Access National Corp (ANCX) SEC Filing 10-Q Quarterly report for the period ending Saturday, September 30, 2017

Access National Announces Third Quarter 2017 Earnings

RESTON, Va.--(BUSINESS WIRE)--October 25, 2017--

Highlights

• Strategic merger with Middleburg Financial Corporation (NASDAQ: MBRG) closed on schedule April 1, 2017 and data/office integrations completed on schedule as of August 4, 2017;
• Reported third quarter earnings of $7.0 million or $0.34 per diluted share. Excluding $993 thousand in pre-tax merger related costs ($646 thousand after-tax and $0.03 per diluted share) and $1.5 million of pre-tax impairment charges ($969 thousand after-tax and $0.05 per diluted share), earnings were $8.6 million or $0.42 per diluted share;
• Tangible book value¹ per common share was $11.64 at September 30, 2017, an increase of $0.32 from the prior period after considering merger costs;
• Loans held for investment were $1.97 billion at September 30, 2017 compared to $967 million at September 30, 2016, a year-over-year growth of 204.0%. Linked quarter growth was $43.0 million or 8.9% annualized; and
• Non-interest bearing demand deposits of $711 million were 31.1% of total deposits at September 30, 2017 compared to $410 million at September 30, 2016, a year-over-year growth of 173.5%.

The transformative combination of Access National with Middleburg Financial continues on a successful progression. “While the recent quarter contained many integration related distractions, we are pleased to report meaningful organic growth in loans and core deposits that generate long-term value. The positive migration of the acquired customer base is best reflected in the deposit growth and composition. We will continue to sharpen our retail focus on the consumer market that values a relationship based approach to private banking,” said Michael Clarke, President and Chief Executive Officer of Access. He continued, “While realization of expected cost savings is choppy, we remain confident in fulfilling our objectives for 2017 and 2018 such that we meet or exceed EPS accretion estimates in 2018 and beyond.”

Third quarter 2017 pre-tax earnings were $9.4 million, up $3.5 million from second quarter 2017, and included pre-tax merger related costs of $993 thousand. The commercial banking segment’s net interest income grew $294 thousand when compared to the second quarter of 2017 while other revenues grew by $274 thousand due mainly to an increase in miscellaneous loan fees. An increase in the commercial banking segment’s other expense of $802 thousand when compared to the second quarter of 2017 was due mainly to accelerated amortization on abandoned leasehold improvements related to branch restructuring, and was complimented by a decrease in salaries and employee benefits of $906 thousand when compared to the second quarter of 2017.

The earnings and balance sheet impact of departed wealth services personnel and loss of select underpriced accounts was reflected in the current quarter’s financial results. When comparing the third quarter of 2017 to the second quarter of 2017, the wealth services segment saw a $206 thousand decrease in revenue as well as a $359 thousand decrease in salaries and employee benefits which was offset by an increase in operating expenses of $1.4 million due to a $1.5 million impairment of goodwill connected with the unprofitable operations of the legacy Access segment. While management believes the full impact from these changes is reflected in this reporting period, continued analysis of goodwill impairment will be made to determine if the complete write-off remains warranted and will make any recapture adjustments in the fourth quarter. According to Access CEO Michael Clarke, “The loss of subject wealth services personnel and related accounts enables a sharper focus of the organization on the go-forward strategy, closely aligning the marketing and delivery of wealth and banking services to a common target market. The leadership of Middleburg Investment Group and the expanded capabilities resulting from the merger are enhancing the client value proposition in a way that management expects will produce consistent and growing fee income in future periods.”

The net interest margin on a fully tax equivalent (non-GAAP) basis decreased to 3.86% from 3.97% when comparing third quarter to second quarter 2017. Third quarter net interest margin on a fully tax equivalent (non-GAAP) basis exclusive of the $1.2 million credit mark accretion for the acquired loan portfolio and the $19 thousand in liability discount amortization was 3.68% for the three months ended September 30, 2017.

Total assets were $2.9 billion at September 30, 2017, up from $2.8 billion at June 30, 2017 due mainly to growth in the interest-bearing balances of $70.3 million and loans held for investment portfolio of $40.3 million. Organic growth in loans held for investment was $42.7 million on a linked quarter basis due mainly to growth in commercial real estate.