Edgar Filing: ACCESS NATIONAL CORP

e10vq

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


þ		Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2007


o		Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number: 000-49929

ACCESS NATIONAL CORPORATION

(Exact name of registrant as specified in its charter)


Virginia		82-0545425

(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

1800 Robert Fulton Drive, Suite 310, Reston, Virginia 20191
(Address of principal executive offices) (Zip Code)

(703) 871-2100

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

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

Large accelerated filer o Accelerated filer o Non-accelerated filer þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) o Yes þ No

The number of shares outstanding of Access National Corporation’s common stock, par value $0.835, as of November 2, 2007 was 11,072,484 shares.

Table of Contents

ACCESS NATIONAL CORPORATION
FORM 10-Q

INDEX


PART I FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements (unaudited)
Consolidated Balance Sheets, September 30, 2007 and December 31, 2006 (audited)		Page 2
Consolidated Statements of Income, three and nine months ended September 30, 2007 and 2006		Page 3
Consolidated Statements of Changes in Shareholders’ Equity, nine months ended September 30, 2007 and 2006		Page 5
Consolidated Statements of Cash Flows, nine months ended September 30, 2007 and 2006		Page 6
Notes to Consolidated Financial Statements		Page 7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		Page 17
Item 3. Quantitative and Qualitative Disclosures About Market Risk		Page 29
Item 4. Controls and Procedures		Page 30

PART II OTHER INFORMATION

Item 1. Legal Proceedings		Page 31
Item 1A. Risk Factors		Page 31
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		Page 31
Item 3. Defaults Upon Senior Securities		Page 31
Item 4. Submission of Matters to a Vote of Security Holders		Page 31
Item 5. Other Information		Page 31
Item 6. Exhibits		Page 32
Signatures		Page 33

- 1 -

PART I — FINANCIAL INFORMATION
Item 1. Financial Statements

ACCESS NATIONAL CORPORATION
Consolidated Balance Sheets
(In Thousands, Except for Share Data)


	September 30,			December 31,
	2007			2006
	(Unaudited)
ASSETS

Cash and due from banks	$	10,324		$	11,974
Interest-bearing deposits in other banks		7,475			15,391
Securities available for sale, at fair value		94,621			105,163
Loans held for sale		26,363			65,320
Loans, net of allowance for loan losses of $7,152 and $5,452, respectively		481,843			428,142
Premises and equipment		9,574			9,598
Other assets		12,464			9,194

Total assets	$	642,664		$	644,782


LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits
Noninterest bearing deposits	$	62,646		$	79,223
Savings and interest-bearing deposits		134,228			120,309
Time deposits		257,695			239,400

Total deposits		454,569			438,932
Other liabilities
Short-term borrowings		76,499			84,951
Long-term borrowings		42,411			42,572
Subordinated debentures		6,186			10,311
Other liabilities		4,417			5,721

Total liabilities		584,082			582,487

SHAREHOLDERS’ EQUITY
Common stock, par value, $0.835; authorized, 60,000,000 shares;
issued and outstanding, 11,072,854 shares in 2007 and 11,816,929 shares in 2006		9,246			9,867
Surplus		23,033			29,316
Retained earnings		26,340			23,641
Accumulated other comprehensive income (loss), net		(37	)		(529	)

Total shareholders’ equity		58,582			62,295

Total liabilities and shareholders’ equity	$	642,664		$	644,782

See accompanying notes to consolidated financial statements (Unaudited).

- 2 -

ACCESS NATIONAL CORPORATION
Consolidated Statements of Income
(In Thousands, Except for Share Data)
(Unaudited)


	Three Months Ended September 30,
	2007			2006
Interest and Dividend Income
Interest and fees on loans	$	10,449		$	9,286
Interest on deposits in other banks		159			94
Interest and dividends on securities		1,091			1,190

Total interest and dividend income		11,699			10,570


Interest Expense
Interest on deposits		5,019			4,399
Interest on short-term borrowings		866			916
Interest on long-term borrowings		520			189
Interest on subordinated debentures		228			237

Total interest expense		6,633			5,741


Net interest income		5,066			4,829
Provision for loan losses		942			—

Net interest income after provision for loan losses		4,124			4,829


Noninterest Income
Service fees on deposit accounts		93			91
Gain on sale of loans		4,719			4,969
Mortgage broker fee income		836			1,572
Other income		469			583

Total noninterest income		6,117			7,215


Noninterest Expense
Salaries and employee benefits		5,053			4,923
Occupancy and equipment		615			524
Other operating expenses		4,352			3,801

Total noninterest expense		10,020			9,248


Income before income taxes		221			2,796

Income tax expense (benefit)		(23	)		895

NET INCOME	$	244		$	1,901


Earnings per common share:
Basic	$	0.02		$	0.19

Diluted	$	0.02		$	0.17


Average outstanding shares:
Basic		11,533,795			10,080,708
Diluted		11,769,998			11,141,358

See accompanying notes to consolidated financial statements (Unaudited).

- 3 -

ACCESS NATIONAL CORPORATION
Consolidated Statements of Income
(In Thousands, Except for Share Data)
(Unaudited)


	Nine Months Ended September 30,
	2007		2006
Interest and Dividend Income
Interest and fees on loans	$	30,568	$	25,259
Interest on deposits in other banks		527		282
Interest and dividends on securities		3,294		3,450

Total interest and dividend income		34,389		28,991


Interest Expense
Interest on deposits		13,465		11,423
Interest on short-term borrowings		3,682		2,996
Interest on long-term borrowings		1,510		586
Interest on subordinated debentures		680		654

Total interest expense		19,337		15,659


Net interest income		15,052		13,332
Provision for loan losses		1,698		173

Net interest income after provision for loan losses		13,354		13,159


Noninterest Income
Service fees on deposit accounts		278		247
Gain on sale of loans		15,283		13,444
Mortgage broker fee income		3,134		3,785
Other income		3,503		2,493

Total noninterest income		22,198		19,969


Noninterest Expense
Salaries and employee benefits		15,572		14,489
Occupancy and equipment		1,844		1,549
Other operating expenses		13,667		9,057

Total noninterest expense		31,083		25,095


Income before income taxes		4,469		8,033

Income tax expense		1,392		2,703

NET INCOME	$	3,077	$	5,330


Earnings per common share:
Basic	$	0.26	$	0.61

Diluted	$	0.25	$	0.53


Average outstanding shares:
Basic		11,830,506		8,773,268
Diluted		12,104,525		10,112,357

See accompanying notes to consolidated financial statements (Unaudited).

- 4 -

ACCESS NATIONAL CORPORATION
Statements of Changes in Shareholders’ Equity
For the Nine Months Ended September 30, 2007 and 2006
(In Thousands)
(Unaudited)


										Accumulated
										Other
	Common						Retained			Comprehensive			Comprehensive
	Stock			Surplus			Earnings			Income (Loss)			Income		Total
Balance, December 31, 2006	$	9,867		$	29,316		$	23,641		$	(529	)	$	—	$	62,295

Comprehensive income:

Net income								3,077						3,077		3,077

Other comprehensive income (loss), unrealized holdings gains arising during the period, net of tax $254											492			492		492

Cash dividend								(378	)							(378	)


													$	3,569


Issuance of common stock		214			866											1,080

Common stock repurchased		(835	)		(7,149	)										(7,984	)

Balance, September 30, 2007	$	9,246		$	23,033		$	26,340		$	(37	)			$	58,582


Balance, December 31, 2005	$	6,644		$	9,099		$	16,227		$	(785	)	$	—	$	31,185

Comprehensive income:

Net income								5,330						5,330		5,330

Other comprehensive income (loss), unrealized holdings gains arising during the period, net of tax $52											101			101		101

Cash dividend								(124	)							(124	)

													$	5,431

Issuance of common stock		2,545			19,239											21,784

Balance, September 30, 2006	$	9,189		$	28,338		$	21,433		$	(684	)			$	58,276

See accompanying notes to consolidated financial statements (Unaudited).

- 5 -

ACCESS NATIONAL CORPORATION
Consolidated Statements of Cash Flows
(Unaudited)



	Nine Months Ended September 30,
	2007			2006
	(In Thousands)
Cash Flows from Operating Activities
Net income	$	3,077		$	5,330
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision for loan losses		1,698			178
Deferred tax (benefit)		(21	)		(86	)
Stock Based Compensation		62			46
Unrealized losses on derivatives		(40	)		(51	)
Net amortization (accretion) on securities		(17	)		2
Depreciation and amortization		642			637
Loss on Disposal of assets		1			1
Changes in assets and liabilities:
(Increase) decrease in loans held for sale		38,956			(10,458	)
Increase in other assets		(3,460	)		(2,288	)
Decrease in other liabilities		(1,305	)		(1,291	)

Net cash provided by (used in) operating activities		39,593			(7,980	)

Cash Flows from Investing Activities
Proceeds from maturities and calls of securities available for sale		33,332			12,584
Purchases of securities available for sale		(22,027	)		(31,080	)
Net increase in loans		(55,399	)		(47,771	)
Purchases of premises and equipment		(620	)		(455	)

Net cash (used in) investing activities		(44,714	)		(66,722	)

Cash Flows from Financing Activities
Net decrease in demand, interest-bearing demand and savings deposits		(2,758	)		(14,596	)
Net increase in time deposits		18,395			68,427
Net increase (decrease) in securities sold under agreement to repurchase		(1,034	)		5,642
Net decrease in short-term borrowings		(7,418	)		(796	)
Net decrease in long-term borrowings		(4,286	)		(4,161	)
Proceeds from issuance of common stock		1,080			21,779
Purchase of common stock		(8,046	)		(41	)
Dividends Paid		(378	)		(124	)

Net cash (used in) provided by financing activities		(4,445	)		76,130


Increase (decrease) in cash and cash equivalents		(9,566	)		1,428
Cash and Cash Equivalents
Beginning		27,365			23,183

Ending	$	17,799		$	24,611

Supplemental Disclosures of Cash Flow Information
Cash payments for interest	$	19,333		$	15,548
Cash payments for income taxes	$	4,015		$	3,281
Supplemental Disclosures of Noncash Investing Activities
Unrealized gain (loss) on securities available for sale	$	746		$	153

See accompanying notes to consolidated financial statements (Unaudited).

- 6 -

NOTE 1 — COMMENCEMENT OF OPERATIONS

Access National Corporation (the “Corporation”) is a bank holding company incorporated under the laws of the Commonwealth of Virginia. The Corporation has three wholly-owned subsidiaries, Access National Bank (the “Bank”), which is an independent commercial bank chartered under federal laws as a national banking association, Access Capital Trust I, and Access Capital Trust II. The Corporation does not have any significant operations and serves primarily as the parent company for the Bank. The Corporation’s income is primarily derived from dividends received from the Bank. The amount of these dividends is determined by the Bank’s earnings and capital position.

The Corporation acquired all of the outstanding stock of the Bank in a statutory exchange transaction on June 15, 2002, pursuant to an Agreement and Plan of Reorganization between the Corporation and the Bank.

Access National Bank opened for business on December 1, 1999 and has two active wholly-owned subsidiaries: Access National Mortgage Corporation (the “Mortgage Corporation”), a Virginia corporation engaged in mortgage banking activities, and Access Real Estate LLC. Access Real Estate LLC is a limited liability company established in July, 2003 for the purpose of holding title to the Corporation’s headquarters building, located at 1800 Robert Fulton Drive, Reston, Virginia.

In August 2006, the Corporation concluded a public stock offering of 2.3 million shares of common stock that provided approximately $20 million in new capital.

NOTE 2 — BASIS OF PRESENTATION

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with rules and regulations of the Securities and Exchange Commission. The statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. All adjustments have been made, which, in the opinion of management, are necessary for a fair presentation of the results for the interim periods presented. Such adjustments are all of a normal and recurring nature. All significant inter-company accounts and transactions have been eliminated in consolidation. Certain prior period amounts have been reclassified to conform to the current period presentation. The results of operations for the nine months ended September 30, 2007 are not necessarily indicative of the results that may be expected for the entire year ending December 31, 2007. These consolidated financial statements should be read in conjunction with the Corporation’s audited financial statements and the notes thereto as of December 31, 2006, included in the Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006.

NOTE 3 — STOCK-BASED COMPENSATION PLANS

During the first nine months of 2007, the Corporation granted 78,400 stock options to officers, directors, and employees under the 1999 Stock Option Plan (the “Plan”). Options granted under the Plan have an exercise price equal to the fair market value as of the grant date. Options granted have a vesting period of two and one half years and expire three and one half years after the issue date. Stock–based compensation expense recognized in other operating expense during the first nine months of 2007 was approximately $62 thousand and $46 thousand for the same period in 2006. The fair value of options is estimated on the date of grant using a Black-Scholes option-pricing model with the assumptions noted below.

A summary of stock option activity under the Plan for the nine months ended September 30, 2007 is presented as follows:


	9 Months ended
Assumptions	September 30, 2007
Expected life of options granted		2.83	%
Risk-free interest rate		4.06	%
Expected volatility of stock		32	%
Annual Expected dividend yield		1.00	%


					Weighted Avg.
	Number of		Weighted Avg.		Remaining		Aggregate Intrinsic
	Options		Exercise Price		Contractual Term		Value
Outstanding at beginning of year		815,244	$	4.80		2.29	$	4,176,393
Granted		78,400	$	9.58		2.83
Exercised		164,820	$	1.67
Lapsed or Canceled		2,500	$	11.45

Outstanding at September 30, 2007		726,324	$	6.00		2.19	$	1,923,599

Exercisable at September 30, 2007		595,954	$	5.49		2.10	$	1,854,842

Fair Value of Granted Options in 2007	$	183,837
Non-Vested Options as of September 30, 2007		130,370

NOTE 4 — SECURITIES

Amortized costs and fair values of securities available for sale as of September 30, 2007 and December 31, 2006 are as follows:


	September 30, 2007
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(In Thousands)
U.S. Treasury Securities	$	994	$	12	$	—		$	1,006
U.S. Government Agencies		81,343		181		(177	)		81,347
Mortgage Backed Securities		830		3		—			833
Municipals — tax exempt		2,890		3		(14	)		2,879
Municipals — taxable		1,110		—		(22	)		1,088
CRA Mutual Fund		1,500		—		(41	)		1,459
Restricted Securities
Federal Reserve Bank Stock		883		—		—			883
FHLB Stock		5,126		—		—			5,126

Total Securities	$	94,676	$	199	$	(254	)	$	94,621


	December 31, 2006
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(In Thousands)
U.S. Treasury Notes	$	990	$	6	$	—		$	996
U.S. Governmental Agencies		92,352		5		(748	)		91,609
Mortgage Backed Securities		1,037		4		(1	)		1,040
Municipals — tax exempt		2,893		5		(10	)		2,888
Municipals — taxable		1,305		—		(30	)		1,275
CRA Mutual Fund		1,500		—		(32	)		1,468
Restricted Securities
Federal Reserve Bank Stock		873		—		—			873
FHLB Stock		5,014		—		—			5,014

Total Securities	$	105,964	$	20	$	(821	)	$	105,163

NOTE 4 — SECURITIES (continued)

The amortized cost and fair value of securities available for sale as of September 30, 2007 and December 31, 2006 by contractual maturity are shown below. Expected maturities may differ from contractual maturities because the securities may be called or prepaid without any penalties.


	September 30, 2007				December 31, 2006
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
	(In Thousands)				(In Thousands)
U.S. Treasury and Agencies
Due in one year or less	$	54,845	$	54,757	$	34,994	$	34,690
Due after one through five years		15,994		15,980		56,850		56,442
Due after five through ten years		11,498		11,616		1,498		1,473
Municipals
Due after one through five years		1,110		1,088		—		—
Due after five through ten years		2,890		2,879		4,198		4,163
Mortgage Backed Securities
Due in one year or less		—		—		48		49
Due after one through five years		830		833		989		991
Mutual Fund		1,500		1,459		1,500		1,468
Restricted Securities:
Federal Reserve Bank stock		883		883		873		873
FHLB stock		5,126		5,126		5,014		5,014

Total	$	94,676	$	94,621	$	105,964	$	105,163

NOTE 4 — SECURITIES (continued)

Investment securities available for sale that have an unrealized loss position at September 30, 2007 and December 31, 2006.


	Securities in a Loss				Securities in a Loss
	Position for Less Than				Position for 12 Months
	12 Months				or Longer					Total
	Fair		Unrealized		Fair		Unrealized			Fair		Unrealized
September 30, 2007	Value		Losses		Value		Losses			Value		Losses
	(In Thousands)
Investment securities available for sale:

U.S. Treasury Security	$	—	$	—	$	—	$	—		$	—	$	—
Mortgage Backed Security		—		—		—		—			—		—
U.S. Government Agencies		—		—		35,165		(177	)		35,165		(177	)
Municipals—Taxable		—		—		1,403		(14	)		1,403		(14	)
Municipals—Tax Exempt		—		—		1,088		(22	)		1,088		(22	)
CRA Mutual Fund		—		—		1,459		(41	)		1,459		(41	)

Total	$	—	$	—	$	39,115	$	(254	)	$	39,115	$	(254	)


	Securities in a Loss					Securities in a Loss
	Position for Less Than					Position for 12 Months
	12 Months					or Longer					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
December 31, 2006	Value		Losses			Value		Losses			Value		Losses
	(In Thousands)
Investment securities available for sale:

U.S. Treasury Security	$	—	$	—		$	—	$	—		$	—	$	—
Mortgage Backed Security		49					378		(1	)		378		(1	)
U.S. Government Agencies		24,936		(64	)		56,668		(684	)		81,604		(748	)
Municipals—Taxable		—		—			1,275		(30	)		1,275		(30	)
Municipals—Tax Exempt		458		(2	)		1,408		(9	)		1,866		(10	)
CRA Mutual Fund		—		—			1,468		(32	)		1,468		(32	)

Total	$	25,443	$	(66	)	$	61,197	$	(756	)	$	86,591	$	(821	)

Management does not believe that any individual unrealized loss as of September 30, 2007 and December 31, 2006 represents other than temporary impairment. These unrealized losses are primarily attributable to changes in interest rates. The Corporation has the ability to hold these securities for a time necessary to recover the amortized cost or until maturity when full repayment would be received.

NOTE 5 — LOANS

The following table presents the composition of the loan portfolio at September 30, 2007 and December 31, 2006.


	September 30,		Percent of			December 31,		Percent of
	2007		Total			2006		Total
			(Dollars in thousands)
Commercial	$	63,748		13.04	%	$	51,825		11.95	%
Commercial real estate		203,234		41.56			159,996		36.90
Real estate construction		58,340		11.93			68,570		15.81
Residential real estate		161,814		33.09			152,648		35.21
Consumer		1,859		0.38			555		0.13

		488,995		100.00	%		433,594		100.00	%

Less allowance for loan losses		7,152					5,452

	$	481,843				$	428,142

NOTE 6 — SEGMENT REPORTING

The Corporation has two reportable segments: traditional commercial banking and a mortgage banking business. Revenues from commercial banking operations consist primarily of interest earned on loans and investment securities and fees from deposit services. Mortgage banking operating revenues consist principally of interest earned on mortgage loans held for sale, gains on sales of loans in the secondary mortgage market and loan origination fee income.

The commercial banking segment provides the mortgage segment with the short-term funds needed to originate mortgage loans through a warehouse line of credit and charges the mortgage banking segment interest based on the prime rate. These transactions are eliminated in the consolidation process.

Other includes the operations of the Corporation and Access Real Estate LLC. The primary source of income for the Corporation is derived from dividends from the Bank and its primary expense relates to interest on subordinated debentures. The primary source of income for Access Real Estate LLC is derived from rents received from the Bank and Mortgage Corporation.

NOTE 6 - SEGMENT REPORTING (continued)

The following table presents segment information for the three months ended September 30, 2007 and 2006:


	Commercial											Consolidated
2007	Banking		Mortgage			Other			Eliminations			Totals
(In Thousands)
Revenues:
Interest income	$	11,605	$	902		$	185		$	(993	)	$	11,699
Gain on sale of loans		—		4,719			—			—			4,719
Other revenues		368		1,358			260			(588	)		1,398

Total revenues		11,973		6,979			445			(1,581	)		17,816


Expenses:
Interest expense		6,280		1,002			344			(993	)		6,633
Salaries and employee benefits		1,867		3,186			—			—			5,053
Other		1,457		4,588			452			(588	)		5,909

Total operating expenses		9,604		8,776			796			(1,581	)		17,595


Income (loss) before income taxes	$	2,369	$	(1,797	)	$	(351	)	$	—		$	221


Total assets	$	613,336	$	35,064		$	10,026		$	(15,762	)	$	642,664


	Commercial		Mortgage								Consolidated
2006	Banking		Banking		Other			Eliminations			Totals
(In Thousands)
Revenues:
Interest income	$	10,468	$	1,019	$	31		$	(948	)	$	10,570
Gain on sale of loans		—		4,835		—			(3	)		4,832
Other revenues		415		1,723		264			(18	)		2,420

Total revenues		10,883		7,577		295			(969	)		17,822


Expenses:
Interest expense		5,307		1,029		353			(949	)		5,740
Salaries and employee benefits		1,670		3,270		—			—			4,940
Other		870		3,044		416			(20	)		4,325

Total operating expenses		7,847		7,343		769			969			14,989


Income (loss) before income taxes	$	3,036	$	234	$	(474	)	$	—		$	2,796


Total assets	$	551,178	$	59,918	$	58,561		$	(52,291	)	$	617,366

NOTE 6 - SEGMENT REPORTING (continued)

The following table presents segment information for the nine months ended September 30, 2007 and 2006:


	Commercial		Mortgage									Consolidated
2007	Banking		Banking			Other			Eliminations			Totals
(In Thousands)
Revenues:
Interest income	$	34,255	$	3,108		$	588		$	(3,562	)	$	34,389
Gain on sale of loans		—		15,286			—			(3	)		15,283
Other revenues		1,110		6,767			791			(1,753	)		6,915

Total revenues		35,365		25,161			1,379			(5,318	)		56,587


Expenses:
Interest expense		18,151		3,724			1,027			(3,565	)		19,337
Salaries and employee benefits		5,354		10,218			—			—			15,572
Other		4,508		13,225			1,229			(1,753	)		17,209

Total operating expenses		28,013		27,167			2,256			(5,318	)		52,118


Income (loss) before income taxes	$	7,352	$	(2,006	)	$	(877	)	$	—		$	4,469


Total assets	$	613,336	$	35,064		$	10,026		$	(15,762	)	$	642,664


	Commercial		Mortgage								Consolidated
2006	Banking		Banking		Other			Eliminations			Totals
(In Thousands)
Revenues:
Interest income	$	28,788	$	2,733	$	61		$	(2,591	)	$	28,991
Gain on sale of loans		—		13,460		—			(16	)		13,444
Other revenues		1,210		5,754		851			(1,290	)		6,525

Total revenues		29,998		21,947		912			(3,897	)		48,960


Expenses:
Interest expense		14,538		2,709		1,006			(2,594	)		15,659
Salaries and employee benefits		4,785		9,704		—			—			14,489
Other		2,991		7,869		1,222			(1,303	)		10,779

Total operating expenses		22,314		20,282		2,228			(3,897	)		40,927


Income (loss) before income taxes	$	7,684	$	1,665	$	(1,316	)	$	—		$	8,033


Total assets	$	551,178	$	59,918	$	58,561		$	(52,291	)	$	617,366

NOTE 7 — EARNINGS PER SHARE (EPS)

The following tables show the calculation of both Basic and Diluted earnings per share (“EPS”) for the three and nine months ended September 30, 2007 and 2006, respectively. The numerator of both the Basic and Diluted EPS is equivalent to net income. The weighted average number of shares outstanding used as the denominator for Diluted EPS is increased over the denominator used for Basic EPS by the effect of potentially dilutive common stock options and warrants utilizing the treasury stock method.


	Three Months		Three Months
	Ended		Ended
	September 30, 2007		September 30, 2006
	(In thousands except for share data)
BASIC EARNINGS PER SHARE:
Net income	$	244	$	1,901
Weighted average shares outstanding		11,533,795		10,080,708

Basic earnings per share	$	0.02	$	0.19

DILUTED EARNINGS PER SHARE:
Net income	$	244	$	1,901

Weighted average shares outstanding		11,533,795		10,080,708
Stock options and warrants		236,203		1,060,650

Weighted average diluted shares outstanding		11,769,998		11,141,358

Diluted earnings per share	$	0.02	$	0.17


	Nine Months		Nine Months
	Ended		Ended
	September 30, 2007		September 30, 2006
	(In thousands except for share data)
BASIC EARNINGS PER SHARE:
Net income	$	3,077	$	5,330
Weighted average shares outstanding		11,830,506		8,773,268

Basic earnings per share	$	0.26	$	0.61

DILUTED EARNINGS PER SHARE:
Net income	$	3,077	$	5,330

Weighted average shares outstanding		11,830,506		8,773,268
Stock options and warrants		274,019		1,339,089

Weighted average diluted shares outstanding		12,104,525		10,112,357

Diluted earnings per share	$	0.25	$	0.53

NOTE 8 — DERIVATIVES

The Mortgage Corporation carries all derivative instruments at fair value as either assets or liabilities in the consolidated balance sheets. Statement of Financial Accounting Standards (“SFAS”) No. 133, “Accounting for Derivative Instruments and Hedging Activities” as amended (“SFAS 133”), provides specific accounting provisions for derivative instruments that qualify for hedge accounting. The Mortgage Corporation has not elected to apply hedge accounting to its derivative instruments as provided in SFAS 133.

The Mortgage Corporation enters into interest rate lock commitments, which are commitments to originate loans whereby the interest rate on the loan is determined prior to funding and the customers have locked into that interest rate. The Mortgage Corporation also has corresponding forward sales commitments related to these interest rate lock commitments, which are recorded at fair value with changes in fair value recorded in non-interest income. The market value of rate lock commitments and best efforts contracts is not readily ascertainable with precision because rate lock commitments and best efforts contracts are not actively traded in stand-alone markets. The Mortgage Corporation determines the fair value of rate lock commitments and best efforts contracts by measuring the change in the value of the underlying asset while taking into consideration the probability that the rate lock commitments will close.

For derivative instruments not designated as hedging instruments, the derivative is recorded as a freestanding asset or liability with the change in value being recognized in current earnings during the period of change.

At September 30, 2007 and December 31, 2006, the Mortgage Corporation had derivative financial instruments with a notional value of $90.0 million and $195.8 million respectively. The fair value of these derivative instruments at September 30, 2007 and December 31, 2006 was $89.6 million and $195.7 million respectively.

NOTE 9 — RECENT ACCOUNTING PRONOUNCEMENTS

In July 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement 109,” which provides guidance on the measurement, recognition, and disclosure of tax positions taken or expected to be taken in a tax return. The interpretation also provides guidance on de-recognition, classification, interest and penalties, and disclosure. FIN 48 prescribes that a tax position should only be recognized if it is more-likely-than-not that the position will be sustained upon examination by the appropriate taxing authority. A tax position that meets this threshold is measured as the largest amount of benefit that is more likely-than-not (greater than 50 percent) realized upon ultimate settlement. The cumulative effect of applying FIN 48 is to be reported as an adjustment to the beginning balance of retained earnings in the period of adoption. FIN 48 is effective for fiscal years beginning after December 15, 2006. The adoption of this standard did not have a material impact on financial condition, results of operations or cash flows.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 establishes a framework for measuring fair value in generally accepted accounting principles (“GAAP”), and expands disclosures about fair value measurements. While SFAS 157 applies under other accounting pronouncements that require or permit fair value measurements, it does not require any new fair value measurements. SFAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. In addition, SFAS 157 establishes a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. Lastly, SFAS 157 requires additional disclosures for each interim and annual period separately for each major category of assets and liabilities. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Management does not expect the adoption of this statement to have a material impact on the Corporation’s financial statements.

In February 2007, the FASB issued SFAS No. 159 “The Fair Value Option for Financial Assets and Financial Liabilities—including an amendment of FASB Statement No. 115” (“SFAS 159”). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value. Such election, which may be applied on an instrument by instrument basis, is typically irrevocable once elected. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS 159 is expected to expand the use of fair value measurement, which is consistent with the Board’s long-term measurement objectives for accounting for financial instruments. SFAS 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions SFAS 157. The Corporation is evaluating the impact of this new standard, but currently does believe the adoption of this statement will not have a material impact on the Corporation’s consolidated financial statements.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis is intended to provide an overview of the significant factors affecting the financial condition and the results of operations of Access National Corporation and subsidiaries (the “Corporation”) for the three and nine months ended September 30, 2007 and 2006. The consolidated financial statements and accompanying notes should be read in conjunction with this discussion and analysis.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

In addition to historical information, this Quarterly Report on Form 10-Q may contain forward-looking statements. For this purpose, any statements contained herein, including documents incorporated by reference, that are not statements of historical fact may be deemed to be forward-looking statements. Examples of forward-looking statements include discussions as the Corporation’s expectations, beliefs, plans, goals, objectives and future financial or other performance or assumptions concerning matters discussed in this document. Forward-looking statements often use words such as “believes,” “expects,” “plans,” “may,” “will,” “should,” “projects,” “contemplates,” “anticipates,” “forecasts,” “intends” or other words of similar meaning. You can also identify them by the fact that they do not relate strictly to historical or current facts. Forward-looking statements are subject to numerous assumptions, risks and uncertainties, and actual results could differ materially from historical results or those anticipated by such statements. Factors that could have a material adverse effect on the operations and future prospects of the Corporation include, but are not limited to: changes in the Corporation’s competitive position, competitive actions by other financial institutions and the competitive nature of the financial services industry and the Corporation’s ability to compete effectively against other financial institutions in its banking markets; the Corporation’s potential growth, including its entrance or expansion into new markets, the opportunities that may be presented to and pursued by it and the need for sufficient capital to support that growth; the Corporation’s ability to manage growth; changes in government monetary policy, interest rates, deposit flow, the cost of funds, and demand for loan products and financial services; the strength of the economy in the Corporation’s target market area, as well as general economic, market, or business conditions; changes in the quality or composition of the Corporation’s loan or investment portfolios, including adverse developments in borrower industries, decline in real estate values in the Corporation’s markets, or in the repayment ability of individual borrowers or issuers; an insufficient allowance for loan losses as a result of inaccurate assumptions; the Corporation’s reliance on dividends from the Bank as a primary source of funds; the Corporation’s reliance on secondary sources, such as Federal Home Loan Bank advances, sales of securities and loans, federal funds lines of credit from correspondent banks and out-of-market time deposits, to meet the Bank’s liquidity needs; changes in laws, regulations and the policies of federal or state regulators and agencies; the Corporation’s mortgage loan business and the offering of non-conforming mortgage loans; and other circumstances, many of which are beyond the Corporation’s control. Standard representations and warranties issued in connection with Loans Held for Sale may impact earnings due to the potential need to repurchase loans due to early payment defaults and for other reasons. The subsequent cost of liquidating these loans may have a negative impact on earnings. These risks and uncertainties should be considered in evaluating the forward-looking statements contained herein, and readers are cautioned not to place undue reliance on such statements. Any forward-looking statement speaks only as of the date on which it is made, and the Corporation undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which it is made.

CRITICAL ACCOUNTING POLICIES

General

The Corporation’s financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The financial information contained within the statements is, to a significant extent, financial information that is based on measures of the financial effects of transactions and events that have already occurred. A variety of factors could affect the ultimate value that is obtained when earning income, recognizing an expense, recovering an asset or relieving a liability. Actual losses could differ significantly from the historical factors that we monitor. Additionally, GAAP itself may change from one previously acceptable method to another method. Although the economics of our transactions would be the same, the timing of events that would impact the Corporation’s transactions could change.

Allowance for Loan Losses

The allowance for loan losses is an estimate of the losses that may be sustained in the Bank’s loan portfolio. The allowance is based on two basic principles of accounting: (i) SFAS No. 5 “Accounting for Contingencies”, which requires that losses be accrued when they are probable of occurring and estimatable and (ii) SFAS No. 114, “Accounting by Creditors for Impairment of a Loan”, which requires that losses be accrued based on the differences between the value of collateral, present value of future cash flows or values that are observable in the secondary market and the loan balance.

An allowance for loan losses is established through a provision for loan losses based upon industry standards, known risk characteristics, management’s evaluation of the risk inherent in the loan portfolio and changes in the nature and volume of loan activity. Such evaluation considers, among other factors, the estimated market value of the underlying collateral and current economic conditions. For further information about our practices with respect to allowance for loan losses, please see the subsection “Allowance for Loan Losses” below.

Derivative Financial Instruments

The Mortgage Corporation carries all derivative instruments at fair value as either assets or liabilities in the consolidated balance sheets. SFAS 133 provides specific accounting provisions for derivative instruments that qualify for hedge accounting. The Mortgage Corporation has not elected to apply hedge accounting to its derivative instruments as provided in SFAS 133.

Off-Balance Sheet Items

In the ordinary course of business, the Bank issues commitments to extend credit and, at September 30, 2007, these commitments amounted to $51.0 million. These commitments do not necessarily represent cash requirements, since many commitments are expected to expire without being drawn on.

At September 30, 2007, the Bank had approximately $131.1 million in unfunded lines of credit and letters of credit. These lines of credit, if drawn upon, would be funded from routine cash flows and short term borrowings. As the Corporation continues the planned expansion of the loan portfolio held for investment, the volume of commitments and unfunded lines of credit are expected to increase accordingly.

FINANCIAL CONDITION (September 30, 2007 compared to December 31, 2006)

At September 30, 2007, the Corporation’s assets totaled $642.7 million compared to $644.8 million at December 31, 2006, a decrease of $2.1 million. The decrease in total assets is due to changes in the composition of our balance sheet. Loans held for investment increased $53.7 million from year end 2006, while loans held for sale decreased approximately $39.0 million. Interest-bearing deposits in other banks decreased $7.9 million and investment securities decreased $10.5 million from December 31,2006 levels. The funds generated from the reduction in interest-bearing deposits in other banks and investment securities were used to reduce borrowings by $12.7 million, which included the redemption of $4.1 million in trust preferred securities. Total deposits increased $15.6 million from year end. Other assets increased $3.3 million from year end, largely due to an increase in other real estate owned of $2.2 million. The growth in loans held for investment is due to our commitment to meeting the credit needs of existing and new clients. The decrease in loans held for sale is partially due to a restructuring of our mortgage subsidiary and the general decline in the mortgage industry. During the third quarter we discontinued our wholesale operations, revised our product offerings and underwriting guidelines. We believe that these changes, while reducing loan origination volumes, will contribute to a smaller and profitable operation. The mortgage industry by its nature is subject to volatility due to changes in interest rates and the general economic outlook for the housing market. However, we believe that this business segment is a vital part of servicing the needs of our clients and the communities we serve.

Securities

The Corporation’s securities portfolio is comprised of U.S. Treasury securities, U.S. Government Agency securities, mortgage backed securities, obligations of states and political subdivisions, CRA mutual fund and Federal Reserve and Federal Home Loan Bank stock. At September 30, 2007 the securities portfolio totaled $94.6 million, down from $105.2 million on December 31, 2006, as a result of maturities and called securities that were not reinvested. All securities were classified as available for sale. Securities classified as available for sale are accounted for at fair market value with unrealized gains and losses recorded directly to a separate component of shareholders’ equity, net of associated tax effect. The Corporation’s securities classified as available for sale had an unrealized loss net of deferred taxes of $37 thousand on September 30, 2007. Investment securities are used to provide liquidity, to generate income, and to temporarily supplement loan growth as needed.

Loans

The loans held for investment portfolio constitutes the largest component of earning assets and is comprised of commercial loans, real estate loans, construction loans, and consumer loans. These lending activities provide access to credit to small businesses, professionals and consumers in the greater Washington, D.C. metropolitan area. All lending activities of the Bank and its subsidiaries are subject to the regulations and supervision of the Office of the Comptroller of Currency. At September 30, 2007, loans held for investment increased by $55.4 million from December 31, 2006 and totaled $489.0 million. Commercial loans increased $11.9 million, commercial real estate loans increased $43.2 million, construction loans decreased $10.2 million, and residential real estate loans increased $9.2 million compared to December 31, 2006. Residential real estate includes $1.5 million in loans held for investment by the Mortgage Corporation.

Consumer loans increased $1.3 million. See Note 5 for a table that summarizes the composition of the Corporation’s loan portfolio. The increase in loans is attributable to servicing the needs of existing clients and new business originating from referrals, community involvement, and increased name recognition and acceptance of the Bank’s products and services within the marketplace. Management intends to increase loan officer staffing and support to facilitate continued growth in the portfolio. The following is a summary of the loans held for investment portfolio at September 30, 2007.

Commercial Loans: Commercial Loans represent 13.0% of the held for investment portfolio. These loans are made to businesses or individuals within our target market for business purposes. Typically the loan proceeds are used to support working capital and the acquisition of fixed assets of an operating business. We underwrite these loans based upon our assessment of the obligor(s)’ ability to generate operating cash flows in the future necessary to repay the loan. To address the risks associated with the uncertainties of future cash flows, these loans are generally well secured by assets owned by the business or its principal shareholders and the principal shareholders are typically required to guarantee the loan.

Commercial Real Estate Loans: Also known as “Commercial Mortgages”, loans in this category represent 41.6% of the loan portfolio held for investment. These loans generally fall into one of three situations in order of magnitude: first, loans supporting an owner occupied commercial property; second, properties used by non-profit organizations such as churches or schools where repayment is dependent upon the cash flow of the non-profit organizations; and third, loans supporting a commercial property leased to third parties for investment. Commercial real estate loans are secured by the subject property and underwritten to policy standards. Policy standards approved by the Board of Directors from time to time set forth, among other considerations, loan to value limits, cash flow coverage ratios, and the general creditworthiness of the obligors.

Real Estate Construction Loans: Real Estate Construction Loans, also known as construction and land development loans, comprise 11.9% of the held for investment loan portfolio. These loans generally fall into one of three categories: first, loans to individuals that are ultimately used to acquire property and construct an owner occupied residence; second, loans to builders for the purpose of acquiring property and constructing homes for sale to consumers; and third, loans to developers for the purpose of acquiring land that is developed into finished lots for the ultimate construction of residential or commercial buildings. Loans of these types are generally secured by the subject property within limits established by the Board of Directors based upon an assessment of market conditions and updated from time to time. The loans typically carry recourse to principal owners. In addition to the repayment risk associated with loans to individuals and businesses, loans in this category carry construction completion risk. To address this additional risk, loans of this type are subject to additional administration procedures designed to verify and ensure progress of the project in accordance with allocated funding, project specifications and time frames.

Real Estate Residential Loans: This category includes loans secured by first or second mortgages on one to four family residential properties and represents 33.1% of the portfolio. Of this amount, the following sub-categories exist as a percentage of the whole Residential Real Estate Loan portfolio: Home Equity Lines of Credit 15.7%; First Trust Mortgage Loans 74.8%; Loans Secured by a Junior Trust 5.9%; Multi-family loans and loans secured by Farmland 3.7%.

Home Equity Loans are extended to borrowers in our target market. Real estate equity is the largest component of consumer wealth in our marketplace. Once approved, this consumer finance tool allows the borrower to access the equity in their home or investment property and use the proceeds for virtually any purpose. Home Equity Loans are most frequently secured by a second lien on residential property. The proceeds of One to Four Family Residential First Trust Loans are used to acquire or refinance the primary financing on owner occupied and residential investment properties. Junior Trust Loans, or “Loans Secured by a Second Trust Loans,” are loans to consumers wherein the proceeds have been used for a stated consumer purpose. Examples of consumer purposes are education, refinancing debt, or purchasing consumer goods. The loans are generally extended in a single disbursement and repaid over a specified period of time.

Loans in the Residential Real Estate portfolio are underwritten to standards within a traditional consumer framework that is periodically reviewed and updated by management and Board of Directors: repayment source and capacity, value of the underlying property, credit history, savings pattern and stability.

Consumer Loans: Consumer Loans make up approximately 0.4% of the loans held for investment portfolio. Most loans are well secured with assets other than real estate, such as marketable securities or automobiles. Very few consumer loans are unsecured. As a matter of
operation, management discourages unsecured lending. Loans in this category are underwritten to standards within a traditional consumer framework that is periodically reviewed and updated by management and the Board of Directors and takes into consideration, repayment capacity, collateral value, savings pattern, credit history and stability.

Loans Held for Sale (“LHFS”)

LHFS are originated by the Mortgage Corporation and includes loans originated through the Wholesale division. LHFS are carried on the books at the lower of cost or market value. These loans are residential mortgage loans extended to consumers and underwritten in accordance with standards set forth by an institutional investor to whom we expect to sell the loans for a profit. Loan proceeds are used for the purchase or refinance of the property securing the loan. Loans are sold with the servicing released to the investor. The LHFS loans are closed by the Mortgage Corporation and carried on their books until the loan is delivered to and purchased by an investor. In the nine months ended September 30, 2007 we originated $731.7 million of loans processed in this manner. Loans are sold without recourse and subject to industry standard representations and warranties that may require the repurchase, by the Mortgage Corporation, of loans previously sold. The repurchase risks associated with this activity center around early payment defaults, and borrower fraud. There is also a risk that loans originated may not be purchased by our investors. The Mortgage Corporation attempts to manage these risks by the on-going maintenance of an extensive quality control program, an internal audit and verification program, and a selective approval process for investors and programs offered. At September 30, 2007, LHFS totaled $26.4 million compared to $65.3 million at year end 2006. The decrease in LHFS is primarily due to a decline in loan originations during the month of September.

Loans originated by the Wholesale Division of the Mortgage Corporation consist of loans originated by independent mortgage companies that broker their loans to the Mortgage Corporation for a fee. During the nine months ended September 30, 2007 there has been a high correlation of loans originated in this manner to the $5.3 million in loans that the Mortgage Corporation has had to repurchase due to early payment defaults and borrower fraud. Because of this high correlation, the Mortgage Corporation has closed its wholesale division.

Brokered Loans

Brokered loans are underwritten and closed by a third party lender. The Mortgage Corporation is paid a fee for procuring and packaging brokered loans. For the first nine months of 2007, $146.7 million in residential mortgage loans was originated under this type of delivery method, as compared to $79.6 million for the same period of 2006. Brokered loans accounted for 16.7% of the total loan volume for the first nine months of 2007.

Allowance for Loan Losses

From December 31, 2006 to September 30, 2007 the allowance for loan losses increased by $1.7 million which includes $545 thousand for loans held for investment by the Mortgage Corporation, which total $1.5 million, and a $2 thousand recovery on a previously charged off loan. The allowance for loan losses totaled $7.2 million at September 30, 2007 compared to $5.5 million at year end 2006. Although actual loan losses have been insignificant, senior credit management, with over 60 years in collective experience in managing similar portfolios in the marketplace, concluded the amount of our reserve and the methodology applied to arrive at the amount of the reserve is justified and appropriate due to the lack of seasoning of the portfolio, the relatively large dollar amount of a relatively small number of loans, portfolio growth, staffing changes, volume, changes in individual risk ratings on new loans and trend analysis. Outside of the Corporation’s analysis, our reserve adequacy and methodology are reviewed on a regular basis by our internal audit program and bank regulators and such reviews have not resulted in any material adjustment to the reserve. The schedule below apportions the allowance for loan losses by loan types.

The Bank does not have a meaningful history of charge offs with which to establish trends in loan losses by loan classifications. The overall allowance for loan losses is equivalent to approximately 1.46% of total consolidated loans held for investment at September 30, 2007. The methodology to derive the allowance for loan losses is a combination of specific allocations and percentages allocation of the unallocated portion of the allowance for loan losses, as discussed below. The Bank has developed a comprehensive risk weighting system based on individual loan characteristics that enables the Bank to allocate the composition of the allowance for loan losses by types of loans, risk ratings and systemic risk factors.

The loss risk of each loan within a particular classification, however, is not the same. The methodology for arriving at the allowance is not dictated by loan classification alone and is detailed below. Unallocated amounts included in the allowance for loan losses have been applied to the loan classifications on a percentage basis.

Adequacy of the reserve is assessed, and appropriate expense and charge offs are taken, no less frequently than at the close of each fiscal quarter end. The methodology by which we systematically determine the amount of the reserve is set forth by the Board of Directors in our Credit Policy. Under this Policy, the Chief Credit Officer is charged with ensuring that each loan is individually evaluated and the portfolio characteristics are evaluated to arrive at an appropriate aggregate reserve. The results of the analysis are documented, reviewed and approved by the Board of Directors no less than quarterly. The following elements are considered in this analysis: loss estimates on specific problem credits (the “Specific Reserve”), individual loan risk ratings, lending staff changes, loan review and Board oversight, loan policies and procedures, portfolio trends with respect to volume, delinquency, composition/concentrations of credit, risk rating migration, levels of classified credit, off-balance sheet credit exposure, any other factors considered relevant from time to time (the “General Reserve”) and, finally, an “Unallocated Reserve” to cover any unforeseen factors not considered above in the appropriate magnitude.

Each of the reserve components, General, Specific and Unallocated, is discussed in further detail below. With respect to the General Reserve, all loans are graded or “Risk Rated” individually for loss potential at the time of origination and as warranted thereafter, but no less frequently than quarterly. Loss potential factors are applied based upon a blend of the following criteria: our own direct experience at this Bank; our collective management experience in administering similar loan portfolios in the market for over 60 years; and peer data contained in statistical releases issued by both the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation. Although looking only at peer data and the Bank’s historically low charge-offs would suggest a lower loan loss allowance, management’s experience with similar portfolios in the same market combined with the fact that the portfolio is relatively unseasoned, justify a conservative approach in contemplating external statistical resources. Accordingly, management’s collective experience at this Bank and other banks is the most heavily weighted criterion, and the weighting is subjective and varies by loan type, amount, collateral, structure, and repayment terms. Prevailing economic conditions, generally and within each individual borrower’s business sector are considered, as well as any changes in the borrower’s own financial position and, in the case of commercial loans, management structure and business operations. As of September 30, 2007, our evaluation of these factors supported approximately 91.9% of the total loss reserve. As our portfolio ages and we gain more direct experience, the direct experience will weigh more heavily in our evaluation.

When deterioration develops in an individual credit, the loan is placed on a “watch list” and the loan is monitored more closely. All loans on the watch list are evaluated for specific loss potential based upon either an evaluation of the liquidated value of the collateral or cash flow deficiencies. If management believes that, with respect to a specific loan, an impaired source of repayment, collateral impairment or a change in a debtor’s financial condition presents a heightened risk of non-performance of a particular loan, a portion of the reserve may be specifically allocated to that individual loan. The aggregation of this loan by loan analysis comprises the “Specific Reserve” and accounted for 12.9% of the total loss reserve at September 30, 2007.

The Unallocated Reserve is maintained to absorb risk factors outside of the General and Specific Allocations. Maximum and minimum target limits are established by us on a quarterly basis for the Unallocated Reserve. As of September 30, 2007, the threshold range for this component was 0.00% to 0.15% of the total loan portfolio and accounted for approximately 8.9% of the total loss reserve. At September 30, 2007, the unallocated reserve amounted to $0.6 million and equaled 0.11% of total loans.

An analysis of the Bank’s allowance for loan losses as of and for the periods indicated is set forth in the following tables:

Allowance for Loan Losses

(In Thousands)



Balance as of December 31, 2006	$	5,452

Charge offs		—
Recoveries		2
Provision		1,698

Balance as of September 30, 2007	$	7,152

Allocation of the Allowance for Loan Losses


	September 30, 2007										December 31, 2006
						Allowance
						for Loan										Allowance for
	Amount		Percentage			Loss		Percentage			Amount		Percentage			Loan Loss		Percentage
	(Dollars In Thousands)
Commercial	$	63,748		13.04	%	$	1,336		18.68	%	$	51,825		11.95	%	$	802		14.71	%
Commercial real estate		203,234		41.56			2,944		41.16			159,996		36.90			2,296		42.11
Real estate construction		58,340		11.93			860		12.02			68,570		15.81			1,055		19.35
Residential real estate		161,814		33.09			1,994		27.88			152,648		35.21			1,293		23.71
Consumer		1,859		0.38			18		0.25			555		0.13			6		0.11

	$	488,995		100.00	%	$	7,152		100.00	%	$	433,594		100.00	%	$	5,452		100.00	%

Reserve for Potential Loan Losses — (LHFS)

The Mortgage Corporation maintains a reserve separately from the Bank for the LHFS activity and other potential losses and is not included in the Bank’s allowance for loan losses. The risks associated with the LHFS activity of the Mortgage Corporation differ from the risks associated with Loans Held for Investment and is therefore accounted for separately by the Mortgage Corporation. The risks for which this reserve protects against do not reside on the Mortgage Corporation’s balance sheet. The risks associated with LHFS center around early payment defaults, loan fraud and failure of a counter party to honor its obligation. Prior to the first quarter of 2007, the reserve for this activity was not material.

Loans or potential risk exposures are added to a “Reserve Schedule” as soon as management is able to ascertain or substantiate a claim or loss potential related to a sold loan. For the nine months ended September 30, 2007, the Mortgage Corporation has expensed approximately $1.4 million to other operating expense to provide for potential losses associated with loans previously sold. The balance in the reserve for potential loan losses at September 30, 2007, was $684 thousand, up from $286 thousand at December 31, 2006. The amount of the reserve for potential loan losses is based on management’s estimate of the financial risks associated with each loan and the likely disposition action. Disposition may be in the form of collateral liquidation or resale to a third party at a discount.

Reserve for Loan Losses on LHFS

(In Thousands)


Balance as of December 31, 2006	$	286

Charge offs		(1,439	)
Recoveries		400
Provision		1,437


Balance as of September 30, 2007	$	684

Non-performing Assets And Past Due Loans

At September 30, 2007, the Bank had two loans in the amount of $390 thousand and $196 thousand in non-accrual status. The Bank also had one loan past due over 90 days and still accruing interest. The collateral on this past due loan has been liquidated and principal and interest will be paid in the fourth quarter. Non-performing assets at the Mortgage Corporation are comprised of non-accrual loans totaling $1.5 million and other real estate owned totaling $2.2 million.

Deposits

Deposits are the primary source of funding loan growth. At September 30, 2007, deposits totaled $454.6 million compared to $438.9 million on December 31, 2006, an increase of $15.7 million. Savings and interest-bearing accounts increased $13.9 million and time deposits increased $18.3 million from December 31, 2006 levels. Noninterest-bearing deposits decreased by $16.6 million to $62.6 million at September 30, 2007. Over $6.0 million of this decrease was directly related to the mortgage industry. The Bank’s core deposit base is comprised primarily of commercial accounts and, due to the inherent nature of these accounts, balances can be subject to wide fluctuations.

Shareholders’ Equity

Shareholders’ equity was $58.6 million at September 30, 2007. A strong capital position is vital to the continued profitability of the Corporation. It also promotes depositor and investor confidence and provides a solid foundation for the future growth of the organization. Shareholders’ equity decreased by $3.7 million during the nine months ended September 30, 2007. The decrease is due to the repurchase of 1 million shares under our share repurchase program at a weighted average price of $8.00 per share that was partially offset by retained earnings of $3.1 million and $492 thousand in other comprehensive income. On October 23, 2007 the Corporation declared $0.01 cash dividend to shareholders of record November 7, 2007 payable on November 23, 2007.

Banking regulators have defined minimum regulatory capital ratios that the Corporation and the Bank are required to maintain. These risk based capital guidelines take into consideration risk factors, as defined by the banking regulators, associated with various categories of assets, both on and off the balance sheet. Both the Corporation and Bank are classified as Well Capitalized, which is the highest rating.

The following table outlines the regulatory components of capital and risk based capital ratios.

Risk Based Capital Analysis


	September 30, December 31,
	2007			2006
	(In Thousands)
Tier 1 Capital:
Common stock	$	9,246		$	9,867
Capital surplus		23,033			29,316
Retained earnings		26,340			23,641
Less: Net Unrealized loss on equity Securities		(27	)		(21	)
Subordinated debentures		6,000			10,000

Total Tier 1 capital		64,592			72,803

Allowance for loan losses		6,536			5,688


Total risk based capital	$	71,128		$	78,491


Risk weighted assets	$	522,008		$	484,987


Quarterly average assets	$	657,959		$	631,378


Capital Ratios:					Regulatory Minimum
Tier 1 risk based capital ratio	12.37	%	15.01	%		4.00	%
Total risk based capital ratio	13.63	%	16.18	%		8.00	%
Leverage ratio	9.82	%	11.53	%		4.00	%

RESULTS OF OPERATIONS (September 30, 2007)

Summary

Net income for the three months and nine months ended September 30, 2007 totaled $244 thousand and $3.1 million, respectively, compared to $1.9 million and $5.3 million, respectively, for the same period in 2006. Basic earnings per common share amounted to $0.02 and $0.26 per share for the three months and nine months ended September 30, 2007, respectively, compared to $0.19 and $0.61 per share for the same periods in 2006. Diluted earnings per share were $0.02 and $0.25 for the three and nine month periods ended September 30, 2007 compared to $0.17 and $0.53 for the three and nine month periods in 2006 respectively. Earnings per share for the nine month period ended September 30, 2007 were impacted by a 42.3% decrease in net income.

The decrease in earnings is attributable to an increase in the allowance for loan losses of $1.5 million of which, $545 thousand is related to $1.5 million in mortgage loans held for investment at the Mortgage Corporation. The increase was largely due to a $55.4 million increase in loans held for investment during the first nine months of 2007. Separate from the allowance for loan losses, the Mortgage Corporation increased its reserve for loan losses on LHFS by approximately $1.4 million.

Interest and fees on loans increased by $1.2 million in the third quarter and $5.3 million for the nine months ended September 30, 2007 over the same periods of 2006. This increase reflects the $55.4 million increase in loans held for investment at September 30, 2007 over year end. Noninterest income totaled $22.2 million for the nine months ended September 30, 2007 compared to $20.0 million for the same period in 2006. This increase is primarily due to a $1.8 million increase in gains on the sale of mortgage loans and a $1.0 million increase in other income. Noninterest income for the three months ended September 30, 2007 totaled $6.1 million, down from $7.2 million for the same period in 2006, do to a $736 thousand decrease in broker fees and a $250 thousand decrease in gains on sale of loans.

Net Interest Income

Net interest income, the principal source of earnings, is the amount of income generated by earning assets (primarily loans and investment securities) less the interest expense incurred on interest-bearing liabilities (primarily deposits) used to fund earning assets. Net interest income increased $1.7 million for the nine months ended September 30, 2007 over the same period in 2006. Net interest margin decreased 7 basis points during the first nine months from 3.21% in 2006 to 3.14% in 2007. The decrease in net interest margin is primarily due to higher interest rates on deposits and borrowings.

Net interest income for the nine months ended September 30, 2007 increased to $15.1 million compared to $13.3 million for the same period in 2006. Net interest income depends upon the volume of earning assets and interest-bearing liabilities and the associated rates. The yield on earning assets increased from 6.96% for the first nine months of 2006 to 7.17% for the same period of 2007.

Total interest expense for the first nine months of 2007 increased $3.6 million from $15.7 million in 2006 to $19.3 million. Total interest- bearing deposits averaged approximately $377.7 million for the nine month period ended September 30, 2007 compared to $358.5 million for the nine month period ended at September 30, 2006. Borrowed funds for the nine months ended September 30, 2007 averaged $149.6 million compared to $113.7 million for the corresponding period in 2006. The increase in deposits and borrowings funded the growth in earning assets. The average cost of interest-bearing liabilities at September 30, 2007 was 4.89%, up from 4.42% at September 30, 2006.

The following table presents volume and rate analysis for nine months ended September 30, 2007 and 2006:

Volume and Rate Analysis


	Nine Months Ended September 30,
	2007 Compared to 2006
	Change Due To:
	Increase /
	(Decrease)			Volume			Rate
	(In Thousands)
Interest Earning Assets:
Securities	$	(156	)	$	(309	)	$	153
Loans		5,309			5,028			281
Interest-bearing deposits		245			224			21

Total increase (decrease) in interest income		5,398			4,943			455

Interest-Bearing Liabilities:
Interest-bearing demand deposits		(15	)		(19	)		4
Money market deposit accounts		(152	)		(500	)		348
Savings accounts		171			150			21
Time deposits		2,038			1,124			914

Total interest-bearing deposits		2,042			755			1,287
FHLB Advances		339			181			158
Securities sold under agreements to repurchase		260			241			19
Other short-term borrowings		85			61			24
Long-term borrowings		926			750			176
Subordinated debentures		26			(3	)		29

Total increase (decrease) in interest expense		3,678			1,985			1,693


Increase (decrease) in net interest income	$	1,720		$	2,958		$	(1,238	)

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


	Nine Month
	Period Ended September 30,
	2007								2006
	Average			Income /		Yield /			Average			Income /		Yield /
	Balance			Expense		Rate			Balance			Expense		Rate
	(Dollars In Thousands)
Assets:
Interest earning assets:
Securities⁽¹⁾	$	97,412		$	3,329		4.56	%	$	106,588		$	3,485		4.36	%
Loans⁽²⁾		528,482			30,568		7.71	%		441,509			25,259		7.63	%
Interest-bearing deposits		13,874			527		5.06	%		7,936			282		4.74	%

Total interest earning assets		639,768			34,424		7.17	%		556,033			29,026		6.96	%
Noninterest earning assets:
Cash and due from banks		6,782								10,620
Premises, land and equipment		9,742								9,626
Other assets		5,655								5,282
Less: allowance for loan losses		(5,945	)							(5,340	)

Total noninterest earning assets		16,234								20,188

Total Assets	$	656,002							$	576,221


Liabilities and Shareholders’ Equity:
Interest-bearing liabilities:
Interest-bearing demand deposits	$	9,823		$	160		2.17	%	$	10,966		$	175		2.13	%
Money market deposit accounts		106,772			3,575		4.46	%		122,301			3,727		4.06	%
Savings accounts		5,478			198		4.82	%		1,147			27		3.14	%
Time deposits		255,674			9,532		4.97	%		224,073			7,494		4.46	%

Total interest-bearing deposits		377,747			13,465		4.75	%		358,487			11,423		4.25	%
FHLB short-term advances		68,737			2,776		5.38	%		64,132			2,437		5.07	%
Securities sold under agreements to repurchase		10,610			338		4.25	%		2,955			78		3.52	%
Other short-term borrowings		17,736			568		4.27	%		15,818			483		4.07	%
FHLB Long-term borrowings		42,245			1,510		4.77	%		20,435			584		3.81	%
Subordinated debentures		10,266			680		8.83	%		10,311			654		8.46	%

Total interest-bearing liabilities		527,341			19,337		4.89	%		472,138			15,659		4.42	%

Non-interest bearing liabilities:
Demand deposits		62,616								61,278
Other liabilities		1,599								3,913

Total liabilities		591,556								537,329
Shareholders’ equity		64,446								38,892

Total liabilities and shareholders’ equity:	$	656,002							$	576,221


Interest spread⁽³⁾							2.28	%							2.54	%

Net interest margin⁽⁴⁾				$	15,087		3.14	%				$	13,367		3.21	%


⁽¹⁾		Interest income and yields are presented on a fully taxable equivalent basis using 34% tax rate.

⁽²⁾		Loans placed on nonaccrual status are included in loan balances.

⁽³⁾		Interest spread is the average yield earned on earning assets, less the average rate incurred on interest-bearing liabilities.

⁽⁴⁾		Net interest margin is net interest income, expressed as a percentage of average earning assets.

Noninterest Income

Noninterest income consists of revenue generated from financial services and activities other than lending and investing. The Mortgage Corporation provides the most significant contributions to noninterest income. Total noninterest income was $22.2 million for the nine month period ended September 30, 2007 compared to $20.0 million for the same period in 2006, an increase of $2.2 million. Noninterest income for the three month period ended September 30, 2007 totaled approximately $6.1 million down from $7.2 million for the same period of 2006. Gains on the sale of loans originated by the Mortgage Corporation totaled $4.7 million and $15.3 million for the three and nine month periods ending September 30, 2007, respectively, compared to $5.0 million and $13.4 million for the same periods of 2006. Other income totaled $3.5 million for the first nine months of 2007, up from $2.5 million for the same period in 2006, an increase of $1.0 million. Other income totaled $0.5 million for the third quarter of 2007, down from $0.6 million for the second quarter of 2006. The increase of $1.0 million for the first nine months of 2007 is largely due to a $745 thousand increase in other settlement fees.

Noninterest Expense

Noninterest expense totaled $10.0 million and $31.1 million for the three and nine months ended September 30, 2007, respectively, compared to $9.2 million and $25.1 million for the same periods in 2006. Salaries and benefits totaled $15.6 million for the first nine months of 2007, compared to $14.5 million for the same period last year due to increases in staff at both the Bank and Mortgage Corporation. Other operating expenses totaled approximately $13.7 million for the nine months ended September 30, 2007, up from $9.1 million for the nine months ended September 30, 2006. The increase in other operating expenses is primarily attributable to an increase in wholesale broker fees and a $1.4 million addition to the provision for potential loan losses relating to LHFS. As with other noninterest income associated with the Mortgage Corporation, noninterest expense fluctuates with loan origination volumes.

Liquidity Management

Liquidity is the ability of the Corporation to convert assets into cash or cash equivalents without significant loss and to raise additional funds by increasing liabilities. Liquidity management involves maintaining the Corporation’s ability to meet the daily cash flow requirements of both depositors and borrowers.

Asset and liability management functions not only serve to assure adequate liquidity in order to meet the needs of the Corporation’s customers, but also to maintain an appropriate balance between interest sensitive assets and interest sensitive liabilities so that the Corporation can earn an appropriate return for its shareholders.

The asset portion of the balance sheet provides liquidity primarily through loan principal repayments and maturities of investment securities. Other short-term investments such as interest-bearing deposits with other banks provide an additional source of liquidity funding. At September 30, 2007, overnight interest-bearing balances totaled $7.5 million and securities available for sale less restricted stock totaled $88.6 million.

The liability portion of the balance sheet provides liquidity through various interest-bearing and noninterest-bearing deposit accounts, Federal Funds purchased, securities sold under agreement to repurchase and other short-term borrowings. At September 30, 2007, the Bank had a line of credit with the FHLB totaling $193.1 million and had outstanding variable rate loans of $30.0 million, and an additional $58.2 million in term loans at fixed rates ranging from 2.70% to 5.21% leaving $104.9 million available on the line. In addition to the line of credit at the FHLB, the Bank and its mortgage bank subsidiary also issue repurchase agreements and commercial paper. As of September 30, 2007, outstanding repurchase agreements totaled approximately $13.5 million and commercial paper issued and short-term borrowings amounted to $17.2 million. The interest rates on these instruments are variable and subject to change daily. The Bank also maintains Federal Funds lines of credit with its correspondent banks and, at September 30, 2007, these lines amounted to $22.6 million. The Corporation also has $6.2 million in subordinated debentures, after redeeming $4.1 million on September 30, 2007, to support the growth of the organization.

Borrowed Funds Distribution


	September 30,			December 31,
	2007			2006
	(Dollars In Thousands)
At Period End
FHLB Advances	$	45,750		$	45,000
FHLB long-term borrowings		42,411			42,572
Securities sold under agreements to repurchase		13,507			14,541
Other short-term borrowings		17,241			20,599
Subordinated debentures		6,186			10,311
Federal Funds Purchased		1			4,811

Total at period end	$	125,096		$	137,834


Average Balances
FHLB Advances	$	68,737		$	61,066
FHLB long-term borrowings		42,245			23,722
Securities sold under agreements to repurchase		10,610			4,644
Other short-term borrowings		17,736			18,005
Subordinated debentures		10,266			10,311

Total average balance	$	149,594		$	117,748


Average rate paid on all borrowed funds		5.23	%		5.02	%

Contractual Obligations

There have been no material changes outside the ordinary course of business to the contractual obligations disclosed in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2006.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Corporation’s market risk is composed primarily of interest rate risk. The Funds Management Committee is responsible for reviewing the interest rate sensitivity position and establishes policies to monitor and coordinate the Corporation’s sources, uses and pricing of funds.

Interest Rate Sensitivity Management

The Corporation uses a simulation model to analyze, manage and formulate operating strategies that address net interest income sensitivity to movements in interest rates. The simulation model projects net interest income based on various interest rate scenarios over a twelve month period. The model is based on the actual maturity and re-pricing characteristics of rate sensitive assets and liabilities. The model incorporates certain assumptions which management believes to be reasonable regarding the impact of changing interest rates and the prepayment assumption of certain assets and liabilities as of September 30, 2007. The table below reflects the outcome of these analyses at September 30, 2007, assuming budgeted growth in the balance sheet. According to the model run for the period ended September 30, 2007, and projecting forward over a twelve month period, an immediate 100 basis points increase in interest rates would result in an increase in net interest income of 3.43%. An immediate 100 basis points decline in interest rates would result in a decrease in net interest income of 3.76%. While management carefully monitors the exposure to changes in interest rates and takes actions as warranted to mitigate any adverse impact, there can be no assurance about the actual effect of interest rate changes on net interest income. The following table reflects the Corporation’s earnings sensitivity profile as of September 30, 2007.

Rate Shock Analysis
September 30, 2007


						Hypothetical Percentage
Change in Federal			Hypothetical Percentage			Change in Economic Value
Funds Target Rate			Change in Earnings			of Equity
	3.00	%		10.39	%		-15.55	%
	2.00	%		6.89	%		-9.51	%
	1.00	%		3.43	%		-4.57	%
	-1.00	%		-3.76	%		4.26	%
	-2.00	%		-7.30	%		8.45	%
	-3.00	%		-10.96	%		12.34	%

The Corporation’s net interest income and the fair value of its financial instruments are influenced by changes in the level of interest rates. The Corporation manages its exposure to fluctuations in interest rates through policies established by its Funds Management Committee. The Funds Management Committee meets periodically and has responsibility for formulating and implementing strategies to improve balance sheet positioning and earnings and reviewing interest rate sensitivity.

The Mortgage Corporation is party to mortgage rate lock commitments to fund mortgage loans at interest rates previously agreed to, as locked by both the Corporation and the borrower for specified periods of time. When the borrower locks its interest rate, the Corporation effectively extends a put option to the borrower, whereby the borrower is not obligated to enter into the loan agreement, but the Corporation must honor the interest rate for the specified time period. The Corporation is exposed to interest rate risk during the accumulation of interest rate lock commitments and loans prior to sale. The Corporation utilizes either a best efforts sell forward commitment or a mandatory sell forward commitment to economically hedge the changes in fair value of the loan due to changes in market interest rates. Failure to effectively monitor, manage and hedge the interest rate risk associated with the mandatory commitments subjects the Corporation to potentially significant market risk.

Throughout the lock period, the changes in the market value of interest rate lock commitments, best efforts and mandatory sell forward commitments are recorded as unrealized gains and losses and are included in the statement of operations in mortgage revenue. The Corporation’s management has made complex judgments in the recognition of gains and losses in connection with this activity. The Corporation utilizes a third party and its proprietary simulation model to assist in identifying and managing the risk associated with this
activity. The Corporation did not have a material gain or loss representing the amount of hedge ineffectiveness during the reporting periods contained in this report.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Corporation maintains a system of disclosure controls and procedures that is designed to ensure that material information relating to the Corporation and its consolidated subsidiaries is accumulated and communicated to management, including the Corporation’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. As required, management, with the participation of the Corporation’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Corporation’s disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation, the Corporation’s Chief Executive Officer and Chief Financial Officer concluded that the Corporation’s disclosure controls and procedures were operating effectively to ensure that information required to be disclosed by the Corporation in reports that it files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC.

Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that the Corporation’s disclosure controls and procedures will detect or uncover every situation involving the failure of persons within the Corporation to disclose material information otherwise required to be set forth in the Corporation’s periodic and current reports.

Changes in Internal Controls

The Corporation’s management is also responsible for establishing and maintaining adequate internal control over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. No changes in our internal control over financial reporting occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

The Bank is a party to legal proceedings arising in the ordinary course of business. Management is of the opinion that these legal proceedings will not have a material adverse effect on the Corporations’ financial condition or results of operations. From time to time the Bank may initiate legal actions against borrowers in connection with collecting defaulted loans. Such actions are not considered material by management unless otherwise disclosed.

Item 1A. Risk Factors

There have been no material changes from the risk factors as previously disclosed in the Corporation’s quarterly report on Form 10-Q for the period ended March 31, 2007.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

In March 2007, the Corporation’s Board of Directors approved a program to repurchase up to 500,000 shares of its common stock, which was increased to 1,000,000 shares on August 14, 2007. Shares may be purchased on the open market or through privately negotiated transactions. No termination date was set for the program. As of September 30, 2007, a total of 1,000,000 shares have been repurchased. Subsequent to the period covered by the table below, the Board of Directors increased the program size by 500,000 shares on November 1, 2007.


		Issuer Purchases of Equity Securities
					(c) Total Number of		(d) Maximum Number
					Shares Purchased as		of Shares that may
	(a) Total Number of		(b) Average Price		Part of Publicly		yet be Purchased
Period	Shares Purchased		Paid Per Share		Announced Plan		Under the Plan
April 1 - April 30, 2007		2,100	$	9.03		2,100		497,900
May 1 - May 31, 2007		40,600		9.11		40,600		457,300
June 1 - June 30, 2007		63,694		8.95		63,694		393,606
July 1 - July 31, 2007		103,000		7.81		103,000		290,606
August 1 - August 31, 2007 *		609,981		7.69		609,981		180,625
September 1 - September 30, 2007		180,625		8.55		180,625		—

		1,000,000	$	0.96		1,000,000


*		Reflects the 500,000 shares increased on August 14, 2007.

Item 3. Defaults Upon Senior Securities

None

Item 4. Submission of Matters to a Vote of Security Holders

None

Item 5. Other Information

None

Item 6. Exhibits


Exhibit No.		Description
3.1		Amended and Restated Articles of Incorporation of Access National Corporation (incorporated by reference to Exhibit 3.1 to Form 8-K filed July 18, 2006 (file number 000-49929))

3.2		Bylaws of Access National Corporation (incorporated by reference to Exhibit 3.2 to Form 8-K dated October 23, 2007 (file number 000-49929))

31.1*		CEO Certification Pursuant to Rule 13a-14(a)

31.2*		CFO Certification Pursuant to Rule 13a-14(a)

32*		CEO/CFO Certification Pursuant to § 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350)


*		filed herewith

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 thereunto duly authorized.


	Access National Corporation (Registrant)
Date: November 13, 2007	By:	/s/ Michael W. Clarke
		Michael W. Clarke
		President & Chief Executive Officer (Principal Executive Officer)



Date: November 13, 2007	By:	/s/ Charles Wimer
		Charles Wimer
		Executive Vice President & Chief Financial Officer (Principal Financial & Accounting Officer)