Toggle SGML Header (+)


Section 1: S-4/A (S-4/A)

S-4/A
Table of Contents

As filed with the Securities and Exchange Commission on January 13, 2017

Registration No. 333-215054

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

AMENDMENT NO. 1

TO

FORM S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

ACCESS NATIONAL CORPORATION

(Exact name of registrant as specified in its charter)

 

 

 

Virginia   6035   82-0545425

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification No.)

1800 Robert Fulton Drive, Suite 300

Reston, Virginia 20191

(703) 871-2100

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Michael W. Clarke

President and Chief Executive Officer

Access National Corporation

1800 Robert Fulton Drive, Suite 300

Reston, Virginia 20191

(703) 871-2100

(Name, address, including zip code, and telephone number, including area code of agent for service)

 

 

Copies to:

 

Jacob A. Lutz, III, Esq.

Seth A. Winter, Esq.

Troutman Sanders LLP

Troutman Sanders Building

1001 Haxall Point

Richmond, Virginia 23219

(804) 697-1490

 

Wayne A. Whitham, Jr., Esq.

Lee G. Lester, Esq.

Williams Mullen

200 S. 10th Street

Suite 1600

Richmond, Virginia 23219

(804) 420-6000

 

 

Approximate date of commencement of the proposed sale of the securities to the public: As soon as practicable after this Registration Statement becomes effective and all other conditions to the proposed merger described herein have been satisfied or waived.

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer      Accelerated filer  
Non-accelerated filer      Smaller reporting company  

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)  ☐

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)  ☐

 

 

 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to Section 8(a), may determine.

 

 

 


Table of Contents

The information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This joint proxy statement/prospectus does not constitute an offer to sell these securities, nor a solicitation of any offer to buy nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale is not permitted.

 

PRELIMINARY – SUBJECT TO COMPLETION – DATED JANUARY 13, 2017

 

LOGO    LOGO

PROPOSED MERGER – YOUR VOTE IS VERY IMPORTANT

Dear Fellow Shareholders:

The boards of directors of Access National Corporation and Middleburg Financial Corporation have approved a strategic merger in which Middleburg will merge with and into Access. The combined company, which will retain the Access name and initially conduct certain operations under the Middleburg Bank brand, is expected to have approximately $2.7 billion in assets, $2.2 billion in deposits, $1.8 billion in gross loans and $2.5 billion in assets under management and administration. The combined company will operate offices throughout Virginia and rank fifth in deposit market share among Virginia-based banks under $10 billion in assets. We are sending you this document to ask you, as an Access and/or Middleburg shareholder, to approve the merger.

In the merger, each share of Middleburg common stock will be converted into the right to receive 1.3314 shares of Access common stock. Although the number of shares of Access common stock that Middleburg shareholders will receive is fixed, the market value of the merger consideration will fluctuate with the market price of Access common stock and will not be known at the time the Middleburg shareholders vote on the merger. Based on the average closing sale price for Access common stock on the NASDAQ Global Market for the twenty trading days ended October 21, 2016 ($24.42), the last trading day before public announcement of the merger, the 1.3314 exchange ratio represented approximately $32.51 in value for each share of Middleburg common stock. The most recent reported closing sale price for Access common stock on January 12, 2017, was $28.86. The most recent reported closing sale price for Middleburg common stock on January 12, 2017, was $36.71. Based on the exchange ratio and the number of shares of Middleburg common stock outstanding and reserved for issuance under various stock incentive plans and agreements, the maximum number of shares of Access common stock offered by Access and issuable in the merger is 9,592,825. We urge you to obtain current market quotations for Access (trading symbol “ANCX”) and Middleburg (trading symbol “MBRG”).

Your vote is very important. We are holding special meetings of our respective shareholders to obtain approval of the merger agreement and related plan of merger and related matters as described in the attached joint proxy statement/prospectus. Approval of the merger agreement and related plan of merger requires the affirmative vote of the holders of more than two thirds of the outstanding shares of Access common stock, and the affirmative vote of the holders of a majority of the outstanding shares of Middleburg common stock.

Whether or not you plan to attend the Access or Middleburg special meeting, it is important that your shares be represented at the meeting and your vote recorded. Please take the time to vote by completing and mailing the enclosed proxy card or by voting via the Internet or telephone using the instructions given on the proxy card. Even if you return the proxy card, you may attend the special meeting and vote your shares in person.

The boards of directors of Access and Middleburg unanimously recommend that you vote “FOR” approval of the merger agreement and the related plan of merger and “FOR” the other matters to be considered at each special meeting.

This joint proxy statement/prospectus describes the special meetings, the merger, the documents related to the merger, and other related matters. Please carefully read this joint proxy statement/prospectus, including the information in the “Risk Factors” section beginning on page []. You can also obtain information about Access and Middleburg from documents that each has filed with the Securities and Exchange Commission.

Thank you for your support.

 

 

Michael W. Clarke

President and Chief Executive Officer

Access National Corporation

 

Gary R. Shook

Chief Executive Officer and President

Middleburg Financial Corporation

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued in connection with the merger or determined if this joint proxy statement/prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

The securities to be issued in the merger are not savings or deposit accounts or other obligations of any bank or non-bank subsidiary of either Access or Middleburg, and they are not insured by the Federal Deposit Insurance Corporation or any other governmental agency.

This joint proxy statement/prospectus is dated [●], 201[●] and is first being mailed to shareholders of Access and Middleburg on or about [●], 201[●].


Table of Contents

LOGO

ACCESS NATIONAL CORPORATION

 

 

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

 

 

To be held on [], 201[]

A special meeting of the shareholders of Access National Corporation (“Access”) will be held at [●], located at [●], at [●] [●].m. local time, on [●], 201[●] for the following purposes:

 

  1. To consider and vote on a proposal to approve the Agreement and Plan of Reorganization, dated as of October 21, 2016, between Access and Middleburg Financial Corporation (“Middleburg”), including the related Plan of Merger (together, the “merger agreement”), pursuant to which Middleburg will merge with and into Access, as more fully described in the accompanying joint proxy statement/prospectus (the “Access merger proposal”). A copy of the merger agreement is attached as Appendix A to the accompanying joint proxy statement/prospectus.

 

  2. To consider and vote on a proposal to adjourn the meeting, if necessary or appropriate, to permit further solicitation of proxies in the event there are not sufficient votes at the time of the meeting to approve the Access merger proposal (the “Access adjournment proposal”).

 

  3. To transact such other business as may properly come before the meeting and any adjournments thereof.

All holders of record of Access common stock at the close of business on [●], 201[●] are entitled to notice of and to vote at the meeting and any adjournments thereof.

By Order of the Board of Directors,

Sheila M. Linton

Vice President & Corporate Secretary

[●], 201[●]

The Access board of directors unanimously recommends that you vote “FOR” the Access merger proposal and “FOR” the Access adjournment proposal.

Please promptly vote by completing and returning the enclosed proxy card, whether or not you plan to attend the special meeting. You may also vote via the Internet or telephone by following the instructions on the proxy card. If you attend the meeting in person, you may withdraw your proxy card and vote your shares in person.


Table of Contents

LOGO

MIDDLEBURG FINANCIAL CORPORATION

 

 

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

 

 

To be held on [], 201[]

A special meeting of the shareholders of Middleburg Financial Corporation (“Middleburg”) will be held at [●], located at [●], at [●] [●].m. local time, on [●], 201[●] for the following purposes:

 

  1. To consider and vote on a proposal to approve the Agreement and Plan of Reorganization, dated as of October 21, 2016, between Access National Corporation (“Access”) and Middleburg, including the related Plan of Merger (together, the “merger agreement”), pursuant to which Middleburg will merge with and into Access, as more fully described in the accompanying joint proxy statement/prospectus (the “Middleburg merger proposal”). A copy of the merger agreement is attached as Appendix A to the accompanying joint proxy statement/prospectus.

 

  2. To consider and vote on a proposal to approve, in a non-binding advisory vote, certain compensation that may become payable to Middleburg’s named executive officers in connection with the merger (the “compensation proposal”).

 

  3. To consider and vote on a proposal to adjourn the meeting, if necessary or appropriate, to permit further solicitation of proxies in the event there are not sufficient votes at the time of the meeting to approve the Middleburg merger proposal (the “Middleburg adjournment proposal”).

 

  4. To transact such other business as may properly come before the meeting and any adjournments thereof.

All holders of record of Middleburg common stock at the close of business on [●], 201[●] are entitled to notice of and to vote at the meeting and any adjournments thereof.

By Order of the Board of Directors,

Jeffrey H. Culver

Senior Executive Vice President, Chief Operating

Officer and Corporate Secretary

[●], 201[●]

The Middleburg board of directors unanimously recommends that you vote “FOR” the Middleburg merger proposal, “FOR” the compensation proposal and “FOR” the Middleburg adjournment proposal.

Please promptly vote by completing and returning the enclosed proxy card, whether or not you plan to attend the special meeting. You may also vote via the Internet or telephone by following the instructions on the proxy card. If you attend the meeting in person, you may withdraw your proxy card and vote your shares in person.


Table of Contents

ADDITIONAL INFORMATION

This joint proxy statement/prospectus incorporates by reference important business and financial information about Access and Middleburg from other documents that are not included in or delivered with this joint proxy statement/prospectus. For a listing of the documents incorporated by reference, see “Where You Can Find More Information” on page [●]. This information is available to you without charge upon your written or oral request. You can obtain the documents incorporated by reference into this joint proxy statement/prospectus through the website of the Securities and Exchange Commission (the “SEC”) at http://www.sec.gov, through the website of Access at http://www.accessnationalbank.com and the website of Middleburg at http://www.middleburgbank.com or by requesting them in writing or by telephone at the contact information set forth below.

 

Access National Corporation

1800 Robert Fulton Drive, Suite 300

Reston, Virginia 20191

Telephone: (703) 871-2100

Attention: Sheila M. Linton, Vice President and

Corporate Secretary

  

Middleburg Financial Corporation

111 West Washington Street

Middleburg, Virginia 20117

Telephone: (703) 777-6327

Attention: Gary R. Shook, Chief Executive Officer and President

Regan & Associates, Inc.

505 Eighth Avenue – Suite 800

New York, New York 10018

Attention: Artie Regan

Telephone: (800) 737-3426

  

Information contained on the websites of Access or Middleburg, or any subsidiary of Access or Middleburg, does not constitute part of this joint proxy statement/prospectus and is not incorporated into other filings that Access or Middleburg makes with the SEC.

If you would like to request documents from Access or Middleburg, please do so by [], 201[] in order to receive timely delivery of the documents before the special meetings.

 

 

In this joint proxy statement/prospectus, Access National Corporation is referred to as “Access” and Middleburg Financial Corporation is referred to as “Middleburg.” The merger of Middleburg with and into Access is referred to as the “merger,” and the Agreement and Plan of Reorganization, dated as of October 21, 2016, between Access and Middleburg, including the related Plan of Merger to be filed with the State Corporation Commission of the Commonwealth of Virginia (along with the articles of merger), is referred to as the “merger agreement,” a copy of which is attached as Appendix A to this joint proxy statement/prospectus. Access’s proposal to approve the merger agreement is referred to as the “Access merger proposal.” Access’s proposal to adjourn its special meeting, if necessary or appropriate, to permit further solicitation of proxies in the event there are not sufficient votes at the time of the meeting to approve the Access merger proposal is referred to as the “Access adjournment proposal.” Middleburg’s proposal to approve the merger agreement is referred to as the “Middleburg merger proposal.” Middleburg’s proposal to approve, in a non-binding advisory vote, certain compensation that may become payable to Middleburg’s named executive officers in connection with the merger is referred to as the “compensation proposal.” Middleburg’s proposal to adjourn its special meeting, if necessary or appropriate, to permit further solicitation of proxies in the event there are not sufficient votes at the time of the meeting to approve the Middleburg merger proposal is referred to as the “Middleburg adjournment proposal.” The special meeting of shareholders of Access and the special meeting of shareholders of Middleburg are sometimes referred to collectively as the “special meetings.”


Table of Contents

TABLE OF CONTENTS

 

     Page  

QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETINGS

     1   

SUMMARY

     5   

SELECTED HISTORICAL FINANCIAL DATA OF ACCESS

     15   

SELECTED HISTORICAL FINANCIAL DATA OF MIDDLEBURG

     17   

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     19   

COMPARATIVE HISTORICAL AND PRO FORMA UNAUDITED SHARE DATA

     27   

RISK FACTORS

     28   

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     34   

THE ACCESS SPECIAL MEETING

     35   

Date, Place and Time

     35   

Purposes of the Access Special Meeting

     35   

Recommendation of the Access Board of Directors

     35   

Record Date and Voting Rights; Quorum

     35   

Votes Required

     35   

Stock Ownership of Access Executive Officers and Directors

     36   

Voting at the Access Special Meeting

     36   

Revocation of Proxies

     36   

Participants in the Access 401(k) Plan

     37   

Solicitation of Proxies

     37   

PROPOSALS TO BE CONSIDERED AT THE ACCESS SPECIAL MEETING

     38   

Approval of the Access Merger Proposal (Access Proposal No. 1)

     38   

Approval of the Access Adjournment Proposal (Access Proposal No. 2)

     38   

THE MIDDLEBURG SPECIAL MEETING

     39   

Date, Place and Time

     39   

Purposes of the Middleburg Special Meeting

     39   

Recommendation of the Middleburg Board of Directors

     39   

Record Date and Voting Rights; Quorum

     39   

Votes Required

     39   

Stock Ownership of Middleburg Executive Officers and Directors

     40   

Stock Ownership of Certain Middleburg Shareholders

     40   

Voting at the Middleburg Special Meeting

     40   

Revocation of Proxies

     41   

Solicitation of Proxies

     42   

PROPOSALS TO BE CONSIDERED AT THE MIDDLEBURG SPECIAL MEETING

     43   

Approval of the Middleburg Merger Proposal (Middleburg Proposal No. 1)

     43   

Approval of the Compensation Proposal (Middleburg Proposal No. 2)

     43   

Approval of the Middleburg Adjournment Proposal (Middleburg Proposal No. 3)

     43   

THE MERGER

     45   

General Information

     45   

Background of the Merger

     45   

Access’s Reasons for the Merger; Recommendation of Access’s Board of Directors

     49   

Middleburg’s Reasons for the Merger; Recommendations of Middleburg’s Board of Directors

     51   

Opinion of Access’s Financial Advisor

     52   

Opinion of Middleburg’s Financial Advisor

     58   

Certain Unaudited Prospective Financial Information

     69   

Interests of Certain Middleburg Directors and Executive Officers in the Merger

     70   

Interests of Certain Shareholders in the Merger

     76   

Regulatory Approvals

     76   

Appraisal or Dissenters’ Rights in the Merger

     77   

Certain Differences in Rights of Shareholders

     77   

Accounting Treatment

     77   

THE MERGER AGREEMENT

     78   

Terms of the Merger

     78   

Effective Date; Closing

     78   

 

-i-


Table of Contents

TABLE OF CONTENTS

(continued)

 

     Page  

Merger Consideration

     78   

Treatment of Middleburg Restricted Stock Awards and Stock Options

     79   

Exchange of Stock in the Merger

     79   

Corporate Governance

     80   

Representations and Warranties

     80   

Conditions to Completion of the Merger

     81   

Business Pending the Merger

     82   

Regulatory Matters

     83   

Shareholder Meetings and Recommendation of Boards of Directors

     83   

No Solicitation

     84   

Termination of the Merger Agreement

     85   

Termination Fee

     86   

Indemnification and Insurance

     87   

Expenses

     87   

Waiver and Amendment

     87   

Affiliate Agreements

     87   

Voting and Standstill Agreement

     88   

Possible Alternative Merger Structure

     88   

Resales of Access Common Stock

     88   

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES

     89   

MARKET FOR COMMON STOCK AND DIVIDENDS

     92   

INFORMATION ABOUT ACCESS NATIONAL CORPORATION

     94   

INFORMATION ABOUT MIDDLEBURG FINANCIAL CORPORATION

     95   

DESCRIPTION OF ACCESS CAPITAL STOCK

     96   

Authorized and Outstanding Capital Stock

     96   

Common Stock

     96   

Preferred Stock

     97   

COMPARATIVE RIGHTS OF SHAREHOLDERS

     98   

Authorized Capital Stock

     98   

Dividend Rights

     98   

Voting Rights

     98   

Directors and Classes of Directors

     98   

Anti-takeover Provisions

     99   

Amendments to Articles of Incorporation and Bylaws

     100   

Dissenters’ and Appraisal Rights

     101   

Director and Officer Exculpation

     101   

Indemnification

     102   

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF ACCESS

     103   

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF MIDDLEBURG

     105   

LEGAL MATTERS

     107   

EXPERTS

     107   

FUTURE SHAREHOLDER PROPOSALS

     107   

OTHER MATTERS

     108   

WHERE YOU CAN FIND MORE INFORMATION

     108   

APPENDIX A: Agreement and Plan of Reorganization, dated October 21, 2016, between Access National Corporation and Middleburg Financial Corporation and the related Plan of Merger

     A-1   

APPENDIX B: Opinion of FBR Capital Markets

     B-1   

APPENDIX C: Opinion of Sandler O’Neill & Partners, L.P.

     C-1   

 

-ii-


Table of Contents

QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETINGS

The following questions and answers briefly address some commonly asked questions about the special meetings and the merger. They may not include all of the information that is important to Access and Middleburg shareholders. We urge shareholders to read carefully this joint proxy statement/prospectus, including the appendices and other documents referred to herein.

 

  Q: What is the merger?

 

  A: Access and Middleburg have entered into the merger agreement whereby Middleburg will merge with and into Access, with Access being the surviving company. As a result of the merger, Middleburg shareholders will receive Access common stock in exchange for their Middleburg common stock. A copy of the merger agreement is attached to this joint proxy statement/prospectus as Appendix A.

We currently expect to complete the merger during the second quarter of 2017. Following completion of the merger, it is expected that Middleburg Bank, Middleburg’s wholly-owned bank subsidiary, will merge with and into Access National Bank, Access’s wholly-owned bank subsidiary, also during the second quarter of 2017 (referred to sometimes as the “subsidiary bank merger”).

 

  Q: What will Middleburg shareholders receive in the merger?

 

  A: In the proposed merger, holders of Middleburg’s common stock will receive 1.3314 shares of common stock of Access for each of their shares of Middleburg common stock. This exchange ratio is fixed and will not be adjusted to reflect stock price changes prior to the closing of the merger. Access shareholders will continue to own their existing shares, which will not be affected by the merger.

 

  Q: Why am I receiving these materials?

 

  A: Access and Middleburg are each holding a special meeting of shareholders to vote on the proposals necessary to complete the merger. We are sending you these materials to solicit your proxy and help you decide how to vote your shares of Access common stock or Middleburg common stock at the special meetings. Access and Middleburg shareholders will be asked in separate company proposals to approve the Access merger proposal and the Middleburg merger proposal, respectively. Middleburg shareholders will also be asked to approve the compensation proposal.

 

  Q: What do I need to do now to vote my shares?

 

  A: After carefully reading and considering the information contained in this joint proxy statement/prospectus, please vote your shares as soon as possible so that your shares will be represented at the Access or Middleburg special meeting, as applicable. Please follow the instructions set forth on the proxy card or on the voting instruction form provided by the record holder if your shares are held in the name of your broker or other nominee.

 

  Q: How do I vote?

 

  A: By mail. You may vote before the Access or Middleburg special meeting by completing, signing, dating and returning the enclosed proxy card in the enclosed postage-paid envelope.

By the Internet or Telephone. If you are a record holder of Access common stock, you can also appoint the proxies to vote your shares for you by going to the Internet website (www.investorvote.com/ANCX) or by calling (800) 652-Vote (8683). When you are prompted for your “control number,” enter the number printed just above your name on the enclosed proxy card, and then follow the instructions provided. You may vote by the Internet or telephone only until [●] Eastern Time on [●], which is the day of the Access special meeting.

If you are a record holder of Middleburg common stock, you can also appoint the proxies to vote your shares for you by going to the Internet website (www.proxyvote.com) or by calling (800) 690-6903. When you are prompted for your “control number,” enter the number printed just above your name on the enclosed proxy card, and then follow the instructions provided. You may vote by the Internet or telephone only until [●] Eastern Time on [●], which is the day of the Middleburg special meeting.

 

1


Table of Contents

In Person. You may also cast your vote in person at the respective company’s special meeting. See below for the date, time and place of the Access and Middleburg special meetings. If your shares are held in “street name,” through a broker, bank or other nominee, that entity will send you separate instructions describing the procedure for voting your shares. “Street name” shareholders who wish to vote in person at the special meetings will need to present a proxy from the entity that holds the shares.

 

  Q: If my shares are held in “street name” by a broker or other nominee, will my broker or nominee vote my shares for me if I do not provide instructions on how to vote my shares?

 

  A: Your broker or other nominee does not have authority to vote on the proposals described in this joint proxy statement/prospectus if you do not provide instructions to it on how to vote. Your broker or other nominee will vote your shares held by it in “street name” with respect to these matters ONLY if you provide instructions to it on how to vote. You should follow the directions your broker or other nominee provides.

 

  Q: When and where is the Access special meeting of shareholders?

 

  A: The special meeting of Access shareholders will be held at [●] local time, on [●] at [●], located at [●].

 

  Q: When and where is the Middleburg special meeting of shareholders?

 

  A: The special meeting of Middleburg shareholders will be held at [●] local time, on [●] at [●], located at [●].

 

  Q: What vote is required to approve each proposal at the Access special meeting?

 

  A: The Access merger proposal requires the affirmative vote of more than two thirds of the outstanding shares of Access common stock entitled to vote on the proposal.

The Access adjournment proposal requires the affirmative vote of at least a majority of the shares voted on the proposal, whether or not a quorum is present.

 

  Q: What vote is required to approve each proposal at the Middleburg special meeting?

 

  A: The Middleburg merger proposal requires the affirmative vote of a majority of the outstanding shares of Middleburg common stock entitled to vote on the proposal.

The compensation proposal, to be approved on an advisory basis only, requires the affirmative vote of at least a majority of the shares voted on the proposal.

The Middleburg adjournment proposal requires the affirmative vote of at least a majority of the shares voted on the proposal, whether or not a quorum is present.

 

  Q: What if I do not vote on the merger proposals?

 

  A: If you are an Access shareholder. With respect to the Access merger proposal, if you fail to vote or fail to instruct your broker or other nominee how to vote, your failure to vote will have the same effect as a vote against the Access merger proposal. If you respond with an “abstain” vote, your proxy will have the same effect as a vote against the Access merger proposal. If you are a shareholder of record of common stock and you sign and return your proxy card but do not indicate how you want to vote on the Access merger proposal, your proxy will be counted as a vote in favor of the proposal.

If you are a Middleburg shareholder. With respect to the Middleburg merger proposal, if you fail to vote or fail to instruct your broker or other nominee how to vote, your failure to vote will have the same effect as a vote against the Middleburg merger proposal. If you respond with an “abstain” vote, your proxy will have the same effect as a vote against the Middleburg merger proposal. If you are a shareholder of record of common stock and you sign and return your proxy card but do not indicate how you want to vote on the Middleburg merger proposal, your proxy will be counted as a vote in favor of the proposal.

 

2


Table of Contents
  Q: May I change my vote after I have delivered my proxy card or voting instructions?

 

  A: Yes. If you are a shareholder of record of common stock, you may change your vote at any time before your proxy is voted at the applicable special meeting. You may do this in any of the following ways:

 

    by sending a notice of revocation to either the Access corporate secretary or the Middleburg corporate secretary, as the case may be;

 

    by sending a completed proxy card bearing a later date than your original proxy card;

 

    by voting via the Internet or telephone any time after delivering your proxy card or voting instructions via the Internet or telephone; or

 

    by attending the Access or Middleburg special meeting and voting in person; your attendance alone will not revoke any proxy.

If you choose either of the first two methods, your notice or new proxy card must be actually received before the voting takes place at the applicable special meeting.

If your shares are held in a stock brokerage account or by a bank or other nominee, you should call your broker or other nominee for additional information regarding how to change your vote.

 

  Q: What are the material U.S. federal income tax consequences of the merger to Middleburg shareholders?

 

  A: The merger will be treated as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”). In connection with the filing of the registration statement of which this document forms a part, Troutman Sanders LLP has delivered to Access, and Williams Mullen, a Professional Corporation (Richmond, Virginia) (“Williams Mullen”) has delivered to Middleburg, their respective opinions that, for U.S. federal income tax purposes, the merger will qualify as a reorganization. Accordingly, a holder of Middleburg common stock generally will not recognize any gain or loss for U.S. federal income tax purposes as a result of the exchange of the holder’s shares of Middleburg common stock for shares of Access common stock pursuant to the merger, except with respect to any cash received instead of fractional shares of Access common stock. For greater detail, see “Material U.S. Federal Income Tax Consequences” beginning on page [●]. Tax matters can be complicated and the tax consequences of the merger to you will depend on your particular tax situation. You should consult your tax advisor to determine the specific tax consequences of the merger to you.

 

  Q: Do I have dissenters’ or appraisal rights?

 

  A: No. Under Virginia law, shareholders of Access and Middleburg are not entitled to exercise dissenters’ or appraisal rights in connection with the merger.

 

  Q: If I am a Middleburg shareholder with shares represented by stock certificates, should I send in my Middleburg stock certificates now?

 

  A: No. Please do not send your stock certificates with your proxy card.

If you are a holder of Middleburg stock, you will receive written instructions from the exchange agent within five business days after the merger is completed on how to exchange your Middleburg stock certificates for shares of Access common stock issued on book-entry form or, if you elect, an Access stock certificate, and your check in lieu of any fractional shares of Access common stock.

 

  Q: What should I do if I hold my shares of Middleburg common stock in book-entry form?

 

  A: After the completion of the merger, Access will send you instructions on how to exchange your shares of Middleburg common stock held in book-entry form for shares of Access common stock in book-entry form and receive your check in lieu of fractional shares of Access common stock.

 

  Q: What happens if I sell or transfer ownership of shares of Middleburg common stock after the record date for the Middleburg special meeting?

 

  A:

The record date for the Middleburg special meeting is earlier than the expected date of completion of the merger. Therefore, if you sell or transfer ownership of your shares of Middleburg common stock after the record date for

 

3


Table of Contents
  the Middleburg special meeting, but prior to completion of the merger, you will retain the right to vote at the Middleburg special meeting, but the right to receive the merger consideration will transfer with the shares of Middleburg common stock.

 

  Q: Who should I contact if I have any questions about the proxy materials or voting?

 

  A: If you have any questions about the merger or if you need assistance in submitting your proxy or voting your shares or need additional copies of the joint proxy statement/prospectus or the enclosed proxy card:

 

    if you are an Access shareholder, you should contact Access’s Corporate Secretary by calling (703) 871-2100 or by writing to Access National Corporation, 1800 Robert Fulton Drive, Suite 300, Reston, Virginia 20191, Attention: Corporate Secretary. You may also obtain more information about the merger and the proxy materials by contacting Regan & Associates, Inc., Access’s proxy solicitor, at 505 Eighth Avenue – Suite 800, New York, New York 10018 or (800) 737-3426.

 

    if you are a Middleburg shareholder, you should contact Middleburg’s investor relations department by calling (703) 777-6327 or by writing to Middleburg Financial Corporation, 111 West Washington Street, Middleburg, Virginia 20117, Attention: Investor Relations.

If your shares are held in a stock brokerage account or by a bank or other nominee, you should call your broker or other nominee for additional information.

 

4


Table of Contents

SUMMARY

This summary highlights selected information from this joint proxy statement/prospectus. We urge you to read carefully the joint proxy statement/prospectus and the other documents to which this joint proxy statement/prospectus refers to understand fully the merger and the other matters to be considered at the special meetings. See “Where You Can Find More Information” beginning on page []. Each item in this summary includes a page reference directing you to a more complete description of that item.

The Merger (page [])

Access and Middleburg are proposing a combination of our companies through a merger of Middleburg with and into Access, pursuant to the terms and conditions of the merger agreement. The parties expect to complete the merger during the second quarter of 2017. The merger agreement is attached to this joint proxy statement/prospectus as Appendix A. We encourage you to read the merger agreement because it is the legal document that governs the merger.

If the merger is completed, it is expected that Middleburg Bank, the wholly-owned subsidiary of Middleburg, will merge with and into Access National Bank, the wholly-owned bank subsidiary of Access, following the merger with Access National Bank being the surviving bank. The parties expect to complete the subsidiary bank merger during the second quarter of 2017.

Consideration to be Received in the Merger by Middleburg Shareholders (page [])

In the proposed merger, holders of Middleburg common stock will receive 1.3314 shares of Access common stock for each of their shares of Middleburg common stock outstanding on the effective date of the merger and cash in lieu of any fractional shares. The number of shares of Access common stock delivered for each share of Middleburg common stock in the merger is referred to as the “exchange ratio.” This exchange ratio is fixed and will not be adjusted to reflect stock price changes prior to the closing of the merger. Based on the average closing price of Access’s common stock for the twenty trading days ended October 21, 2016 ($24.42), the 1.3314 exchange ratio represented approximately $32.51 in value for each share of Middleburg common stock or $233.1 million in the aggregate. Based on the average closing price of Access’s common stock for the twenty trading days ended January 12, 2017, the last trading day before the date of this joint proxy statement/prospectus, the 1.3314 exchange ratio represented approximately $37.70 in value for each share of Middleburg common stock or $271.6 million in the aggregate. It is expected that existing holders of Middleburg common stock will own approximately 47.4% of Access’s common stock after the merger.

Shares of Access common stock held by Access shareholders will remain unchanged in the merger. It is expected that existing holders of Access common stock will own approximately 52.6% of Access’s outstanding common stock after the merger.

Treatment of Middleburg Stock Options and Restricted Stock Awards (page [])

Stock Options. In the merger, each outstanding Middleburg stock option will be cancelled for a cash payment equal to the product of (i) the difference between the closing sale price of Middleburg common stock on the trading day immediately preceding the effective date of the merger and the per share exercise price of the stock option, and (ii) the number of shares of Middleburg common stock subject to such stock option.

Restricted Stock Awards. In the merger, all outstanding Middleburg restricted stock awards which are unvested or contingent will, pursuant to the terms of each such award, vest in full immediately prior to the merger and be converted into unrestricted shares of Access common stock based on the exchange ratio.

Dividend Information (page [])

Access is currently paying a quarterly cash dividend on shares of its common stock at a rate of $0.15 per share. Access has no current intention to change its dividend strategy of paying a quarterly cash dividend, but has and will continue to

 



 

5


Table of Contents

evaluate that decision based on a quarterly review of earnings, growth, capital and such other factors that the Access board of directors considers relevant to the dividend decision process. Middleburg currently pays a quarterly cash dividend on shares of its common stock at a rate of $0.13 per share.

Material U.S. Federal Income Tax Consequences (page [])

The merger will be treated as a “reorganization” within the meaning of Section 368(a) of the Code. In connection with the filing of the registration statement of which this document forms a part, Troutman Sanders LLP has delivered to Access, and Williams Mullen has delivered to Middleburg, their respective opinions (Exhibits 8.1 and 8.2, respectively) to that effect. Subject to the limitations and qualifications described in “Material U.S. Federal Income Tax Consequences” (page [●]), for U.S. federal income tax purposes, the merger generally will be tax-free to Middleburg shareholders as to the shares of Access common stock they receive in the merger. However, Middleburg shareholders may recognize gain or loss in connection with cash received instead of any fractional shares of Access common stock they would otherwise be entitled to receive. Additionally, it is a condition to Middleburg’s and Access’s obligations to complete the merger that they each receive a legal opinion that the merger will be treated for U.S. federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code. These opinions, however, will not bind the Internal Revenue Service, which could take a different view.

The tax consequences of the merger to you will depend on your own situation and the consequences described in this joint proxy statement/prospectus may not apply to you. Middleburg shareholders will also be required to file certain information with their federal income tax returns and to retain certain records with regard to the merger. In addition, you may be subject to state, local or foreign tax laws and consequences that are not addressed in this joint proxy statement/prospectus. You are urged to consult with your own tax advisor for a full understanding of the tax consequences of the merger to you.

For greater detail, see “Material U.S. Federal Income Tax Consequences” beginning on page [●].

Access’s Board of Directors Unanimously Recommends that Access Shareholders Vote “FOR” the Access Merger Proposal and “FOR” the Access Adjournment Proposal (page [])

Access’s board of directors has determined that the merger, the merger agreement and the transactions contemplated by the merger agreement are in the best interests of Access and its shareholders and has approved the merger agreement. The Access board of directors unanimously recommends that Access shareholders vote “FOR” the Access merger proposal and “FOR” the Access adjournment proposal. In making its recommendations, a number of substantive reasons were considered by the Access board, including, among others: (i) the expectation that the merger will create a $2.7 billion-asset bank ranked fifth in deposit market-share among Virginia-based banks under $10 billion in assets; (ii) the belief that the merger will allow the combined company to more effectively and efficiently navigate the challenges and costs associated with becoming a larger financial institution; (iii) the expectation that the combined company will have increased resources to invest in future growth opportunities in comparison to Access on a stand-alone basis; (iv) the complementary nature of Middleburg’s business, operations and proficiencies with those of Access; and (v) the opportunities for greater efficiencies from conducting Access’s and Middleburg’s operations as part of a single enterprise. For additional discussion of the factors considered by Access’s board of directors in reaching its decision to approve the merger agreement, see “The Merger – Access’s Reasons for the Merger; Recommendation of Access’s Board of Directors.”

Middleburg’s Board of Directors Unanimously Recommends that Middleburg Shareholders Vote “FOR” the Middleburg Merger Proposal, “FOR” the Compensation Proposal and “FOR” the Middleburg Adjournment Proposal (page [])

Middleburg’s board of directors has determined that the merger, the merger agreement and the transactions contemplated by the merger agreement are in the best interests of Middleburg and its shareholders and has unanimously approved the merger agreement. The Middleburg board of directors unanimously recommends that Middleburg shareholders vote “FOR” the Middleburg merger proposal, “FOR” the compensation proposal and “FOR” the Middleburg adjournment proposal. In making its recommendations, a number of substantive reasons were considered by the Middleburg board, including, among others: (i) the expectation that the merger will create a $2.7 billion-asset bank ranked fifth in deposit market-share among Virginia-based banks under $10 billion in assets; (ii) Middleburg’s historical financial performance, prospects for the future, projected financial results and alternatives for loan growth on a stand-alone basis, and the belief that the combined company will have increased resources and ability to accelerate growth in comparison to Middleburg on a

 



 

6


Table of Contents

stand-alone basis; (iii) the potential for Middleburg’s shareholders to benefit from the combined company’s expected profitability and potential for growth and stock appreciation; (iv) the expected increase in cash dividend payments to be received by Middleburg’s shareholders, as shareholders of Access following the merger; and (v) the belief that the combined company will be able to more effectively and efficiently navigate the challenges of the current and prospective economic, regulatory and competitive environments facing Middleburg and the financial services industry generally. For additional discussion of the factors considered by Middleburg’s board of directors in reaching its decision to approve the merger agreement, see “The Merger – Middleburg’s Reasons for the Merger; Recommendation of Middleburg’s Board of Directors.”

Opinion of Access’s Financial Advisor (page [])

In considering whether to approve the merger, Access’s board of directors considered the opinion of its financial advisor, FBR Capital Markets & Co. (“FBR”), which delivered to Access’s board of directors its oral opinion on October 20, 2016, which was subsequently confirmed in writing, that as of such date the exchange ratio was fair to Access from a financial point of view. A copy of the FBR’s written fairness opinion, dated October 21, 2016, is attached to this joint proxy statement/prospectus as Appendix B. You should read this opinion completely to understand the assumptions made, matters considered and limitations of the review undertaken by FBR in providing its opinion. The opinion of FBR has not been updated prior to the date of this joint proxy statement/prospectus and does not reflect any change in circumstances after October 21, 2016.

FBR’s opinion is directed to Access’s board of directors, addresses only the fairness of the exchange ratio pursuant to the merger agreement from a financial point of view to Access, and does not address any other aspect of the merger. FBR’s opinion does not constitute a recommendation to any Access shareholder as to how to vote or act with respect to the merger or any matter considered at the Access special meeting.

Opinion of Middleburg’s Financial Advisor (page [])

In connection with the merger, Middleburg’s board of directors received the opinion of Middleburg’s financial advisor, Sandler O’Neill & Partners, L.P. (“Sandler O’Neill”), which delivered to Middleburg’s board of directors its oral opinion, which was subsequently confirmed in writing on October 20, 2016, to the effect that, as of such date, the exchange ratio was fair to the holders of Middleburg common stock from a financial point of view. A copy of the written opinion, dated October 20, 2016, is attached to this joint proxy statement/prospectus as Appendix C. You should read this opinion completely to understand the assumptions made, matters considered and limitations of the review undertaken by Sandler O’Neill in providing its opinion. The opinion of Sandler O’Neill has not been updated prior to the date of this joint proxy statement/prospectus and does not reflect any change in circumstances after October 20, 2016.

Sandler O’Neill’s opinion is directed to Middleburg’s board of directors, addresses only the fairness of the exchange ratio pursuant to the merger agreement from a financial point of view to the holders of Middleburg common stock, and does not address any other aspect of the merger. Sandler O’Neill’s opinion does not constitute a recommendation to any Middleburg shareholder as to how to vote or act with respect to the merger or any matter considered at the Middleburg special meeting.

The Parties to the Merger (pages [] and [])

Access National Corporation

Access National Corporation is a bank holding company organized under the laws of the Commonwealth of Virginia and headquartered in Reston, Virginia. Access owns all of the stock of its subsidiary bank, Access National Bank, which is an independent commercial bank chartered under federal law as a national banking association. Access National Bank provides credit, deposit, mortgage services and wealth management services to middle market commercial businesses and associated professionals, primarily in the greater Washington, D.C. Metropolitan Area. Access National Bank operates from six banking centers located in Virginia: Chantilly, Tysons, Reston, Leesburg, Manassas and Alexandria, and the mortgage division of Access National Bank operates offices in Virginia, Indiana, Tennessee, Maryland, and Georgia. A seventh banking center located in Arlington, Virginia is planned to be opened during the first quarter of 2017.

 



 

7


Table of Contents

As of September 30, 2016, Access had total consolidated assets of approximately $1.4 billion, total consolidated loans, net of unearned income, of approximately $966.5 million, total consolidated deposits through Access National Bank of approximately $1.1 billion, and consolidated shareholders’ equity of approximately $121.3 million.

The principal executive offices of Access are located at 1800 Robert Fulton Drive, Suite 300, Reston, Virginia 20191, and its telephone number is (703) 871-2100.

Middleburg Financial Corporation

Middleburg Financial Corporation is a bank holding company organized under the laws of the Commonwealth of Virginia and headquartered in Middleburg, Virginia. Middleburg owns all of the stock of its subsidiary bank, Middleburg Bank, and of Middleburg Investment Group, Inc. Middleburg Bank is a commercial bank chartered under the laws of the Commonwealth Virginia and offers a wide range of banking products and services to individuals and businesses primarily located in the Virginia counties of Loudoun, Fairfax, Fauquier and Prince William and the Virginia cities of Richmond and Williamsburg through twelve full service branches and one limited service facility. Middleburg Investment Group, Inc. owns all of the stock of its subsidiary, Middleburg Trust Company, which is a trust company chartered under the laws of the Commonwealth of Virginia and is headquartered in Richmond, Virginia, and offers a wide range of wealth management, fiduciary and trust services to individual, institutional and foundation clients.

As of September 30, 2016, Middleburg had total consolidated assets of approximately $1.3 billion, total consolidated loans, net of unearned income, of approximately $845.9 million, total consolidated deposits through Middleburg Bank of approximately $1.1 billion, and consolidated shareholders’ equity of approximately $128.9 million. As of September 30, 2016, Middleburg Trust Company had approximately $2.01 billion in assets under management or administration.

The principal executive offices of Middleburg are located at 111 West Washington Street, Middleburg, Virginia 20117, and its telephone number is (703) 777-6327.

Regulatory Approvals (page [])

Access and Middleburg cannot complete the merger without prior approval from the Board of Governors of the Federal Reserve System (the “Federal Reserve”) and the Virginia State Corporation Commission (the “Virginia SCC”). Once the Federal Reserve approves the merger, we have to wait from 15 to 30 days before we can complete it. During that time, the Department of Justice may challenge the merger. As of the date of this joint proxy statement/prospectus, we have not yet received the required regulatory approvals. While we do not know of any reason why we would not be able to obtain the necessary regulatory approvals in a timely manner, we cannot be certain when or if we will receive them or, if obtained, whether they will contain terms, conditions or restrictions not currently contemplated that will be detrimental to the combined company after completion of the merger.

Conditions to Completion of the Merger (page [])

Access’s and Middleburg’s respective obligations to complete the merger are subject to the fulfillment or waiver of certain conditions, including the following:

 

    approval of the Access merger proposal and the Middleburg merger proposal by Access and Middleburg shareholders, respectively;

 

    approval of the merger by the necessary federal and state regulatory authorities;

 

    the effectiveness of Access’s registration statement on Form S-4, of which this joint proxy statement/prospectus is a part;

 

    approval from the NASDAQ Stock Market for the listing on the NASDAQ Global Market of the shares of common stock of Access to be issued in the merger;

 

    the absence of any order, decree or injunction of any court or regulatory agency that enjoins or prohibits the completion of the merger;

 



 

8


Table of Contents
    the accuracy of the other party’s representations and warranties in the merger agreement, subject to the material adverse effect standard in the merger agreement (subject to certain limited exceptions);

 

    the other party’s performance in all material respects of its obligations under the merger agreement;

 

    the effectiveness of employment agreements with respect to the employment following the merger of Messrs. Shook, Culver and Hartley by Access or certain of its subsidiaries, a general release for Messrs. Shook, Culver and Hartley, and a separation agreement with respect to the termination of Mr. Mehra’s employment; and

 

    the receipt by each party from its respective outside legal counsel of a written legal opinion to the effect that the merger will be treated as a “reorganization” within the meaning of Section 368(a) of the Code.

In addition, Access’s obligation to complete the merger is subject to Middleburg having minimum tangible equity of $124.0 million and Middleburg’s obligation to complete the merger is subject to Access having minimum tangible equity of $120.5 million, in each case as of the last day of the month ended prior to the effective date of the merger. The merger agreement defines each party’s tangible equity as total shareholders’ equity excluding intangible assets and other comprehensive income and, in the case of Middleburg, excluding incremental losses to net book value related to certain specifically identified loans. Because Access and Middleburg currently expect to complete the merger during the second quarter of 2017, the measurement of tangible equity for these closing conditions is expected to include the impact of net income earned less dividends paid by Access and Middleburg, respectively, during the fourth quarter of 2016 and the first quarter of 2017. As a result, as of the date of this joint proxy statement/prospectus, Access and Middleburg do not know of any reason why either of Access or Middleburg would not meet its applicable minimum tangible equity closing condition in connection with the merger’s expected completion during the second quarter of 2017. As of September 30, 2016, Access and Middleburg had tangible equity (measured as defined in the merger agreement) of $118.1 million and $122.6 million, respectively.

Where the merger agreement and/or law permits, Access and Middleburg could choose to waive a condition to its obligation to complete the merger even if that condition has not been satisfied. We cannot be certain when, or if, the conditions to the merger will be satisfied or waived or that the merger will be completed.

Timing of the Merger (page [])

Access and Middleburg expect to complete the merger after all conditions to the merger in the merger agreement are satisfied or waived, including after shareholder approvals are received at the respective special meetings of Access and Middleburg and the receipt of all required regulatory approvals. We currently expect to complete the merger during the second quarter of 2017. However, it is possible that factors outside of either party’s control could require us to complete the merger at a later time or not to complete it at all.

Interests of Certain Middleburg Directors and Executive Officers in the Merger (page [])

Some of the directors and executive officers of Middleburg have interests in the merger that differ from, or are in addition to, their interests as shareholders of Middleburg. These interests exist because of, among other things, employment agreements that the officers entered into with Middleburg, rights that these officers and directors have under Middleburg’s benefit plans including equity plans (i.e., the acceleration of vesting of restricted stock awards), arrangements to continue as employees and directors of Access, Access National Bank and certain of Access’s other subsidiaries following the merger (including potential arrangements), and rights to indemnification and directors’ and officers’ liability insurance following the merger. These interests include the following, which have been calculated where applicable using assumptions set forth in “The Merger – Interests of Certain Middleburg Directors and Executive Officers in the Merger”, on page [●]:

 

    Change of control benefits to be paid by Access to Gary R. Shook, president and chief executive officer of Middleburg, under his employment agreement with Middleburg when his employment agreement is terminated simultaneous with the closing of the merger. The total value of the change of control benefits to which Mr. Shook is entitled under his employment agreement is approximately $1,492,935, and the value associated with accelerated vesting of his unvested restricted stock awards is approximately $1,250,137, assuming in both cases the merger was completed on November 30, 2016 (although such benefits will be reduced to the extent necessary to avoid imposition of an excise tax under Sections 280G and 4999 of the Code).

 



 

9


Table of Contents
    Change of control benefits to be paid by Access to Jeffrey H. Culver, senior executive vice president and chief operating officer of Middleburg, under his employment agreement with Middleburg when his employment agreement is terminated simultaneous with the closing of the merger. The total value of the change of control benefits to which Mr. Culver is entitled under his employment agreement is approximately $717,520, and the value associated with accelerated vesting of his unvested restricted stock awards is approximately $1,022,287, assuming in both cases the merger was completed on November 30, 2016 (although such benefits will be reduced to the extent necessary to avoid imposition of an excise tax under Sections 280G and 4999 of the Code). In addition, Mr. Culver will receive a cash payment of approximately $83,096, in connection with the cancellation of outstanding Middleburg stock options.

 

    Change of control benefits to be paid by Access to David L. Hartley, president and chief executive officer of Middleburg Investment Group, under his employment agreement with Middleburg Investment Group when his employment agreement is terminated simultaneous with the closing of the merger. The total value of the change of control benefits to which Mr. Hartley is entitled under his employment agreement is approximately $440,750, and the value associated with accelerated vesting of his unvested restricted stock awards is approximately $470,890, assuming in both cases the merger was completed on November 30, 2016.

 

    Change of control benefits to be paid by Access to Rajesh Mehra, chief financial officer of Middleburg, under his employment agreement with Middleburg when his employment agreement and his employment with Middleburg is terminated simultaneous with the closing of the merger. The total value of the change of control benefits to which Mr. Mehra is entitled under his employment agreement is approximately $555,410, and the value associated with accelerated vesting of his unvested restricted stock awards is approximately $543,043, assuming in both cases the merger was completed on November 30, 2016. In addition, Mr. Mehra will receive a cash payment of approximately $81,900, in connection with the cancellation of outstanding Middleburg stock options.

 

    Accelerated vesting of unvested restricted stock awards held by Mark A. McLean, having an aggregate value of approximately $243,040, assuming the merger was completed on November 30, 2016.

 

    A new employment agreement between Access National Bank, Middleburg Investment Group, Inc., Middleburg Trust Company and Gary R. Shook, pursuant to which Mr. Shook will serve as chairman and chief executive officer of Middleburg Investment Group, Inc., chairman of Middleburg Trust Company and president of Middleburg Bank, an operating division of Access National Bank, upon completion of the merger and will receive, among other benefits, an annual base salary of $400,000.

 

    A new employment agreement between Access National Bank and Jeffrey H. Culver, pursuant to which Mr. Culver will serve as executive vice president and chief operating officer of Access National Bank upon completion of the merger and will receive, among other benefits, an annual base salary of $320,000.

 

    A new employment agreement between Middleburg Investment Group, Inc., Middleburg Trust Company and David L. Hartley, pursuant to which Mr. Hartley will serve as president of Middleburg Investment Group, Inc. and president and chief executive officer of Middleburg Trust Company upon completion of the merger and will receive, among other benefits, an annual base salary of $220,375.

 

    The appointment, as provided under the terms of the merger agreement, of six current directors of Middleburg to become directors of Access following the merger. One of the six such Middleburg directors, John C. Lee, IV, current chairman of Middleburg’s board of directors, will serve as chairman of Access’ board of directors. Non-employee members of the board of directors of Access currently receive an annual retainer of $36,000 each and the chairman of Access’s board of directors currently receives an annual retainer of $12,000, in each case payable monthly, and also are eligible to receive annual incentive awards.

 

    Access has agreed to indemnify the officers and directors of Middleburg against certain liabilities arising before the effective date of the merger. Access has also agreed to purchase a six year “tail” prepaid policy, on the same terms as Middleburg’s existing directors’ and officers’ liability insurance, for the current officers and directors of Middleburg, subject to a cap on the cost of such policy equal to 300% of Middleburg current annual premium.

The members of the Middleburg board of directors knew about these additional interests and considered them when they approved the merger agreement and the merger. See “The Merger – Interests of Certain Middleburg Directors and Executive Officers in the Merger”, on page [●].

 



 

10


Table of Contents

Interests of Certain Middleburg Shareholders in the Merger (page [])

Access and Middleburg entered into a voting and standstill agreement with David L. Sokol and the David L. Sokol Revocable Trust simultaneous with entry into the merger agreement. Pursuant to the voting and standstill agreement, Access will reimburse Mr. Sokol and the trust for certain of his out-of-pocket fees, costs and expenses up to $500,000. In addition, Middleburg and Access agreed to indemnify Mr. Sokol and his representatives to the maximum extent possible under applicable law in connection with the merger and the merger agreement, in each case except to the extent relating to any willful misconduct, actual fraud or criminal conduct of Mr. Sokol and his representatives.

No Solicitation (page [])

Access and Middleburg have agreed that each party will not directly or indirectly:

 

    initiate, solicit, encourage or facilitate any inquiries or proposals with respect to any “acquisition proposal” (as defined in the merger agreement); or

 

    engage or participate in any negotiations or discussions concerning, or provide any confidential or nonpublic information relating to, an acquisition proposal.

The merger agreement does not, however, prohibit Access or Middleburg from considering an unsolicited bona fide acquisition proposal from a third party if certain specified conditions are met.

Termination of the Merger Agreement (page [])

The merger agreement may be terminated, and the merger abandoned, by Access and Middleburg at any time before the merger is completed if the boards of directors of both parties vote to do so. In addition, the merger agreement may be terminated, and the merger abandoned, under the following circumstances:

 

    by the board of directors of Access or Middleburg if the merger has not been completed by September 30, 2017, unless the failure to complete the merger by such time was caused by a failure to perform an obligation under the merger agreement by the terminating party;

 

    by the board of directors of Access or Middleburg if any required regulatory approval has been denied by the relevant governmental authority or any governmental authority has issued an injunction permanently enjoining or otherwise prohibiting the completion of the merger or the other transactions contemplated in the merger agreement;

 

    by the board of directors of Access or Middleburg if there is a breach by the other party of any representation, warranty, covenant or agreement contained in the merger agreement that would cause the failure of the closing conditions described above, and the breach is not cured within 30 days following written notice to the breaching party or by its nature cannot be cured within such time period;

 

    by the board of directors of Access at any time before the holders of Middleburg common stock approve the merger agreement and the merger if (i) Middleburg’s board of directors (a) fails to recommend to the Middleburg shareholders that they approve the Middleburg merger proposal, or (b) withholds, withdraws or modifies in any manner adverse to Access, or proposes publicly to withhold, withdraw or modify in any manner adverse to Access, the approval, recommendation or declaration of advisability with respect to the Middleburg merger proposal; or (ii) Middleburg fails to comply in all material respects with its obligations in the merger agreement requiring the calling and holding of a meeting of shareholders to consider the Middleburg merger proposal or its obligations regarding the non-solicitation of other competing offers;

 

    by the board of directors of Access or Middleburg if Middleburg shareholders do not approve the Middleburg merger proposal;

 

   

by the board of directors of Middleburg at any time before the holders of Access common stock approve the merger agreement and the merger if (i) Access’s board of directors (a) fails to recommend to the Access shareholders that they approve the Access merger proposal, or (b) withholds, withdraws or modifies in any manner adverse to Middleburg, or proposes publicly to withhold, withdraw or modify in any manner adverse to Middleburg, the approval, recommendation or declaration of advisability with respect to the Access merger

 



 

11


Table of Contents
 

proposal; or (ii) Access fails to comply in all material respects with its obligations in the merger agreement requiring the calling and holding of a meeting of shareholders to consider the Access merger proposal or its obligations regarding the non-solicitation of other competing offers;

 

    by the board of directors of Access or Middleburg if Access shareholders do not approve the Access merger proposal;

 

    by the board of directors of Access if it has approved the entering into of a definitive agreement to accept a “superior proposal” (as defined in the merger agreement), provided Access pays to Middleburg the termination fee described below; or

 

    by the board of directors of Middleburg if it has approved the entering into of a definitive agreement to accept a superior proposal, provided Middleburg pays to Access the termination fee.

Termination Fee and Expenses (page [])

Access or Middleburg must pay the other a termination fee of $9.9 million if the merger agreement is terminated by either party under certain specified circumstances. The termination and payment circumstances are more fully described elsewhere in this joint proxy statement/prospectus. See “The Merger Agreement – Termination Fee” on page [●] and in Article 7 of the merger agreement.

In general, whether or not the merger is completed, Access and Middleburg will each pay its respective expenses incident to preparing, entering into and carrying out the terms of the merger agreement. The parties will share the costs of printing this joint proxy statement/prospectus and all filing fees paid to the SEC and other governmental authorities.

The Access Special Meeting (page [])

The Access special meeting will be held on [●], 201[●] at [●] local time, at [●], located at [●].

At the special meeting the shareholders of Access will be asked to vote on the following matters:

 

    the Access merger proposal; and

 

    the Access adjournment proposal.

The Middleburg Special Meeting (page [])

The Middleburg special meeting will be held on [●], 201[●] at [●] local time, at [●], located at [●].

At the special meeting the shareholders of Middleburg will be asked to vote on the following matters:

 

    the Middleburg merger proposal;

 

    the compensation proposal; and

 

    the Middleburg adjournment proposal.

Record Date and Votes Required – Access Special Meeting (page [])

You can vote at the Access special meeting of shareholders if you owned Access common stock at the close of business on [●], 201[●]. On that date, Access had [●] shares of common stock outstanding and entitled to vote. For each proposal presented at the Access special meeting, a shareholder can cast one vote for each share of Access common stock owned on the record date.

The votes required to approve the proposals at the Access special meeting are as follows:

 

    The Access merger proposal requires the affirmative vote of more than two thirds of the outstanding shares of Access common stock entitled to vote on the proposal.

 



 

12


Table of Contents
    The Access adjournment proposal requires the affirmative vote of a majority of the shares voted on the proposal, whether or not a quorum is present.

Record Date and Votes Required – Middleburg Special Meeting (page [])

You can vote at the Middleburg special meeting of shareholders if you owned Middleburg common stock at the close of business on [●], 201[●]. On that date, Middleburg had [●] shares of common stock outstanding and entitled to vote. For each proposal presented at the Middleburg special meeting, a shareholder can cast one vote for each share of Middleburg common stock owned on the record date.

The votes required to approve the proposals at the Middleburg special meeting are as follows:

 

    The Middleburg merger proposal requires the affirmative vote of a majority of the outstanding shares of Middleburg common stock entitled to vote on the proposal.

 

    Approval of the compensation proposal, to be obtained on an advisory basis only, requires the affirmative vote of at least a majority of the shares voted on the proposal.

 

    The Middleburg adjournment proposal requires the affirmative vote of a majority of the shares voted on the proposal, whether or not a quorum is present.

Affiliate Agreements and Voting by Access and Middleburg Directors and Executive Officers (page [])

Each of Access’s directors and executive officers has agreed, subject to several conditions and exceptions, to vote all shares of Access common stock over which he or she has sole voting and investment power in favor of the Access merger proposal. As of [●], 201[●], the record date for the Access special meeting, directors and executive officers of Access and their affiliates owned and are entitled to vote [●] shares of Access common stock, or approximately [●]% of the total voting power of the shares of Access common stock outstanding on that date, of which [●] shares or [●]% of the total voting power of the shares of Access common stock outstanding on that date are subject to an affiliate agreement.

Each of Middleburg’s directors and executive officers has agreed, subject to several conditions and exceptions, to vote all of his or her shares of Middleburg common stock over which he or she has sole voting and investment power in favor of the Middleburg merger proposal. As of [●], 201[●], the record date for the Middleburg special meeting, directors and executive officers of Middleburg and their affiliates owned and are entitled to vote [●] shares of Middleburg common stock, or approximately [●]% of the total voting power of the shares of Middleburg common stock outstanding on that date, of which [●] shares or [●]% of the total voting power of the shares of Middleburg common stock outstanding on that date are subject to an affiliate agreement.

Voting and Standstill Agreement by Certain Shareholders of Middleburg (page [])

David L. Sokol, Middleburg’s largest shareholder, and a trust of which Mr. Sokol is the sole trustee, entered into a voting and standstill agreement with Middleburg and Access pursuant to which Mr. Sokol and the trust have agreed to vote all shares of Middleburg common stock beneficially owned by them, among other things, in favor of the merger and against any competing acquisition proposal. Mr. Sokol and the trust have also agreed not to sell or otherwise transfer any shares of Middleburg common stock subject to the voting and standstill agreement, and not to solicit proxies to vote shares of Middleburg common stock or make any public announcement regarding a competing acquisition proposal, in each case before the effective date of the merger or termination of the merger agreement. Mr. Sokol has also agreed to not solicit, initiate or knowingly encourage or facilitate any competing acquisition proposal. As of [●], 201[●], the record date for the Middleburg special meeting, Mr. Sokol and the trust owned and are entitled to vote 2,103,008 shares of Middleburg common stock, or approximately [●]% of the total voting power of the shares of Middleburg common stock outstanding on that date, and all such shares of Middleburg common stock are subject to the voting and standstill agreement.

For additional discussion of the voting and standstill agreement, see “The Merger Agreement – The Voting and Standstill Agreement.”

 



 

13


Table of Contents

No Appraisal or Dissenters’ Rights (page [])

Under Virginia law, the shareholders of Access and Middleburg are not entitled to appraisal or dissenters’ rights in connection with the merger.

Shareholders of Access and Middleburg Have Different Rights (page [])

Access and Middleburg are Virginia corporations governed by the Virginia Stock Corporation Act (the “Virginia SCA”). In addition, the rights of Access and Middleburg shareholders are governed by their respective articles of incorporation and bylaws. Upon completion of the merger, Middleburg shareholders will become shareholders of Access, and as such their shareholder rights will then be governed by the articles of incorporation and bylaws of Access and by the Virginia SCA. The rights of shareholders of Access differ in certain respects from the rights of shareholders of Middleburg.

The Merger Will Be Accounted for Under the Acquisition Method of Accounting (page [])

Access will use the acquisition method of accounting to account for the merger.

Listing of Access Common Stock (page [])

Access will list the shares of common stock to be issued in the merger on the NASDAQ Global Market.

Market Prices and Share Information (page [])

Access’s common stock is listed on the NASDAQ Global Market under the symbol “ANCX” and Middleburg’s common stock is listed on the NASDAQ Capital Market under the symbol “MBRG.” The following table sets forth the closing sale prices per share of Access common stock as reported on the NASDAQ Global Market and of Middleburg common stock on the NASDAQ Capital Market on October 21, 2016, the last trading day before we announced the signing of the merger agreement, and on January 12, 2017, the last trading day before the date of this joint proxy statement/prospectus.

 

     Access
Common
Stock
     Middleburg
Common
Stock
     Implied Value of
One Share of
Middleburg

Common Stock
 

October 21, 2016

   $ 26.61       $ 27.59       $ 35.43   

January 12, 2016

   $ 28.86       $ 36.71       $ 38.42   

Access cannot assure Middleburg shareholders that its stock price will continue to trade at or above, as applicable, the prices shown in the table above. You should obtain current stock price quotations for Access common stock and Middleburg common stock from a newspaper, via the Internet or by calling your broker.

Risk Factors (page [])

You should consider all the information contained in or incorporated by reference into this joint proxy statement/prospectus in deciding how to vote for the proposals presented in the joint proxy statement/prospectus. In particular, you should consider the factors under “Risk Factors.”

 



 

14


Table of Contents

SELECTED HISTORICAL FINANCIAL DATA OF ACCESS

The following tables set forth certain of Access’ consolidated financial data as of the end of and for each of the years in the five-year period ended December 31, 2015 and as of and for the nine months ended September 30, 2016 and 2015. The historical consolidated financial information as of the end of and for each of the years in the five-year period ended December 31, 2015, is derived from Access’ audited consolidated financial statements. The consolidated financial information as of and for the nine-month periods ended September 30, 2016 and 2015 is derived from Access’ unaudited consolidated financial statements. In Access’ opinion, such unaudited consolidated financial statements include all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of its financial position and results of operations for such periods. Interim results for the nine months ended September 30, 2016 are not necessarily indicative of, and are not projections for, the results to be expected for the full year ended December 31, 2016.

The selected historical financial data below is only a summary and should be read in conjunction with the consolidated financial statements that are incorporated by reference into this joint proxy statement/prospectus and their accompanying notes.

Access National Corporation

 

     Nine Months Ended
September 30,

(Unaudited)
    Year Ended
December 31,
 
     2016     2015     2015     2014     2013     2012     2011  
     (Amounts in thousands)  

Results of Operations:

              

Interest and dividend income

   $ 37,095      $ 32,219      $ 43,666      $ 38,501      $ 35,876      $ 36,716      $ 35,167   

Interest expense

     4,641        2,873        4,119        3,273        3,712        5,165        7,050   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

     32,454        29,346        39,547        35,228        32,164        31,551        28,117   

Provision for loan losses

     870        150        150        —         675        1,515        1,149   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income after provision for loan losses

     31,584        29,196        39,397        35,228        31,489        30,036        26,968   

Noninterest income

     24,677        19,798        26,065        19,300        28,150        54,794        36,429   

Noninterest expense

     35,601        31,379        41,866        33,018        39,198        56,399        45,722   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     20,660        17,615        23,596        21,510        20,441        28,431        17,675   

Income tax expense

     7,262        6,114        8,177        7,585        7,234        10,708        6,287   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 13,398      $ 11,501      $ 15,419      $ 13,925      $ 13,207      $ 17,723      $ 11,388   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Financial Condition:

              

Assets

   $ 1,362,838      $ 1,118,229      $ 1,178,548      $ 1,052,880      $ 847,182      $ 863,914      $ 809,758   

Loans, net of unearned income

     966,545        849,037        887,478        776,603        687,055        616,978        569,400   

Deposits

     1,115,053        931,435        913,744        755,443        572,972        671,496        645,013   

Shareholders’ equity

     121,331        107,629        109,138        98,904        91,134        91,267        82,815   

Ratios:

              

Return on average assets(1)

     1.41     1.40     1.39     1.45     1.55     2.15     1.50

Return on average equity(1)

     15.56     14.94     14.83     14.47     14.00     19.68     14.80

Efficiency ratio(1)(2)

     62.31     63.85     63.81     60.55     64.99     65.32     70.84

Common equity to total assets

     8.90     9.62     9.26     9.39     10.76     10.56     10.23

Tangible common equity / tangible assets

     8.78     9.50     9.12     9.27     10.76     10.56     10.23

 



 

15


Table of Contents
     Nine Months Ended
September 30,
(Unaudited)
    Year Ended
December 31,
 
     2016     2015     2015     2014     2013     2012     2011  
     (Amounts in thousands, except for share and per share amounts)  

Asset Quality:

              

Allowance for loan losses

   $ 14,696      $ 13,474      $ 13,563      $ 13,399      $ 13,136      $ 12,500      $ 11,738   

Nonaccrual loans

     5,845        6,616        7,417        1,622        2,535        2,743        6,703   

Other real estate owned (foreclosed loans)

     —         —         —         —         —         —         —    

ALL / total outstanding loans

     1.52     1.59     1.53     1.73     1.91     2.03     2.06

ALL / nonaccrual loans

     251     204     183     826     518     456     175

NPAs / total outstanding loans(3)

     0.60     0.78     0.84     0.21     0.37     0.44     1.18

Net charge-offs / total outstanding loans

     -0.03     0.01     0.00     -0.03     0.01     0.12     -0.01

Per Share Data:

              

Earnings per share, basic

   $ 1.27      $ 1.09      $ 1.46      $ 1.33      $ 1.28      $ 1.73      $ 1.11   

Earnings per share, diluted

   $ 1.26      $ 1.09      $ 1.46      $ 1.33      $ 1.27      $ 1.71      $ 1.10   

Cash dividends paid

   $ 0.45      $ 0.79      $ 0.94      $ 0.50      $ 1.11      $ 0.95      $ 0.13   

Market value per share

   $ 23.90      $ 20.37      $ 20.46      $ 16.92      $ 14.95      $ 13.00      $ 8.80   

Book value per common share

   $ 11.44      $ 10.23      $ 10.35      $ 9.45      $ 8.79      $ 8.85      $ 8.13   

Price to earnings ratio, diluted

     18.97x        18.69x        14.01x        12.72x        11.77x        7.60x        8.00x   

Price to book value ratio

     2.09x        1.99x        1.98x        1.79x        1.70x        1.47x        1.08x   

Dividend payout ratio

     35.71     72.48     64.38     37.59     87.40     14.62     11.82

Weighted average shares outstanding, basic

     10,575,088        10,504,086        10,513,008        10,424,067        10,319,802        10,253,656        10,277,801   

Weighted average shares outstanding, diluted

     10,644,897        10,567,173        10,581,871        10,466,841        10,403,155        10,363,267        10,344,325   

 

(1) Ratios for the nine months ended September 30, 2016 and 2015 are presented on an annualized basis.
(2) The efficiency ratio is calculated as noninterest expense divided by the sum of net interest income before provision plus noninterest income.
(3) NPAs consist of nonaccrual loans, other real estate owned and repossessed assets.

 



 

16


Table of Contents

SELECTED HISTORICAL FINANCIAL DATA OF MIDDLEBURG

The following table sets forth certain of Middleburg’s consolidated financial data as of the end of and for each of the years in the five-year period ended December 31, 2015 and as of and for the nine months ended September 30, 2016 and 2015. The historical consolidated financial information as of the end of and for each of the years in the five-year period ended December 31, 2015, is derived from Middleburg’s audited consolidated financial statements. The consolidated financial information as of and for the nine-month periods ended September 30, 2016 and 2015 is derived from Middleburg’s unaudited consolidated financial statements. In Middleburg’s opinion, such unaudited consolidated financial statements include all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of its financial position and results of operations for such periods. Interim results for the nine months ended September 30, 2016 are not necessarily indicative of, and are not projections for, the results to be expected for the full year ended December 31, 2016.

The selected historical financial data below is only a summary and should be read in conjunction with the consolidated financial statements that are incorporated by reference into this joint proxy statement/prospectus and their accompanying notes.

 



 

17


Table of Contents

Middleburg Financial Corporation

 

 
    Nine Months Ended
September 30,
(Unaudited)
    Year Ended
December 31,
 
    2016     2015     2015     2014     2013     2012     2011  
    (Amounts in thousands, except for share and per share information)  

Results of Operations:

             

Interest and dividend income

  $ 32,711      $ 31,754      $ 42,281      $ 43,325      $ 44,272      $ 47,023      $ 48,636   

Interest expense

    3,376        3,151        4,207        5,243        6,567        8,824        10,691   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

    29,335        28,603        38,074        38,082        37,705        38,199        37,945   

Provision for (recovery of) loan losses

    53        (407     2,293        1,960        109        3,438        2,884   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income after provision for (recovery of) loan losses

    29,282        29,010        35,781        36,122        37,596        34,761        35,061   

Noninterest income

    6,822        7,264        10,390        14,786        24,539        29,454        19,962   

Noninterest expense

    26,939        26,719        35,626        41,081        54,041        54,259        49,011   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

    9,165        9,555        10,545        9,827        8,094        9,956        6,012   

Income tax expense

    2,193        2,506        2,715        2,341        1,931        1,966        1,350   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

    6,972        7,049        7,830        7,486        6,163        7,990        4,662   

Net (income) loss attributable to non-controlling interest

    —         —         —         98        (9     (1,504     298   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to Middleburg Financial Corporation

  $ 6,972      $ 7,049      $ 7,830      $ 7,584      $ 6,154      $ 6,486      $ 4,960   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Financial Condition:

             

Assets

  $ 1,335,002      $ 1,261,290      $ 1,294,863      $ 1,222,857      $ 1,227,753      $ 1,236,781      $ 1,192,860   

Loans, net of unearned income

    845,890        780,867        805,681        754,846        728,480        709,477        671,393   

Deposits

    1,091,505        1,032,353        1,040,800        989,080        982,396        981,900        929,869   

Shareholders’ equity

    128,920        126,412        123,554        122,034        115,073        117,122        108,013   

Ratios:

             

Return on average assets(1)

    0.71     0.75     0.62     0.62     0.51     0.54     0.44

Return on average equity(1)

    7.37     7.54     6.25     6.40     5.40     5.86     4.87

Efficiency ratio(1)(2)

    74.51     74.49     73.51     77.70     86.82     80.20     84.64

Common equity to total assets

    9.66     10.02     9.54     9.98     9.37     9.47     9.05

Tangible common equity / tangible assets

    9.42     9.76     9.29     9.70     8.98     9.03     8.58

Asset Quality:

             

Allowance for loan losses

  $ 11,200      $ 11,400      $ 11,046      $ 11,786      $ 13,320      $ 14,311      $ 14,623   

Nonaccrual loans

    6,703        8,827        8,784        9,944        19,752        21,664        25,346   

Other real estate owned and repossessed assets

    4,430        4,915        4,388        5,183        3,424        9,929        8,535   

ALL / total outstanding loans

    1.32     1.46     1.37     1.56     1.83     2.02     2.18

ALL / nonaccrual loans

    167     129     126     119     67     66     58

NPAs / total outstanding loans(3)

    1.32     1.76     1.63     2.00     3.18     4.45     5.05

Net charge-offs / total outstanding loans

    -0.01     0.00     0.38     0.45     0.15     0.53     0.48

Per Share Data:

             

Earnings per share, basic

  $ 0.98      $ 0.99      $ 1.10      $ 1.07      $ 0.87      $ 0.92      $ 0.71   

Earnings per share, diluted

  $ 0.98      $ 0.98      $ 1.09      $ 1.06      $ 0.87      $ 0.92      $ 0.71   

Cash dividends paid

  $ 0.39      $ 0.33      $ 0.46      $ 0.34      $ 0.24      $ 0.20      $ 0.20   

Market value per share

  $ 28.28      $ 17.61      $ 18.48      $ 18.01      $ 18.04      $ 17.66      $ 14.25   

Book value per common share

  $ 18.15      $ 17.65      $ 17.44      $ 17.11      $ 15.90      $ 16.15      $ 15.13   

Price to earnings ratio, diluted

    28.86x        17.97x        16.95x        16.99x        20.74x        19.20x        20.07x   

Price to book value ratio

    1.56x        1.00x        1.06x        1.05x        1.13x        1.09x        0.94x   

Dividend payout ratio

    39.80     33.67     42.20     32.08     27.59     21.74     28.17

Weighted average shares outstanding, basic

    7,092,131        7,146,495        7,147,390        7,106,171        7,074,410        7,031,971        6,974,781   

Weighted average shares outstanding, diluted

    7,139,206        7,166,542        7,167,387        7,126,601        7,107,146        7,043,119        6,976,902   

 

(1) Ratios for the nine months ended September 30, 2016 and 2015 are presented on an annualized basis.
(2) The efficiency ratio is calculated as noninterest expense divided by the sum of net interest income before provision plus noninterest income.
(3) NPAs consist of nonaccrual loans, other real estate owned and repossessed assets.

 



 

18


Table of Contents

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following unaudited pro forma condensed combined financial information combines the historical consolidated financial position and results of operations of Access and Middleburg, as an acquisition by Access of Middleburg using the acquisition method of accounting and giving effect to the related pro forma adjustments described in the accompanying notes. Under the acquisition method of accounting, the assets and liabilities of Middleburg will be recorded by Access at their respective fair values as of the date the merger is completed. The pro forma financial information should be read in conjunction with the Quarterly Reports on Forms 10-Q for the period ended September 30, 2016 and Annual Reports on Forms 10-K for the calendar year ended December 31, 2015 of both Access and Middleburg, which are incorporated by reference herein. See “Selected Historical Financial Data of Access” on page [●], “Selected Historical Financial Data of Middleburg” on page [●], “Information About Access National Corporation” on page [●], “Information About Middleburg Financial Corporation” on page [●], and “Where You Can Find More Information” on page [●].

The merger was announced on October 24, 2016. As a result of the merger, the holders of shares of Middleburg common stock will receive 1.3314 shares of Access common stock for each share of Middleburg common stock held immediately prior to the effective date of the merger. Each share of Access common stock outstanding immediately prior to the merger will continue to be outstanding after the merger. Each option to purchase shares of Middleburg common stock granted under a Middleburg equity-based compensation plan that is outstanding immediately prior to the effective date of the merger will be cancelled for a cash payment equal to the product of (i) the difference between the closing sale price of Middleburg common stock on the trading day immediately preceding the effective date of the merger and the per share exercise price of the stock option, and (ii) the number of shares of Middleburg common stock subject to such stock option. Each restricted share of Middleburg common stock granted under a Middleburg equity compensation plan that is outstanding immediately prior to the effective date of the merger will, pursuant to the terms of each such grant, vest in full immediately prior to the effective date of the merger and be converted into unrestricted shares of Access’s common stock based on the exchange ratio. The merger is intended to be treated as a “reorganization” for federal income tax purposes; Access and Middleburg shareholders are not expected to recognize, for federal income tax purposes, any gain or loss on the merger or the receipt of shares of Access common stock. For more information, see “Material U.S. Federal Income Tax Consequences” on page [●].

The unaudited pro forma condensed combined balance sheet gives effect to the merger as if the transaction had occurred on September 30, 2016. The unaudited pro forma condensed combined income statements for the nine months ended September 30, 2016 and the year ended December 31, 2015 give effect to the merger as if the transaction had occurred on January 1, 2015.

The unaudited pro forma condensed combined financial information included herein is presented for informational purposes only and does not necessarily reflect the financial results of the combined companies had the companies actually been combined at the beginning of the periods presented. The adjustments included in this unaudited pro forma condensed combined financial information are preliminary and may be revised and may not agree to actual amounts recorded by Access upon consummation of the merger. This financial information does not reflect the benefits of the expected cost savings and expense efficiencies, opportunities to earn additional revenue, potential impacts of current market conditions on revenues or asset dispositions, among other factors, and includes various preliminary estimates and may not necessarily be indicative of the financial position or results of operations that would have occurred if the merger had been consummated on the date or at the beginning of the period indicated or which may be attained in the future. The unaudited pro forma condensed combined financial information should be read in conjunction with and is qualified in its entirety by reference to the historical consolidated financial statements and related notes thereto of Access and its subsidiaries, which are incorporated in this document by reference, and the historical consolidated financial statements and related notes thereto of Middleburg and its subsidiaries, which are also incorporated by reference.

 



 

19


Table of Contents

Access and Middleburg

Unaudited Pro Forma Condensed Combined Consolidated Balance Sheet

As of September 30, 2016

(Dollars in thousands)

 

     Access
(As Reported)
    Middleburg
(As Reported)
    Merger
Pro Forma
Adjustments
           Pro Forma
Combined
 

ASSETS

           

Cash and due from banks

   $ 14,109      $ 5,557      $ —          $ 19,666   

Interest-bearing balances and federal funds sold

     67,801        50,234        (12,317     (a)         105,718   
  

 

 

   

 

 

   

 

 

      

 

 

 

Total cash and cash equivalents

     81,910        55,791        (12,317        125,384   

Investment securities:

           

Available-for-sale, at fair value

     190,265        352,618        —            542,883   

Held-to-maturity, at amortized cost

     9,214        10,727        230        (b)         20,171   
  

 

 

   

 

 

   

 

 

      

 

 

 

Total investment securities

     199,479        363,345        230           563,054   

Restricted stock, at amortized cost

     6,309        5,562        —            11,871   

Loans held for sale, at fair value

     70,998        669        —            71,667   

Loans

     966,545        845,890        (22,125     (c)         1,790,310   

Allowance for loan losses

     (14,696     (11,200     11,200        (d)         (14,696
  

 

 

   

 

 

   

 

 

      

 

 

 

Net loans

     951,849        834,690        (10,925        1,775,614   

Premises, equipment and land, net

     6,875        18,755        5,328        (e)         30,958   

Goodwill and other identified intangibles, net

     1,845        3,507        104,529        (f)         109,881   

Other real estate owned

     —         3,387        —            3,387   

Bank-owned life insurance policies

     23,630        23,761        —            47,391   

Other assets

     19,943        25,535        (2,200     (g)         43,278   
  

 

 

   

 

 

   

 

 

      

 

 

 

TOTAL ASSETS

   $ 1,362,838      $ 1,335,002      $ 84,645         $ 2,782,485   
  

 

 

   

 

 

   

 

 

      

 

 

 

LIABILITIES AND EQUITY

           

Liabilities

           

Deposits:

           

Noninterest-bearing demand

   $ 409,558      $ 267,017      $ —          $ 676,575   

Interest-bearing

     705,495        824,488        1,106        (h)         1,531,089   
  

 

 

   

 

 

   

 

 

      

 

 

 

Total deposits

     1,115,053        1,091,505        1,106           2,207,664   

Short-term borrowings

     41,336        31,540        —            72,876   

Long-term borrowings

     75,000        63,500        28        (i)         138,528   

Subordinated notes

     —         5,155        (1,592     (i)         3,563   

Other liabilities

     10,118        14,382        —            24,500   
  

 

 

   

 

 

   

 

 

      

 

 

 

TOTAL LIABILITIES

     1,241,507        1,206,082        (458        2,447,131   

Shareholders’ Equity

           

Common stock

     8,860        17,331        (9,434     (j)(k)         16,757   

Additional paid in capital

     21,159        44,186        174,257        (j)(k)         239,602   

Retained earnings

     90,026        64,600        (76,917     (a)(j)         77,709   

Accumulated other comprehensive income, net

     1,286        2,803        (2,803     (j)         1,286   
  

 

 

   

 

 

   

 

 

      

 

 

 

TOTAL SHAREHOLDERS’ EQUITY

     121,331        128,920        85,103           335,354   
  

 

 

   

 

 

   

 

 

      

 

 

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

   $ 1,362,838      $ 1,335,002      $ 84,645         $ 2,782,485   
  

 

 

   

 

 

   

 

 

      

 

 

 

See accompanying notes to unaudited pro forma condensed combined consolidated financial statements.

 



 

20


Table of Contents

Access and Middleburg

Unaudited Pro Forma Condensed Combined Consolidated Statements of Income

For the Nine Months Ended September 30, 2016

(Dollars in thousands, except for share and per share amounts)

 

     Access
(As Reported)
     Middleburg
(As Reported)
     Merger
Pro Forma
Adjustments
         Pro Forma
Combined
 

Interest and dividend income:

             

Interest and fees on loans

   $ 33,877       $ 25,397       $ 1,208      (l)    $ 60,482   

Other interest income

     3,218         7,314         —            10,532   
  

 

 

    

 

 

    

 

 

      

 

 

 

Total interest and dividend income

     37,095         32,711         1,208           71,014   
  

 

 

    

 

 

    

 

 

      

 

 

 

Interest expense:

             

Interest on deposits

     3,774         2,670         —             6,444   

Other interest expense

     867         706         128      (m)      1,701   
  

 

 

    

 

 

    

 

 

      

 

 

 

Total interest expense

     4,641         3,376         128           8,145   
  

 

 

    

 

 

    

 

 

      

 

 

 

Net interest income

     32,454         29,335         1,080           62,869   

Provision for loan losses

     870         53         —            923   
  

 

 

    

 

 

    

 

 

      

 

 

 

Net interest income after provision for loan losses

     31,584         29,282         1,080           61,946   
  

 

 

    

 

 

    

 

 

      

 

 

 

Noninterest income:

             

Service charges on deposit accounts

     748         868         —            1,616   

Gains on sales of loans held for sale

     19,419         23         —            19,442   

Trust services income

     —          3,458         —            3,458   

Other operating income

     4,510         2,473         —            6,983   
  

 

 

    

 

 

    

 

 

      

 

 

 

Total noninterest income

     24,677         6,822         —            31,499   
  

 

 

    

 

 

    

 

 

      

 

 

 

Noninterest expenses:

             

Salaries and benefits

     24,283         14,152         —            38,435   

Occupancy and equipment

     2,278         3,937         100     (n)      6,315   

Other operating expenses

     9,040         8,850         1,541      (o)      19,431   
  

 

 

    

 

 

    

 

 

      

 

 

 

Total noninterest expenses

     35,601         26,939         1,641           64,181   
  

 

 

    

 

 

    

 

 

      

 

 

 

Income before income taxes

     20,660         9,165         (561        29,264   

Income tax expense

     7,262         2,193         (196   (p)      9,259   
  

 

 

    

 

 

    

 

 

      

 

 

 

Net income

   $ 13,398       $ 6,972       $ (365      $ 20,005   
  

 

 

    

 

 

    

 

 

      

 

 

 

Earnings per share:

             

Basic

   $ 1.27       $ 0.98              1.00   

Diluted

   $ 1.26       $ 0.98              0.99   

Weighted average common shares outstanding, basic

     10,575,088         7,092,131         2,354,053      (q)      20,021,272   

Weighted average common shares outstanding, diluted

     10,644,897         7,139,206         2,343,171      (q)      20,127,274   

See accompanying notes to unaudited pro forma condensed combined consolidated financial statements.

 



 

21


Table of Contents

Access and Middleburg

Unaudited Pro Forma Condensed Combined Consolidated Statements of Income

For the Year Ended December 31, 2015

(Dollars in thousands, except for share and per share amounts)

 

     Access
(As Reported)
     Middleburg
(As Reported)
    Merger
Pro Forma
Adjustments
         Pro Forma
Combined
 

Interest and dividend income:

            

Interest and fees on loans

   $ 40,055       $ 32,479      $ 4,945      (l)    $ 77,479   

Other interest income

     3,611         9,802        —            13,413   
  

 

 

    

 

 

   

 

 

      

 

 

 

Total interest and dividend income

     43,666         42,281        4,945           90,892   
  

 

 

    

 

 

   

 

 

      

 

 

 

Interest expense:

            

Interest on deposits

     3,648         3,462        (1,106   (r)      6,004   

Other interest expense

     471         745        170      (m)      1,386   
  

 

 

    

 

 

   

 

 

      

 

 

 

Total interest expense

     4,119         4,207        (936        7,390   
  

 

 

    

 

 

   

 

 

      

 

 

 

Net interest income

     39,547         38,074        5,881           83,502   

Provision for loan losses

     150         2,293        —            2,443   
  

 

 

    

 

 

   

 

 

      

 

 

 

Net interest income after provision for loan losses

     39,397         35,781        5,881           81,059   
  

 

 

    

 

 

   

 

 

      

 

 

 

Noninterest income:

            

Service charges on deposit accounts

     903         1,061        —            1,964   

Gains on sales of loans held for sale

     19,633         (1     —            19,632   

Trust services income

     —          4,785        —            4,785   

Other operating income

     5,529         4,545        —            10,074   
  

 

 

    

 

 

   

 

 

      

 

 

 

Total noninterest income

     26,065         10,390        —            36,455   
  

 

 

    

 

 

   

 

 

      

 

 

 

Noninterest expenses:

            

Salaries and benefits

     26,966         18,435        —            45,401   

Occupancy and equipment

     3,040         5,106        133     (n)      8,279   

Other operating expenses

     11,860         12,085        2,312      (o)      26,257   
  

 

 

    

 

 

   

 

 

      

 

 

 

Total noninterest expenses

     41,866         35,626        2,445           79,937   
  

 

 

    

 

 

   

 

 

      

 

 

 

Income before income taxes

     23,596         10,545        3,436           37,577   

Income tax expense

     8,177         2,715        1,203      (p)      12,095   
  

 

 

    

 

 

   

 

 

      

 

 

 

Net income

   $ 15,419       $ 7,830      $ 2,233         $ 25,482   
  

 

 

    

 

 

   

 

 

      

 

 

 

Earnings per share:

            

Basic

   $ 1.46       $ 1.10             1.27   

Diluted

   $ 1.46       $ 1.09             1.27   

Weighted average common shares outstanding, basic

     10,513,008         7,147,390        2,354,053      (q)      20,014,451   

Weighted average common shares outstanding, diluted

     10,581,871         7,167,387        2,347,248      (q)      20,096,506   

See accompanying notes to unaudited pro forma condensed combined consolidated financial statements.

 



 

22


Table of Contents

NOTE A – BASIS OF PRESENTATION

On October 21, 2016, Access entered into the merger agreement with Middleburg. The merger agreement provides that at the effective date of the merger, each outstanding share of common stock of Middleburg will be converted into the right to receive 1.3314 shares of Access common stock, par value $0.835 per share.

The unaudited pro forma condensed combined financial information of Access’ financial condition and results of operations, including per share data, are presented after giving effect to the merger. The pro forma financial information assumes that the merger with Middleburg was consummated on January 1, 2015 for purposes of the unaudited pro forma condensed combined statements of income and on September 30, 2016 for purposes of the unaudited pro forma condensed combined balance sheet and gives effect to the merger, for purposes of the unaudited pro forma condensed combined statement of income, as if it had been effective during the entire period presented.

The merger will be accounted for using the acquisition method of accounting; accordingly, the difference between the purchase price over the estimated fair value of the assets acquired (including identifiable intangible assets) and liabilities assumed will be recorded as goodwill.

The pro forma financial information includes estimated adjustments to record the assets and liabilities of Middleburg at their respective fair values and represents management’s estimates based on available information. The pro forma adjustments included herein may be revised as additional information becomes available and as additional analysis is performed. The final allocation of the purchase price will be determined after the merger is completed and after completion of a final analysis to determine the fair values of Middleburg’s tangible, and identifiable intangible, assets and liabilities as of the effective date of the merger.

In connection with the merger and the plan to integrate the operations of Access and Middleburg following the completion of the merger, Access and Middleburg anticipate that nonrecurring charges, such as systems conversion costs, legal, investment banking and accounting fees, fees paid to regulatory agencies, severance costs, and other merger-related costs will be incurred. Access also anticipates that as a result of the integration following the completion of the merger, there will be certain cost savings resulting from the integration of the operations of the banks. The unaudited pro forma condensed combined consolidated statements of income do not include the effects of the costs associated with any nonrecurring charges or integration activities resulting from the merger, as they are nonrecurring in nature and not factually supportable at this time. In addition, the unaudited pro forma condensed combined consolidated financial information does not include any expected cost savings to be realized as a result of the merger. However, these charges and savings will affect the statement of income of the surviving company following the completion of the merger and in the period(s) in which they are recorded and/or realized. The unaudited pro forma condensed combined consolidated balance sheet does include a pro forma adjustment to reduce cash and shareholders’ equity to reflect the payment of certain anticipated merger and integration costs, including amounts paid for systems conversion costs, legal, investment banking and accounting fees, fees paid to regulatory agencies, severance costs, and other merger-related costs.

NOTE B – PRO FORMA ADJUSTMENTS

The following pro forma adjustments have been reflected in the unaudited pro forma condensed combined financial information. All adjustments are based on current valuations, estimates, and assumptions. Subsequent to the completion of the merger, Access will engage an independent third party valuation firm to determine the fair value of the assets acquired and liabilities assumed which could significantly change the amount of the estimated fair values used in the pro forma financial information presented.

 

(a) Adjustment reflects $2.5 million to be paid to Middleburg’s executive officers in connection with change in control arrangements and $308 thousand to be paid to holders of in-the-money Middleburg stock options. Additionally, it is assumed that cash and cash equivalents will be used to pay $2.6 million for after tax one-time merger expenses of Middleburg and $6.8 million for after tax one-time merger expenses of Access.

 

(b) Estimated fair value adjustment on securities held-to-maturity at current market pricing.

 

(c)

A fair value adjustment was recorded to Middleburg’s outstanding loan portfolio. This fair value adjustment consists of an adjustment to record the estimated fair value premium of $375 thousand to reflect differences in interest rates as well

 



 

23


Table of Contents
  as a fair value mark for credit deterioration of the acquired portfolio in the amount of $22.5 million which represented a mark of 2.6% on Middleburg’s outstanding loan portfolio. Of the $22.5 million credit mark, approximately $11.9 million is estimated to be an accretable adjustment. In order to determine the adjustment related to credit deterioration, Access engaged an independent third party loan review team to review and perform analytics on Middleburg’s loan portfolio.

 

(d) Elimination of Middleburg’s allowance for loan losses. Purchased loans acquired in a business combination are recorded at fair value and the recorded allowance of the acquired company is not carried over.

 

(e) Estimated fair value adjustment on premises, equipment and land acquired.

 

(f) Elimination of Middleburg’s goodwill ($3.4 million), addition of $11.6 million related to the core deposit intangible (representing a 1.5% premium on Middleburg’s core deposits based on current market data for similar transactions) plus the addition of goodwill generated as a result of the total purchase price and the fair value of assets acquired exceeding the fair value of liabilities assumed ($96.4 million).

 

(g) Adjustment for deferred taxes associated with the adjustments to record the assets and liabilities of Middleburg at fair value based on Access’ statutory rate of 35% as well as adjust for the conversion of Middleburg’s existing deferred tax asset from a 34% effective tax rate to Access’ 35% tax rate.

 

(h) Estimated fair value adjustment on deposits at current market rates and spreads for similar products.

 

(i) Estimated fair value adjustment on long-term borrowings at current market rates and spreads for similar products.

 

(j) Elimination of Middleburg’s shareholders’ equity representing conversion of all of Middleburg’s common shares into Access common shares.

 

(k) Recognition of the equity portion of the merger consideration. The adjustment to common stock represents the $0.835 par value of Access’ common stock issued to effect the transaction. The adjustment to surplus represents the amount of equity consideration above the par value of Access’ common stock issued.

 

(l) Represents the net amortization and accretion on acquired loans assuming the merger closed on January 1, 2015 (see Note D).

 

(m) Represents net discount accretion on borrowings assumed as part of the merger assuming the merger closed on January 1, 2015 (see Note D). Discount on trust preferred capital notes will be accreted over nine years using the straight-line method. Premium on other long-term borrowings will be amortized over four years using the straight-line method.

 

(n) Represents amortization of the fair value adjustment to premises and equipment assuming the merger closed on January 1, 2015 (see Note D).

 

(o) Represents amortization of core deposit premium assuming the merger closed on January 1, 2015 (see Note D). Premium will be amortized over nine years using the sum-of-years digits method.

 

(p) Income tax expense calculated using a 35% tax rate.

 

(q) Weighted average basic and diluted shares outstanding were adjusted to effect the transaction.

 

(r) Represents premium amortization on deposits assumed as part of the merger assuming the merger closed on January 1, 2015 (see Note D).

 



 

24


Table of Contents

NOTE C – PRO FORMA ALLOCATION OF PURCHASE PRICE

The following table shows the pro forma allocation of the consideration paid for Middleburg’s common equity to the acquired identifiable assets and liabilities assumed and the pro forma goodwill generated from the transaction (unaudited, dollars in thousands):

 

Purchase price:

     

Fair value of Access common shares to be issued for 7,103,358 Middleburg common shares

      $ 226,032   

Cash consideration for Middleburg options

        308   
     

 

 

 

Total pro forma purchase price

      $ 226,340   

Fair value of assets acquired:

     

Cash and cash equivalents

   $ 55,791      

Securities available for sale

     352,618      

Securities held to maturity

     10,957      

Restricted stock, at cost

     5,562      

Loans held for sale

     669      

Net loans

     823,765      

Bank premises and equipment

     24,083      

Intangibles (other than goodwill)

     11,644      

OREO

     3,387      

Bank-owned life insurance policies

     23,761      

Other assets

     23,335      
  

 

 

    

Total assets

     1,335,572      

Fair value of liabilities assumed:

     

Deposits

     1,092,611      

Securities sold under agreements to repurchase

     31,540      

Other short-term borrowings

     63,528      

Long-term borrowings

     3,563      

Other liabilities

     14,382      
  

 

 

    

Total liabilities

     1,205,624      

Net assets acquired

      $ 129,948   
     

 

 

 

Preliminary proforma goodwill

      $ 96,392   
     

 

 

 

The following table depicts the sensitivity of the purchase price and resulting goodwill to changes in the price of Access’ common stock at a price of $23.90 as of September 30, 2016:

 

Share Price Sensitivity (unaudited, dollars in thousands)

 
     Purchase Price      Estimated Goodwill  

Up 20%

   $ 271,695       $ 141,747   

Up 10%

   $ 249,018       $ 119,070   

As presented in proforma

   $ 226,340       $ 96,392   

Down 10%

   $ 203,662       $ 73,714   

Down 20%

   $ 180,985       $ 51,037   

 



 

25


Table of Contents

NOTE D – ESTIMATED AMORTIZATION/ACCRETION OF ACQUISITION ACCOUNTING ADJUSTMENTS

The following table sets forth an estimate of the expected effects of the estimated aggregate acquisition accounting adjustments reflected in the pro forma combined financial statements on the future pre-tax net income of Access after the merger with Middleburg (unaudited, dollars in thousands):

 

     Discount Accretion (Premium Amortization)
For the Years Ended December 31,
 
     2017     2018     2019     2020     Thereafter     Total  

Loans

   $ 4,945      $ 1,610      $ 1,265      $ 1,150      $ 2,530      $ 11,500   

Premises, equipment and land

     133        133        133        133        4,796        5,328   

Deposits

     (1,106     —         —         —         —         (1,106

Borrowings

     170        170        170        170        884        1,564   

Core deposit intangible

     (2,312     (2,055     (1,798     (1,541     (3,852     (11,558

The actual effect of acquisition accounting adjustments on the future pre-tax income of Access will differ from these estimates based on the closing date estimates of fair values and the use of different amortization methods than assumed above.

NOTE E – ESTIMATED COST SAVINGS AND MERGER – RELATED COSTS

Estimated cost savings, expected to approximate 32% of Middleburg’s annualized pre-tax noninterest expenses, are excluded from the pro forma analysis. Cost savings are estimated to be realized at 75% in the first year after acquisition and 100% in subsequent years. In addition, estimated merger-related costs are not included in the pro forma combined statements of income since they will be recorded in the combined results of income as they are incurred prior to or after completion of the merger and not indicative of what historical results of the combined company would have been had the companies been actually combined during the periods presented. Merger-related costs are estimated to be approximately $9.3 million, after-tax.

 



 

26


Table of Contents

COMPARATIVE HISTORICAL AND PRO FORMA UNAUDITED SHARE DATA

Summarized below is historical unaudited per share information for Access and Middleburg and additional information as if the companies had been combined for the periods shown, which is referred to as “pro forma” information.

The Middleburg pro forma equivalent per share amounts are calculated by multiplying the Access pro forma combined book value per share and net income per share by the exchange ratio of 1.3314 so that the per share amounts equate to the respective values for one share of Middleburg common stock.

It is expected that both Access and Middleburg will incur merger and integration charges as a result of the merger. Also anticipated is that the merger will provide the combined company with financial benefits that may include reduced operating expenses. The information set forth below, while helpful in illustrating the financial characteristics of the combined company under one set of assumptions, may not reflect all of these anticipated financial expenses and does not reflect all of these anticipated financial benefits or consider any potential impacts of current market conditions or the merger on revenues, expense efficiencies, asset dispositions, and share repurchases, among other factors, and, accordingly, does not attempt to predict or suggest future results. It also does not necessarily reflect what the historical results of the combined company would have been had the companies been combined during the periods presented.

In addition, the information set forth below has been prepared based on preliminary estimates of merger consideration and fair values attributable to the merger; the actual amounts recorded for the merger may differ from the information presented. The estimation and allocations of merger consideration are subject to change pending further review of the fair value of the assets acquired and liabilities assumed and actual transaction costs. A final determination of fair value will be based on the actual net tangible and intangible assets and liabilities of Middleburg that will exist on the date of completion of the merger.

The information in the following table is based on, and should be read together with, the historical financial information and the notes thereto for Access and Middleburg incorporated by reference into, or contained in, this joint proxy statement/prospectus.

 

     Historical      Proforma
Combined
     Proforma Equivalent
Middleburg Share
 
     Access      Middleburg        

Basic earnings per common share

           

Year ended December 31, 2015

   $ 1.46       $ 1.10       $ 1.27       $ 1.70   

For the nine months ended September 30, 2016

   $ 1.27       $ 0.98       $ 1.00       $ 1.33   

Diluted earnings per common share

           

Year ended December 31, 2015

   $ 1.46       $ 1.09       $ 1.27       $ 1.69   

For the nine months ended September 30, 2016

   $ 1.26       $ 0.98       $ 0.99       $ 1.32   

Cash dividends per common share

           

Year ended December 31, 2015

   $ 0.94       $ 0.46       $ 0.60       $ 0.80   

For the nine months ended September 30, 2016

   $ 0.45       $ 0.39       $ 0.45       $ 0.60   

Book value per common share

           

Year ended December 31, 2015

   $ 10.35       $ 17.44       $ 15.91       $ 21.18   

For the nine months ended September 30, 2016

   $ 11.44       $ 18.15       $ 16.71       $ 22.25   

 



 

27


Table of Contents

RISK FACTORS

In addition to general investment risks and the other information contained in or incorporated by reference into this joint proxy statement/prospectus, including the matters addressed under the heading “Cautionary Statement Regarding Forward-Looking Statements” on page [], you should consider carefully the following risk factors in deciding how to vote on the proposals presented in this joint proxy statement/prospectus. Certain risks can also be found in the documents incorporated by reference into this joint proxy statement/prospectus by Access and Middleburg. See “Where You Can Find More Information” on page [].

Because of the fixed exchange ratio and the fluctuation of the market price of Access common stock, shareholders of Access and Middleburg will not know at the time of the special meetings the market value of the merger consideration to be paid by Access to Middleburg shareholders.

In the merger, each share of Middleburg common stock will be converted into the right to receive 1.3314 shares of Access common stock, the value of which will depend upon the price of Access common stock at the effective date of the merger. The price of Access common stock as of the effective date of the merger may vary from its price at the date the fixed exchange ratio was established, at the date of this joint proxy statement/prospectus and at the date of the special meetings. Such variations in the price of Access common stock may result from changes in the business, operations or prospects of Access, regulatory considerations, general market and economic conditions, and other factors. At the time of the special meetings, shareholders of Access and Middleburg will not know the exact value of the consideration to be paid by Access when the merger is completed. You should obtain current market quotations for shares of Access common stock and for shares of Middleburg common stock.

The market price of Access common stock after the merger may be affected by factors different from those affecting the shares of Access or Middleburg currently.

Upon completion of the merger, holders of Middleburg common stock will become holders of Access common stock. Access’s business differs in important respects from that of Middleburg, and, accordingly, the results of operations of the combined company and the market price of Access common stock after the completion of the merger may be affected by factors different from those currently affecting the independent results of operations of each of Access and Middleburg. For a discussion of the businesses of Access and Middleburg and of certain factors to consider in connection with those businesses, see the information described elsewhere in this joint proxy statement/prospectus and the documents incorporated herein by reference.

Combining Access and Middleburg may be more difficult, costly or time-consuming than we expect.

The success of the merger will depend, in part, on Access’s ability to realize the anticipated benefits and cost savings from combining the businesses of Access and Middleburg and to combine the businesses of Access and Middleburg in a manner that permits growth opportunities and cost savings to be realized without materially disrupting the existing customer relationships of Middleburg or Access or decreasing revenues due to loss of customers. However, to realize these anticipated benefits and cost savings, Access must successfully combine the businesses of Access and Middleburg. If Access is not able to achieve these objectives, the anticipated benefits and cost savings of the merger may not be realized fully, or at all, or may take longer to realize than expected.

Access and Middleburg have operated, and, until the completion of the merger, will continue to operate, independently. The success of the merger will depend, in part, on Access’s ability to successfully combine the businesses of Access and Middleburg. To realize these anticipated benefits, after the completion of the merger, Access expects to integrate Middleburg’s business into its own. The integration process in the merger could result in the loss of key employees, the disruption of each party’s ongoing business, inconsistencies in standards, controls, procedures and policies that affect adversely either party’s ability to maintain relationships with customers and employees or achieve the anticipated benefits of the merger. The loss of key employees could adversely affect Access’s ability to successfully conduct its business in the markets in which Middleburg now operates, which could have an adverse effect on Access’s financial results and the value of its common stock. If Access experiences difficulties with the integration process, the anticipated benefits of the merger may not be realized, fully or at all, or may take longer to realize than expected. As with any merger of financial institutions, there also may be disruptions that cause Access and Middleburg to lose customers or cause customers to withdraw their deposits from Middleburg’s or Access’s banking subsidiaries, or other unintended consequences that could have a material

 

28


Table of Contents

adverse effect on Access’s results of operations or financial condition after the merger. These integration matters could have an adverse effect on each of Middleburg and Access during this transition period and for an undetermined period after consummation of the merger.

If Access and Middleburg do not successfully integrate, the combined company may not realize the expected benefits from the merger.

Integration in connection with a merger is sometimes difficult, and there is a risk that integrating Access and Middleburg may take more time and resources than we expect. Access’s ability to integrate Middleburg and its future success depend in large part on the ability of members of its board of directors and executive officers to work together effectively. After the merger, Access will be governed by a board of directors comprised of 13 directors, of which seven are current directors of Access and the following six are directors of Middleburg: John C. Lee, IV, Childs F. Burden, Gary D. LeClair, Mary Leigh McDaniel, Janet A. Neuharth, and Gary R. Shook. One of the six such Middleburg directors, John C. Lee, IV, current chairman of Middleburg’s board of directors, will serve as chairman of Access’s board of directors; Michael G. Anzilotti, the current chairman of Access’s board, will serve as vice chairman of Access’s board; and the Executive Committee of the Access Board of Directors shall be Mr. Anzilotti, Martin S. Friedman, Michael W. Clarke, Mr. Lee, IV, and Mr. Shook. The executive officers of Access will continue serving in their current positions as executive officers of Access after the merger, and Mr. Shook and Jeffrey H. Culver will also serve as officers of Access after the merger as Chairman and Chief Executive Officer of Middleburg Investment Group and Chairman of Middleburg Trust Company, and as Executive Vice President and Chief Operating Officer, respectively. Disagreements among board members and executive management could arise in connection with integration issues, strategic considerations and other matters. As a result, there is a risk that Access’s board of directors and executive officers may not be able to operate effectively, which would affect adversely Access’s ability to integrate the operations of Access and Middleburg successfully and Access’s future operating results.

Access may not be able to effectively integrate the operations of Middleburg Bank into Access National Bank.

The future operating performance of Access and Access National Bank will depend, in part, on the success of the merger of Middleburg Bank and Access National Bank. After the merger of Access and Middleburg and at a time to be determined by Access, Middleburg Bank will be merged with and into Access National Bank with Access National Bank surviving. After the merger of Access and Middleburg, each director of Access, in addition to Mark Moore, President of Access National Bank, will serve as a director of Access National Bank and as a director of Middleburg Bank, and executive officers of Access National Bank will continue serving in their current positions as officers of Access National Bank. After the merger of Access and Middleburg, Mr. Shook and Mr. Culver will also serve as officers of Access National Bank as President of Middleburg Bank, an operating division of Access National Bank, and as Executive Vice President and Chief Operating Officer, respectively, and all executive officers of Access National Bank will serve in substantially similar positions as officers of Middleburg Bank. The success of the merger of the banks will, in turn, depend on a number of factors, including Access’s ability to: (i) integrate the operations and branches of Middleburg Bank and Access National Bank; (ii) retain the deposits and customers of Middleburg Bank and Access National Bank; (iii) control the incremental increase in noninterest expense arising from the merger in a manner that enables the combined bank to improve its overall operating efficiencies; and (iv) retain and integrate the appropriate personnel of Middleburg Bank into the operations of Access National Bank, as well as reducing overlapping bank personnel. The integration of Middleburg Bank and Access National Bank following the subsidiary bank merger will require the dedication of the time and resources of the banks’ management and may temporarily distract managements’ attention from the day-to-day business of the banks. If Access National Bank is unable to successfully integrate Middleburg Bank, Access National Bank may not be able to realize expected operating efficiencies and eliminate redundant costs.

Future results of the combined company may be materially different from those reflected in the unaudited pro forma condensed combined financial statements included in this document because such financial statements do not reflect actual merger-related expenses and restructuring charges.

The unaudited pro forma condensed combined financial statements included in this joint proxy statement/prospectus only show a combination of Access’s and Middleburg’s historical results, and they do not necessarily indicate the future financial condition or operating results of the combined company. Access estimates that the combined company will record an aggregate of approximately $6.8 million, net of income tax effect, in merger-related expenses and restructuring charges. The actual charges may be higher or lower than estimated, depending upon how costly or difficult it is to integrate the two companies. These charges will decrease the capital of the combined company available for future profitable, income-earning investments.

 

29


Table of Contents

Regulatory approvals may not be received, may take longer than expected or may impose conditions that are not presently anticipated or that could have an adverse effect on the surviving corporation following the merger.

Before the merger of Middleburg into Access, or the merger of Middleburg Bank into Access National Bank, may be completed, Access and Middleburg must obtain approvals from the Federal Reserve, the Virginia SCC and the Office of the Comptroller of the Currency (the “OCC”). Other approvals, waivers or consents from regulators may also be required. In determining whether to grant these approvals the regulators consider a variety of factors, including the regulatory standing of each party, the competitive effects of the contemplated transactions, and the factors described under “The Merger –Regulatory Approvals Required for the Merger.” An adverse development in either party’s regulatory standing or these factors could result in an inability to obtain approval or delay their receipt. The Community Reinvestment Act of 1977, as amended, and the regulations issued thereunder (which we refer to as the “CRA”) also requires that the bank regulatory authorities, in deciding whether to approve the merger and the bank merger, assess the records of performance of Access National Bank and Middleburg Bank in meeting the credit needs of the communities they serve, including low and moderate income neighborhoods. Each of Access National Bank and Middleburg Bank currently maintains a CRA rating of “Satisfactory” from its primary regulator. As part of the review process under the CRA, it is not unusual for the bank regulatory authorities to receive protests and other adverse comments from community groups and others. Any such protests or adverse comments could prolong the period during which the merger and the bank merger are subject to review by the bank regulatory authorities.

These regulators may impose conditions on the completion of the merger or the bank merger or require changes to the terms of the merger or the bank merger. Such conditions or changes could have the effect of delaying or preventing completion of the merger or the bank merger or imposing additional costs on or limiting the revenues of the surviving corporation following the merger and the bank merger, any of which might have an adverse effect on the surviving corporation following the merger. See “The Merger – Regulatory Approvals Required for the Merger.”

The merger may distract management of Access and Middleburg from their other responsibilities.

The merger could cause the respective management groups of Access and Middleburg to focus their time and energies on matters related to the transaction that otherwise would be directed to their business and operations. Any such distraction on the part of either company’s management could affect its ability to service existing business and develop new business and adversely affect the business and earnings of Access or Middleburg before the merger, or the business and earnings of Access after the merger.

Termination of the merger agreement could negatively impact Access or Middleburg.

If the merger agreement is terminated, Access’s or Middleburg’s business may be impacted adversely by the failure to pursue other beneficial opportunities due to the focus of management on the merger, without realizing any of the anticipated benefits of completing the merger. Additionally, if the merger agreement is terminated, the market price of Access’s or Middleburg’s common stock could decline to the extent that the current market prices reflect a market assumption that the merger will be completed. Furthermore, costs relating to the merger, such as legal, accounting and financial advisory fees, must be paid even if the merger is not completed. If the merger agreement is terminated under certain circumstances, including circumstances involving a change in recommendation by Access’s or Middleburg’s board of directors, Access or Middleburg may be required to pay to the other party a termination fee of $9.9 million. See “The Merger Agreement –Termination Fee” on page [●].

Neither of the fairness opinions received by the respective boards of directors of Access and Middleburg in connection with the merger prior to the signing of the merger agreement has been updated to reflect changes in circumstances since the signing of the merger agreement.

The opinions rendered by FBR Capital Markets & Co., financial advisor to Access, orally on October 20, 2016 and subsequently confirmed in writing on October 21, 2016, and by Sandler O’Neill & Partners, L.P., financial advisor to Middleburg, on October 20, 2016, are based upon information available as of such date. Neither opinion has been updated to reflect changes that may occur or may have occurred after the date on which it was delivered, including changes to the operations and prospects of Access or Middleburg, changes in general market and economic conditions, or other changes. Any such changes may alter the relative value of Access or Middleburg or the prices of shares of Access common stock or Middleburg common stock by the time the merger is completed. The opinions do not speak as of the date the merger will be

 

30


Table of Contents

completed or as of any date other than the date of such opinions. For a description of the opinion that Access received from its financial advisor, please see “The Merger – Opinion of Access’s Financial Advisor,” beginning on page [●]. For a description of the opinion that Middleburg received from its financial advisor, please see “The Merger – Opinion of Middleburg’s Financial Advisor,” beginning on page [●].

Certain of Middleburg’s directors and executive officers have interests in the merger that differ from the interests of Middleburg’s other shareholders.

Middleburg’s shareholders should be aware that some of Middleburg’s directors and executive officers have interests in the merger and have arrangements that are different from, or in addition to, those of Middleburg’s shareholders generally. The Middleburg board of directors was aware of these interests and considered these interests, among other matters, when making its decision to approve the merger agreement and the plan of merger, and in recommending that Middleburg’s shareholders vote in favor of approving the Middleburg merger proposal. These interests include the following: (i) employment agreements with respect to employment with Access and certain of its subsidiaries after the merger of each of Messrs. Shook, Culver and Hartley, and the termination of current employment agreements and payment of benefits thereunder for Messrs. Shook, Culver, Hartley and Mehra; (ii) the treatment of outstanding Middleburg stock options and restricted stock awards pursuant to the merger agreement and the terms of such instruments; (iii) that following the merger six directors (Messrs. Lee, IV, Burden, LeClair and Shook and Mmes. McDaniel and Neuharth) will serve as directors of Access, Access National Bank and, until merged with Access National Bank, Middleburg Bank; and (iv) rights to ongoing indemnification and insurance coverage by Access following the merger for acts or omissions occurring prior to the merger. For a more complete description of these interests, see “The Merger – Interests of Certain Middleburg Directors and Executive Officers in the Merger.”

The merger agreement limits the ability of Access and Middleburg to pursue alternatives to the merger and might discourage competing offers for a higher price or premium.

The merger agreement contains “no-shop” provisions that, subject to limited exceptions, limit the ability of Access and Middleburg to discuss, facilitate or commit to competing third-party proposals to acquire all or a significant part of each company. In addition, under certain circumstances, if the merger agreement is terminated and either Access or Middleburg, subject to certain restrictions, consummates a similar transaction other than the merger, the party consummating such transaction must pay to the other a termination fee of $9.9 million. These provisions might discourage a potential competing acquiror that might have an interest in acquiring all or a significant percentage of ownership of Access or Middleburg from considering or proposing the acquisition even if it were prepared to pay consideration, with respect to Middleburg, with a higher per share market price than that proposed in the merger, and with respect to Access, with a per share market price that would amount to a premium over the current per share market price of Access. See “The Merger Agreement – Termination Fee” on page [●].

Access and Middleburg will be subject to business uncertainties and contractual restrictions while the merger is pending.

Uncertainty about the effect of the merger on employees and customers may have an adverse effect on Access and Middleburg. These uncertainties may impair Access’s and Middleburg’s ability to attract, retain and motivate key personnel until the merger is completed, and could cause customers and others that deal with Access and Middleburg to seek to change existing business relationships with Access and Middleburg. Retention of certain employees by Access and Middleburg may be challenging while the merger is pending, as certain employees may experience uncertainty about their future roles with Access or Middleburg. If key employees depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with Access or Middleburg, Access’s or Middleburg’s business, or the business of the combined company following the merger, could be harmed. In addition, subject to certain exceptions, Access and Middleburg have each agreed to operate its business in the ordinary course prior to closing and refrain from taking certain specified actions until the merger occurs, which may prevent Access or Middleburg from pursuing attractive business opportunities that may arise prior to completion of the merger. See “The Merger Agreement – Business Pending the Merger” on page [●] for a description of the restrictive covenants applicable to Access and Middleburg.

If the merger is not completed, Access and Middleburg will have incurred substantial expenses without realizing the expected benefits of the merger.

Each of Access and Middleburg has incurred and will incur substantial expenses in connection with the negotiation and completion of the transactions contemplated by the merger agreement, as well as the costs and expenses of filing, printing

 

31


Table of Contents

and mailing this joint proxy statement/prospectus and all filing and other fees paid to the SEC in connection with the merger. If the merger is not completed, Access and Middleburg would have to incur these expenses without realizing the expected benefits of the merger.

The unaudited pro forma condensed combined financial statements included in this document are preliminary and the actual financial condition and results of operations of Access after the merger may differ materially.

The unaudited pro forma condensed combined financial statements in this document are presented for illustrative purposes only and are not necessarily indicative of what Access’s actual financial condition or results of operations would have been had the merger been completed on the dates indicated. The unaudited pro forma condensed combined financial statements reflect adjustments to illustrate the effect of the merger had it been completed on the dates indicated, which are based upon preliminary estimates, to record the Middleburg identifiable assets acquired and liabilities assumed at fair value and the resulting goodwill recognized. The purchase price allocation for the merger reflected in this document is preliminary, and final allocation of the purchase price will be based upon the actual purchase price and the fair value of the assets and liabilities of Middleburg as of the date of the completion of the merger. Accordingly, the final acquisition accounting adjustments may differ materially from the pro forma adjustments reflected in this document. For more information, see “Unaudited Pro Forma Condensed Combined Financial Information.”

Current holders of Access and Middleburg common stock will have less influence as holders of Access common stock after the merger.

It is expected that the current holders of Access common stock will own approximately 52.6% of the outstanding common stock of Access after the merger. As a group, the current holders of common stock of Middleburg will own approximately 47.4% of the outstanding common stock of Access after the merger. Each current holder of Access and Middleburg common stock will own a smaller percentage of Access after the merger than they currently own of Access or Middleburg, respectively. As a result of the merger, holders of Access and Middleburg common stock will have less influence on the management and policies of Access than they currently have on the management and policies of Access or Middleburg, respectively.

Access is not obligated to pay cash dividends on its common stock.

Access is a bank holding company and, currently, its primary source of funds for paying dividends to its shareholders is dividends it receives from Access National Bank. Access is currently paying a quarterly cash dividend to holders of its common stock at a rate of $0.15 per share. However, Access is not obligated to pay dividends in any particular amounts or at any particular times. Its decision to pay dividends in the future will depend on a number of factors, including its capital and the availability of funds from which dividends may be paid. See “Market for Common Stock and Dividends” on page [●] and “Description of Access Capital Stock” on page [●].

The shares of Access common stock to be received by Middleburg shareholders as a result of the merger will have different rights than shares of Middleburg common stock.

Upon completion of the merger, Middleburg shareholders will become Access shareholders and their rights as shareholders will be governed by Virginia law and the Access articles of incorporation and bylaws. The rights associated with Middleburg common stock are different from the rights associated with Access common stock. See “Comparative Rights of Shareholders” beginning on page [●] for a discussion of the different rights associated with Access common stock.

After the merger a limited number of shareholders will collectively own a substantial percentage of the Access common stock and could significantly influence matters requiring shareholder approval.

Access’s present officers and directors beneficially own approximately 24.7% of Access common stock as of November 30, 2016, and after giving effect to the merger’s exchange ratio, based on shares of Access common stock and Middleburg common stock outstanding as of January 12, 2017, are expected to beneficially own 13.1% of Access common stock following the merger. In addition, David L. Sokol beneficially owns approximately 29.2% of Middleburg common stock as of November 11, 2016, and after giving effect to the merger’s exchange ratio, based on shares of Access common stock and Middleburg common stock outstanding as of January 12, 2017, is expected to beneficially own 13.7% of Access common stock following the merger.

 

32


Table of Contents

Based on their share ownership, these shareholders may be able to exercise significant influence over certain matters requiring shareholder approval. Those matters include approval of significant corporate transactions (including mergers), which may require the approval of more than two thirds of the shares of Access common stock entitled to vote on the transaction, the election of directors or the amendment of Access’s articles of incorporation. This influence could have the effect of delaying or preventing a change of control of Access following the merger or changes in management, may make the approval of certain transactions difficult without the support of these significant shareholders, and may result in corporate actions or inaction with which you do not agree.

Middleburg shareholders are not entitled to appraisal rights in connection with the merger.

Appraisal rights are statutory rights that, if applicable under law, enable shareholders to dissent from an extraordinary transaction, such as a merger, and to demand that the corporation pay the fair value for their shares as determined by a court in a judicial proceeding instead of receiving the consideration offered to shareholders in connection with the extraordinary transaction. The Virginia SCA provides that appraisal rights are not available to holders of common or preferred stock of a Virginia corporation in a merger when the stock is either listed on a national securities exchange, such as the NASDAQ Global Market, or is held by at least 2,000 shareholders of record. The stock of each of Access and Middleburg is listed on the NASDAQ Stock Market. Therefore, Middleburg shareholders are not entitled to appraisal rights in connection with the merger.

 

33


Table of Contents

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements to encourage companies to provide prospective information, so long as those statements are identified as forward-looking and are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those discussed in the statement. Access and Middleburg desire to take advantage of these “safe harbor” provisions with regard to the forward-looking statements in this joint proxy statement/prospectus and in the documents that are incorporated herein by reference. These forward-looking statements reflect the current views of Access and Middleburg with respect to future events and financial performance. Specifically, forward-looking statements may include:

 

    statements relating to the ability of Access and Middleburg to timely complete the merger and the benefits thereof, including anticipated efficiencies, opportunities, synergies and cost savings estimated to result from the merger;

 

    projections of revenues, expenses, income, income per share, net interest margins, asset growth, loan production, asset quality, deposit growth and other performance measures, including the information set forth under the heading “Certain Unaudited Prospective Financial Information” beginning on page [●];

 

    statements regarding expansion of operations, including branch openings, entrance into new markets, development of products and services, and execution of strategic initiatives;

 

    discussions of the future state of the economy, competition, regulation, taxation, our business strategies, subsidiaries, investment risk and policies; and

 

    statements preceded by, followed by or that include the words “estimate,” “plan,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “seek,” “target,” “prospects,” “may,” “could,” “will” or similar expressions.

These forward-looking statements express the best judgment of Access and Middleburg based on currently available information and we believe that the expectations reflected in our forward-looking statements are reasonable.

By their nature, however, forward-looking statements often involve assumptions about the future. Such assumptions are subject to risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. As such, Access and Middleburg cannot guarantee you that the expectations reflected in or implied by our forward-looking statements actually will be achieved. Actual results may differ materially from those reflected in or implied by the forward-looking statements due to, among other things, the following factors:

 

    the businesses of Access and Middleburg 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 merger may not be fully realized or realized within the expected timeframe;

 

    revenues following the merger may be lower than expected;

 

    customer and employee relationships and business operations may be disrupted by the merger;

 

    the ability to obtain required regulatory and shareholder approvals, and the ability to complete the merger within the expected timeframe, may be more difficult, time-consuming or costly than expected;

 

    changes in general business, economic and market conditions;

 

    changes in fiscal and monetary policies, and laws and regulations;

 

    changes in interest rates, deposit flows, loan demand and real estate values;

 

    a deterioration in credit quality and/or a reduced demand for, or supply of, credit;

 

    volatility in the securities markets generally or in the market price of Access’s stock specifically; and

 

    the risks outlined in “Risk Factors” beginning on page [●].

We caution you not to place undue reliance on any forward-looking statements, which speak only as of the date of this joint proxy statement/prospectus or, in the case of a document incorporated herein by reference, as of the date of that document. Except as required by law, neither Access nor Middleburg undertakes any obligation to publicly update or release any revisions to these forward-looking statements to reflect any events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in reports filed with the SEC by Access and Middleburg. See “Where You Can Find More Information” beginning on page [●] for a list of the documents incorporated herein by reference.

 

34


Table of Contents

THE ACCESS SPECIAL MEETING

Date, Place and Time

This joint proxy statement/prospectus is first being mailed on or about [●], 201[●] to Access shareholders who held shares of Access common stock, par value $0.835 per share, on the record date for the Access special meeting of shareholders. This joint proxy statement/prospectus is accompanied by the notice of the special meeting and a form of proxy that is solicited by the Access board of directors for use at the special meeting to be held on [●], 201[●] at [●] local time, at [●], located at [●], and at any adjournments of that meeting.

Purposes of the Access Special Meeting

At the special meeting, the shareholders of Access will be asked:

 

    to approve the Access merger proposal as more fully described in this joint proxy statement/prospectus; and

 

    to approve the Access adjournment proposal as more fully described in this joint proxy statement/prospectus.

Recommendation of the Access Board of Directors

The Access board of directors believes that the proposed merger with Middleburg is fair to and is in the best interests of Access and its shareholders and unanimously recommends that Access shareholders vote “FOR” each of the proposals that will be presented at the Access special meeting as described in this joint proxy statement/prospectus.

Record Date and Voting Rights; Quorum

The Access board of directors has fixed the close of business on [●], 201[●] as the record date for determining the shareholders of Access entitled to notice of and to vote at the Access special meeting or any adjournments thereof. Accordingly, you are only entitled to notice of and to vote at the Access special meeting if you were a record holder of Access common stock at the close of business on the record date. At that date, [●] shares of Access common stock were outstanding and entitled to vote.

To have a quorum that permits Access to conduct business at the Access special meeting, the presence, whether in person or by proxy, of the holders of Access’s common stock representing a majority of the voting shares outstanding on the record date is required. You are entitled to one vote for each outstanding share of Access common stock you held as of the close of business on the record date.

Holders of shares of Access common stock present in person at the special meeting but not voting, and shares of Access common stock for which proxy cards are received indicating that their holders have abstained, will be counted as present at the special meeting for purposes of determining whether there is a quorum for transacting business. Shares held in “street name” that have been designated by brokers on proxies as not voted will not be counted as votes cast for or against any proposal and will not be counted for purposes of determining the presence of a quorum unless the broker has been instructed to vote on at least one of the proposals for the Access special meeting.

Votes Required

Vote Required for Approval of the Access Merger Proposal. The approval of the Access merger proposal requires the vote of more than two-thirds of the shares of Access common stock outstanding on the record date for the special meeting.

Failures to vote, abstentions and broker non-votes will not count as votes cast on the proposal. Because, however, approval of the Access merger proposal requires the affirmative vote of more than two-thirds of the shares of Access common stock outstanding on the record date for the special meeting, failures to vote, abstentions and broker non-votes will have the same vote as votes against the Access merger proposal.

Vote Required for Approval of the Access Adjournment Proposal. The approval of the Access adjournment proposal requires the affirmative vote of a majority of the shares of Access common stock voted on the proposal, whether or not a quorum is present.

Failures to vote, abstentions and broker non-votes will not count as votes cast and will have no effect for purposes of determining whether the Access adjournment proposal has been approved.

 

35


Table of Contents

Stock Ownership of Access Executive Officers and Directors

Each director and executive officer of Access has entered into an agreement with Access and Middleburg pursuant to which he or she has agreed to vote all of his or her shares in favor of the Access merger proposal, subject to certain exceptions, including that certain shares they hold in a fiduciary capacity or for which they do not have sole voting or dispositive power are not covered by the agreement. As of the record date, directors and executive officers of Access and their affiliates beneficially owned and were entitled to vote approximately [●] shares of Access common stock at the Access special meeting, or approximately [●]% of the total voting power of shares of Access common stock entitled to vote at the special meeting, of which [●] shares or [●]% of the total voting power of the shares of Access common stock outstanding on that date are subject to an affiliate agreement.

Voting at the Access Special Meeting

Record Holders. If your shares of Access common stock are held of record in your name, your shares can be voted at the Access special meeting in any of the following ways:

 

    By Mail. You can vote your shares by using the proxy card that is enclosed for your use in connection with the special meeting. If you complete and sign the proxy card and return it in the enclosed postage-paid envelope, you will be appointing the “proxies” named in the proxy card to vote your shares for you at the special meeting. The authority you will be giving the proxies is described in the proxy card. When your proxy card is returned properly executed, the shares of Access common stock represented by it will be voted at the Access special meeting in accordance with the instructions contained in the proxy card.

 

    If proxy cards are returned properly executed without an indication as to how the proxies should vote, the Access common stock represented by each such proxy card will be considered to be voted (i) “FOR” the Access merger proposal and (ii) “FOR” the Access adjournment proposal.

 

    By the Internet or Telephone. You can appoint the proxies to vote your shares for you by going to the Internet website (www.investorvote.com/ANCX) or by calling 800-652-Vote (8683). When you are prompted for your “control number,” enter the number printed just above your name on the enclosed proxy card, and then follow the instructions provided. You may vote by Internet or telephone only until [●] local time on [●], 201[●], which is the day of the Access special meeting. If you vote by the Internet or telephone, you need not sign and return a proxy card. Under Virginia law, you will be appointing the proxies to vote your shares on the same terms as are described above and with the same authority as if you completed, signed and returned a proxy card. The authority you will be giving the proxies is described in the proxy card.

 

    In Person. You can attend the Access special meeting and vote in person. A ballot will be provided for your use at the meeting.

Your vote is important. Accordingly, please sign, date and return the enclosed proxy card, or follow the instructions above to vote by the Internet or telephone, whether or not you plan to attend the Access special meeting in person.

Shares Held in “Street Name.” Only the record holders of shares of Access common stock, or their appointed proxies, may vote those shares. As a result, if your shares of Access common stock are held for you in “street name” by a broker or other nominee, such as a bank or custodian, then only your broker or nominee (i.e., the record holder) may vote them for you, or appoint the proxies to vote them for you, unless you previously have made arrangements for your broker or nominee to assign its voting rights to you or for you to be recognized as the person entitled to vote your shares. You will need to follow the directions your broker or nominee provides you and give it instructions as to how it should vote your shares by following the instructions you received from your broker or nominee with your copy of this joint proxy statement/prospectus. Brokers and other nominees who hold shares in “street name” for their clients typically have the discretionary authority to vote those shares on “routine” proposals when they have not received instructions from beneficial owners of the shares. However, they may not vote those shares on “non-routine” matters, such as the proposals that will be presented at the Access special meeting, unless their clients give them voting instructions. To ensure that your shares are represented at the Access special meeting and voted in the manner you desire, it is important that you instruct your broker or nominee as to how it should vote your shares.

If your shares are held in “street name” and you wish to vote them in person at the Access special meeting, you must obtain a proxy, executed in your favor, from the holder of record.

Revocation of Proxies

Record Holders. If you are the record holder of shares of Access common stock and you sign and return a proxy card or appoint the proxies by the Internet or telephone and you later wish to revoke the authority or change the voting instructions

 

36


Table of Contents

you gave the proxies, you can do so at any time before the voting takes place at the Access special meeting by taking the appropriate action described below.

To change the voting instructions you gave the proxies:

 

    you can complete, sign and submit a new proxy card, dated after the date of your original proxy card, which contains your new instructions, and submit it so that it is received before the special meeting or, if hand delivered, before the voting takes place at the Access special meeting; or

 

    if you appointed the proxies by the Internet or telephone, you can go to the same Internet website (www.investorvote.com/ANCX), or use the same telephone number (800-652-Vote (8683)) before [●] local time on [●], 201[●] (the day of the special meeting), enter the same control number (printed just above your name on the enclosed proxy card) that you previously used to appoint the proxies, and then change your voting instructions.

The proxies will follow the last voting instructions received from you before the Access special meeting.

To revoke your proxy card or your appointment of the proxies by Internet or telephone:

 

    you can give Access’s Corporate Secretary a written notice, before the Access special meeting or, if hand delivered, before the voting takes place at the Access special meeting, that you want to revoke your proxy card or Internet or telephone appointment; or

 

    you can attend the Access special meeting and vote in person or notify Access’s Corporate Secretary, before the voting takes place, that you want to revoke your proxy card or Internet or telephone appointment. Simply attending the special meeting alone, without voting in person or notifying Access’s Corporate Secretary, will not revoke your proxy card or Internet or telephone appointment.

If you submit your new proxy card or notice of revocation by mail, it should be addressed to Access’s Corporate Secretary at Access National Corporation, Attention: Corporate Secretary, 1800 Robert Fulton Drive, Suite 300, Reston, Virginia 20191, and must be received no later than the beginning of the Access special meeting or, if the special meeting is adjourned, before the adjourned meeting is actually held. If hand delivered, your new proxy card or notice of revocation must be received by Access’s Corporate Secretary before the voting takes place at the special meeting or at any adjourned meeting.

If you need assistance in changing or revoking your proxy, please contact:

 

    Access’s Corporate Secretary by calling (703) 871-2100 or by writing to Access National Corporation, 1800 Robert Fulton Drive, Suite 300, Reston, Virginia 20191, Attention: Corporate Secretary; or

 

    Regan & Associates, Inc. by calling (800) 737-3246 or by writing to Regan & Associates, 505 Eighth Avenue –Suite 800, New York, New York 10018, Attention: Artie Regan.

Shares Held in “Street Name.” If your shares are held in “street name” and you want to change or revoke voting instructions you have given to the record holder of your shares, you must follow the directions given by your bank, broker, custodian or nominee.

Participants in the Access 401(k) Plan

If you hold shares in the Access 401(k) Plan, your voting instructions for those shares must be received by [●] local time on [●], 201[●] to allow sufficient time for voting by the trustee of the plan.

Solicitation of Proxies

This solicitation is made on behalf of the Access board of directors, and Access will pay the costs of soliciting and obtaining proxies, including the cost of reimbursing banks and brokers for forwarding proxy materials to shareholders. Proxies may be solicited, without extra compensation, by Access’s officers and employees by mail, electronic mail, telephone, fax or personal interviews. Access has currently engaged Regan & Associates, Inc. to assist it in the distribution and solicitation of proxies for a fee of $22,500, plus out-of-pocket expenses. Access will also reimburse brokers and other custodians, nominees and fiduciaries for their expenses in sending these materials to you and getting your voting instructions.

 

37


Table of Contents

PROPOSALS TO BE CONSIDERED AT THE ACCESS SPECIAL MEETING

Approval of the Access Merger Proposal (Access Proposal No. 1)

At the Access special meeting, shareholders of Access will be asked to approve the Access merger proposal providing for the merger of Middleburg with and into Access. Shareholders of Access should read this joint proxy statement/prospectus carefully and in its entirety, including the appendices, for more detailed information concerning the merger agreement and the merger. A copy of the merger agreement is attached to this joint proxy statement/prospectus as Appendix A.

After careful consideration, the Access board of directors approved the merger agreement and the merger to be advisable and in the best interests of Access and the shareholders of Access. See “The Merger – Access’s Reasons for the Merger; Recommendation of Access’s Board of Directors” included elsewhere in this joint proxy statement/prospectus for a more detailed discussion of the Access board of directors’ recommendation.

The Access board of directors unanimously recommends that Access shareholders vote “FOR” the Access merger proposal.

Approval of the Access Adjournment Proposal (Access Proposal No. 2)

If at the Access special meeting there are not sufficient votes to approve the Access merger proposal, the meeting may be adjourned to a later date or dates, if necessary or appropriate, to permit further solicitation of proxies to approve the Access merger proposal. In that event, Access shareholders will be asked to vote on the Access adjournment proposal and will not be asked to vote on the Access merger proposal.

In order to allow proxies that have been received by Access at the time of the Access special meeting to be voted for the Access adjournment proposal, Access is submitting the Access adjournment proposal to its shareholders as a separate matter for their consideration. This proposal asks Access shareholders to authorize the holder of any proxy solicited by the Access board of directors on a discretionary basis to vote in favor of adjourning the Access special meeting to another time and place for the purpose of soliciting additional proxies, including the solicitation of proxies from Access shareholders who have previously voted.

If it is necessary to adjourn the Access special meeting, then, unless the meeting will have been adjourned for a total of more than 120 days, no notice of the date, time, place or purpose of such adjourned meeting is required to be given to shareholders, other than an announcement at the Access special meeting, prior to such adjournment. Even if a quorum is not present, shareholders who are represented at a meeting may approve an adjournment of the meeting.

The Access board of directors unanimously recommends that Access shareholders vote “FOR” the Access adjournment proposal.

 

38


Table of Contents

THE MIDDLEBURG SPECIAL MEETING

Date, Place and Time

This joint proxy statement/prospectus is first being mailed on or about [●], 201[●], 201[●] to Middleburg shareholders who held shares of Middleburg common stock, par value $2.50 per share, on the record date for the Middleburg special meeting of shareholders. This joint proxy statement/prospectus is accompanied by the notice of the special meeting and a form of proxy that is solicited by the Middleburg board of directors for use at the special meeting to be held on [●], 201[●] at [●] local time, at the [●], located at [●], and at any adjournments of that meeting.

Purposes of the Middleburg Special Meeting

At the special meeting, the shareholders of Middleburg will be asked:

 

    to approve the Middleburg merger proposal as more fully described in this joint proxy statement/prospectus;

 

    to approve, on an advisory basis only, the compensation proposal as more fully described in this joint proxy statement/prospectus; and

 

    to approve the Middleburg adjournment proposal as more fully described in this joint proxy statement/prospectus.

Recommendation of the Middleburg Board of Directors

The Middleburg board of directors believes that the proposed merger with Access is fair to and is in the best interests of Middleburg and its shareholders and unanimously recommends that Middleburg shareholders vote “FOR” each of the proposals that will be presented at the Middleburg special meeting as more fully described in this joint proxy statement/prospectus.

Record Date and Voting Rights; Quorum

The Middleburg board of directors has fixed the close of business on [●], 201[●] as the record date for determining the shareholders of Middleburg entitled to notice of and to vote at the Middleburg special meeting or any adjournments thereof. Accordingly, you are only entitled to notice of and to vote at the Middleburg special meeting if you were a record holder of Middleburg common stock at the close of business on the record date. At that date, [●] shares of Middleburg common stock were outstanding and entitled to vote.

To have a quorum that permits Middleburg to conduct business at the Middleburg special meeting, we require the presence, whether in person or by proxy, of the holders of Middleburg’s common stock representing a majority of the voting shares outstanding on the record date. You are entitled to one vote for each outstanding share of Middleburg common stock you held as of the close of business on the record date.

Holders of shares of Middleburg common stock present in person at the special meeting but not voting, and shares of Middleburg common stock for which proxy cards are received indicating that their holders have abstained, will be counted as present at the special meeting for purposes of determining whether there is a quorum for transacting business. Shares held in “street name” that have been designated by brokers on proxies as not voted will not be counted as votes cast for or against any proposal and will not be counted for purposes of determining the presence of a quorum unless the broker has been instructed to vote on at least one of the proposals for the Middleburg special meeting.

Votes Required

Vote Required for Approval of the Middleburg Merger Proposal. The approval of the Middleburg merger proposal requires the affirmative vote of a majority of the shares of Middleburg common stock outstanding on the record date for the special meeting.

Failures to vote, abstentions and broker non-votes will not count as votes cast. Because, however, approval of the Middleburg merger proposal requires the affirmative vote of at least a majority of the shares of Middleburg common stock outstanding on the record date, failures to vote, abstentions and broker non-votes will have the same effect as votes against the Middleburg merger proposal.

 

39


Table of Contents

Vote Required for Approval, on an Advisory Basis Only, of the Compensation Proposal. The approval, on an advisory basis only, of the compensation proposal requires the affirmative vote of a majority of the shares of Middleburg common stock voted on the proposal.

Failures to vote, abstentions and broker non-votes will not count as votes cast and will have no effect on the compensation proposal.

Vote Required for Approval of the Middleburg Adjournment Proposal. The approval of the Middleburg adjournment proposal requires the affirmative vote of a majority of the shares of Middleburg common stock voted on the proposal, whether or not a quorum is present.

Failures to vote, abstentions and broker non-votes will not count as votes cast and will have no effect for purposes of determining whether the Middleburg adjournment proposal has been approved.

Stock Ownership of Middleburg Executive Officers and Directors

Each director and executive officer of Middleburg has entered into an agreement with Access and Middleburg pursuant to which he or she has agreed to vote all of his or her shares in favor of the Middleburg merger proposal, subject to certain exceptions, including that certain shares they hold in a fiduciary capacity or for which they do not have sole voting or dispositive power are not covered by the agreement. As of the record date, directors and executive officers of Middleburg and their affiliates beneficially owned and were entitled to vote approximately [●] shares of Middleburg common stock at the Middleburg special meeting, or approximately [●]% of the total voting power of the shares of Middleburg common stock entitled to vote at the special meeting, of which [●] shares or [●]% of the total voting power of the shares of Middleburg common stock outstanding on that date are subject to an affiliate agreement.

Stock Ownership of Certain Middleburg Shareholders

David L. Sokol, Middleburg’s largest shareholder, and a trust of which Mr. Sokol is the sole trustee, entered into a voting and standstill agreement with Middleburg and Access pursuant to which Mr. Sokol and the trust have agreed to vote all shares of Middleburg common stock beneficially owned by them, among other things, in favor of the merger and against any competing acquisition proposal. As of the record date, Mr. Sokol and the trust owned and are entitled to vote 2,103,008 shares of Middleburg common stock, or approximately [●]% of the total voting power of the shares of Middleburg common stock outstanding on that date, and all such shares of Middleburg common stock are subject to the voting and standstill agreement. For additional discussion of the voting and standstill agreement, see “The Merger Agreement – The Voting and Standstill Agreement.”

Voting at the Middleburg Special Meeting

Record Holders. If your shares of Middleburg common stock are held of record in your name, your shares can be voted at the Middleburg special meeting in any of the following ways:

 

    By Mail. You can vote your shares by using the proxy card that is enclosed for your use in connection with the special meeting. If you complete and sign the proxy card and return it in the enclosed postage-paid envelope, you will be appointing the “proxies” named in the proxy card to vote your shares for you at the special meeting. The authority you will be giving the proxies is described in the proxy card. When your proxy card is returned properly executed, the shares of Middleburg common stock represented by it will be voted at the Middleburg special meeting in accordance with the instructions contained in the proxy card.

If proxy cards are returned properly executed without an indication as to how the proxies should vote, the Middleburg common stock represented by each such proxy card will be considered to be voted (i) “FOR” the Middleburg merger proposal, (ii) “FOR” the compensation proposal and (iii) “FOR” the Middleburg adjournment proposal.

 

    By the Internet or Telephone. You can appoint the proxies to vote your shares for you by going to the Internet website (www.proxyvote.com) or by calling (800) 690-6903. When you are prompted for your “control number,” enter the number printed just above your name on the enclosed proxy card, and then follow the instructions provided. You may vote by the Internet or telephone only until [●] local time on [●], which is the day of the Middleburg special meeting.

 

40


Table of Contents

If you vote by the Internet or telephone, you need not sign and return a proxy card. Under Virginia law, you will be appointing the proxies to vote your shares on the same terms as are described above and with the same authority as if you completed, signed and returned a proxy card. The authority you will be giving the proxies is described in the proxy card.

 

    In Person. You can attend the Middleburg special meeting and vote in person. A ballot will be provided for your use at the meeting.

Your vote is important. Accordingly, please sign, date and return the enclosed proxy card, or follow the instructions above to vote by the Internet or telephone, whether or not you plan to attend the Middleburg special meeting in person.

Shares Held in “Street Name.” Only the record holders of shares of Middleburg common stock, or their appointed proxies, may vote those shares. As a result, if your shares of Middleburg common stock are held for you in “street name” by a broker or other nominee, such as a bank or custodian, then only your broker or nominee (i.e., the record holder) may vote them for you, or appoint the proxies to vote them for you, unless you previously have made arrangements for your broker or nominee to assign its voting rights to you or for you to be recognized as the person entitled to vote your shares. You will need to follow the directions your broker or nominee provides you and give it instructions as to how it should vote your shares by following the instructions you received from your broker or nominee with your copy of this joint proxy statement/prospectus. Brokers and other nominees who hold shares in “street name” for their clients typically have the discretionary authority to vote those shares on “routine” proposals when they have not received instructions from beneficial owners of the shares. However, they may not vote those shares on “non-routine” matters, such as the proposals that will be presented at the Middleburg special meeting, unless their clients give them voting instructions. To ensure that your shares are represented at the Middleburg special meeting and voted in the manner you desire, it is important that you instruct your broker or nominee as to how it should vote your shares.

If your shares are held in “street name” and you wish to vote them in person at the Middleburg special meeting, you must obtain a proxy, executed in your favor, from the holder of record.

Revocation of Proxies

Record Holders. If you are the record holder of shares of Middleburg common stock and you sign and return a proxy card or appoint the proxies by the Internet or by telephone and you later wish to revoke the authority or change the voting instructions you gave the proxies, you can do so at any time before the voting takes place at the Middleburg special meeting by taking the appropriate action described below.

To change the voting instructions you gave the proxies:

 

    you can complete, sign and submit a new proxy card, dated after the date of your original proxy card, which contains your new instructions, and submit it so that it is received before the special meeting or, if hand delivered, before the voting takes place at the Middleburg special meeting; or

 

    if you appointed the proxies by the Internet or telephone, you can go to the same Internet website (www.proxyvote.com), or use the same telephone number ((800) 690-6903) before [●] local time on [●], 201[●] (the day of the special meeting), enter the same control number (printed just above your name on the enclosed proxy card) that you previously used to appoint the proxies, and then change your voting instructions.

The proxies will follow the last voting instructions received from you before the Middleburg special meeting.

To revoke your proxy card or your appointment of the proxies by the Internet or telephone:

 

    you can give Middleburg’s Corporate Secretary a written notice, before the Middleburg special meeting or, if hand delivered, before the voting takes place at the Middleburg special meeting, that you want to revoke your proxy card or Internet or telephone appointment; or

 

    you can attend the Middleburg special meeting and vote in person or notify Middleburg’s Corporate Secretary, before the voting takes place, that you want to revoke your proxy card or Internet or telephone appointment. Simply attending the special meeting alone, without voting in person or notifying Middleburg’s Corporate Secretary, will not revoke your proxy card or Internet or telephone appointment.

 

41


Table of Contents

If you submit your new proxy card or notice of revocation by mail, it should be addressed to Middleburg’s Corporate Secretary at Middleburg Financial Corporation, Attention: Corporate Secretary, 111 West Washington Street, Middleburg, Virginia 20117, and must be received no later than the beginning of the Middleburg special meeting or, if the special meeting is adjourned, before the adjourned meeting is actually held. If hand delivered, your new proxy card or notice of revocation must be received by Middleburg’s Corporate Secretary before the voting takes place at the special meeting or at any adjourned meeting.

If you need assistance in changing or revoking your proxy, please contact Middleburg’s Corporate Secretary by calling (703) 777-6327 or by writing to Middleburg Financial Corporation, 111 West Washington Street, Middleburg, Virginia 20117, Attention: Corporate Secretary.

Shares Held in “Street Name.” If your shares are held in “street name” and you want to change or revoke voting instructions you have given to the record holder of your shares, you must follow the directions given by your bank, broker, custodian or nominee.

Solicitation of Proxies

This solicitation is made on behalf of the Middleburg board of directors, and Middleburg will pay the costs of soliciting and obtaining proxies, including the cost of reimbursing banks and brokers for forwarding proxy materials to shareholders. Proxies may be solicited, without extra compensation, by Middleburg’s officers and employees by mail, electronic mail, telephone, fax or personal interviews. Middleburg will reimburse brokers and other custodians, nominees and fiduciaries for their expenses in sending these materials to you and getting your voting instructions.

 

42


Table of Contents

PROPOSALS TO BE CONSIDERED AT THE MIDDLEBURG SPECIAL MEETING

Approval of the Middleburg Merger Proposal (Middleburg Proposal No. 1)

At the special meeting, shareholders of Middleburg will be asked to approve the Middleburg merger proposal providing for the merger of Middleburg with and into Access. Shareholders of Middleburg should read this joint proxy statement/prospectus carefully and in its entirety, including the appendices, for more detailed information concerning the merger agreement and the merger. A copy of the merger agreement is attached to this joint proxy statement/prospectus as Appendix A.

After careful consideration, the Middleburg board of directors, by a unanimous vote of all directors, approved the merger agreement and the merger to be advisable and in the best interests of Middleburg and the shareholders of Middleburg. See “The Merger – Middleburg’s Reasons for the Merger; Recommendation of Middleburg’s Board of Directors” included elsewhere in this joint proxy statement/prospectus for a more detailed discussion of the Middleburg board of directors’ recommendation.

The Middleburg board of directors unanimously recommends that Middleburg shareholders vote “FOR” the Middleburg merger proposal.

Approval of the Compensation Proposal (Middleburg Proposal No. 2)

As required by Section 14A of the Exchange Act, Middleburg is providing its shareholders with the opportunity to approve, in a non-binding advisory vote, the compensation proposal, by voting on the following resolution:

“RESOLVED, that the compensation that may be paid to the named executive officers of Middleburg in connection with or as a result of the merger, as disclosed in the sections entitled “The Merger – Interests of Certain Middleburg Directors and Executive Officers in the Merger – Employment and Change of Control Agreements for Middleburg Named Executive Officers” and “– Payments and Benefits to Middleburg Named Executive Officers” and the related table and narrative, is hereby APPROVED.”

Approval of this proposal is not a condition to completion of the merger. The vote on this proposal is a vote separate and apart from the vote on the Middleburg merger proposal. Because the compensation proposal is advisory in nature only, a vote for or against approval will not be binding on either Middleburg or Access.

The compensation that is subject to this proposal is a contractual obligation of Middleburg and/or Middleburg Bank, or of Access and/or Access National Bank including as the successors to Middleburg and Middleburg Bank, respectively. If the merger is approved and completed, such compensation may be paid, subject only to the conditions applicable thereto, even if shareholders fail to approve this proposal. If the merger is not completed, the Middleburg board of directors will consider the results of the vote in making future executive compensation decisions.

The Middleburg board of directors unanimously recommends that Middleburg shareholders vote “FOR” the compensation proposal.

Approval of the Middleburg Adjournment Proposal (Middleburg Proposal No. 3)

If at the Middleburg special meeting there are not sufficient votes to approve the Middleburg merger proposal, the meeting may be adjourned to a later date or dates, if necessary or appropriate, to permit further solicitation of proxies to approve the Middleburg merger proposal. In that event, Middleburg shareholders will be asked to vote on the Middleburg adjournment proposal, may be asked to vote on the compensation proposal and will not be asked to vote on the Middleburg merger proposal at the Middleburg special meeting.

In order to allow proxies that have been received by Middleburg at the time of the Middleburg special meeting to be voted for the Middleburg adjournment proposal, Middleburg is submitting the Middleburg adjournment proposal to its shareholders as a separate matter for their consideration. This proposal asks Middleburg shareholders to authorize the holder of any proxy solicited by the Middleburg board of directors on a discretionary basis to vote in favor of adjourning the Middleburg special meeting to another time and place for the purpose of soliciting additional proxies, including the solicitation of proxies from Middleburg shareholders who have previously voted.

 

43


Table of Contents

If it is necessary to adjourn the Middleburg special meeting, then no notice of such adjourned meeting is required to be given to shareholders, other than an announcement at the special meeting before adjournment of the place, date and time to which the Middleburg special meeting is adjourned. Even if a quorum is not present, shareholders who are represented at a meeting may approve an adjournment of the meeting.

The Middleburg board of directors unanimously recommends that Middleburg shareholders vote “FOR” the Middleburg adjournment proposal.

 

44


Table of Contents

THE MERGER

The following discussion contains certain information about the merger. The discussion is subject to and is qualified in its entirety by reference to the merger agreement, which is attached as Appendix A to this joint proxy statement/prospectus and incorporated herein by reference. We urge you to read carefully this joint proxy statement/prospectus, including the merger agreement attached as Appendix A, for a more complete understanding of the merger.

General Information

The Access board of directors and the Middleburg board of directors have each approved the merger agreement and the merger, which provides for the merger of Middleburg with and into Access.

Pursuant to the terms of the merger agreement, as a result of the merger, each share of Middleburg common stock issued and outstanding before the merger will be converted into the right to receive 1.3314 shares of Access common stock. We sometimes refer to this as the “exchange ratio.” The exchange ratio is fixed and will not be adjusted to reflect stock price changes prior to the effective date of the merger. No fractional shares will be issued; instead cash will be paid for fractional shares.

As of the date of this joint proxy statement/prospectus, Access expects that it will issue approximately 9,592,825 shares of Access common stock to the holders of Middleburg common stock in the merger. At the completion of the merger, it is expected that there will be issued and outstanding approximately 20,245,047 shares of Access common stock, with current Access shareholders owning approximately 52.6% of Access’s outstanding common stock, and former holders of Middleburg common stock owning approximately 47.4% of Access’s outstanding common stock.

After the merger, it is expected that Middleburg Bank, the Virginia chartered bank subsidiary of Middleburg, will merge with and into Access National Bank, the national bank subsidiary of Access. Access National will be the surviving bank in the subsidiary bank merger, which is expected to be completed during the second quarter of 2017.

Background of the Merger

Each of Access and Middleburg’s board of directors and senior management teams have, from time to time, independently engaged in long term strategic reviews as part of their ongoing duties to enhance shareholder value. These reviews and evaluations considered the operating environment, competitive landscape, performance history and expected future performance, and have included periodic discussions concerning potential transactions, operating strategies and the associated risks and benefits.

In February 2016, Middleburg’s board of directors asked investment banking firm Sandler O’Neill & Partners, L.P. (or “Sandler O’Neill”) to assist in a potential sale of stock by its largest beneficial shareholder, David L. Sokol, who had reported a series of sales of Middleburg common stock with the SEC in late February 2016 and who had expressed to Middleburg’s management an interest in selling his position in Middleburg’s common stock. On March 30, 2016, Middleburg and representatives of Sandler O’Neill met in-person with Mr. Sokol to discuss various alternatives for Mr. Sokol to sell his shares, as well as Middleburg’s operating performance and outlook and challenges facing Middleburg and the community banking industry generally. On March 31, 2016, Mr. Sokol made a public filing with the SEC in which Mr. Sokol, among other things, suggested that Middleburg initiate a process to explore strategic alternatives.

In spring of 2016, Middleburg undertook a number of strategic initiatives intended to organically grow its business and to enhance profitability, improve efficiency and focus on asset quality. At the same time, Middleburg’s board of directors, with the assistance of Sandler O’Neill, engaged in a process to review and assess its business plan as an independent company, to consider various alternatives to accelerate growth in Middleburg’s relatively low loan to deposits ratio, and to consider strategic alternatives with third parties, including acquisitions, sale transactions and strategic mergers.

In the course of Access’s ongoing strategic planning process which included a review of prospective merger candidates, Access contacted Middleburg in April 2016 after Mr. Sokol’s SEC filing on March 31, 2016. Access management formed a small working group consisting of Access’s chief executive officer, Michael W. Clarke, chief financial officer, Margaret M Taylor, and Executive Vice President Robert C. Shoemaker, to conduct a detailed review and analysis of publicly available

 

45


Table of Contents

information. Access concluded that a “partnership” style transaction with Middleburg could have mutual appeal given the perceived benefits from the combined balance sheet, complementary business lines, and familiarity of both banks with overlapping markets.

In early May 2016, Access management authorized FBR Capital Markets & Co. (“FBR”) to contact Sandler O’Neill to determine if Middleburg would be open to a strategic discussion with Access.

At the same time, and as part of its strategic review, Middleburg’s management had identified Access, among others, as a potential partner in a strategic transaction. In response to FBR’s request, Middleburg’s management authorized Sandler O’Neill to respond to FBR to set up a conversation between Middleburg chief executive officer Gary R. Shook and a representative of Access.

During the week of May 9, 2016, Mr. Clarke and Mr. Shook spoke by phone to discuss their respective companies. That telephone conversation gave rise to an in-person meeting between Mr. Clarke and Mr. Shook on May 23, 2016.

At the May 23, 2016 meeting, Mr. Clarke and Mr. Shook shared views and experiences concerning company background, current operating performance and outlook, strategic challenges and expected future operating conditions. Mr. Clarke and Mr. Shook agreed that increased scale was desirable given a rising regulatory burden and the stringent public policy outlook towards the banking industry. They further agreed that growing scale through a local combination could best serve the shareholders, clients, employees and the communities of their respective companies. While Mr. Clarke and Mr. Shook generally agreed a transaction could be financially attractive, pricing was not discussed. The meeting concluded with Mr. Clarke and Mr. Shook agreeing to study the idea further and socialize the idea with the appropriate leadership levels of each company.

On June 15, 2016, at a regularly scheduled meeting of Middleburg’s board of directors, Sandler O’Neill discussed with the board Middleburg’s historical operating performance relative to peers and financial aspects of various potential alternatives, including remaining independent, accelerating growth organically or through acquisitions, a strategic merger and a sale transaction. As part of this discussion, Sandler O’Neill reviewed the recent market for mergers and acquisitions generally and financial aspects of a combination with Access. In addition, a representative of Williams Mullen, outside legal counsel to Middleburg, reviewed with the board of directors their fiduciary duties under Virginia law, including a focused summary of fiduciary duties in connection with a merger. Middleburg’s board of directors discussed the potential benefits of a strategic merger transaction, including a significant ownership position in the combined company and the potential retention of the Middleburg brand, and of a combination with Access in particular, including complementary business and geographic footprints, the benefits of scale and the strategic fit of Middleburg’s strong deposits and wealth management services with Access’s lending and mortgage origination expertise. Middleburg’s board determined that these considerations were compelling to warrant further consideration of, and to continue a conversation with Access regarding a strategic combination.

On June 17, 2016, Mr. Clarke and Mr. Shook met to brief one another on feedback from their respective leadership groups and share ideas on how the companies could operate as a combined entity.

On June 23, 2016, the board of directors of Access discussed the possibility of a transaction with Middleburg and reviewed a financial analysis prepared by FBR based on publicly available information and management assumptions. Based upon the preliminary analysis, management was authorized to engage in more detailed discussion with Middleburg regarding a strategic transaction. In doing so, it was agreed Access would refrain from comprehensive due diligence involving the time and expense of third parties until such time as company representatives could meet, interview and forge a favorable opinion concerning the potential relationship with Middleburg’s largest shareholder, Mr. Sokol.

On June 25, 2016, Middleburg entered into a non-disclosure agreement with Mr. Sokol to facilitate discussions with Mr. Sokol regarding Middleburg’s strategic initiatives, including the potential for a strategic combination with Access.

On July 7, 2016, Messrs. Clarke and Shoemaker met with Mr. Shook and Middleburg’s executive vice president and chief operating officer, Jeffrey H. Culver. The parties exchanged previously negotiated and executed non-disclosure agreements at the onset of the meeting to facilitate open discussion covering material non-public information. During this meeting the parties assessed the preliminary financial and operational feasibility of a potential combination, and reviewed organizational structures and operating profiles, and identified potential operational efficiencies and cost reductions.

 

46


Table of Contents

On July 11, 2016, representatives of the boards of directors of Access and Middleburg had a dinner meeting. Those attending included chairman of the Access board of directors Michael G. Anzilotti, vice chairman of the Access board of directors Martin S. Friedman and Mr. Clarke from Access, and chairman of the Middleburg board of directors Joseph L. Boling, director (and later chairman of the Middleburg board of directors) John C. Lee, IV, and Mr. Shook of Middleburg. In the meeting, company and individual backgrounds where shared along with current views on the industry and each company’s strategic outlook.

On the morning of July 27, 2016, at a regularly scheduled meeting of Middleburg’s board of directors, Middleburg’s management updated the board of directors on the status of discussions with Access.

Also on July 27, 2016, representatives of each management team and the parties’ respective financial advisors held a work session to review existing and proposed operating structures, historical and expected financial performance, expected cost savings and anticipated one-time charges in the event of a strategic transaction. Access was represented by Messrs. Clarke and Shoemaker, Ms. Taylor, and executive vice president and chief deposit officer of Access National Bank Steven A. Reeder. Middleburg was represented by Messrs. Shook and Culver. Following the meeting, Access and Middleburg began sharing preliminary due diligence information.

On August 15, 2016 Mr. Anzilotti and Mr. Lee met for a lunch meeting to discuss governance and leadership considerations related to a possible strategic transaction between Access and Middleburg.

On August 18, 2016, at the Access board meeting, an updated and detailed financial analysis prepared by FBR was reviewed. FBR provided insights on assumptions, comparative transactions and potential reactions by the market to a combination. The Access board authorized issuance of a non-binding term sheet to be delivered to the Middleburg Board through Mr. Lee. The term sheet outlined an illustrative exchange ratio based on post-transaction fully diluted ownership of 55% to 45% by current Access and Middleburg shareholders, respectively, and the proposed consideration mix and organization structure. The term sheet addressed proposed governance of Access following a merger by increasing the Access board of directors from 7 to 13 members, and by adding 6 members of the Middleburg board of directors.

On August 23, 2016 Messrs. Lee and Shook met with Messrs. Anzilotti and Clarke to further discuss the term sheet. Financial objectives and constraints of each party’s interest and preliminary views on valuation were discussed.

In response to differences in financial assumptions and valuations between Access and Middleburg, Mr. Lee suggested the exchange ratio range be based on the fully diluted ownership split between Access and Middleburg expressed in terms of an ownership split floor and ceiling. Chairman Lee agreed he would present the indicative range to the Middleburg Board the following day and asked that Access consider revising the offer set forth in the non-binding term sheet to meet Mr. Lee’s suggested range.

Later on the evening of August 23, 2016 and the following morning on August 24, 2016, a number of communications took place to identify an acceptable range of ownership for each party to move forward with more extensive due diligence. The parties agreed that given the overlap of each party’s desired post-transaction fully diluted ownership ranges at 53.5% to 46.5% fully diluted ownership by current Access and Middleburg shareholders, respectively, they would take the next steps towards an agreement and commence comprehensive and reciprocal due diligence. Further, Access requested a meeting and interview with Middleburg’s largest shareholder, Mr. Sokol, individually and jointly with Middleburg.

During a regularly scheduled board meeting on August 24, 2016, representatives of Sandler O’Neill provided an overview of the Access franchise, including financial and stock price performance, an outline of the preliminary term sheet and review of Middleburg’s historical operating performance relative to peers, the recent market for mergers and acquisitions generally, the potential financial implications of a combination with Access and the potential financial implications of other strategic alternatives available to Middleburg. During the meeting, Middleburg’s board of directors discussed the preliminary term sheet, including the updated fully diluted ownership target range and the related exchange ratio range, further discussed the potential benefits of a combination with Access and determined to move forward with discussions with Access and perform additional due diligence of Access.

On September 2, 2016, Access entered into a non-disclosure agreement with Mr. Sokol in order to facilitate the sharing of material non-public information.

 

47


Table of Contents

On September 6, 2016, Middleburg’s board of directors held a special meeting to update Middleburg’s board on the progress and status of discussions with Access.

On September 19, 2016, representatives of both companies and their respective financial advisors met with Mr. Sokol and his financial advisors, Donnelly Penman & Partners, to discuss progress of the proposed transaction and enable in-person communication between Mr. Sokol and Messrs. Anzilotti and Clarke. The meeting began with an overview and background of Access followed by a presentation of the proposed combination at an exchange ratio of 1.3314, which represented post-transaction fully diluted ownership of 53.5% to 46.5% by current Access and Middleburg shareholders, respectively. Following discussion of plans for the proposed company post-merger, including governance and leadership of the combined company, Messrs. Anzilotti and Clarke met privately with Mr. Sokol. During the session, plans for the combined company were further discussed, followed by a discussion of the banking industry and outlook for future M&A activity more generally. Access’s representatives and Mr. Sokol discussed Mr. Sokol’s investment and expectations in Middleburg as well as outlook for his continued investment in the combined company.

Following the meeting of Messrs. Anzilotti and Clarke and Mr. Sokol, all parties reconvened and agreed there was compelling case to proceed towards reaching an agreement for a strategic transaction. A timeline and activity overview of the requisite due diligence to reach a final agreement between the boards was discussed and agreed upon, then distributed to all parties including outside legal counsel.

On September 21, 2016, at a regularly scheduled meeting of Middleburg’s board, Middleburg’s management updated the board of directors on the status of discussions with Access. In addition, the board of directors reviewed and discussed the anticipated timeline to reach a final agreement and authorized management to move forward in performing comprehensive due diligence of Access and negotiating a merger agreement.

From September 23, 2016 through October 21, 2016, Access and Middleburg, with the assistance of their respective advisors and representatives, gathered and reviewed comprehensive business, financial and other information concerning each of the companies. Reviews, discussions and meetings took place remotely and in person. During this time, the parties agreed that holders of Middleburg common stock would receive, in the merger of Middleburg into Access, only shares of Access common stock.

On October 4, 2016, representatives of Troutman Sanders as outside legal counsel to Access provided a draft of the merger agreement to representatives of Williams Mullen as outside legal counsel to Middleburg.

On October 5th and 6th, 2016, Access and Middleburg engaged in a two-day, in-person working session to conduct comprehensive and mutual interviews of top managers overseeing all critical functions of each company. Further, a smaller working group of representatives from each side worked to refine critical assumptions for the pro forma financial models for the proposed transaction, including one-time charges and cost savings.

On October 14, 2016, the Access board of directors held a special meeting, at which representatives of FBR and Troutman Sanders were present, where management reviewed the progress of negotiations with and due diligence on Middleburg. Troutman Sanders made a presentation and reviewed with the board of directors their fiduciary duties under Virginia law, including a focused summary of fiduciary duties in connection with a merger. Troutman Sanders then led a review of the draft merger agreement and related documents and discussed open items pending further negotiation. Included in the documents was a draft voting and standstill agreement to be entered into between Access, Middleburg and Middleburg’s largest shareholder, Mr. Sokol. Representatives of FBR then led a review of the updated financial analysis regarding the proposed transaction and discussed the updated financial assumptions. Through discussion, the board provided feedback and guidance concerning unresolved business matters and instructed Access’s management to continue to review anticipated cost savings and pro forma financial estimates for the combined company.

Also on October 14, 2016, Middleburg’s board of directors held a meeting at which representatives of Sandler O’Neill and Williams Mullen were also present, where management reviewed the progress of negotiations with and due diligence on Access. Representatives of Sandler O’Neill then led a review of updated financial aspects of the proposed transaction. Representatives of Williams Mullen reviewed the terms of the draft merger agreement and related documents and the status of negotiations. In addition, the board of directors reviewed and discussed the draft voting and standstill agreement with Mr. Sokol and the support agreements contemplated to be executed by each director.

 

48


Table of Contents

During the week of October 17, 2016 Access held a series of telephonic board meetings to review the status of negotiations. Further conversations and negotiations of contract terms and an exchange ratio were conducted by all parties and on October 18, 2016 the parties agreed to an exchange ratio of 1.3314 shares of Access common stock for each share of Middleburg common stock, or a post-transaction fully diluted ownership of 53.5% to 46.5% by current Access and Middleburg shareholders, respectively.

On October 18, 2016, Middleburg’s board of directors held a telephonic meeting to update the board of directors on the status of negotiations. Representatives of Williams Mullen were present and led a review of the merger agreement, including open items subject to further negotiation. Representatives of Sandler O’Neill were present and led a discussion of the final exchange ratio and updated financial aspects of the merger.

Also on October 18, 2016, Access’s board of directors held a special meeting to update the board on the status of negotiations with Middleburg. At this meeting, Access’s management also reviewed proposed post-closing employment arrangements with certain executive officers of Middleburg and the proposed voting and standstill agreement with Mr. Sokol. The Access board of directors authorized Mr. Clarke to communicate to Middleburg that the exchange ratio of 1.3314 is acceptable, subject to final negotiation of certain closing conditions, post-closing employment arrangements and the voting and standstill agreement with Mr. Sokol.

On October 20, 2016 Access held its regularly scheduled board meeting at which updated analysis was provided. The Access board of directors reviewed the updated analysis and financial assumptions in connection with the exchange ratio, and updates to the transaction documents. In connection with the merger, Access’ financial advisor, FBR, delivered an oral opinion at the October 20, 2016 meeting to the Access board of directors, which was subsequently confirmed in writing on October 21, 2016, that the merger consideration to be issued and paid by Access pursuant to the merger agreement was fair, from a financial point of view and as of the date of the opinion, to Access. Following discussion and review, the Board unanimously approved a resolution authorizing management to finalize all agreements after close of business Friday October 21, 2016 so public announcement and communication could occur the morning of Monday October 24, 2016.

On October 20, 2016, Middleburg held a special meeting of its board of directors to consider the proposed merger and the merger agreement. At the meeting, Middleburg’s board of directors received an update from management on the status of the negotiations with Access. Also at the meeting, representatives of Sandler O’Neill reviewed its financial analysis of the exchange ratio, and delivered to Middleburg’s board of directors its oral opinion which was subsequently provided in writing to the effect that, as of October 20, 2016, and based on and subject to various assumptions and limitations described in that opinion, the exchange ratio in the merger was fair, from a financial point of view, to holders of Middleburg common stock. Representatives of Williams Mullen discussed with Middleburg’s board the legal standards applicable to its decisions and actions with respect to the proposed transaction and reviewed in detail the proposed merger agreement and related agreements, copies of which were delivered to each director before the date of the meeting. Following these discussions, the Middleburg board unanimously approved the merger and authorized management to finalize the merger agreement and the related plan of merger.

Access and Middleburg executed the merger agreement on the evening of Friday, October 21, 2016, and before the financial markets opened on Monday, October 24, 2016, issued a joint press release announcing the execution of the merger agreement and the terms of the merger.

Access’s Reasons for the Merger; Recommendation of Access’s Board of Directors

In adopting the merger agreement and recommending approval of the Access merger proposal set forth in this joint proxy statement/prospectus, Access’s board of directors consulted with members of Access’s management and with Access’s legal, financial, and business advisors, and also considered a number of factors that the Access board of directors viewed as supporting its decisions. The principal factors that the Access board of directors viewed as supporting its decisions are:

 

    the expectation that the merger will create a $2.7 billion-asset bank ranked fifth in deposit market-share among Virginia-based banks under $10 billion in assets;

 

    the belief that the merger will allow the combined company to more effectively and efficiently navigate the challenges and costs associated with becoming a larger financial institution, and the challenges of the current and prospective economic, regulatory and competitive environments facing Access and the financial services industry generally;

 

49


Table of Contents
    the expectation that the combined company will have increased resources to invest in future growth opportunities in comparison to Access on a stand-alone basis;

 

    the complementary nature of Middleburg’s business, operations and proficiencies with those of Access;

 

    the opportunities for greater efficiencies from conducting Access’s and Middleburg’s operations as part of a single enterprise;

 

    the expectation that the combination will enhance geographic, industry and client diversity of the combined company’s loan and deposit portfolios, as compared to the loan and deposit portfolios of Access and Middleburg on a stand-alone basis;

 

    the fact that the merger will expand Access’s operations into the Richmond and southeast Virginia banking markets;

 

    the benefits associated with revenue diversification driven by fee income business lines of the combined company, with pro forma fee income representing more than 30% of pro forma revenue of the combined company;

 

    the expectation that the merger will result in earnings per share accretion to Access’s shareholders of more than 7.5% in 2017 and more than 10% in 2018 (the first full year of operations as a combined company), tangible book value dilution of less than 1.0% and a tangible book value earn-back period less than one fiscal quarter;

 

    Middleburg’s financial condition, earnings, business, operations, depository base and asset quality, taking into account publicly-filed information and the results of Access’ due diligence of Middleburg; and

 

    the oral opinion of FBR & Co., delivered on October 20, 2016 to the Access board of directors and subsequently confirmed in writing on October 21, 2016, that the merger consideration to be issued and paid by Access pursuant to the merger agreement was fair, from a financial point of view and as of the date of the opinion, to Access.

In addition to considering the factors described above, the Access Board of Directors also considered the following factors:

 

    the proposed governance and management of Access following the merger;

 

    the financial and other terms of the proposed transaction as outlined in the merger agreement;

 

    Middleburg’s largest shareholder and Access’s understanding of his intentions with respect to ownership of Access common stock;

 

    the market for alternative merger or acquisition candidates and the likelihood and timing of other strategic transactions;

 

    the probability and likelihood of timely approvals from regulatory authorities and any expected conditions associated with approvals;

 

    the risks and costs associated with integrating Middleburg’s business, operations and employees with those of Access;

 

    the risks of diverting management attention and resources from the operation of Access’ business in planning for the merger and executing integration plans;

 

    the risks of not being able to realize all of the anticipated cost savings and operational synergies between Access and Middleburg and the risk that other anticipated benefits might not be realized; and

 

    the termination fee payable, under certain circumstances, by Access to Middleburg, including the risk that the termination fee might discourage third parties from proposing an alternate transaction or would increase the cost of an alternate transaction.

The preceding discussion of the information and factors considered by Access’s board of directors is not intended to be exhaustive, but, rather, includes the material factors considered by it in connection with its evaluation of the merger. In reaching its determination to approve and adopt the merger agreement and recommend that Access’s shareholders approve the Access merger proposal, Access’s board of directors did not quantify, rank or otherwise assign any relative or specific weights to the factors considered in reaching that determination. In addition, Access’s board of directors did not undertake to make any specific determination as to whether any factor, or any particular aspect of any factor, supported or did not support

 

50


Table of Contents

its ultimate determination. Moreover, in considering the information and factors described above, individual directors may have given differing weights to different factors. Access’s board of directors based its determination on the totality of the information presented.

Access’s board of directors determined that the merger agreement is in the best interests of Access and its shareholders. Accordingly, Access’s board of directors approved and adopted the merger agreement and unanimously recommends that shareholders vote “FOR” the Access merger proposal.

Middleburg’s Reasons for the Merger; Recommendations of Middleburg’s Board of Directors

In adopting the merger agreement and recommending approval of the Middleburg merger proposal set forth in this joint proxy statement/prospectus, Middleburg’s board of directors evaluated the merger proposal in consultation with members of Middleburg’s management and with Middleburg’s legal, financial, and business advisors, and also considered a number of positive factors, including the following material factors:

 

    the expectation that the merger will create a $2.7 billion-asset bank, ranked fifth in deposit market-share among Virginia-based banks under $10 billion in assets;

 

    Middleburg’s historical financial performance, prospects for the future, projected financial results and alternatives for loan growth on a stand-alone basis, and the belief that the combined company will have increased resources and ability to accelerate growth in comparison to Middleburg on a stand-alone basis;

 

    the potential for Middleburg’s shareholders to benefit from the combined company’s expected profitability and potential for growth and stock appreciation, and the expectation that the combined company will have superior future earnings and prospects compared to Middleburg’s earnings and prospects on a stand-alone basis;

 

    the expected increase in cash dividend payments to be received by Middleburg’s shareholders, as shareholders of Access following the merger, due to the current quarterly cash dividend payment of $0.15 per share paid by Access (or $0.19971 per share of Middleburg stock converted into Access stock in connection with the merger, taking into account the 1.3314 exchange ratio) versus the most recent quarterly cash dividend payment of $0.12 per share paid by Middleburg, although Access has no obligation to pay future dividends in any particular amounts or at any particular times;

 

    the belief that the combined company will be able to more effectively and efficiently navigate the challenges of the current and prospective economic, regulatory and competitive environments facing Middleburg and the financial services industry generally;

 

    the expectation of cost savings and greater efficiencies from conducting Access’s and Middleburg’s operations as part of a larger, single enterprise;

 

    its review and diligence of Access’s business, operations, financial condition, asset quality, earnings and prospects, and the complementary nature of Middleburg’s business, operations and proficiencies with those of Access;

 

    the ability to leverage the combination of Middleburg’s strong retail deposit franchise and wealth management experience with Access’s expertise in business banking, commercial and industrial lending and mortgage origination;

 

    the expectation that the combination will enhance geographic, industry and client diversity of the loan and deposit portfolios;

 

    the benefits associated with the diversification and balance of the combined company’s revenues;

 

    the continued representation of Middleburg’s management on the management team and board of directors of the combined company;

 

    the potential for increased liquidity in the market for common stock and the opportunity for higher trading multiples of book value and EPS of the combined company, versus Middleburg independently;

 

    the value of the merger consideration relative to the historical market value, book value and earnings of Middleburg;

 

    the financial presentation, dated October 20, 2016, of Sandler O’Neill to Middleburg’s board of directors and the opinion of Sandler O’Neill, dated October 20, 2016, to Middleburg’s board of directors, to the effect that, as of such date, the exchange ratio provided for in the merger was fair to the holders of Middleburg common stock from a financial point of view; and

 

51


Table of Contents
    the terms of the merger, including the expected tax treatment, deal protection and termination fee provisions, which Middleburg reviewed with its outside legal advisor.

In addition to considering the factors described above, Middleburg’s board of directors also considered a number of potential risks and uncertainties associated with the merger in connection with its deliberations on the merger, including the following material factors:

 

    the probability and likelihood of timely approvals from regulatory authorities and any expected conditions associated with approvals;

 

    the risks and costs associated with integrating Middleburg’s business, operations and employees with those of Access;

 

    the risks of diverting management attention and resources from the operation of Middleburg’s business in planning for the merger and executing integration plans, and the possibility of employee attrition or adverse effects on client and business relationships as a result of the announcement and pendency of the merger;

 

    the risks of not being able to realize all of the anticipated cost savings and operational synergies between Access and Middleburg and the risk that other anticipated benefits might not be realized; and

 

    the termination fee payable, under certain circumstances, by Middleburg to Access, including the risk that the termination fee might discourage third parties from offering to acquire Middleburg by increasing the cost of a third-party acquisition.

In the judgment of Middleburg’s board of directors, the potential benefits of the merger outweigh these considerations.

The preceding discussion of the information and factors considered by Middleburg’s board of directors is not intended to be exhaustive, but, rather, includes the material factors considered by it in connection with its evaluation of the merger. In reaching its determination to approve and adopt the merger agreement and recommend that Middleburg’s shareholders approve the Middleburg merger proposal, Middleburg’s board of directors did not quantify, rank or otherwise assign any relative or specific weights to the factors considered in reaching that determination. In addition, Middleburg’s board of directors did not undertake to make any specific determination as to whether any factor, or any particular aspect of any factor, supported or did not support its ultimate determination. Moreover, in considering the information and factors described above, individual directors may have given differing weights to different factors. Middleburg’s board of directors based its determination on the totality of the information presented.

Middleburg’s board of directors unanimously determined that the merger agreement is in the best interests of Middleburg and its shareholders. Accordingly, Middleburg’s board of directors unanimously approved and adopted the merger agreement and unanimously recommends that shareholders vote “FOR” the Middleburg merger proposal.

Opinion of Access’s Financial Advisor

Access engaged FBR to act as its exclusive financial advisor, including providing an opinion to the Access board of directors as to the fairness, from a financial point of view, to Access of the consideration to be paid by Access in the merger. In the ordinary course of its investment banking business, FBR is regularly engaged in the valuation of financial institutions and their securities in connection with mergers and acquisitions and other corporate transactions.

In connection with its engagement, representatives of FBR participated via telephonic conference in the meeting of the Access board of directors held on October 20, 2016 at which the Access board of directors evaluated the merger. At this meeting, FBR reviewed the financial aspects of the merger and rendered an oral opinion (subsequently confirmed in writing) that, as of such date, the consideration to be paid by Access in the merger was fair, from a financial point of view, to Access.

The summary of FBR’s opinion in this joint proxy statement/prospectus is qualified in its entirety by reference to the full text of FBR’s written opinion, which is included as Appendix B to this joint proxy statement/prospectus and sets forth the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by FBR in preparing its opinion.

 

52


Table of Contents

FBR’s opinion was directed to the Access board of directors (in its capacity as such), and only addressed the fairness, from a financial point of view, to Access of the consideration to be issued and paid by Access in the merger. It is not intended to and should not be construed as creating any fiduciary duty on the part of FBR to the Access board of directors, Access, Middleburg, any security holder of Access or any other party. It does not constitute a recommendation to the Access board of directors, Access, Middleburg, any security holder of Access or any other person as to how to act or vote on any matter relating to the merger or otherwise.

In arriving at its opinion, FBR made such reviews, analyses and inquiries as FBR deemed necessary and appropriate under the circumstances. Among other things, FBR:

 

    reviewed the financial terms of the merger agreement, dated October 21, 2016;

 

    the audited financial statements and Annual Report on Form 10-K for the fiscal year ended December 31, 2015 and the unaudited quarterly financial statements and Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2016 and June 30, 2016 of Access;

 

    reviewed the Current Report on Form 8-K of Access regarding Access’s financial condition and results of operations as of and for the fiscal quarter ended September 30, 2016;

 

    reviewed the Definitive Proxy Statement pursuant to section 14(a) of the Exchange Act filed on April 18, 2016 of Access;

 

    reviewed the audited financial statements and Annual Report on Form 10-K for the fiscal year ended December 31, 2015 and the unaudited quarterly financial statements and Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2016 and June 30, 2016 of Middleburg;

 

    reviewed the Definitive Proxy Statement pursuant to section 14(a) of the Exchange Act filed on April 12, 2016 of Middleburg;

 

    reviewed certain financial forecasts for Middleburg prepared by the management of Middleburg (the “Middleburg Financial Forecasts”), and adjustments thereto and extensions thereof prepared by the management of Access to take into account certain projected cost savings, including the amount and timing thereof, expected by the management of Access to result from the merger (as adjusted, the “Adjusted Middleburg Financial Forecasts”);

 

    reviewed certain publicly available consensus “street estimates” for Access affirmed to FBR by management of Access (the “Access Consensus Projections”) and certain additional financial forecasts for Access provided to FBR by the management of Access (the “Access Management Financial Forecasts” and, together with the Access Consensus Projections, the “Access Financial Forecasts”);

 

    reviewed certain non-public internal financial information and other data relating to Access and Middleburg that were provided to FBR by Access and Middleburg for the purpose of FBR’s analysis and accordingly on which basis FBR prepared its analysis;

 

    met with certain members of the senior management of Middleburg to discuss the business and prospects of Middleburg, and with certain members of the senior management of Access to discuss the business and prospects of Middleburg and Access, and the projected cost savings, including the amount and timing thereof, expected by the management of Access to result from the merger, and relied on the statements made by such persons;

 

    reviewed certain publicly available information with respect to certain other companies FBR believed to be generally relevant in evaluating the businesses of Middleburg and Access;

 

    reviewed the publicly available financial terms of certain business combinations FBR believed to be generally relevant in evaluating the financial terms of the merger;

 

    reviewed historical stock prices and trading volumes of Access common stock and Middleburg common stock;

 

    reviewed the potential pro forma impact of the merger on Access based on the financial forecasts and estimates referred to above relating to Middleburg and Access; and

 

    conducted such other financial studies, analyses and investigations and considered such other financial, economic and market criteria that we deemed relevant.

FBR relied upon and assumed, without independent verification, the accuracy and completeness of all data, material and other information furnished, or otherwise made available, to FBR, discussed with or reviewed by FBR, or publicly available,

 

53


Table of Contents

and FBR did not assume any responsibility with respect to such data, material and other information. With respect to the Middleburg Financial Forecasts, management of Middleburg advised FBR, and FBR assumed, that the Middleburg Financial Forecasts were reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of the management of Middleburg with respect to the future financial performance of Middleburg. With respect to the Adjusted Middleburg Financial Forecasts, management of Access advised FBR, and FBR assumed, that the Adjusted Middleburg Financial Forecasts were reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of the management of Access with respect to the future financial performance of Middleburg following the consummation of the merger, after giving effect to the projected cost savings, including the amount and timing thereof, expected by the management of Access to result from the merger. With respect to the Access Financial Forecasts, the management of Access advised FBR, and FBR assumed, that the Access Consensus Projections are reasonable and achievable, and that the Access Financial Forecasts were reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of the management of Access, in each case with respect to the future financial performance of Access. FBR relied upon, without independent verification, the assessment of the management of Access with respect to the timing and risks associated with the integration of the businesses of Access and Middleburg and the risks associated with Access and Middleburg’s current and contemplated products, services and business models. FBR expressed no view or opinion with respect to the Middleburg Financial Forecasts, the Adjusted Middleburg Financial Forecasts, the Access Financial Forecasts or the assumptions on which they are based including, without limitation, the projected cost savings expected by Access’s management to result from the merger, which cost savings, at the direction of Access’s management, FBR assumed will be achieved in the amounts and at the times indicated thereby. Access’s management advised FBR and FBR has assumed, without undertaking any responsibility for the independent verification thereof, that the Adjusted Middleburg Financial Forecasts, the Access Financial Forecasts and the assumptions on which they are based were a reasonable basis on which to evaluate Middleburg, Access and the proposed merger and, at the direction of Access’s management, FBR used and relied upon the Adjusted Middleburg Financial Forecasts and the Access Financial Forecasts for purposes of FBR’s analyses and FBR’s opinion. FBR also relied upon and assumed, without independent verification, that there was no change in the business, assets, liabilities, financial condition, results of operations, cash flows or prospects of Middleburg or Access since the dates of the most recent financial statements and other information, financial or otherwise, provided to FBR that would be material to FBR’s analyses or this opinion, and that there was no information or any facts or developments that would make any of the information reviewed by FBR incomplete or misleading. FBR also assumed, with the consent of Access’s management, that (i) in the course of obtaining any regulatory or third party consents, approvals or agreements in connection with the merger (which FBR assumes will be obtained), no delay, limitation, restriction or condition will be imposed that would have an adverse effect on Middleburg, Access or the contemplated benefits of the merger; (ii) the representations and warranties made by the parties in the merger agreement are accurate and complete in all respects material to FBR’s analyses and FBR’s opinion; (iii) each party to the merger agreement will perform in all material respects all of its covenants and obligations thereunder; (iv) the merger will be consummated in accordance with the terms of the merger agreement, without waiver, modification or amendment of any term, condition or provision thereof that is material to FBR’s analyses or FBR’s opinion; and (v) the merger will qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended. FBR also assumed that the merger agreement and subsidiary bank merger agreement, when executed by the relevant parties thereto, will conform to the drafts of such agreements and other documents reviewed by FBR in all respects material to FBR’s analyses.

FBR’s opinion only addresses the fairness, from a financial point of view, to Access of the merger consideration to be issued and paid by Access in respect of the outstanding shares of Middleburg common stock in the merger pursuant to the merger agreement and does not address any other aspect or implication of the merger or any agreement, arrangement or understanding entered into in connection therewith or otherwise, including, without limitation, the form or, except to the extent expressly provided herein, the amounts of the merger consideration to be issued and paid in the merger; the allocation of the outstanding Access common stock after giving effect to the merger as between the current holders of Access common stock and the current holders of Middleburg common stock or any individual members or groups thereof; the dilutive or other effects of the merger on the existing holders of Access common stock; the solvency or fair value of Access, Middleburg or any other entity or person or their respective assets or liabilities under any laws relating to bankruptcy, insolvency, fraudulent conveyance or similar matters; any tax implications of the merger to Access or its security holders or any other party; the fairness of any portion or aspect of the merger to the current holders of any class of securities, creditors or other constituencies of Access, Middleburg or to any other party; or the fairness of the amount or nature of, or any other aspect relating to, any compensation or consideration to be received by or otherwise payable to any officers, directors, employees, security holders or affiliates of any party to the merger, or class of such persons, relative to the merger consideration to be paid to Middleburg’s shareholders or otherwise.

 

54


Table of Contents

FBR did not express any opinion or provide any advice, counsel or interpretation, with respect to matters that require legal, regulatory, accounting, insurance, tax or other similar professional advice. FBR assumed that any such opinions, advice, counsel or interpretations have been or will be obtained by Access from appropriate professional sources. Furthermore, with the consent of Access’s management, FBR relied upon the assessments by Access and its other advisors as to all legal, regulatory, accounting, insurance and tax matters with respect to Access, Middleburg and the merger.

FBR’s opinion is necessarily based upon information made available to FBR as of the date of its opinion and financial, economic, market and other conditions were evaluated as they existed as of the date of its opinion. Although subsequent developments may affect this opinion, FBR assumes no obligation to update, revise or reaffirm this opinion. As Access’s management is aware, the credit, financial and stock markets may experience significant volatility. FBR expressed no opinion or view as to any potential effects of such volatility on Access, Middleburg or the merger. FBR’s opinion does not address the relative merits of the merger as compared to alternative transactions or strategies that might be available to Access, Middleburg or any other party to the merger, nor does it address the underlying business decision of the board of directors of Access, Middleburg, or any other party to proceed with the merger. Furthermore, in connection with this opinion, FBR was not requested to make, and did not make, any physical inspection or independent appraisal or evaluation of any of the assets, properties or liabilities (contingent or otherwise) of Access, Middleburg, or any other party. In addition, FBR did not receive or review any individual credit files nor make an independent evaluation or appraisal of the assets and liabilities (including any contingent, derivative or off-balance-sheet assets and liabilities) of Access, Middleburg, or any of their respective subsidiaries. FBR is not an expert in the evaluation of loan, lease, investment or trading portfolios for purposes of assessing the adequacy of the allowances for losses with respect thereto and, accordingly, FBR assumed that such allowances for losses are adequate to cover such losses. FBR did not express any opinion as to what the value of Access common stock actually will be when issued pursuant to the merger, or the price or range of prices at which Access common stock or Middleburg common stock may be purchased or sold at any time. With the consent of Access’s management, FBR assumed that the Access common stock to be issued in the merger will be listed on the NASDAQ Global Market.

In preparing its opinion to the Access board of directors, FBR performed a variety of analyses, including those described below. The summary of FBR’s financial analyses is not a complete description of the analyses underlying FBR’s opinion. The preparation of such an opinion is a complex process involving various quantitative and qualitative judgments and determinations with respect to the financial, comparative and other analytic methods employed and the adaptation and application of those methods to the unique facts and circumstances presented. As a consequence, neither FBR’s opinion nor the analyses underlying its opinion are readily susceptible to partial analysis or summary description. FBR arrived at its opinion based on the results of all analyses undertaken by it and assessed as a whole and did not draw, in isolation, conclusions from or with regard to any individual analysis, analytic method or factor. Accordingly, FBR believes that its analyses must be considered as a whole and that selecting portions of its analyses, analytic methods and factors, without considering all analyses and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying its analyses and opinion.

In performing its analyses, FBR considered business, economic, industry and market conditions, financial and otherwise, and other matters as they existed on, and could be evaluated as of, the date of its opinion. No company, business or merger used in FBR’s financial analyses for comparative purposes is identical to Access, Middleburg or the proposed merger. While the results of each analysis were taken into account in reaching its overall conclusion, FBR did not make separate or quantifiable judgments regarding individual analyses. The multiples and valuation reference ranges indicated by FBR’s financial analyses are illustrative and not necessarily indicative of actual values nor predictive of future results or values, which may be significantly more or less favorable than those suggested by the analyses. In addition, any analyses relating to the value of assets, businesses or securities do not purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold, which may depend on a variety of factors, many of which are beyond Access’ control and the control of FBR. Much of the information used in, and accordingly the results of, FBR’s analyses are inherently subject to substantial uncertainty.

FBR’s opinion and analyses were provided to the Access board of directors (in its capacity as such) in connection with its consideration of the proposed merger and were among many factors considered by the Access board of directors in evaluating the proposed merger. Neither FBR’s opinion nor its analyses were determinative of the consideration or of the views of the Access board of directors with respect to the proposed merger.

The following is a summary of the material financial analyses performed by FBR in connection with the preparation of its oral opinion rendered to the Access board on October 20, 2016, which was subsequently confirmed in writing by FBR to

 

55


Table of Contents

the Access board on October 21, 2016. The analyses summarized below include information presented in tabular format. The tables alone do not constitute a complete description of the analyses. Considering the data in the tables below without considering the full narrative description of the analyses, as well as the methodologies underlying, and the assumptions, qualifications and limitations affecting, each analysis, could create a misleading or incomplete view of FBR’s analyses.

Unless the context indicates otherwise, (1) share prices for the selected companies used in the selected comparable public companies analysis described below were closing sale prices as of October 19, 2016; (2) estimates of financial performance of Middleburg were based on the Middleburg Financial Forecasts; (3) estimates of financial performance for the selected companies listed below for the fiscal years ended December 31, 2016, December 31, 2017 and December 31, 2018 were based on publicly available research analyst estimates for those companies; and (4) the merger values for the selected mergers used in the selected mergers analysis described below were based on the value of the consideration proposed to be paid in the selected mergers as of the date of the announcement.

Based on the merger consideration of 1.3314 shares of Access common stock per share of Middleburg common stock, FBR calculated an implied value of the merger consideration of $34.00 per share of Middleburg common stock, based on the closing price per share of Access common stock of $25.54 as of October 19, 2016.

Selected Comparable Public Companies Analysis. FBR considered certain financial data for Middleburg and selected companies with publicly traded equity securities. FBR selected these companies because they were deemed to be similar to Middleburg in one or more respects.

The financial data reviewed included:

 

    Price as a multiple of analyst consensus median earnings per share for the fiscal year ending December 31, 2016 (“Price/2016E EPS”);

 

    Price as a multiple of analyst consensus median earnings per share for the fiscal year ending December 31, 2017 (“Price/2017E EPS”);

 

    Price as a multiple of analyst consensus median earnings per share for the fiscal year ending December 31, 2018 (“Price/2018E EPS”); and

 

    Price as a multiple of tangible book value as of the most recently reported fiscal quarter (“Price/TBV”).

The selected companies and resulting 25th percentile, median and 75th percentile data were:

 

    Sandy Spring Bancorp, Inc.

 

    First Community Bancshares, Inc.

 

    WashingtonFirst Bankshares, Inc.

 

    American National Bankshares Inc.

 

    Old Line Bancshares, Inc.

 

    Eastern Virginia Bankshares, Inc.

 

    Community Financial Corporation

 

    National Bankshares, Inc.

 

    Community Bankers Trust Corporation

 

    Shore Bancshares, Inc.

 

    Southern National Bancorp of Virginia, Inc.

Selected Comparable Public Companies Analysis

 

     Price / 2016E EPS      Price / 2017E EPS      Price / 2018E EPS      Price / TBV  

25th Percentile:

     15.2x         14.2x         12.0x         1.12x   

Median:

     15.9x         14.5x         13.4x         1.44x   

75th Percentile:

     16.8x         15.2x         14.2x         1.58x   

 

56


Table of Contents

FBR applied multiple ranges based on the 25th to 75th percentiles of Price/2016E EPS, Price/2017E EPS, Price/2018E EPS and Price/TBV to corresponding financial data for Middleburg. FBR assumed and applied a 25% control premium to these values to account for the ownership, control and operation of Middleburg and Middleburg Bank by Access following the consummation of the merger. The selected comparable public companies analysis indicated implied valuation reference ranges per share of Middleburg common stock of $26.80 to $29.65 based on the Price/2016E EPS multiples, $27.99 to $29.90 based on the Price/2017E EPS multiples, $25.76 to $30.43 based on the Price/2018E EPS multiples and $24.52 to $34.72 based on the Price/TBV multiples.

Selected Precedent Transactions. FBR also considered the financial terms of certain business combinations. The precedent transactions were selected because the characteristics of the seller were deemed to be similar to Middleburg in one or more respects.

The financial data reviewed included:

 

    Price as a premium to market capitalization one trading day prior to announcement date (“Premium to Current Market”);

 

    Price as a multiple of last-twelve-months earnings per share (“Price/LTM EPS”);

 

    Price as a multiple of estimated earnings per share for the next fiscal year following announcement date (“Price/FY1 EPS”); and

 

    Price as a multiple of tangible book value as of the most recently reported fiscal quarter (“Price/TBV”).

The selected mergers and resulting 25th percentile, median and 75th percentile data were:

 

Announcement Date   

Buyer

  

Seller

5/3/2016

   Access, Inc.    Your Community Bankshares, Inc.

1/28/2016

   Pinnacle Financial Partners, Inc.    Avenue Financial Holdings, Inc.

12/17/2015

   TowneBank    Monarch Financial Holdings, Inc.

12/3/2015

   First Busey Corporation    Pulaski Financial Corp.

11/9/2015

   United Bankshares, Inc.    Bank of Georgetown

5/27/2015

   Valley National Bancorp    CNLBancshares, Inc.

4/22/2015

   United Community Banks, Inc.    Palmetto Bancshares, Inc.

4/7/2015

   Pinnacle Financial Partners, Inc.    CapitalMark Bank & Trust

1/6/2015

   Chemical Financial Corporation    Lake Michigan Financial Corporation

Selected Precedent Transactions

 

     Premium to
Current Market
    Price / LTM
EPS
     Price / FY1
EPS
     Price / TBV      Core Deposit
Premium
 

25th Percentile:

     6     17.4x         15.6x         1.77x         10

Median:

     20     23.9x         16.3x         1.92x         13

75th Percentile:

     39     27.4x         21.2x         2.04x         18

FBR applied multiple ranges based on the 25th to 75th percentiles of Premium to Current Market, Price/LTM EPS, Price/FYI EPS, Price/TBV and the Core Deposit Premium to corresponding financial data for Middleburg. The selected precedent transactions analysis indicated implied valuation reference ranges per share of Middleburg common stock of $28.98 to $38.13 based on the Premium to Current Market, $21.64 to $34.14 based on Price/LTM EPS, $24.45 to $33.26 based on Price/FYI EPS, $31.02 to $35.75 based on Price/TBV and $28.99 to $37.72 based on Core Deposit Premium.

Discounted Cash Flow Analysis. FBR performed a discounted cash flow analysis of Middleburg based on the Middleburg Financial Forecasts, which do not take into account the cost savings expected by management to result from the merger, and the Adjusted Middleburg Financial Forecasts, which take into account the cost savings expected by management to result from the merger. FBR applied a range of terminal value multiples of 15.5x to 17.5x to an estimate of Middleburg’s 2022 free cash flow, calculated by applying a 9.0% growth rate to the estimated 2021 free cash flow in both the Middleburg Financial Forecasts and Adjusted Middleburg Financial Forecasts. The estimated net present value of the projected future cash flow and terminal values, as of the opinion date, were then calculated using discount rates ranging from 10.5% to 13.5%.

 

57


Table of Contents

The discounted cash flow analysis using the Middleburg Financial Forecasts indicated an implied valuation reference range per share of Middleburg common stock of approximately $29.38 to $31.58, based on the 25th to 75th percentiles. FBR assumed and applied a 25% control premium to these values to account for the ownership, control and operation of Middleburg and Middleburg Bank by Access following the consummation of the merger. The discounted cash flow analysis, taking into account the 25% control premium, indicated an implied valuation reference range per share of Middleburg common stock of approximately $36.73 to $39.48, based on the 25th to 75th percentiles.

The discounted cash flow analysis using the Adjusted Middleburg Financial Forecasts indicated an implied valuation reference range per share of Middleburg common stock of approximately $39.04 to $42.21, based on the 25th to 75th percentiles.

Pro Forma Merger Analysis. FBR analyzed certain potential pro forma effects of the merger, based on the following assumptions: (i) the merger closes on March 31, 2017; (ii) 100% of the outstanding shares of Middleburg common stock are converted into the stock consideration at the fixed exchange ratio of 1.3314; (iii) 100% of Middleburg stock options are cashed out, based upon the terms of the merger agreement; and (iv) 100% of Middleburg warrants are converted into Access warrants, based upon the guidance of Access and Middleburg management. FBR also utilized assumptions, as provided by Access and Middleburg management, relating to (a) estimated transaction costs and expenses, (b) purchase accounting adjustments, and (c) estimated cost savings resulting from the merger. The analysis indicated the merger would be accretive to Access’ estimated earnings per share in 2017 and 2018 (the first full year after the assumed closing of the merger) and nominally dilutive to estimated tangible book value per share at closing with an earn back period of less than one fiscal quarter.

In connection with this analysis, FBR considered and discussed with the Access board of directors how the analysis would be affected by changes in the underlying assumptions, including the impact of final purchase accounting adjustments determined at the closing of the merger, and noted that the actual results achieved by the combined company may vary from projected results and the variations may be material.

Other Matters. Access selected FBR as its exclusive financial advisor in connection with the proposed merger based on FBR’s experience and reputation and FBR’s knowledge of Access and its industry. FBR will receive a transaction fee of $1,015,000 for its services as financial advisor to Access in connection with the merger, which is contingent upon the successful completion of the merger. FBR received a fee of $35,000 upon entering into an engagement letter with Access in connection with the proposed merger and a fee of $200,000 for rendering its opinion, both of which were not contingent upon the successful completion of the merger. In addition, Access has also agreed to indemnify FBR and certain related parties for certain liabilities arising out of or related to FBR’s engagement and to reimburse FBR for certain of its legal and other out-of-pocket expenses incurred in connection with its engagement.

FBR is a full-service securities firm engaged in securities trading and brokerage activities as well as providing investment banking and other financial services. In its ordinary course of business, FBR and its affiliates may acquire, hold or sell, for its and its affiliates’ own accounts and the accounts of customers, equity, debt and other securities and financial instruments (including bank loans and other obligations) of Access, Middleburg, certain of their affiliates and any other company that may be involved in the merger.

In the two years preceding the date of its opinion, FBR did not provide any other investment banking services to Access, Middleburg and certain of their respective affiliates, for which compensation was received. FBR and its affiliates may in the future provide investment banking and other financial services to Access, Middleburg and certain of their respective affiliates, for which FBR and its affiliates would expect to receive compensation. FBR has adopted policies and procedures designed to preserve the independence of its research and credit analysts whose views may differ from those of the members of the team of investment banking professionals that are advising Access.

Opinion of Middleburg’s Financial Advisor

Middleburg (or, for the purposes of this section, “MBRG”) retained Sandler O’Neill, to act as financial advisor to MBRG’s board of directors in connection with MBRG’s consideration of a possible business combination. Sandler O’Neill is a nationally recognized investment banking firm whose principal business specialty is financial institutions. In the ordinary course of its investment banking business, Sandler O’Neill is regularly engaged in the valuation of financial institutions and their securities in connection with mergers and acquisitions and other corporate transactions.

 

58


Table of Contents

Sandler O’Neill acted as financial advisor in connection with the proposed transaction and participated in certain of the negotiations leading to the execution of the merger agreement. At the October 20, 2016 meeting at which MBRG’s board of directors considered and discussed the terms of the merger agreement and the merger, Sandler O’Neill delivered to MBRG’s board of directors its oral opinion, which was subsequently confirmed in writing on October 20, 2016, to the effect that, as of such date, the exchange ratio provided for in the merger was fair to the holders of MBRG common stock from a financial point of view. The full text of Sandler O’Neill’s opinion is attached as Appendix C to this joint proxy statement/prospectus. The opinion outlines the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by Sandler O’Neill in rendering its opinion. The description of the opinion set forth below is qualified in its entirety by reference to the full text of the opinion. Holders of MBRG common stock are urged to read the entire opinion carefully in connection with their consideration of the proposed merger.

Sandler O’Neill’s opinion speaks only as of the date of the opinion. The opinion was directed to MBRG’s board of directors in connection with its consideration of the merger agreement and the merger and does not constitute a recommendation to any shareholder of MBRG as to how any such shareholder should vote at any meeting of shareholders called to consider and vote upon the approval of the merger agreement and the merger. Sandler O’Neill’s opinion was directed only to the fairness, from a financial point of view, of the exchange ratio to the holders of MBRG common stock and does not address the underlying business decision of MBRG to engage in the merger, the form or structure of the merger or any other transactions contemplated in the merger agreement, the relative merits of the merger as compared to any other alternative transactions or business strategies that might exist for MBRG or the effect of any other transaction in which MBRG might engage. Sandler O’Neill did not express any opinion as to the fairness of the amount or nature of the compensation to be received in the merger by any officer, director or employee of MBRG or Access (or, for the purposes of this section, “ANCX”), or any class of such persons, if any, relative to the compensation to be received in the merger by any other shareholder, including the exchange ratio to be received by the holders of MBRG common stock. Sandler O’Neill’s opinion was approved by Sandler O’Neill’s fairness opinion committee.

In connection with its opinion, Sandler O’Neill reviewed and considered, among other things:

 

    a draft of the merger agreement, dated October 19, 2016;

 

    certain publicly available financial statements and other historical financial information of MBRG that Sandler O’Neill deemed relevant;

 

    certain publicly available financial statements and other historical financial information of ANCX that Sandler O’Neill deemed relevant;

 

    certain financial projections for MBRG for the years ending December 31, 2016 and December 31, 2017 and estimated long-term annual earnings growth rate, dividend and other assumptions for MBRG, as provided by the respective senior managements of MBRG and ANCX, that were prepared by such senior managements to reflect MBRG’s recent financial performance and that Sandler O’Neill was directed by MBRG to rely upon and utilize for purposes of its analysis and its opinion;

 

    mean publicly available analyst estimates for ANCX for the years ending December 31, 2016, December 31, 2017 and December 31, 2018, as well as estimated long-term annual earnings growth rate, dividend and other assumptions for ANCX, as provided by the senior management of ANCX;

 

    the pro forma financial impact of the merger on ANCX based on certain assumptions relating to purchase accounting adjustments, cost savings and transaction expenses, as provided by the senior management of ANCX;

 

    the relative contribution of assets, liabilities, equity and earnings of MBRG and ANCX to the combined entity;

 

    the publicly reported historical price and trading activity for MBRG’s common stock and ANCX’s common stock, including a comparison of certain stock market information for MBRG common stock and ANCX common stock and certain stock indices as well as publicly available information for certain other similar companies, the securities of which are publicly traded;

 

    a comparison of certain financial information for MBRG and ANCX with similar institutions for which information is publicly available;

 

    the financial terms of certain recent business combinations in the bank and thrift industry on a nationwide basis, to the extent publicly available;

 

    the current market environment generally and the banking environment in particular; and

 

59


Table of Contents
    such other information, financial studies, analyses and investigations and financial, economic and market criteria as Sandler O’Neill considered relevant.

Sandler O’Neill also discussed with certain members of the senior management of MBRG the business, financial condition, results of operations and prospects of MBRG and held similar discussions with certain members of the senior management of ANCX regarding the business, financial condition, results of operations and prospects of ANCX.

In performing its review, Sandler O’Neill relied upon the accuracy and completeness of all of the financial and other information that was available to and reviewed by it from public sources, that was provided to Sandler O’Neill by MBRG or ANCX or their respective representatives or that was otherwise reviewed by Sandler O’Neill, and Sandler O’Neill assumed such accuracy and completeness for purposes of rendering this opinion without any independent verification or investigation. Sandler O’Neill relied on the assurances of the respective managements of MBRG and ANCX that they were not aware of any facts or circumstances that would have made any of such information inaccurate or misleading. Sandler O’Neill had not been asked to and did not undertake an independent verification of any of such information and did not assume any responsibility or liability for the accuracy or completeness thereof. Sandler O’Neill did not make an independent evaluation or perform an appraisal of the specific assets, the collateral securing assets or the liabilities (contingent or otherwise) of MBRG or ANCX or any of their respective subsidiaries, nor was Sandler O’Neill furnished with any such evaluations or appraisals. Sandler O’Neill rendered no opinion or evaluation on the collectability of any assets or the future performance of any loans of MBRG or ANCX. Sandler O’Neill did not make an independent evaluation of the adequacy of the allowance for loan losses of MBRG or ANCX, or of the combined entity after the merger, and it did not review any individual credit files relating to MBRG or ANCX. Sandler O’Neill assumed, with MBRG’s consent, that the respective allowances for loan losses for both MBRG and ANCX were adequate to cover such losses and would be adequate on a pro forma basis for the combined entity.

In preparing its analyses, Sandler O’Neill used certain financial projections for MBRG for the years ending December 31, 2016 and December 31, 2017 and estimated long-term annual earnings growth rate, dividend and other assumptions for MBRG, as provided by the respective senior managements of MBRG and ANCX, as well as mean publicly available analyst estimates for ANCX for the years ending December 31, 2016, December 31, 2017 and December 31, 2018 and estimated long-term annual earnings growth rate, dividend and other assumptions for ANCX, as provided by the senior management of ANCX. Sandler O’Neill also received and used in its pro forma analyses certain assumptions relating to purchase accounting adjustments, cost savings and transaction expenses, as provided by the senior management of ANCX. With respect to the foregoing information, the respective senior managements of MBRG and ANCX confirmed to Sandler O’Neill that such information reflected (or, in the case of the mean publicly available analyst estimates referred to above, were consistent with) the best currently available estimates and judgments of those respective senior managements as to the future financial performance of MBRG and ANCX, respectively, and the other matters covered thereby, and Sandler O’Neill assumed that the future financial performance reflected in such information would be achieved. Sandler O’Neill expressed no opinion as to such information, or the assumptions on which such information was based. Sandler O’Neill also assumed that there had been no material change in the respective assets, financial condition, results of operations, business or prospects of MBRG or ANCX since the date of the most recent financial statements made available to it. Sandler O’Neill assumed in all respects material to its analysis that MBRG and ANCX would remain as going concerns for all periods relevant to its analysis.

Sandler O’Neill also assumed, with MBRG’s consent, that (i) each of the parties to the merger agreement would comply in all material respects with all material terms and conditions of the merger agreement and all related agreements, that all of the representations and warranties contained in such agreements were true and correct in all material respects, that each of the parties to such agreements would perform in all material respects all of the covenants and other obligations required to be performed by such party under such agreements and that the conditions precedent in such agreements were not and would not be waived, (ii) in the course of obtaining the necessary regulatory or third party approvals, consents and releases with respect to the merger, no delay, limitation, restriction or condition would be imposed that would have an adverse effect on MBRG, ANCX or the merger or any related transaction, (iii) the merger and any related transactions would be consummated in accordance with the terms of the merger agreement without any waiver, modification or amendment of any material term, condition or agreement thereof and in compliance with all applicable laws and other requirements, and (iv) the merger would qualify as a tax-free reorganization for federal income tax purposes. Finally, with MBRG’s consent, Sandler O’Neill relied upon the advice that MBRG received from its legal, accounting and tax advisors as to all legal, accounting and tax matters relating to the merger and the other transactions contemplated by the merger agreement. Sandler O’Neill expressed no opinion as to any such matters.

 

60


Table of Contents

Sandler O’Neill’s opinion was necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to it as of, the date thereof. Events occurring after the date thereof could materially affect Sandler O’Neill’s opinion. Sandler O’Neill has not undertaken to update, revise, reaffirm or withdraw its opinion or otherwise comment upon events occurring after the date thereof. Sandler O’Neill expressed no opinion as to the trading values of MBRG common stock or ANCX common stock at any time or what the value of MBRG common stock would be once it is actually received by the holders of MBRG common stock.

In rendering its opinion, Sandler O’Neill performed a variety of financial analyses. The summary below is not a complete description of the analyses underlying Sandler O’Neill’s opinion or the presentation made by Sandler O’Neill to MBRG’s board of directors, but is a summary of all material analyses performed and presented by Sandler O’Neill. The summary includes information presented in tabular format. In order to fully understand the financial analyses, these tables must be read together with the accompanying text. The tables alone do not constitute a complete description of the financial analyses. The preparation of a fairness opinion is a complex process involving subjective judgments as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. The process, therefore, is not necessarily susceptible to a partial analysis or summary description. Sandler O’Neill believes that its analyses must be considered as a whole and that selecting portions of the factors and analyses to be considered without considering all factors and analyses, or attempting to ascribe relative weights to some or all such factors and analyses, could create an incomplete view of the evaluation process underlying its opinion. Also, no company included in Sandler O’Neill’s comparative analyses described below is identical to MBRG or ANCX and no transaction is identical to the merger. Accordingly, an analysis of comparable companies or transactions involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies and other factors that could affect the public trading values or merger transaction values, as the case may be, of MBRG and ANCX and the companies to which they are being compared. In arriving at its opinion, Sandler O’Neill did not attribute any particular weight to any analysis or factor that it considered. Rather, Sandler O’Neill made qualitative judgments as to the significance and relevance of each analysis and factor. Sandler O’Neill did not form an opinion as to whether any individual analysis or factor (positive or negative) considered in isolation supported or failed to support its opinion, rather, Sandler O’Neill made its determination as to the fairness of the exchange ratio on the basis of its experience and professional judgment after considering the results of all its analyses taken as a whole.

In performing its analyses, Sandler O’Neill also made numerous assumptions with respect to industry performance, business and economic conditions and various other matters, many of which are beyond the control of MBRG, ANCX and Sandler O’Neill. The analyses performed by Sandler O’Neill are not necessarily indicative of actual values or future results, both of which may be significantly more or less favorable than suggested by such analyses. Sandler O’Neill prepared its analyses solely for purposes of rendering its opinion and provided such analyses to MBRG’s board of directors at its October 20, 2016 meeting. Estimates on the values of companies do not purport to be appraisals or necessarily reflect the prices at which companies or their securities may actually be sold. Such estimates are inherently subject to uncertainty and actual values may be materially different. Accordingly, Sandler O’Neill’s analyses do not necessarily reflect the value of MBRG common stock or the prices at which MBRG common stock or ANCX common stock may be sold at any time. The analyses of Sandler O’Neill and its opinion were among a number of factors taken into consideration by MBRG’s board of directors in making its determination to approve the merger agreement and should not be viewed as determinative of the exchange ratio or the decision of MBRG’s board of directors or management with respect to the fairness of the merger. The type and amount of consideration payable in the merger were determined through negotiation between MBRG and ANCX.

 

61


Table of Contents

Summary of Proposed Exchange Ratio and Implied Transaction Metrics. Sandler O’Neill reviewed the financial terms of the proposed merger. Using the closing price of ANCX common stock on October 19, 2016 of $25.54 for valuing ANCX common stock issuable in the merger and ANCX common stock that may be issued pursuant to the exercise of MBRG warrants that were outstanding on October 20, 2016 and would convert into ANCX warrants in the merger, Sandler O’Neill calculated an aggregate implied transaction value of approximately $243.9 million, or an implied transaction price per share of MBRG common stock of $34.00. Based upon historical financial information for MBRG as or for the last twelve months (“LTM”) ended June 30, 2016 and projected financial information for 2016 and 2017 as provided by the respective senior managements of MBRG and ANCX, Sandler O’Neill calculated the following implied transaction metrics.

 

Transaction Price / Tangible Book Value Per Share of MBRG:

     194

Transaction Price / Last Twelve Months Earnings Per Share of MBRG:

     31.2x   

Transaction Price / 2016E Earnings Per Share of MBRG:

     24.1x   

Transaction Price / 2017E Earnings Per Share of MBRG:

     21.6x   

Core Deposit Premium1:

     13.6

One Day Market Premium to March 30, 2016 MBRG Closing Stock Price:

     66.2 %2 

One Day Market Premium to October 19, 2016 MBRG Closing Stock Price:

     23.8

 

1) Tangible book premium to core deposits calculated as deal value less tangible common equity, as a percentage of core deposits (defined as total deposits less time deposits with balances over $100,000).
2) Based on MBRG’s closing price of $20.46 on March 30, 2016 before initial 13D was filed by MBRG’s largest shareholder.

Contribution Analysis. Sandler O’Neill reviewed the relative contribution of various balance sheet and income statement items to be made by MBRG and ANCX to the combined entity based on financial information for both companies as of or for the period ended June 30, 2016 and for 2016 and 2017 as provided by the respective managements of MBRG and ANCX in the case of MBRG or based on mean publicly available analyst estimates for ANCX. The results of this analysis are set forth in the following table, which also compares the results of this analysis with the implied pro forma ownership percentages of MBRG and ANCX shareholders in the combined company based on the 1.3314x exchange ratio provided for in the merger agreement and the fully diluted shares of MBRG common stock assuming exercise of warrants and options:

 

     ANCX     MBRG  

Balance Sheet

    

Gross Loans Held For Investment

     52.5     47.5

Total Assets

     49.8     50.2

Core Deposits1

     49.1     50.9

Total Deposits

     49.7     50.3

Tangible Common Equity

     48.3     51.7

Income Statement

    

Last Twelve Months Net Income to Common Shareholders

     68.3     31.7

2016E Net Income to Common Shareholders

     63.1     36.9

2017E Net Income to Common Shareholders

     59.3     40.7

Pro Forma Ownership2

     53.5     46.5

 

1) Core deposits equal total deposits less time deposits with balances over $100,000.
2) Assumes 7,230,821 MBRG shares (assuming exercise of options and warrants) are exchanged for ANCX shares.

Stock Trading History. Sandler O’Neill reviewed the historical stock price performance of MBRG common stock and ANCX common stock for the three-year period ended October 19, 2016. Sandler O’Neill then compared the relationship between the stock price performance of MBRG’s common stock and ANCX’s common stock, respectively, to movements in their respective peer groups (as described below) as well as certain stock indices.

 

62


Table of Contents

MBRG Three-Year Stock Price Performance

 

     Beginning
October 19, 2013
    Ending
October 19, 2016
 

MBRG

     100     131.3

MBRG Peer Group

     100     128.9

NASDAQ Bank Index

     100     124.0

S&P 500 Index

     100     122.9

ANCX Three-Year Stock Price Performance

 

     Beginning
October 19, 2013
    Ending
October 19, 2016
 

ANCX

     100     174.9

ANCX Peer Group

     100     127.1

NASDAQ Bank Index

     100     124.0

S&P 500 Index

     100     122.9

Comparable Company Analyses. Sandler O’Neill used publicly available information to compare selected financial information for MBRG with a group of financial institutions, including ANCX, selected by Sandler O’Neill (the “MBRG Peer Group”). The MBRG Peer Group consisted of major exchange traded banks and thrifts headquartered in District of Columbia, Maryland, Virginia, and West Virginia with assets between $750 million and $5 billion, excluding announced merger targets. The MBRG Peer Group consisted of ANCX and the following companies:

 

American National Bankshares Inc.    Old Line Bancshares, Inc.
C&F Financial Corporation    Old Point Financial Corporation
City Holding Company    Premier Financial Bancorp, Inc.
Community Bankers Trust Corporation    Sandy Spring Bancorp, Inc.
Community Financial Corporation    Severn Bancorp, Inc.
Eastern Virginia Bankshares, Inc.    Shore Bancshares, Inc.
First Community Bancshares, Inc.    Southern National Bancorp of Virginia, Inc.
First United Corporation    Summit Financial Group, Inc.
Howard Bancorp, Inc.    WashingtonFirst Bankshares, Inc.
National Bankshares, Inc.    Xenith Bankshares, Inc.

The analysis compared financial information for MBRG provided by MBRG as of or for the twelve months ended June 30, 2016 (unless otherwise noted) with the corresponding publicly available data for the MBRG Peer Group as of or for the twelve months ended June 30, 2016 (unless otherwise noted), with pricing data as of October 19, 2016. The table below sets forth the data for MBRG and the high, low, median and mean data for the MBRG Peer Group.

 

63


Table of Contents

MBRG Comparable Company Analysis

 

     MBRG     MBRG
Peer Group
Median
    MBRG
Peer
Group
Mean
    MBRG
Peer
Group
High
    MBRG
Peer
Group
Low
 

Total assets (in millions)

   $ 1,314      $ 1,363      $ 1,679      $ 4,739      $ 794   

Loans/Deposits

     80.9     91.4     92.6     114.5     61.7

Non-performing assets1/Total assets

     1.82     1.38     1.65     4.30     0.23

Tangible common equity/Tangible assets

     9.50     9.36     9.73     14.44     6.34

Leverage Ratio

     9.45     10.19     10.51     14.91     8.55

Total RBC Ratio

     17.34     14.50     14.81     25.28     10.61

Last Twelve Months Return on average assets

     0.60     0.93     1.09     4.69     (0.07 )% 

Last Twelve Months Return on average equity

     6.22     8.49     9.72     36.09     (0.71 )% 

Last Twelve Months Net interest margin

     3.24     3.60     3.75     6.38     3.09

Last Twelve Months Efficiency ratio

     71.1     63.2     66.7     88.6     48.2

Price/Tangible book value

     157     135     139     232     85

Price/Last Twelve Months Earnings per share

     25.2x        15.8x        15.6x        37.0x        4.2x   

Price/Median Analyst 2016E Earnings per share2

     19.5x        16.1x        16.9x        33.3x        12.6x   

Price/Median Analyst 2017E Earnings per share2

     17.5x        14.8x        15.2x        24.5x        11.4x   

Current Dividend Yield

     1.9     2.0     1.8     3.5     0.0

Last Twelve Months Dividend ratio

     47.7     27.0     29.4     69.1     0.0

Market value (in millions)

   $ 195      $ 164      $ 244      $ 741      $ 73   

 

Note: Publicly available financial data as of September 30, 2016 for the following companies: ANCX, Community Financial Corporation and Howard Bancorp, Inc.
1) Nonperforming assets defined as nonaccrual loans, and leases, real estate owned and repossessed assets.
2) Based on median publicly available analyst estimates except, in the case of MBRG, for which 2016 and 2017 earnings projections were provided by the respective senior managements of MBRG and ANCX.

Sandler O’Neill used publicly available information to perform a similar analysis for ANCX and a group of financial institutions, including MBRG, selected by Sandler O’Neill (the “ANCX Peer Group”). The ANCX Peer Group consisted of major exchange traded banks and thrifts headquartered in District of Columbia, Maryland, Virginia, and West Virginia with assets between $750 million and $5 billion, excluding announced merger targets. The ANCX Peer Group consisted of MBRG and the same companies as in the MBRG Peer Group (other than ANCX).

The analysis compared financial information for ANCX provided by ANCX as of or for the twelve months ended September 30, 2016 (unless otherwise noted) with the corresponding publicly available data for the ANCX Peer Group as of or for the twelve months ended June 30, 2016 (unless otherwise noted), with pricing data as of October 19, 2016. The table below sets forth the data for ANCX and the high, low, median and mean data for the ANCX Peer Group.

 

64


Table of Contents

ANCX Comparable Company Analysis

 

     ANCX     ANCX
Peer
Group
Median
    ANCX
Peer
Group
Mean
    ANCX
Peer
Group
High
    ANCX
Peer
Group
Low
 

Total assets (in millions)

   $ 1,363      $ 1,314      $ 1,677      $ 4,739      $ 794   

Loans/Deposits

     86.7     91.4     92.4     114.5     61.7

Non-performing assets1/Total assets

     0.23     1.60     1.73     4.30     0.41

Tangible common equity/Tangible assets

     8.94     9.50     9.75     14.44     6.34

Leverage Ratio

     9.05     10.19     10.53     14.91     8.55

Total RBC Ratio

     12.35     14.52     15.05     25.28     10.61

Last Twelve Months Return on average assets

     1.40     0.90     1.06     4.69     (0.07 )% 

Last Twelve Months Return on average equity

     15.31     8.43     9.28     36.09     (0.71 )% 

Last Twelve Months Net interest margin

     3.60     3.59     3.73     6.38     3.09

Last Twelve Months Efficiency ratio

     62.3     64.4     67.1     88.6     48.2

Price/Tangible book value

     232     135     135     212     85

Price/Last Twelve Months Earnings per share

     15.7x        15.9x        16.1x        37.0x        4.2x   

Price/Median Analyst 2016E Earnings per share2

     15.8x        16.1x        17.1x        33.3x        12.6x   

Price/Median Analyst 2017E Earnings per share2

     16.8x        14.8x        15.4x        24.5x        11.4x   

Current Dividend Yield

     2.3     1.9     1.8     3.5     0.0

Last Twelve Months Dividend ratio

     36.8     27.0     29.9     69.1     0.0

Market value (in millions)

   $ 271      $ 164      $ 241      $ 741      $ 73   

 

Note: Publicly available financial data as of September 30, 2016 for the following companies: ANCX, Community Financial Corporation and Howard Bancorp, Inc.
1) Nonperforming assets defined as nonaccrual loans, and leases, real estate owned and repossessed assets.
2) Based on median publicly available analyst estimates except, in the case of ANCX, for which 2016 and 2017 earnings projections were based on mean publicly available analyst estimates.

Analysis of Selected Merger Transactions. Sandler O’Neill reviewed a group of selected merger and acquisition transactions involving U.S. banks and thrifts (the “Precedent Transactions”). The Precedent Transactions group consisted of transactions with all stock deal values greater than $100 million since January 1, 2013, where the pro forma ownership and board representation of former shareholders and directors of the target were greater than 40%. The Precedent Transactions group was composed of the following transactions:

 

Acquiror

  

Target

BBCN Bancorp Inc.    Wilshire Bancorp Inc.
Nicolet Bankshares Inc.    Baylake Corp.
Yadkin Financial Corporation    VantageSouth Bancshares
Center Bancorp Inc.    ConnectOne Bancorp Inc.
Rockville Financial Inc.    United Financial Bancorp
Mercantile Bank Corp.    Firstbank Corp.
Peoples Financial Services    Penseco Financial Services
Union First Market Bankshares Corp.    StellarOne Corp.
Provident New York Bancorp    Sterling Bancorp

 

65


Table of Contents

Using the latest publicly available information prior to the announcement of the relevant transaction, Sandler O’Neill reviewed the following transaction metrics: transaction price to last-twelve-months earnings per share, transaction price to forward year estimated earnings per share, transaction price to tangible book value per share, tangible book premium to core deposits, and 1-day market premium. Sandler O’Neill compared the indicated transaction multiples for the merger to the high, low, mean and median multiples of the Precedent Transactions group.

 

    MBRG /
ANCX
    Precedent
Transactions
Median
    Precedent
Transactions
Mean
    Precedent
Transactions
High
    Precedent
Transactions
Low
 

Transaction price/Last Twelve Months earnings per share:

    31.2x        17.1x        24.5x        53.1x        13.9x   

Transaction price/Estimated forward year earnings per share:

    24.1x        16.6x        16.5x        19.6x        13.1x   

Transaction price/Tangible book value per share:

    194     148     161     224     140

Core deposit premium:

    13.6     7.5     9.5     22.9     5.6

1-Day market premium:

    23.8%/66.2 %1      14.5     14.8     26.1     5.2

 

1) Based on MBRG’s closing price of $20.46 on March 30, 2016, before initial 13D was filed by largest shareholder.

Net Present Value Analyses. Sandler O’Neill performed an analysis that estimated the net present value per share of MBRG common stock assuming MBRG performed in accordance with financial projections for the years ending December 31, 2016 and December 31, 2017 and estimated long-term annual earnings growth rate, dividend and other assumptions as provided by the respective senior managements of MBRG and ANCX. To approximate the terminal value of a share of MBRG common stock at December 31, 2020, Sandler O’Neill applied price to 2020 earnings per share multiples ranging from 10.0x to 20.0x and price to December 31, 2020 tangible book value per share multiples ranging from 100% to 225%. The terminal values were then discounted to present values using different discount rates ranging from 9.0% to 15.0% which were chosen to reflect different assumptions regarding required rates of return of holders or prospective buyers of MBRG common stock. As illustrated in the following tables, the analysis indicated an imputed range of values per share of MBRG common stock of $12.74 to $29.79 when applying multiples of earnings per share and $14.03 to $36.93 when applying multiples of tangible book value per share.

Earnings Per Share Multiples

 

Discount Rate

   10.0x    12.0x    14.0x    16.0x    18.0x    20.0x

9.0%

   $15.99    $18.75    $21.51    $24.27    $27.03    $29.79

10.0%

   $15.38    $18.03    $20.68    $23.33    $25.98    $28.63

11.0%

   $14.80    $17.34    $19.89    $22.43    $24.98    $27.52

12.0%

   $14.24    $16.69    $19.13    $21.58    $24.02    $26.46

13.0%

   $13.72    $16.07    $18.41    $20.76    $23.11    $25.46

14.0%

   $13.22    $15.47    $17.73    $19.99    $22.24    $24.50

15.0%

   $12.74    $14.91    $17.08    $19.25    $21.42    $23.59

Tangible Book Value Per Share Multiples

 

Discount Rate

   100%    125%    150%    175%    200%    225%

9.0%

   $17.63    $21.49    $25.35    $29.21    $33.07    $36.93

10.0%

   $16.96    $20.66    $24.36    $28.07    $31.77    $35.48

11.0%

   $16.31    $19.87    $23.43    $26.98    $30.54    $34.10

12.0%

   $15.70    $19.12    $22.53    $25.95    $29.36    $32.78

13.0%

   $15.12    $18.40    $21.68    $24.96    $28.25    $31.53

14.0%

   $14.56    $17.72    $20.87    $24.02    $27.18    $30.33

15.0%

   $14.03    $17.06    $20.10    $23.13    $26.16    $29.19

Sandler O’Neill also considered and discussed with the MBRG board of directors how this analysis would be affected by changes in the underlying assumptions, including variations with respect to net income. To illustrate this impact, Sandler O’Neill performed a similar analysis assuming MBRG’s net income varied from 25% above projections to 25% below projections. This analysis resulted in the following range of per share values for MBRG common stock, applying the price to 2020 earnings per share multiples range of 10.0x to 20.0x referred to above and a discount rate of 12.05%.

 

66


Table of Contents

Earnings Per Share Multiples

 

Annual

Budget Variance

   10.0x    12.0x    14.0x    16.0x    18.0x    20.0x
(25.0%)    $11.17    $13.00    $14.83    $16.66    $18.49    $20.31
(20.0%)    $11.78    $13.73    $15.68    $17.63    $19.58    $21.53
(15.0%)    $12.39    $14.46    $16.53    $18.61    $20.68    $22.75
(10.0%)    $13.00    $15.19    $17.39    $19.58    $21.78    $23.97
(5.0%)    $13.61    $15.92    $18.24    $20.56    $22.88    $25.19
0.0%    $14.22    $16.66    $19.10    $21.53    $23.97    $26.41
5.0%    $14.83    $17.39    $19.95    $22.51    $25.07    $27.63
10.0%    $15.44    $18.12    $20.80    $23.49    $26.17    $28.85
15.0%    $16.05    $18.85    $21.66    $24.46    $27.27    $30.07
20.0%    $16.66    $19.58    $22.51    $25.44    $28.36    $31.29
25.0%    $17.27    $20.31    $23.36    $26.41    $29.46    $32.51

Sandler O’Neill also performed an analysis that estimated the net present value per share of ANCX common stock assuming that ANCX performed in accordance with mean publicly available analyst estimates for ANCX for the years ending December 31, 2016, December 31, 2017 and December 31, 2018, as well as estimated long-term annual earnings growth rate, dividend and other assumptions as provided by the senior management of ANCX. To approximate the terminal value of ANCX common stock at December 31, 2020, Sandler O’Neill applied price to 2020 earnings per share multiples ranging from 10.0x to 20.0x and price to December 31, 2020 tangible book value per share multiples ranging from 100% to 225%. The terminal values were then discounted to present values using different discount rates ranging from 9.0% to 15.0% chosen to reflect different assumptions regarding required rates of return of holders or prospective buyers of ANCX common stock. As illustrated in the following tables, the analysis indicated an imputed range of values per share of ANCX common stock of $11.72 to $27.07 when applying multiples of earnings per share and $10.27 to $25.97 when applying multiples of tangible book value per share.

Earnings Per Share Multiples

 

Discount Rate

   10.0x    12.0x    14.0x    16.0x    18.0x    20.0x

9.0%

   $14.68    $17.16    $19.64    $22.12    $24.60    $27.07

10.0%

   $14.13    $16.51    $18.88    $21.26    $23.64    $26.02

11.0%

   $13.60    $15.88    $18.17    $20.45    $22.74    $25.02

12.0%

   $13.10    $15.29    $17.48    $19.68    $21.87    $24.07

13.0%

   $12.62    $14.72    $16.83    $18.94    $21.05    $23.16

14.0%

   $12.16    $14.19    $16.21    $18.24    $20.26    $22.29

15.0%

   $11.72    $13.67    $15.62    $17.57    $19.52    $21.46

Tangible Book Value Per Share Multiples

 

Discount Rate

   100%    125%    150%    175%    200%    225%

9.0%

   $12.83    $15.46    $18.08    $20.71    $23.34    $25.97

10.0%

   $12.35    $14.87    $17.39    $19.92    $22.44    $24.96

11.0%

   $11.90    $14.32    $16.74    $19.16    $21.58    $24.00

12.0%

   $11.46    $13.79    $16.11    $18.44    $20.76    $23.09

13.0%

   $11.05    $13.28    $15.51    $17.75    $19.98    $22.22

14.0%

   $10.65    $12.80    $14.94    $17.09    $19.24    $21.39

15.0%

   $10.27    $12.34    $14.40    $16.47    $18.53    $20.59

Sandler O’Neill also considered and discussed with the MBRG board of directors how this analysis would be affected by changes in the underlying assumptions, including variations with respect to net income. To illustrate this impact, Sandler O’Neill performed a similar analysis assuming ANCX’s net income varied from 25% above estimates to 25% below estimates. This analysis resulted in the following range of per share values for ANCX common stock, applying the price to 2020 earnings per share multiples range of 10.0x to 20.0x referred to above and a discount rate of 12.05%.

 

67


Table of Contents

Earnings Per Share Multiples

 

Annual

Budget Variance

   10.0x    12.0x    14.0x    16.0x    18.0x    20.0x
(25.0%)    $10.33    $11.98    $13.62    $15.26    $16.90    $18.54
(20.0%)    $10.88    $12.63    $14.38    $16.14    $17.89    $19.64
(15.0%)    $11.43    $13.29    $15.15    $17.01    $18.87    $20.73
(10.0%)    $11.98    $13.95    $15.92    $17.89    $19.86    $21.83
(5.0%)    $12.52    $14.60    $16.68    $18.76    $20.84    $22.92
0.0%    $13.07    $15.26    $17.45    $19.64    $21.83    $24.02
5.0%    $13.62    $15.92    $18.22    $20.52    $22.81    $25.11
10.0%    $14.17    $16.57    $18.98    $21.39    $23.80    $26.21
15.0%    $14.71    $17.23    $19.75    $22.27    $24.78    $27.30
20.0%    $15.26    $17.89    $20.52    $23.14    $25.77    $28.40
25.0%    $15.81    $18.54    $21.28    $24.02    $26.76    $29.49

Sandler O’Neill noted that the net present value analysis is a widely used valuation methodology, but the results of such methodology are highly dependent upon the numerous assumptions that must be made, and the results thereof are not necessarily indicative of actual values or future results.

Pro Forma Merger Analysis. Sandler O’Neill analyzed certain potential pro forma effects of the merger, assuming the merger closes at the end of the first calendar quarter of 2017. In performing this analysis, Sandler O’Neill utilized the following information: (i) financial projections for MBRG for the years ending December 31, 2016 and December 31, 2017 and estimated long-term annual earnings growth rate, dividend and other assumptions as provided by the respective senior managements of MBRG and ANCX; (ii) mean publicly available analyst estimates for ANCX for the years ending December 31, 2016, December 31, 2017 and December 31, 2018 as well as estimated long-term annual earnings growth rate, dividend and other assumptions as provided by the senior management of ANCX; and (iii) certain assumptions relating to purchase accounting adjustments, cost savings and transaction expenses, as provided by the senior management of ANCX. The analysis indicated that the merger could be accretive to ANCX’s earnings per share (excluding one-time transaction costs and expenses) in the years ended December 31, 2017, December 31, 2018 and December 31, 2019, neutral to ANCX’s estimated tangible book value per share at close and accretive to ANCX’s estimated tangible book value per share at December 31, 2017, December 31, 2018 and December 31, 2019.

In connection with this analysis, Sandler O’Neill considered and discussed with the MBRG board of directors how the analysis would be affected by changes in the underlying assumptions, including the impact of final purchase accounting adjustments determined at the closing of the transaction, and noted that the actual results achieved by the combined company may vary from projected results and the variations may be material.

Sandler O’Neill’s Relationship. Sandler O’Neill has acted as MBRG’s financial advisor in connection with the merger and will receive a fee for its services estimated to be approximately $3.05 million based on the market value of Access’s common stock at the time the merger was announced. The fee is equal to 1.25% of the aggregate purchase price, will vary based on the market value of Access’ common stock at the time of closing and is contingent upon the closing of the merger. Sandler O’Neill also received a $500,000 fee upon rendering its fairness opinion to the MBRG board of directors, which opinion fee will be credited in full towards the transaction fee which will become payable to Sandler O’Neill on the day of closing of the merger. MBRG has also agreed to indemnify Sandler O’Neill against certain claims and liabilities arising out of its engagement and to reimburse Sandler O’Neill for certain of its out-of-pocket expenses incurred in connection with its engagement. In connection with its engagement, Sandler O’Neill was not asked to, and did not, solicit indications of interest in a potential transaction with MBRG from other parties.

In the two years preceding the date of its opinion, Sandler O’Neill provided certain other investment banking services to MBRG and received fees for such services. Earlier in 2016, Sandler O’Neill was engaged as MBRG’s financial advisor in connection with MBRG’s strategic defense planning and its board of directors’ consideration of alternative strategies. Sandler O’Neill has not provided any investment banking services to ANCX in the two years preceding the date of its opinion. In the ordinary course of its business as a broker-dealer, Sandler O’Neill may purchase securities from and sell securities to MBRG and its affiliates. Sandler O’Neill may also actively trade the equity and debt securities of MBRG, ANCX and their respective affiliates for its own account and for the accounts of its customers.

 

68


Table of Contents

Certain Unaudited Prospective Financial Information

Access and Middleburg do not as a matter of course make public projections as to future revenues, earnings, financial condition or other results. However, the management of Middleburg and Access prepared the Middleburg Financial Forecasts and the Adjusted Middleburg Financial Forecasts, respectively (collectively, the “Financial Forecasts”), to present certain unaudited prospective financial information regarding Middleburg’s future operations for the years ending December 31, 2017 and 2018, with linear extrapolations therefrom. The Financial Forecasts were made available to each party and to their respective financial advisors in connection with the merger. The inclusion of the Financial Forecasts in the joint proxy statement/prospectus should not be regarded as an admission that any of Access, Middleburg, FBR or Sandler O’Neill considered, or now considers, the Financial Forecasts to be necessarily predictive of actual future results, or that the Financial Forecasts should be construed as financial guidance, and the Financial Forecasts should not be relied upon as such.

The Financial Forecasts were prepared for internal use only and are subjective in many respects. The Financial Forecasts were not prepared with a view toward public disclosure or with a view toward complying with GAAP, the rules or published guidelines of the SEC, the guidelines established by the American Institute of Certified Public Accountants with respect to prospective financial information, but, in the view of Access’s management and Middleburg’s management, were prepared on a reasonable basis, reflect the best available estimates and judgments at the time they were prepared, and present expected future financial performance to the best of Access’s management’s and Middleburg’s management’s respective knowledge and belief when prepared. However, this prospective financial information is not fact and should not be relied upon as being necessarily indicative of actual future results.

Neither Access’s or Middleburg’s independent auditors, nor any other independent accountants, have compiled, examined, or performed any procedures with respect to the Financial Forecasts, nor have they expressed any opinion or any other form of assurance on such information or its achievability, and assume no responsibility for, and disclaim any association with, the prospective financial information.

The Financial Forecasts reflect numerous estimates and assumptions made with respect to business, economic, market, competition, regulatory and financial conditions and matters specific to the business of Middleburg and Access, all of which are difficult to predict and many of which are beyond the control of Middleburg and Access. The Financial Forecasts reflect assumptions as to certain business decisions that are subject to change and, in many respects, subjective judgment, and thus are susceptible to multiple interpretations and periodic revisions based on actual experience and business developments. Access and Middleburg can give no assurance that the Financial Forecasts and the underlying estimates and assumptions will be realized. In addition, because the Financial Forecasts cover multiple years, the information by its nature becomes less predictive with each successive year. Actual results may differ materially from those set forth below, and important factors that may affect actual results and cause the Financial Forecasts not to be realized include, but are not limited to, risks and uncertainties relating to the business of Access or Middleburg, industry performance, general business and economic conditions, customer requirements, competition and adverse changes in applicable laws, regulations or policies. Other factors that could cause actual results to differ are further described in the sections of this joint proxy statement/prospectus entitled “Risk Factors,” “Cautionary Statement Regarding Forward-Looking Statements,” and “Where You Can Find More Information” beginning on pages [●], [●] and [●] of this joint proxy statement/prospectus. Shareholders of each of Access and Middleburg are urged to review Access’s and Middleburg’s most recent SEC filings for a description of risk factors with respect to the business of Access and Middleburg, respectively.

Furthermore, the Financial Forecasts do not take into account any circumstances or events occurring after the date they were prepared. Access and Middleburg can give no assurance that, had the Financial Forecasts been prepared as of the date of this joint proxy statement/prospectus, similar estimates and assumptions would be used. Access and Middleburg do not intend to, and disclaim any obligation to, make publicly available any update or other revision to the Financial Forecasts to reflect circumstances existing since their preparation or to reflect the occurrence of unanticipated events, even in the event that any or all of the underlying assumptions are shown to be in error, or to reflect changes in general economic or industry conditions. The Financial Forecasts do not take into account all possible financial and other effects on either Access or Middleburg, as applicable, of the merger and do not attempt to predict or suggest future results of the combined company. The Financial Forecasts do not give effect to the impact of negotiating or executing the merger agreement, the expenses that may be incurred in connection with consummating the merger, all potential synergies that may be achieved by the combined company as a result of the merger, the effect of any business or strategic decision or action that has been or will be taken as a result of the merger agreement having been executed, or the effect of any business or strategic decisions or actions that would likely have been taken if the merger agreement had not been executed, but which were instead altered, accelerated, postponed

 

69


Table of Contents

or not taken in anticipation of the merger. Further, the Financial Forecasts do not take into account the effect of any possible failure of the merger to occur. None of Access, Middleburg or their respective affiliates, officers, directors, advisors including FBR and Sandler O’Neill, or other representatives has made, makes or is authorized in the future to make any representation to any shareholder of Access or Middleburg, or any other person, regarding actual performance compared to the information contained in the Financial Forecasts or that projected results will be achieved. The inclusion of the Financial Forecasts should not be deemed an admission or representation by Access or Middleburg that it is viewed as material information of Access or Middleburg, particularly in light of the inherent risks and uncertainties associated with such Financial Forecasts. The summary of the Financial Forecasts included below is not being included to influence your decision whether to vote for the Access merger proposal or the Middleburg merger proposal, as applicable, nor should the Financial Forecasts be construed as financial guidance, and they should not be relied on as such.

In light of the foregoing, and considering that the Access and Middleburg special meetings will be held several months after the Financial Forecasts were prepared, as well as the uncertainties inherent in any forecasted information, shareholders of Access and Middleburg are cautioned not to place unwarranted reliance on such information in connection with their consideration of the merger.

The following table presents selected unaudited prospective financial data constituting the Financial Forecasts for the periods presented.

 

     For the years ending
December 31,
 
     2017      2018 (1)  
     ($ in millions)  

Middleburg Financial Forecasts

     

Middleburg Estimated Standalone Net Income

   $ 11.3       $ 12.3   

Adjusted Middleburg Financial Forecasts

     

Middleburg Estimated Standalone Net Income, Inclusive of Cost Savings (2)

   $ 17.1       $ 20.3   

 

  (1) The unaudited prospective financial data presented for the year ending December 31, 2018 was extrapolated for select future periods using an annual earnings growth rate of 9.0%.

 

  (2) Based on due diligence performed before signing the merger agreement, management of Access estimated cost savings of approximately 32% of Middleburg’s pre-tax noninterest expenses. The Adjusted Middleburg Financial Forecast for the year ending December 31, 2017 includes nine months of estimated cost savings.

Interests of Certain Middleburg Directors and Executive Officers in the Merger

In considering the recommendations of the Middleburg board of directors that Middleburg shareholders vote in favor of the Middleburg merger proposal and the compensation proposal, Middleburg shareholders should be aware that Middleburg directors and executive officers may have interests in the merger that differ from, or are in addition to, their interests as shareholders of Middleburg. The Middleburg board of directors was aware of these interests and took them into account in its decision to approve the merger agreement and the merger.

Indemnification and Insurance. Access has agreed to indemnify the officers and directors of Middleburg against certain liabilities arising before the effective date of the merger. Access has also agreed to purchase a six year “tail” prepaid policy, on the same terms as Middleburg’s existing directors’ and officers’ liability insurance, for the current officers and directors of Middleburg, subject to a cap on the cost of such policy equal to 300% of Middleburg’s current annual premium.

Director Appointments. At the effective date of the merger, six current directors of Middleburg, John C. Lee, IV, Childs F. Burden, Gary D. LeClair, Mary Leigh McDaniel, Janet A. Neuharth, and Gary R. Shook, will become directors of Access. John C. Lee, IV, current chairman of Middleburg’s board of directors, will serve as chairman of Access’ board of directors. Michael G. Anzilotti, Access’ current chairman of the board of directors, will serve as vice chairman; and the executive committee of the Access board of directors shall be Mr. Anzilotti, Martin S. Friedman, Michael W. Clarke, Mr. Lee, IV, and Mr. Shook. The executive officers of Access will continue serving in their current positions as executive officers of Access after the merger, and Messrs. Shook, Jeffrey H. Culver and David L. Hartley will also serve as executive officers of Access after the merger as follows: Mr. Shook will serve as Chairman and Chief Executive Officer of Middleburg Investment Group, Inc., Chairman of Middleburg Trust Company, and President of Middleburg Bank, a division of Access National

 

70


Table of Contents

Bank; Mr. Culver will serve as Executive Vice President and Chief Operating Officer of Access National Bank; and Mr. Hartley will serve as President of Middleburg Investment Group, Inc. and President and Chief Executive officer of Middleburg Trust Company. Each director of Access following the merger will also serve as a director of Access National Bank.

Access pays non-employee directors a basic cash retainer on a quarterly or monthly basis that is designed to compensate directors for their participation on the Access board of directors and the execution of their basic duties and responsibilities. Access’ compensation committee also conducts an annual evaluation of performance under criteria similar to the criteria used for its executive cash bonuses for payment of annual incentives to Access directors. Incentives are paid in cash, option awards or some combination thereof. Non-employee members of the board of directors of Access currently receive a basic retainer of $36,000 each, and the chairman of the Access board of directors receives an additional retainer of $12,000, in each case payable monthly. At the end of 2016 and into the first quarter of 2017, Access’ Compensation Committee expects to evaluate director performance for incentive awards in connection with 2016 performance and set basic director compensation for 2017. Access’s directors do not currently receive any additional compensation for service on the board of directors of any subsidiary of Access, or on any committee of the board of directors of Access or any of its subsidiaries.

Stock Options and Restricted Stock Awards. Middleburg has awarded certain employees, officers and directors stock options and grants of restricted stock pursuant to its equity compensation plans. As of the record date for the Middleburg special meeting, the Middleburg directors and executive officers held, in the aggregate, options to purchase [●] shares of Middleburg common stock granted under Middleburg’s equity compensation plans. To the extent the options have not been exercised, at the effective date of the merger, each option to purchase shares of Middleburg common stock granted under a Middleburg equity compensation plan that is outstanding immediately prior to the effective date of the merger will be cancelled for a cash payment equal to the product of (i) the difference between the closing sale price of Middleburg common stock on the trading day immediately preceding the effective date of the merger and the per share exercise price of the stock option, and (ii) the number of shares of Middleburg common stock subject to such stock option.

For each Middleburg named executive officer, the cash payments for cancellation of stock options in connection with the merger is set forth in the table below entitled “Golden Parachute Compensation,” which assumes the merger was completed on November 30, 2016 and assumes a price per share of Middleburg common stock of $30.38 (which is the average closing market price of Middleburg common stock over the first five business days following the first public announcement of the merger). Using the same assumptions, Middleburg’s other executive officers as a group will receive cash payments for cancellation of stock options in connection with the merger of approximately $32,957 in the aggregate. Middleburg’s non-employee directors do not hold stock options.

Each restricted share of Middleburg common stock granted under a Middleburg equity compensation plan that is outstanding immediately prior to the effective date of the merger will, pursuant to the terms of each such grant, vest in full immediately prior to the effective date of the merger and be converted into unrestricted shares of Access common stock based on the merger’s exchange ratio.

For each Middleburg named executive officer, the value of the accelerated vesting of restricted stock in connection with the merger is set forth in the table below entitled “Golden Parachute Compensation,” which assumes a value of $30.38 per each unvested share of common stock (which is the average closing market price of Middleburg common stock over the first five business days following the first public announcement of the merger) and assumes the merger was completed on November 30, 2016. Using the same assumptions, the value of the accelerated vesting of restricted stock for Middleburg’s other executive officers as a group is approximately $615,195 in the aggregate. Non-employee directors do not hold restricted stock that will vest in connection with the merger.

Employee Benefit Plans. On or as soon as reasonably practicable following the merger, employees of Middleburg or its subsidiaries (including Middleburg Bank) who continue on as employees of Access or its subsidiaries (including Access National Bank) will be entitled to participate in the health and welfare benefit and similar plans of Access or its subsidiaries on the same terms and conditions as employees of Access and its subsidiaries. Participation by former employees of Middleburg and its subsidiaries in the combined company’s benefit plans may commence at different times with respect to each benefit plan until such time as the full complement of benefits of the combined company are legally or practically available to said employees. Subject to certain exceptions, these employees will receive credit for their years of service to Middleburg or Middleburg Bank for participation, vesting and benefit accrual purposes.

 

71


Table of Contents

Change of Control Payments under Current Middleburg Employment Agreements. Middleburg has written employment agreements with each of Messrs. Shook, Culver, Hartley and Mehra. These employment agreements provide, in relevant part, that if the officer’s employment is terminated by Middleburg without “cause” or by the officer for “good reason” within one year of a “change of control,” then Middleburg shall pay amounts to the officers as follows: (i) pursuant to Mr. Shook’s employment agreement, a cash amount equal to 300% of his highest cash compensation earned after 2009, (ii) pursuant to Mr. Culver’s employment agreement, a cash amount equal to 200% of his highest cash compensation earned after 2008, and (iii) pursuant to Mr. Mehra’s employment agreement, a cash amount equal to 200% of his highest cash compensation earned after 2009. Pursuant to Mr. Hartley’s employment agreement, upon his termination, regardless of whether or not the termination occurs following a “change of control,” a cash amount equal to 200% of his current salary will be paid by Middleburg. Payment of these amounts is subject to the provisions of Section 409A of the Code which may require that disbursement of benefits be postponed for six months from the date of termination. In addition, compensation to each of Messrs. Shook, Culver, Hartley and Mehra related to the change of control will be reduced as necessary to avoid any “excess parachute payment” as defined by Section 280G and Section 4999 of the Code. If Mr. Shook, Mr. Culver, Mr. Hartley or Mr. Mehra breach any of the covenants in their respective agreements related to the protection of confidential information, non-disclosure, non-competition and non-solicitation, or is terminated “for cause” as defined in the employment agreement, he is not entitled to any further compensation.

Under the Shook, Culver, Hartley and Mehra employment agreements, a change of control is a significant change of the ownership, management or assets of Middleburg that fits into one of these categories: (i) a person or group of persons acting together becomes the beneficial owner of Middleburg securities having at least 50% of the combined voting power of the Middleburg securities that may be voted in an election of Middleburg’s directors, other than as a result of certain issuances or repurchases of securities initiated by Middleburg; (ii) as a result of or in connection with a tender or exchange offer, a merger or other business combination, a sale of assets, a contested election of directors, or any combination of these events, the persons who were the directors of Middleburg before such events cease to constitute a majority of Middleburg’s board of directors or any successor’s board, within two years of the last of such events. The merger will constitute a change of control for purposes of these agreements. The employment agreements also provide for payment of specified severance compensation in the event that the executive is terminated without “cause” or resigns for “good reason,” each as defined in the employment agreements, and in any such case the executive is subject to noncompetition covenants for twelve months following termination and nonsolicitation covenants for 24 months following termination.

Simultaneous with the effectiveness of the merger, Middleburg will terminate the employment agreements of Messrs. Shook, Culver and Hartley and pay to each benefits that would be provided thereunder in the event of termination without “cause” or a resignation by the executive for “good reason” (in the case of Messrs. Shook and Culver, which occurs within one year after a change of control), and each of Messrs. Shook, Culver and Hartley will execute a general release of claims. As described in more detail below, in addition to payment of benefits provided under the employment agreements of Messrs. Shook, Culver and Hartley, Access, Middleburg and certain of their respective subsidiaries have entered into agreements for employment following the merger with Messrs. Shook, Culver and Hartley.

Simultaneous with the effectiveness of the merger, (i) Middleburg will terminate the employment agreement of Mr. Mehra and pay to him the benefits provided thereunder in the event of termination without “cause” within one year after a change of control, and (ii) Middleburg will terminate Mr. Mehra’s employment. In connection therewith Mr. Mehra will execute a separation agreement and general release that provides (a) Mr. Mehra will receive a lump sum payment of $100, and (b) Mr. Mehra agrees to customary confidentiality covenants and further agrees to release and waive any and all claims against Access, Middleburg and their respective affiliates and subsidiaries, among other parties.

Payments and Benefits to Middleburg Named Executive Officers. The following table sets forth the information required by Item 402(t) of Regulation S-K promulgated by the SEC regarding certain compensation which Middleburg named executive officers may receive that is based on or that otherwise relates to the merger. The amounts are calculated assuming that the effective date of the merger and a qualifying termination of employment occurred on November 30, 2016. The merger-related compensation payable to the Middleburg named executive officers is the subject of a non-binding advisory vote of Middleburg shareholders, as described under “Proposals to be Considered at the Middleburg Special Meeting — Approval of the Compensation Proposal (Middleburg Proposal No. 2)” beginning on page [●].

 

72


Table of Contents

Golden Parachute Compensation*

 

Name

   Cash1      Equity     Pension/
NQDC
     Perquisites/
benefits
     Tax
reimbursement
     Other      Total4  

Gary R. Shook

   $ 1,492,935       $ 1,250,137 2      —           —           —           —         $ 2,743,072   

Rajesh Mehra

   $ 555,410       $ 624,943 3      —           —           —           —         $ 1,180,353   

Jeffrey H. Culver

   $ 717,520       $ 1,105,383 3      —           —           —           —         $ 1,822,903   

David L. Hartley

   $ 440,750       $ 470,890 2      —           —           —           —         $ 911,640   

Mark A. McLean

     —         $ 243,040 2      —           —           —           —         $ 243,040   

 

* This table assumes the merger was completed on November 30, 2016, and that all required conditions to the payment of these amounts have been satisfied.
(1) Represents estimated cash payments payable under the named executive officers’ employment agreements upon a termination without cause or for good reason within one year of a “change of control” (double-trigger) in the case of Messrs. Shook, Mehra and Culver, and upon a termination without cause or for good reason in the case of Mr. Hartley. The merger agreement provides that Middleburg will terminate these employment agreements and, on the ninetieth day following closing of the merger, Access will make lump sum cash payments to the named executive officers in the amounts provided pursuant to the foregoing provisions, in each case subject to reduction as needed so that no cash or other compensation would constitute an “excess parachute payment,” causing the executive to be subject to an excise tax under Sections 280G and 4999 of the Code. The value of the accelerated vesting of restricted stock awards, as determined for this purpose under Sections 280G and 4999 of the Code and described in note 2 below, is compensation that will be taken into account in determining any such reduction in cash payments.
(2) Represents single-trigger accelerated vesting of restricted stock awards that are unvested at the time the merger closes and assuming a value of $30.38 per each unvested share of common stock (which is the average closing market price of Middleburg common stock over the first five business days following the first public announcement of the merger). The values shown are different from – and significantly higher than – the valuation of the accelerated vesting of outstanding restricted stock awards for purposes of Section 280G and 4999 of the Code, which valuation is determined as of the merger date and is based on several factors, including the stock’s fair market value and, where vesting would have occurred based on continued service, the length of time until the unvested equity grants would otherwise have vested absent the change in control.
(3) Represents single-trigger accelerated vesting of restricted stock awards that are unvested at the time the merger closes and payment in cancellation of stock options outstanding at the time the merger closes. The aggregate dollar value related to the accelerated vesting of restricted stock awards of $543,043 for Mr. Mehra and $1,022,287 for Mr. Culver assumes a value of $30.38 per each unvested share of common stock (which is the average closing market price of Middleburg common stock over the first five business days following the first public announcement of the merger). The aggregate dollar value related to payment in cancellation of outstanding stock options of $81,900 for Mr. Mehra and $83,096 for Mr. Culver represents the difference between $30.38 (which is the average closing market price of Middleburg common stock over the first five business days following the first public announcement of the merger) and the exercise price for each outstanding stock option that is cancelled as a result of the merger. Importantly, these values are different from – and significantly higher than – the valuation of unvested equity grants for purposes of Section 280G and 4999 of the Code, which valuation is determined as of the date of the change in control and is based on several factors, including the stock’s fair market value and the length of time until the unvested equity grants would otherwise have vested, assuming no change in control.
(4) Subject to reduction for Messrs. Shook and Culver as described below.

If the payments or benefits received or to be received by Messrs. Shook, Mehra, Culver or Hartley would constitute an “excess parachute payment,” thereby causing the executive to be subject to an excise tax under Sections 280G and 4999 of the Code, then the total benefits paid to such executive will be reduced to the extent necessary to avoid imposition of any such excise taxes. Any reduction is taken first from cash compensation, then from equity compensation or accelerated vesting on a pro-rata basis. Assuming the merger closed on [●], 2017, the maximum amount that could be paid without causing Messrs. Shook and Culver to be subject to the excise tax described above is estimated as follows: Mr. Shook, $1,737,929, and Mr. Culver, $1,177,683. As a result, Mr. Shook’s payments and benefits would be reduced to $1,737,929, and Mr. Culver’s payments and benefits would be reduced to $1,177,683, in each case to avoid imposition of the excise tax described above. Assuming the merger closed on [●], 2017, the value of the payments and benefits received by Messrs. Mehra, Hartley and McLean, as calculated for purposes of Sections 280G and 4999 of the Code in connection with the merger, would be below their respective Section 280G limits, such that no reductions would be necessary to avoid the imposition of the excise tax described above.

 

73


Table of Contents

New Employment Agreements for Middleburg Named Executive Officers. In connection with the merger, Access National Bank, Middleburg Investment Group, Inc. and/or Middleburg Trust Company have entered into new employment agreements to be effective upon completion of the merger with Gary R. Shook, Jeffrey H. Culver and David L. Hartley, as applicable, each of whom is currently a named executive officer of Middleburg.

Access Employment Agreement with Mr. Shook. Access National Bank, Middleburg Investment Group, Inc. and Middleburg Trust Company entered into an employment agreement, dated as of October 21, 2016, with Mr. Shook to serve as chairman and chief executive officer of Middleburg Investment Group, Inc., chairman of Middleburg Trust Company and as the president of the Middleburg Bank, an operating division of Access National Bank. The employment agreement, which will become effective upon the closing of the merger, will have a term that expires on the third anniversary of the closing of the merger. The agreement may be extended upon mutual agreement of the parties thereto, for single one-year terms, commencing only on the third and fourth anniversaries of the effectiveness of the merger. The agreement cannot be renewed past the fifth anniversary of the closing of the merger. The employment agreement provides for an annual base salary of $400,000. Under the agreement, Mr. Shook is eligible to receive an annual bonus of up to $80,000 in cash or other form of compensation as mutually agreed and an annual award of stock options to acquire shares of Access common stock in an amount up to 3,500 shares issued at market that have an exercise price at least equal to the fair market value of a share of Access common stock on the date of grant and shall vest and be exercisable in accordance with the Access stock option plan, the exact number of shares granted under a stock option to be determined by the Access board in its discretion only if Mr. Shook earns an annual bonus. The agreement also provides for certain benefits including a monthly automobile allowance, payment of monthly country club dues, a cellular telephone allowance and group term life insurance and split dollar life insurance. Finally, Mr. Shook must maintain an ownership position in Access common stock in an amount no less than the lesser of $750,000 or 50,000 shares during the term of the agreement.

If Access terminates Mr. Shook’s employment without “cause” or if he resigns for “good reason,” then Mr. Shook will, subject to his execution, delivery and non-revocation of a release of claims, be entitled to continue to receive: (i) if the termination occurs prior to the first anniversary of the effectiveness of the agreement, six months of his base salary in effect at the time of termination, plus 50% of the target annual incentive for the year of the termination; or (ii) if the termination occurs after the first anniversary of the effectiveness of the agreement, but not in connection with the expiration or non-renewal of the initial term or any renewal term of the agreement, two weeks of base salary in effect at the date of termination per year of service (allowing credit for Mr. Shook’s years of service at Middleburg), which will be capped at 26 weeks, with any severance payment related to (i) or (ii) to be paid over a six-month period in equal installments in accordance with Access National Bank’s normal p