Market Overview

Access National Announces Fourth Quarter 2017 Earnings

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Access National Corporation (NASDAQ:ANCX) (the "Corporation" or
"Access"), parent company for Access National Bank (the "Bank") and
Middleburg Investment Group, reported fourth quarter 2017 net income of
$3.0 million, or $0.15 per diluted share. Excluding a one-time tax
adjustment related to the Tax Cuts and Jobs Act of 2017 and provision
expense related to one large commercial credit, net income was $8.6
million or $0.42 per diluted share. This represents the Corporation's 70th
consecutive quarterly profit over its 72 quarter history. Consistent
with management's renewed objective of a 40% dividend payout of
sustainable core earnings, the Board of Directors declared a dividend of
$0.15 per share for common shareholders of record as of February 12,
2018 and payable on February 23, 2018.

Highlights

  • Reported fourth quarter earnings of $3.0 million or $0.15 per diluted
    share. Excluding $3.1 million in pre-tax ($2.1 million after tax)
    provision expense related to one large commercial credit and $3.5
    million in tax expense related to the Tax Cuts and Jobs Act of 2017
    ("Act"), earnings were $8.6 million after tax or $0.42 per diluted
    share;
  • Tangible book value1 per common share was $11.52 at
    December 31, 2017, a decrease of $0.12 from the prior period.
    Excluding the $3.5 million tax expense related to the Act, tangible
    book value per common share was $11.69;
  • Loans held for investment were $1.98 billion at December 31, 2017
    compared to $1.05 billion at December 31, 2016, a year-over-year
    growth of 88.5%. Organic loan growth from the linked quarter was $34.8
    million prior to the strategic sale of $17.2 million of non-core
    residential real estate loans and the disposition of a deteriorating
    commercial loan of $8.5 million; and
  • Non-interest bearing demand deposits of $745.0 million were 33.3% of
    total deposits at December 31, 2017 compared to $362.0 million at
    December 31, 2016, a year-over-year growth of 105.8%.

The transformative combination of Access National with Middleburg
Financial continues on a successful progression. "We continue to work on
putting acquisition distractions behind us and believe the stage is set
for a promising 2018. In spite of the noise this quarter with the tax
adjustment and loan portfolio repositioning, we remain on target with
the financial objectives of our merger. Furthermore, we continue to
implement a program of enhanced focus on our target markets that is
producing results in the most desirable segments of the deposit and loan
portfolios. We are confident in our ability to meet our renewed growth
targets in 2018 of $200 million per annum in net deposit and loan
growth."

Fourth quarter 2017 pre-tax earnings were $9.0 million, down from the
$9.4 million reported in the third quarter of 2017 due mainly to an
impaired credit loss of $3.1 million pre-tax. The commercial banking
segment's net interest income declined $636 thousand from the linked
quarter, from $24.4 million to $23.7 million. The commercial banking
segment's other expense reflected an increase of $101 thousand when
compared to the third quarter of 2017 and included a $3.1 million
pre-tax provision expense.

The net interest margin on a fully tax equivalent (non-GAAP) basis
decreased to 3.83% from 3.86% when comparing fourth quarter to third
quarter 2017. Fourth quarter net interest margin exclusive of the $1.2
million credit mark accretion for the acquired loan portfolio and the $3
thousand in liability discount amortization was 3.77% for the three
months ended December 31, 2017.

Total deposits at December 31, 2017 were $2.2 billion, down slightly
from the $2.3 billion at September 30, 2017 while non-interest bearing
deposits increased $34.3 million from the linked quarter, to $745.0
million. While non-interest bearing demand deposits remain the largest
and most attractive source of funding for the Corporation, the
combination of legacy Middleburg's significant low cost interest-bearing
demand deposits and legacy Access' non-interest bearing demand deposits
accounted for $1.2 billion or 55.6% of total deposits at December 31,
2017. Interest-bearing deposits decreased to $1.5 billion at December
31, 2017 when compared to $1.6 billion from the prior quarter. Brokered
deposits as a percentage of the deposit portfolio decreased quarter over
quarter, from 3.1% of the portfolio at September 30, 2017 to 2.3% at
December 31, 2017, a decrease of $20.1 million. The go-forward strategy
places a high priority on the maintenance and expansion of core
deposits, particularly high value demand deposit relationships.

Prior to the strategic sale and disposition of $25.7 million in loans,
organic loan growth during the fourth quarter was $34.8 million. Organic
loan growth net of run-off totaled $116 million for the three quarters
since the acquisition of Middleburg Financial Corporation. Acquired
non-core residential real estate loans in the amount $17.2 million were
sold to mitigate interest rate risk and provide portfolio capacity for
relationship focused credits. A gain on the sale of this portfolio was
recognized in the amount of $136 thousand pre-tax as well as the
recognition of $481 thousand in pre-tax credit and fair value marks.
Separately, a deteriorating commercial loan relationship in the amount
$8.5 million was sold for $4.9 million, creating a loss of $3.6 million
charged to the reserve. This charge accounted for the majority of the
$3.7 million provision expense during the quarter. In careful analysis
in reaching the decision to exit this relationship, management concluded
the credit was destined to become a non-accrual loan in the very near
term and generate losses over a prolonged work out or liquidation at a
level well beyond the incurred charge.

Non-performing assets ("NPAs") decreased to $5.3 million at December 31,
2017 from $7.8 million at September 30, 2017, representing 0.18% and
0.27% of total assets, respectively. Included in the NPAs total is $643
thousand in other real estate owned, a reduction of $1.4 million over
the prior quarter. The allowance for loan loss was $15.8 million and
$15.7 million at December 31, 2017 and September 30, 2017, respectively,
and represented 0.80% of total loans held for investment at December 31,
2017 and September 30, 2017. The remaining credit and fair value marks
on the loans acquired in the merger totaled $12.4 million at December
31, 2017.

Tangible book value2 per common share decreased from $11.64
at September 30, 2017 to $11.52 at December 31, 2017. The tangible
common equity ratio for Access National Corporation and its subsidiary
bank was 8.79% at December 31, 2017, 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".

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.

__________

1   Non-GAAP financial information. See "Reconciliation of Non-GAAP
Financial Measures" at end of release.
2 Non-GAAP financial information. See "Reconciliation of Non-GAAP
Financial Measures" at end of release.
 
   
Access National Corporation
Consolidated Balance Sheet
         
December 31, December 31,
2017 2016
(In Thousands Except for Share and Per Share Data)   (Unaudited)    
 
ASSETS
 
Cash and due from banks $ 29,855 $ 9,186
 
Interest-bearing balances and federal funds sold 92,458 81,873
 
Investment securities:
Available-for-sale, at fair value 407,446 194,090
Held-to-maturity, at amortized cost (fair value of $16,379 and
$9,293, respectively)
  15,721     9,200  
Total investment securities 423,167 203,290
 
Restricted Stock, at amortized cost 16,572 10,092
 
Loans held for sale - at fair value 31,999 35,676
 

Loans held for investment net of allowance for loan losses of
$15,805 and $16,008, respectively

1,963,104 1,033,690
 
Premises, equipment and land, net 27,797 7,084
 
Goodwill and intangible assets 185,161 1,833
 
Other assets 103,781 47,984
   
Total assets $ 2,873,894   $ 1,430,708  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
LIABILITIES
Noninterest-bearing deposits $ 744,960 $ 362,036
 
Interest-bearing demand deposits 496,677 126,189
 
Savings and interest-bearing deposits 623,889 314,396
 
Time deposits   368,622     251,706  
 
Total deposits 2,234,148 1,054,327
 
Short-term borrowings 145,993 186,009
 
Long-term borrowings 40,000 60,000
 
Trust preferred debentures 3,883 -
 
Other liabilities and accrued expenses 28,246 9,842
   
Total Liabilities   2,452,270     1,310,178  
 
SHAREHOLDERS' EQUITY

Common stock $0.835 par value; 60,000,000 authorized; issued and
outstanding, 20,534,163 and 10,636,242 , respectively

17,146 8,881
 
Additional paid in capital 307,614 21,779
 
Retained earnings 98,584 91,439
 
Accumulated other comprehensive income (loss), net (1,720 ) (1,569 )
   
Total shareholders' equity   421,624     120,530  
   
Total liabilities and shareholders' equity $ 2,873,894   $ 1,430,708  
 
 
Access National Corporation
Consolidated Statement of Operations
 
  Three Months Ended   Twelve Months Ended
December 31, 2017   December 31, 2016 December 31, 2017   December 31, 2016
(In Thousands Except for Share and Per Share Data)   (unaudited)   (unaudited)    
 
INTEREST INCOME
Interest and fees on loans $ 24,321 $ 11,762 $ 84,572 $ 45,639
 
Interest on federal funds sold and bank balances 453 73 1,199 337
 
Interest and dividends on securities   2,321   1,085   9,709   4,039
Total interest income 27,095 12,920 95,480 50,015
 
INTEREST EXPENSE
Interest on deposits 2,714 1,376 9,274 5,150
 
Interest on other borrowings   468   287   1,834   1,154
Total interest expense   3,182   1,663   11,108   6,304
Net interest income 23,913 11,257 84,372 43,711
 
Provision for loan losses   3,719   1,250   6,919   2,120
Net interest income after provision for loan losses 20,194 10,007 77,453 41,591
 
NONINTEREST INCOME
Service charges and fees 489 223 1,998 971
 
Gain on sale of loans 5,095 5,745 20,080 25,164
 
Other Income   3,097   1,158   10,014   5,668
Total noninterest income 8,681 7,126 32,092 31,803
 
NONINTEREST EXPENSE
Salaries and benefits 12,115 7,495 43,915 31,778
 
Occupancy and equipment 1,058 766 6,878 3,044
 
Other operating expense   6,681   3,928   30,275   12,968
Total noninterest expense   19,854   12,189   81,068   47,790
Income before income tax 9,021 4,944 28,477 25,604
 
Income tax expense   5,976   1,938   11,977   9,200
NET INCOME $ 3,045 $ 3,006 $ 16,500 $ 16,404
 
Earnings per common share:
Basic $ 0.15 $ 0.28 $ 0.92 $ 1.55
Diluted $ 0.15 $ 0.28 $ 0.92 $ 1.54
 
Average outstanding shares:
Basic 20,485,116 10,620,312 17,988,670 10,586,394
Diluted 20,601,740 10,775,553 18,076,304 10,677,561
 
 
Performance and Capital Ratios
                         
  Three Months   Three Months   Three Months   Three Months   Twelve Months   Twelve Months
Ended Ended Ended Ended Ended Ended
December 31, September 30, June 30, March 31, December 31, December 31,
(Dollars In Thousands)   2017   2017   2017   2017   2017   2016
 
Return on average assets (annualized) 0.43 % 0.96 % 0.55 % 0.74 % 0.67 % 1.27 %
Return on average equity (annualized) 3.09 % 6.69 % 3.73 % 8.57 % 5.03 % 14.11 %
Return on tangible average equity (annualized) (1) 5.06 % 11.89 % 6.73 % 8.70 % 7.72 % 14.33 %
Net interest margin - fully tax equivalent basis (1) 3.83 % 3.86 % 3.97 % 3.52 % 3.88 % 3.55 %
Net interest margin 3.77 % 3.76 % 3.91 % 3.46 % 3.81 % 3.52 %
Efficiency ratio - Bank only 51.48 % 57.56 % 59.23 % 53.26 % 55.72 % 49.59 %
Total average equity to earning assets 15.55 % 16.00 % 16.68 % 8.99 % 14.82 % 9.36 %
Tangible common equity ratio (1) 8.79 % 8.85 % 8.97 % 8.65 % 8.79 % 8.31 %
 
Averages
Assets $ 2,837,834 $ 2,922,105 $ 2,789,088 $ 1,401,652 $ 2,453,894 $ 1,288,582
Loans held for investment 1,965,608 2,002,842 1,896,824 1,052,167 1,704,040 939,837
Loans held for sale 30,006 28,734 28,254 24,461 27,881 47,060
Interest-bearing deposits & federal funds sold 102,095 136,222 121,572 64,628 104,565 67,457
Investment securities 420,218 437,628 422,792 209,533 362,614 189,585
Earning assets 2,535,999 2,617,443 2,471,036 1,353,360 2,212,019 1,242,923
Interest-bearing deposits 1,528,133 1,566,286 1,523,997 761,075 1,327,261 662,271
Total deposits 2,247,225 2,277,759 2,163,567 1,096,309 1,922,249 1,021,624
Repurchase agreements & federal funds purchased 54,702 58,149 53,949 28,369 48,378 16,270
FHLB short term borrowings 68,300 59,697 57,824 86,200 67,907 56,522
FHLB long-term borrowings 46,304 82,790 79,892 59,556 66,329 68,525
Trust Preferred debt 3,871 3,029 3,824 - 2,692 -
Equity $ 394,319 $ 418,678 $ 412,146 $ 121,724 $ 327,738 $ 116,296
Tangible Equity(1) $ 240,754 $ 235,526 $ 228,480 $ 119,896 $ 202,408 $ 114,437
 
Allowance for loan losses $ 15,805 $ 15,692 $ 14,671 $ 13,727 $ 15,805 $ 16,008
Allowance for loan losses/loans held for investment 0.80 % 0.80 % 0.76 % 1.28 % 0.80 % 1.53 %
Remaining fair value marks on purchased performing loans $ 11,241 $ 12,444 $ 13,584 NA $ 11,241 NA
Purchased credit impaired loans $ 4,969 $ 5,184 $ 7,237 NA $ 4,969 NA
Remaining fair value marks on purchased credit impaired loans $ 1,175 $ 694 $ 2,296 NA $ 1,175 NA
Total NPA $ 5,270 $ 7,817 $ 8,954 $ 5,244 $ 5,270 $ 6,922
NPA to total assets 0.18 % 0.27 % 0.32 % 0.37 % 0.18 % 0.48 %
 
Mortgage loan originations and brokered loans $ 113,513 $ 107,706 $ 116,958 $ 94,500 $ 432,678 $ 544,866
Gain on sale of mortgage loans net hedging activity $ 4,984 $ 5,371 $ 10,792 $ 3,416 $ 19,192 $ 23,835
Allowance for losses on mortgage loans sold $ 953 $ 987 $ 1,029 $ 1,029 $ 953 $ 1,029
 
Wealth Services segment - assets under management $ 1,955,720 $ 1,935,780 $ 1,927,629 $ 676,865 $ 1,955,720 $ 667,300
 
Book value per common share $ 20.53 $ 20.55 $ 20.36 $ 11.40 $ 20.53 $ 11.33
 
Tangible book value per common share (1) $ 11.52 $ 11.64 $ 11.32 $ 11.23 $ 11.52 $ 11.16
                         
 
(1) Non-GAAP financial information. See "Reconciliation of Non-GAAP
Financial Measures" at end of release.
 
 
Composition of Loan Portfolio
 
    December 31, 2017   September 30, 2017   June 30, 2017   March 31, 2017   December 31, 2016
(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 $ 467,082 23.60 % $ 443,128 22.50 % $ 401,853 20.84 % $ 262,431 24.46 % $ 250,440 23.87 %
Commercial real estate - non-owner occupied 436,083 22.04 435,181 22.09 377,037 19.55 205,452 19.15 184,688 17.59
Residential real estate 489,669 24.74 512,621 26.03 525,649 27.26 212,007 19.76 204,413 19.47
Commercial 463,652 23.43 449,450 22.82 476,055 24.69 294,451 27.45 311,486 29.67
Real estate construction 97,481 4.93 104,193 5.29 124,186 6.44 91,614 8.54 91,822 8.75
Consumer   24,942   1.26     25,087   1.27     23,565   1.22     6,836   0.64     6,849   0.65  
Total loans $ 1,978,909 100.00 % $ 1,969,660 100.00 % $ 1,928,345 100.00 % $ 1,072,791 100.00 % $ 1,049,698 100.00 %
Less allowance for loan losses   15,805   15,692   14,671   13,727   16,008
$ 1,963,104 $ 1,953,968 $ 1,913,674 $ 1,059,064 $ 1,033,690
 
 
Composition of Deposits
 
    December 31, 2017   September 30, 2017   June 30, 2017   March 31, 2017   December 31, 2016
(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 $ 744,960 33.34 % $ 710,691 31.09 % $ 660,481 30.20 % $ 376,674 32.56 % $ 362,036 34.34 %
Interest-bearing demand deposits 486,621 21.78 480,620 21.02 454,675 20.79 141,981 12.27 126,189 11.97
Savings and money market 580,827 26.00 616,596 26.97 562,581 25.72 284,182 24.56 270,310 25.64
CDARS time deposits 21,582 0.97 37,836 1.65 39,746 1.82 41,369 3.58 34,290 3.25
CDARS/ICS non-maturity deposits 48,011 2.15 47,219 2.07 44,009 2.01 42,960 3.71 40,925 3.88
Brokered deposits 51,028 2.28 71,090 3.11 101,419 4.64 110,254 9.53 57,389 5.44
Time deposits   301,119   13.48       322,160   14.09       324,295   14.82       159,570   13.79       163,188   15.48  
Total Deposits $ 2,234,148   100.00 %   $ 2,286,212   100.00 %   $ 2,187,206   100.00 %   $ 1,156,990   100.00 %   $ 1,054,327   100.00 %
 
 

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

Three Months Ended

 
    December 31, 2017   December 31, 2016
  Average   Income /   Yield /   Average   Income /   Yield /
(Dollars In Thousands)   Balance   Expense   Rate   Balance   Expense   Rate
 
Assets:
Interest-earning assets:
Securities $ 438,290 $ 2,321 2.12 % $ 204,612 $ 1,085 2.12 %
Loans held for sale 30,006 297 3.96 % 44,454 412 3.71 %
Loans(1) 1,965,608 24,024 4.89 % 990,517 11,350 4.58 %
Interest-bearing balances and federal funds sold   102,095       453   1.77 %   60,300       73   0.48 %
Total interest-earning assets   2,535,999   27,095 4.27 %   1,299,883   12,920 3.98 %
Noninterest-earning assets:
Cash and due from banks 18,784 13,442
Premises, land and equipment 26,156 6,989
Other assets 272,877 46,418
Less: allowance for loan losses   (15,982 )   (15,110 )
Total noninterest-earning assets   301,835     51,739  
Total Assets $ 2,837,834   $ 1,351,622  
 
Liabilities and Shareholders' Equity:
Interest-bearing deposits:
Interest-bearing demand deposits $ 480,147 $ 499 0.42 % $ 135,342 $ 126 0.37 %
Money market deposit accounts 483,416

691

0.57

% 261,656 324 0.50 %
Savings accounts 175,123

322

0.74

% 46,596 59 0.51 %
Time deposits   389,447      

1,202

 

1.23

%   258,666       867   1.34 %
Total interest-bearing deposits 1,528,133 2,714 0.71 % 702,260 1,376 0.78 %
Borrowings:
FHLB short-term borrowings 68,300 231 1.35 % 50,728 106 0.84 %
Securities sold under agreements to repurchase and federal funds
purchased
54,702 10 0.07 % 18,765 5 0.11 %
Subordinated debentures 3,871 73 7.54 % - - 0.00 %
FHLB long-term borrowings   46,304       154   1.33 %   60,163       176   1.17 %
Total borrowings   173,177       468   1.08 %   129,656       287   0.89 %
Total interest-bearing deposits and borrowings 1,701,310 3,182 0.75 % 831,916 1,663 0.80 %
Noninterest-bearing liabilities:
Demand deposits 719,093 389,171
Other liabilities   23,112     9,894  
Total liabilities 2,443,515 1,230,981
Shareholders' Equity   394,319     120,641  
Total Liabilities and Shareholders' Equity $ 2,837,834   $ 1,351,622  
 
Interest Spread(2) 3.53 % 3.18 %
 
Net Interest Margin(3) $ 23,913   3.77 % $ 11,257   3.46 %
 

(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
Twelve Months Ended
                         
    December 31, 2017   December 31, 2016
  Average   Income /   Yield /   Average   Income /   Yield /
(Dollars In Thousands)   Balance   Expense   Rate   Balance   Expense   Rate
 
Assets:
Interest-earning assets:
Securities $ 375,533 $ 9,709 2.59 % $ 188,569 $ 4,039 2.14 %
Loans held for sale 27,881 1,143 4.10 % 47,060 1,767 3.75 %
Loans(1) 1,704,040 83,429 4.90 % 939,837 43,872 4.67 %
Interest-bearing balances and federal funds sold   104,565       1,199   1.15 %   67,457       337   0.50 %
Total interest-earning assets   2,212,019   95,480 4.32 %   1,242,923   50,015 4.02 %
Noninterest-earning assets:
Cash and due from banks 20,859 12,732
Premises, land and equipment 22,683 6,834
Other assets 213,337 40,172
Less: allowance for loan losses   (15,004 )   (14,079 )
Total noninterest-earning assets   241,875     45,659  
Total Assets $ 2,453,894   $ 1,288,582  
 
Liabilities and Shareholders' Equity:
Interest-bearing deposits:
Interest-bearing demand deposits $ 386,046 $ 1,409 0.36 % $ 132,734 $ 486 0.37 %
Money market deposit accounts 386,786 2,335 0.60 % 204,897 846 0.41 %
Savings accounts 153,769 714 0.46 % 37,950 196 0.52 %
Time deposits   400,660       4,816   1.20 %   286,690       3,622   1.26 %
Total interest-bearing deposits 1,327,261 9,274 0.70 % 662,271 5,150 0.78 %
Borrowings:
FHLB short-term borrowings 67,907 822 1.21 % 56,522 386 0.68 %
Securities sold under agreements to repurchase and federal funds
purchased
48,378 68 0.14 % 16,270 16 0.10 %
Subordinated debentures 2,692 221 8.21 % - - 0.00 %
FHLB long-term borrowings   66,329       723   1.09 %   68,525       752   1.10 %
Total borrowings   185,306       1,834   0.99 %   141,317       1,154   0.82 %
Total interest-bearing deposits and borrowings 1,512,567 11,108 0.73 % 803,588 6,304 0.78 %
Noninterest-bearing liabilities:
Demand deposits 594,987 359,352
Other liabilities   18,602     9,346  
Total liabilities 2,126,156 1,172,286
Shareholders' Equity   327,738     116,296  
Total Liabilities and Shareholders' Equity $ 2,453,894   $ 1,288,582  
 
Interest Spread(2) 3.58 % 3.24 %
 
Net Interest Margin(3) $ 84,372   3.81 % $ 43,711   3.52 %
                                 

(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 Trust & Wealth Consolidated
December 31, 2017   Banking Banking Management Other Eliminations Totals
(In Thousands)
Revenues:
Interest income $ 26,837 $ 295 $ - $ 8 $ (45 ) $ 27,095
Gain on sale of loans 136 4,959 - - - 5,095
Other revenues   1,825   (1 )   1,793     478     (509 )   3,586
Total revenues   28,798   5,253     1,793     486     (554 )   35,776
 
Expenses:
Interest expense 3,116 (24 ) - 135 (45 ) 3,182
Salaries and employee benefits 8,116 2,836 1,163 - - 12,115
Other expenses   8,825   1,092     919     1,131     (509 )   11,458
Total operating expenses   20,057   3,904     2,082     1,266     (554 )   26,755
 
Income (loss) before income taxes $ 8,741 $ 1,349   $ (289 ) $ (780 ) $ -   $ 9,021
 
Total assets $ 2,827,041 $ 31,999   $ 10,967   $ 21,727   $ (17,840 ) $ 2,873,894
 
 
Three Months Ended Commercial Mortgage Wealth Consolidated
December 31, 2016   Banking Banking Management Other Eliminations Totals
(In Thousands)
Revenues:
Interest income $ 12,684 $ 412 $ - $ 5 $ (181 ) $ 12,920
Gain on sale of loans - 5,745 - - - 5,745
Other revenues   985   (477 )   765     423     (315 )   1,381
Total revenues   13,669   5,680     765     428     (496 )   20,046
 
Expenses:
Interest expense 1,668 109 - 67 (181 ) 1,663
Salaries and employee benefits 3,950 2,978 567 - - 7,495
Other expenses   2,947   1,227     251     1,834     (315 )   5,944
Total operating expenses   8,565   4,314     818     1,901     (496 )   15,102
 
Income (loss) before income taxes $ 5,104 $ 1,366   $ (53 ) $ (1,473 ) $ -   $ 4,944
 
Total assets $ 1,394,061 $ 39,356   $ 2,841   $ 18,037   $ (23,587 ) $ 1,430,708
 
                         
Segment Reporting
           
Twelve Months Ended Commercial Mortgage Trust & Wealth Consolidated
December 31, 2017   Banking Banking Management Other Eliminations Totals
(In Thousands)
Revenues:
Interest income $ 94,577 $ 1,141 $ 7 $ 25 $ (270 ) $ 95,480
Gain on sale of loans 136 19,944 - - - 20,080
Other revenues   6,270   (307 )   5,988     1,453     (1,392 )   12,012
Total revenues   100,983   20,778     5,995     1,478     (1,662 )   127,572
 
Expenses:
Interest expense 10,912 (6 ) - 472 (270 ) 11,108
Salaries and employee benefits 28,108 11,958 3,849 - - 43,915
Other expenses   28,998   4,338     3,460     8,668     (1,392 )   44,072
Total operating expenses   68,018   16,290     7,309     9,140     (1,662 )   99,095
 
Income (loss) before income taxes $ 32,965 $ 4,488   $ (1,314 ) $ (7,662 ) $ -   $ 28,477
 
Total assets $ 2,827,041 $ 31,999   $ 10,967   $ 21,727   $ (17,840 ) $ 2,873,894
 
 
Twelve Months Ended Commercial Mortgage Wealth Consolidated
December 31, 2016   Banking Banking Management Other Eliminations Totals
(In Thousands)
Revenues:
Interest income $ 49,063 $ 1,767 $ - $ 20 $ (835 ) $ 50,015
Gain on sale of loans - 25,164 - - - 25,164
Other revenues   3,893   (424 )   3,034     1,401     (1,265 )   6,639
Total revenues   52,956   26,507     3,034     1,421     (2,100 )   81,818
 
Expenses:
Interest expense 6,324 548 - 267 (835 ) 6,304
Salaries and employee benefits 16,015 13,541 2,222 - - 31,778
Other expenses   9,232   5,354     1,034     3,777     (1,265 )   18,132
Total operating expenses   31,571   19,443     3,256     4,044     (2,100 )   56,214
 
Income (loss) before income taxes $ 21,385 $ 7,064   $ (222 ) $ (2,623 ) $ -   $ 25,604
 
Total assets $ 1,394,061 $ 39,356   $ 2,841   $ 18,037   $ (23,587 ) $ 1,430,708
 

Reconciliation of Non-GAAP Financial Measures

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 per performance measures that may be presented by
other companies. Out 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 Twelve Months Twelve Months
Ended Ended Ended Ended Ended Ended
December 31, September 30, June 30, March 31, December 31, December 31,
(Dollars In Thousands)     2017       2017       2017       2017       2017       2016  
 
 
Book value per common share $ 20.53 $ 20.55 $ 20.36 $ 11.40 $ 20.53 $ 11.33
Effect of intangible assets $ (9.01 ) $ (8.91 ) $ (9.04 ) $ (0.17 ) $ (9.01 ) $ (0.17 )
Tangible book value per common share $ 11.52 $ 11.64 $ 11.32 $ 11.23 $ 11.52 $ 11.16
 
 
Common equity ratio 14.67 % 14.62 % 15.05 % 8.77 % 14.67 % 8.42 %
Effect of intangible assets -5.88 % -5.77 % -6.08 % -0.12 % -5.88 % -0.11 %
Tangible common equity ratio 8.79 % 8.85 % 8.97 % 8.65 % 8.79 % 8.31 %
 
 
Net interest margin 3.77 % 3.76 % 3.91 % 3.46 % 3.81 % 3.52 %
Effect of tax exempt securities and loans 0.06 % 0.10 % 0.06 % 0.06 % 0.07 % 0.03 %
Net interest margin - fully tax equivalent basis 3.83 % 3.86 % 3.97 % 3.52 % 3.88 % 3.55 %
 
 
Return on average equity 3.09 % 6.69 % 3.73 % 8.57 % 5.03 % 14.11 %
Effect of intangible assets 1.97 % 5.20 % 3.00 % 0.13 % 2.69 % 0.22 %
Return on average tangible equity 5.06 % 11.89 % 6.73 % 8.70 % 7.72 % 14.33 %
 
 
Average equity $ 394,319 $ 418,678 $ 412,146 $ 121,724 $ 327,738 $ 116,296
Effect of average intangible assets $ 153,565 $ 183,152 $ 183,666 $ 1,828 $ 125,330 $ 1,859
Average tangible equity $ 240,754 $ 235,526 $ 228,480 $ 119,896 $ 202,408 $ 114,437
 

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