Access National Corporation (NASDAQ: ANCX) (the “Corporation” or “Access”), parent company for Access National Bank (the “Bank”) and Middleburg Investment Group, reported third quarter 2017 net income of $7.0 million, or $0.34 per diluted share. Excluding merger related one-time charges and impairment charges, net income was $8.62 million or $0.42 per diluted share. This represents the Corporation’s 69th consecutive quarterly profit over its 71 quarter history. Consistent with management’s stated objective of a 40% to 50% dividend payout ratio against core earnings, the Board of Directors declared a dividend of $0.15 per share for common shareholders of record as of November 9, 2017 and payable on November 24, 2017.

Highlights

  • Strategic merger with Middleburg Financial Corporation (NASDAQ: MBRG) closed on schedule April 1, 2017 and data/office integrations completed on schedule as of August 4, 2017;
  • Reported third quarter earnings of $7.0 million or $0.34 per diluted share. Excluding $993 thousand in pre-tax merger related costs ($646 thousand after-tax and $0.03 per diluted share) and $1.5 million of pre-tax impairment charges ($969 thousand after-tax and $0.05 per diluted share), earnings were $8.6 million or $0.42 per diluted share;
  • Tangible book value1 per common share was $11.64 at September 30, 2017, an increase of $0.32 from the prior period after considering merger costs;
  • Loans held for investment were $1.97 billion at September 30, 2017 compared to $967 million at September 30, 2016, a year-over-year growth of 204.0%. Linked quarter growth was $43.0 million or 8.9% annualized; and
  • Non-interest bearing demand deposits of $711 million were 31.1% of total deposits at September 30, 2017 compared to $410 million at September 30, 2016, a year-over-year growth of 173.5%.

The transformative combination of Access National with Middleburg Financial continues on a successful progression. “While the recent quarter contained many integration related distractions, we are pleased to report meaningful organic growth in loans and core deposits that generate long-term value. The positive migration of the acquired customer base is best reflected in the deposit growth and composition. We will continue to sharpen our retail focus on the consumer market that values a relationship based approach to private banking,” said Michael Clarke, President and Chief Executive Officer of Access. He continued, “While realization of expected cost savings is choppy, we remain confident in fulfilling our objectives for 2017 and 2018 such that we meet or exceed EPS accretion estimates in 2018 and beyond.”

Third quarter 2017 pre-tax earnings were $9.4 million, up $3.5 million from second quarter 2017, and included pre-tax merger related costs of $993 thousand. The commercial banking segment’s net interest income grew $294 thousand when compared to the second quarter of 2017 while other revenues grew by $274 thousand due mainly to an increase in miscellaneous loan fees. An increase in the commercial banking segment’s other expense of $802 thousand when compared to the second quarter of 2017 was due mainly to accelerated amortization on abandoned leasehold improvements related to branch restructuring, and was complimented by a decrease in salaries and employee benefits of $906 thousand when compared to the second quarter of 2017.

The earnings and balance sheet impact of departed wealth services personnel and loss of select underpriced accounts was reflected in the current quarter’s financial results. When comparing the third quarter of 2017 to the second quarter of 2017, the wealth services segment saw a $206 thousand decrease in revenue as well as a $359 thousand decrease in salaries and employee benefits which was offset by an increase in operating expenses of $1.4 million due to a $1.5 million impairment of goodwill connected with the unprofitable operations of the legacy Access segment. While management believes the full impact from these changes is reflected in this reporting period, continued analysis of goodwill impairment will be made to determine if the complete write-off remains warranted and will make any recapture adjustments in the fourth quarter. According to Access CEO Michael Clarke, “The loss of subject wealth services personnel and related accounts enables a sharper focus of the organization on the go-forward strategy, closely aligning the marketing and delivery of wealth and banking services to a common target market. The leadership of Middleburg Investment Group and the expanded capabilities resulting from the merger are enhancing the client value proposition in a way that management expects will produce consistent and growing fee income in future periods.”

The net interest margin on a fully tax equivalent (non-GAAP) basis increased to 4.41% from 4.28% when comparing third quarter to second quarter 2017. Third quarter net interest margin on a fully tax equivalent (non-GAAP) basis exclusive of the $1.2 million credit mark accretion for the acquired loan portfolio and the $19 thousand in liability discount amortization was 4.23% for the three months ended September 30, 2017.

Total assets were $2.9 billion at September 30, 2017, up from $2.8 billion at June 30, 2017 due mainly to growth in the interest-bearing balances of $70.3 million and loans held for investment portfolio of $40.3 million. Organic growth in loans held for investment was $42.7 million on a linked quarter basis due mainly to growth in commercial real estate.

Total deposits at September 30, 2017 were $2.3 billion, an increase of $99.0 million when compared to June 30, 2017. At September 30, 2017, non-interest bearing deposits, which represent 31.1% of the deposit portfolio, were $710.7 million, an increase of $50.2 million from the linked quarter. While non-interest bearing demand deposits remain the largest and most attractive source of funding for the Corporation, the combination of legacy Middleburg’s significant low cost interest-bearing demand deposits and legacy Access’ non-interest bearing demand deposits accounted for $1.2 billion or 52.6% of total deposits at September 30, 2017. Interest-bearing deposits totaled $1.6 billion at September 30, 2017, an increase of $48.8 million from the prior quarter. Brokered deposits as a percentage of the deposit portfolio decreased quarter over quarter, from 4.6% of the portfolio at June 30, 2017 to 3.1% at September 30, 2017. The go-forward strategy places a high priority on the maintenance and expansion of core deposits, particularly high value demand deposit relationships.

Non-performing assets (“NPAs”) decreased to $7.8 million at September 30, 2017 from $9.0 million at June 30, 2017, representing 0.27% and 0.32% of total assets, respectively. Included in the NPAs total is $2.0 million in other real estate owned. The allowance for loan loss was $15.7 million and $14.7 million at September 30, 2017 and June 30, 2017, respectively, and represented 0.80% and 0.76% of total loans held for investment at September 30, 2017 and June 30, 2017, respectively. The remaining credit and fair value marks on the loans acquired in the merger totaled $13.1 million at September 30, 2017.

Tangible book value2 per common share increased from $11.32 at June 30, 2017 to $11.64 at September 30, 2017. The tangible common equity ratio for Access National Corporation and its subsidiary bank was 8.85% at September 30, 2017, within the Corporation’s target range of 8.00% to 10.50%.

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

Forward-Looking Statements

The information presented herein contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 regarding expectations or predictions of future financial or business performance or conditions. Forward-looking statements may be identified by words such as "may," "could," "will," "expect," "believe," "anticipate," "forecast," "intend," "plan," "prospects," "estimate," "potential," or by variations of such words or by similar expressions. These forward-looking statements are subject to numerous assumptions, risks and uncertainties which change over time. Forward-looking statements in this report may include, but are not limited to, statements about projected impacts of and financial results generated by the merger of Access and Middleburg Financial Corporation (“Middleburg”). Forward-looking statements speak only as of the date they are made and Access assumes no duty to update forward-looking statements.

In addition to factors previously disclosed in Access's reports filed with the SEC and those identified elsewhere in this release, the following factors, among others, could cause actual results to differ materially from the results expressed in or implied by forward-looking statements and historical performance: changes in asset quality and credit risk; changes in interest rates and capital markets; the introduction, timing and success of business initiatives; competitive conditions; and the inability to recognize cost savings or revenues or to implement integration plans associated with the merger of Access and Middleburg.

______________

1   Non-GAAP financial information. See “Reconciliation of Non-GAAP Financial Measures” at end of release.
2 Non-GAAP financial information. See “Reconciliation of Non-GAAP Financial Measures” at end of release.
 
     
Access National Corporation
Consolidated Balance Sheet
             
September 30, December 31, September 30,
2017 2016 2016
(In Thousands Except for Share and Per Share Data)   (Unaudited)   (Audited)   (Unaudited)
 
ASSETS
 
Cash and due from banks $ 12,774 $ 9,186 $ 14,109
 
Interest-bearing balances and federal funds sold 117,159 81,873 67,801
 
Investment securities:
Available-for-sale, at fair value 395,040 194,090 190,265
Held-to-maturity, at amortized cost (fair value of $16,416, $9,293 and $9,475)   15,778     9,200     9,214
Total investment securities 410,818 203,290 199,479
 
Restricted Stock, at amortized cost 14,447 10,092 6,309
 
Loans held for sale - at fair value 26,234 35,676 70,998
 

Loans held for investment net of allowance for loan losses of $15,692, $16,008 and $14,696, respectively

1,953,968 1,033,690 951,849
 
Premises, equipment and land, net 26,400 7,084 6,875
 
Goodwill and intangible assets 182,156 1,833 1,845
 
Other assets 129,113 47,984 43,573
     
Total assets $ 2,873,069   $ 1,430,708   $ 1,362,838
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
LIABILITIES
Noninterest-bearing deposits $ 710,691 $ 362,036 $ 409,558
 
Interest-bearing demand deposits 490,759 126,189 134,858
 
Savings and interest-bearing deposits 658,799 314,396 302,007
 
Time deposits   425,963     251,706     268,630
 
Total deposits 2,286,212 1,054,327 1,115,053
 
Short-term borrowings 79,527 186,009 41,336
 
Long-term borrowings 60,000 60,000 75,000
 
Trust preferred debentures 3,863 - -
 
Other liabilities and accrued expenses 23,294 9,842 10,118
     
Total Liabilities   2,452,896     1,310,178     1,241,507
 
SHAREHOLDERS' EQUITY

Common stock $0.835 par value; 60,000,000 authorized; issued and outstanding, 20,449,738, 10,636,242 and 10,610,279, respectively

17,076 8,881 8,860
 
Additional paid in capital 305,682 21,779 21,159
 
Retained earnings 98,607 91,439 90,026
 
Accumulated other comprehensive income (loss), net (1,192 ) (1,569 ) 1,286
     
Total shareholders' equity   420,173     120,530     121,331
     
Total liabilities and shareholders' equity $ 2,873,069   $ 1,430,708   $ 1,362,838
 
 
Access National Corporation
Consolidated Statement of Operations
 
    Three Months Ended     Nine Months Ended
September 30, 2017     September 30, 2016 September 30, 2017     September 30, 2016
(In Thousands Except for Share and Per Share Data)     (unaudited)     (unaudited)
 
INTEREST INCOME
Interest and fees on loans $ 24,306 $ 11,647 $ 60,251 $ 33,877
 
Interest on federal funds sold and bank balances 394 98 746 264
 
Interest and dividends on securities   2,992   1,033   7,388   2,954
Total interest income 27,692 12,778 68,385 37,095
 
INTEREST EXPENSE
Interest on deposits 2,639 1,349 6,560 3,774
 
Interest on other borrowings   459   286   1,366   867
Total interest expense   3,098   1,635   7,926   4,641
Net interest income 24,594 11,143 60,459 32,454
 
Provision for loan losses   900   750   3,200   870
Net interest income after provision for loan losses 23,694 10,393 57,259 31,584
 
NONINTEREST INCOME
Service charges and fees 560 249 1,509 748
 
Gain on sale of loans 5,594 8,316 14,985 19,419
 
Other Income   2,369   120   6,917   4,510
Total noninterest income 8,523 8,685 23,411 24,677
 
NONINTEREST EXPENSE
Salaries and benefits 11,100 8,208 31,800 24,283
 
Occupancy and equipment 3,019 768 5,820 2,278
 
Other operating expense   8,674   3,193   23,594   9,040
Total noninterest expense   22,793   12,169   61,214   35,601
Income before income tax 9,424 6,909 19,456 20,660
 
Income tax expense   2,422   2,484   6,001   7,262
NET INCOME   7,002   4,425   13,455   13,398
 
Earnings per common share:
Basic $ 0.34 $ 0.42 $ 0.77 $ 1.27
Diluted $ 0.34 $ 0.41 $ 0.77 $ 1.26
 
Average outstanding shares:
Basic 20,409,696 10,595,599 17,156,521 10,575,088
Diluted 20,508,875 10,689,167 17,273,367 10,644,897
 
 
Performance and Capital Ratios
 
  Three Months   Three Months   Three Months   Nine Months   Nine Months   Twelve Months
Ended Ended Ended Ended Ended Ended
September 30, June 30, March 31, September 30, September 30, December 31,
(Dollars In Thousands)   2017   2017   2017   2017   2016   2016
 
Return on average assets (annualized) 0.96 % 0.55 % 0.74 % 0.75 % 1.41 % 1.27 %
Return on average equity (annualized) 6.69 % 3.73 % 8.57 % 4.72 % 15.56 % 14.11 %
Return on average tangible equity (annualized) (1) 11.89 % 6.73 % 8.70 % 6.96 % 15.81 % 14.33 %
Net interest margin - fully tax equivalent basis (1) 4.41 % 4.28 % 3.85 % 4.33 % 3.60 % 3.72 %
Net interest margin 3.76 % 3.91 % 3.46 % 3.84 % 3.54 % 3.52 %
Efficiency ratio - Bank only 57.56 % 59.23 % 53.26 % 57.41 % 50.48 % 49.59 %
Total average equity to earning assets 16.00 % 16.68 % 8.99 % 18.10 % 9.38 % 9.36 %
Tangible common equity ratio (1) 8.85 % 8.97 % 8.65 % 8.85 % 8.78 % 8.31 %
 
Averages
Assets $ 2,922,105 $ 2,789,088 $ 1,401,652 $ 2,396,103 $ 1,267,482 $ 1,288,582
Loans held for investment 2,002,842 1,896,824 1,052,167 1,614,893 922,821 939,837
Loans held for sale 28,734 28,254 24,461 27,165 47,935 47,060
Interest-bearing deposits & federal funds sold 136,222 121,572 64,628 103,360 69,860 67,457
Investment securities 437,628 422,792 209,533 343,360 184,479 189,585
Earning assets 2,617,443 2,471,036 1,353,360 2,101,947 1,223,798 1,242,923
Interest-bearing deposits 1,566,286 1,523,997 761,075 1,257,364 648,844 662,271
Total deposits 2,277,759 2,163,567 1,096,309 1,810,139 998,183 1,021,624
Repurchase agreements & federal funds purchased 58,149 53,949 28,369 46,209 15,433 16,270
FHLB short term borrowings 59,697 57,824 86,200 67,774 58,467 56,522
FHLB long-term borrowings 82,790 79,892 59,556 73,040 71,332 68,525
Trust Preferred debt 3,029 3,824 - 2,289 - -
Equity $ 418,678 $ 412,146 $ 121,724 $ 380,378 $ 114,838 $ 116,296
Tangible equity (1) $ 235,526 $ 228,480 $ 119,896 $ 257,919 $ 112,973 $ 114,437
 
Allowance for loan losses $ 15,692 $ 14,671 $ 13,727 $ 15,692 $ 14,696 $ 16,008
Allowance for loan losses/loans held for investment 0.80 % 0.76 % 1.28 % 0.80 % 1.52 % 1.53 %
Remaining fair value marks on purchased performing loans $ 12,444 $ 13,584 NA $ 12,444 NA NA
Purchased credit impaired loans $ 5,184 $ 7,237 NA $ 5,184 NA NA
Remaining fair value marks on purchased credit impaired loans $ 694 $ 2,296 NA $ 694 NA NA
Total NPA $ 7,817 $ 8,954 $ 5,244 $ 7,817 $ 5,845 $ 6,922
NPA to total assets 0.27 % 0.32 % 0.37 % 0.27 % 0.43 % 0.48 %
 
Mortgage loan originations and brokered loans $ 107,706 $ 116,958 $ 94,500 $ 319,164 $ 429,418 $ 544,866
Gain on sale of mortgage loans net hedging activity $ 5,371 $ 10,792 $ 3,416 $ 14,208 $ 16,936 $ 23,835
Allowance for losses on mortgage loans sold $ 987 $ 1,029 $ 1,029 $ 987 $ 1,029 $ 1,029
 
Wealth Services segment - assets under management $ 1,935,780 $ 1,927,629 $ 676,865 $ 1,935,780 $ 655,000 $ 667,300
 
Book value per common share $ 20.55 $ 20.36 $ 11.40 $ 20.55 $ 11.44 $ 11.33
 
Tangible book value per common share (1) $ 11.64 $ 11.32 $ 11.23 $ 11.64 $ 11.26 $ 11.16
                         
 
(1) Non-GAAP financial information. See "Reconciliation of Non-GAAP Financial Measures" at end of release.
 
                 
Composition of Loan Portfolio
                                         
    September 30, 2017   June 30, 2017   March 31, 2017   December 31, 2016   September 30, 2016
(Dollars In Thousands)   Amount   Percentage of Total   Amount   Percentage of Total   Amount   Percentage of Total   Amount   Percentage of Total   Amount   Percentage of Total
 
Commercial real estate - owner occupied $ 443,128 22.50 % $ 401,853 20.84 % $ 262,431 24.46 % $ 250,440 23.87 % $ 238,224 24.65 %
Commercial real estate - non-owner occupied 435,181 22.09 377,037 19.55 205,452 19.15 184,688 17.59 174,342 18.04
Residential real estate 512,621 26.03 525,649 27.26 212,007 19.76 204,413 19.47 202,605 20.96
Commercial 449,450 22.82 476,055 24.69 294,451 27.45 311,486 29.67 264,794 27.40
Real estate construction 104,193 5.29 124,186 6.44 91,614 8.54 91,822 8.75 79,621 8.24
Consumer   25,087   1.27     23,565   1.22     6,836   0.64     6,849   0.65     6,959   0.71  
Total loans $ 1,969,660 100.00 % $ 1,928,345 100.00 % $ 1,072,791 100.00 % $ 1,049,698 100.00 % $ 966,545 100.00 %
Less allowance for loan losses   15,692   14,671   13,727   16,008   14,696
$ 1,953,968 $ 1,913,674 $ 1,059,064 $ 1,033,690 $ 951,849
 
                 
Composition of Deposits
                                         
    September 30, 2017   June 30, 2017   March 31, 2017   December 31, 2016   September 30, 2016
(Dollars In Thousands)   Amount   Percentage of Total   Amount   Percentage of Total   Amount   Percentage of Total   Amount   Percentage of Total   Amount   Percentage of Total
 
Demand deposits $ 710,691 31.09 % $ 660,481 30.20 % $ 376,674 32.56 % $ 362,036 34.34 % $ 409,558 36.73 %
Interest-bearing demand deposits 480,620 21.02 454,675 20.79 141,981 12.27 126,189 11.97 124,856 11.20
Savings and money market 616,596 26.97 562,581 25.72 284,182 24.56 270,310 25.64 265,308 23.79
CDARS time deposits 37,836 1.65 39,746 1.82 41,369 3.58 34,290 3.25 36,948 3.31
CDARS/ICS non-maturity deposits 47,219 2.07 44,009 2.01 42,960 3.71 40,925 3.88 46,156 4.14
Brokered deposits 71,090 3.11 101,419 4.64 110,254 9.53 57,389 5.44 68,483 6.14
Time deposits   322,160   14.09       324,295   14.82       159,570   13.79       163,188   15.48       163,744   14.69  
Total Deposits $ 2,286,212   100.00 %   $ 2,187,206   100.00 %   $ 1,156,990   100.00 %   $ 1,054,327   100.00 %   $ 1,115,053   100.00 %
 
 
Yield on Average Earning Assets and Rates on Average Interest-Bearing Liabilities
Three Months Ended
                         

 

 

September 30, 2017

  

September 30, 2016

 

Average

   Income /   Yield /   Average   Income /  

Yield /

(Dollars In Thousands)  

Balance

   Expense   Rate   Balance   Expense  

Rate

 
Assets:
Interest-earning assets:
Securities $ 449,645 $ 2,992 2.66 % $ 191,794 $ 1,033 2.15 %
Loans held for sale 28,734 299 4.16 % 63,667 574 3.61 %
Loans(1) 2,002,842 24,007 4.79 % 947,622 11,073 4.67 %
Interest-bearing balances and federal funds sold   136,222       394   1.16 %   72,680       98   0.54 %
Total interest-earning assets 2,617,443 27,692 4.23 % 1,275,763 12,778 4.01 %
Noninterest-earning assets:
Cash and due from banks 36,260 13,251
Premises, land and equipment 30,382 6,819
Other assets 253,424 42,642
Less: allowance for loan losses   (15,404 )   (13,964 )
Total noninterest-earning assets   304,662     48,748  
Total Assets $ 2,922,105   $ 1,324,511  
 
Liabilities and Shareholders' Equity:
Interest-bearing deposits:
Interest-bearing demand deposits $ 483,370 $ 412 0.34 % $ 137,387 $ 127 0.37 %
Money market deposit accounts 435,241 821 0.75 % 224,548 257 0.46 %
Savings accounts 199,109 90 0.18 % 37,892 47 0.50 %
Time deposits   448,566       1,316   1.17 %   277,014       918   1.33 %
Total interest-bearing deposits 1,566,286 2,639 0.67 % 676,841 1,349 0.80 %
Borrowings:
FHLB short-term borrowings and subordinated debt 62,726 242 1.54 % 38,043 69 0.73 %
Securities sold under agreements to repurchase and federal funds purchased 58,149 16 0.11 % 14,881 4 0.11 %
FHLB long-term borrowings   82,790       201   0.97 %   75,000       213   1.14 %
Total borrowings   203,665       459   0.90 %   127,924       286   0.89 %
Total interest-bearing deposits and borrowings 1,769,951 3,098 0.70 % 804,765 1,635 0.81 %
Noninterest-bearing liabilities:
Demand deposits 711,474 390,997
Other liabilities   22,002     10,095  
Total liabilities 2,503,427 1,205,857
Shareholders' Equity   418,678     118,654  
Total Liabilities and Shareholders' Equity $ 2,922,105   $ 1,324,511  
 
Interest Spread(2) 3.53 % 3.19 %
 
Net Interest Margin(3) $ 24,594   3.76 % $ 11,143   3.49 %
 
                         

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

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

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

 
 
Yield on Average Earning Assets and Rates on Average Interest-Bearing Liabilities
Nine Months Ended
                         
    September 30, 2017   September 30, 2016
  Average   Income /   Yield /   Average   Income /   Yield /
(Dollars In Thousands)   Balance   Expense   Rate   Balance   Expense   Rate
 
Assets:
Interest-earning assets:
Securities $ 354,529 $ 7,388 2.78 % $ 183,182 $ 2,954 2.15 %
Loans held for sale 27,165 846 4.15 % 47,935 1,355 3.77 %
Loans(1) 1,614,893 59,405 4.90 % 922,821 32,522 4.70 %
Interest-bearing balances and federal funds sold   105,360       746   0.94 %   69,860       264   0.50 %
Total interest-earning assets 2,101,947 68,385 4.34 % 1,223,798 37,095 4.04 %
Noninterest-earning assets:
Cash and due from banks 21,552 12,493
Premises, land and equipment 21,692 6,782
Other assets 265,578 38,142
Less: allowance for loan losses   (14,666 )   (13,733 )
Total noninterest-earning assets   294,156     43,684  
Total Assets $ 2,396,103   $ 1,267,482  
 
Liabilities and Shareholders' Equity:
Interest-bearing deposits:
Interest-bearing demand deposits $ 352,647 $ 910 0.34 % $ 131,859 $ 360 0.36 %
Money market deposit accounts 352,525 1,644 0.62 % 185,839 522 0.37 %
Savings accounts 146,773 392 0.36 % 35,047 137 0.52 %
Time deposits   405,419       3,614   1.19 %   296,099       2,755   1.24 %
Total interest-bearing deposits 1,257,364 6,560 0.70 % 648,844 3,774 0.78 %
Borrowings:
FHLB short-term borrowings and subordinated debt 70,063 739 1.41 % 58,467 280 0.64 %
Securities sold under agreements to repurchase and federal funds purchased 46,209 58 0.17 % 15,433 11 0.10 %
FHLB long-term borrowings   73,040       569   1.04 %   71,332       576   1.08 %
Total borrowings   189,312       1,366   0.96 %   145,232       867   0.80 %
Total interest-bearing deposits and borrowings 1,446,676 7,926 0.73 % 794,076 4,641 0.78 %
Noninterest-bearing liabilities:
Demand deposits 552,775 349,339
Other liabilities   16,274     9,229  
Total liabilities 2,015,725 1,152,644
Shareholders' Equity   380,378     114,838  
Total Liabilities and Shareholders' Equity $ 2,396,103   $ 1,267,482  
 
Interest Spread(2) 3.61 % 3.26 %
 
Net Interest Margin(3) $ 60,459   3.84 % $ 32,454   3.54 %
 
                         
(1) Loans placed on nonaccrual status are included in loan balances.

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

(3) Net interest margin is net interest income, expressed as a percentage of average earning assets.
 
                         
Segment Reporting
           
Three Months Ended Commercial Mortgage Trust & Wealth Consolidated
September 30, 2017   Banking Banking Management   Other Eliminations Totals
(In Thousands)
Revenues:
Interest income $ 27,429 $ 299 $ 4 $ 5 $ (45 ) $ 27,692
Gain on sale of loans - 5,594 - - - 5,594
Other revenues   1,977   (740 )   1,617     312     (237 )   2,929
Total revenues   29,406   5,153     1,621     317     (282 )   36,215
 
Expenses:
Interest expense 3,072 (25 ) - 96 (45 ) 3,098
Salaries and employee benefits 7,334 2,898 868 - - 11,100
Other expenses   8,724   1,149     1,850     1,107     (237 )   12,593
Total operating expenses   19,130   4,022     2,718     1,203     (282 )   26,791
 
Income (loss) before income taxes $ 10,276 $ 1,131   $ (1,097 ) $ (886 ) $ -   $ 9,424
 
Total assets $ 2,810,037   $ 26,485     $ 41,002     $ 19,756     $ (24,211 ) $ 2,873,069
 
 
Three Months Ended Commercial Mortgage Wealth Consolidated
September 30, 2016   Banking Banking Management   Other Eliminations Totals
(In Thousands)
Revenues:
Interest income $ 12,531 $ 574 $ - $ 5 $ (332 ) $ 12,778
Gain on sale of loans - 8,316 - - - 8,316
Other revenues   682   (1,060 )   773     289     (315 )   369
Total revenues   13,213   7,830     773     294     (647 )   21,463
 
Expenses:
Interest expense 1,640 261 - 66 (332 ) 1,635
Salaries and employee benefits 3,977 3,664 567 - - 8,208
Other expenses   2,578   1,491     233     724     (315 )   4,711
Total operating expenses   8,195   5,416     800     790     (647 )   14,554
 
Income (loss) before income taxes $ 5,018 $ 2,414   $ (27 ) $ (496 ) $ -   $ 6,909
 
Total assets $ 1,290,518 $ 74,195   $ 2,894   $ 18,420   $ (23,189 ) $ 1,362,838
 
                         
Segment Reporting
           
Nine Months Ended Commercial Mortgage Trust & Wealth Consolidated
September 30, 2017   Banking Banking Management Other Eliminations Totals
(In Thousands)
Revenues:
Interest income $ 67,740 $ 846 $ 7 $ 17 $ (225 ) $ 68,385
Gain on sale of loans - 14,985 - - - 14,985
Other revenues   4,445   (306 )   4,195     975     (883 )   8,426
Total revenues   72,185   15,525     4,202     992     (1,108 )   91,796
 
Expenses:
Interest expense 7,796 18 - 337 (225 ) 7,926
Salaries and employee benefits 19,992 9,122 2,686 - - 31,800
Other expenses   20,173   3,246     2,541     7,537     (883 )   32,614
Total operating expenses   47,961   12,386     5,227     7,874     (1,108 )   72,340
 
Income (loss) before income taxes $ 24,224 $ 3,139   $ (1,025 ) $ (6,882 ) $ -   $ 19,456
 
Total assets $ 2,810,037 $ 26,485   $ 41,002   $ 19,756   $ (24,211 ) $ 2,873,069
 
 
Nine Months Ended Commercial Mortgage Wealth Consolidated
September 30, 2016   Banking Banking Management Other Eliminations Totals
(In Thousands)
Revenues:
Interest income $ 36,379 $ 1,355 $ - $ 15 $ (654 ) $ 37,095
Gain on sale of loans - 19,419 - - - 19,419
Other revenues   2,908   53     2,269     978     (950 )   5,258
Total revenues   39,287   20,827     2,269     993     (1,604 )   61,772
 
Expenses:
Interest expense 4,656 439 - 200 (654 ) 4,641
Salaries and employee benefits 12,065 10,563 1,655 - - 24,283
Other expenses   6,285   4,127     783     1,943     (950 )   12,188
Total operating expenses   23,006   15,129     2,438     2,143     (1,604 )   41,112
 
Income (loss) before income taxes $ 16,281 $ 5,698   $ (169 ) $ (1,150 ) $ -   $ 20,660
 
Total assets $ 1,290,518 $ 74,195   $ 2,894   $ 18,420   $ (23,189 ) $ 1,362,838
 

Reconciliation of Non-GAAP Financial Measures

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

           
Three Months Three Months Three Months Nine Months Nine Months Twelve Months
Ended Ended Ended Ended Ended Ended
September 30, June 30, March 31, September 30, September 30, December 31,
(Dollars In Thousands)   2017   2017   2017   2017   2016   2016
 
 
Book value per common share $ 20.55 $ 20.36 $ 11.40 $ 20.55 $ 11.44 $ 11.33
Effect of intangible assets $ (8.91 ) $ (9.04 ) $ (0.17 ) $ (8.91 ) $ (0.18 ) $ (0.17 )
Tangible book value per common share $ 11.64 $ 11.32 $ 11.23 $ 11.64 $ 11.26 $ 11.16
 
Common equity ratio 14.62 % 15.05 % 8.77 % 14.62 % 8.90 % 8.42 %
Effect of intangible assets -5.77 % -6.08 % -0.12 % -5.77 % -0.12 % -0.11 %
Tangible common equity ratio 8.85 % 8.97 % 8.65 % 8.85 % 8.78 % 8.31 %
 
Net interest margin 3.76 % 3.91 % 3.46 % 3.84 % 3.54 % 3.52 %
Effect of tax exempt securities and loans 0.65 % 0.37 % 0.39 % 0.49 % 0.06 % 0.20 %
Net interest margin - fully tax equivalent basis 4.41 % 4.28 % 3.85 % 4.33 % 3.60 % 3.72 %
 
Return on average equity 6.69 % 3.73 % 8.57 % 4.72 % 15.56 % 14.11 %
Effect of intangible assets 5.20 % 3.00 % 0.13 % 2.24 % 0.25 % 0.22 %
Return on average tangible equity 11.89 % 6.73 % 8.70 % 6.96 % 15.81 % 14.33 %
 
Average equity $ 418,678 $ 412,146 $ 121,724 $ 380,378 $ 114,838 $ 116,296
Effect of average intangible assets $ 183,152 $ 183,666 $ 1,828 $ 122,459 $ 1,865 $ 1,859
Average tangible equity $ 235,526 $ 228,480 $ 119,896 $ 257,919 $ 112,973 $ 114,437