ANCX Access National Corp.

Access National Corporation (NASDAQ: ANCX) (the “Corporation” or “Access”), parent company for Access National Bank (the “Bank”), reported first quarter 2017 net income of $1.37 million, or $0.13 per common share. This represents the Corporation’s 67th consecutive quarterly profit over its 69 quarter history. In anticipation of the Corporation’s merger with Middleburg and to align first quarter earnings of Access to its pre-merger shareholders of record, a $0.15 per share dividend was declared on March 20, 2017 for common shareholders of record as of March 31, 2017 and is payable on May 25, 2017.

Highlights

• Strategic merger with Middleburg announced October 24, 2016, closed April 1, 2017;
• Reported earnings reflect $2.1 million in pre-tax merger related costs ($1.8 million after-tax) impacting earnings per share by $0.16 on a diluted basis;
• Tangible book value per common share grew 5.8% to $11.22 at March 31, 2017 when compared to $10.60 at March 31, 2016;
• Loans held for investment grew $158.1 million or 17.3% year-over-year;
• Demand deposits grew $41.5 million year-over-year and account for 32.6% of total deposits at March 31, 2017; and
• An increase in the provision for loan loss reserve of $1.4 million when compared to the quarter ended March 31, 2016 was recorded to resolve one problematic credit as well as account for the continued loan growth in the portfolio.

“We are delighted with the timely closing of our strategic merger with Middleburg on April 1 and the continued growth of the core commercial bank,” said Michael W. Clarke, President and Chief Executive Officer of Access, “however, we experienced some choppiness this quarter due to one problem credit which drove a sizable charge-off as well as the second consecutive period of elevated provisioning. We believe this is an isolated situation and not indicative of any systemic credit deterioration. Importantly, core loan and deposit growth grew directionally consistent with our strategic goals. As previously announced, the core conversion project related to our merger is slated for August of this year. We expect 65% of the annual overhead cost savings from the combination to be realized in 2017 as contrasted with an expectation of 75% at the time of announcement in October 2016. We remain optimistic concerning the future growth and efficiencies of our newly expanded business and ability to deliver financial results that equal or exceed peers.”

First quarter 2017 pre-tax earnings were $2.5 million, down $3.7 million from the first quarter of 2016 due mainly to merger related costs of $2.1 million as well as an increase in the provision for loan losses of $1.4 million. The commercial banking segment’s net interest income grew $1.2 million when compared to the first quarter 2016 and was offset by an increase in salaries and employee benefits of $495 thousand, due to an increase in commercial lending staffing when compared to the first quarter 2016, as well as an increase in other expenses not related to the provision of $287 thousand. The increase in other expenses pertains to the increased rent expense related to the addition of the Alexandria, Virginia branch as well as increases in data processing and FDIC insurance expense.

The net interest margin decreased from 3.61% to 3.46% when comparing first quarter 2016 to first quarter 2017, while on a linked quarter basis the margin remained stable at 3.46%.

Total assets were $1.4 billion at March 31, 2017 and grew $184.3 million when compared to March 31, 2016. The growth in assets since March 31, 2016 was due mainly to an increase in loans held for investment of $158.1 million, a $27.3 million increase in investment securities, and a $11.3 million increase in other assets which was largely due to an increase in bank owned life insurance of $10.6 million. Offsetting these increases was a decrease in loans held for sale of $13.7 million. Total loans held for investment grew 17.3% year-over-year with commercial loans remaining the largest portfolio segment.

Total deposits at March 31, 2017 were $1.2 billion, an increase of $196.5 million when compared to March 31, 2016. At March 31, 2017, non-interest bearing deposits were $376.7 million, an increase of $41.5 million or 12.4% when compared to March 31, 2016. On a linked quarter basis non-interest bearing deposits grew 16.2% on an annualized basis. Interest-bearing deposits increased to $780.3 million at March 31, 2017, an increase of $155.1 million since March 31, 2016. A targeted marketing campaign continues to propel growth in this category which saw a year-over-year increase in savings and money market accounts of $134.5 million and an increase in non-brokered time deposits of $16.8 million. These increases were partially offset by a $14.3 million reduction in wholesale funding when comparing March 31, 2017 to March 31, 2016.

Non-performing assets (“NPAs”) decreased to $5.2 million at March 31, 2017 from $7.3 million at March 31, 2016, representing 0.37% and 0.60% of total assets, respectively. The allowance for loan loss was $13.7 million and $13.6 million at March 31, 2017 and 2016, respectively, and represented 1.28% of total loans held for investment at March 31, 2017 and 1.49% of total loans held for investment at March 31, 2016. The growth in the loan portfolio from the fourth quarter of 2016 as well as an increased allowance for one specific non-performing asset was responsible for the $1.4 million increase in the provision for loan loss when comparing first quarter 2016 to first quarter 2017.

Tangible book value per common share increased from $10.60 at March 31, 2016 to $11.22 at March 31, 2017. The tangible common equity ratio for Access National Corporation and its subsidiary bank was 8.64% at March 31, 2017, within the Corporation’s target range of 8.00% to 10.50%.

Access National Corporation is the parent company of Access National Bank, an independent, nationally chartered bank serving the business community of the greater Washington DC Metropolitan area. Additional information is available on our website at www.AccessNationalBank.com. Shares of Access National Corporation are traded on the NASDAQ Global Market under the symbol "ANCX".

Forward-Looking Statements

The information presented herein contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 regarding expectations or predictions of future financial or business performance or conditions. Forward-looking statements may be identified by words such as "may," "could," "will," "expect," "believe," "anticipate," "forecast," "intend," "plan," "prospects," "estimate," "potential," or by variations of such words or by similar expressions. These forward-looking statements are subject to numerous assumptions, risks and uncertainties which change over time. Forward-looking statements in this report may include, but are not limited to, statements about projected impacts of and financial results generated by the merger of Access and Middleburg Financial Corporation (“Middleburg”). Forward-looking statements speak only as of the date they are made and Access assumes no duty to update forward-looking statements.

In addition to factors previously disclosed in Access's reports filed with the SEC and those identified elsewhere in this release, the following factors, among others, could cause actual results to differ materially from the results expressed in or implied by forward-looking statements and historical performance: changes in asset quality and credit risk; changes in interest rates and capital markets; the introduction, timing and success of business initiatives; competitive conditions; and the inability to recognize cost savings or revenues or to implement integration plans associated with the merger of Access and Middleburg.

      Access National Corporation Consolidated Balance Sheet               March 31, December 31, March 31, 2017 2016 2016 (In Thousands Except for Share and Per Share Data)   (Unaudited)       (Unaudited)   ASSETS   Cash and due from banks $ 11,740 $ 9,186 $ 14,522   Interest-bearing balances and federal funds sold 31,866 81,873 27,110   Investment securities: Available-for-sale, at fair value 190,129 194,090 162,720

Held-to-maturity, at amortized cost (fair value of $9,273, $9,293 and $9,487, respectively)

  9,186     9,200     9,295

Total investment securities

199,315 203,290 172,015   Restricted Stock, at amortized cost 6,324 10,092 7,159   Loans held for sale - at fair value 36,299 35,676 49,977  

Loans held for investment net of allowance for loan losses of $13,727, $16,008 and $13,614, respectively

1,059,064 1,033,690 901,068   Premises, equipment and land, net 7,097 7,084 6,852   Other assets 49,642 49,817 38,332       Total assets $ 1,401,347   $ 1,430,708   $ 1,217,035   LIABILITIES AND SHAREHOLDERS' EQUITY

 

  LIABILITIES Noninterest-bearing deposits $ 376,674 $ 362,036 $ 335,219   Savings and interest-bearing deposits 472,105 440,585 308,986   Time deposits   308,211     251,706     316,252   Total deposits 1,156,990 1,054,327 960,457   Short-term borrowings 61,827 186,009 77,467   Long-term borrowings 50,000 60,000 55,000   Other liabilities and accrued expenses 9,596 9,842 10,070       Total Liabilities   1,278,413     1,310,178     1,102,994   SHAREHOLDERS' EQUITY

Common stock $0.835 par value; 60,000,000 authorized; issued and outstanding, 10,787,490, 10,636,242 and 10,570,056, respectively

9,008 8,881 8,826   Additional paid in capital 24,254 21,779 20,386   Retained earnings 91,198 91,439 83,897   Accumulated other comprehensive income (loss), net (1,526 ) (1,569 ) 932       Total shareholders' equity   122,934     120,530     114,041       Total liabilities and shareholders' equity $ 1,401,347   $ 1,430,708   $ 1,217,035                   Access National Corporation Consolidated Statement of Operations             Three Months Ended March 31, 2017   March 31, 2016 (In Thousands Except for Share and Per Share Data)   (unaudited)   INTEREST INCOME Interest and fees on loans $ 12,199 $ 10,876   Interest on federal funds sold and bank balances 131 70   Interest and dividends on securities   1,224   1,035 Total interest income 13,554 11,981   INTEREST EXPENSE Interest on deposits 1,502 1,150   Interest on other borrowings   362   281 Total interest expense   1,864   1,431 Net interest income 11,690 10,550   Provision for loan losses   1,400   - Net interest income after provision for loan losses 10,290 10,550   NONINTEREST INCOME Service charges and fees 280 260   Gain on sale of loans 3,345 3,830   Other Income   2,378   2,729 Total noninterest income 6,003 6,819   NONINTEREST EXPENSE Salaries and benefits 8,040 7,668   Occupancy and equipment 820 761   Other operating expense   4,886   2,700 Total noninterest expense   13,746   11,129 Income before income tax 2,547 6,240   Income tax expense   1,178   2,145 NET INCOME $ 1,369 $ 4,095   Earnings per common share: Basic $ 0.13 $ 0.39 Diluted $ 0.13 $ 0.39   Average outstanding shares: Basic 10,724,798 10,553,150 Diluted 10,857,235 10,606,359               Performance and Capital Ratios                           Three Months Three Months Three Months Three Months Three Months Twelve Months Ended Ended Ended Ended Ended Ended March 31, December 31, September 30, June 30, March 31, December 31, (Dollars In Thousands Except for Per Share Data)   2017   2016   2016   2016   2016   2016   Return on average assets (annualized) 0.39 % 0.89 % 1.34 % 1.54 % 1.35 % 1.27 % Return on average equity (annualized) 4.50 % 9.97 % 14.92 % 17.00 % 14.75 % 14.11 % Net interest margin 3.46 % 3.46 % 3.49 % 3.51 % 3.61 % 3.52 % Efficiency ratio - Bank only 53.26 % 47.06 % 50.16 % 50.10 % 51.20 % 49.59 % Total average equity to earning assets 8.99 % 9.28 % 9.30 % 9.36 % 9.50 % 9.36 % Tangible common equity ratio 8.64 % 8.31 % 8.78 % 8.94 % 9.23 % 8.31 %   Averages Assets $ 1,401,652 $ 1,351,622 $ 1,324,511 $ 1,268,504 $ 1,208,864 $ 1,288,582 Loans held for investment 1,052,167 990,517 947,622 915,218 905,382 939,837 Loans held for sale 24,461 44,454 63,667 45,357 34,607 47,060 Interest-bearing deposits & federal funds sold 64,628 60,300 72,680 84,008 52,862 67,457 Investment securities 209,533 204,794 194,131 182,751 176,448 189,585 Earning assets 1,353,360 1,299,883 1,275,763 1,225,910 1,169,183 1,242,923 Interest-bearing deposits 761,075 702,260 676,841 657,363 612,021 662,271 Total deposits 1,096,309 1,091,431 1,067,838 1,005,419 920,528 1,021,624 Repurchase agreements & federal funds purchased 28,367 18,765 14,881 13,981 17,442 16,270 FHLB short-term borrowings 86,200 50,728 38,043 51,154 86,429 56,522 FHLB long-term borrowings 59,555 60,163 75,000 74,341 64,615 68,525 Equity $ 121,724 $ 120,641 $ 118,654 $ 114,748 $ 111,068 $ 116,296   Allowance for loan losses/loans held for investment 1.28 % 1.53 % 1.52 % 1.47 % 1.49 % 1.53 % Total NPA $ 5,244 $ 6,922 $ 5,845 $ 1,866 $ 7,349 $ 6,922 NPA to total assets 0.37 % 0.48 % 0.43 % 0.14 % 0.60 % 0.48 %   Mortgage loan originations and brokered loans $ 94,500 $ 115,448 $ 168,774 $ 154,022 $ 106,622 $ 544,866 Gain on sale of mortgage loans net hedging activity $ 3,416 $ 6,899 $ 7,122 $ 6,579 $ 3,235 $ 23,835 Allowance for losses on mortgage loans sold $ 1,029 $ 1,029 $ 1,029 $ 1,029 $ 1,029 $ 1,029   Wealth Management segment - assets under management $ 676,865 $ 667,300 $ 655,000 $ 625,000 $ 611,000 $ 667,300   Tangible book value per common share $ 11.22 $ 11.15 $ 11.25 $ 11.00 $ 10.60 $ 11.15 Book value per common share $ 11.40 $ 11.33 $ 11.44 $ 11.19 $ 10.79 $ 11.33     Composition of Loan Portfolio       March 31, 2017   December 31, 2016   September 30, 2016   June 30, 2016   March 31, 2016

(Dollars In

    Percentage     Percentage     Percentage     Percentage     Percentage

Thousands)

  Amount   of Total   Amount   of Total   Amount   of Total   Amount   of Total   Amount   of Total   Commercial real estate - owner occupied $ 262,431 24.46 % $ 250,440 23.87 % $ 238,224 24.65 % $ 235,735 25.01 % $ 217,954 23.83 % Commercial real estate - non-owner occupied 205,452 19.15 184,688 17.59 174,342 18.04 153,206 16.25 153,433 16.77 Residential real estate 212,007 19.76 204,413 19.47 202,605 20.96 208,311 22.10 202,858 22.18 Commercial 294,451 27.45 311,486 29.67 264,794 27.40 257,139 27.28 258,520 28.26 Real estate construction 91,614 8.54 91,822 8.75 79,621 8.24 79,200 8.39 72,055 7.88 Consumer   6,836   0.64     6,849   0.65     6,959   0.71     9,138   0.97     9,862   1.08   Total loans $ 1,072,791 100.00 % $ 1,049,698 100.00 % $ 966,545 100.00 % $ 942,729 100.00 % $ 914,682 100.00 % Less allowance for loan losses   13,727   16,008   14,696   13,834   13,614 $ 1,059,064 $ 1,033,690 $ 951,849 $ 928,895 $ 901,068     Composition of Deposits       March 31, 2017   December 31, 2016   September 30, 2016   June 30, 2016   March 31, 2016 (Dollars In     Percentage     Percentage     Percentage     Percentage     Percentage Thousands)   Amount   of Total   Amount   of Total   Amount   of Total   Amount   of Total   Amount   of Total   Demand deposits $ 376,674 32.56 % $ 362,036 34.34 % $ 409,558 36.73 % $ 392,269 37.55 % $ 335,219 34.90 % Interest-bearing demand deposits 141,981 12.27 126,189 11.97 124,856 11.20 123,638 11.84 123,876 12.90 Savings and money market 284,182 24.56 270,310 25.64 265,308 23.79 206,566 19.78 149,679 15.59 CDARS time deposits 41,369 3.58 34,290 3.25 36,948 3.31 53,212 5.09 67,540 7.03 CDARS/ICS non-maturity deposits 42,960 3.71 40,925 3.88 46,156 4.14 35,247 3.37 35,238 3.67 Brokered deposits 110,254 9.53 57,389 5.44 68,483 6.14 69,139 6.62 106,150 11.05 Time deposits   159,570   13.79       163,188   15.48       163,744   14.69       164,474   15.75       142,755   14.86  

Total Deposits

$ 1,156,990   100.00 %   $ 1,054,327   100.00 %   $ 1,115,053   100.00 %   $ 1,044,545   100.00 %   $ 960,457   100.00 %     Yield on Average Earning Assets and Rates on Average Interest-Bearing Liabilities Three Months Ended         March 31, 2017   March 31, 2016   Average   Income /   Yield /   Average   Income /   Yield / (Dollars In Thousands)   Balance   Expense   Rate   Balance   Expense   Rate   Assets: Interest-earning assets: Securities $ 212,104 $ 1,224 2.31 % $ 176,332 $ 1,035 2.35 % Loans held for sale 24,461 250 4.09 % 34,607 344 3.98 % Loans(1) 1,052,167 11,949 4.54 % 905,382 10,532 4.65 % Interest-bearing balances and federal funds sold   64,628       131   0.81 %   52,862       70   0.53 % Total interest-earning assets 1,353,360 13,554 4.01 % 1,169,183 11,981 4.10 % Noninterest-earning assets: Cash and due from banks 11,700 11,707 Premises, land and equipment 7,102 6,676 Other assets 45,009 34,878 Less: allowance for loan losses   (15,519 )   (13,580 ) Total noninterest-earning assets   48,292     39,681   Total Assets $ 1,401,652   $ 1,208,864     Liabilities and Shareholders' Equity: Interest-bearing deposits: Interest-bearing demand deposits $ 141,315 $ 153 0.43 % $ 124,982 $ 107 0.34 % Money market deposit accounts 258,786 345 0.53 % 142,221 98 0.28 % Savings accounts 61,001 90 0.59 % 34,698 47 0.54 % Time deposits   299,973       914   1.22 %   310,120       898   1.16 % Total interest-bearing deposits 761,075 1,502 0.79 % 612,021 1,150 0.75 % Borrowings: FHLB short-term borrowings 28,367 16 0.23 % 17,442 4 0.09 % Securities sold under agreements to repurchase and federal funds purchased 86,200 166 0.77 % 86,429 123 0.57 % FHLB long-term borrowings   59,555       180   1.21 %   64,615       154   0.95 % Total borrowings   174,122       362   0.83 %   168,486       281   0.67 % Total interest-bearing deposits and borrowings 935,197 1,864 0.80 % 780,507 1,431 0.73 % Noninterest-bearing liabilities: Demand deposits 335,234 308,507 Other liabilities   9,497     8,782   Total liabilities 1,279,928 1,097,796 Shareholders' Equity   121,724     111,068   Total Liabilities and Shareholders' Equity $ 1,401,652   $ 1,208,864     Interest Spread(2) 3.21 % 3.37 %   Net Interest Margin(3) $ 11,690   3.46 % $ 10,550   3.61 %      

(1)

 

Loans placed on nonaccrual status are included in loan balances.

(2)

Interest spread is the average yield earned on earning assets, less the average rate incurred on interest-bearing liabilities.

(3)

 

Net interest margin is net interest income, expressed as a percentage of average earning assets.

                            Segment Reporting               Three Months Ended Commercial Mortgage Wealth Consolidated March 31, 2017     Banking Banking Management Other Eliminations Totals (In Thousands) Revenues: Interest income $ 13,394 $ 250 $ - $ 6 $ (96 ) $ 13,554 Gain on sale of loans - 3,345 - - - 3,345 Other revenues   765   1,126   754     336     (323 )   2,658 Total revenues   14,159   4,721   754     342     (419 )   19,557   Expenses: Interest expense 1,870 27 - 63 (96 ) 1,864 Salaries and employee benefits 4,418 3,031 591 - - 8,040 Other expenses   3,527   841   239     2,822     (323 )   7,106 Total operating expenses   9,815   3,899   830     2,885     (419 )   17,010   Income (loss) before income taxes $ 4,344 $ 822 $ (76 ) $ (2,543 ) $ -   $ 2,547   Total assets $ 1,351,257 $ 52,447 $ 2,739   $ 20,657   $ (25,753 ) $ 1,401,347     Three Months Ended Commercial Mortgage Wealth Consolidated March 31, 2016     Banking Banking Management Other Eliminations Totals (In Thousands) Revenues: Interest income $ 11,756 $ 344 $ - $ 4 $ (123 ) $ 11,981 Gain on sale of loans - 3,830 - - - 3,830 Other revenues   936   1,247   778     347     (319 )   2,989 Total revenues   12,692   5,421   778     351     (442 )   18,800   Expenses: Interest expense 1,436 51 - 67 (123 ) 1,431 Salaries and employee benefits 3,923 3,185 560 - - 7,668 Other expenses   1,840   1,069   291     580     (319 )   3,461 Total operating expenses   7,199   4,305   851     647     (442 )   12,560   Income (loss) before income taxes $ 5,493 $ 1,116 $ (73 ) $ (296 ) $ -   $ 6,240   Total assets $ 1,185,681 $ 32,716 $ 2,686   $ 17,283   $ (21,331 ) $ 1,217,035  

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Access National CorporationMichael Clarke, 703-871-2100