Access National Announces Record Earnings for Second Quarter 2018 and Dividend Increase

Access National Corporation (NASDAQ: ANCX) (the “Corporation” or “Access”), parent company for Access National Bank (the “Bank”) and Middleburg Investment Group, reported second quarter 2018 net income of $9.0 million, or $0.43 per diluted share. This represents the Corporation’s 72^nd consecutive quarterly profit over its 74 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 $0.16 per share for common shareholders of record as of August 09, 2018 and payable on August 24, 2018. This dividend represents a $0.01 increase from the prior quarter.

Highlights

• For the three month period ended June 30, 2018, net income increased 10.8% compared to the preceding period and 20.0% compared to the same period of the prior year (after a tax adjusted add back for merger costs in the prior year);
• Loans held for investment increased $59.3 million (12.3% annualized) during the three-month period to $2.0 billion at June 30, 2018;
• Tangible book value¹ per common share was $11.99 at June 30, 2018, an increase of $0.34 from the linked quarter; and
• Demand deposits of $1.2 billion at June 30, 2018 comprised 56% of total deposits, inclusive of $719.9 million of non-interest bearing demand deposits or 34% of the deposit portfolio. Non-interest bearing demand deposits increased $13.7 million during the three month period and $59.4 million during the twelve month period ended June 30, 2018.

According to CEO Michael Clarke, “Not only did we experience strong increases in nominal earnings during this period, we exceeded our strategic profitability measures with Return on Tangible Common Equity (ROTCE) of 13.74% compared to the target of 13.25%, and Return on Assets of 1.26% compared to the target of 1.25%. While modest margin compression was a drag on performance (down 3 basis points), our team focused this quarter on delivering solid loan growth and maintaining an attractive core deposit base. Non-interest bearing demand deposits, our largest and most valued source of funding, increased $13.7 million during the quarter and comprised 34% of total deposits. We place a priority focus on maintaining and expanding commercial checking accounts with businesses that value a trusted advisor relationship and sophisticated treasury management solutions.”

Both fee income businesses, wealth management and mortgage, made meaningful contributions to deliver 17% of pre-tax income, up from 12% during the prior three months. Mr. Clarke concluded: “Our brand of relationship banking with complementary and valued-added fee income services resonates well with our target market and gives us the financial levers to deliver results and drive long term shareholder value.” For the wealth segment, pre-tax income rose to $1.0 million for the three months ended June 30, 2018 compared to $0.3 million for the prior period. This increase is primarily attributable to a one-time fee associated with an estate settlement. On a linked quarter basis, the mortgage segment margins decreased while origination volume increased, resulting in pretax earnings of $0.9 million for the three months ended June 30, 2018 compared to $0.9 million for the prior quarter. Mortgage originations were $123.2 million for the three months ended June 30, 2018, compared to $84.4 million for the three months ended March 31, 2018 and $117.0 million for the three months ended June 30, 2017. The Corporation’s efficiency ratio continues to improve and is within the stated strategic target threshold of 65% or better.

The net interest margin on a fully tax equivalent (non-GAAP) basis decreased to 3.67% from 3.70% when comparing second quarter 2018 to the linked quarter. This decrease is primarily attributed to changes in the Corporation’s funding mix. Net purchase mark accretion included in net interest income was $781 thousand for the second quarter 2018 and $773 thousand for the linked quarter.

Loans Held for Investment increased $59.3 million during the quarter to $2.0 billion at June 30, 2018. The growth experienced during the quarter reversed a decline during the prior quarter which was attributed to seasonal factors led by pay downs on lines of credit to commercial and industrial borrowers. During the recent quarter, many of those lines of credit have been re-drawn and new borrowers added to the portfolio. As of June 30, 2018, commercial and industrial loans as well as owner occupied commercial real estate loans combined to account for 48% of the loan portfolio reflecting the Corporation’s continued focus on lower-middle-market businesses. The Corporation’s priority focus is 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 June 30, 2018 were $719.9 million, an increase of $13.7 million compared to the first quarter of 2018. Noninterest-bearing deposits remain the largest and most attractive source of funding for the Corporation, comprising 34% of the deposit portfolio. When combined with interest-bearing demand deposit accounts, total transaction accounts comprise 56% of the total deposit portfolio, reducing reliance of non-core and more price sensitive funding.

Total deposits at June 30, 2018 were $2.1 billion, down $70.2 million from the $2.2 billion at March 31, 2018. The decrease in interest-bearing deposits was most pronounced in the “rate sensitive” categories of brokered deposits and CDARS while all interest-bearing deposit categories experienced rate motivated runoff. Our 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 increased $146.5 million during the three months ended June 30, 2018. This increase is attributable primarily to a few large dollar deposit account balance fluctuations during the quarter.

Asset quality remains strong for the quarter. Non-performing assets (“NPAs”) decreased to $6.0 million at June 30, 2018 from $7.5 million at March 31, 2018, representing 0.21% and 0.26% of total assets, respectively. Included in the NPA total is $1.9 million in other real estate owned. The allowance for loan loss was $16.5 million and $15.8 million at June 30, 2018 and December 31, 2017, respectively, and represented 0.83% and 0.80% of total loans held for investment, respectively.

Tangible book value² per common share increased to $11.99 at June 30, 2018 from $11.52 at December 31, 2017. The tangible common equity ratio for Access National Corporation and its subsidiary bank was 9.12% at June 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, July 27, 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 [phone]; international callers wishing to participate may do so by dialing [phone]. The conference ID number is 8569152.

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 - Unaudited
(In Thousands Except for Share and Per Share Data)		June 30, 2018				March 31, 2018				December 31, 2017				June 30, 2017
ASSETS
Cash and due from banks		$	17,346			$	17,084			$	29,855			$	19,772
Interest-bearing balances and federal funds sold			105,626				127,280				92,458				46,889
Investment securities:
Available-for-sale, at fair value			421,975				401,411				406,067				401,169
Marketable equity, at fair value			1,340				1,351				1,379				1,388
Held-to-maturity, amortized cost (fair value of $ 16,419, $15,657, $16,379, and $16,449, respectively)			16,350				15,676				15,721				15,786
Total investment securities			439,665				418,438				423,167				418,343
Restricted Stock, at amortized cost			23,742				16,502				16,572				8,742
Loans held for sale - at fair value			51,365				30,008				31,999				34,954
Loans held for investment net of allowance for loan losses of $16,543, $15,928, $15,805, and $14,671, respectively			1,967,646				1,908,983				1,963,104				1,913,674
Premises, equipment and land, net			28,082				28,111				27,797				29,363
Goodwill and intangible assets, net			184,838				185,646				185,161				184,194
Other assets			102,275				101,796				103,781				101,059
Total assets		$	2,920,585			$	2,833,848			$	2,873,894			$	2,756,990
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Noninterest-bearing deposits		$	719,873			$	706,128			$	744,960			$	660,481
Interest-bearing demand deposits			477,329				511,850				496,677				454,675
Savings and interest-bearing deposits			625,120				659,615				623,889				611,708
Time deposits			304,398				319,335				368,622				460,342
Total deposits			2,126,720				2,196,928				2,234,148				2,187,206
Short-term borrowings			289,934				143,413				145,993				55,429
Long-term borrowings			45,000				40,000				40,000				80,000
Trust preferred debentures			3,922				3,903				3,883				3,843
Other liabilities and accrued expenses			20,727				22,951				28,246				15,644
Total Liabilities			2,486,303				2,407,195				2,452,270				2,342,122
SHAREHOLDERS' EQUITY
Common stock $0.835 par value; 60,000,000 authorized; issued and outstanding, 20,796,193, 20,695,946, 20,534,163, and 20,378,994, respectively			17,365				17,281				17,146				17,016
Additional paid in capital			314,367				311,675				307,670				303,997
Retained earnings			109,690				103,834				98,584				94,664
Accumulated other comprehensive (loss) income, net			(7,140	)			(6,137	)			(1,776	)			(809	)
Total shareholders' equity			434,282				426,653				421,624				414,868
Total liabilities and shareholders' equity		$	2,920,585			$	2,833,848			$	2,873,894			$	2,756,990

Access National Corporation
Consolidated Statement of Operations - Unaudited
		Three Months Ended									Six Months Ended
(In Thousands Except for Share and Per Share Data)		June 30, 2018			March 31, 2018			June 30, 2017			June 30, 2018			June 30, 2017
INTEREST INCOME
Interest and fees on loans		$	24,143		$	23,411		$	23,746		$	47,554		$	35,945
Interest on federal funds sold and bank balances			437			517			221			954			352
Interest and dividends on securities			2,642			2,680			3,172			5,322			4,396
Total interest income			27,222			26,608			27,139			53,830			40,693
INTEREST EXPENSE
Interest on deposits			3,017			2,798			2,419			5,815			3,921
Interest on other borrowings			1,190			565			545			1,755			907
Total interest expense			4,207			3,363			2,964			7,570			4,828
Net interest income			23,015			23,245			24,175			46,260			35,865
Provision for loan losses			652			750			900			1,402			2,300
Net interest income after provision for loan losses			22,363			22,495			23,275			44,858			33,565
NONINTEREST INCOME
Service charges and fees			494			477			669			971			949
Gain on sale of loans			4,196			2,792			6,046			6,988			9,391
Other Income			4,400			4,126			2,170			8,526			4,548
Total noninterest income			9,090			7,395			8,885			16,485			14,888
NONINTEREST EXPENSE
Salaries and benefits			12,529			11,728			12,660			24,257			20,700
Occupancy and equipment			1,640			2,241			1,981			3,881			2,801
Other operating expense			6,257			6,005			11,585			12,262			14,920
Total noninterest expense			20,426			19,974			26,226			40,400			38,421
Income before income tax			11,027			9,916			5,934			20,943			10,032
Income tax expense			2,065			1,830			2,088			3,895			3,579
NET INCOME			8,962			8,086			3,846			17,048			6,453
Earnings per common share:
Basic		$	0.43		$	0.39		$	0.19		$	0.82		$	0.42
Diluted		$	0.43		$	0.39		$	0.19		$	0.82		$	0.41
Average outstanding shares:
Basic			20,736,727			20,619,817			20,335,070			20,678,272			15,529,934
Diluted			20,822,853			20,715,188			20,453,991			20,769,020			15,655,613

Performance and Capital Ratios - Unaudited
(Dollars In Thousands)		Three Months Ended June 30, 2018			Three Months Ended March 31, 2018			Three Months Ended June 30, 2017			Six Months Ended June 30, 2018			Six Months Ended June 30, 2017			Twelve Months Ended December 31 2017
Return on average assets (annualized)			1.26%			1.06%			0.55%			1.17%			0.62%			0.67%
Return on average tangible equity (annualized) (1)			13.74%			13.57%			6.87%			13.93%			7.52%			7.72%
Net interest margin - fully tax equivalent basis (1)			3.67%			3.70%			3.98%			3.68%			3.81%			3.88%
Net interest margin			3.62%			3.65%			3.91%			3.64%			3.75%			3.81%
Cost of funds			0.98%			0.79%			0.69%			0.88%			0.73%			0.73%
Access National Bank efficiency ratio (2)			57.36%			59.65%			59.23%			58.20%			57.30%			55.72%
Access National Corporation efficiency ratio (2)			63.62%			65.19%			79.33%			64.39%			75.70%			69.61%
Total average equity to earning assets			16.86%			16.59%			16.68%			16.73%			13.95%			14.82%
Tangible common equity ratio (1)			9.12%			9.10%			8.97%			9.12%			8.97%			8.79%
Averages
Assets		$	2,848,307		$	2,856,201		$	2,789,088		$	2,852,359		$	2,096,372		$	2,453,894
Loans held for investment			1,935,422			1,950,077			1,896,824			1,942,700			1,474,551			1,704,040
Loans held for sale			41,515			21,257			28,254			31,442			26,368			27,881
Interest-bearing deposits & federal funds sold			110,800			136,969			121,572			123,812			94,174			104,566
Investment securities			444,779			434,003			422,792			439,421			316,345			362,614
Earning assets			2,541,454			2,548,836			2,471,037			2,545,115			1,913,515			2,212,020
Interest-bearing deposits			1,440,998			1,517,030			1,523,996			1,478,811			1,143,566			1,327,262
Total deposits			2,114,617			2,215,222			2,163,566			2,164,723			1,631,078			1,922,249
Repurchase agreements & federal funds purchased			56,693			57,344			53,949			57,017			41,148			48,378
FHLB short term borrowings			180,348			91,002			57,824			135,922			71,934			67,907
FHLB long-term borrowings			42,088			40,000			79,892			41,050			69,698			66,329
Trust Preferred debt			3,911			3,891			3,824			3,901			1,919			2,691
Equity		$	428,590		$	422,780		$	412,146		$	425,699		$	266,951		$	327,738
Tangible equity (1)		$	243,232		$	238,381		$	223,891		$	240,803		$	171,716		$	213,756
Allowance for loan losses		$	16,543		$	15,928		$	14,671		$	16,543		$	14,671		$	15,805
Allowance for loan losses/loans held for investment			0.83%			0.83%			0.76%			0.83%			0.76%			0.80%
Remaining purchase marks on performing loans		$	11,335		$	10,415		$	15,880		$	11,335		$	15,880		$	11,241
Purchased credit impaired loans		$	4,632		$	4,702		$	7,237		$	4,632		$	7,237		$	4,969
Remaining purchase marks on credit impaired loans		$	1,720		$	1,749		$	2,296		$	1,720		$	2,296		$	1,175
Total NPA		$	6,049		$	7,453		$	8,954		$	6,049		$	8,954		$	5,270
NPA to total assets			0.21%			0.26%			0.32%			0.21%			0.32%			0.18%
Mortgage loan originations and brokered loans		$	123,157		$	84,411		$	116,958		$	207,568		$	211,458		$	432,678
Gain on sale of mortgage loans net hedging activity		$	4,251		$	3,273		$	5,421		$	7,524		$	8,837		$	19,192
Allowance for losses on mortgage loans sold		$	953		$	953		$	1,029		$	953		$	1,029		$	953
Wealth Services segment - assets under management		$	1,949,992		$	1,942,526		$	1,927,629		$	1,949,992		$	1,927,629		$	1,955,720
Book value per common share		$	20.88		$	20.62		$	20.36		$	20.88		$	20.36		$	20.53
Tangible book value per common share (1)		$	11.99		$	11.65		$	11.32		$	11.99		$	11.32		$	11.52
(1) Non-GAAP financial information. See "Reconciliation of Non-GAAP Financial Measures" at end of release.
(2) Efficiency ratio is non-interest expense divided by the sum of net interest income and non-interest income.

Composition of Loan Portfolio - Unaudited
		June 30, 2018						March 31, 2018						December 31, 2017						September 30, 2017						June 30, 2017
(Dollars In Thousands)		Amount			Percentage of Total			Amount			Percentage of Total			Amount			Percentage of Total			Amount			Percentage of Total			Amount			Percentage of Total
Commercial real estate - owner occupied		$	478,928		24.13	%		$	462,298		24.02	%		$	467,082		23.60	%		$	443,128		22.50	%		$	401,853		20.84	%
Commercial real estate - non-owner occupied			457,940		23.08				419,139		21.77				436,083		22.04				435,181		22.09				377,037		19.55
Residential real estate			460,269		23.20				476,366		24.75				489,669		24.74				512,621		26.03				525,649		27.26
Commercial			464,270		23.40				437,287		22.72				463,652		23.43				449,450		22.82				476,055		24.69
Real estate construction			99,164		5.00				104,528		5.43				97,481		4.93				104,193		5.29				124,186		6.44
Consumer			23,618		1.19				25,293		1.31				24,942		1.26				25,087		1.27				23,565		1.22
Total loans		$	1,984,189		100.00	%		$	1,924,911		100.00	%		$	1,978,909		100.00	%		$	1,969,660		100.00	%		$	1,928,345		100.00	%
Less allowance for loan losses			16,543						15,928						15,805						15,692						14,671
		$	1,967,646					$	1,908,983					$	1,963,104					$	1,953,968					$	1,913,674

Composition of Deposits - Unaudited
		June 30, 2018						March 31, 2018						December 31, 2017						September 30, 2017						June 30, 2017
(Dollars In Thousands)		Amount			Percentage of Total			Amount			Percentage of Total			Amount			Percentage of Total			Amount			Percentage of Total			Amount			Percentage of Total
Demand deposits		$	719,873		33.85	%		$	706,128		32.14	%		$	744,960		33.34	%		$	710,691		31.09	%		$	660,481		30.20	%
Interest-bearing demand deposits			462,355		21.74				501,745		22.84				486,621		21.78				480,620		21.02				454,675		20.79
Savings and money market			585,673		27.54				616,879		28.08				580,827		26.00				616,596		26.97				562,581		25.72
CDARS time deposits			13,666		0.64				17,247		0.78				21,582		0.97				37,836		1.65				39,746		1.82
CDARS/ICS non-maturity deposits			53,233		2.50				50,233		2.29				48,011		2.15				47,219		2.07				44,009		2.01
Brokered deposits			17,590		0.83				23,244		1.06				51,028		2.28				71,090		3.11				101,419		4.64
Time deposits			274,330		12.90				281,452		12.81				301,119		13.48				322,160		14.09				324,295		14.82
Total Deposits		$	2,126,720		100.00	%		$	2,196,928		100.00	%		$	2,234,148		100.00	%		$	2,286,212		100.00	%		$	2,187,206		100.00	%

Yield on Average Earning Assets and Rates on Average Interest-Bearing Liabilities
Three Months Ended - Unaudited
		June 30, 2018										March 31, 2018										June 30, 2017
		Average				Income /			Yield /			Average				Income /			Yield /			Average				Income /			Yield /
(Dollars In Thousands)		Balance				Expense			Rate			Balance				Expense			Rate			Balance				Expense			Rate
Assets:
Interest-earning assets:
Securities		$	453,717			$	2,643		2.33	%		$	440,533			$	2,679		2.43	%		$	424,387			$	3,172		2.99	%
Loans held for sale			41,515				477		4.59	%			21,257				227		4.27	%			28,254				297		4.20	%
Loans(1)			1,935,422				23,663		4.89	%			1,950,077				23,187		4.76	%			1,896,824				23,449		4.94	%
Interest-bearing balances and federal funds sold			110,800				439		1.59	%			136,969				515		1.50	%			121,572				221		0.73	%
Total interest-earning assets			2,541,454				27,222		4.28	%			2,548,836				26,608		4.18	%			2,471,037				27,139		4.39	%
Noninterest-earning assets:
Cash and due from banks			15,953										18,261										17,131
Premises, land and equipment			28,087										28,333										29,459
Other assets			279,127										276,819										285,518
Less: allowance for loan losses			(16,314	)									(16,048	)									(14,057	)
Total noninterest-earning assets			306,853										307,365										318,051
Total Assets		$	2,848,307									$	2,856,201									$	2,789,088
Liabilities and Shareholders' Equity:
Interest-bearing deposits:
Interest-bearing demand deposits		$	490,619			$	680		0.55	%		$	502,621			$	590		0.47	%		$	472,065			$	345		0.29	%
Money market deposit accounts			466,538				1,047		0.90	%			494,707				930		0.75	%			367,590				478		0.52	%
Savings accounts			174,392				233		0.53	%			173,509				209		0.48	%			191,409				212		0.44	%
Time deposits			309,449				1,057		1.37	%			346,193				1,069		1.24	%			492,932				1,384		1.12	%
Total interest-bearing deposits			1,440,998				3,017		0.84	%			1,517,030				2,798		0.74	%			1,523,996				2,419		0.63	%
Borrowings:
FHLB short-term borrowings			180,348				866		1.92	%			91,002				350		1.54	%			57,825				221		1.53	%
Securities sold under agreements to repurchase and federal funds purchased			56,693				14		0.10	%			57,344				14		0.10	%			53,949				26		0.19	%
Subordinated debentures			3,911				84		8.63	%			3,891				75		7.71	%			3,824				111		11.61	%
FHLB long-term borrowings			42,088				226		2.14	%			40,000				126		1.26	%			79,892				188		0.94	%
Total borrowings			283,040				1,190		1.68	%			192,237				565		1.18	%			195,490				546		1.12	%
Total interest-bearing deposits and borrowings			1,724,038				4,207		0.98	%			1,709,267				3,363		0.79	%			1,719,486				2,965		0.69	%
Noninterest-bearing liabilities:
Demand deposits			673,619										698,192										639,570
Other liabilities			22,060										25,962										17,886
Total liabilities			2,419,717										2,433,421										2,376,942
Shareholders' Equity			428,590										422,780										412,146
Total Liabilities and Shareholders' Equity		$	2,848,307									$	2,856,201									$	2,789,088
Interest Spread(2)									3.30	%									3.39	%									3.70	%
Net Interest Margin(3)						$	23,015		3.62	%						$	23,245		3.65	%						$	24,174		3.91	%

(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
Six Months Ended - Unaudited
		June 30, 2018										June 30, 2017
		Average				Income /			Yield /			Average				Income /			Yield /
(Dollars In Thousands)		Balance				Expense			Rate			Balance				Expense			Rate
Assets:
Interest-earning assets:
Securities		$	447,161			$	5,322		2.38	%		$	318,422			$	4,396		2.76	%
Loans held for sale			31,442				704		4.48	%			26,368				547		4.15	%
Loans(1)			1,942,700				46,850		4.82	%			1,474,551				35,398		4.80	%
Interest-bearing balances and federal funds sold			123,812				954		1.54	%			94,174				352		0.75	%
Total interest-earning assets			2,545,115				53,830		4.23	%			1,913,515				40,693		4.25	%
Noninterest-earning assets:
Cash and due from banks			17,100										14,416
Premises, land and equipment			28,210										18,280
Other assets			278,116										164,945
Less: allowance for loan losses			(16,182	)									(14,784	)
Total noninterest-earning assets			307,244										182,857
Total Assets		$	2,852,359									$	2,096,372
Liabilities and Shareholders' Equity:
Interest-bearing deposits:
Interest-bearing demand deposits		$	496,587			$	1,270		0.51	%		$	307,685			$	498		0.32	%
Money market deposit accounts			480,551				1,977		0.82	%			313,339				823		0.53	%
Savings accounts			173,960				442		0.51	%			126,103				302		0.48	%
Time deposits			327,713				2,126		1.30	%			396,439				2,298		1.16	%
Total interest-bearing deposits			1,478,811				5,815		0.79	%			1,143,566				3,921		0.69	%
Borrowings:
FHLB short-term borrowings			135,922				1,216		1.79	%			71,934				387		1.35	%
Securities sold under agreements to repurchase and federal funds purchased			57,017				28		0.10	%			41,148				42		0.20	%
Subordinated debentures			3,901				159		8.17	%			1,919				111		11.57	%
FHLB long-term borrowings			41,050				352		1.71	%			69,698				368		1.06	%
Total borrowings			237,890				1,755		1.48	%			184,699				908		0.98	%
Total interest-bearing deposits and borrowings			1,716,701				7,570		0.88	%			1,328,265				4,829		0.73	%
Noninterest-bearing liabilities:
Demand deposits			685,912										487,511
Other liabilities			24,048										13,645
Total liabilities			2,426,660										1,829,421
Shareholders' Equity			425,699										266,951
Total Liabilities and Shareholders' Equity		$	2,852,359									$	2,096,372
Interest Spread(2)									3.35	%									3.53	%
Net Interest Margin(3)						$	46,260		3.64	%						$	35,864		3.75	%
(1) Loans placed on nonaccrual status are included in loan balances.
(2) Interest spread is the average yield earned on earning assets, less the average rate incurred on interest-bearing liabilities.
(3) Net interest margin is net interest income, expressed as a percentage of average earning assets.

Segment Reporting - Unaudited
Three Months Ended		Commercial			Mortgage				Trust & Wealth											Consolidated
June 30, 2018		Banking			Banking				Management			Other				Eliminations				Totals
		(In Thousands)
Revenues:
Interest income		$	26,841		$	477			$	3		$	6			$	(105	)		$	27,222
Gain on sale of loans			-			4,196				-			-				-				4,196
Other revenues			1,634			373				2,726			491				(330	)			4,894
Total revenues			28,475			5,046				2,729			497				(435	)			36,312
Expenses:
Interest expense			4,130			39				-			143				(105	)			4,207
Salaries and employee benefits			8,324			3,130				1,075			-				-				12,529
Other expenses			6,292			971				660			956				(330	)			8,549
Total operating expenses			18,746			4,140				1,735			1,099				(435	)			25,285
Income (loss) before income taxes		$	9,729		$	906			$	994		$	(602	)		$	-			$	11,027
Total assets		$	2,871,045		$	40,293			$	12,301		$	23,435			$	(26,489	)		$	2,920,585
Three Months Ended		Commercial			Mortgage				Trust & Wealth											Consolidated
March 31, 2018		Banking			Banking				Management			Other				Eliminations				Totals
		(In Thousands)
Revenues:
Interest income		$	26,287		$	227			$	2		$	6			$	86			$	26,608
Gain on sale of loans			-			2,792				-			-				-				2,792
Other revenues			1,505			1,269				1,741			418				(330	)			4,603
Total revenues			27,792			4,288				1,743			424				(244	)			34,003
Expenses:
Interest expense			3,294			(152	)			-			135				86				3,363
Salaries and employee benefits			7,928			2,877				948			-				(25	)			11,728
Other expenses			7,285			706				482			828				(305	)			8,996
Total operating expenses			18,507			3,431				1,430			963				(244	)			24,087
Income (loss) before income taxes		$	9,285		$	857			$	313		$	(539	)		$	0			$	9,916
Total assets		$	2,781,867		$	39,416			$	11,078		$	22,494			$	(21,007	)		$	2,833,848
Three Months Ended		Commercial			Mortgage				Trust & Wealth											Consolidated
June 30, 2017		Banking			Banking				Management			Other				Eliminations				Totals
		(In Thousands)
Revenues:
Interest income		$	26,917		$	297			$	3		$	6			$	(84	)		$	27,139
Gain on sale of loans			-			6,046				-			-				-				6,046
Other revenues			1,703			(692	)			1,824			327				(323	)			2,839
Total revenues			28,620			5,651				1,827			333				(407	)			36,024
Expenses:
Interest expense			2,854			16				-			178				(84	)			2,964
Salaries and employee benefits			8,240			3,193				1,227			-				-				12,660
Other expenses			7,922			1,256				452			5,159				(323	)			14,466
Total operating expenses			19,016			4,465				1,679			5,337				(407	)			30,090
Income (loss) before income taxes		$	9,604		$	1,186			$	148		$	(5,004	)		$	-			$	5,934
Total assets		$	2,685,238		$	37,923			$	41,437		$	418,877			$	(426,485	)		$	2,756,990

Segment Reporting - Unaudited
Six Months Ended		Commercial			Mortgage				Trust & Wealth											Consolidated
June 30, 2018		Banking			Banking				Management			Other				Eliminations				Totals
		(In Thousands)
Revenues:
Interest income		$	53,128		$	704			$	5		$	12			$	(19	)		$	53,830
Gain on sale of loans			-			6,988				-			-				-				6,988
Other revenues			3,139			1,642				4,467			909				(660	)			9,497
Total revenues			56,267			9,334				4,472			921				(679	)			70,315
Expenses:
Interest expense			7,424			(113	)			-			278				(19	)			7,570
Salaries and employee benefits			16,252			6,007				2,023			-				(25	)			24,257
Other expenses			13,577			1,677				1,142			1,784				(635	)			17,545
Total operating expenses			37,253			7,571				3,165			2,062				(679	)			49,372
Income (loss) before income taxes		$	19,014		$	1,763			$	1,307		$	(1,141	)		$	-			$	20,943
Total assets		$	2,871,045		$	40,293			$	12,301		$	23,435			$	(26,489	)		$	2,920,585
Six Months Ended		Commercial			Mortgage				Trust & Wealth											Consolidated
June 30, 2017		Banking			Banking				Management			Other				Eliminations				Totals
		(In Thousands)
Revenues:
Interest income		$	40,311		$	547			$	3		$	12			$	(180	)		$	40,693
Gain on sale of loans			-			9,391				-			-				-				9,391
Other revenues			2,468			434				2,578			663				(646	)			5,497
Total revenues			42,779			10,372				2,581			675				(826	)			55,581
Expenses:
Interest expense			4,724			43				-			241				(180	)			4,828
Salaries and employee benefits			12,658			6,224				1,818			-				-				20,700
Other expenses			11,449			2,097				691			6,430				(646	)			20,021
Total operating expenses			28,831			8,364				2,509			6,671				(826	)			45,549
Income (loss) before income taxes		$	13,948		$	2,008			$	72		$	(5,996	)		$	-			$	10,032
Total assets		$	2,685,238		$	37,923			$	41,437		$	418,877			$	(426,485	)		$	2,756,990

Reconciliation of Non-GAAP Financial Measures - Unaudited

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

		Three Months				Three Months				Three Months				Six Months				Six Months				Twelve Months
		Ended				Ended				Ended				Ended				Ended				Ended
		June 30,				March 31,				June 30,				June 30,				June 30,				December 31,
(Dollars In Thousands)			2018				2018				2017				2018				2017				2017
Book value per common share		$	20.88			$	20.62			$	20.36			$	20.88			$	20.36			$	20.53
Effect of intangible assets		$	(8.89	)		$	(8.97	)		$	(9.04	)		$	(8.89	)		$	(9.04	)		$	(9.01	)
Tangible book value per common share		$	11.99			$	11.65			$	11.32			$	11.99			$	11.32			$	11.52
Common equity ratio			14.87	%			15.06	%			15.05	%			14.87	%			15.05	%			14.67	%
Effect of intangible assets			-5.75	%			-5.96	%			-6.08	%			-5.75	%			-6.08	%			-5.88	%
Tangible common equity ratio			9.12	%			9.10	%			8.97	%			9.12	%			8.97	%			8.79	%
Net interest margin			3.62	%			3.65	%			3.91	%			3.64	%			3.75	%			3.81	%
Effect of tax exempt securities and loans			0.05	%			0.05	%			0.07	%			0.04	%			0.06	%			0.07	%
Net interest margin - fully tax equivalent basis			3.67	%			3.70	%			3.98	%			3.68	%			3.81	%			3.88	%
Return on average equity			8.36	%			7.06	%			3.73	%			8.01	%			4.83	%			5.03	%
Effect of intangible assets			5.38	%			6.51	%			3.14	%			5.92	%			2.69	%			2.69	%
Return on average tangible equity			13.74	%			13.57	%			6.87	%			13.93	%			7.52	%			7.72	%
Average equity		$	428,590			$	422,780			$	412,146			$	425,699			$	266,951			$	327,738
Effect of average intangible assets		$	185,358			$	184,399			$	188,255			$	184,896			$	95,235			$	125,330
Average tangible equity		$	243,232			$	238,381			$	223,891			$	240,803			$	171,716			$	202,408

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