average Remaining Contractual Life (years)	2 years 4 months 9 days
Options Exercisable (in shares)	23,362.000

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Employee Benefit Plans - 401(k) Plan Narrative (Details) - 401(k) Plan [Member] - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Defined Benefit Plan Disclosure [Line Items]
Employees contribution, maximum	100.00%
Matching contribution	50.00%
Percentage of employer matching contribution to employees compensation	6.00%
Matching contributions vesting period	5 years
Expense attributable to the plan	$ 364	$ 351	$ 340

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Employee Benefit Plans - Money Purchase Pension Plan (MPPP) (Details) - Money Purchase Pension Plan [Member] $ in Thousands	12 Months Ended
	Dec. 31, 2016 USD ($) year	Dec. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)
Defined Benefit Plan Disclosure [Line Items]
Minimum qualifying age under plan | year	21
Service period	1 year
Minimum number of hours for allocation of an employer contribution	1000 hours
Employer contribution	3.00%
Additional contribution by employer	2.75%
Matching contributions vesting period	5 years
Expense attributable to the plan | $	$ 545	$ 926	$ 898

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Employee Benefit Plans - Deferred Compensation Plans (Details) - Deferred Compensation Plans [Member] $ in Thousands	12 Months Ended
	Dec. 31, 2016 USD ($) plan	Dec. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)
Defined Benefit Plan Disclosure [Line Items]
Number of deferred compensation plans | plan	2
Basis spread on credit rate	1.50%
Deferred compensation expense | $	$ 245	$ 226	$ 222

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Income Taxes - Schedule of net deferred tax assets (Details) - USD ($)	Dec. 31, 2016	Dec. 31, 2015
Income Tax Disclosure [Abstract]
Valuation allowance	$ 0	$ 0
Deferred tax assets:
Allowance for loan losses	3,877,000	3,756,000
Deferred compensation	687,000	647,000
Interest rate swap	67,000	99,000
Other real estate owned	288,000	257,000
Securities available for sale	654,000	0
Property and equipment	0	49,000
Other	1,427,000	2,028,000
Total deferred tax assets	7,000,000	6,836,000
Deferred tax liabilities:
Deferred loan costs, net	526,000	317,000
Securities available for sale	0	965,000
Property and equipment	79,000	0
Total deferred tax liabilities	605,000	1,282,000
Net deferred tax assets	$ 6,395,000	$ 5,554,000

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Income Taxes - Provision for income taxes charged to operations (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Income Tax Disclosure [Abstract]
Current tax expense	$ 2,067	$ 2,606	$ 1,160
Deferred tax expense	746	109	1,181
Total income tax expense	$ 2,813	$ 2,715	$ 2,341

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Income Taxes - Income tax provision differs from federal income tax rate to pretax income (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Income Tax Disclosure [Abstract]
Computed expected tax expense	$ 3,698	$ 3,585	$ 3,374
Tax-exempt income	(796)	(829)	(959)
Low income housing tax credits	(408)	(120)	(211)
Merger related expenses	267	0	0
Other, net	52	79	137
Total income tax expense	$ 2,813	$ 2,715	$ 2,341

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Related Party Transactions (Details) - Subsidiary Bank [Member] - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Indebted to subsidiary bank [Roll Forward]
Balance, beginning	$ 1,369	$ 3,804
Decrease due to status changes	0	(2,375)
Principal additions	352	439
Principal payments	(130)	(499)
Balance, ending	1,591	1,369
Unused commitments to extend credit	1,100	2,300
Related party deposit	$ 5,000	$ 5,900

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Contingent Liabilities and Commitments (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Commitments and Contingencies Disclosure [Abstract]
Daily average required reserves	$ 3.5	$ 3.1

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Earnings Per Share (Details) - $ / shares	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Shares [Abstract]
Earning (loss) per share, basic (in shares)	7,107,403	7,147,390	7,106,171
Effect of dilutive securities:
Stock options (in shares)	11,461	6,805	6,939
Warrant (in shares)	32,026	13,192	13,491
Earnings per share, diluted (in shares)	7,150,890	7,167,387	7,126,601
Per Share Amount [Abstract]
Earnings per share, basic (in dollars per share)	$ 1.13	$ 1.10	$ 1.07
Earnings per share, diluted (in dollars per share)	$ 1.13	$ 1.09	$ 1.06

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Earnings Per Share - Narrative (Details) - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2016	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Sep. 15, 2015
2015 Share Repurchase Plan [Member]
Equity, Class of Treasury Stock [Line Items]
Authorized stock repurchase amount (up to)					$ 10,000,000
Shares repurchased (in shares)	26,800	104,300
Shares repurchased amount	$ 489,000	$ 1,900,000
Average price (in dollars per share)	$ 18.29	$ 18.34
1999 Share Repurchase Plan [Member]
Equity, Class of Treasury Stock [Line Items]
Shares remaining for repurchase (in shares)					24,084
Employee Stock Option [Member]
Equity, Class of Treasury Stock [Line Items]
Anti-dilutive securities		0	0	0

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Retained Earnings (Details) $ in Millions	Dec. 31, 2016 USD ($)
Equity [Abstract]
Excess of regulatory limitations available for transfer to Parent Company	$ 12.9

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Financial Instruments With Off-Balance-Sheet Risk and Credit Risk (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Deposits in financial institutions in excess of amounts insured by the FDIC	$ 3,400
Commitments to Extend Credit [Member]
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Financial instrument contract amount	132,669	$ 153,806
Standby Letters of Credit [Member]
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Financial instrument contract amount	$ 4,998	$ 3,718

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Fair Value Measurements - Financial assets and liabilities measured at fair value on a recurring basis (Details) - Recurring [Member] - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Assets:
U.S. government agencies	$ 73,184	$ 78,940
Obligations of states and political subdivisions	63,373	75,593
Mortgage-backed securities:
Agency	98,051	131,661
Non-agency	9,933	12,777
Other asset backed securities	41,605	58,781
Corporate securities	15,421	16,819
Liabilities:
Interest rate swaps	242	370
Level I [Member]
Assets:
U.S. government agencies	0	0
Obligations of states and political subdivisions	0	0
Mortgage-backed securities:
Agency	0	0
Non-agency	0	0
Other asset backed securities	0	0
Corporate securities	0	0
Liabilities:
Interest rate swaps	0	0
Level II [Member]
Assets:
U.S. government agencies	73,184	78,940
Obligations of states and political subdivisions	63,373	75,593
Mortgage-backed securities:
Agency	98,051	131,661
Non-agency	9,933	12,777
Other asset backed securities	41,605	58,781
Corporate securities	15,421	16,819
Liabilities:
Interest rate swaps	242	370
Level III [Member]
Assets:
U.S. government agencies	0	0
Obligations of states and political subdivisions	0	0
Mortgage-backed securities:
Agency	0	0
Non-agency	0	0
Other asset backed securities	0	0
Corporate securities	0	0
Liabilities:
Interest rate swaps	0	0
Interest Rate Swap [Member]
Mortgage-backed securities:
Interest rate contracts	44	73
Interest Rate Swap [Member] | Level I [Member]
Mortgage-backed securities:
Interest rate contracts	0	0
Interest Rate Swap [Member] | Level II [Member]
Mortgage-backed securities:
Interest rate contracts	44	73
Interest Rate Swap [Member] | Level III [Member]
Mortgage-backed securities:
Interest rate contracts	0	0
Interest Rate Cap [Member]
Mortgage-backed securities:
Interest rate contracts	9	39
Interest Rate Cap [Member] | Level I [Member]
Mortgage-backed securities:
Interest rate contracts		0
Interest Rate Cap [Member] | Level II [Member]
Mortgage-backed securities:
Interest rate contracts	$ 9	39
Interest Rate Cap [Member] | Level III [Member]
Mortgage-backed securities:
Interest rate contracts		$ 0

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Fair Value Measurements - Financial and non-financial assets measured at fair value on a nonrecurring basis (Details) - Nonrecurring [Member] - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans	$ 6,298	$ 9,018
Other real estate owned	5,073	3,345
Repossessed assets	843	1,043
Level I [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans	0	0
Other real estate owned	0	0
Repossessed assets	0	0
Level II [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans	0	0
Other real estate owned	0	0
Repossessed assets	0	0
Level III [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans	6,298	9,018
Other real estate owned	5,073	3,345
Repossessed assets	$ 843	$ 1,043

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Fair Value Measurements - Quantitative information about Level III fair value measurements (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Impaired Loans [Member] | Discounted appraised value [Member] | Minimum [Member] | Level III [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Discount rate	0.00%	0.00%
Impaired Loans [Member] | Discounted appraised value [Member] | Maximum [Member] | Level III [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Discount rate	100.00%	100.00%
Impaired Loans [Member] | Discounted appraised value [Member] | Weighted Average [Member] | Level III [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Discount rate	14.00%	17.00%
Impaired Loans [Member] | Present Value of Cash Flows | Minimum [Member] | Level III [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Discount rate	6.00%	6.00%
Impaired Loans [Member] | Present Value of Cash Flows | Maximum [Member] | Level III [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Discount rate	8.00%	8.00%
Impaired Loans [Member] | Present Value of Cash Flows | Weighted Average [Member] | Level III [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Discount rate	7.00%	7.00%
Other Real Estate Owned [Member] | Discounted appraised value [Member] | Weighted Average [Member] | Level III [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Discount rate	10.00%
Other Real Estate Owned [Member] | Market Approach Valuation Technique [Member] | Weighted Average [Member] | Level III [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Discount rate		10.00%
Repossessed Assets [Member] | Discounted appraised value [Member] | Weighted Average [Member] | Level III [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Discount rate	70.00%
Repossessed Assets [Member] | Market Approach Valuation Technique [Member] | Weighted Average [Member] | Level III [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Discount rate		50.00%
Nonrecurring [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Impaired loans	$ 6,298	$ 9,018
Other real estate owned	5,073	3,345
Repossessed assets	843	1,043
Nonrecurring [Member] | Level III [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Impaired loans	6,298	9,018
Other real estate owned	5,073	3,345
Repossessed assets	843	1,043
Nonrecurring [Member] | Discounted appraised value [Member] | Level III [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Impaired loans	1,134	5,434
Nonrecurring [Member] | Present Value of Cash Flows | Level III [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Impaired loans	$ 5,164	$ 3,584

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Fair Value Measurements - Estimated fair values and related carrying values of financial instruments (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Financial assets:
Securities held to maturity	$ 10,095	$ 4,163
Level I [Member]
Financial assets:
Cash and cash equivalents	28,544	39,228
Securities held to maturity	0	0
Securities available for sale	0	0
Loans, net	0	0
Bank owned life insurance	0	0
Accrued interest receivable	0	0
Interest rate contracts		0
Financial liabilities:
Deposits	0	0
Securities sold under agreements to repurchase	0	0
FHLB borrowings	0	0
Subordinated notes	0	0
Accrued interest payable	0	0
Interest rate contracts		0
Level II [Member]
Financial assets:
Cash and cash equivalents	0	0
Securities held to maturity	10,095	4,163
Securities available for sale	301,567	374,571
Loans, net	0	0
Bank owned life insurance	23,925	23,273
Accrued interest receivable	5,093	5,204
Interest rate contracts		73
Financial liabilities:
Deposits	1,051,245	1,040,016
Securities sold under agreements to repurchase	34,864	26,869
FHLB borrowings	39,530	85,033
Subordinated notes	5,159	5,157
Accrued interest payable	387	410
Interest rate contracts		370
Level III [Member]
Financial assets:
Cash and cash equivalents	0	0
Securities held to maturity	0	0
Securities available for sale	0	0
Loans, net	852,280	802,535
Bank owned life insurance	0	0
Accrued interest receivable	0	0
Interest rate contracts		0
Financial liabilities:
Deposits	0	0
Securities sold under agreements to repurchase	0	0
FHLB borrowings	0	0
Subordinated notes	0	0
Accrued interest payable	0	0
Interest rate contracts		0
Carrying Amount [Member]
Financial assets:
Cash and cash equivalents	28,544	39,228
Securities held to maturity	10,683	4,207
Securities available for sale	301,567	374,571
Loans, net	848,693	794,635
Bank owned life insurance	23,925	23,273
Accrued interest receivable	5,093	5,204
Interest rate contracts		73
Financial liabilities:
Deposits	1,053,058	1,040,800
Securities sold under agreements to repurchase	34,864	26,869
FHLB borrowings	39,500	85,000
Subordinated notes	5,155	5,155
Accrued interest payable	387	410
Interest rate contracts		370
Fair Value [Member]
Financial assets:
Cash and cash equivalents	28,544	39,228
Securities held to maturity	10,095	4,163
Securities available for sale	301,567	374,571
Loans, net	852,280	802,535
Bank owned life insurance	23,925	23,273
Accrued interest receivable	5,093	5,204
Interest rate contracts		73
Financial liabilities:
Deposits	1,051,245	1,040,016
Securities sold under agreements to repurchase	34,864	26,869
FHLB borrowings	39,530	85,033
Subordinated notes	5,159	5,157
Accrued interest payable	387	410
Interest rate contracts		370
Interest Rate Swap [Member] | Level I [Member]
Financial assets:
Interest rate contracts	0
Financial liabilities:
Interest rate contracts	0
Interest Rate Swap [Member] | Level II [Member]
Financial assets:
Interest rate contracts	44
Financial liabilities:
Interest rate contracts	242
Interest Rate Swap [Member] | Level III [Member]
Financial assets:
Interest rate contracts	0
Financial liabilities:
Interest rate contracts	0
Interest Rate Swap [Member] | Carrying Amount [Member]
Financial assets:
Interest rate contracts	44
Financial liabilities:
Interest rate contracts	242
Interest Rate Swap [Member] | Fair Value [Member]
Financial assets:
Interest rate contracts	44
Financial liabilities:
Interest rate contracts	242
Interest Rate Cap [Member] | Level I [Member]
Financial assets:
Interest rate contracts	0	0
Interest Rate Cap [Member] | Level II [Member]
Financial assets:
Interest rate contracts	9	39
Interest Rate Cap [Member] | Level III [Member]
Financial assets:
Interest rate contracts	0	0
Interest Rate Cap [Member] | Carrying Amount [Member]
Financial assets:
Interest rate contracts	9	39
Interest Rate Cap [Member] | Fair Value [Member]
Financial assets:
Interest rate contracts	$ 9	$ 39

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Capital Requirements (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Consolidated [Member]
Total Capital (to Risk- Weighted Assets), Amount [Abstract]
Actual	$ 139,419	$ 132,481
Minimum Capital Requirement	$ 62,436	$ 60,495
Total Capital (to Risk- Weighted Assets), Ratio [Abstract]
Actual, Ratio (in hundredths)	17.90%	17.50%
Minimum Capital Requirement, Ratio (in hundredths)	8.00%	8.00%
Tier 1 Capital (to Risk- Weighted Assets), Amount [Abstract]
Actual	$ 129,642	$ 123,008
Minimum Capital Requirement	$ 46,827	$ 45,371
Tier 1 Capital (to Risk- Weighted Assets), Ratio [Abstract]
Actual, Ratio (in hundredths)	16.60%	16.30%
Minimum Capital Requirement, Ratio (in hundredths)	6.00%	6.00%
Tier 1 Common Equity Capital (to Risk- Weighted Assets), Amount [Abstract]
Actual	$ 124,642	$ 118,008
Minimum Capital Requirement	$ 35,121	$ 34,028
Tier 1 Common Equity Capital (to Risk- Weighted Assets), Ratio [Abstract]
Actual, Ratio (in hundredths)	16.00%	15.60%
Minimum Capital Requirement, Ratio (in hundredths)	4.50%	4.50%
Tier 1 Capital (to Average Assets), Amount [Abstract]
Actual	$ 129,642	$ 123,008
Minimum Capital Requirement	$ 52,142	$ 51,301
Tier 1 Capital (to Average Assets), Ratio [Abstract]
Actual, Ratio (in hundredths)	10.00%	9.60%
Minimum Capital Requirement, Ratio (in hundredths)	4.00%	4.00%
Middleburg Bank [Member]
Total Capital (to Risk- Weighted Assets), Amount [Abstract]
Actual	$ 131,725	$ 127,418
Minimum Capital Requirement	61,994	60,055
Minimum To Be Well Capitalized Under Prompt Corrective Action Provisions	$ 77,492	$ 75,068
Total Capital (to Risk- Weighted Assets), Ratio [Abstract]
Actual, Ratio (in hundredths)	17.00%	17.00%
Minimum Capital Requirement, Ratio (in hundredths)	8.00%	8.00%
Minimum To Be Well Capitalized Under Prompt Corrective Action Provisions, Ratio (in hundredths)	10.00%	10.00%
Tier 1 Capital (to Risk- Weighted Assets), Amount [Abstract]
Actual	$ 122,016	$ 118,013
Minimum Capital Requirement	46,495	45,041
Minimum To Be Well Capitalized Under Prompt Corrective Action Provisions	$ 61,994	$ 60,055
Tier 1 Capital (to Risk- Weighted Assets), Ratio [Abstract]
Actual, Ratio (in hundredths)	15.80%	15.70%
Minimum Capital Requirement, Ratio (in hundredths)	6.00%	6.00%
Minimum To Be Well Capitalized Under Prompt Corrective Action Provisions, Ratio (in hundredths)	8.00%	8.00%
Tier 1 Common Equity Capital (to Risk- Weighted Assets), Amount [Abstract]
Actual	$ 122,016	$ 118,013
Minimum Capital Requirement	34,872	33,781
Minimum To Be Well Capitalized Under Prompt Corrective Action Provisions	$ 50,370	$ 48,794
Tier 1 Common Equity Capital (to Risk- Weighted Assets), Ratio [Abstract]
Actual, Ratio (in hundredths)	15.80%	15.70%
Minimum Capital Requirement, Ratio (in hundredths)	4.50%	4.50%
Minimum To Be Well Capitalized Under Prompt Corrective Action Provisions, Ratio (in hundredths)	6.50%	6.50%
Tier 1 Capital (to Average Assets), Amount [Abstract]
Actual	$ 122,016	$ 118,013
Minimum Capital Requirement	51,909	51,067
Minimum To Be Well Capitalized Under Prompt Corrective Action Provisions	$ 64,886	$ 63,834
Tier 1 Capital (to Average Assets), Ratio [Abstract]
Actual, Ratio (in hundredths)	9.40%	9.20%
Minimum Capital Requirement, Ratio (in hundredths)	4.00%	4.00%
Minimum To Be Well Capitalized Under Prompt Corrective Action Provisions, Ratio (in hundredths)	5.00%	5.00%

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Goodwill and Intangibles Assets (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Goodwill and Intangible Assets Disclosure [Abstract]
Identifiable intangible assets, amortization period	15 years
Identifiable intangibles
Gross Carrying Value	$ 3,734	$ 3,734
Accumulated Amortization	3,690	3,519
Unamortizable goodwill
Gross Carrying Value	3,421	3,421
Accumulated Amortization	0	0
Amortization	171	$ 171	$ 171
Estimated amortization expense of identifiable intangibles [Abstract]
2017	44
Estimated amortization expense of identifiable intangibles, total	$ 44

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Subordinated Notes (Details) - MFC Capital Trust II [Member] - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 19, 2003
Financial Instruments Subject to Mandatory Redemption by Settlement Terms [Line Items]
Principal asset of the trust of junior subordinate debt securities	$ 5,200,000
Trust-Preferred Securities [Member]
Financial Instruments Subject to Mandatory Redemption by Settlement Terms [Line Items]
Trust-preferred securities issued		$ 5,000,000
Pooled underwriting total		$ 344,000,000
Weighted-average interest rate (as a percent)	3.54%
Mandatory redemption date	Jan. 23, 2034
Percentage Tier 1 capital covered by trust preferred securities, maximum (as a percent)	25.00%
Trust-Preferred Securities [Member] | Minimum [Member]
Financial Instruments Subject to Mandatory Redemption by Settlement Terms [Line Items]
Interest rate (as a percent)	3.17%
Trust-Preferred Securities [Member] | Maximum [Member]
Financial Instruments Subject to Mandatory Redemption by Settlement Terms [Line Items]
Interest rate (as a percent)	3.74%

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Ownership of Southern Trust Mortgage (Details) $ in Millions	1 Months Ended
	May 30, 2008 USD ($) membership_unit	May 15, 2014	May 14, 2014	Dec. 31, 2013	May 31, 2008
Business Acquisition [Line Items]
Percentage interest in issued and outstanding membership interest			62.30%
Southern Trust Mortgage [Member]
Business Acquisition [Line Items]
Number of membership units acquired | membership_unit	1
Cost to acquire membership interest | $	$ 1.6
Percentage ownership interest, minimum					50.00%
Percentage interest in issued and outstanding membership interest				62.30%
Ownership interest, percentage sold		100.00%

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Condensed Financial Information - Parent Corporation Only - BALANCE SHEETS (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Condensed Balance Sheet Statements, Captions [Line Items]
Cash on deposit with subsidiary bank	$ 6,989	$ 5,489
Investment in subsidiaries	155	155
TOTAL ASSETS	1,272,643	1,294,863	$ 1,222,857
Subordinated notes	5,155	5,155
TOTAL LIABILITIES	1,145,964	1,171,309
Common stock	17,636	17,330
Capital surplus	45,688	44,155
Retained earnings	64,755	60,392
Accumulated other comprehensive income (loss), net	(1,400)	1,677	3,794	$ 232
TOTAL SHAREHOLDERS' EQUITY	126,679	123,554	$ 122,034	$ 115,073
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	1,272,643	1,294,863
Middleburg Financial Corporation [Member]
Condensed Balance Sheet Statements, Captions [Line Items]
Cash on deposit with subsidiary bank	2,154	1,403
Investment in subsidiaries	126,694	125,900
Other assets	3,199	1,686
TOTAL ASSETS	132,047	128,989
Subordinated notes	5,155	5,155
Other liabilities	213	280
TOTAL LIABILITIES	5,368	5,435
Common stock	17,636	17,330
Capital surplus	45,688	44,155
Retained earnings	64,755	60,392
Accumulated other comprehensive income (loss), net	(1,400)	1,677
TOTAL SHAREHOLDERS' EQUITY	126,679	123,554
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 132,047	$ 128,989

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Condensed Financial Information - Parent Corporation Only - STATEMENTS OF INCOME (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
INCOME:
Interest and dividends from investments	$ 43,375	$ 42,281	$ 43,325
EXPENSES:
Salaries and employee benefits	18,757	18,435	22,601
Legal and advisory fees	1,202	1,029	1,324
Interest expense	4,424	4,207	5,243
Other	4,190	4,091	4,776
Income before income taxes	10,877	10,545	9,827
Income tax benefit	2,813	2,715	2,341
Net income attributable to Middleburg Financial Corporation	8,064	7,830	7,584
Middleburg Financial Corporation [Member]
INCOME:
Dividends from subsidiaries	6,870	5,383	3,440
Interest and dividends from investments	0	0	15
Other income	2	17	0
Total income	6,872	5,400	3,455
EXPENSES:
Salaries and employee benefits	1,240	919	746
Legal and advisory fees	1,506	164	91
Directors fees	352	274	280
Interest expense	280	279	279
Other	426	416	366
Total expenses	3,804	2,052	1,762
Income before income taxes	3,068	3,348	1,693
Income tax benefit	(1,081)	(715)	(753)
Income before equity in undistributed income of subsidiaries	4,149	4,063	2,446
Equity in undistributed income of subsidiaries	3,915	3,767	5,138
Net income attributable to Middleburg Financial Corporation	$ 8,064	$ 7,830	$ 7,584

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Condensed Financial Information - Parent Corporation Only - STATEMENTS OF CASH FLOWS (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Cash Flows from Operating Activities
Net income	$ 8,064	$ 7,830	$ 7,584
Adjustments to reconcile net income to net cash provided by operating activities:
Share-based compensation	925	605	426
(Increase) decrease in other assets	(1,406)	(4,826)	(2,604)
(Decrease) increase in other liabilities	(98)	448	2,447
Net cash provided by operating activities	15,977	12,303	48,789
Cash Flows from Investing Activities
Proceeds from maturity, calls, principal repayments and sales of securities available for sale	155,485	106,154	132,286
Net cash provided by (used in) investing activities	1,373	(93,337)	(44,693)
Cash Flows from Financing Activities
Net proceeds from issuance of common stock	1,742	0	394
Cash dividends paid on common stock	(3,701)	(3,292)	(2,419)
Net cash provided by (used in) provided by financing activities	(28,034)	65,240	(16,417)
Decrease in cash and cash equivalents	(10,684)	(15,794)	(12,321)
Cash and cash equivalents at beginning of year	39,228	55,022	67,343
Cash and cash equivalents at end of year	28,544	39,228	55,022
Middleburg Financial Corporation [Member]
Cash Flows from Operating Activities
Net income	8,064	7,830	7,584
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in undistributed earnings of subsidiaries	(3,915)	(3,767)	(5,138)
Share-based compensation	925	605	426
(Increase) decrease in other assets	(1,469)	957	(1,099)
(Decrease) increase in other liabilities	(67)	13	213
Net cash provided by operating activities	3,538	5,638	1,986
Cash Flows from Investing Activities
Proceeds from maturity, calls, principal repayments and sales of securities available for sale	0	0	44
Net cash provided by (used in) investing activities	0	0	44
Cash Flows from Financing Activities
Net proceeds from issuance of common stock	1,742	0	394
Cash dividends paid on common stock	(3,701)	(3,292)	(2,419)
Repurchases of stock	(828)	(1,506)	(88)
Net cash provided by (used in) provided by financing activities	(2,787)	(4,798)	(2,113)
Decrease in cash and cash equivalents	751	840	(83)
Cash and cash equivalents at beginning of year	1,403	563	646
Cash and cash equivalents at end of year	$ 2,154	$ 1,403	$ 563

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Segment Reporting (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Revenues:
Interest income	$ 43,375	$ 42,281	$ 43,325
Trust services income	4,643	4,785	4,362
Other income	6,095	5,605	10,424
Total operating income	54,113	52,671	58,111
Expenses:
Interest expense	4,424	4,207	5,243
Salaries and employee benefits	18,757	18,435	22,601
Provision for loan losses	1,853	2,293	1,960
Other expense	18,202	17,191	18,480
Total operating expenses	43,236	42,126	48,284
Income before income taxes	10,877	10,545	9,827
Income tax expense	2,813	2,715	2,341
NET INCOME	8,064	7,830	7,486
Non-controlling interest in consolidated subsidiary	0	0	98
Net income attributable to Middleburg Financial Corporation	8,064	7,830	7,584
Total assets	1,272,643	1,294,863	1,222,857
Capital expenditures	978	2,137	920
Goodwill and other intangibles	3,465	3,636	3,807
Operating Segments [Member] | Commercial & Retail Banking [Member]
Revenues:
Interest income	43,365	42,270	43,149
Trust services income	0	0	0
Other income	6,204	5,605	5,349
Total operating income	49,569	47,875	48,498
Expenses:
Interest expense	4,424	4,207	5,227
Salaries and employee benefits	16,473	16,130	16,567
Provision for loan losses	1,853	2,293	1,926
Other expense	17,556	16,237	15,818
Total operating expenses	40,306	38,867	39,538
Income before income taxes	9,263	9,008	8,960
Income tax expense	2,203	2,131	1,894
NET INCOME	7,060		7,066
Non-controlling interest in consolidated subsidiary			0
Net income attributable to Middleburg Financial Corporation		6,877	7,066
Total assets	1,270,222	1,291,708	1,218,452
Capital expenditures	978	2,137	911
Goodwill and other intangibles	0	0	0
Operating Segments [Member] | Wealth Management [Member]
Revenues:
Interest income	10	11	14
Trust services income	4,806	4,951	4,516
Other income	0	0	0
Total operating income	4,816	4,962	4,530
Expenses:
Interest expense	0	0	0
Salaries and employee benefits	2,284	2,305	2,262
Provision for loan losses	0	0	0
Other expense	918	1,120	1,140
Total operating expenses	3,202	3,425	3,402
Income before income taxes	1,614	1,537	1,128
Income tax expense	610	584	447
NET INCOME	1,004		681
Non-controlling interest in consolidated subsidiary			0
Net income attributable to Middleburg Financial Corporation		953	681
Total assets	6,693	6,700	7,152
Capital expenditures	0	0	6
Goodwill and other intangibles	3,465	3,636	3,807
Operating Segments [Member] | Mortgage Banking [Member]
Revenues:
Interest income	0	0	450
Trust services income	0	0	0
Other income	0	0	5,121
Total operating income	0	0	5,571
Expenses:
Interest expense	0	0	304
Salaries and employee benefits	0	0	3,772
Provision for loan losses	0	0	34
Other expense	0	0	1,722
Total operating expenses	0	0	5,832
Income before income taxes	0	0	(261)
Income tax expense	0	0	0
NET INCOME	0		(261)
Non-controlling interest in consolidated subsidiary			98
Net income attributable to Middleburg Financial Corporation		0	(163)
Total assets	0	0	0
Capital expenditures	0	0	3
Goodwill and other intangibles	0	0	0
Intercompany Eliminations [Member]
Revenues:
Interest income	0	0	(288)
Trust services income	(163)	(166)	(154)
Other income	(109)	0	(46)
Total operating income	(272)	(166)	(488)
Expenses:
Interest expense	0	0	(288)
Salaries and employee benefits	0	0	0
Provision for loan losses	0	0	0
Other expense	(272)	(166)	(200)
Total operating expenses	(272)	(166)	(488)
Income before income taxes	0	0	0
Income tax expense	0	0	0
NET INCOME	0		0
Non-controlling interest in consolidated subsidiary			0
Net income attributable to Middleburg Financial Corporation		0	0
Total assets	(4,272)	(3,545)	(2,747)
Capital expenditures	0	0	0
Goodwill and other intangibles	$ 0	$ 0	$ 0

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Capital Purchase Program and Stock Warrant (Details) - USD ($) $ / shares in Units, $ in Thousands			12 Months Ended
	Nov. 03, 2016	Jan. 30, 2009	Dec. 31, 2009	Dec. 31, 2016	Dec. 31, 2015
Equity, Class of Treasury Stock [Line Items]
Warrants issued under capital repurchase program (in shares)		208,202	104,101
Common stock, par value (in dollars per share)		$ 2.50		$ 2.50	$ 2.50
Exercise price of warrants (in dollars per share)		$ 15.85
Proceeds from warrant exercises	$ 1,650
Series A Cumulative Perpetual Preferred Stock [Member]
Equity, Class of Treasury Stock [Line Items]
Preferred stock issued under capital repurchase program (in shares)		22,000
Preferred stock, par value (in dollars per share)		$ 2.50
Liquidation preference per share (in dollars per shares)		$ 1,000
Shares redeemed during period (in shares)			22,000

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Derivatives - Derivatives designated as cash flow hedges narrative (Details)			12 Months Ended
	Nov. 25, 2013 USD ($)	Oct. 23, 2010	Dec. 31, 2016 USD ($) position	Dec. 31, 2015 USD ($) position	Dec. 31, 2014 USD ($)	Dec. 31, 2010 USD ($)
Derivative [Line Items]
Notional Amount			$ 10,342,000	$ 10,932,000
Operating Expense [Member] | Hedging Instrument [Member]
Derivative [Line Items]
Loss on cash flow hedge ineffectiveness			0	0	$ 6,000
Cash Flow Hedging [Member] | Hedging Instrument [Member]
Derivative [Line Items]
Term	5 years
Collateral reserved for swap			$ 600,000	$ 300,000
Interest Rate Swap One [Member] | Hedging Instrument [Member]
Derivative [Line Items]
Fixed rate payment			2.59%	2.59%		2.59%
Notional Amount			$ 5,155,000	$ 5,155,000		$ 5,200,000
Term		10 years
Number of positions | position			1	1
Interest Rate Swap One [Member] | Cash Flow Hedging [Member] | Hedging Instrument [Member]
Derivative [Line Items]
Collateral reserved for swap			$ 400,000	$ 400,000
Interest Rate Swap 2 [Member] | Cash Flow Hedging [Member] | Hedging Instrument [Member]
Derivative [Line Items]
Fixed rate payment	1.43%
Notional Amount	$ 10,000,000
Interest Rate Swap [Member] | Hedging Instrument [Member]
Derivative [Line Items]
Amounts included in accumulated other comprehensive income as unrealized losses			$ 130,000	$ 195,000
Interest Rate Swap [Member] | Not Designated as Hedging Instrument [Member]
Derivative [Line Items]
Number of positions | position			0	0
Interest Rate Cap [Member]
Derivative [Line Items]
Notional Amount			$ 10,000,000	$ 10,000,000
Interest Rate Cap [Member] | Not Designated as Hedging Instrument [Member]
Derivative [Line Items]
Premium Paid			$ 70,000	$ 70,000
3-Month LIBOR Strike Rate			2.00%	2.00%
Interest Rate Cap [Member] | Other Operating Income (Expense) [Member] | Not Designated as Hedging Instrument [Member]
Derivative [Line Items]
Change in fair value of derivative asset			$ 30,000	$ 31,000
Other Assets [Member] | Interest Rate Cap [Member] | Not Designated as Hedging Instrument [Member]
Derivative [Line Items]
Fair value of derivative asset			$ 9,000	$ 39,000

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Derivatives - Derivatives designated as cash flow hedges (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2016 USD ($) position	Dec. 31, 2015 USD ($) position	Dec. 31, 2010 USD ($)
Derivative [Line Items]
Notional Amount	$ 10,342	$ 10,932
Life (Years)
Interest Rate Swap One [Member] | Hedging Instrument [Member]
Derivative [Line Items]
Number of positions | position	1	1
Notional Amount	$ 5,155	$ 5,155	$ 5,200
Asset	0	0
Liability	$ 160	$ 226
Receive Rate (as a percent)	0.87%	0.32%
Pay Rate (as a percent)	2.59%	2.59%	2.59%
Life (Years)	3 years 9 months 18 days	4 years 9 months 18 days
Interest Rate Swap Two [Member] | Hedging Instrument [Member]
Derivative [Line Items]
Number of positions | position	1	1
Notional Amount	$ 10,000	$ 10,000
Asset	0	0
Liability	$ 38	$ 71
Receive Rate (as a percent)	0.60%	0.23%
Pay Rate (as a percent)	1.43%	1.43%
Life (Years)	2 years	3 years

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Derivatives - Two-way client interest rate swaps not designated as either fair value or cash flow hedges (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2016 USD ($) position	Dec. 31, 2015 USD ($) position
Derivative [Line Items]
Notional Amount	$ 10,342	$ 10,932
Asset	44	73
Liability	$ 44	$ 73
Life (Years)
Interest Rate Swap at 3.90% Pay Rate [Member]
Derivative [Line Items]
Number of positions | position	1	1
Notional Amount	$ 3,508	$ 3,760
Asset	15	0
Liability	$ 0	$ 21
Pay Rate	3.90%	3.90%
Life (Years)	10 years 10 months 24 days	11 years 10 months 24 days
Interest Rate Swap at 4.09% Pay Rate [Member]
Derivative [Line Items]
Number of positions | position	1	1
Notional Amount	$ 1,663	$ 1,706
Asset	0	0
Liability	$ 29	$ 52
Pay Rate	4.09%	4.09%
Life (Years)	7 years 10 months 24 days	8 years 10 months 24 days
Reverse Interest Rate Swap at 3.90% Pay Rate [Member]
Derivative [Line Items]
Number of positions | position	1	1
Notional Amount	$ 3,508	$ 3,760
Asset	0	21
Liability	$ 15	$ 0
Pay Rate	3.90%	3.90%
Life (Years)	10 years 10 months 24 days	11 years 10 months 24 days
Reverse Interest Rate Swap at 4.09% Pay Rate [Member]
Derivative [Line Items]
Number of positions | position	1	1
Notional Amount	$ 1,663	$ 1,706
Asset	$ 29	52
Liability		$ 0
Pay Rate	4.09%	4.09%
Life (Years)	7 years 10 months 24 days	8 years 10 months 24 days
London Interbank Offered Rate (LIBOR) [Member] | Interest Rate Swap at 3.90% Pay Rate [Member]
Derivative [Line Items]
Spread on variable rate (as a percent)	2.00%	2.00%
London Interbank Offered Rate (LIBOR) [Member] | Interest Rate Swap at 4.09% Pay Rate [Member]
Derivative [Line Items]
Spread on variable rate (as a percent)	1.80%	1.80%
London Interbank Offered Rate (LIBOR) [Member] | Reverse Interest Rate Swap at 3.90% Pay Rate [Member]
Derivative [Line Items]
Spread on variable rate (as a percent)	2.00%	2.00%
London Interbank Offered Rate (LIBOR) [Member] | Reverse Interest Rate Swap at 4.09% Pay Rate [Member]
Derivative [Line Items]
Spread on variable rate (as a percent)	1.80%	1.80%

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Derivatives - Details of interest rate cap agreement (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Derivative [Line Items]
Notional Amount	$ 10,342	$ 10,932
Interest Rate Cap [Member]
Derivative [Line Items]
Notional Amount	$ 10,000	$ 10,000
Not Designated as Hedging Instrument [Member] | Interest Rate Cap [Member]
Derivative [Line Items]
3-Month LIBOR Strike Rate	2.00%	2.00%
Premium Paid	$ 70	$ 70
Unamortized premium	70	70
Other Assets [Member] | Not Designated as Hedging Instrument [Member] | Interest Rate Cap [Member]
Derivative [Line Items]
Fair value of derivative asset	9	39
Cumulative Cash Flows Received	$ 0	$ 0

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Accumulated Other Comprehensive Income (Loss), Net - Change in other comprehensive income (loss) for the period (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Balance beginning of period	$ 1,677	$ 3,794	$ 232
Unrealized holding gains (net of tax, $1,979, $1,037, and 1,091 for 2014, 2015 and 2016, respectively)	(2,116)	(2,015)	3,841
Reclassification adjustment (net of tax, $63, $48, and $528 for 2014, 2015 and 2016, respectively)	(1,026)	(92)	(123)
Unrealized gain on interest rate swaps (net of tax, $82, $3, and ($34) for 2014, 2015 and 2016, respectively)	65	(6)	(160)
Reclassification adjustment, net of tax of $0, $2 and $2, for 2014, 2015 and 2016, respectively	0	(4)	4
Balance end of period	(1,400)	1,677	3,794
Other Comprehensive Income (Loss), Tax, Portion Attributable to Parent, Parenthetical Disclosures [Abstract]
Unrealized holding gains arising during the period, tax	1,091	1,037	(1,979)
Reclassification adjustment for investment securities, taxes	528	48	63
Unrealized gain (loss) on interest rate swap, tax	(34)	3	82
Reclassification adjustment for (gain) loss on interest rate swap ineffectiveness, tax	0	2	(2)
Unrealized Gains (Losses) on Securities [Member]
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Balance beginning of period	1,872	3,979	261
Unrealized holding gains (net of tax, $1,979, $1,037, and 1,091 for 2014, 2015 and 2016, respectively)	(2,116)	(2,015)	3,841
Reclassification adjustment (net of tax, $63, $48, and $528 for 2014, 2015 and 2016, respectively)	(1,026)	(92)	(123)
Unrealized gain on interest rate swaps (net of tax, $82, $3, and ($34) for 2014, 2015 and 2016, respectively)	0	0	0
Reclassification adjustment, net of tax of $0, $2 and $2, for 2014, 2015 and 2016, respectively		0	0
Balance end of period	(1,270)	1,872	3,979
Derivatives [Member]
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Balance beginning of period	(195)	(185)	(29)
Unrealized holding gains (net of tax, $1,979, $1,037, and 1,091 for 2014, 2015 and 2016, respectively)	0	0	0
Reclassification adjustment (net of tax, $63, $48, and $528 for 2014, 2015 and 2016, respectively)	0	0	0
Unrealized gain on interest rate swaps (net of tax, $82, $3, and ($34) for 2014, 2015 and 2016, respectively)	65	(6)	(160)
Reclassification adjustment, net of tax of $0, $2 and $2, for 2014, 2015 and 2016, respectively		(4)	4
Balance end of period	$ (130)	$ (195)	$ (185)

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Accumulated Other Comprehensive Income (Loss), Net - Reclassification out of Accumulated Other Comprehensive Income (Details) - USD ($) $ in Thousands		12 Months Ended
		Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Gains on sales of securities available for sale, net		$ (1,554)	$ (140)	$ (186)
Income tax expense		2,813	2,715	2,341
Net income		8,064	7,830	7,486
Reclassification out of Accumulated Other Comprehensive Income [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net income		(1,026)	(96)	(119)
Reclassification out of Accumulated Other Comprehensive Income [Member] | Unrealized Gains (Losses) on Securities [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Gains on sales of securities available for sale, net	[1]	(1,554)	(140)	(186)
Income tax expense	[1]	528	48	63
Net income		(1,026)	(96)	(119)
Reclassification out of Accumulated Other Comprehensive Income [Member] | Derivatives [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Income tax expense	[2]	0	2	(2)
Other operating expense	[2]	$ 0	$ (6)	$ 6

[1] For more information related to unrealized gains on securities available for sale, see Note 2, "Securities".

[2] For more information related to unrealized losses on derivatives, see Note 24, "Derivatives".

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Other Real Estate Owned (OREO) - Narrative (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2016 USD ($) loan	Dec. 31, 2015 USD ($) loan	Dec. 31, 2014 USD ($)
Banking and Thrift [Abstract]
Repossessed assets	$ 5,073	$ 3,345	$ 4,051
Expenses applicable to OREO	$ 363	$ 284	$ 256
Number of loans secured by residential real estate | loan	0	1
Amount of loan secured by residential real estate		$ 533

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Other Real Estate Owned (OREO) - Changes in the Balance for OREO (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Other Real Estate [Roll Forward]
Balance at the beginning of year, net	$ 3,345	$ 4,051
Transfers from loans, net	2,645	287
Purchased loans	40	0
Sales proceeds	(713)	(814)
Gain (loss) on disposition	66	(100)
Less valuation adjustments	(310)	(79)
Balance at the end of year, net	$ 5,073	$ 3,345

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Other Real Estate Owned (OREO) - Schedule of Real Estate Owned Classifications (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Accounts, Notes, Loans and Financing Receivable [Line Items]
Repossessed assets	$ 5,073	$ 3,345	$ 4,051
Construction Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Repossessed assets	946	853
Real Estate Loans Secured by 1 - 4 Family Residential [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Repossessed assets	3,767	1,958
Other Real Estate Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Repossessed assets	$ 360	$ 534

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Low Income Housing Tax Credits (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2016 USD ($) housing_equity_fund	Dec. 31, 2015 USD ($) housing_equity_fund	Dec. 31, 2014 USD ($)
Schedule of Equity Method Investments [Line Items]
Number of housing equity funds | housing_equity_fund	4	4
Tax credits and other tax benefits	$ 408	$ 120	$ 211
Tax credits projected to be received	441
Other Assets [Member]
Schedule of Equity Method Investments [Line Items]
Investments in housing equity funds	8,400	9,000
Other Liabilities [Member]
Schedule of Equity Method Investments [Line Items]
Additional capital calls expected	$ 8,200	$ 9,300