ANCX Access National Corp.

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.

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".

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.

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1 Non-GAAP financial information. See “Reconciliation of Non-GAAP Financial Measures” at end of release. 2 Non-GAAP financial information. See “Reconciliation of Non-GAAP Financial Measures” at end of release.   Access National Corporation Consolidated Balance Sheet - 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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Michael W. ClarkeCEO703-871-2100