Access National Corp (ANCX) SEC Filing 8-K Material Event for the period ending Thursday, October 25, 2018

 

Exhibit 99.1

 

	PRESS RELEASE

 

CONTACT:	Michael W. Clarke	FOR IMMEDIATE RELEASE:	October 25, 2018
	CEO
	703-871-2100

 

Access National Grows Deposits and Loans, Hikes Dividend

 

Reston, Virginia. Access National Corporation (NASDAQ: ANCX) (the “Corporation” or “Access”), parent company for Access National Bank (the “Bank”) and Middleburg Investment Group, reported third quarter 2018 net income of $9.6 million, or $0.46 per diluted share. This represents the Corporation’s 73^rd consecutive quarterly profit over its 75 quarter history. Consistent with management’s objective of a 40% dividend payout ratio against level and sustainable earnings, the Board of Directors declared a dividend of $0.17 per share for common shareholders of record as of November 08, 2018 and payable on November 23, 2018. This dividend reflects a $0.01 increase from the prior quarter.

 

Highlights

·

For the three month period ended September 30, 2018, net income increased 7.2% compared to the preceding period and 37.2% compared to the same period of the prior year;

·

Gross loans held for investment increased $110.1 million (22.2% annualized) during the three-month period to $2.1 billion at September 30, 2018;

·

Excluding brokered deposits, customer deposits increased $131.8 million (25.0% annualized) during the three month period ended September 30, 2018 to $2.2 billion;

·

Demand deposits of $1.2 billion at September 30, 2018 comprised 52.9% of total deposits, inclusive of $757.9 million of non-interest bearing demand deposits or 33.0% of the deposit portfolio. Non-interest bearing demand deposits increased $38.0 million and $47.2 million during the three month and twelve month periods ended September 30, 2018, respectively; and

·

Tangible book value1 per common share was $12.33 at September 30, 2018, an increase of $0.34 from the linked quarter.

 

According to CEO Michael Clarke, “Third quarter 2018 reflects strong performance against our stated strategic growth and profitability measures as customer deposits and loans exceeded a linked quarter growth rate in excess of $200 million per annum. We experienced strong increases in nominal earnings during the period and exceeded our strategic profitability measures with Return on Tangible Common Average Equity (ROTCAE) of 15.20% compared to the target of 13.25%, and Return on Average Assets of 1.30% compared to the target of 1.25%.” Mr. Clarke continued, “The announced merger with Union Bankshares Corporation (“Union”) will enable us to further accelerate growth and opportunity in our markets. We are excited about being an important part of the Union team and the combined positioning as Virginia’s regional bank.”

 

On a linked quarter basis, the mortgage segment margins increased while origination volume decreased, resulting in pretax earnings of $1.0 million for the three months ended September 30, 2018 compared to $0.9 million for the linked quarter.

 

During the period, we evaluated the accounting for our low income housing tax credits as well as investments in small business investment company funds (SBICs) and elected to change the policy for these investments. We believe the change better reflects our economic interest in these investments. We believe that the results of this change are immaterial to the results of our operations and they were recorded through the current period as a one-time after-tax gain of $882 thousand or $0.04 per share on a fully diluted basis. This includes $608 thousand ($445 thousand pre-tax credit to income with a $163 thousand credit to income tax provision) related to low income housing tax credits and a $466 thousand pre-tax gain related to equity investments.

 

¹ Non-GAAP financial information. See “Reconciliation of Non-GAAP Financial Measures” at end of release.

 

 

The Corporation’s efficiency ratio has improved each quarter during 2018 and is within the stated strategic target threshold of 65% or better at September 30, 2018 at 60.19%.

 

The net interest margin on a fully tax equivalent (non-GAAP) basis remained consistent at 3.67% when comparing third quarter 2018 to the linked quarter. Net purchase mark accretion included in net interest income was $634 thousand for the third quarter 2018 and $781 thousand for the linked quarter. 

 

Gross loans Held for Investment increased $110.1 million during the quarter to $2.1 billion at September 30, 2018. As of September 30, 2018, commercial and industrial loans as well as owner occupied commercial real estate loans combined to account for 49% of the loan portfolio, reflecting the Corporation’s continued focus on lower-middle-market businesses. The Corporation’s priority focus remains on expanding borrowers in these portfolios as a driver of future growth in the loan portfolio, along with related core deposits.

 

Noninterest-bearing deposits at September 30, 2018 were $757.9 million, an increase of $38.0 million compared to the second quarter of 2018. Noninterest-bearing deposits remain the largest and most attractive source of funding for the Corporation, comprising 33% of the deposit portfolio. When combined with interest-bearing demand deposit accounts, total transaction accounts comprise 53% of the total deposit portfolio, reducing reliance of non-core and more price sensitive funding.

 

Total deposits at September 30, 2018 were $2.3 billion, an increase of $168.1 million from the $2.1 billion at June 30, 2018. The increase in interest-bearing deposits was most pronounced in the savings and interest-bearing deposits category. The Corporation’s strategy places a high priority on the maintenance and expansion of core deposits, particularly transaction accounts. Premium interest rates are targeted to existing high value core depositors and used offensively to acquire new accounts in selective market segments.

 

Short-term borrowings decreased $77.4 million during the three months ended September 30, 2018. This decrease is primarily attributable to the increase in core deposit accounts seen during the quarter.

 

Asset quality remained strong for the quarter. Non-performing assets (“NPAs”) increased to $6.1 million at September 30, 2018 from $6.0 million at June 30, 2018, representing 0.20% and 0.21% of total assets, respectively. Included in the NPA total is $644 thousand in other real estate owned. The allowance for loan loss was $17.3 million and $15.8 million at September 30, 2018 and December 31, 2017, respectively, and represented 0.83% of total loans held for investment at the end of the third quarter 2018.

 

Tangible book value² per common share increased to $12.33 at September 30, 2018 from $11.52 at December 31, 2017. The tangible common equity ratio for Access National Corporation and its subsidiary bank was 9.09% at September 30, 2018, within the Corporation’s target range of 8.50% to 9.50%.

 

Access National Corporation is the parent company of Access National Bank and Middleburg Investment Group serving Northern and Central Virginia. 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".

 

Access National Corporation will hold a conference call on Friday, October 26, 2018 at 9:00 a.m. Eastern Time during which management will review earnings and performance trends. Callers wishing to participate may call toll-free by dialing (844) 348-3796; international callers wishing to participate may do so by dialing (213) 358-0951.  The conference ID number is 6696465.

 

² Non-GAAP financial information. See “Reconciliation of Non-GAAP Financial Measures” at end of release.

 

 

Forward-Looking Statements

 

Certain statements in this press release may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, projections, predictions, expectations, or beliefs about future events or results and are not statements of historical fact. Such statements also include statements as to the anticipated impact of the acquisition by Union Bankshares Corporation (“Union”) of Access. Such forward-looking statements are based on various assumptions as of the time they are made, and are inherently subject to known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements are often accompanied by words that convey projected future events or outcomes such as “expect,” “believe,” “estimate,” “plan,” “project,” “anticipate,” “intend,” “will,” “may,” “view,” “opportunity,” “potential,” or words of similar meaning or other statements concerning opinions or judgment of Access or its management about future events. Although Access believes that its expectations with respect to forward-looking statements are based upon reasonable assumptions within the bounds of its existing knowledge of its business and operations, there can be no assurance that actual results, performance, or achievements of Access will not differ materially from any projected future results, performance, or achievements expressed or implied by such forward-looking statements. Actual future results performance, or achievements may differ materially from historical results or those anticipated depending on a variety of factors, including but not limited to, changes in asset quality and credit risk, changes in interest rates and capital markets, competitive conditions, the businesses of Union and Access may not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected, expected revenue synergies and cost savings from the proposed acquisition may not be fully realized or realized within the expected time frame, revenues following the proposed acquisition may be lower than expected, customer and employee relationships and business operations may be disrupted by the proposed acquisition, the diversion of management time on acquisition-related issues, changes in Union’s share price before closing, risks relating to the potential dilutive effect of shares of Union common stock to be issued in the proposed transaction, the ability to obtain regulatory, shareholder or other approvals or other conditions to closing on a timely basis or at all, the ability to close the proposed acquisition on the expected timeframe, or at all, and that closing may be more difficult, time-consuming or costly than expected, the reaction to the proposed acquisition of the companies’ customers, employees and counterparties, and other risk factors, many of which are beyond the control of Union and Access. We refer you to the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of Access’s Annual Report on Form 10-K for the year ended December 31, 2017 and comparable “risk factors” sections of Access’s Quarterly Reports on Form 10-Q and other filings, which have been filed with the SEC and are available on the SEC’s website at www.sec.gov. All of the forward-looking statements made in this press release are expressly qualified by the cautionary statements contained or referred to herein. The actual results or developments anticipated may not be realized or, even if substantially realized, they may not have the expected consequences to or effects on Access or its business or operations. Readers are cautioned not to rely too heavily on the forward-looking statements contained in this press release. Forward-looking statements speak only as of the date they are made and Access does not undertake any obligation to update, revise or clarify these forward-looking statements, whether as a result of new information, future events or otherwise.

 

Important Additional Information will be Filed with the SEC

 

As previously disclosed, Access and Union have entered into an Agreement and Plan of Reorganization pursuant to which Access will merge with and into Union. Union will be the surviving corporation in the merger.

 

This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval with respect to the proposed acquisition by Union of Access. No offer of securities shall be made except by means of a prospectus meeting the requirements of the Securities Act of 1933, as amended, and no offer to sell or solicitation of an offer to buy shall be made in any jurisdiction in which such offer, solicitation or sale would be unlawful.

 

In connection with the proposed acquisition, Union will file with the Securities and Exchange Commission (the “SEC”) a Registration Statement on Form S-4 that will include a joint proxy statement of Access and Union and a prospectus of Union (the “Joint Proxy/Prospectus”), and each of Access and Union may file with the SEC other relevant documents concerning the proposed transaction. A definitive Joint Proxy/Prospectus will be sent to the shareholders of Access and Union. Investors and shareholders of Access and Union are urged to read carefully and in their entirety the Registration Statement and Joint Proxy/Prospectus when they become available and any other relevant documents filed with the SEC by Access and Union, as well as any amendments or supplements to those documents, because they will contain important information about the proposed transaction.

 

Investors and shareholders may obtain free copies of the Registration Statement and the Joint Proxy/Prospectus (when available) and other documents filed with the SEC by Access and Union through the website maintained by the SEC at www.sec.gov. Free copies of the Registration Statement and the Joint Proxy/Prospectus and other documents filed with the SEC also may be obtained by directing a request by telephone or mail to Access National Corporation, 1800 Robert Fulton Drive, Suite 300, Reston, VA 20191. Attention: Sheila Linton (telephone: (703) 871-2100) or Union Bankshares Corporation, 1051 East Cary Street, Suite 1200, Richmond, Virginia 23219, Attention: Investor Relations (telephone: (804) 633-5031), or by accessing Access’s website at www.accessnationalbank.com under “Investor Relations” or Union’s website at www.bankatunion.com under “Investor Relations.” The information on Access’s and Union’s websites is not, and shall not be deemed to be, a part of this Form 8-K or incorporated into other filings either company makes with the SEC.

 

Participants in the Solicitation

 

Access, Union and their respective directors and certain of their executive officers and employees may be deemed to be participants in the solicitation of proxies from the shareholders of Access or Union in connection with the proposed transaction. Information about the directors and executive officers of Access and their ownership of Access Common Stock is set forth in the proxy statement for Access’s 2018 annual meeting of shareholders, which was filed with the SEC on April 12, 2018. Information about the directors and executive officers of Union and their ownership of Union Common Stock is set forth in the proxy statement for Union’s 2018 annual meeting of shareholders, which was filed with the SEC on March 21, 2018. Information regarding the persons who may, under the rules of the SEC, be deemed participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the Joint Proxy/Prospectus and other relevant materials to be filed with the SEC when they become available. Free copies of these documents may be obtained as described above.

 

  

Access National Corporation

Consolidated Balance Sheet - Unaudited

 

		September 30,				June 30,				December 31,				September 30,
(In Thousands Except for Share and Per Share Data)			2018				2018				2017				2017
ASSETS
Cash and due from banks		$	14,062			$	17,346			$	29,855			$	12,774
Interest-bearing balances and federal funds sold			110,308				105,626				92,458				117,159
Investment securities:
Available-for-sale, at fair value			436,484				421,975				406,067				393,650
Marketable equity, at fair value			-				1,340				1,379				1,390
Held-to-maturity, amortized cost (fair value of $16,368, $16,419, $16,379, and $16,416, respectively)			16,314				16,350				15,721				15,778
Total investment securities			452,798				439,665				423,167				410,818
Restricted Stock, at amortized cost			21,192				23,742				16,572				14,447
Loans held for sale - at fair value			36,600				51,365				31,999				26,234
Loans held for investment net of allowance for loan losses of $17,349, $16,543, $15,805, and $15,692, respectively			2,076,921				1,967,646				1,963,104				1,953,968
Premises, equipment and land, net			27,768				28,082				27,797				26,400
Goodwill and intangible assets, net			184,028				184,838				185,161				182,156
Other assets			97,646				102,275				103,781				129,113
Total assets		$	3,021,323			$	2,920,585			$	2,873,894			$	2,873,069
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Noninterest-bearing deposits		$	757,900			$	719,873			$	744,960			$	710,691
Interest-bearing demand deposits			481,676				477,329				496,677				490,759
Savings and interest-bearing deposits			711,262				625,120				623,889				658,799
Time deposits			344,026				304,398				368,622				425,963
Total deposits			2,294,864				2,126,720				2,234,148				2,286,212
Short-term borrowings			212,561				289,934				145,993				79,527
Long-term borrowings			45,000				45,000				40,000				60,000
Trust preferred debentures			3,942				3,922				3,883				3,863
Other liabilities and accrued expenses			23,013				20,727				28,246				23,294
Total Liabilities			2,579,380				2,486,303				2,452,270				2,452,896
SHAREHOLDERS' EQUITY
Common stock $0.835 par value; 60,000,000 authorized;
issued and outstanding, 20,920,262, 20,796,193, 20,534,163, and 20,449,738, respectively			17,468				17,365				17,146				17,076
Additional paid in capital			317,626				314,367				307,670				305,682
Retained earnings			115,973				109,690				98,584				98,607
Accumulated other comprehensive loss, net			(9,124	)			(7,140	)			(1,776	)			(1,192	)
Total shareholders' equity			441,943				434,282				421,624				420,173
Total liabilities and shareholders' equity		$	3,021,323			$	2,920,585			$	2,873,894			$	2,873,069

 

  

Access National Corporation

Consolidated Statement of Operations - Unaudited

 

		Three Months Ended												Nine Months Ended
(In Thousands Except for Share and Per Share Data)		September 30, 2018				June 30, 2018				September 30, 2017				September 30, 2018				September 30, 2017
INTEREST INCOME
Interest and fees on loans		$	25,687			$	24,143			$	24,306			$	73,241			$	60,251
Interest on federal funds sold and bank balances			578				437				394				1,532				746
Interest and dividends on securities			3,047				2,642				2,992				8,369				7,388
Total interest income			29,312				27,222				27,692				83,142				68,385
INTEREST EXPENSE
Interest on deposits			3,902				3,017				2,639				9,717				6,560
Interest on other borrowings			1,345				1,190				459				3,100				1,366
Total interest expense			5,247				4,207				3,098				12,817				7,926
Net interest income			24,065				23,015				24,594				70,325				60,459
Provision for loan losses			700				652				900				2,102				3,200
Net interest income after provision for loan losses			23,365				22,363				23,694				68,223				57,259
NONINTEREST INCOME
Service charges and fees			485				494				560				1,456				1,509
Gain on sale of loans			4,465				4,196				5,594				11,453				14,985
Other Income			2,494				4,400				2,369				11,020				6,917
Total noninterest income			7,444				9,090				8,523				23,929				23,411
NONINTEREST EXPENSE
Salaries and benefits			11,113				12,529				11,100				35,370				31,800
Occupancy and equipment			2,000				1,640				3,019				5,881				5,820
Other operating expense			5,853				6,257				8,674				18,115				23,594
Total noninterest expense			18,966				20,426				22,793				59,366				61,214
Income before income tax			11,843				11,027				9,424				32,786				19,456
Income tax expense			2,233				2,065				2,422				6,128				6,001
NET INCOME			9,610				8,962				7,002				26,658				13,455
Earnings per common share:
Basic		$	0.46			$	0.43			$	0.34			$	1.28			$	0.77
Diluted		$	0.46			$	0.43			$	0.34			$	1.28			$	0.77
Average outstanding shares:
Basic			20,847,319				20,736,727				20,409,696				20,734,621				17,156,521
Diluted			20,925,247				20,822,853				20,508,875				20,821,096				17,273,367

 

  

Performance and Capital Ratios - Unaudited

 

		Three Months				Three Months				Three Months				Three Months				Nine Months				Nine Months				Twelve Months
		Ended				Ended				Ended				Ended				Ended				Ended				Ended
		September 30,				June 30,				March 31,				September 30,				September 30,				September 30,				December 31,
(Dollars In Thousands)		2018				2018				2018				2017				2018				2017				2017
Return on average assets (annualized)			1.30	%			1.26	%			1.13	%			0.96	%			1.23	%			0.75	%			0.67	%
Return on average tangible equity (annualized) (1)			15.20	%			14.73	%			13.57	%			11.47	%			14.52	%			9.33	%			8.15	%
Net interest margin - fully tax equivalent basis (1)			3.67	%			3.67	%			3.70	%			3.86	%			3.68	%			3.91	%			3.88	%
Net interest margin			3.62	%			3.62	%			3.65	%			3.76	%			3.63	%			3.84	%			3.81	%
Cost of funds			1.17	%			0.98	%			0.79	%			0.70	%			0.98	%			0.73	%			0.73	%
Access National Bank efficiency ratio (2)			53.14	%			57.36	%			59.65	%			57.56	%			56.45	%			57.41	%			55.72	%
Access National Corporation efficiency ratio (2)			60.19	%			63.62	%			65.19	%			68.82	%			62.99	%			72.99	%			69.61	%
Total average equity to earning assets			16.47	%			16.86	%			16.59	%			16.00	%			16.64	%			18.10	%			14.82	%
Tangible common equity ratio (1)			9.09	%			9.12	%			9.10	%			8.85	%			9.09	%			8.85	%			8.79	%
Averages
Assets		$	2,953,987			$	2,848,307			$	2,856,201			$	2,922,105			$	2,886,998			$	2,396,103			$	2,453,894
Loans held for investment, gross			2,038,292				1,935,422				1,950,077				2,002,842				1,974,914				1,614,893				1,704,040
Loans held for sale			36,672				41,515				21,257				28,734				33,205				27,165				27,881
Interest-bearing deposits & federal funds sold			110,140				110,800				136,969				136,222				119,205				105,360				104,566
Investment securities			461,708				444,779				434,003				437,628				446,932				343,360				362,614
Earning assets			2,656,213				2,541,454				2,548,836				2,617,443				2,582,555				2,101,947				2,212,020
Interest-bearing deposits			1,502,982				1,440,998				1,517,030				1,566,286				1,486,956				1,257,364				1,327,262
Total deposits			2,201,473				2,114,617				2,215,222				2,277,760				2,177,107				1,810,139				1,922,249
Repurchase agreements & federal funds purchased			50,135				56,693				57,344				58,149				54,698				46,209				48,378
FHLB short term borrowings			193,784				180,348				91,002				59,697				155,421				67,774				67,907
FHLB long-term borrowings			45,000				42,088				40,000				82,790				42,381				73,040				66,329
Trust Preferred debt			3,930				3,911				3,891				3,029				3,911				2,289				2,691
Equity			437,398				428,590				422,780				418,678				429,642				380,378				327,738
Tangible equity (1)		$	252,864			$	243,232			$	238,381			$	243,974			$	244,868			$	192,150			$	202,408
Allowance for loan losses		$	17,349			$	16,543			$	15,928			$	15,692			$	17,349			$	15,692			$	15,805
Allowance for loan losses/loans held for investment			0.83	%			0.83	%			0.83	%			0.80	%			0.83	%			0.80	%			0.80	%
Remaining purchase marks on performing loans		$	8,838			$	9,615			$	10,415			$	12,444			$	8,838			$	12,444			$	11,241
Purchased credit impaired loans		$	4,509			$	4,632			$	4,702			$	5,184			$	4,509			$	5,184			$	4,969
Remaining purchase marks on credit impaired loans		$	1,592			$	1,720			$	1,749			$	694			$	1,592			$	694			$	1,175
Total NPA		$	6,106			$	6,049			$	7,453			$	7,817			$	6,106			$	7,817			$	5,270
NPA to total assets			0.20	%			0.21	%			0.26	%			0.27	%			0.20	%			0.27	%			0.18	%
Mortgage loan originations and brokered loans		$	85,087			$	123,157			$	84,411			$	107,706			$	292,655			$	319,164			$	432,678
Gain on sale of mortgage loans net hedging activity		$	4,137			$	4,251			$	3,273			$	5,371			$	11,661			$	14,208			$	19,192
Allowance for losses on mortgage loans sold		$	953			$	953			$	953			$	987			$	953			$	987			$	953
Wealth Services segment - assets under management		$	2,012,526			$	1,949,992			$	1,942,526			$	1,935,780			$	2,012,526			$	1,935,780			$	1,955,720
Book value per common share		$	21.13			$	20.88			$	20.62			$	20.55			$	21.13			$	20.55			$	20.53
Tangible book value per common share (1)		$	12.33			$	11.99			$	11.65			$	11.64			$	12.33			$	11.64			$	11.52

 

(1) Non-GAAP financial information. See "Reconciliation of Non-GAAP Financial Measures" at end of release.

(2) Efficiency ratio is non-interest expense divided by the sum of net interest income and non-interest income.

 

 

Composition of Loan Portfolio - Unaudited

 

		September 30, 2018								June 30, 2018								March 31, 2018								December 31, 2017								September 30, 2017
(Dollars In Thousands)		Amount				Percentage of Total				Amount				Percentage of Total				Amount				Percentage of Total				Amount				Percentage of Total				Amount				Percentage of Total
Commercial real estate  - owner occupied		$	525,047				25.07	%		$	478,928				24.13	%		$	462,298				24.02	%		$	467,082				23.60	%		$	443,128				22.50	%
Commercial real estate - non-owner occupied			467,495				22.32				457,940				23.08				419,139				21.77				436,083				22.04				435,181				22.09
Residential real estate			459,989				21.96				460,269				23.20				476,366				24.75				489,669				24.74				512,621				26.03
Commercial			507,269				24.22				464,270				23.40				437,287				22.72				463,652				23.43				449,450				22.82
Real estate construction			113,790				5.43				99,164				5.00				104,528				5.43				97,481				4.93				104,193				5.29
Consumer			20,680				1.00				23,618				1.19				25,293				1.31				24,942				1.26				25,087				1.27
Total loans		$	2,094,270				100.00	%		$	1,984,189				100.00			$	1,924,911				100.00	%		$	1,978,909				100.00	%		$	1,969,660				100.00	%
Less allowance for loan losses			17,349								16,543								15,928								15,805								15,692
		$	2,076,921							$	1,967,646							$	1,908,983							$	1,963,104							$	1,953,968

 

Composition of Deposits - Unaudited

 

		September 30, 2018								June 30, 2018								March 31, 2018								December 31, 2017								September 30, 2017
(Dollars In Thousands)		Amount				Percentage of Total				Amount				Percentage of Total				Amount				Percentage of Total				Amount				Percentage of Total				Amount				Percentage of Total
Demand deposits		$	757,900				33.03	%		$	719,873				33.85	%		$	706,128				32.14	%		$	744,960				33.34	%		$	710,691				31.09	%
Interest-bearing demand deposits			455,769				19.86				462,355				21.74				501,745				22.84				486,621				21.78				480,620				21.02
Savings and money market			670,497				29.22				585,673				27.54				616,879				28.08				580,827				26.00				616,596				26.97
CDARS time deposits			17,050				0.74				13,666				0.64				17,247				0.78				21,582				0.97				37,836				1.65
CDARS/ICS non-maturity deposits			66,604				2.90				53,233				2.50				50,233				2.29				48,011				2.15				47,219				2.07
Brokered deposits			53,900				2.35				17,590				0.83				23,244				1.06				51,028				2.28				71,090				3.11
Time deposits			273,144				11.90				274,330				12.90				281,452				12.81				301,119				13.48				322,160				14.09
Total Deposits		$	2,294,864				100.00	%		$	2,126,720				100.00	%		$	2,196,928				100.00	%		$	2,234,148				100.00	%		$	2,286,212				100.00	%

 

  

Yield on Average Earning Assets and Rates on Average Interest-Bearing Liabilities

Three Months Ended - Unaudited

 

		September 30, 2018												June 30, 2018												September 30, 2017
		Average				Income /				Yield /				Average				Income /				Yield /				Average				Income /				Yield /
(Dollars In Thousands)		Balance				Expense				Rate				Balance				Expense				Rate				Balance				Expense				Rate
Assets:
Interest-earning assets:
Securities		$	471,109			$	3,047				2.59	%		$	453,717			$	2,642				2.33	%		$	449,645			$	2,992				2.66	%
Loans held for sale			36,672				450				4.91	%			41,515				477				4.59	%			28,734				299				4.16	%
Loans(1)			2,038,292				25,237				4.95	%			1,935,422				23,666				4.89	%			2,002,842				24,007				4.79	%
Interest-bearing balances and federal funds sold			110,140				578				2.10	%			110,800				437				1.59	%			136,222				394				1.16	%
Total interest-earning assets			2,656,213				29,312				4.41	%			2,541,454				27,222				4.28	%			2,617,443				27,692				4.23	%
Noninterest-earning assets:
Cash and due from banks			15,050												15,953												36,260
Premises, land and equipment			27,996												28,087												30,382
Other assets			271,592												279,127												253,424
Less: allowance for loan losses			(16,864	)											(16,314	)											(15,404	)
Total noninterest-earning assets			297,774												306,853												304,662
Total Assets		$	2,953,987											$	2,848,307											$	2,922,105
Liabilities and Shareholders' Equity:
Interest-bearing deposits:
Interest-bearing demand deposits		$	494,436			$	797				0.64	%		$	490,619			$	680				0.55	%		$	483,370			$	412				0.34	%
Money market deposit accounts			507,888				1,483				1.17	%			466,538				1,047				0.90	%			435,241				821				0.75	%
Savings accounts			165,937				242				0.58	%			174,392				233				0.53	%			199,109				90				0.18	%
Time deposits			334,721				1,380				1.65	%			309,449				1,057				1.37	%			448,566				1,316				1.17	%
Total interest-bearing deposits			1,502,982				3,902				1.04	%			1,440,998				3,017				0.84	%			1,566,286				2,639				0.67	%
Borrowings:
FHLB short-term borrowings			193,784				976				2.01	%			180,348				866				1.92	%			59,697				207				1.39	%
Securities sold under agreements to repurchase and federal funds purchased			50,135				13				0.10	%			56,693				14				0.10	%			58,149				16				0.11	%
Subordinated debentures			3,930				87				8.81	%			3,911				84				8.63	%			3,029				35				4.62	%
FHLB long-term borrowings			45,000				269				2.39	%			42,088				226				2.14	%			82,790				201				0.97	%
Total borrowings			292,849				1,345				1.84	%			283,040				1,190				1.68	%			203,665				459				0.90	%
Total interest-bearing deposits and borrowings			1,795,831				5,247				1.17	%			1,724,038				4,207				0.98	%			1,769,951				3,098				0.70	%
Noninterest-bearing liabilities:
Demand deposits			698,491												673,619												711,474
Other liabilities			22,267												22,060												22,002
Total liabilities			2,516,589												2,419,717												2,503,427
Shareholders' Equity			437,398												428,590												418,678
Total Liabilities and Shareholders' Equity		$	2,953,987											$	2,848,307											$	2,922,105
Interest Spread(2)											3.25	%											3.30	%											3.53	%
Net Interest Margin(3)						$	24,065				3.62	%						$	23,015				3.62	%						$	24,594				3.76	%

 

⁽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.

 

  

Yield on Average Earning Assets and Rates on Average Interest-Bearing Liabilities
Nine Months Ended - Unaudited

 

		September 30, 2018												September 30, 2017
		Average				Income /				Yield /				Average				Income /				Yield /
(Dollars In Thousands)		Balance				Expense				Rate				Balance				Expense				Rate
Assets:
Interest-earning assets:
Securities		$	455,231			$	8,369				2.45	%		$	354,529			$	7,388				2.78	%
Loans held for sale			33,205				1,154				4.63	%			27,165				846				4.15	%
Loans(1)			1,974,914				72,087				4.87	%			1,614,893				59,405				4.90	%
Interest-bearing balances and federal funds sold			119,205				1,532				1.71	%			105,360				746				0.94	%
Total interest-earning assets			2,582,555				83,142				4.29	%			2,101,947				68,385				4.34	%
Noninterest-earning assets:
Cash and due from banks			16,409												21,552
Premises, land and equipment			28,138												21,692
Other assets			276,307												265,578
Less: allowance for loan losses			(16,411	)											(14,666	)
Total noninterest-earning assets			304,442												294,156
Total Assets		$	2,886,998											$	2,396,103
Liabilities and Shareholders' Equity:
Interest-bearing deposits:
Interest-bearing demand deposits		$	495,862			$	2,067				0.56	%		$	352,647			$	910				0.34	%
Money market deposit accounts			489,764				3,460				0.94	%			352,525				1,644				0.62	%
Savings accounts			171,256				684				0.53	%			146,773				392				0.36	%
Time deposits			330,074				3,506				1.42	%			405,419				3,614				1.19	%
Total interest-bearing deposits			1,486,956				9,717				0.87	%			1,257,364				6,560				0.70	%
Borrowings:
FHLB short-term borrowings			155,421				2,192				1.88	%			67,774				593				1.17	%
Securities sold under agreements to repurchase and federal funds purchased			54,698				41				0.10	%			46,209				58				0.17	%
Subordinated debentures			3,911				246				8.37	%			2,289				146				8.50	%
FHLB long-term borrowings			42,381				621				1.95	%			73,040				569				1.04	%
Total borrowings			256,412				3,100				1.61	%			189,312				1,366				0.96	%
Total interest-bearing deposits and borrowings			1,743,367				12,817				0.98	%			1,446,676				7,926				0.73	%
Noninterest-bearing liabilities:
Demand deposits			690,151												552,775
Other liabilities			23,838												16,274
Total liabilities			2,457,356												2,015,725
Shareholders' Equity			429,642												380,378
Total Liabilities and Shareholders' Equity		$	2,886,998											$	2,396,103
Interest Spread(2)											3.31	%											3.61	%
Net Interest Margin(3)						$	70,325				3.63	%						$	60,459				3.84	%

 

⁽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 - Unaudited

 

Three Months Ended		Commercial				Mortgage				Trust & Wealth												Consolidated
September 30, 2018		Banking				Banking				Management				Other				Eliminations				Totals
		(In Thousands)
Revenues:
Interest income		$	28,957			$	450			$	4			$	10			$	(109	)		$	29,312
Gain on sale of loans			-				4,465				-				-				-				4,465
Other revenues			2,152				(743	)			1,688				219				(337	)			2,979
Total revenues			31,109				4,172				1,692				229				(446	)			36,756
Expenses:
Interest expense			5,169				41				-				146				(109	)			5,247
Salaries and employee benefits			7,800				2,284				979				-				50				11,113
Other expenses			6,684				819				552				885				(387	)			8,553
Total operating expenses			19,653				3,144				1,531				1,031				(446	)			24,913
Income (loss) before income taxes		$	11,456			$	1,027			$	161			$	(802	)		$	-			$	11,843
Total assets		$	2,978,843			$	38,763			$	13,166			$	26,808			$	(36,257	)		$	3,021,323

 

Three Months Ended		Commercial				Mortgage				Trust & Wealth												Consolidated
June 30, 2018		Banking				Banking				Management				Other				Eliminations				Totals
		(In Thousands)
Revenues:
Interest income		$	26,841			$	477			$	3			$	6			$	(105	)		$	27,222
Gain on sale of loans			-				4,196				-				-				-				4,196
Other revenues			1,634				373				2,726				491				(330	)			4,894
Total revenues			28,475				5,046				2,729				497				(435	)			36,312
Expenses:
Interest expense			4,130				39				-				143				(105	)			4,207
Salaries and employee benefits			8,324				3,130				1,075				-				-				12,529
Other expenses			6,292				971				660				956				(330	)			8,549
Total operating expenses			18,746				4,140				1,735				1,099				(435	)			25,285
Income (loss) before income taxes		$	9,729			$	906			$	994			$	(602	)		$	-			$	11,027
Total assets		$	2,871,045			$	40,293			$	12,301			$	23,435			$	(26,489	)		$	2,920,585

 

Three Months Ended		Commercial				Mortgage				Trust & Wealth												Consolidated
September 30, 2017		Banking				Banking				Management				Other				Eliminations				Totals
		(In Thousands)
Revenues:
Interest income		$	27,429			$	299			$	4			$	5			$	(45	)		$	27,692
Gain on sale of loans			-				5,594				-				-				-				5,594
Other revenues			1,977				(740	)			1,617				312				(237	)			2,929
Total revenues			29,406				5,153				1,621				317				(282	)			36,215
Expenses:
Interest expense			3,072				(25	)			-				96				(45	)			3,098
Salaries and employee benefits			7,334				2,898				868				-				-				11,100
Other expenses			8,724				1,149				1,850				1,107				(237	)			12,593
Total operating expenses			19,130				4,022				2,718				1,203				(282	)			26,791
Income (loss) before income taxes		$	10,276			$	1,131			$	(1,097	)		$	(886	)		$	-			$	9,424
Total assets		$	2,810,037			$	26,485			$	41,002			$	19,756			$	(24,211	)		$	2,873,069

 

  

Segment Reporting - Unaudited

 

Nine Months Ended		Commercial				Mortgage				Trust & Wealth												Consolidated
September 30, 2018		Banking				Banking				Management				Other				Eliminations				Totals
Revenues:
Interest income		$	82,085			$	1,154			$	9			$	22			$	(128	)		$	83,142
Gain on sale of loans			-				11,453				-				-				-				11,453
Other revenues			5,291				899				6,155				1,128				(997	)			12,476
Total revenues			87,376				13,506				6,164				1,150				(1,125	)			107,071
Expenses:
Interest expense			12,593				(72	)			-				424				(128	)			12,817
Salaries and employee benefits			24,052				8,291				3,002				-				25				35,370
Other expenses			20,261				2,496				1,694				2,669				(1,022	)			26,098
Total operating expenses			56,906				10,715				4,696				3,093				(1,125	)			74,285
Income (loss) before income taxes		$	30,470			$	2,791			$	1,468			$	(1,943	)		$	-			$	32,786
Total assets		$	2,978,843			$	38,763			$	13,166			$	26,808			$	(36,257	)		$	3,021,323

 

Nine Months Ended		Commercial				Mortgage				Trust & Wealth												Consolidated
September 30, 2017		Banking				Banking				Management				Other				Eliminations				Totals
Revenues:
Interest income		$	67,740			$	846			$	7			$	17			$	(225	)		$	68,385
Gain on sale of loans			-				14,985				-				-				-				14,985
Other revenues			4,445				(306	)			4,195				975				(883	)			8,426
Total revenues			72,185				15,525				4,202				992				(1,108	)			91,796
Expenses:
Interest expense			7,796				18				-				337				(225	)			7,926
Salaries and employee benefits			19,992				9,122				2,686				-				-				31,800
Other expenses			20,173				3,246				2,541				7,537				(883	)			32,614
Total operating expenses			47,961				12,386				5,227				7,874				(1,108	)			72,340
Income (loss) before income taxes		$	24,224			$	3,139			$	(1,025	)		$	(6,882	)		$	-			$	19,456
Total assets		$	2,810,037			$	26,485			$	41,002			$	19,756			$	(24,211	)		$	2,873,069

 

 

Reconciliation of Non-GAAP Financial Measures - Unaudited

 

The press release contains certain financial information determined by methods other than in accordance with generally accepted accounting policies in the United States (GAAP). These non-GAAP financial measures are “tangible book value per common shares”, “tangible common equity ratio”, and “net interest margin on a fully tax equivalent basis.” This non-GAAP disclosure has limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of the Corporation’s results as reported under GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies. Management uses these non-GAAP measures in its analysis of our performance because it believes these measures are material and will be used as a measure of our performance by investors.

 

		Three Months				Three Months				Three Months				Three Months				Nine Months				Nine Months				Twelve Months
		Ended				Ended				Ended				Ended				Ended				Ended				Ended
		September 30,				June 30,				March 31,				September 30,				September 30,				September 30,				December 31,
(Dollars In Thousands)		2018				2018				2018				2017				2018				2017				2017
Book value per common share		$	21.13			$	20.88			$	20.62			$	20.55			$	21.13			$	20.55			$	20.53
Effect of intangible assets		$	(8.80	)		$	(8.89	)		$	(8.97	)		$	(8.91	)		$	(8.80	)		$	(8.91	)		$	(9.01	)
Tangible book value per common share		$	12.33			$	11.99			$	11.65			$	11.64			$	12.33			$	11.64			$	11.52
Common equity ratio			14.63	%			14.87	%			15.06	%			14.62	%			14.63	%			14.62	%			14.68	%
Effect of intangible assets			-5.54	%			-5.75	%			-5.96	%			-5.77	%			-5.54	%			-5.77	%			-5.89	%
Tangible common equity ratio			9.09	%			9.12	%			9.10	%			8.85	%			9.09	%			8.85	%			8.79	%
Net interest margin			3.62	%			3.62	%			3.65	%			3.76	%			3.63	%			3.84	%			3.81	%
Effect of tax exempt securities and loans			0.05	%			0.05	%			0.05	%			0.10	%			0.05	%			0.07	%			0.07	%
Net interest margin - fully tax equivalent basis			3.67	%			3.67	%			3.70	%			3.86	%			3.68	%			3.91	%			3.88	%
Return on average equity			8.79	%			8.36	%			7.65	%			6.68	%			8.27	%			4.71	%			5.03	%
Effect of intangible assets			6.41	%			6.37	%			5.92	%			4.79	%			6.25	%			4.62	%			3.12	%
Return on average tangible equity			15.20	%			14.73	%			13.57	%			11.47	%			14.52	%			9.33	%			8.15	%
Average equity		$	437,398			$	428,590			$	422,780			$	418,678			$	429,642			$	380,378			$	327,738
Effect of average intangible assets		$	184,534			$	185,358			$	184,399			$	174,704			$	184,774			$	188,228			$	125,330
Average tangible equity		$	252,864			$	243,232			$	238,381			$	243,974			$	244,868			$	192,150			$	202,408