Access National Grows Deposits and Loans, Hikes Dividend

Access National Corporation (NASDAQ: ANCX) (the “Corporation” or “Access”), parent company for Access National Bank (the “Bank”) and Middleburg Investment Group, reported third quarter 2018 net income of $9.6 million, or $0.46 per diluted share. This represents the Corporation’s 73rd consecutive quarterly profit over its 75 quarter history. Consistent with management’s objective of a 40% dividend payout ratio against level and sustainable earnings, the Board of Directors declared a dividend of $0.17 per share for common shareholders of record as of November 08, 2018 and payable on November 23, 2018. This dividend reflects a $0.01 increase from the prior quarter.

Highlights

• For the three month period ended September 30, 2018, net income increased 7.2% compared to the preceding period and 37.2% compared to the same period of the prior year;
• Gross loans held for investment increased $110.1 million (22.2% annualized) during the three-month period to $2.1 billion at September 30, 2018;
• Excluding brokered deposits, customer deposits increased $131.8 million (25.0% annualized) during the three month period ended September 30, 2018 to $2.2 billion;
• Demand deposits of $1.2 billion at September 30, 2018 comprised 52.9% of total deposits, inclusive of $757.9 million of non-interest bearing demand deposits or 33.0% of the deposit portfolio. Non-interest bearing demand deposits increased $38.0 million and $47.2 million during the three month and twelve month periods ended September 30, 2018, respectively; and
• Tangible book value1 per common share was $12.33 at September 30, 2018, an increase of $0.34 from the linked quarter.

According to CEO Michael Clarke, “Third quarter 2018 reflects strong performance against our stated strategic growth and profitability measures as customer deposits and loans exceeded a linked quarter growth rate in excess of $200 million per annum. We experienced strong increases in nominal earnings during the period and exceeded our strategic profitability measures with Return on Tangible Common Average Equity (ROTCAE) of 15.20% compared to the target of 13.25%, and Return on Average Assets of 1.30% compared to the target of 1.25%.” Mr. Clarke continued, “The announced merger with Union Bankshares Corporation (“Union”) will enable us to further accelerate growth and opportunity in our markets. We are excited about being an important part of the Union team and the combined positioning as Virginia’s regional bank.”

On a linked quarter basis, the mortgage segment margins increased while origination volume decreased, resulting in pretax earnings of $1.0 million for the three months ended September 30, 2018 compared to $0.9 million for the linked quarter.

During the period, we evaluated the accounting for our low income housing tax credits as well as investments in small business investment company funds (SBICs) and elected to change the policy for these investments. We believe the change better reflects our economic interest in these investments. We believe that the results of this change are immaterial to the results of our operations and they were recorded through the current period as a one-time after-tax gain of $882 thousand or $0.04 per share on a fully diluted basis. This includes $608 thousand ($445 thousand pre-tax credit to income with a $163 thousand credit to income tax provision) related to low income housing tax credits and a $466 thousand pre-tax gain related to equity investments.

The Corporation’s efficiency ratio has improved each quarter during 2018 and is within the stated strategic target threshold of 65% or better at September 30, 2018 at 60.19%.

The net interest margin on a fully tax equivalent (non-GAAP) basis remained consistent at 3.67% when comparing third quarter 2018 to the linked quarter. Net purchase mark accretion included in net interest income was $634 thousand for the third quarter 2018 and $781 thousand for the linked quarter.

Gross loans Held for Investment increased $110.1 million during the quarter to $2.1 billion at September 30, 2018. As of September 30, 2018, commercial and industrial loans as well as owner occupied commercial real estate loans combined to account for 49% 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 September 30, 2018 were $757.9 million, an increase of $38.0 million compared to the second quarter of 2018. Noninterest-bearing deposits remain the largest and most attractive source of funding for the Corporation, comprising 33% of the deposit portfolio. When combined with interest-bearing demand deposit accounts, total transaction accounts comprise 53% of the total deposit portfolio, reducing reliance of non-core and more price sensitive funding.

Total deposits at September 30, 2018 were $2.3 billion, an increase of $168.1 million from the $2.1 billion at June 30, 2018. The increase in interest-bearing deposits was most pronounced in the savings and interest-bearing deposits category. The Corporation’s strategy places a high priority on the maintenance and expansion of core deposits, particularly transaction accounts. Premium interest rates are targeted to existing high value core depositors and used offensively to acquire new accounts in selective market segments.

Short-term borrowings decreased $77.4 million during the three months ended September 30, 2018. This decrease is primarily attributable to the increase in core deposit accounts seen during the quarter.

Asset quality remained strong for the quarter. Non-performing assets (“NPAs”) increased to $6.1 million at September 30, 2018 from $6.0 million at June 30, 2018, representing 0.20% and 0.21% of total assets, respectively. Included in the NPA total is $644 thousand in other real estate owned. The allowance for loan loss was $17.3 million and $15.8 million at September 30, 2018 and December 31, 2017, respectively, and represented 0.83% of total loans held for investment at the end of the third quarter 2018.

Tangible book value2 per common share increased to $12.33 at September 30, 2018 from $11.52 at December 31, 2017. The tangible common equity ratio for Access National Corporation and its subsidiary bank was 9.09% at September 30, 2018, within the Corporation’s target range of 8.50% to 9.50%.

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

Access National Corporation will hold a conference call on Friday, October 26, 2018 at 9:00 a.m. Eastern Time during which management will review earnings and performance trends. Callers wishing to participate may call toll-free by dialing (844) 348-3796; international callers wishing to participate may do so by dialing (213) 358-0951. The conference ID number is 6696465.

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 acquisition by Union Bankshares Corporation (“Union”) of Access. 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, changes in asset quality and credit risk, changes in interest rates and capital markets, competitive conditions, 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 acquisition-related issues, changes in Union’s share price before closing, risks relating to the potential dilutive effect of shares of Union common stock to be issued in the proposed transaction, the ability to obtain regulatory, shareholder or other approvals or other conditions to closing on a timely basis or at all, 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 Union and 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 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 Access or its business 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.

Important Additional Information will be Filed with the SEC

As previously disclosed, Access and Union have entered into an Agreement and Plan of Reorganization pursuant to which Access will merge with and into Union. Union will be the surviving corporation in the merger.

This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval with respect to the proposed acquisition by Union of Access. No offer of securities shall be made except by means of a prospectus meeting the requirements of the Securities Act of 1933, as amended, and no offer to sell or solicitation of an offer to buy shall be made in any jurisdiction in which such offer, solicitation or sale would be unlawful.

In connection with the proposed acquisition, Union will file with the Securities and Exchange Commission (the “SEC”) a Registration Statement on Form S-4 that will include a joint proxy statement of Access and Union and a prospectus of Union (the “Joint Proxy/Prospectus”), and each of Access and Union may file with the SEC other relevant documents concerning the proposed transaction. A definitive Joint Proxy/Prospectus will be sent to the shareholders of Access and Union. Investors and shareholders of Access and Union are urged to read carefully and in their entirety the Registration Statement and Joint Proxy/Prospectus when they become available and any other relevant documents filed with the SEC by Access and Union, as well as any amendments or supplements to those documents, because they will contain important information about the proposed transaction.

Investors and shareholders may obtain free copies of the Registration Statement and the Joint Proxy/Prospectus (when available) and other documents filed with the SEC by Access and Union through the website maintained by the SEC at www.sec.gov. Free copies of the Registration Statement and the Joint Proxy/Prospectus and other documents filed with the SEC also may be obtained by directing a request by telephone or mail to Access National Corporation, 1800 Robert Fulton Drive, Suite 300, Reston, VA 20191. Attention: Sheila Linton (telephone: (703) 871-2100) or Union Bankshares Corporation, 1051 East Cary Street, Suite 1200, Richmond, Virginia 23219, Attention: Investor Relations (telephone: (804) 633-5031), or by accessing Access’s website at www.accessnationalbank.com under “Investor Relations” or Union’s website at www.bankatunion.com under “Investor Relations.” The information on Access’s and Union’s websites is not, and shall not be deemed to be, a part of this Form 8-K or incorporated into other filings either company makes with the SEC.

Participants in the Solicitation

Access, Union and their respective directors and certain of their executive officers and employees may be deemed to be participants in the solicitation of proxies from the shareholders of Access or Union in connection with the proposed transaction. Information about the directors and executive officers of Access and their ownership of Access Common Stock is set forth in the proxy statement for Access’s 2018 annual meeting of shareholders, which was filed with the SEC on April 12, 2018. Information about the directors and executive officers of Union and their ownership of Union Common Stock is set forth in the proxy statement for Union’s 2018 annual meeting of shareholders, which was filed with the SEC on March 21, 2018. Information regarding the persons who may, under the rules of the SEC, be deemed participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the Joint Proxy/Prospectus and other relevant materials to be filed with the SEC when they become available. Free copies of these documents may be obtained as described above.