WashingtonFirst Bankshares, Inc. (NASDAQ: WFBI) ("WashingtonFirst" or the "Company") announced today that it had achieved record financial results for the year ended December 31, 2016. Loans, deposits, fee income, net income, return on assets, and earnings per share reached all-time highs. At the same time, the Company's asset quality has improved to its best since 2007, as measured in terms of non-performing assets as a percentage of total assets. In addition, the Company opened two additional full-service bank branches in 2016 and increased its dividends to shareholders.

In commenting on the Company's 2016 performance, Shaza Andersen, the Company's President and CEO, said "I am very excited to report our record performance. Our team was charged with high expectations and goals in 2016 and we achieved them. Looking to the future, WashingtonFirst remains committed to growing long-term shareholder value through a continued focus on customer relationships, high standards of quality and service, and strong financial performance."

In the fourth quarter of 2016, the Company reported net income of $4.7 million, a 34.0% increase compared to the fourth quarter of 2015. This translated into fully-diluted earnings per share of $0.36 for the fourth quarter of 2016, a 20.0% increase compared to the fourth quarter of 2015. The percentage increase in per-share earnings was lower than the percentage increase in net income because of the 1,655,000 shares that were issued in the Company's public stock offering in December 2015.

For the year ended December 31, 2016, WashingtonFirst reported net income of $18.0 million and fully-diluted earnings per share of $1.37, representing increases of 47.8% and 21.2%, respectively, compared to the previous year. Return on average assets, a key performance objective for the Company, reached 1.00% in 2016 compared to 0.83% in 2015. Management attributed the increase in return on average assets to the increased level of fee income contributed by the mortgage and wealth management businesses acquired in July 2015.

The Company's total assets reached $2.0 billion as of December 31, 2016, an increase of 19.6% compared to one year earlier. Net loans held-for-investment and total deposits each ended the year at $1.5 billion, reflecting increases of 17.4% and 14.2%, respectively, compared to one year earlier. Non-performing assets represented 0.43% of total assets as of December 31, 2016, compared to 0.86% one year earlier.

In November 2016 the Company announced a 5% stock dividend, the fourth such dividend since the inception of WashingtonFirst Bank in 2004. Additionally, the Company increased its quarterly cash dividend by 16.7% to $0.07 from $0.06 per share. WashingtonFirst has increased its cash dividend to stockholders every year since it declared its initial dividend in October 2013.

About The Company

WashingtonFirst Bankshares, Inc., headquartered in Reston, Virginia, is the holding company for WashingtonFirst Bank, which operates 19 full-service banking offices throughout the Washington, D.C. metropolitan area. In addition, the Company provides wealth management services through its subsidiary, 1st Portfolio Wealth Advisors, and mortgage banking services through the Bank's subsidiary, WashingtonFirst Mortgage Corporation. The Company's common stock is traded on the NASDAQ Stock Market under the quotation symbol "WFBI" and is included in the ABA NASDAQ Community Bank Index and the Russell 2000® index. For more information about the Company, please visit: www.wfbi.com.

Cautionary Statements About Forward-Looking Information

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements of the goals, intentions, and expectations of the Company as to future trends, plans, events, results of operations and policies and regarding general economic conditions. Forward-looking information is inherently subject to risks and uncertainties, and actual results could differ materially from those currently anticipated due to a number of factors which include, but are not limited to, factors discussed in our Annual Report on Form 10-K and in other documents we file with the Securities and Exchange Commission from time to time. In some cases, forward-looking statements can be identified by use of words such as "may," "will," "anticipates," "believes," "expects," "plans," "estimates," "potential," "continue," "should," and similar words or phrases. These statements are based upon the beliefs of the management of the Company as to the expected outcome of future events, current and anticipated economic conditions, nationally and in the Company's market, and their impact on the operations, assets and earnings of the Company, interest rates and interest rate policy, competitive factors, judgments about the ability of the Company to successfully integrate its operations following significant transactions including, but not limited to, mergers and acquisitions, the ability to avoid customer dislocation during the period leading up to and following such transactions, and other conditions which by their nature, are not susceptible to accurate forecast and are subject to significant uncertainty. Readers are cautioned against placing undue reliance on such forward-looking statements. The Company assumes no obligation to revise, update, or clarify forward-looking statements to reflect events or conditions after the date of this release.
   
WashingtonFirst Bankshares, Inc.
Consolidated Balance Sheets

(unaudited)
 
December 31, 2016 December 31, 2015
($ in thousands)
Assets:
Cash and cash equivalents:
Cash and due from bank balances $ 3,614 $ 3,739
Federal funds sold 93,659 59,014
Interest bearing deposits   100      
Cash and cash equivalents 97,373 62,753
Investment securities, available-for-sale, at fair value 280,204 220,113
Restricted stock, at cost 11,726 6,128
Loans held for sale, at lower of cost or fair value 32,109 36,494
Loans held for investment:
Loans held for investment, at amortized cost 1,534,543 1,308,083
Allowance for loan losses   (13,582 )   (12,289 )
Total loans held for investment, net of allowance 1,520,961 1,295,794
Premises and equipment, net 6,955 7,374
Goodwill 11,420 11,431
Identifiable intangibles 1,619 1,888
Deferred tax asset, net 8,944 8,116
Accrued interest receivable 5,243 4,502
Other real estate owned 1,428
Bank-owned life insurance 13,880 13,521
Other assets   11,049     6,352  
Total Assets $ 2,002,911   $ 1,674,466  
Liabilities and Shareholders' Equity:
Liabilities:
Non-interest bearing deposits $ 381,887 $ 304,425
Interest bearing deposits   1,140,854     1,028,817  
Total deposits 1,522,741 1,333,242
Other borrowings 6,707 6,942
FHLB advances 232,097 110,087
Long-term borrowings 32,638 32,884
Accrued interest payable 947 912
Other liabilities   15,121     11,804  
Total Liabilities 1,810,251 1,495,871
Commitments and contingent liabilities
Shareholders' Equity:
Preferred stock:
Series D, $5.00 par value, 0, 0, and 13,347 shares issued and outstanding, respectively, 1% dividend
Additional paid-in capital - preferred
Common stock:
Common Stock Voting, $0.01 par value, 50,000,000 shares authorized, 10,987,652 and 10,377,981 shares issued and outstanding, respectively 109 103
Common Stock Non-Voting, $0.01 par value, 10,000,000 shares authorized; 1,908,733 and 1,817,842 shares issued and outstanding, respectively 19 18
Additional paid-in capital 177,924 160,861
Accumulated earnings 17,187 17,740
Accumulated other comprehensive income/(loss)   (2,579 )   (127 )
Total Shareholders' Equity   192,660     178,595  
Total Liabilities and Shareholders' Equity $ 2,002,911   $ 1,674,466  
 
       
WashingtonFirst Bankshares, Inc.
Consolidated Statements of Income

(unaudited)
 
For the Three Months Ended For the Year Ended
December 31, 2016 December 31, 2015 December 31, 2016 December 31, 2015
($ in thousands, except per share data)
Interest and dividend income:
Interest and fees on loans $ 17,971 $ 16,088 $ 68,901 $ 59,346
Interest and dividends on investments:
Taxable 1,002 923 4,274 3,257
Tax-exempt 57 23 123 74
Dividends on other equity securities 76 71 284 257
Interest on Federal funds sold and other short-term investments   79   54     265   249  
Total interest and dividend income 19,185 17,159 73,847 63,183
Interest expense:
Interest on deposits 2,300 1,809 8,727 6,431
Interest on borrowings   906   1,018     3,744   2,780  
Total interest expense   3,206   2,827     12,471   9,211  
Net interest income 15,979 14,332 61,376 53,972
Provision for loan losses   1,240   1,075     3,880   3,550  
Net interest income after provision for loan losses 14,739 13,257 57,496 50,422
Non-interest income:
Service charges on deposit accounts 45 97 259 434
Earnings on bank-owned life insurance 89 93 359 374
Gain on sale of other real estate owned, net 100 11 231
Gain on sale of loans, net 3,973 2,462 18,329 4,645
Mortgage banking activities 493 470 4,265 759
Wealth management income 497 425 1,835 693
Gain/(loss) on sale of available-for-sale investment securities, net 36 1,323 10
Other operating income   435   159     1,124   745  
Total non-interest income 5,568 3,806 27,505 7,891
Non-interest expense:
Compensation and employee benefits 7,974 7,616 35,183 23,122
Premises and equipment 1,888 1,697 7,370 6,327
Data processing 986 895 4,169 3,510
Professional fees 290 362 1,336 1,285
Merger expenses (9 ) 30 545
Mortgage loan processing expenses 246 139 1,240 248
Debt extinguishment 136 1,335
Other operating expenses   1,696   1,214     6,200   4,552  
Total non-interest expense   13,216   11,914     56,863   39,589  
Income before provision for income taxes 7,091 5,149 28,138 18,724
Provision for income taxes   2,347   1,607     10,131   6,469  
Net income 4,744 3,542 18,007 12,255
Preferred stock dividends     (1 )     (74 )
Net income available to common shareholders $ 4,744 $ 3,541   $ 18,007 $ 12,181  
 
Earnings per common share: (1)
Basic earnings per common share $ 0.37 $ 0.31 $ 1.40 $ 1.15
Diluted earnings per common share $ 0.36 $ 0.30 $ 1.37 $ 1.13
 

(1)
 

2015 amounts have been adjusted to reflect the 5% stock dividend declared in December 2016
       
For the Three Months Ended For the Year Ended
December 31, 2016 December 31, 2015 December 31, 2016 December 31, 2015
($ in thousands, except per share data)

Performance Ratios:
Return on average assets 1.00 % 0.86 % 1.00 % 0.83 %
Return on average shareholders' equity 9.69 % 8.93 % 9.50 % 8.48 %
Yield on average interest-earning assets 4.10 % 4.24 % 4.23 % 4.32 %
Rate on average interest-earning liabilities 1.00 % 0.99 % 1.02 % 0.90 %
Net interest spread 3.10 % 3.25 % 3.21 % 3.42 %
Net interest margin 3.40 % 3.53 % 3.52 % 3.74 %
Efficiency ratio (1) 60.81 % 65.69 % 63.42 % 64.00 %
Net charge-offs to average loans held for investment (2) 0.16 % 0.11 % 0.18 % 0.04 %
 
Mortgage origination volume $ 168,902 $ 118,454 $ 772,076 $ 216,330
 
Assets under management $ 297,394 $ 226,688 $ 297,394 $ 226,688
 

Per Share Data: (3)
Basic earnings per common share $ 0.37 $ 0.31 $ 1.40 $ 1.15
Fully diluted earnings per common share $ 0.36 $ 0.30 $ 1.37 $ 1.13
Weighted average basic shares outstanding 12,877,374 11,503,785 12,854,011 10,593,573
Weighted average diluted shares outstanding 13,151,482 11,747,996 13,108,247 10,781,434

 
(1) The efficiency ratio is calculated as total non-interest expense (less debt extinguishment costs) divided by the sum of net interest income and total non-interest income (less gain on sale of AFS securities). This non-GAAP financial measure is presented to facilitate an understanding of the Company's performance.
(2) Annualized
(3) 2015 amounts have been adjusted to reflect the 5% stock dividend declared in December 2016
 
  December 31, 2016   December 31, 2015

Capital Ratios:
Total risk-based capital ratio 13.99% 14.86%
Tier 1 risk-based capital ratio 11.61% 12.22%
Common equity tier 1 risk-based capital ratio 11.12% 11.66%
Tier 1 leverage ratio 10.14% 10.67%
Tangible common equity to tangible assets (1) 9.03% 9.95%
 

Per Share Capital Data: (2)
Book value per common share $14.94 $13.95
Tangible book value per common share $13.93 $12.91
Common shares outstanding 12,896,385 12,805,152
(1) This is a non-GAAP financial measure. Refer to the table below outlining the reconciliation of tangible common equity to tangible assets.
(2) 2015 amounts have been adjusted to reflect the 5% stock dividend declared in December 2016
 
           
Average Balances, Interest Income and Expense and Average Yield and Rates (QTD)
For the Three Months Ended
December 31, 2016 December 31, 2015
AverageBalance Income/Expense Yield/Rate (6) AverageBalance Income/Expense Yield/Rate (6)
($ in thousands)
Assets
Interest-earning assets:
Loans (1) $ 1,518,639 $ 17,971 4.63 % $ 1,317,000 $ 16,088 4.78 %
Investment securities - taxable 234,321 1,002 1.67 % 208,301 923 1.74 %
Investment securities - tax-exempt (2) 13,416 69 2.02 % 4,274 28 2.52 %
Other equity securities 6,806 76 4.41 % 6,530 71 4.34 %
Interest-bearing balances 100 0.60 % %
Federal funds sold   60,335     79 0.52 %   49,364     54 0.43 %
Total interest earning assets 1,833,617 19,197 4.10 % 1,585,469 17,164 4.24 %
Non-interest earning assets:
Cash and due from banks 5,276 3,905
Premises and equipment 7,179 7,214
Other real estate owned 1,830 80
Other assets (3) 47,045 46,829
Less: allowance for loan losses   (13,216 )   (11,867 )
Total non-interest earning assets   48,114     46,161  
Total Assets $ 1,881,731   $ 1,631,630  
 
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing demand deposits $ 120,645 $ 86 0.28 % $ 109,939 $ 73 0.26 %
Money market deposit accounts 285,036 440 0.61 % 265,665 335 0.50 %
Savings accounts 213,283 379 0.71 % 157,994 277 0.70 %
Time deposits   498,576     1,395 1.11 %   436,198     1,124 1.02 %
Total interest-bearing deposits 1,117,540 2,300 0.82 % 969,796 1,809 0.74 %
FHLB advances 116,108 366 1.24 % 119,614 454 1.49 %
Other borrowings and long-term borrowings   38,640     540 5.54 %   38,508     564 5.79 %
Total interest-bearing liabilities 1,272,288 3,206 1.00 % 1,127,918 2,827 0.99 %
Non-interest-bearing liabilities:
Demand deposits 401,985 332,906
Other liabilities   12,752     13,491  
Total non-interest-bearing liabilities   414,737     346,397  
Total Liabilities 1,687,025 1,474,315
Shareholders' Equity   194,706     157,315  
Total Liabilities and Shareholders' Equity $ 1,881,731   $ 1,631,630  
 
Interest Spread (4)   3.10 %   3.25 %
Net Interest Margin (2)(5) $ 15,991 3.40 % $ 14,337 3.53 %

(1)
 

Includes loans held for sale and loans placed on non-accrual status.

(2)

Yield and income presented on a fully taxable equivalent basis using a federal statutory rate of 35 percent.

(3)

Includes intangibles, deferred tax asset, accrued interest receivable, bank-owned life insurance and other assets.

(4)

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

(5)

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

(6)

Annualized income/expense is used for the yield/rate.
 
           
Average Balances, Interest Income and Expense and Average Yield and Rates (YTD)
For the Year Ended December 31,
2016 2015
AverageBalance Income/Expense Yield/Rate AverageBalance Income/Expense Yield/Rate
($ in thousands)
Assets
Interest-earning assets:
Loans (1) $ 1,440,519 $ 68,901 4.78 % $ 1,187,273 $ 59,346 5.00 %
Investment securities - taxable 243,578 4,274 1.75 % 186,931 3,257 1.74 %
Investment securities - tax-exempt (2) 6,849 149 2.18 % 3,088 93 3.01 %
Other equity securities 6,289 284 4.52 % 6,153 257 4.18 %
Interest-bearing balances 86 1 1.57 % 4,239 27 0.64 %
Federal funds sold   48,110     264 0.55 %   55,121     222 0.40 %
Total interest earning assets 1,745,431 73,873 4.23 % 1,442,805 63,202 4.32 %
Non-interest earning assets:
Cash and due from banks 3,209 3,795
Premises and equipment 7,499 6,575
Other real estate owned 1,609 250
Other assets (3) 47,291 40,549
Less: allowance for loan losses   (12,604 )   (10,474 )
Total non-interest earning assets   47,004     40,695  
Total Assets $ 1,792,435   $ 1,483,500  
 
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing demand deposits $ 121,823 $ 355 0.29 % $ 106,202 $ 261 0.25 %
Money market deposit accounts 277,552 1,666 0.60 % 229,819 1,129 0.49 %
Savings accounts 207,153 1,469 0.71 % 137,010 943 0.69 %
Time deposits   475,224     5,237 1.10 %   411,336     4,098 1.00 %
Total interest-bearing deposits 1,081,752 8,727 0.81 % 884,367 6,431 0.73 %
FHLB advances 106,882 1,583 1.48 % 109,967 1,625 1.48 %
Other borrowings and long-term borrowings   39,122     2,161 5.52 %   23,816     1,155 4.85 %
Total interest-bearing liabilities 1,227,756 12,471 1.02 % 1,018,150 9,211 0.90 %
Non-interest-bearing liabilities:
Demand deposits 362,196 310,182
Other liabilities   12,851     10,676  
Total non-interest-bearing liabilities   375,047     320,858  
Total Liabilities 1,602,803 1,339,008
Shareholders' Equity   189,632     144,492  
Total Liabilities and Shareholders' Equity $ 1,792,435   $ 1,483,500  
 
Interest Spread (4)   3.21 %   3.42 %
Net Interest Margin (2)(5) $ 61,402 3.52 % $ 53,991 3.74 %

(1)
   

Includes loans held for sale and loans placed on non-accrual status.

(2)

Yield and income presented on a fully taxable equivalent basis using a federal statutory rate of 35 percent.

(3)

Includes intangibles, deferred tax asset, accrued interest receivable, bank-owned life insurance and other assets.

(4)

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

(5)

Net interest margin is net interest income, expressed as a percentage of average earning assets.
 
 
Composition of Loans Held for Investment
  December 31, 2016   December 31, 2015
($ in thousands)
Construction and development $ 288,193 $ 249,433
Commercial real estate 789,260 657,110
Residential real estate   287,250   241,395
Real estate loans 1,364,703 1,147,938
Commercial and industrial 165,172 153,860
Consumer   4,668   6,285
Total loans 1,534,543 1,308,083
Less: allowance for loan losses   13,582   12,289
Net loans $ 1,520,961 $ 1,295,794
 
   
Composition of Deposits
December 31, 2016 December 31, 2015
($ in thousands)
Demand deposit accounts $381,887 $304,425
NOW accounts 134,938 115,459
Money market accounts 270,794 309,940
Savings accounts 209,961 163,289
Time deposits up to $250,000 386,095 324,454
Time deposits over $250,000 139,066 115,675
Total deposits $1,522,741 $1,333,242
 
   
December 31, 2016 December 31, 2015

Allowance and Asset Quality Ratios:
Allowance for loan losses to loans held for investment 0.89 % 0.94 %
Adjusted allowance for loan losses to loans held for investment (1) 1.11 % 1.30 %
Allowance for loan losses to non-accrual loans 236.37 % 120.47 %
Allowance for loan losses to non-performing assets 159.10 % 84.76 %
Non-performing assets to total assets 0.43 % 0.86 %
 

(1)
 

This is a non-GAAP financial measure. Refer to the table below outlining the reconciliation of GAAP Allowance Ratio to Adjusted Allowance Ratio.
 
   
Non-Performing Assets
December 31, 2016 December 31, 2015
($ in thousands)
Non-accrual loans $ 5,746 $ 10,201
90+ days still accruing 2 28
Trouble debt restructurings still accruing 1,361 4,269
Other real estate owned   1,428  
Total non-performing assets $ 8,537 $ 14,498
 
 
Reconciliation of Tangible Common Equity to Tangible Assets Ratio (1)
  December 31, 2016   December 31, 2015
($ in thousands)

Tangible Common Equity:
Common Stock Voting $ 109 $ 103
Common Stock Non-Voting 19 18
Additional paid-in capital - common 177,924 160,861
Accumulated earnings 17,187 17,740
Accumulated other comprehensive income/(loss)   (2,579 )   (127 )
Total Common Equity $ 192,660   $ 178,595  
 

Less Intangibles:
Goodwill $ 11,420 $ 11,431
Identifiable intangibles   1,619     1,888  
Total Intangibles $ 13,039   $ 13,319  
 
Tangible Common Equity $ 179,621   $ 165,276  
 

Tangible Assets:
Total Assets $ 2,002,911 $ 1,674,466
 

Less Intangibles:
Goodwill $ 11,420 $ 11,431
Identifiable intangibles   1,619     1,888  
Total Intangibles $ 13,039   $ 13,319  
 
Tangible Assets $ 1,989,872   $ 1,661,147  
 
Tangible Common Equity to Tangible Assets 9.03 % 9.95 %
 

(1)
 

Tangible common equity to tangible assets ratio is a non-GAAP financial measure that is presented to facilitate an understanding of the Company's capital structure. This table provides a reconciliation between certain GAAP amounts and this non-GAAP financial measure.
 
Reconciliation of GAAP Allowance Ratio to Adjusted Allowance Ratio (1)
  December 31, 2016   December 31, 2015
($ in thousands)
GAAP allowance for loan losses $ 13,582 $ 12,289
GAAP loans held for investment, at amortized cost 1,534,543 1,308,083
 
GAAP allowance for loan losses to total loans held for investment 0.89 % 0.94 %
 
GAAP allowance for loan losses $ 13,582 $ 12,289
Plus: Credit purchase accounting marks   3,439     4,721  
Adjusted allowance for loan losses $ 17,021   $ 17,010  
 
GAAP loans held for investment, at amortized cost $ 1,534,543 $ 1,308,083
Plus: Credit purchase accounting marks   3,439     4,721  
Adjusted loans held for investment, at amortized cost $ 1,537,982   $ 1,312,804  
 
Adjusted allowance for loan losses to total loans held for investment 1.11 % 1.30 %
 

(1)
 

This is a non-GAAP financial measure. Credit purchase accounting marks are GAAP marks under purchase accounting guidance.
 
Segment Reporting (QTD)
  For the Three Months Ended December 31, 2016
Commercial Bank   Mortgage Bank   Wealth Management   Other (1)   Consolidated Totals
($ in thousands)
Revenues:
Interest income 19,102 427 (344 ) 19,185
Gain on sale of loans 3,973 3,973
Other revenues   604   493   498       1,595
Total income $ 19,706 $ 4,893 $ 498 $ (344 ) $ 24,753
 
Expenses:
Interest expense 2,677 344 1 184 3,206
Salaries and employee benefits 3,970 3,540 246 218 7,974
Other expenses   7,962   871   170   (174 )   8,829
Total expenses $ 14,609 $ 4,755 $ 417 $ 228   $ 20,009
 
Net Income (loss) $ 5,097 $ 138 $ 81 $ (572 ) $ 4,744
 
Total assets $ 1,952,964 $ 46,185 $ 3,868 $ (106 ) $ 2,002,911

(1)
 

Includes parent company and intercompany eliminations
 
 
Segment Reporting (YTD)
  For the Year Ended December 31, 2016
Commercial Bank   Mortgage Bank   Wealth Management   Other (1)   Consolidated Totals
($ in thousands)
Revenues:
Interest income 73,340 1,790 (1,283 ) 73,847
Gain on sale of loans 18,329 18,329
Other revenues   3,008   4,265   1,837   66     9,176
Total income $ 76,348 $ 24,384 $ 1,837 $ (1,217 ) $ 101,352
 
Expenses:
Interest expense 10,378 1,283 3 807 12,471
Salaries and employee benefits 18,376 14,961 974 872 35,183
Other expenses   30,466   5,227   602   (604 )   35,691
Total expenses $ 59,220 $ 21,471 $ 1,579 $ 1,075   $ 83,345
 
Net Income (loss) $ 17,128 $ 2,913 $ 258 $ (2,292 ) $ 18,007
 
Total assets $ 1,952,964 $ 46,185 $ 3,868 $ (106 ) $ 2,002,911
(1) Includes parent company and intercompany eliminations
 

Additional Discussion and Analysis

Consolidated net income for the year was $18.0 million ($1.37 per diluted common share), an increase of $5.8 million (47.8%) over the $12.2 million ($1.13 per diluted common share) earned during the prior year. For the three months ended December 31, 2016, consolidated net income was $4.7 million ($0.36 per diluted common share), an increase of $1.2 million (34.0%) over the $3.5 million in net income (or $0.30 per diluted common share) earned during the three months ended December 31, 2015.

As of December 31, 2016, the Company reported total assets of $2.0 billion, compared to $1.7 billion as of December 31, 2015. During the year ended December 31, 2016, total loans held for investment increased $226.5 million or 17.3% to $1.5 billion. This increase is attributable to organic loan growth from our existing lending team. During the year ended 2016, total deposits increased $189.5 million or 14.2% to $1.5 billion. The increase in deposits is due to core deposit growth in our branch network and commercial customers.

The net interest margin was 3.40% and 3.52% for the three months and year ended December 31, 2016, respectively, as compared to 3.53% and 3.74% for the same periods in 2015. This decrease is primarily attributable to the addition of $25.0 million in subordinated debt added in the fourth quarter of 2015 and competitive pressure for incremental loans and deposits. On a linked quarter basis, net interest margin decreased from 3.53% for the three months ended September 30, 2016, to 3.40% for the three months ended December 31, 2016. The Company remains focused on its pricing discipline on both sides of the balance sheet and on all factors contributing to net income.

The adjusted allowance for loan losses to adjusted total loans held for investment, which includes credit purchase accounting marks, was 1.11% as of December 31, 2016, compared to 1.30% as of December 31, 2015. This decrease is attributable to net charge-offs of $2.6 million which had substantially been reserved for previously and credit mark accretion during the year ended December 31, 2016. A reconciliation of the allowance for loan losses and related ratios to the adjusted allowance for loan losses and related ratios is included herein. Non-performing assets continue to decline. The ratio of non-performing assets to total assets decreased to 0.43% as of December 31, 2016, compared to 0.86% as of December 31, 2015.

Non-interest income grew during the three months and year ended December 31, 2016, by $1.8 million and $19.6 million, respectively, compared to the same periods ended December 31, 2015, as a result of the strong performance of the mortgage and wealth management units. The mortgage subsidiary closed on a record volume of loans during the year ended December 31, 2016. During the three months and year ended December 31, 2016, the mortgage subsidiary originated $168.9 million and $772.1 million, respectively, in total mortgage loan volume. The strategic initiatives executed in 2015 to diversify revenue channels have proven to be very effective.

Non-interest expense grew during both the three months and year ended December 31, 2016, by $1.3 million and $17.3 million, respectively, compared to the same periods ended December 31, 2015, primarily as a result of the new mortgage and wealth units acquired in 2015, as well as further expansion of the Bank's retail network. As a result of record performance of the new mortgage and wealth units where compensation is directly linked to production levels, total compensation and employee benefit costs have risen year over year. In addition, the Company incurred one-time debt termination expenses of $1.3 million during the year ended December 31, 2016. This was offset by gains on the sale of available-for-sale securities of $1.3 million as part of a debt repositioning strategy.

During the year ended 2016, total shareholders' equity increased $14.1 million (7.9%) to $192.7 million due primarily to earnings offset by dividends of $3.1 million and changes in accumulated other comprehensive income. Tangible book value per common share increased to $13.93 as of December 31, 2016, compared to $12.91 as of December 31, 2015. The Company's capital position remains well in excess of " well-capitalized" per the regulatory framework.

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