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Section 1: 8-K (FORM 8-K)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

 

 

FORM 8-K

 

Current Report

Pursuant to Section 13 or 15(d) of

The Securities Exchange Act of 1934

 

         January 25, 2019        

Date of Report

(Date of earliest event reported)

 

Access National Corporation

(Exact name of registrant as specified in its charter)

 

         Virginia         

(State or other

jurisdiction of incorporation)

    000-49929    

(Commission

File Number)

        82-0545425        

(IRS Employer Identification No.)

 

 

 

          1800 Robert Fulton Drive, Suite 300, Reston, VA  20191           

(Address of principal executive offices) (Zip Code)

 

                               (703) 871-2100                               

(Registrant’s telephone number, including area code)

 

                                                   n/a                                                   

(Former name or former address, if changed since last report.)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

oWritten communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

oSoliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

oPre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

oPre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company  ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ¨

 

 

 
 

 

Item 2.02Results of Operations and Financial Condition.

 

Access National Corporation (the “Company” or “Access”) (Nasdaq: ANCX) issued a press release (the “Press Release”) announcing its unaudited financial results on January 25, 2019 for the quarter and year ended December 31, 2018. A copy of the press release detailing the summary results is attached hereto as Exhibit 99.1.

 

Item 7.01Regulation FD Disclosure.

 

The Company also announced on January 25, 2019 that the Board of Directors of Union Bankshares Corporation (“Union”) declared a cash dividend of $0.23 per share to shareholders of record as of February 8, 2019, for payment on February 22, 2019. At the exchange rate of 0.75 shares of Union common stock for each share of Company common stock in the acquisition of the Company by Union, which is expected to close on February 1, 2019, the Union dividend equates to $0.1725 per share of Company common stock. A copy of the press release including the announcement is attached hereto as Exhibit 99.1.

 

Forward-Looking Statements

 

Certain statements in this Form 8-K may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, projections, predictions, expectations, or beliefs about future events or results and are not statements of historical fact. Such statements also include statements as to the anticipated impact of the proposed Union acquisition of Access, including future financial and operating results, ability to successfully integrate the combined businesses, the amount of cost savings, overall operational efficiencies and enhanced revenues and the expected closing date, as well as other statements regarding the acquisition. Such forward-looking statements are based on various assumptions as of the time they are made, and are inherently subject to known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements are often accompanied by words that convey projected future events or outcomes such as “expect,” “believe,” “estimate,” “plan,” “project,” “anticipate,” “intend,” “will,” “may,” “view,” “opportunity,” “potential,” or words of similar meaning or other statements concerning opinions or judgment of Access or its management about future events. Although Access believes that its expectations with respect to forward-looking statements are based upon reasonable assumptions within the bounds of its existing knowledge of its business and operations, there can be no assurance that actual results, performance, or achievements of Access will not differ materially from any projected future results, performance, or achievements expressed or implied by such forward-looking statements. Actual future results, performance or achievements may differ materially from historical results or those anticipated depending on a variety of factors, including but not limited to, economic and financial market conditions in the United States generally and particularly in the markets in which Access operates and which its loans are concentrated including declines in real estate values, the effects an increase in unemployment levels, slowdowns in economic growth, and a prolonged federal government shutdown, changes in asset quality and credit risk, changes in interest rates and capital markets, competitive conditions, the quality or composition of the loan or investment portfolio, the fact that the businesses of Access and Union may not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected, expected revenue synergies and cost savings from the proposed acquisition may not be fully realized or realized within the expected time frame, revenues following the proposed acquisition may be lower than expected, customer and employee relationships and business operations may be disrupted by the proposed acquisition, the diversion of management time on acquisition-related issues, changes in Union’s share price before closing, risks relating to the potential dilutive effect of shares of Union common stock to be issued in the proposed transaction, the ability to close the proposed acquisition on the expected timeframe, or at all, and that closing may be more difficult, time-consuming or costly than expected, the reaction to the proposed acquisition of the companies’ customers, employees and counterparties, and other risk factors, many of which are beyond the control of Access. We refer you to the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of Access’s Annual Report on Form 10-K for the year ended December 31, 2017 and comparable “risk factors” sections of Access’s Quarterly Reports on Form 10-Q and other filings, which have been filed with the Securities and Exchange Commission (the “SEC”) and are available on the SEC’s website at www.sec.gov. All of the forward-looking statements made in this Form 8-K are expressly qualified by the cautionary statements contained or referred to herein. The actual results or developments anticipated may not be realized or, even if substantially realized, they may not have the expected consequences to or effects on Access or its business or operations. Readers are cautioned not to rely too heavily on the forward-looking statements contained in this Form 8-K. Forward-looking statements speak only as of the date they are made and Access does not undertake any obligation to update, revise or clarify these forward-looking statements, whether as a result of new information, future events or otherwise.

 

 

 

 

Item 9.01Financial Statements and Exhibits.

 

(a) - Not applicable.
(b) - Not applicable.
(c) - Not applicable.
(d) - Exhibits.

 

  Exhibit Number Description
     
  Exhibit 99.1 Press Release, dated January 25, 2019 announcing unaudited financial results for the quarter and year ended December 31, 2018 and declaration of quarterly dividend.

 

 

  

Signatures

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

     ACCESS NATIONAL CORPORATION
     (Registrant)
       
       
Date: January 25, 2019  By:  /s/ Michael W. Clarke  
  Name:  Michael W. Clarke  
  Title:  President & Chief Executive Officer  

 

 

 

 

(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit 99.1

PRESS RELEASE

 

CONTACT: Michael W. Clarke FOR IMMEDIATE RELEASE: January 25, 2019
  CEO  
  703-871-2100  

 

Access National Finishes Year With Exceptional Loan Growth

 

Reston, Virginia. Access National Corporation (NASDAQ: ANCX) (the “Corporation” or “Access”), parent company for Access National Bank (the “Bank”) and Middleburg Investment Group, reported fourth quarter 2018 net income of $8.7 million, or $0.41 per diluted share. This represents the Corporation’s 74th consecutive quarterly profit over its 76 quarter history. Due to the timing of the pending merger with Union Bankshares (“Union”), the Access Board of Directors did not declare a dividend for this reporting period.

 

On January 24, 2019, the Union Board of Directors declared a $0.23 per share dividend for Union common shareholders of record as of February 8, 2019 and payable on February 22, 2019. At the exchange rate of 0.75 for Access shares to Union shares, which will occur on February 1, 2019, the dividend to be paid equates to a $0.1725 per share dividend for Access common shareholders.

 

Highlights

·All shareholder and regulatory approvals are in place for the Union merger to close as expected in February, 2019;
·For the three month period ended December 31, 2018, net income increased 186.6% compared to the same period of the prior year;
·Gross loans held for investment increased $196.5 million during the twelve-month period ended December 31, 2018, inclusive of a growth of $81.2 million in the fourth quarter 2018;
·Customer deposits increased $26.6 million during the twelve month period ended December 31, 2018 to $2.3 billion;
·Demand deposits of $1.2 billion at December 31, 2018 comprised 53.3% of total deposits, inclusive of $731.4 million of non-interest bearing demand deposits or 32.4% of the deposit portfolio;
·Merger related expenses totaled $1.5 million during the fourth quarter of 2018 accounting for a $0.07 decrease in fourth quarter earnings per share; and
·Tangible book value1 per common share was $12.88 at December 31, 2018, an increase of $1.36 from the prior year ended December 31, 2017.

 

According to CEO Michael Clarke, “For the second consecutive quarter, net loan growth exceeded our stated goal of annualized growth of $200 million per annum. On a linked quarter basis, net loans grew at an annualized pace of 15.5% compared to an annualized rate of 22% in the period ended September 30, 2018. The exceptional growth evidences the enthusiasm our relationship managers and their clients have concerning our pending combination with Union. Mr. Clarke continued, “The convincing approval of the merger by our shareholders on January 15, 2019 made an equally strong statement concerning the anticipated benefits of investing with Union to create Virginia’s regional bank.”

 

Gross loans held for investment increased $81.2 million during the quarter to $2.2 billion at December 31, 2018 resulting in a total growth of $196.5 million in 2018. As of December 31, 2018, commercial and industrial loans as well as owner occupied commercial real estate loans combined to account for 51.2% of the loan portfolio, reflecting the Corporation’s continued focus on lower-middle-market businesses. The Corporation’s priority focus remains on expanding borrowers in these portfolios as a driver of future growth in the loan portfolio, along with related core deposits.

 

 

 

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

 

 

 

Noninterest-bearing deposits at December 31, 2018 were $731.4 million, a decrease of $13.5 million compared to December 31, 2017 and remain the largest and most attractive source of funding for the Corporation, comprising 32.4% of the deposit portfolio. When combined with interest-bearing demand deposit accounts, total transaction accounts comprise 53.3% of the total deposit portfolio, reducing reliance of non-core and more price sensitive funding. Total deposits grew $26.6 million from December 31, 2017 to December 31, 2018 ending the year at $2.3 billion.

 

The net interest margin on a fully tax equivalent (non-GAAP) basis was 3.69% at December 31, 2018 compared to 3.88% at December 31, 2017. Net purchase mark accretion included in net interest income was $504 thousand for the fourth quarter 2018 and $2.7 million for the year. 

 

Non-performing assets (“NPAs”) increased to $7.1 million at December 31, 2018 from $6.1 million at September 30, 2018, representing 0.23% and 0.20% of total assets, respectively. Included in the NPA total is $585 thousand in other real estate owned. The provision for loan loss was $1.5 million during the fourth quarter 2018 and was due mainly to the growth in the loan portfolio. The allowance for loan loss represented 0.84% of total loans held for investment at December 31, 2018.

 

Tangible book value2 per common share increased to $12.88 at December 31, 2018 from $12.33 at September 30, 2018 and $11.52 at December 31, 2017. The tangible common equity ratio for Access National Corporation and its subsidiary bank was 9.51% at December 31, 2018, at the top of the Corporation’s target range of 8.50% to 9.50%.

 

Access National Corporation is the parent company of Access National Bank and Middleburg Investment Group serving Northern and Central Virginia. Additional information is available on our website at www.AccessNationalBank.com. Shares of Access National Corporation are traded on the NASDAQ Global Market under the symbol "ANCX".

 

 

 

 

 

 

 

 

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

 

 

 

Forward-Looking Statements

 

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

 

 

 

 

 

 

Access National Corporation
Consolidated Balance Sheet - Unaudited

 

 

   December 31,   December 31, 
(In Thousands Except for Share and Per Share Data)  2018   2017  
         
ASSETS          
           
Cash and due from banks  $18,591   $29,855 
           
Interest-bearing balances and federal funds sold   66,756    92,458 
           
Investment securities:          
Available-for-sale, at fair value   423,760    406,067 
Marketable equity, at fair value   -    1,379 
Held-to-maturity, amortized cost (fair value of $ 22,474 and $16,379, respectively)   22,465    15,721 
Total investment securities   446,225    423,167 
           
Restricted Stock, at amortized cost   22,935    16,572 
           
Loans held for sale - at fair value   20,537    31,999 
           
Loans held for investment          
net of allowance for loan losses of $18,181 and $15,805, respectively   2,157,273    1,963,104 
           
Premises, equipment and land, net   27,432    27,797 
           
Goodwill and intangible assets, net   183,218    185,161 
           
Other assets   96,193    103,781 
           
  Total assets  $3,039,160   $2,873,894 
           
LIABILITIES AND SHAREHOLDERS' EQUITY          
           
LIABILITIES          
Noninterest-bearing deposits  $731,449   $744,960 
           
Interest-bearing demand deposits   502,539    496,677 
           
Savings and interest-bearing deposits   682,317    623,889 
           
Time deposits   344,445    368,622 
           
Total deposits   2,260,750    2,234,148 
           
Short-term borrowings   286,930    145,993 
           
Long-term borrowings   10,000    40,000 
           
Trust preferred debentures   3,962    3,883 
           
Other liabilities and accrued expenses   22,706    28,246 
           
Total Liabilities   2,584,348    2,452,270 
           
SHAREHOLDERS' EQUITY          
Common stock $0.835 par value; 60,000,000 authorized;          
issued and outstanding, 21,078,433 and 20,534,163 respectively   17,600    17,146 
           
Additional paid in capital   321,278    307,670 
           
Retained earnings   121,141    98,584 
           
Accumulated other comprehensive income (loss), net   (5,207)   (1,776)
           
Total shareholders' equity   454,812    421,624 
           
Total liabilities and shareholders' equity  $3,039,160   $2,873,894 

 

 

 

Access National Corporation
Consolidated Statement of Operations - Unaudited

 

 

   Three Months Ended   Twelve Months Ended 
(In Thousands Except for Share and Per Share Data)  December 31, 2018   December 31, 2017   December 31, 2018   December 31, 2017 
                 
INTEREST INCOME                    
Interest and fees on loans  $26,783   $24,321   $100,024   $84,572 
                     
Interest on federal funds sold and bank balances   432    453    1,964    1,199 
                     
Interest and dividends on securities   3,286    2,321    11,655    9,709 
Total interest income   30,501    27,095    113,643    95,480 
                     
INTEREST EXPENSE                    
Interest on deposits   4,468    2,714    14,185    9,274 
                     
Interest on other borrowings   1,410    468    4,510    1,834 
Total interest expense   5,878    3,182    18,695    11,108 
Net interest income   24,623    23,913    94,948    84,372 
                     
Provision for loan losses   1,500    3,719    3,602    6,919 
Net interest income after provision for loan losses   23,123    20,194    91,346    77,453 
                     
NONINTEREST INCOME                    
Service charges and fees   487    489    1,943    1,998 
                     
Gain on sale of loans   3,161    5,095    14,614    20,080 
                     
Other Income   2,524    3,097    13,544    10,014 
Total noninterest income   6,172    8,681    30,101    32,092 
                     
NONINTEREST EXPENSE                    
Salaries and benefits   10,016    12,115    45,386    43,915 
                     
Occupancy and equipment   1,699    1,058    7,580    6,878 
                     
Other operating expense   6,931    6,681    25,046    30,275 
Total noninterest expense   18,646    19,854    78,012    81,068 
Income before income tax   10,649    9,021    43,435    28,477 
                     
Income tax expense   1,923    5,976    8,051    11,977 
NET INCOME   8,726    3,045    35,384    16,500 
                     
Earnings per common share:                    
Basic  $0.42   $0.15   $1.70   $0.92 
Diluted  $0.41   $0.15   $1.69   $0.92 
                     
Average outstanding shares:                    
Basic   20,990,926    20,485,116    20,798,697    17,988,670 
Diluted   21,046,839    20,601,740    20,877,532    18,076,304 

 

 

 

 

Performance and Capital Ratios - Unaudited

 

 

    Three Months  Three Months  Three Months  Three Months  Twelve Months  Twelve Months 
    Ended  Ended  Ended  Ended  Ended  Ended 
    December 31,  September 30,  June 30,  March 31,  December 31,  December 31 
(Dollars In Thousands)   2018  2018  2018  2018  2018  2017 
                     
Return on average assets (annualized)    1.17%   1.30%   1.26%   1.13%   1.21%   0.67% 
Return on average tangible equity (annualized) (1)    13.35%   15.20%   14.73%   13.57%   14.21%   8.15% 
Net interest margin - fully tax equivalent basis (1)    3.69%   3.67%   3.67%   3.70%   3.69%   3.88% 
Net interest margin    3.64%   3.62%   3.62%   3.65%   3.63%   3.81% 
Cost of funds    1.29%   1.17%   0.98%   0.79%   1.06%   0.73% 
Access National Bank efficiency ratio (2)    50.06%   53.14%   57.36%   59.65%   54.80%   55.72% 
Access National Corporation efficiency ratio (2)    60.55%   60.19%   63.62%   65.19%   62.39%   69.61% 
Total average equity to earning assets    16.46%   16.47%   16.86%   16.59%   16.59%   14.82% 
Tangible common equity ratio (1)    9.51%   9.09%   9.12%   9.10%   9.51%   8.79% 
                           
Averages                          
Assets   $2,995,148  $2,953,987  $2,848,307  $2,856,201  $2,913,778  $2,453,894 
Loans held for investment, gross    2,113,576   2,038,292   1,935,422   1,950,077   2,009,865   1,704,040 
Loans held for sale    30,191   36,672   41,515   21,257   32,445   27,881 
Interest-bearing deposits & federal funds sold    79,542   110,140   110,800   136,969   109,208   104,566 
Investment securities and restricted stock    469,844   461,708   444,779   434,003   452,707   362,614 
Earning assets    2,705,299   2,656,213   2,541,454   2,548,836   2,613,494   2,212,020 
Interest-bearing deposits    1,543,921   1,502,982   1,440,998   1,517,030   1,501,334   1,327,262 
Total deposits    2,246,993   2,201,473   2,114,617   2,215,222   2,194,722   1,922,249 
Repurchase agreements & federal funds purchased    45,390   50,135   56,693   57,344   52,351   48,378 
FHLB short term borrowings    201,680   193,784   180,348   91,002   167,081   67,907 
FHLB long-term borrowings    27,935   45,000   42,088   40,000   38,740   66,329 
Trust Preferred debt    3,950   3,930   3,911   3,891   3,921   2,691 
Equity    445,254   437,398   428,590   422,780   433,577   327,738 
Tangible equity (1)   $261,518  $252,864  $243,232  $238,381  $249,065  $202,408 
                           
Allowance for loan losses   $18,181  $17,349  $16,543  $15,928  $18,181  $15,805 
Allowance for loan losses/loans held for investment    0.84%   0.83%   0.83%   0.83%   0.84%   0.80% 
Remaining purchase marks on performing loans   $8,353  $8,838  $9,615  $10,415  $8,353  $11,241 
Purchased credit impaired loans   $4,077  $4,509  $4,632  $4,702  $4,077  $4,969 
Remaining purchase marks on credit impaired loans   $1,573  $1,592  $1,720  $1,749  $1,573  $1,175 
Total NPA   $7,074  $6,106  $6,049  $7,453  $7,074  $5,270 
NPA to total assets    0.23%   0.20%   0.21%   0.26%   0.23%   0.18% 
                           
Mortgage loan originations and brokered loans   $69,028  $85,087  $123,157  $84,411  $361,683  $432,678 
Gain on sale of mortgage loans net hedging activity   $3,434  $4,137  $4,251  $3,273  $15,095  $19,192 
Allowance for losses on mortgage loans sold   $916  $953  $953  $953  $916  $953 
                           
Wealth Services segment - assets under management   $1,810,173  $2,012,526  $1,949,992  $1,942,526  $1,810,173  $1,955,720 
                           
Book value per common share   $21.58  $21.13  $20.88  $20.62  $21.58  $20.53 
                           
Tangible book value per common share (1)   $12.88  $12.33  $11.99  $11.65  $12.88  $11.52 

 

 

 

(1) Non-GAAP financial information.  See "Reconciliation of Non-GAAP Financial Measures" at end of release.
(2) Efficiency ratio is non-interest expense divided by the sum of net interest income and non-interest income

 

 

 

 

Composition of Loan Portfolio - Unaudited

 

 

   December 31, 2018   September 30, 2018   June 30, 2018   March 31, 2018   December 31, 2017 
(Dollars In Thousands)  Amount   Percentage of Total   Amount   Percentage of Total   Amount   Percentage of Total   Amount   Percentage of Total   Amount   Percentage of Total 
                                         
Commercial real estate  - owner occupied  $547,817    25.18%  $525,047    25.07%  $478,928    24.13%  $462,298    24.02%  $467,082    23.60%
Commercial real estate - non-owner occupied   480,783    22.10    467,495    22.32    457,940    23.08    419,139    21.77    436,083    22.04 
Residential real estate   454,910    20.91    459,989    21.96    460,269    23.20    476,366    24.75    489,669    24.74 
Commercial   565,086    25.98    507,269    24.22    464,270    23.40    437,287    22.72    463,652    23.43 
Real estate construction   107,939    4.96    113,790    5.43    99,164    5.00    104,528    5.43    97,481    4.93 
Consumer   18,919    0.87    20,680    1.00    23,618    1.19    25,293    1.31    24,942    1.26 
Total loans  $2,175,454    100.00%  $2,094,270    100.00%  $1,984,189    100.00   $1,924,911    100.00%  $1,978,909    100.00%
Less allowance for loan losses   18,181         17,349         16,543         15,928         15,805      
   $2,157,273        $2,076,921        $1,967,646        $1,908,983        $1,963,104      

 

 

Composition of Deposits - Unaudited

 

 

   December 31, 2018   September 30, 2018   June 30, 2018   March 31, 2018   December 31, 2017 
(Dollars In Thousands)  Amount   Percentage of Total   Amount   Percentage of Total   Amount   Percentage of Total   Amount   Percentage of Total   Amount   Percentage of Total 
                                         
Demand deposits  $731,449    32.35%  $757,900    33.03%  $719,873    33.85%  $706,128    32.14%  $744,960    33.34%
Interest-bearing demand deposits   473,222    20.93    455,769    19.86    462,355    21.74    501,745    22.84    486,621    21.78 
Savings and money market   640,724    28.34    670,497    29.22    585,673    27.54    616,879    28.08    580,827    26.00 
CDARS time deposits   17,366    0.77    17,050    0.74    13,666    0.64    17,247    0.78    21,582    0.97 
CDARS/ICS non-maturity deposits   70,857    3.13    66,604    2.90    53,233    2.50    50,233    2.29    48,011    2.15 
Brokered deposits   53,997    2.39    53,900    2.35    17,590    0.83    23,244    1.06    51,028    2.28 
Time deposits   273,135    12.09    273,144    11.90    274,330    12.90    281,452    12.81    301,119    13.48 
Total Deposits  $2,260,750    100.00%  $2,294,864    100.00%  $2,126,720    100.00%  $2,196,928    100.00%  $2,234,148    100.00%

 

 

 

 

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

 

 

   December 31, 2018   December 31, 2017 
   Average   Income /   Yield /   Average   Income /   Yield / 
(Dollars In Thousands)  Balance   Expense   Rate   Balance   Expense   Rate 
                         
Assets:                              
Interest-earning assets:                              
Investment securities and restricted stock  $481,990   $3,286    2.73%  $438,290   $2,321    2.12%
Loans held for sale   30,191    377    5.00%   30,006    297    3.96%
Loans(1)   2,113,576    26,406    5.00%   1,965,608    24,024    4.89%
Interest-bearing balances and federal funds sold   79,542    432    2.17%   102,095    453    1.77%
Total interest-earning assets   2,705,299    30,501    4.51%   2,535,999    27,095    4.27%
Noninterest-earning assets:                              
Cash and due from banks   14,330              18,784           
Premises, land and equipment   27,652              26,156           
Other assets   265,480              272,877           
Less: allowance for loan losses   (17,613)             (15,982)          
Total noninterest-earning assets   289,849              301,835           
Total Assets  $2,995,148             $2,837,834           
                               
Liabilities and Shareholders' Equity:                              
Interest-bearing deposits:                              
Interest-bearing demand deposits  $500,836   $948    0.76%  $480,147   $499    0.42%
Money market deposit accounts   539,267    1,717    1.27%   483,416    691    0.57%
Savings accounts   160,073    265    0.66%   175,123    322    0.74%
Time deposits   343,745    1,538    1.79%   389,447    1,202    1.23%
Total interest-bearing deposits   1,543,921    4,468    1.16%   1,528,133    2,714    0.71%
Borrowings:                              
FHLB short-term borrowings   201,680    1,227    2.43%   68,300    231    1.35%
Securities sold under agreements to repurchase and federal funds purchased   45,390    13    0.11%   54,702    10    0.07%
Subordinated debentures   3,950    89    9.06%   3,871    73    7.54%
FHLB long-term borrowings   27,935    81    1.16%   46,304    154    1.33%
Total borrowings   278,955    1,410    2.02%   173,177    468    1.08%
Total interest-bearing deposits and borrowings   1,822,876    5,878    1.29%   1,701,310    3,182    0.75%
Noninterest-bearing liabilities:                              
Demand deposits   703,072              719,093           
Other liabilities   23,946              23,112           
Total liabilities   2,549,894              2,443,515           
Shareholders' Equity   445,254              394,319           
Total Liabilities and Shareholders' Equity  $2,995,148             $2,837,834           
                               
Interest Spread(2)             3.22%             3.52%
                               
Net Interest Margin(3)       $24,623    3.64%       $23,913    3.77%

 

 

 

(1) Loans placed on nonaccrual status are included in loan balances.
(2) Interest spread is the average yield earned on earning assets, less the average rate incurred on interest-bearing liabilities.        
(3) Net interest margin is net interest income, expressed as a percentage of average earning assets.

 

 

 

 

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

 

 

   December 31, 2018   December 31, 2017 
   Average   Income /   Yield /   Average   Income /   Yield / 
(Dollars In Thousands)  Balance   Expense   Rate   Balance   Expense   Rate 
                         
Assets:                              
Interest-earning assets:                              
Investment securities and restricted stock  $461,976   $11,655    2.52%  $375,533   $9,709    2.59%
Loans held for sale   32,445    1,531    4.72%   27,881    1,143    4.10%
Loans(1)   2,009,865    98,493    4.90%   1,704,040    83,429    4.90%
Interest-bearing balances and federal funds sold   109,208    1,964    1.80%   104,565    1,199    1.15%
Total interest-earning assets   2,613,494    113,643    4.35%   2,212,019    95,480    4.32%
Noninterest-earning assets:                              
Cash and due from banks   15,885              20,859           
Premises, land and equipment   28,015              22,683           
Other assets   273,098              213,337           
Less: allowance for loan losses   (16,714)             (15,004)          
Total noninterest-earning assets   300,284              241,875           
Total Assets  $2,913,778             $2,453,894           
                               
Liabilities and Shareholders' Equity:                              
Interest-bearing deposits:                              
Interest-bearing demand deposits  $497,136   $3,015    0.61%  $386,046   $1,409    0.36%
Money market deposit accounts   502,241    5,177    1.03%   386,786    2,335    0.60%
Savings accounts   168,437    949    0.56%   153,769    714    0.46%
Time deposits   333,520    5,044    1.51%   400,660    4,816    1.20%
Total interest-bearing deposits   1,501,334    14,185    0.94%   1,327,261    9,274    0.70%
Borrowings:                              
FHLB short-term borrowings   167,081    3,419    2.05%   67,907    822    1.21%
Securities sold under agreements to repurchase and federal funds purchased   52,351    54    0.10%   48,378    68    0.14%
Subordinated debentures   3,921    335    8.56%   2,692    221    8.21%
FHLB long-term borrowings   38,740    702    1.81%   66,329    723    1.09%
Total borrowings   262,093    4,510    1.72%   185,306    1,834    0.99%
Total interest-bearing deposits and borrowings   1,763,427    18,695    1.06%   1,512,567    11,108    0.73%
Noninterest-bearing liabilities:                              
Demand deposits   693,388              594,987           
Other liabilities   23,386              18,602           
Total liabilities   2,480,201              2,126,156           
Shareholders' Equity   433,577              327,738           
Total Liabilities and Shareholders' Equity  $2,913,778             $2,453,894           
                               
Interest Spread(2)             3.29%             3.59%
                               
Net Interest Margin(3)       $94,948    3.63%       $84,372    3.81%

 

 

 

(1) Loans placed on nonaccrual status are included in loan balances.
(2) Interest spread is the average yield earned on earning assets, less the average rate incurred on interest-bearing liabilities.            
(3) Net interest margin is net interest income, expressed as a percentage of average earning assets.

 

 

 

 

Segment Reporting - Unaudited

 

Three Months Ended Commercial  Mortgage  Trust & Wealth        Consolidated 
December 31, 2018 Banking  Banking  Management  Other  Eliminations  Totals 
  (In Thousands) 
Revenues:                  
Interest income $30,179  $376  $3  $12  $(69) $30,501 
Gain on sale of loans  -   3,161   -   -   -   3,161 
Other revenues  1,646   (334)  1,618   398   (317)  3,011 
Total revenues  31,825   3,203   1,621   410   (386)  36,673 
                         
Expenses:                        
Interest expense  5,800   -   -   147   (69)  5,878 
Salaries and employee benefits  7,122   2,048   846   -   -   10,016 
Other expenses  7,408   548   558   1,933   (317)  10,130 
Total operating expenses  20,330   2,596   1,404   2,080   (386)  26,024 
                         
Income (loss) before income taxes $11,495  $607  $217  $(1,670) $-  $10,649 
                         
Total assets $3,012,742  $24,014  $13,289  $29,319  $(40,204) $3,039,160 

 

 

Three Months Ended Commercial  Mortgage  Trust & Wealth        Consolidated 
December 31, 2017 Banking  Banking  Management  Other  Eliminations  Totals 
  (In Thousands) 
Revenues:                  
Interest income $26,837  $295  $-  $8  $(45) $27,095 
Gain on sale of loans  136   4,959   -   -   -   5,095 
Other revenues  1,825   (1)  1,793   478   (509)  3,586 
Total revenues  28,798   5,253   1,793   486   (554)  35,776 
                         
Expenses:                        
Interest expense  3,116   (24)  -   135   (45)  3,182 
Salaries and employee benefits  8,116   2,836   1,163   -   -   12,115 
Other expenses  8,825   1,092   919   1,131   (509)  11,458 
Total operating expenses  20,057   3,904   2,082   1,266   (554)  26,755 
                         
Income (loss) before income taxes $8,741  $1,349  $(289) $(780) $-  $9,021 
                         
Total assets $2,827,041  $31,999  $10,967  $21,727  $(17,840) $2,873,894 

 

 

 

 

Segment Reporting - Unaudited

 

Twelve Months Ended Commercial  Mortgage  Trust & Wealth        Consolidated 
December 31, 2018 Banking  Banking  Management  Other  Eliminations  Totals 
    
Revenues:                        
Interest income $112,264  $1,531  $12  $33  $(197) $113,643 
Gain on sale of loans  -   14,614   -   -   -   14,614 
Other revenues  6,937   566   7,773   1,525   (1,314)  15,487 
Total revenues  119,201   16,711   7,785   1,558   (1,511)  143,744 
                         
Expenses:                        
Interest expense  18,393   (72)  -   571   (197)  18,695 
Salaries and employee benefits  31,174   10,339   3,848   -   25   45,386 
Other expenses  27,669   3,043   2,252   4,603   (1,339)  36,228 
Total operating expenses  77,236   13,310   6,100   5,174   (1,511)  100,309 
                         
Income (loss) before income taxes $41,965  $3,401  $1,685  $(3,616) $-  $43,435 
                         
Total assets $3,012,742  $24,014  $13,289  $29,319  $(40,204) $3,039,160 

 

 

Twelve Months Ended Commercial  Mortgage  Trust & Wealth        Consolidated 
December 31, 2017 Banking  Banking  Management  Other  Eliminations  Totals 
    
Revenues:                        
Interest income $94,577  $1,141  $7  $25  $(270) $95,480 
Gain on sale of loans  136   19,944   -   -   -   20,080 
Other revenues  6,270   (307)  5,988   1,453   (1,392)  12,012 
Total revenues  100,983   20,778   5,995   1,478   (1,662)  127,572 
                         
Expenses:                        
Interest expense  10,912   (6)  -   472   (270)  11,108 
Salaries and employee benefits  28,108   11,958   3,849   -   -   43,915 
Other expenses  28,998   4,338   3,460   8,668   (1,392)  44,072 
Total operating expenses  68,018   16,290   7,309   9,140   (1,662)  99,095 
                         
Income (loss) before income taxes $32,965  $4,488  $(1,314) $(7,662) $-  $28,477 
                         
Total assets $2,827,041  $31,999  $10,967  $21,727  $(17,840) $2,873,894 

 

 

 

 

Reconciliation of Non-GAAP Financial Measures - Unaudited

 

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

 

  Three Months  Three Months  Three Months  Three Months  Twelve Months  Twelve Months 
  Ended  Ended  Ended  Ended  Ended  Ended 
  December 31,  September 30,  June 30,  March 31,  December 31,  December 31, 
(Dollars In Thousands) 2018  2018  2018  2018  2018  2017 
                   
                   
Book value per common share $21.57  $21.13  $20.88  $20.62  $21.57  $20.53 
Effect of intangible assets $(8.69) $(8.80) $(8.89) $(8.97) $(8.69) $(9.01)
Tangible book value per common share $12.88  $12.33  $11.99  $11.65  $12.88  $11.52 
                         
                         
Common equity ratio  14.97%  14.63%  14.87%  15.06%  14.97%  14.68%
Effect of intangible assets  -5.46%  -5.54%  -5.75%  -5.96%  -5.46%  -5.89%
Tangible common equity ratio  9.51%  9.09%  9.12%  9.10%  9.51%  8.79%
                         
                         
Net interest margin  3.64%  3.62%  3.62%  3.65%  3.63%  3.81%
Effect of tax exempt securities and loans  0.05%  0.05%  0.05%  0.05%  0.06%  0.07%
Net interest margin - fully tax equivalent basis  3.69%  3.67%  3.67%  3.70%  3.69%  3.88%
                         
                         
Return on average equity  8.02%  8.79%  8.36%  7.65%  8.21%  5.03%
Effect of intangible assets  5.33%  6.41%  6.37%  5.92%  6.00%  3.12%
Return on average tangible equity  13.35%  15.20%  14.73%  13.57%  14.21%  8.15%
                         
                         
Average equity $445,254  $437,398  $428,590  $422,780  $433,577  $327,738 
Effect of average intangible assets $183,736  $184,534  $185,358  $184,399  $184,512  $125,330 
Average tangible equity $261,518  $252,864  $243,232  $238,381  $249,065  $202,408 

 

 

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