Market Overview

Access National Announces First Quarter 2017 Earnings

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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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