##### 



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 Form 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year endedDecember 31, 2007
  o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission File Number000-49929
 Access National Corporation
 (Exact name of registrant as specified in its charter)
 Organized under the laws of Virginia
    
    82-0545425(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    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)
 Securities registered pursuant to Section 12(b) of the Act:Title of each class
    
    Name of each exchange on which registeredCommon Stock $.835 par value
    
    The NASDAQ Stock Market LLCSecurities registered pursuant to Section 12 (g) of the Act:(Title of class) None
 o þ
 o þ
 þ o
 þ
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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Access National Corporation
FORM 10-K  INDEX
 PagePART IItem 1 Business
    
    
    2Item 1A Risk Factors
    
    
    10Item 1B Unresolved Staff Comments
    
    
    15Item 2 Properties
    
    
    15Item 3 Legal Proceedings
    
    
    15Item 4 Submission of Matters to a Vote of Security Holders
    
    
    16PART IIItem 5 Market for Registrants Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity
Securities
    
    
    16Item 6 Selected Financial Data
    
    
    19Item 7 Managements Discussion and Analysis of Financial
Condition and Results of Operation
    
    
    20Item 7A Quantitative and Qualitative Disclosures About Market Risk
    
    
    36Item 8 Financial Statements and Supplementary Data
    
    
    37Item 9 Changes in and Disagreements with Accountants On
Accounting and Financial Disclosure
    
    
    73Item 9A Controls and Procedures
    
    
    73Item 9B Other Information
    
    
    73PART IIIItem 10 Directors, Executive Officers and Corporate Governance
    
    
    74Item 11 Executive Compensation
    
    
    74Item 12 Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters
    
    
    74Item 13 Certain Relationships and Related Transactions, and
Director Independence
    
    
    74Item 14 Principal Accountant Fees and Services
    
    
    74PART IVItem 15 Exhibits, Financial Statement Schedules
    
    
    76Signatures
    
    
    77
 1




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PART I
  ITEM 1  BUSINESS
         2




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Our Strategy  historical and prospective
      3




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Lending Activities
     Loan Portfolio  Loans Held for Investment.
 Commercial Loans:
 Real Estate Construction Loans:
 Commercial Real Estate Loans:
 4




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Residential Real Estate Loans:
   Consumer Loans:
 Loans Held for Sale (LHFS).
  Brokered Loans
  Deposits
  Market Area
  5




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Competition
  Employees
  Supervision and Regulation
  General.
    6




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Governmental Policies and Legislation.
   Dividends.
 Capital Requirements.
  7




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Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA).
        8




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Deposit Insurance Assessments.
 Gramm-Leach-Bliley Act of 1999.
    Community Reinvestment Act.
 Federal Home Loan Bank (FHLB) of Atlanta .
 Mortgage Banking Regulation .
 9




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USA PATRIOT Act .
 Reporting Terrorist Activities.
  Consumer Laws and Regulations.
 ITEM 1A  RISK FACTORS
 Our future success will depend on our ability to compete effectively in the highly competitive
financial services industry.
   10




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Our profitability depends on interest rates generally, and we may be adversely affected by changes
in government monetary policy.
   Our profitability depends significantly on local economic conditions.
   Our business strategy includes the continuation of our growth plans, and our financial condition
and results of operations could be negatively affected if we fail to grow or fail to manage our
growth effectively.
   We may face risks with respect to future acquisitions.
  11




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
    
    the time and costs associated with identifying and evaluating potential acquisitions and
merger partners;
    
    the estimates and judgments used to evaluate credit, operations, management and market
risks with respect to the target entity may not be accurate;
    
    the time and costs of evaluating new markets, hiring experienced local management and
opening new offices, and the time lags between these activities and the generation of
sufficient assets and deposits to support the costs of the expansion;
    
    our ability to finance an acquisition and possible ownership or economic dilution to our
current shareholders;
    
    the diversion of our managements attention to the negotiation of a transaction, and the
integration of the operations and personnel of the combining businesses;
    
    entry into new markets where we lack experience;
    
    the introduction of new products and services into our business;
    
    the incurrence and possible impairment of goodwill associated with an acquisition and
possible adverse short-term effects on our results of operations; and
    
    the potential loss of key employees and clients.
  Our allowance for loan losses could become inadequate and reduce our earnings and capital.
  Liquidity needs could adversely affect our results of operations and financial condition.
  12




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We are subject to extensive regulation that could limit or restrict our activities and adversely
affect our earnings.
    Our recent results may not be indicative of our future results.
  Our hedging strategies may not be successful in managing our risks associated with interest rates.
  The profitability of the Mortgage Corporation will be significantly reduced if we are not able to
sell mortgages.
   We may be exposed to greater risks from offering non-conforming mortgage loans.
  13




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Our small- to medium-sized business target market may have fewer financial resources to weather a
downturn in the economy.
  We depend on the accuracy and completeness of information about clients and counterparties.
  Negative public opinion could damage our reputation and adversely impact our earnings.
  We depend on the services of key personnel, and a loss of any of those personnel could disrupt our
operations and result in reduced revenues.
  We may need to invest in new technology to compete effectively, and that could have a negative
effect on our operating results and the value of our common stock.
  Our ability to pay dividends is subject to regulatory restrictions, and we may be unable to pay
future dividends.
  14




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Certain provisions under our articles of incorporation and applicable law may make it difficult for
others to obtain control of our corporation even if such a change in control may be favored by some
shareholders.
  ITEM
1B  UNRESOLVED STAFF COMMENTS
  ITEM 2  PROPERTIES
   ITEM
3  LEGAL PROCEEDINGS
  ITEM 4  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  PART II
 ITEM
5  MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
   15




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2007
    
    
    
    
    
    2006High
    
    Low
    
    Dividends
    
    High
    
    Low
    
    DividendsFirst Quarter
    
    $
    9.82
    
    
    $
    9.10
    
    
    $
    0.01
    
    
    $
    15.10
    
    
    $
    9.84
    
    
    $
    0.005Second Quarter
    
    
    9.59
    
    
    
    8.60
    
    
    
    0.01
    
    
    
    11.30
    
    
    
    8.40
    
    
    
    0.005Third Quarter
    
    
    8.91
    
    
    
    6.89
    
    
    
    0.01
    
    
    
    10.39
    
    
    
    8.75
    
    
    
    0.005Fourth Quarter
    
    
    8.14
    
    
    
    5.60
    
    
    
    0.01
    
    
    
    10.05
    
    
    
    9.10
    
    
    
    0.005
   Issuer Purchases of Equity Securities for the Quarter Ended December 31, 2007
  Issuer Purchases of Equity Securities(c) Total Number of
    
    
    (d) Maximum NumberShares Purchased as
    
    
    of Shares that may(a) Total Number of
    
    
    (b) Average Price
    
    
    Part of Publicly
    
    
    yet be PurchasedPeriod
    
    Shares Purchased
    
    
    Paid Per Share
    
    
    Announced Plan
    
    
    Under the PlanOctober 1 - October 31, 2007
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    November 1 - November 30, 2007
    
    
    149,083
    
    
    
    5.84
    
    
    
    149,083
    
    
    
    350,917December 1 - December 31, 2007
    
    
    96,541
    
    
    
    5.93
    
    
    
    96,541
    
    
    
    254,376Total
    
    
    245,624
    
    
    $
    5.88
    
    
    
    245,624
    
    
    
    254,376
 Stock Performance
   16




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Company, Headquarters
    
    Exchange
    
    Trading Symbol
    
    EstablishedCardinal Financial Corporation
    
    NASDAQ-GS
    
    CFNL
    
    1998Fairfax, VirginiaEagle Bancorp, Inc.
    
    NASDAQ-CM
    
    EGBN
    
    1998Bethesda, MarylandTowne Bank
    
    NASDAQ-GS
    
    TOWN
    
    1999Portsmouth, VirginiaValley Financial Corporation
    
    NASDAQ-CM
    
    VYFC
    
    1995Roanoke, VirginiaVirginia National Bank
    
    OTC-BB
    
    VABK
    
    1998Charlottesville, Virginia
  17




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##### 



Access National Corporation
 
 Period EndingIndex
    
    12/31/02
    
    12/31/03
    
    12/31/04
    
    12/31/05
    
    12/31/06
    
    12/31/07Access National Corporation
    
    
    100.00
    
    
    
    218.72
    
    
    
    205.22
    
    
    
    413.64
    
    
    
    278.05
    
    
    
    176.59S&P500
    
    
    100.00
    
    
    
    128.68
    
    
    
    142.69
    
    
    
    149.70
    
    
    
    173.34
    
    
    
    182.86Peer Group Index*
    
    
    100.00
    
    
    
    153.99
    
    
    
    197.93
    
    
    
    203.03
    
    
    
    204.57
    
    
    
    169.20
 
 *
    
    Access National Corporations peer group consists of the following: Cardinal Financial
Corporation (CFNL),
Eagle Bancorp, Inc. (EGBN), Towne Bank (TOWN), Valley Financial Corporation (VYFC), and Virginia
National
Bank (VABK). 18




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ITEM 6  SELECTED FINANCIAL DATA
 Selected Financial Data
 Year Ended December 312007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003(In Thousands, Except Per Share Data)Income Statement Data:Net interest income
    
    $
    20,122
    
    
    $
    18,256
    
    
    $
    15,273
    
    
    $
    11,694
    
    
    $
    9,138Provision for loan losses
    
    
    2,588
    
    
    
    232
    
    
    
    1,196
    
    
    
    1,462
    
    
    
    526Non-interest income
    
    
    27,707
    
    
    
    27,633
    
    
    
    30,956
    
    
    
    25,952
    
    
    
    33,765Non-interest expense
    
    
    39,949
    
    
    
    34,212
    
    
    
    35,830
    
    
    
    31,580
    
    
    
    36,432Income taxes
    
    
    1,590
    
    
    
    3,853
    
    
    
    3,305
    
    
    
    1,619
    
    
    
    2,129Net income before extra ordinary items
    
    
    3,702
    
    
    
    7,592
    
    
    
    5,898
    
    
    
    2,985
    
    
    
    3,816Extra ordinary income, net of income tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    330
    
    
    
    Net Income
    
    $
    3,702
    
    
    $
    7,592
    
    
    $
    5,898
    
    
    $
    3,315
    
    
    $
    3,816Per Share Data:Earnings per shareBasic, before extra ordinary income
    
    $
    0.32
    
    
    $
    0.81
    
    
    $
    0.75
    
    
    $
    0.40
    
    
    $
    0.55Basic
    
    
    0.32
    
    
    
    0.81
    
    
    
    0.75
    
    
    
    0.44
    
    
    
    0.55Diluted, before extra ordinary income
    
    
    0.31
    
    
    
    0.72
    
    
    
    0.63
    
    
    
    0.33
    
    
    
    0.44Diluted
    
    
    0.31
    
    
    
    0.72
    
    
    
    0.63
    
    
    
    0.36
    
    
    
    0.44Cash dividends paid
    
    
    0.04
    
    
    
    0.02
    
    
    
    
    
    
    
    
    
    
    
    Book value at period end
    
    
    5.35
    
    
    
    5.27
    
    
    
    3.92
    
    
    
    3.29
    
    
    
    2.84Balance Sheet Data:Total assets
    
    $
    622,376
    
    
    $
    644,782
    
    
    $
    537,050
    
    
    $
    420,098
    
    
    $
    257,390Loans held for sale
    
    
    39,144
    
    
    
    65,320
    
    
    
    45,019
    
    
    
    36,245
    
    
    
    29,756Total loans
    
    
    477,598
    
    
    
    433,594
    
    
    
    369,733
    
    
    
    292,594
    
    
    
    189,320Total securities
    
    
    73,558
    
    
    
    105,163
    
    
    
    87,771
    
    
    
    51,378
    
    
    
    23,178Total deposits
    
    
    473,418
    
    
    
    438,932
    
    
    
    419,629
    
    
    
    317,393
    
    
    
    198,183Shareholders equity
    
    
    57,961
    
    
    
    62,295
    
    
    
    31,185
    
    
    
    25,998
    
    
    
    19,755Average shares outstanding, basic
    
    
    11,620,130
    
    
    
    9,429,074
    
    
    
    7,867,135
    
    
    
    7,509,536
    
    
    
    6,986,680Average shares outstanding, diluted
    
    
    11,866,468
    
    
    
    10,541,873
    
    
    
    9,423,087
    
    
    
    9,155,778
    
    
    
    8,822,372Performance Ratios:Return on average assets
    
    
    0.57
    %
    
    
    1.29
    %
    
    
    1.29
    %
    
    
    0.97
    %
    
    
    1.45
    %Return on average equity
    
    
    5.84
    %
    
    
    17.15
    %
    
    
    20.63
    %
    
    
    14.48
    %
    
    
    20.48
    %Net interest margin (1)
    
    
    3.18
    %
    
    
    3.21
    %
    
    
    3.49
    %
    
    
    3.64
    %
    
    
    3.58
    %Efficiency Ratios:Access National Bank
    
    
    50.87
    %
    
    
    48.67
    %
    
    
    52.21
    %
    
    
    56.40
    %
    
    
    50.71
    %Access National Mortgage Corp.
    
    
    107.52
    %
    
    
    92.42
    %
    
    
    89.13
    %
    
    
    94.18
    %
    
    
    89.66
    %Access National Corporation
    
    
    83.52
    %
    
    
    75.06
    %
    
    
    80.09
    %
    
    
    87.61
    %
    
    
    84.26
    %Asset Quality Ratios:Allowance to period end loans
    
    
    1.56
    %
    
    
    1.26
    %
    
    
    1.41
    %
    
    
    1.37
    %
    
    
    1.35
    %Allowance to nonperforming loans
    
    
    449.25
    %
    
    
    1514.60
    %
    
    
    397.78
    %
    
    
    185.07
    %
    
    
    310.93
    %Net charge-offs to average loans
    
    
    0.12
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
   19




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ITEM 6  SELECTED FINANCIAL DATA continued
 December 312007
    
    2006
    
    2005
    
    2004
    
    2003(In Thousands, Except Per Share Data)Average Balance Sheet Data:Total assets
    
    $
    649,584
    
    
    $
    589,834
    
    
    $
    457,251
    
    
    $
    341,153
    
    
    $
    263,415Securities
    
    
    94,331
    
    
    
    107,165
    
    
    
    64,862
    
    
    
    25,340
    
    
    
    14,036Loans held for sale
    
    
    49,750
    
    
    
    53,935
    
    
    
    45,688
    
    
    
    42,416
    
    
    
    80,649Loans
    
    
    472,372
    
    
    
    400,211
    
    
    
    318,438
    
    
    
    246,809
    
    
    
    146,366Allowance for loan losses
    
    
    6,170
    
    
    
    5,363
    
    
    
    4,433
    
    
    
    2,945
    
    
    
    2,363Total deposits
    
    
    444,999
    
    
    
    423,788
    
    
    
    337,403
    
    
    
    235,387
    
    
    
    203,840Junior subordinated debentures
    
    
    9,237
    
    
    
    10,311
    
    
    
    10,311
    
    
    
    10,311
    
    
    
    5,593Total shareholders equity
    
    
    63,343
    
    
    
    44,270
    
    
    
    28,586
    
    
    
    22,901
    
    
    
    18,637Capital Ratios:Tier 1 risk-based capital
    
    
    12.41
    %
    
    
    15.01
    %
    
    
    10.78
    %
    
    
    10.97
    %
    
    
    12.54
    %Total risk-based capital
    
    
    13.66
    %
    
    
    16.18
    %
    
    
    12.11
    %
    
    
    12.80
    %
    
    
    15.47
    %Leverage capital ratio
    
    
    10.07
    %
    
    
    11.53
    %
    
    
    7.60
    %
    
    
    8.83
    %
    
    
    10.28
    %
 ITEM 7  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIALCONDITION AND RESULTS OF
OPERATION
  Forward-Looking Statements
  20




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CRITICAL ACCOUNTING POLICIES
 Allowance for Loan Losses
   Other Than Temporary Impairment of Investment Securities
  Derivative Financial Instruments
   FINANCIAL CONDITION
 Summary
    21




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Investment Securities
  Investment Securities Available for Sale
  December 312007
    
    
    2006
    
    
    2005Investment Securities
Available for Sale:US Treasury
    
    $
    1,013
    
    
    $
    996
    
    
    $
    1,602US Government agency
    
    
    61,720
    
    
    
    91,609
    
    
    
    75,260Mortgage backed
    
    
    799
    
    
    
    1,040
    
    
    
    1,393Tax exempt municipals
    
    
    2,891
    
    
    
    2,888
    
    
    
    2,840Taxable municipals
    
    
    1,099
    
    
    
    1,275
    
    
    
    1,466Mutual fund
    
    
    1,479
    
    
    
    1,468
    
    
    
    1,471Restricted stock
    
    
    4,557
    
    
    
    5,887
    
    
    
    3,739Total Securities
    
    $
    73,558
    
    
    $
    105,163
    
    
    $
    87,771
 Maturity Schedule of Investment Securities Available for Sale 2007
 After One Year
    
    
    After Five YearsWithin
    
    
    But Within
    
    
    But WithinOne Year
    
    
    Five Years
    
    
    Ten Years
    
    
    TotalAmount
    
    
    Yield
    
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    Yield
    
    
    AmountInvestment Securities Available for Sale (1)US Treasury
    
    $
    
    
    
    
    
    
    
    $
    1,013
    
    
    
    4.50
    %
    
    $
    
    
    
    
    
    
    
    $
    1,013US Government agency
    
    
    38,879
    
    
    
    4.42
    %
    
    
    997
    
    
    
    4.05
    %
    
    
    21,844
    
    
    
    5.78
    %
    
    
    61,720Mortgage backed
    
    
    
    
    
    
    
    
    
    
    799
    
    
    
    5.34
    %
    
    
    
    
    
    
    
    
    
    
    799Tax exempt municipals
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,891
    
    
    
    5.50
    %
    
    
    2,891Taxable municipals
    
    
    
    
    
    
    
    
    
    
    1,099
    
    
    
    4.30
    %
    
    
    
    
    
    
    
    
    
    
    1,099Total
    
    $
    38,879
    
    
    
    4.42
    %
    
    $
    3,908
    
    
    
    3.29
    %
    
    $
    24,735
    
    
    
    5.75
    %
    
    $
    67,522
 
 (1)
    
    Excludes CRA Mutual Fund, FRB Stock and FHLB Stock Loans
  22




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##### 



Composition of Loan Portfolio
 Year Ended December 312007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003Percentage
    
    
    
    
    
    
    Percentage
    
    
    
    
    
    
    Percentage
    
    
    
    
    
    
    Percentage
    
    
    
    
    
    
    PercentageAmount
    
    
    of Total
    
    
    Amount
    
    
    of Total
    
    
    Amount
    
    
    of Total
    
    
    Amount
    
    
    of Total
    
    
    Amount
    
    
    of Total(In Thousands)Commercial
    
    $
    64,860
    
    
    
    13.58
    %
    
    $
    51,825
    
    
    
    11.95
    %
    
    $
    38,516
    
    
    
    10.42
    %
    
    $
    48,427
    
    
    
    16.55
    %
    
    $
    31,759
    
    
    
    16.78
    %Commercial real estate
    
    
    199,894
    
    
    
    41.85
    
    
    
    159,996
    
    
    
    36.90
    
    
    
    137,423
    
    
    
    37.17
    
    
    
    96,939
    
    
    
    33.13
    
    
    
    69,128
    
    
    
    36.51Real estate construction
    
    
    55,074
    
    
    
    11.53
    
    
    
    68,570
    
    
    
    15.81
    
    
    
    37,054
    
    
    
    10.02
    
    
    
    33,073
    
    
    
    11.30
    
    
    
    13,766
    
    
    
    7.27Residential real estate
    
    
    156,731
    
    
    
    32.82
    
    
    
    152,648
    
    
    
    35.21
    
    
    
    156,185
    
    
    
    42.24
    
    
    
    113,432
    
    
    
    38.77
    
    
    
    73,846
    
    
    
    39.01Consumer
    
    
    1,039
    
    
    
    0.22
    
    
    
    555
    
    
    
    0.13
    
    
    
    555
    
    
    
    0.15
    
    
    
    723
    
    
    
    0.25
    
    
    
    821
    
    
    
    0.43Total loans
    
    $
    477,598
    
    
    
    100.00
    %
    
    $
    433,594
    
    
    
    100.00
    %
    
    $
    369,733
    
    
    
    100.00
    %
    
    $
    292,594
    
    
    
    100.00
    %
    
    $
    189,320
    
    
    
    100.00
    %
 Loan Maturity Distribution at December 31, 2007Three Months or
    
    
    Over Three Months
    
    
    Over One Year
    
    
    OverLess
    
    
    Through One Year
    
    
    Through Five Years
    
    
    Five Years
    
    
    Total(In Thousands)Commercial
    
    $
    9,357
    
    
    $
    18,383
    
    
    $
    32,413
    
    
    $
    4,707
    
    
    $
    64,860Commercial real estate
    
    
    20,229
    
    
    
    43,095
    
    
    
    126,818
    
    
    
    9,752
    
    
    
    199,894Real estate construction
    
    
    3,022
    
    
    
    9,426
    
    
    
    42,626
    
    
    
    
    
    
    
    55,074Residential real estate
    
    
    31,489
    
    
    
    33,175
    
    
    
    76,649
    
    
    
    15,418
    
    
    
    156,731Consumer
    
    
    89
    
    
    
    30
    
    
    
    920
    
    
    
    
    
    
    
    1,039Total
    
    $
    64,186
    
    
    $
    104,109
    
    
    $
    279,426
    
    
    $
    29,877
    
    
    $
    477,598
 Allowance for Loan Losses
  23




---



##### 



24




---



##### 



Allowance for Loan Losses
 Year Ended December 312007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003(In Thousands)Balance, beginning of period
    
    $
    5,452
    
    
    $
    5,215
    
    
    $
    4,019
    
    
    $
    2,565
    
    
    $
    2,048Provision for loan losses
    
    
    2,588
    
    
    
    232
    
    
    
    1,196
    
    
    
    1,462
    
    
    
    526Charge-offs:Commerical
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8
    
    
    
    11Real estate
    
    
    580
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Consumer
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total charge-offs
    
    
    580
    
    
    
    
    
    
    
    
    
    
    
    8
    
    
    
    11Recoveries:Commerical
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2Real estate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Consumer
    
    
    2
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    Total recoveries
    
    
    2
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    2Net charge-offs
    
    
    (578
    )
    
    
    5
    
    
    
    
    
    
    
    (8
    )
    
    
    (9
    )Balance, end of period
    
    $
    7,462
    
    
    $
    5,452
    
    
    $
    5,215
    
    
    $
    4,019
    
    
    $
    2,565
 Allocation of the Allowance for Loan Losses
 Year Ended December 31Percentage
    
    
    
    
    
    
    Percentage
    
    
    
    
    
    
    Percentage
    
    
    
    
    
    
    Percentage
    
    
    
    
    
    
    Percentage2007
    
    
    of total
    
    
    2006
    
    
    of total
    
    
    2005
    
    
    of total
    
    
    2004
    
    
    of total
    
    
    2003
    
    
    of total( In Thousands)Commercial
    
    $
    1,341
    
    
    
    17.97
    %
    
    $
    802
    
    
    
    14.71
    %
    
    $
    1,546
    
    
    
    29.64
    %
    
    $
    1,475
    
    
    
    36.70
    %
    
    $
    508
    
    
    
    19.81
    %Commercial real estate
    
    
    3,487
    
    
    
    46.73
    
    
    
    2,296
    
    
    
    42.11
    
    
    
    1,896
    
    
    
    36.36
    
    
    
    1,235
    
    
    
    30.73
    
    
    
    1,054
    
    
    
    41.09Real estate construction
    
    
    929
    
    
    
    12.45
    
    
    
    1,055
    
    
    
    19.35
    
    
    
    499
    
    
    
    9.58
    
    
    
    438
    
    
    
    10.90
    
    
    
    220
    
    
    
    8.58Residential real estate
    
    
    1,695
    
    
    
    22.72
    
    
    
    1,293
    
    
    
    23.72
    
    
    
    1,267
    
    
    
    24.30
    
    
    
    862
    
    
    
    21.45
    
    
    
    772
    
    
    
    30.10Consumer
    
    
    10
    
    
    
    0.13
    
    
    
    6
    
    
    
    0.11
    
    
    
    6
    
    
    
    0.12
    
    
    
    9
    
    
    
    0.22
    
    
    
    11
    
    
    
    0.42Total
    
    $
    7,462
    
    
    
    100.00
    %
    
    $
    5,452
    
    
    
    100.00
    %
    
    $
    5,215
    
    
    
    100.00
    %
    
    $
    4,019
    
    
    
    100.00
    %
    
    $
    2,565
    
    
    
    100.00
    %
 25




---



##### 



Non-performing Assets And Past Due
  Nonperforming Assets and Accruing Loans Past Due 90 Days or More
 December 31,(In Thousands)
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003Non-accrual loans:Commercial
    
    $
    187
    
    
    $
    
    
    
    $
    1,311
    
    
    $
    1,615
    
    
    $
    228Residential real estate
    
    
    1,474
    
    
    
    360
    
    
    
    
    
    
    
    543
    
    
    
    598Total non-accrual loans
    
    
    1,661
    
    
    
    360
    
    
    
    1,311
    
    
    
    2,158
    
    
    
    826Restructured loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other real estate owned (OREO)
    
    
    1,041
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total non-performing assets
    
    $
    2,702
    
    
    $
    360
    
    
    $
    1,311
    
    
    $
    2,158
    
    
    $
    826Ratio of non-performing assets to:Total loans plus OREO
    
    
    0.56
    %
    
    
    0.08
    %
    
    
    0.35
    %
    
    
    0.74
    %
    
    
    0.44
    %Total assets
    
    
    0.43
    %
    
    
    0.06
    %
    
    
    0.24
    %
    
    
    0.51
    %
    
    
    0.32
    %Accruing past due loans:90 or more days past due
    
    $
    
    
    
    $
    914
    
    
    $
    
    
    
    $
    
    
    
    $
    
     Deposits
  26




---



##### 



Average Deposits and Average Rates Paid
 Year Ended December 312007
    
    
    2006
    
    
    2005Average
    
    
    Income /
    
    
    Yield /
    
    
    Average
    
    
    Income /
    
    
    Yield /
    
    
    Average
    
    
    Income /
    
    
    Yield /Balance
    
    
    Expense
    
    
    Rate
    
    
    Balance
    
    
    Expense
    
    
    Rate
    
    
    Balance
    
    
    Expense
    
    
    RateInterest-bearing demand deposits
    
    $
    9,507
    
    
    $
    199
    
    
    
    2.09
    %
    
    $
    10,691
    
    
    $
    224
    
    
    
    2.10
    %
    
    $
    10,630
    
    
    $
    200
    
    
    
    1.88
    %Money market deposit accounts
    
    
    111,344
    
    
    
    4,888
    
    
    
    4.39
    %
    
    
    118,548
    
    
    
    4,859
    
    
    
    4.10
    %
    
    
    130,147
    
    
    
    4,255
    
    
    
    3.27
    %Savings accounts
    
    
    4,989
    
    
    
    231
    
    
    
    4.63
    %
    
    
    2,147
    
    
    
    88
    
    
    
    4.10
    %
    
    
    450
    
    
    
    4
    
    
    
    0.89
    %Time deposits
    
    
    256,805
    
    
    
    12,808
    
    
    
    4.99
    %
    
    
    230,896
    
    
    
    10,605
    
    
    
    4.59
    %
    
    
    129,314
    
    
    
    4,559
    
    
    
    3.53
    %Total interest-bearing deposits
    
    
    382,645
    
    
    
    18,126
    
    
    
    4.74
    %
    
    
    362,282
    
    
    
    15,776
    
    
    
    4.35
    %
    
    
    270,541
    
    
    
    9,018
    
    
    
    3.33
    %Non-interest bearing demand deposits
    
    
    62,354
    
    
    
    
    
    
    
    
    
    
    
    61,506
    
    
    
    
    
    
    
    
    
    
    
    66,862Total deposits
    
    $
    444,999
    
    
    
    
    
    
    
    
    
    
    $
    423,788
    
    
    
    
    
    
    
    
    
    
    $
    337,403
  Certificate of Deposit Maturity Distribution
 December 31, 2007Three months
    
    
    Over three
    
    
    Overor less
    
    
    through twelve months
    
    
    twelve months
    
    
    Total(In Thousands)Less than $100,000
    
    $
    43,127
    
    
    $
    65,578
    
    
    $
    60,253
    
    
    $
    168,958Greater than or equal to $100,000
    
    
    36,576
    
    
    
    50,059
    
    
    
    15,590
    
    
    
    102,225$
    79,703
    
    
    $
    115,637
    
    
    $
    75,843
    
    
    $
    271,183
 Borrowings
  27




---



##### 



Borrowed Funds Distribution
 Year Ended December 312007
    
    
    2006
    
    
    2005(In Thousands)At Period EndFHLB advances
    
    $
    15,500
    
    
    $
    45,000
    
    
    $
    36,000Securities sold under agreements to repurchase
    
    
    14,814
    
    
    
    14,541
    
    
    
    977Commercial paper
    
    
    9,454
    
    
    
    20,599
    
    
    
    11,219US Treasury demand note
    
    
    1,907
    
    
    
    
    
    
    
    FHLB long term borrowings
    
    
    39,524
    
    
    
    42,572
    
    
    
    21,786Subordinated debentures
    
    
    6,186
    
    
    
    10,311
    
    
    
    10,311Fed funds purchased
    
    
    
    
    
    
    4,811
    
    
    
    Total at period end
    
    $
    87,385
    
    
    
    137,834
    
    
    $
    80,293Average BalancesFHLB advances
    
    $
    60,224
    
    
    $
    61,066
    
    
    $
    43,375Securities sold under agreements to repurchase
    
    
    11,695
    
    
    
    4,644
    
    
    
    925Commercial paper
    
    
    15,679
    
    
    
    17,586
    
    
    
    8,520US Treasury demand note
    
    
    234
    
    
    
    
    
    
    
    FHLB long term borrowings
    
    
    41,932
    
    
    
    23,722
    
    
    
    24,028Subordinated debentures
    
    
    9,237
    
    
    
    10,311
    
    
    
    10,311Fed funds purchased
    
    
    716
    
    
    
    419
    
    
    
    Total average balance
    
    $
    139,717
    
    
    $
    117,748
    
    
    $
    87,159Average rate paid on all borrowed funds
    
    
    5.14
    %
    
    
    5.02
    %
    
    
    4.02
    %
 Shareholders Equity
  28




---



##### 



Risk Based Capital Analysis
 Year Ended December 312007
    
    
    2006
    
    
    2005(In Thousands)Tier 1 Capital:Common stock
    
    $
    9,052
    
    
    $
    9,867
    
    
    $
    6,644Capital surplus
    
    
    21,833
    
    
    
    29,316
    
    
    
    9,099Retained earnings
    
    
    26,832
    
    
    
    23,620
    
    
    
    16,227Subordinated debt (trust preferred debenture)
    
    
    6,000
    
    
    
    10,000
    
    
    
    10,000Total Tier 1 capital
    
    
    63,717
    
    
    
    72,803
    
    
    
    41,970Subordinated debt not included in Tier I
    
    
    
    
    
    
    
    
    
    
    311Allowance for loan losses
    
    
    6,436
    
    
    
    5,688
    
    
    
    4,874Total Risk Based Capital
    
    $
    70,153
    
    
    $
    78,491
    
    
    $
    47,155Risk weighted assets
    
    $
    513,598
    
    
    $
    484,987
    
    
    $
    389,381Quarterly average assets
    
    $
    632,752
    
    
    $
    631,378
    
    
    $
    552,292Capital Ratios:Tier 1 risk based capital ratio
    
    
    12.41
    %
    
    
    15.01
    %
    
    
    10.78
    %Total risk based capital ratio
    
    
    13.66
    %
    
    
    16.18
    %
    
    
    12.11
    %Leverage ratio
    
    
    10.07
    %
    
    
    11.53
    %
    
    
    7.60
    %
 RESULTS OF OPERATIONS
   Net Interest Income
  29




---



##### 



30




---



##### 



Yield on Average Earning Assets and Rates on Average Interest-Bearing Liabilities*
 Year Ended December 31,2007
    
    
    2006
    
    
    2005Average
    
    
    Income /
    
    
    Yield /
    
    
    Average
    
    
    Income /
    
    
    Yield /
    
    
    Average
    
    
    Income /
    
    
    Yield /Balance
    
    
    Expense
    
    
    Rate
    
    
    Balance
    
    
    Expense
    
    
    Rate
    
    
    Balance
    
    
    Expense
    
    
    Rate(In Thousands)Assets:Interest earning assets:Securities
    
    $
    94,331
    
    
    $
    4,324
    
    
    
    4.58
    %
    
    $
    107,165
    
    
    $
    4,687
    
    
    
    4.37
    %
    
    $
    64,862
    
    
    $
    2,489
    
    
    
    3.84
    %Loans(3)
    
    
    522,122
    
    
    
    40,303
    
    
    
    7.72
    %
    
    
    454,146
    
    
    
    34,899
    
    
    
    7.68
    %
    
    
    364,126
    
    
    
    25,043
    
    
    
    6.88
    %Interest bearing deposits & federal funds sold
    
    
    17,474
    
    
    
    846
    
    
    
    4.84
    %
    
    
    8,193
    
    
    
    400
    
    
    
    4.88
    %
    
    
    8,739
    
    
    
    279
    
    
    
    3.19
    %Total interest earning assets
    
    
    633,927
    
    
    
    45,473
    
    
    
    7.17
    %
    
    
    569,504
    
    
    
    39,986
    
    
    
    7.02
    %
    
    
    437,727
    
    
    
    27,811
    
    
    
    6.35
    %Non-interest earning assets:Cash and due from banks
    
    
    6,784
    
    
    
    
    
    
    
    
    
    
    
    10,546
    
    
    
    
    
    
    
    
    
    
    
    10,579Premises, land and equipment
    
    
    9,710
    
    
    
    
    
    
    
    
    
    
    
    9,616
    
    
    
    
    
    
    
    
    
    
    
    9,260Other assets
    
    
    5,333
    
    
    
    
    
    
    
    
    
    
    
    5,531
    
    
    
    
    
    
    
    
    
    
    
    4,118Less: allowance for loan losses
    
    
    (6,170
    )
    
    
    
    
    
    
    
    
    
    
    (5,363
    )
    
    
    
    
    
    
    
    
    
    
    (4,433
    )Total non-interest earning assets
    
    
    15,657
    
    
    
    
    
    
    
    
    
    
    
    20,330
    
    
    
    
    
    
    
    
    
    
    
    19,524Total Assets
    
    $
    649,584
    
    
    
    
    
    
    
    
    
    
    $
    589,834
    
    
    
    
    
    
    
    
    
    
    $
    457,251Liabilities and Shareholders Equity:Interest bearing liabilities:Interest bearing demand deposits
    
    $
    9,507
    
    
    $
    199
    
    
    
    2.09
    %
    
    $
    10,691
    
    
    $
    224
    
    
    
    2.10
    %
    
    $
    10,630
    
    
    $
    200
    
    
    
    1.88
    %Money market deposit accounts
    
    
    111,344
    
    
    
    4,888
    
    
    
    4.39
    %
    
    
    118,548
    
    
    
    4,859
    
    
    
    4.10
    %
    
    
    130,147
    
    
    
    4,255
    
    
    
    3.27
    %Savings accounts
    
    
    4,989
    
    
    
    231
    
    
    
    4.63
    %
    
    
    2,147
    
    
    
    88
    
    
    
    4.10
    %
    
    
    450
    
    
    
    4
    
    
    
    0.89
    %Time deposits
    
    
    256,805
    
    
    
    12,808
    
    
    
    4.99
    %
    
    
    230,896
    
    
    
    10,605
    
    
    
    4.59
    %
    
    
    129,314
    
    
    
    4,559
    
    
    
    3.53
    %Total interest-bearing deposits
    
    
    382,645
    
    
    
    18,126
    
    
    
    4.74
    %
    
    
    362,282
    
    
    
    15,776
    
    
    
    4.35
    %
    
    
    270,541
    
    
    
    9,018
    
    
    
    3.33
    %FHLB Advances
    
    
    60,224
    
    
    
    3,197
    
    
    
    5.31
    %
    
    
    61,066
    
    
    
    3,161
    
    
    
    5.18
    %
    
    
    43,375
    
    
    
    1,610
    
    
    
    3.71
    %Securities sold under agreements to repurchase
    
    
    11,695
    
    
    
    516
    
    
    
    4.41
    %
    
    
    4,643
    
    
    
    166
    
    
    
    3.58
    %
    
    
    925
    
    
    
    19
    
    
    
    2.05
    %Other short-term borrowings
    
    
    16,628
    
    
    
    641
    
    
    
    3.85
    %
    
    
    18,005
    
    
    
    738
    
    
    
    4.10
    %
    
    
    8,520
    
    
    
    250
    
    
    
    2.93
    %Long-term borrowings
    
    
    41,932
    
    
    
    2,018
    
    
    
    4.81
    %
    
    
    23,722
    
    
    
    962
    
    
    
    4.06
    %
    
    
    24,028
    
    
    
    917
    
    
    
    3.82
    %Subordinated Debentures
    
    
    9,237
    
    
    
    806
    
    
    
    8.73
    %
    
    
    10,311
    
    
    
    880
    
    
    
    8.53
    %
    
    
    10,311
    
    
    
    706
    
    
    
    6.85
    %Total interest-bearing liabilities
    
    
    522,361
    
    
    
    25,304
    
    
    
    4.84
    %
    
    
    480,029
    
    
    
    21,683
    
    
    
    4.52
    %
    
    
    357,700
    
    
    
    12,520
    
    
    
    3.50
    %Non-interest bearing liabilities:Demand deposits
    
    
    62,354
    
    
    
    
    
    
    
    
    
    
    
    61,506
    
    
    
    
    
    
    
    
    
    
    
    66,862Other liabilities
    
    
    1,526
    
    
    
    
    
    
    
    
    
    
    
    4,029
    
    
    
    
    
    
    
    
    
    
    
    4,103Total liabilities
    
    
    586,241
    
    
    
    
    
    
    
    
    
    
    
    545,564
    
    
    
    
    
    
    
    
    
    
    
    428,665Shareholders Equity
    
    
    63,343
    
    
    
    
    
    
    
    
    
    
    
    44,270
    
    
    
    
    
    
    
    
    
    
    
    28,586Total Liabilities and Shareholders Equity:
    
    $
    649,584
    
    
    
    
    
    
    
    
    
    
    $
    589,834
    
    
    
    
    
    
    
    
    
    
    $
    457,251Interest Spread(1)
    
    
    
    
    
    
    
    
    
    
    2.33
    %
    
    
    
    
    
    
    
    
    
    
    2.50
    %
    
    
    
    
    
    
    
    
    
    
    2.85
    %Net Interest Margin(2)*
    
    
    
    
    
    $
    20,169
    
    
    
    3.18
    %
    
    
    
    
    
    $
    18,303
    
    
    
    3.21
    %
    
    
    
    
    
    $
    15,291
    
    
    
    3.49
    %
 
 (1)
    
    Interest spread is the average yield earned on earning assets, less the
average rate incurred on interest bearing liabilities.(2)
    
    Net interest margin is net interest income, expressed as a percentage of
average earning assets.(3)
    
    Loans placed on non-accrual status are included in loan balances*
    
    Note: Interest income and yields are presented on a fully taxable equivalent basis
using 34% tax rate. 31




---



##### 



Volume and Rate Analysis*
 Years Ended December 312007 compared to 2006
    
    
    2006 compared to 2005
    
    
    2005 compared to 2004Change Due To:
    
    
    Change Due To:
    
    
    Change Due To:Increase /
    
    
    
    
    
    
    
    
    
    
    Increase /
    
    
    
    
    
    
    
    
    
    
    Increase /(Decrease)
    
    
    Volume
    
    
    Rate
    
    
    (Decrease)
    
    
    Volume
    
    
    Rate
    
    
    (Decrease)
    
    
    Volume
    
    
    Rate(In Thousands)Interest Earning Assets:Investments
    
    $
    (363
    )
    
    $
    (584
    )
    
    $
    221
    
    
    $
    2,197
    
    
    $
    1,814
    
    
    $
    383
    
    
    $
    1,584
    
    
    $
    1,511
    
    
    $
    73Loans
    
    
    5,404
    
    
    
    5,226
    
    
    
    178
    
    
    
    9,856
    
    
    
    6,713
    
    
    
    3,143
    
    
    
    7,815
    
    
    
    4,897
    
    
    
    2,918Interest bearing deposits
    
    
    431
    
    
    
    434
    
    
    
    (3
    )
    
    
    121
    
    
    
    (18
    )
    
    
    139
    
    
    
    187
    
    
    
    35
    
    
    
    152Federal funds sold
    
    
    15
    
    
    
    16
    
    
    
    (1
    )
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Increase in Interest Income
    
    
    5,487
    
    
    
    5,092
    
    
    
    395
    
    
    
    12,175
    
    
    
    8,510
    
    
    
    3,665
    
    
    
    9,586
    
    
    
    6,443
    
    
    
    3,143Interest Bearing Liabilities:Interest bearing demand deposits
    
    
    (25
    )
    
    
    (24
    )
    
    
    (1
    )
    
    
    24
    
    
    
    
    
    
    
    24
    
    
    
    107
    
    
    
    18
    
    
    
    89Money market deposit accounts
    
    
    29
    
    
    
    (304
    )
    
    
    333
    
    
    
    604
    
    
    
    (406
    )
    
    
    1,009
    
    
    
    3,417
    
    
    
    2,709
    
    
    
    709Savings accounts
    
    
    143
    
    
    
    130
    
    
    
    13
    
    
    
    84
    
    
    
    43
    
    
    
    41
    
    
    
    
    
    
    
    
    
    
    
    Time deposits
    
    
    2,203
    
    
    
    1,240
    
    
    
    963
    
    
    
    6,046
    
    
    
    4,376
    
    
    
    1,669
    
    
    
    1,139
    
    
    
    662
    
    
    
    478Total interest-bearing deposits
    
    
    2,350
    
    
    
    1,042
    
    
    
    1,308
    
    
    
    6,758
    
    
    
    4,013
    
    
    
    2,743
    
    
    
    4,663
    
    
    
    3,389
    
    
    
    1,276FHLB Advances
    
    
    36
    
    
    
    (42
    )
    
    
    78
    
    
    
    1,551
    
    
    
    785
    
    
    
    766
    
    
    
    948
    
    
    
    (19
    )
    
    
    967Securities sold under agreements to
repurchase
    
    
    350
    
    
    
    304
    
    
    
    46
    
    
    
    147
    
    
    
    124
    
    
    
    23
    
    
    
    (6
    )
    
    
    (20
    )
    
    
    14Other short-term borrowings
    
    
    (97
    )
    
    
    (54
    )
    
    
    (43
    )
    
    
    488
    
    
    
    359
    
    
    
    129
    
    
    
    129
    
    
    
    109
    
    
    
    20Long-term borrowings
    
    
    1,056
    
    
    
    851
    
    
    
    205
    
    
    
    45
    
    
    
    (12
    )
    
    
    57
    
    
    
    63
    
    
    
    260
    
    
    
    (197
    )Trust Preferred
    
    
    (74
    )
    
    
    (95
    )
    
    
    21
    
    
    
    173
    
    
    
    1
    
    
    
    172
    
    
    
    192
    
    
    
    
    
    
    
    192Total Increase in Interest Expense
    
    
    3,621
    
    
    
    2,006
    
    
    
    1,615
    
    
    
    9,162
    
    
    
    5,270
    
    
    
    3,890
    
    
    
    5,989
    
    
    
    3,719
    
    
    
    2,272Increase in Net Interest Income
    
    $
    1,866
    
    
    
    3,086
    
    
    $
    (1,220
    )
    
    $
    3,013
    
    
    
    3,240
    
    
    $
    (225
    )
    
    $
    3,597
    
    
    $
    2,724
    
    
    $
    871
 
 *
    
    Note: Interest income and yields are presented on a fully taxable equivalent basis using 34% tax rate. Provision for Loan Losses
   32




---



##### 



Non-Interest Income
    Non-Interest Expense
   Income Taxes
  33




---



##### 



Quarterly Results(unaudited)
  First
    
    
    Second
    
    
    Third
    
    
    Fourth
    
    
    TotalQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    YTD(In Thousands, Except Per Share Data)2007Total interest income
    
    $
    11,173
    
    
    $
    11,517
    
    
    $
    11,699
    
    
    $
    11,037
    
    
    $
    45,426Total interest expense
    
    
    6,117
    
    
    
    6,587
    
    
    
    6,633
    
    
    
    5,967
    
    
    
    25,304Net interest income
    
    
    5,056
    
    
    
    4,930
    
    
    
    5,066
    
    
    
    5,070
    
    
    
    20,122Provision for loan losses
    
    
    291
    
    
    
    465
    
    
    
    942
    
    
    
    890
    
    
    
    2,588Net interest
income after provision for loan
    
    
    4,765
    
    
    
    4,465
    
    
    
    4,124
    
    
    
    4,180
    
    
    
    17,534Total noninterest income
    
    
    8,161
    
    
    
    7,920
    
    
    
    6,117
    
    
    
    5,509
    
    
    
    27,707Total noninterest expense
    
    
    10,967
    
    
    
    10,096
    
    
    
    10,020
    
    
    
    8,866
    
    
    
    39,949Income tax expense
    
    
    633
    
    
    
    782
    
    
    
    (23
    )
    
    
    198
    
    
    
    1,590Net income
    
    $
    1,326
    
    
    $
    1,507
    
    
    $
    244
    
    
    $
    625
    
    
    $
    3,702Earnings Per Share:Basic
    
    $
    0.11
    
    
    $
    0.13
    
    
    $
    0.02
    
    
    $
    0.06
    
    
    $
    0.32Diluted
    
    
    0.11
    
    
    
    0.12
    
    
    
    0.02
    
    
    
    0.06
    
    
    
    0.31
 First
    
    
    Second
    
    
    Third
    
    
    Fourth
    
    
    TotalQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    YTD(In Thousands, Except Per Share Data)2006Total interest income
    
    $
    8,645
    
    
    $
    9,776
    
    
    $
    10,570
    
    
    $
    10,947
    
    
    $
    39,938Total interest expense
    
    
    4,548
    
    
    
    5,371
    
    
    
    5,740
    
    
    
    6,023
    
    
    
    21,682Net interest income
    
    
    4,097
    
    
    
    4,405
    
    
    
    4,830
    
    
    
    4,924
    
    
    
    18,256Provision for loan losses
    
    
    124
    
    
    
    49
    
    
    
    
    
    
    
    59
    
    
    
    232Net interest
income after provision for loan
    
    
    3,973
    
    
    
    4,356
    
    
    
    4,830
    
    
    
    4,865
    
    
    
    18,024Total noninterest income
    
    
    6,231
    
    
    
    6,486
    
    
    
    7,252
    
    
    
    7,664
    
    
    
    27,633Total noninterest expense
    
    
    7,744
    
    
    
    8,065
    
    
    
    9,286
    
    
    
    9,117
    
    
    
    34,212Income tax expense
    
    
    837
    
    
    
    971
    
    
    
    895
    
    
    
    1,150
    
    
    
    3,853Net income
    
    $
    1,623
    
    
    $
    1,806
    
    
    $
    1,901
    
    
    $
    2,262
    
    
    $
    7,592Earnings Per Share:Basic
    
    $
    0.20
    
    
    $
    0.22
    
    
    $
    0.19
    
    
    $
    0.20
    
    
    $
    0.81Diluted
    
    
    0.17
    
    
    
    0.19
    
    
    
    0.17
    
    
    
    0.19
    
    
    
    0.72
 Liquidity Management
   34




---



##### 



Contractual Obligations
  Payments Due By PeriodDecember 31, 2007Less Than
    
    
    1 - 3
    
    
    More Than1 Year
    
    
    Years
    
    
    3 Years
    
    
    Total(In Thousands)FHLB Advances
    
    $
    15,500
    
    
    $
    
    
    
    $
    
    
    
    $
    15,500Securities sold under
agreements to repurchase
    
    
    14,814
    
    
    
    
    
    
    
    
    
    
    
    14,814FHLB long-term borrowings
    
    
    
    
    
    
    36,274
    
    
    
    3,250
    
    
    
    39,524Commercial paper
    
    
    9,454
    
    
    
    
    
    
    
    
    
    
    
    9,454US treasury demand notes
    
    
    1,907
    
    
    
    
    
    
    
    
    
    
    
    1,907Subordinated debentures
    
    
    
    
    
    
    
    
    
    
    6,186
    
    
    
    6,186Leases
    
    
    432
    
    
    
    919
    
    
    
    249
    
    
    
    1,600Other contractual commitments
    
    
    2,000
    
    
    
    
    
    
    
    
    
    
    
    2,000Total
    
    $
    44,107
    
    
    $
    37,193
    
    
    $
    9,685
    
    
    $
    90,985
 Off Balance Sheet Items
  Recent Accounting Pronouncements
  35




---



##### 



ITEM 7A  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Interest Rate Sensitivity Management
  Rate Shock AnalysisDecember 31, 2007Change in
    
    Hypothetical
    
Hypothetical PercentageFederal Funds
    
    Percentage Change
    
    Change In EconomicTarget Rate
    

In Earnings
    

Value
of Equity3.00
    %
    
    
    12.49
    %
    
    -17.89%2.00
    %
    
    
    8.13
    %
    
    -11.89%1.00
    %
    
    
    4.42
    %
    
    -5.72%-1.00
    %
    
    
    -4.57
    %
    
    5.63%-2.00
    %
    
    
    -8.94
    %
    
    11.55%-3.00
    %
    
    
    -13.09
    %
    
    18.96%
    Impact of Inflation and Changing Prices
  36




---



##### 



ITEM 8  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 37




---



##### 



Report of Independent Registered Public Accounting Firm
 
 Internal Control-Integrated
Framework
       
 38




---



##### 



Report of Independent Registered Public Accounting Firm
 
   ,
 Internal Control 
Integrated Framework
  
 39




---



##### 



ACCESS NATIONAL CORPORATION
Consolidated Balance Sheets
 2007
    
    
    2006AssetsCash and due from banks
    
    $
    6,238
    
    
    $
    11,974Interest bearing deposits in other banks and federal funds sold
    
    
    13,266
    
    
    
    15,391Securities available for sale, at fair value
    
    
    73,558
    
    
    
    105,163Loans held for sale
    
    
    39,144
    
    
    
    65,320Loans, net of allowance for loan losses 2007; $7,462; 2006; $5,452
    
    
    470,136
    
    
    
    428,142Premises and equipment, net
    
    
    9,712
    
    
    
    9,598Other assets
    
    
    10,322
    
    
    
    9,194Total assets
    
    $
    622,376
    
    
    $
    644,782Liabilities and Shareholders EquityLiabilitiesDepositsNon-interest bearing demand deposits
    
    $
    59,415
    
    
    $
    79,223Savings and interest bearing deposits
    
    
    142,820
    
    
    
    120,309Time deposits
    
    
    271,183
    
    
    
    239,400Total deposits
    
    
    473,418
    
    
    
    438,932Short term borrowings
    
    
    41,676
    
    
    
    84,951Long term borrowings
    
    
    39,524
    
    
    
    42,572Subordinated debentures
    
    
    6,186
    
    
    
    10,311Other liabilities and accrued expenses
    
    
    3,611
    
    
    
    5,721Total liabilities
    
    
    564,415
    
    
    
    582,487Shareholders EquityCommon stock, par value, $.835, authorized 60,000,000 shares,
issued and outstanding, 10,840,730 in 2007 and 11,816,929 in 2006
    
    
    9,052
    
    
    
    9,867Additional paid in capital
    
    
    21,833
    
    
    
    29,316Retained earnings
    
    
    26,846
    
    
    
    23,641Accumulated other comprehensive income (loss), net
    
    
    230
    
    
    
    (529
    )Total shareholders equity
    
    
    57,961
    
    
    
    62,295Total liabilities and shareholders equity
    
    $
    622,376
    
    
    $
    644,782
  40




---



##### 



ACCESS NATIONAL CORPORATION
Consolidated Statements of Income
 Year Ended December 31,2007
    
    
    2006
    
    
    2005Interest and Dividend IncomeLoans
    
    $
    40,303
    
    
    $
    34,898
    
    
    $
    25,043Interest-bearing deposits & federal funds sold
    
    
    830
    
    
    
    399
    
    
    
    279Securities
    
    
    4,293
    
    
    
    4,641
    
    
    
    2,471Total interest and dividend income
    
    
    45,426
    
    
    
    39,938
    
    
    
    27,793Interest ExpenseDeposits
    
    
    18,125
    
    
    
    15,776
    
    
    
    9,018Short-term borrowings
    
    
    4,354
    
    
    
    4,065
    
    
    
    1,879Long-term borrowings
    
    
    2,018
    
    
    
    962
    
    
    
    917Trust preferred capital notes
    
    
    807
    
    
    
    879
    
    
    
    706Total interest expense
    
    
    25,304
    
    
    
    21,682
    
    
    
    12,520Net interest income
    
    
    20,122
    
    
    
    18,256
    
    
    
    15,273Provision for loan losses
    
    
    2,588
    
    
    
    232
    
    
    
    1,196Net interest income after provision for
loan losses
    
    
    17,534
    
    
    
    18,024
    
    
    
    14,077Non-interest IncomeService fees on deposit accounts
    
    
    365
    
    
    
    359
    
    
    
    260Gain on sale of loans
    
    
    20,241
    
    
    
    19,813
    
    
    
    22,616Mortgage broker fee income
    
    
    3,890
    
    
    
    5,280
    
    
    
    5,634Other income
    
    
    3,211
    
    
    
    2,181
    
    
    
    2,446Total non-interest income
    
    
    27,707
    
    
    
    27,633
    
    
    
    30,956Non-interest ExpenseCompensation and employee benefits
    
    
    19,578
    
    
    
    19,404
    
    
    
    20,537Occupancy
    
    
    1,419
    
    
    
    751
    
    
    
    712Furniture and equipment
    
    
    1,111
    
    
    
    1,108
    
    
    
    1,204Other
    
    
    17,841
    
    
    
    12,949
    
    
    
    13,377Total non-interest expense
    
    
    39,949
    
    
    
    34,212
    
    
    
    35,830Income before income taxes
    
    
    5,292
    
    
    
    11,445
    
    
    
    9,203Income taxes
    
    
    1,590
    
    
    
    3,853
    
    
    
    3,305Net Income
    
    $
    3,702
    
    
    $
    7,592
    
    
    $
    5,898Earnings per common share:Basic
    
    $
    0.32
    
    
    $
    0.81
    
    
    $
    0.75Diluted
    
    $
    0.31
    
    
    $
    0.72
    
    
    $
    0.63Average outstanding shares:Basic
    
    
    11,620,130
    
    
    
    9,429,074
    
    
    
    7,867,135Diluted
    
    
    11,866,468
    
    
    
    10,541,873
    
    
    
    9,423,087
  41




---



##### 



ACCESS NATIONAL CORPORATION
Consolidated Statements of Changes in Shareholders Equity
 AccumulatedOtherAdditional
    
    
    
    
    
    
    Compre-Common
    
    
    Paid in
    
    
    Retained
    
    
    hensiveStock
    
    
    Capital
    
    
    Earnings
    
    
    Income (Loss)
    
    
    TotalBalance, December 31, 2004
    
    $
    6,608
    
    
    $
    9,067
    
    
    $
    10,330
    
    
    $
    (7
    )
    
    $
    25,998Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    5,898
    
    
    
    
    
    
    
    5,898Other comprehensive income,
unrealized holdings losses
arising during the period
(net of tax, $401)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (778
    )
    
    
    (778
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,120Stock options exercised (45,074 Shares)
    
    
    38
    
    
    
    55
    
    
    
    
    
    
    
    
    
    
    
    93Repurchase of common stock (2,666 Shares)
    
    
    (2
    )
    
    
    (23
    )
    
    
    
    
    
    
    
    
    
    
    (25
    )Balance, December 31, 2005
    
    
    6,644
    
    
    
    9,099
    
    
    
    16,228
    
    
    
    (785
    )
    
    
    31,186Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    7,592
    
    
    
    
    
    
    
    7,592Other comprehensive income,
unrealized holdings gains
arising during the period
(net of tax, $132)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    256
    
    
    
    256Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,848Stock offering (2,300,000 Shares)
    
    
    1,920
    
    
    
    18,063
    
    
    
    
    
    
    
    
    
    
    
    19,983Stock options & warrants exercised (1,462,286 shs)
    
    
    1,232
    
    
    
    1,348
    
    
    
    
    
    
    
    
    
    
    
    2,580Dividend Reinvestment plan (103,449 Shares)
    
    
    77
    
    
    
    805
    
    
    
    
    
    
    
    
    
    
    
    882Repurchase of common stock (7,362 Shares)
    
    
    (6
    )
    
    
    (45
    )
    
    
    
    
    
    
    
    
    
    
    (51
    )Cash dividend
    
    
    
    
    
    
    
    
    
    
    (179
    )
    
    
    
    
    
    
    (179
    )Stock-based compensation
expense recognized in earnings
    
    
    
    
    
    
    46
    
    
    
    
    
    
    
    
    
    
    
    46Balance, December 31, 2006
    
    
    9,867
    
    
    
    29,316
    
    
    
    23,641
    
    
    
    (529
    )
    
    
    62,295Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    3,702
    
    
    
    
    
    
    
    3,702Other comprehensive income,
unrealized holdings gains
arising during the period
(net of tax, $391)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    759
    
    
    
    759Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,461Stock options exercised (178,320 Shares)
    
    
    149
    
    
    
    151
    
    
    
    
    
    
    
    
    
    
    
    300Dividend
Reinvestment plan (91,105 Shares)
    
    
    76
    
    
    
    729
    
    
    
    
    
    
    
    
    
    
    
    805Repurchase of common stock under share
repurchase program (1,245,624 Shares)
    
    
    (1,040
    )
    
    
    (8,462
    )
    
    
    
    
    
    
    
    
    
    
    (9,502
    )Cash dividend
    
    
    
    
    
    
    
    
    
    
    (497
    )
    
    
    
    
    
    
    (497
    )Stock-based
compensation expense recognized in earnings
    
    
    
    
    
    
    99
    
    
    
    
    
    
    
    
    
    
    
    99Balance, December 31, 2007
    
    $
    9,052
    
    
    $
    21,833
    
    
    $
    26,846
    
    
    $
    230
    
    
    $
    57,961
  42




---



##### 



ACCESS NATIONAL CORPORATION
Consolidated Statements of Cash Flows
 Year Ended December 31,2007
    
    
    2006
    
    
    2005Cash Flows from Operating ActivitiesNet income
    
    $
    3,702
    
    
    $
    7,592
    
    
    $
    5,898Adjustments to reconcile net income to net cash provided by
operating activities:Provision for loan losses  net of recoveries
    
    
    2,588
    
    
    
    237
    
    
    
    1,196Deferred tax benefit
    
    
    (1,106
    )
    
    
    (576
    )
    
    
    (908
    )Stock based compensation
    
    
    99
    
    
    
    46
    
    
    
    Valuation allowance on derivatives
    
    
    68
    
    
    
    (24
    )
    
    
    30Net amortization on securities
    
    
    (20
    )
    
    
    (5
    )
    
    
    Depreciation and amortization
    
    
    839
    
    
    
    846
    
    
    
    697Loss on disposal of assets
    
    
    1
    
    
    
    2
    
    
    
    81Changes in assets and liabilities:Originations of loans held for sale
    
    
    (886,433
    )
    
    
    (807,549
    )
    
    
    (740,718
    )Proceeds from sale of loans held for sale
    
    
    912,609
    
    
    
    787,248
    
    
    
    731,944Increase in other assets
    
    
    (1,851
    )
    
    
    (1,921
    )
    
    
    (904
    )Increase (decrease) in other liabilities
    
    
    (2,110
    )
    
    
    (221
    )
    
    
    3,627Net cash provided by (used in) operating activities
    
    
    28,386
    
    
    
    (14,325
    )
    
    
    943Cash Flows from Investing ActivitiesProceeds from maturities and calls of securities available for sale
    
    
    66,612
    
    
    
    21,591
    
    
    
    25,523Purchases of securities available for sale
    
    
    (33,838
    )
    
    
    (38,590
    )
    
    
    (63,095
    )Net increase in loans
    
    
    (44,581
    )
    
    
    (63,862
    )
    
    
    (77,138
    )Proceeds from sale of assets
    
    
    23
    
    
    
    
    
    
    
    7Proceeds from sales of other real estate owned
    
    
    1,363
    
    
    
    
    
    
    
    Purchases of premises and equipment
    
    
    (970
    )
    
    
    (692
    )
    
    
    (1,793
    )Net cash used in investing activities
    
    
    (11,391
    )
    
    
    (81,553
    )
    
    
    (116,496
    )Cash Flows from Financing ActivitiesNet increase (decrease) in demand, interest-bearing demand and savings deposits
    
    
    2,704
    
    
    
    (30,596
    )
    
    
    32,746Net increase in time deposits
    
    
    31,782
    
    
    
    49,899
    
    
    
    69,490Increase (decrease) in securities sold under agreement to repurchase
    
    
    273
    
    
    
    13,564
    
    
    
    (1,885
    )Net increase (decrease) in other short-term borrowings
    
    
    (43,548
    )
    
    
    24,191
    
    
    
    12,002Net increase (decrease) in long term borrowings
    
    
    (7,173
    )
    
    
    19,786
    
    
    
    (4,215
    )Proceeds from issuance of common stock
    
    
    1,105
    
    
    
    23,446
    
    
    
    93Repurchase of common stock
    
    
    (9,502
    )
    
    
    (51
    )
    
    
    (25
    )Dividends paid
    
    
    (497
    )
    
    
    (179
    )
    
    
    Net cash (used in) provided by financing activities
    
    
    (24,856
    )
    
    
    100,060
    
    
    
    108,206Increase (decrease) in cash and cash equivalents
    
    
    (7,861
    )
    
    
    4,182
    
    
    
    (7,347
    )Cash and Cash EquivalentsBeginning
    
    
    27,365
    
    
    
    23,183
    
    
    
    30,532Ending
    
    $
    19,504
    
    
    $
    27,365
    
    
    $
    23,185Supplemental Disclosures of Cash Flow InformationCash payments for interest
    
    $
    25,285
    
    
    $
    21,660
    
    
    $
    12,553Cash payments for income taxes
    
    $
    4,815
    
    
    $
    3,532
    
    
    $
    3,830Supplemental Disclosures of Noncash Investing ActivitiesUnrealized gain (loss) on securities available for sale
    
    $
    1,150
    
    
    $
    388
    
    
    $
    (1,180
    )
  43




---



##### 



ACCESS NATIONAL CORPORATION
Notes to Consolidated Financial Statements
 Note 1. Summary of Significant Accounting Policies
 Nature of Operations
  Basis of Presentation
 Use of Estimates
 Cash Flow Reporting
 Concentrations and Restrictions on Cash and Cash Equivalents
  Securities
  Loans
  44




---



##### 



Notes to Consolidated Financial Statements
   Loans Held for Sale
 Allowance for Loan Losses
     Derivative Financial Instruments
  45




---



##### 



Notes to Consolidated Financial Statements
   Premises and Equipment
 Real Estate Owned 
 Income Taxes
 46




---



##### 



Notes to Consolidated Financial Statements
 Stock-Based Compensation Plans
 Year Ended December 31
 2005Net income, as reported
    
    $
    5,898Total stock-based compensation expense determined under fair value
based method for all awards, net of related tax effects
    
    
    (285
    )Pro forma net income
    
    $
    5,613Earnings per share:Basic  as reported
    
    $
    0.75Basic  pro forma
    
    $
    0.71Diluted  as reported
    
    $
    0.63Diluted  pro forma
    
    $
    0.60
  Year Ended December 31
 2005Expected life
    
    6.78 yearsRisk-free interest rate
    
    
    4.70
    %Volatility
    
    
    18.37
    %Dividend yield
    
    
    
 47




---



##### 



Notes to Consolidated Financial Statements
 Earnings Per Share
 Advertising Costs
 Recent Accounting Pronouncements  I
  
    48




---



##### 



Notes to Consolidated Financial Statements
  Note 2. Securities
  December 31, 2007Gross
    
    
    GrossUnrealized
    
    
    Unrealized
    
    
    EstimatedAmortized Cost
    
    
    Gains
    
    
    (Losses)
    
    
    Fair Value(In Thousands)U.S. Treasury Notes
    
    $
    995
    
    
    $
    18
    
    
    $
    
    
    
    $
    1,013U.S. Governmental Agencies
    
    
    61,365
    
    
    
    417
    
    
    
    (62
    )
    
    
    61,720Mortgage Backed Securities
    
    
    793
    
    
    
    6
    
    
    
    
    
    
    
    799Tax Exempt Municipals
    
    
    2,890
    
    
    
    6
    
    
    
    (5
    )
    
    
    2,891Taxable Municipals
    
    
    1,110
    
    
    
    
    
    
    
    (11
    )
    
    
    1,099Mutual Fund
    
    
    1,500
    
    
    
    
    
    
    
    (21
    )
    
    
    1,479Restricted Stock -Federal Reserve Bank Stock
    
    
    894
    
    
    
    
    
    
    
    
    
    
    
    894FHLB Stock
    
    
    3,663
    
    
    
    
    
    
    
    
    
    
    
    3,663$
    73,210
    
    
    $
    447
    
    
    $
    (99
    )
    
    $
    73,558
 December 31, 2006Gross
    
    
    GrossUnrealized
    
    
    Unrealized
    
    
    EstimatedAmortized Cost
    
    
    Gains
    
    
    (Losses)
    
    
    Fair Value(In Thousands)U.S. Treasury Notes
    
    $
    990
    
    
    $
    6
    
    
    $
    
    
    
    $
    996U.S. Governmental Agencies
    
    
    92,352
    
    
    
    5
    
    
    
    (748
    )
    
    
    91,609Mortgage Backed Securities
    
    
    1,037
    
    
    
    4
    
    
    
    (1
    )
    
    
    1,040Tax Exempt Municipals
    
    
    2,893
    
    
    
    5
    
    
    
    (10
    )
    
    
    2,888Taxable Municipals
    
    
    1,305
    
    
    
    
    
    
    
    (30
    )
    
    
    1,275Mutual Fund
    
    
    1,500
    
    
    
    
    
    
    
    (32
    )
    
    
    1,468Restricted Stock -Federal Reserve Bank Stock
    
    
    873
    
    
    
    
    
    
    
    
    
    
    
    873FHLB Stock
    
    
    5,014
    
    
    
    
    
    
    
    
    
    
    
    5,014$
    105,964
    
    
    $
    20
    
    
    $
    (821
    )
    
    $
    105,163
 49




---



##### 



Notes to Consolidated Financial Statements
  December 31, 2007EstimatedAmortized
    
    
    FairCost
    
    
    Value(In Thousands)US Treasury & AgenciesDue in one year or less
    
    $
    38,867
    
    
    $
    38,878Due after one through five years
    
    
    1,995
    
    
    
    2,011Due after five through ten years
    
    
    21,498
    
    
    
    21,844MunicipalsDue after one through five years
    
    
    1,110
    
    
    
    1,099Due after five through ten years
    
    
    2,890
    
    
    
    2,891Mortgage Backed Securities:Due after one through five years
    
    
    793
    
    
    
    799Mutual Fund
    
    
    1,500
    
    
    
    1,479Restricted Stock:Federal Reserve Bank stock
    
    
    894
    
    
    
    894FHLB stock
    
    
    3,663
    
    
    
    3,663$
    73,210
    
    
    $
    73,558
   50




---



##### 



Notes to Consolidated Financial Statements
  Securities in a loss
    
    
    Securities in a lossPosition for less than
    
    
    Position for 12 Months12 Months
    
    
    or Longer
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedDecember 31, 2007
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses(In Thousands)Investment securities
available
for sale:U.S. Treasury Securities
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Mortgage Backed Securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    U.S. Government Agencies
    
    
    
    
    
    
    
    
    
    
    19,812
    
    
    
    (62
    )
    
    
    19,812
    
    
    
    (62
    )Municipals-Taxable
    
    
    
    
    
    
    
    
    
    
    1,100
    
    
    
    (11
    )
    
    
    1,100
    
    
    
    (11
    )Municipals-Tax Exempt
    
    
    457
    
    
    
    (2
    )
    
    
    915
    
    
    
    (3
    )
    
    
    1,372
    
    
    
    (5
    )CRA Mutual Fund
    
    
    
    
    
    
    
    
    
    
    1,479
    
    
    
    (21
    )
    
    
    1,479
    
    
    
    (21
    )Total
    
    $
    457
    
    
    $
    (2
    )
    
    $
    23,306
    
    
    $
    (97
    )
    
    $
    23,763
    
    
    $
    (99
    )
 Securities in a loss
    
    
    Securities in a lossPosition for less than
    
    
    Position for 12 Months12 Months
    
    
    or Longer
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedDecember 31, 2006
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses(In Thousands)Investment securities
available
for sale:U.S. Treasury Securities
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Mortgage Backed Securities
    
    
    
    
    
    
    
    
    
    
    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
    
    
    
    (1
    )
    
    
    1,408
    
    
    
    (9
    )
    
    
    1,866
    
    
    
    (10
    )CRA Mutual Fund
    
    
    
    
    
    
    
    
    
    
    1,468
    
    
    
    (32
    )
    
    
    1,468
    
    
    
    (32
    )Total
    
    $
    25,394
    
    
    $
    (65
    )
    
    $
    61,197
    
    
    $
    (756
    )
    
    $
    86,591
    
    
    $
    (821
    )
  51




---



##### 



Notes to Consolidated Financial Statements
 Note 3. Loans
  December 312007
    
    
    2006(In Thousands)Loans secured by real estate:Construction and land development
    
    $
    55,074
    
    
    $
    68,570Residential properties
    
    
    156,731
    
    
    
    152,648Secured by commercial properties
    
    
    199,894
    
    
    
    159,996Commercial and industrial loans
    
    
    64,860
    
    
    
    51,825Consumer loans
    
    
    1,039
    
    
    
    555Total loans
    
    
    477,598
    
    
    
    433,594Less allowance for loan losses
    
    
    7,462
    
    
    
    5,452Net loans
    
    $
    470,136
    
    
    $
    428,142
 Note 4. Allowance for Loan Losses
  December 312007
    
    
    2006
    
    
    2005(In Thousands)Balance at beginning of year
    
    $
    5,452
    
    
    $
    5,215
    
    
    $
    4,019Provision charged to operating expense
    
    
    2,588
    
    
    
    232
    
    
    
    1,196Loan recoveries
    
    
    2
    
    
    
    5
    
    
    
    Loan charge-offs
    
    
    (580
    )
    
    
    
    
    
    
    Balance at end of year
    
    $
    7,462
    
    
    $
    5,452
    
    
    $
    5,215
  52




---



##### 



Notes to Consolidated Financial Statements
 Note 5. Premises and Equipment, Net
  December 31,2007
    
    
    2006(In Thousands)Land
    
    $
    2,549
    
    
    $
    2,549Premises
    
    
    6,460
    
    
    
    6,162Leasehold improvements
    
    
    711
    
    
    
    447Furniture & equipment
    
    
    2,975
    
    
    
    2,77212,695
    
    
    
    11,930Less accumulated depreciation
    
    
    (2,983
    )
    
    
    (2,332
    )$
    9,712
    
    
    $
    9,598
  53




---



##### 



Notes to Consolidated Financial Statements
 Note 6. Deposits
  2007
    
    
    2006Type of Account
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %(In Thousands)Interest-bearing demand deposits
    
    $
    9,865
    
    
    
    2.08
    %
    
    $
    11,498
    
    
    
    2.62
    %Money market deposit accounts
    
    
    129,904
    
    
    
    27.44
    %
    
    
    103,694
    
    
    
    23.62
    %Savings accounts
    
    
    3,051
    
    
    
    0.64
    %
    
    
    5,117
    
    
    
    1.17
    %Time deposits
    
    
    271,183
    
    
    
    57.28
    %
    
    
    239,400
    
    
    
    54.54
    %Total interest-bearing deposits
    
    
    414,003
    
    
    
    87.45
    %
    
    
    359,709
    
    
    
    81.95
    %Non-interest bearing demand deposits
    
    
    59,415
    
    
    
    12.55
    %
    
    
    79,223
    
    
    
    18.05
    %Total deposits
    
    $
    473,418
    
    
    
    100.00
    %
    
    $
    438,932
    
    
    
    100.00
    %
   Year
    
    Amount(In Thousands)2008
    
    $
    195,2982009
    
    
    44,1502010
    
    
    21,2472011
    
    
    3,4192012
    
    
    4,146Later years
    
    
    2,923$
    271,183
  54




---



##### 



Note 7. Borrowings
  December 312007
    
    
    2006(In Thousands)Securities sold under agreements to repurchase
    
    $
    14,814
    
    
    $
    14,541Commercial paper arrangements
    
    
    9,455
    
    
    
    20,599FHLB borrowings
    
    
    15,500
    
    
    
    45,000Fed Funds Purchased
    
    
    
    
    
    
    4,811US Treasury demand note
    
    
    1,907
    
    
    
    Total
    
    $
    41,676
    
    
    $
    84,951Weighted interest rate
    
    
    3.66
    %
    
    
    4.84
    %Average for the year ended December 31:Outstanding
    
    $
    72,869
    
    
    $
    83,715Interest rate
    
    
    5.91
    %
    
    
    4.86
    %Maximum month-end outstandings
    
    $
    139,991
    
    
    $
    111,629
 55




---



##### 



Notes to Consolidated Financial Statements
    Amount(In Thousands)Due in 2009
    
    $
    19,667Due in 2010
    
    
    16,607Due in 2014
    
    
    3,250Total Due
    
    $
    39,524
       56




---



##### 



Notes to Consolidated Financial Statements
 Note 8. Income Taxes
  2007
    
    
    2006Deferred tax assets:Allowance for loan losses
    
    $
    2,036
    
    
    $
    1,424Securities available for sale
    
    
    
    
    
    
    273Deferred fees
    
    
    574
    
    
    
    426Other
    
    
    482
    
    
    
    9373,092
    
    
    
    3,060Deferred tax liability:Depreciation
    
    
    93
    
    
    
    135Securities available for sale
    
    
    118
    
    
    
    211
    
    
    
    135Net deferred tax assets
included in other assets
    
    $
    2,881
    
    
    $
    2,925
  2007
    
    
    2006
    
    
    2005(In Thousands)Current tax expense
    
    $
    2,696
    
    
    $
    4,429
    
    
    $
    4,213Deferred tax (benefit)
    
    
    (1,106
    )
    
    
    (576
    )
    
    
    (908
    )$
    1,590
    
    
    $
    3,853
    
    
    $
    3,305
 57




---



##### 



Notes to Consolidated Financial Statements
  2007
    
    
    2006
    
    
    2005(In Thousands)Computed expected tax expense
    
    $
    1,799
    
    
    $
    3,888
    
    
    $
    3,078Increase (decrease) in income taxes resulting from:State income taxes
    
    
    (180
    )
    
    
    12
    
    
    
    150Other
    
    
    (29
    )
    
    
    (47
    )
    
    
    77$
    1,590
    
    
    $
    3,853
    
    
    $
    3,305
 Note 9. Commitments and Contingent Liabilities
   Year
    
    Amount(In Thousands)2008
    
    $
    4322009
    
    
    3782010
    
    
    2812011
    
    
    2602012
    
    
    249$
    1,600
  58




---



##### 



Notes to Consolidated Financial Statements
 Note 10. Derivatives
    59




---



##### 



Notes to Consolidated Financial Statements
 Note 11. Financial Instruments with Off-Balance-Sheet Risk
      60




---



##### 



Notes to Consolidated Financial Statements
 Note 12. Related Party Transactions
  Note 13. Stock Option Plan
      61




---



##### 



Notes to Consolidated Financial Statements
 Year endedDecember 31, 2007Expected life of options granted
    
    
    2.60Risk-free interest rate
    
    
    4.56
    %Expected volatility of stock
    
    
    33
    %Annual Expected dividend yield
    
    
    1
    %Fair Value of Granted Options
    
    $
    188,073Non-Vested Options
    
    
    108,170
 Weighted Avg.Number of
    
    Weighted Avg.
    
    Remaining
    
    Aggregate IntrinsicOptions
    
    Exercise Price
    
    Contractual Term
    
    ValueOutstanding at beginning of year
    
    
    815,244
    
    
    $
    4.80
    
    
    
    2.31
    
    
    $
    4,176,393Granted
    
    
    80,900
    
    
    $
    9.47
    
    
    
    2.60
    
    
    $
    Exercised
    
    
    178,320
    
    
    $
    1.68Lapsed or Canceled
    
    
    4,200
    
    
    $
    11.23Outstanding at December 31, 2007
    
    
    713,624
    
    
    $
    6.07
    
    
    
    1.99
    
    
    $
    979,866Exercisable at December 31, 2007
    
    
    605,454
    
    
    $
    5.61
    
    
    
    1.91
    
    
    $
    979,716
 Options Outstanding
    
    Options ExercisableWeighted-
    
    
    
    
    
    
    
    
    
    Weighted-Average
    
    Weighted
    
    
    
    
    
    Average
    
    WeightedRange of
    
    
    
    
    
    Remaining
    
    Average
    
    
    
    
    
    Remaining
    
    AverageExercise
    
    Number
    
    Contractual
    
    Exercise
    
    Number
    
    Contractual
    
    ExercisePrice
    
    Outstanding
    
    Life (in yrs)
    
    Price
    
    Exercisable
    
    Life (in yrs)
    
    Price$1.85
    
    
    44,400
    
    
    
    0.2
    
    
    $
    1.85
    
    
    
    44,400
    
    
    
    0.2
    
    
    $
    1.852.84-3.45
    
    
    299,220
    
    
    
    1.5
    
    
    
    3.39
    
    
    
    299,220
    
    
    
    1.5
    
    
    
    3.395.98-6.94
    
    
    129,670
    
    
    
    3.3
    
    
    
    6.57
    
    
    
    98,000
    
    
    
    3.6
    
    
    
    6.597.36-7.54
    
    
    99,334
    
    
    
    2.6
    
    
    
    7.52
    
    
    
    99,334
    
    
    
    2.6
    
    
    
    7.5214.05
    
    
    64,500
    
    
    
    1.0
    
    
    
    14.05
    
    
    
    64,500
    
    
    
    1.0
    
    
    
    14.05$8.95-9.58
    
    
    76,500
    
    
    
    2.6
    
    
    
    9.58
    
    
    
    
    
    
    
    0.0
    
    
    713,624
    
    
    
    1.994
    
    
    $
    6.07
    
    
    
    605,454
    
    
    
    1.903
    
    
    $
    5.61
 62




---



##### 



Notes to Consolidated Financial Statements
 Note 14. Capital Requirements
    63




---



##### 



Notes to Consolidated Financial Statements
  MinimumTo Be WellCapitalized UnderMinimum Capital
    
    Prompt CorrectiveActual
    
    Requirement
    
    Action ProvisionsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    Ratio(In Thousands)December 31, 2007:Total Capital
(to Risk Weighted Assets)Corporation
    
    $
    70,153
    
    
    
    13.66
    %
    
    $
    41,088
    
    
    
    8.00
    %
    
    $
    51,360
    
    
    
    10.00
    %Bank
    
    $
    62,494
    
    
    
    12.17
    %
    
    $
    41,068
    
    
    
    8.00
    %
    
    $
    51,336
    
    
    
    10.00
    %Tier 1 Capital
(to Risk-Weighted Assets)Corporation
    
    $
    63,717
    
    
    
    12.41
    %
    
    $
    20,544
    
    
    
    4.00
    %
    
    $
    30,816
    
    
    
    6.00
    %Bank
    
    $
    56,051
    
    
    
    10.92
    %
    
    $
    20,534
    
    
    
    4.00
    %
    
    $
    30,801
    
    
    
    6.00
    %Tier 1 Capital
(to Average Assets)Corporation
    
    $
    63,717
    
    
    
    10.07
    %
    
    $
    25,310
    
    
    
    4.00
    %
    
    $
    31,638
    
    
    
    5.00
    %Bank
    
    $
    56,051
    
    
    
    8.87
    %
    
    $
    25,266
    
    
    
    4.00
    %
    
    $
    31,583
    
    
    
    5.00
    %December 31, 2006:Total Capital
(to Risk Weighted Assets)Corporation
    
    $
    78,491
    
    
    
    16.18
    %
    
    $
    38,799
    
    
    
    8.00
    %
    
    $
    48,499
    
    
    
    10.00
    %Bank
    
    $
    58,493
    
    
    
    12.09
    %
    
    $
    38,705
    
    
    
    8.00
    %
    
    $
    48,382
    
    
    
    10.00
    %Tier 1 Capital
(to Risk-Weighted Assets)Corporation
    
    $
    72,803
    
    
    
    15.01
    %
    
    $
    19,399
    
    
    
    4.00
    %
    
    $
    29,099
    
    
    
    6.00
    %Bank
    
    $
    52,805
    
    
    
    10.91
    %
    
    $
    19,353
    
    
    
    4.00
    %
    
    $
    29,029
    
    
    
    6.00
    %
 Note 15. Earnings Per Share
  64




---



##### 



Year Ended December 312007
    
    
    2006
    
    
    2005Net
    
    
    
    
    
    
    Per Share
    
    
    Net
    
    
    
    
    
    
    Per Share
    
    
    Net
    
    
    
    
    
    
    Per ShareIncome
    
    
    Shares
    
    
    Amount
    
    
    Income
    
    
    Shares
    
    
    Amount
    
    
    Income
    
    
    Shares
    
    
    Amount(In Thousands, Except Per Share Data)Earnings per shareBasic
    
    $
    3,702
    
    
    
    11,620
    
    
    $
    0.32
    
    
    $
    7,592
    
    
    
    9,429
    
    
    $
    0.81
    
    
    $
    5,898
    
    
    
    7,867
    
    
    $
    0.75Effect of dilutive securities:Stock options and warrants
    
    
    
    
    
    
    246
    
    
    
    
    
    
    
    
    
    
    
    1,113
    
    
    
    
    
    
    
    
    
    
    
    1,556Diluted
    
    
    
    
    
    
    
    
    
    $
    0.31
    
    
    
    
    
    
    
    
    
    
    $
    0.72
    
    
    
    
    
    
    
    
    
    
    $
    0.63Diluted earnings per share
    
    $
    3,702
    
    
    
    11,866
    
    
    $
    0.31
    
    
    $
    7,592
    
    
    
    10,542
    
    
    $
    0.72
    
    
    $
    5,898
    
    
    
    9,423
    
    
    $
    0.63
 Note 16. Employee Benefits
  65




---



##### 



Notes to Consolidated Financial Statements
 Note 17. Other Expenses
  Year Ended December 312007
    
    
    2006
    
    
    2005(In Thousands)Advertising and promotional expense
    
    $
    3,921
    
    
    $
    4,190
    
    
    $
    3,969Investor fees
    
    
    891
    
    
    
    663
    
    
    
    864Broker premium
    
    
    3,443
    
    
    
    2,688
    
    
    
    Other settlement fees
    
    
    251
    
    
    
    164
    
    
    
    295Management fees
    
    
    1,560
    
    
    
    1,227
    
    
    
    1,957Provision for LHFS
    
    
    1,750
    
    
    
    (266
    )
    
    
    680Mortgage buy back expense
    
    
    409
    
    
    
    
    
    
    
    Business & franchise tax
    
    
    458
    
    
    
    251
    
    
    
    120Accounting and auditing service
    
    
    570
    
    
    
    402
    
    
    
    341Consulting fees
    
    
    405
    
    
    
    416
    
    
    
    323Early payoff and default penalties
    
    
    331
    
    
    
    320
    
    
    
    431Office Supplies-Stationary-Print
    
    
    150
    
    
    
    162
    
    
    
    184Telephone
    
    
    331
    
    
    
    353
    
    
    
    351Postage
    
    
    223
    
    
    
    250
    
    
    
    256Credit report expenses
    
    
    299
    
    
    
    146
    
    
    
    107Other office expenses
    
    
    152
    
    
    
    178
    
    
    
    519Other operating expenses
    
    
    179
    
    
    
    169
    
    
    
    91Data processing
    
    
    374
    
    
    
    355
    
    
    
    301Regulatory examinations
    
    
    159
    
    
    
    112
    
    
    
    106Other
    
    
    1,985
    
    
    
    1,169
    
    
    
    2,482$
    17,841
    
    
    $
    12,949
    
    
    $
    13,377
 Note 18. Fair Value of Financial Instruments and Interest Rate Risk
  Cash and Short-Term Investments
  Securities
  Loans Held for Sale
  Loan Receivables
  66




---



##### 



Notes to Consolidated Financial Statements
 Deposits and Borrowings
  Accrued Interest
  Off-Balance-Sheet Financial Instruments
   December 31,2007
    
    
    2006Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairAmount
    
    
    Value
    
    
    Amount
    
    
    Value(In Thousands)Financial assets:Cash and short-term
investments
    
    $
    19,504
    
    
    $
    19,504
    
    
    $
    27,365
    
    
    $
    27,365Securities available for sale
    
    
    73,210
    
    
    
    73,558
    
    
    
    105,965
    
    
    
    105,163Loans, net of allowance
    
    
    509,280
    
    
    
    506,056
    
    
    
    493,462
    
    
    
    496,363Total Financial Assets
    
    $
    601,994
    
    
    $
    599,118
    
    
    $
    626,792
    
    
    $
    628,891Financial liabilities:Deposits
    
    $
    473,418
    
    
    $
    475,674
    
    
    $
    438,932
    
    
    $
    435,823Short-term borrowings
    
    
    41,676
    
    
    
    41,676
    
    
    
    84,951
    
    
    
    84,961Long-term borrowings
    
    
    39,524
    
    
    
    42,777
    
    
    
    42,572
    
    
    
    42,657Subordinated debentures
    
    
    6,186
    
    
    
    6,192
    
    
    
    10,311
    
    
    
    10,311Total Financial Liabilities
    
    $
    560,804
    
    
    $
    566,319
    
    
    $
    576,766
    
    
    $
    573,752
 67




---



##### 



Notes to Consolidated Financial Statements
  Note 19. Segment Reporting
   68




---



##### 



Notes to Consolidated Financial Statements
  2007
    
    Commercial
    
    
    Mortgage
    
    
    
    
    
    
    
    
    
    
    Consolidated(In Thousands)
    
    Banking
    
    
    Banking
    
    
    Other
    
    
    Eliminations
    
    
    TotalsRevenues:Interest income
    
    $
    45,176
    
    
    $
    3,594
    
    
    $
    665
    
    
    $
    (4,009
    )
    
    $
    45,426Gain on sale of loans
    
    
    
    
    
    
    20,244
    
    
    
    
    
    
    
    (3
    )
    
    
    20,241Other revenues
    
    
    1,452
    
    
    
    7,256
    
    
    
    1,081
    
    
    
    (2,323
    )
    
    
    7,466Total revenues
    
    
    46,628
    
    
    
    31,094
    
    
    
    1,746
    
    
    
    (6,335
    )
    
    
    73,133Expenses:Interest expense
    
    
    23,881
    
    
    
    4,166
    
    
    
    1,270
    
    
    
    (4,013
    )
    
    
    25,304Salaries and employee benefits
    
    
    6,822
    
    
    
    12,756
    
    
    
    
    
    
    
    
    
    
    
    19,578Other
    
    
    6,546
    
    
    
    16,989
    
    
    
    1,746
    
    
    
    (2,322
    )
    
    
    22,959Total operating expenses
    
    
    37,249
    
    
    
    33,911
    
    
    
    3,016
    
    
    
    (6,335
    )
    
    
    67,841Income before income taxes
    
    $
    9,379
    
    
    $
    (2,817
    )
    
    $
    (1,270
    )
    
    $
    
    
    
    $
    5,292Total assets
    
    $
    599,835
    
    
    $
    46,184
    
    
    $
    9,115
    
    
    $
    (32,758
    )
    
    $
    622,376Capital expenditures
    
    $
    554
    
    
    $
    111
    
    
    $
    305
    
    
    $
    
    
    
    $
    970
 2006
    
    Commercial
    
    
    Mortgage
    
    
    
    
    
    
    
    
    
    
    Consolidated(In Thousands)
    
    Banking
    
    
    Banking
    
    
    Other
    
    

Eliminations
    
    
    TotalsRevenues:Interest income
    
    $
    39,526
    
    
    $
    3,972
    
    
    $
    250
    
    
    $
    (3,810
    )
    
    $
    39,938Gain on sale of loans
    
    
    
    
    
    
    19,865
    
    
    
    
    
    
    
    (52
    )
    
    
    19,813Other
    
    
    1,644
    
    
    
    7,435
    
    
    
    1,331
    
    
    
    (2,590
    )
    
    
    7,820Total operating income
    
    
    41,170
    
    
    
    31,272
    
    
    
    1,581
    
    
    
    (6,452
    )
    
    
    67,571Expenses:Interest expense
    
    
    20,092
    
    
    
    4,053
    
    
    
    1,352
    
    
    
    (3,815
    )
    
    
    21,682Salaries and employee benefits
    
    
    6,371
    
    
    
    13,033
    
    
    
    
    
    
    
    
    
    
    
    19,404Other
    
    
    4,120
    
    
    
    12,123
    
    
    
    1,434
    
    
    
    (2,637
    )
    
    
    15,040Total operating expenses
    
    
    30,583
    
    
    
    29,209
    
    
    
    2,786
    
    
    
    (6,452
    )
    
    
    56,126Income before income taxes
    
    $
    10,587
    
    
    $
    2,063
    
    
    $
    (1,205
    )
    
    $
    
    
    
    $
    11,445Total assets
    
    $
    591,973
    
    
    $
    69,749
    
    
    $
    9,876
    
    
    $
    (26,816
    )
    
    $
    644,782Capital expenditures
    
    $
    248
    
    
    $
    444
    
    
    $
    
    
    
    $
    
    
    
    $
    692
 2005
    
    Commercial
    
    
    Mortgage
    
    
    
    
    
    
    
    
    
    
    Consolidated(In Thousands)
    
    Banking
    
    
    Banking
    
    
    Other
    
    

Eliminations
    
    
    TotalsRevenues:Interest income
    
    $
    27,617
    
    
    $
    3,085
    
    
    $
    91
    
    
    $
    (3,000
    )
    
    $
    27,793Gain on sale of loans
    
    
    
    
    
    
    22,719
    
    
    
    
    
    
    
    (103
    )
    
    
    22,616Other
    
    
    1,570
    
    
    
    7,545
    
    
    
    1,132
    
    
    
    (1,907
    )
    
    
    8,340Total operating income
    
    
    29,187
    
    
    
    33,349
    
    
    
    1,223
    
    
    
    (5,010
    )
    
    
    58,749Expenses:Interest expense
    
    
    11,575
    
    
    
    2,760
    
    
    
    1,188
    
    
    
    (3,003
    )
    
    
    12,520Salaries and employee benefits
    
    
    5,798
    
    
    
    14,739
    
    
    
    
    
    
    
    
    
    
    
    20,537Other
    
    
    4,594
    
    
    
    12,525
    
    
    
    1,377
    
    
    
    (2,007
    )
    
    
    16,489Total operating expenses
    
    
    21,967
    
    
    
    30,024
    
    
    
    2,565
    
    
    
    (5,010
    )
    
    
    49,546Income before income taxes
    
    $
    7,220
    
    
    $
    3,325
    
    
    $
    (1,342
    )
    
    $
    
    
    
    $
    9,203Total assets
    
    $
    514,808
    
    
    $
    48,883
    
    
    $
    9,101
    
    
    $
    (35,743
    )
    
    $
    537,050Capital expenditures
    
    $
    428
    
    
    $
    121
    
    
    $
    1,244
    
    
    $
    
    
    
    $
    1,793
 69




---



##### 



Notes to Consolidated Financial Statements
 Note 20. Parent Only Statements
 ACCESS NATIONAL CORPORATION
(Parent Corporation Only)
Balance Sheets
 December 31,2007
    
    
    2006(In Thousands)AssetsCash
    
    $
    2
    
    
    $
    48Other investments
    
    
    7,280
    
    
    
    19,339Investment in subsidiaries
    
    
    56,606
    
    
    
    52,297Other assets
    
    
    725
    
    
    
    1,182Total assets
    
    $
    64,613
    
    
    $
    72,866Liabilities and Shareholders EquityLiabilitiesSubordinated debentures
    
    $
    6,186
    
    
    $
    10,311Other liabilities
    
    
    466
    
    
    
    261Total liabilities
    
    
    6,652
    
    
    
    10,572Shareholders EquityCommon stock
    
    
    9,052
    
    
    
    9,867Additional paid in capital
    
    
    21,833
    
    
    
    29,317Retained earnings
    
    
    26,846
    
    
    
    23,641Accumulated other comprehensive income (loss), net
    
    
    230
    
    
    
    (529
    )Total shareholders equity
    
    
    57,961
    
    
    
    62,296Total liabilities and shareholders equity
    
    $
    64,613
    
    
    $
    72,868
 70




---



##### 



Notes to Consolidated Financial Statements
 ACCESS NATIONAL CORPORATION
(Parent Corporation Only)
Statements of Income
 Year Ended December 312007
    
    
    2006
    
    
    2005(In Thousands)IncomeDividends from subsidiaries
    
    $
    1,260
    
    
    $
    1,005
    
    
    $
    1,014Interest
    
    
    665
    
    
    
    250
    
    
    
    91Other
    
    
    46
    
    
    
    94
    
    
    
    851,971
    
    
    
    1,349
    
    
    
    1,190ExpensesInterest expense on subordinated debentures
    
    
    807
    
    
    
    879
    
    
    
    706Other expenses
    
    
    1,188
    
    
    
    832
    
    
    
    845Total expenses
    
    
    1,995
    
    
    
    1,711
    
    
    
    1,551Income before income taxes and undistributed income of
subsidiaries
    
    
    (24
    )
    
    
    (362
    )
    
    
    (361
    )Income tax (benefit)
    
    
    (487
    )
    
    
    (518
    )
    
    
    (525
    )Income before undistributed income of subsidiaries
    
    
    463
    
    
    
    156
    
    
    
    164Undistributed income of subsidiaries
    
    
    3,239
    
    
    
    7,436
    
    
    
    5,734Net income
    
    $
    3,702
    
    
    $
    7,592
    
    
    $
    5,898
 71




---



##### 



Notes to Consolidated Financial Statements
 ACCESS NATIONAL CORPORATION
(Parent Corporation Only)
Statements of Cash Flows
 Year Ended December 312007
    
    
    2006
    
    
    2005(In Thousands)Cash Flows from Operating ActivitiesNet income
    
    $
    3,702
    
    
    $
    7,592
    
    
    $
    5,898Adjustments to reconcile net income to net cash provided by
(used in) operating activities:Undistributed income of subsidiaries
    
    
    (3,239
    )
    
    
    (7,436
    )
    
    
    (5,734
    )(Increase) decrease in other assets
    
    
    147
    
    
    
    (592
    )
    
    
    1,142Increase (decrease) in other liabilities
    
    
    205
    
    
    
    (273
    )
    
    
    240Stock Based Compensation
    
    
    99
    
    
    
    46
    
    
    
    Net cash provided by (used in) operating
activities
    
    
    914
    
    
    
    (663
    )
    
    
    1,546Cash Flows from Investing ActivitiesIncrease in investment in subsidiaries
    
    
    
    
    
    
    (5,000
    )
    
    
    (3,500
    )(Increase) decrease in other investments
    
    
    12,059
    
    
    
    (17,514
    )
    
    
    1,888Net cash provided by (used in) investing
activities
    
    
    12,059
    
    
    
    (22,514
    )
    
    
    (1,612
    )Cash Flows from Financing ActivitiesRepurchase of common stock
    
    
    (9,502
    )
    
    
    (51
    )
    
    
    (25
    )Net proceeds from issuance of common stock
    
    
    1,105
    
    
    
    23,446
    
    
    
    92Repayments on subordinated debentures
    
    
    (4,125
    )
    
    
    
    
    
    
    Dividends paid
    
    
    (497
    )
    
    
    
    
    
    
    Net cash (used in) provided by financing
activities
    
    
    (13,019
    )
    
    
    23,395
    
    
    
    67Increase (decrease) in cash and cash equivalents
    
    
    (46
    )
    
    
    38
    
    
    
    1Cash and Cash EquivalentsBeginning
    
    
    48
    
    
    
    10
    
    
    
    9Ending
    
    $
    2
    
    
    $
    48
    
    
    $
    10
 72




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##### 



ITEM 9  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
  
 ITEM 9A  CONTROLS AND PROCEDURES
    Report of Managements Assessment of Internal Control over Financial Reporting
      
 ITEM 9B  OTHER INFORMATION
  73




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##### 



PART III
 
 ITEM 10  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
  
 ITEM 11  EXECUTIVE COMPENSATION
  
 ITEM 12  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
  Equity Compensation Plan
  Equity Compensation Plan Information (1)
 (c)Number of securities(a)
    
    
    
    
    
    remaining available forNumber of securities to
    
    (b)
    
    future issuance underbe issued upon
    
    Weighted-average
    
    equity compensation plansexercise of
    
    exercise price of
    
    (excluding securitiesoutstanding options,
    
    outstanding options,
    
    reflectedPlan category
    
    warrants and rights
    
    warrants and rights
    
    in column (a))Equity compensation
plans approved by
security holders
(2)
    
    
    713,624
    
    
    $
    6.07
    
    
    
    546,416Equity compensation
plans not approved
by security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    713,624
    
    
    $
    6.07
    
    
    
    546,416
 
 (1)
    
    All share and dollar per share amounts have been adjusted to give effect to the 10-for-1
stock dividend distributed by the Corporation in April 2001, the 3-for-1 stock dividend
distributed in June 2003, and the 2-for-1 stock dividend distributed in December 2005.(2)
    
    All shares relate to the Corporations 1999 Stock Option Plan, as amended in 2003. 
 ITEM 13  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
  74




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##### 



ITEM 14  PRINCIPAL ACCOUNTANT FEES AND SERVICES
  75




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##### 



PART IV
 
 ITEM 15  EXHIBITS, FINANCIAL STATEMENT SCHEDULES
 (a)  Exhibit Index
 Exhibit No.
    
    Description3.1
    
    Articles of Incorporation of Access National Corporation
(incorporated by reference to Exhibit 3.1 to Form 8-K filed July
18, 2006)3.2
    
    Bylaws of Access National Corporation (incorporated by reference
to Exhibit 3.2 to Form 8-K Filed October 24, 2007)4
    
    Form of Common Stock Certificate (incorporated by reference to
Exhibit 4.0 to Form 10-KSB filed March 31, 2003)Certain instruments relating to trust preferred securities not
being registered have been omitted in accordance with Item
601(b)(4)(iii) of Regulation S-K. The registrant will furnish a
copy of any such instrument to the Securities and Exchange
Commission upon its request.10.1+
    
    Employment Letter Agreement between Access National Bank and
Michael W. Clarke (incorporated by reference to Exhibit 10.1 to
Form 10-K filed March 31, 2005)10.2+
    
    Employment Letter Agreement between Access National Bank and
Robert C. Shoemaker (incorporated by reference to Exhibit 10.2
to Form 10-K filed March 31, 2005)10.3+
    
    Employment Letter Agreement between Access National Bank and
Charles Wimer (incorporated by reference to Exhibit 10.3 to
Form 10-KSB filed March 31, 2003)10.4+
    
    Employment Agreement between Access National Mortgage
Corporation and Dean Hackemer (incorporated by reference to
Exhibit 10.4 to Form 10-K filed March 31, 2005)10.4.1+
    
    Amendment #1 to Employment Agreement between Access National
Mortgage Corporation and Dean Hackemer (incorporated by
reference to Exhibit 10.2 to Form 10-Q filed May 15, 2007)10.5*+
    
    Schedule of Non-Employee Directors Annual Compensation10.6*+
    
    Base Salaries for Named Executive Officers10.7+
    
    Access National Bank 1999 Stock Option Plan (incorporated by
reference to Exhibit 10.5 to Form 10-KSB filed March 31, 2003)10.7.1+
    
    Form of Incentive Stock Option Agreement for Employee under 1999
Stock Option Plan (incorporated by reference to Exhibit 10.5.1
to Form 8-K filed January 31, 2007)10.7.2+
    
    Form of Incentive Stock Option for Employee-Director under 1999
Stock Option Plan (incorporated by reference to Exhibit 10.5.2
to Form 8-K filed January 31, 2007)10.7.3+
    
    Form of Non-Qualified Stock Option Agreement for Director under
1999 Stock Option Plan (incorporated by reference to Exhibit
10.5.3 to Form 8-K filed January 31, 2007)10.8
    
    Lease agreement between Access National Bank and William and
Blanca Spencer (incorporated by reference to Exhibit 10.6 to
Form 10-KSB filed March 31, 2003)10.9
    
    Lease agreement between Access National Mortgage Corporation and
WJG, LLC (incorporated by reference to Exhibit 10.7 to
Form 10-KSB filed March 31, 2003)14
    
    Code of Ethics (incorporated by reference to Exhibit 14 to
Form 10-KSB filed March 30, 2004)21*
    
    Subsidiaries of Access National Corporation
 76




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##### 



Exhibit No.
    
    Description23*
    
    Consent of BDO Seidman, LLP24*
    
    Power of Attorney (included on the signature page of this report)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+
    
    indicates a management contract or compensatory plan or arrangement 
 SIGNATURES
 Pursuant to the requirements of Section 13 or 15(d) 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: March  13,  2008
    By:
    /s/ Michael W. ClarkeMichael W. ClarkePresident and Chief Executive OfficerDate: March 13, 2008
    By:
    /s/ Charles WimerCharles WimerExecutive Vice President and Chief Financial Officer 77




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##### 



Signature
    
    Title
    
    Date/s/ J. Randolph BabbittJ. Randolph Babbitt
    
    Director
    
    March 13, 2008/s/ Michael W. ClarkeMichael W. Clarke
    
    President / Chief Executive Officer &
Director (Principal Executive Officer)
    
    March 13, 2008/s/ John W. EdgemondJohn W. Edgemond IV
    
    Director
    
    March 13, 2008/s/ James L. JadlosJames L. Jadlos
    
    Director
    
    March 13, 2008/s/ Thomas M. KodyThomas M. Kody
    
    Director
    
    March 13, 2008/s/ Jacques RebiboJacques Rebibo
    
    Chairman of the Board of Directors
Director
    
    March 13, 2008/s/ Robert C. ShoemakerRobert C. Shoemaker
    
    Executive Vice President,
Chief Credit Officer & Director
    
    March 13, 2008/s/ Charles WimerCharles Wimer
    
    Executive Vice President and Chief Financial
Officer

(Principal Financial Officer and Principal
Accounting Officer)
    
    March 13, 2008
 78