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Bank of Marin Bancorp Reports Record Quarterly Earnings of $8.7 Million; Increases Dividend and Announces 2:1 Stock Split

NOVATO, Calif.--(BUSINESS WIRE)--

Bank of Marin Bancorp, "Bancorp" (BMRC), parent company of Bank of Marin, "Bank," announced record earnings of $8.7 million in the third quarter of 2018, compared to $7.9 million in the second quarter of 2018 and $5.1 million in the third quarter of 2017. Diluted earnings per share were $1.23 in the third quarter of 2018, compared to $1.12 in the prior quarter and $0.83 in the same quarter last year. Year-to-date earnings totaled $23.0 million, compared to $14.9 million in the same period last year. Diluted earnings per share were $3.27 and $2.41 in the nine months ended September 30, 2018 and 2017, respectively.

“Our record earnings for the third quarter reflect our proven relationship banking model, which provides us with a growing base of low-cost deposits and attractive lending opportunities,” said Russell A. Colombo, President and Chief Executive Officer. “As we head into Q4, we are focused on finishing the year strong and laying the groundwork for a successful 2019.”

Bancorp also provided the following highlights in the third quarter of 2018:

  • Pre-tax net income in the third quarter of 2018 was up $1.2 million from the second quarter of 2018 and $4.0 million from the third quarter of 2017. Higher average balances of both loans and non-interest bearing deposits and higher yields across earning asset categories favorably impacted earnings in the current quarter. Reported net interest margin was 3.91% in the third quarter of 2018, compared to 3.87% in the prior quarter and 3.63% in the same quarter last year.
  • Loans increased $11.3 million to $1,728.9 million at September 30, 2018, compared to $1,717.6 million at June 30, 2018. New loan volume of $52.6 million in the third quarter was well-distributed among our Marin, Napa and San Francisco Commercial Banking markets as well as Consumer Banking.
  • Strong credit quality remains a cornerstone of the Bank's consistent performance. Non-accrual loans continue to represent 0.02% of the Bank's loan portfolio at September 30, 2018. There was no provision for either loan losses or off-balance sheet commitments recorded in the third quarter of 2018.
  • Total deposits increased $75.1 million in the third quarter to $2,212.8 million. Non-interest bearing deposits represented 50.2% of total deposits versus 49.5% last quarter. The cost of total deposits increased to 0.10% for the third quarter of 2018, compared to 0.08% for the prior quarter.
  • All capital ratios are well above regulatory requirements for a well-capitalized institution. The total risk-based capital ratio for Bancorp was 15.3% at September 30, 2018, compared to 15.2% at June 30, 2018. Tangible common equity to tangible assets was 10.9% at September 30, 2018, compared to 11.0% at June 30, 2018 (refer to footnote 3 on page 6 for a definition of this non-GAAP financial measure.)
  • The Board of Directors declared a cash dividend of $0.35 per share, a $0.03 increase from the prior quarter. This represents the 54th consecutive quarterly dividend paid by Bank of Marin Bancorp. The dividend is payable on November 8, 2018, to shareholders of record at the close of business on November 1, 2018.
  • In order to further enhance liquidity in Bank of Marin Bancorp (BMRC) stock and expand diversification in the investor base, the Board of Directors announced a 2:1 stock split payable on November 27, 2018, to shareholders of record at the close of business on November 9, 2018.
  • To reduce our funding costs, on October 5, 2018, Bancorp early-redeemed one of the two subordinated debentures assumed as part of the 2013 acquisition of NorCal Community Bancorp. The unaccreted purchase discount of $916 thousand has been accelerated and will have a one-time impact on net interest income in the fourth quarter of 2018, but will not have a material impact on our capital ratios.

Loans and Credit Quality

Loans grew $11.3 million in the third quarter and totaled $1,728.9 million at September 30, 2018. For the three months and nine months ended September 30, 2018, new loan originations of $52.6 million and $165.8 million, respectively, exceeded 2017 loan originations of $42.3 million and $121.6 million for the same periods. New loan originations were partially offset by payoffs of $52.0 million in the third quarter and $120.8 million in the nine months ended September 30 of 2018, and combined with lines of credit utilization, resulted in $11.3 million loan growth in the third quarter of 2018.

Non-accrual loans totaled $386 thousand, or 0.02% of the loan portfolio at September 30, 2018, compared to $385 thousand, or 0.02% at June 30, 2018, and $1.3 million, or 0.09% a year ago. Classified loans totaled $12.4 million at September 30, 2018, compared to $13.9 million at June 30, 2018 and $33.5 million at September 30, 2017. There were no loans classified doubtful at September 30, 2018 or December 31, 2017. Accruing loans past due 30 to 89 days totaled $301 thousand at September 30, 2018, compared to $88 thousand at June 30, 2018 and $205 thousand a year ago.

There was no provision for loan losses recorded in either the third or second quarters of 2018 or the third quarter of 2017. Net recoveries were $4 thousand in the third quarter of 2018, compared to $42 thousand in the prior quarter and $16 thousand in the same quarter a year ago. The ratio of loan loss reserves to loans, including acquired loans, was 0.91% at September 30, 2018, 0.92% at June 30, 2018, and 1.00% at September 30, 2017.

Investments

The investment securities portfolio totaled $569.8 million at September 30, 2018, compared to $558.8 million at June 30, 2018. Purchases of $53.3 million in securities issued by U.S. government-sponsored agencies during the third quarter were partially offset by principal paydowns, maturities, and $12.1 million in investments sold.

Deposits

Total deposits were $2,212.8 million at September 30, 2018, compared to $2,137.7 million at June 30, 2018. The increase in deposit balances at September 30, 2018, was primarily due to normal cash fluctuations of our large business clients. The average cost of deposits in the third quarter of 2018 increased 2 basis points to 0.10%, resulting from increases to interest bearing transaction accounts and money market rates.

Earnings

“As a result of the Bank’s strong performance and robust capital ratios, we are raising our dividend by $0.03 or 9.4%,” said Tani Girton, Executive Vice President and Chief Financial Officer. “The 1.38% return on assets, return on equity of 11.20%, and efficiency ratio of 54.20% once again reflect the outstanding value of our franchise.”

Net interest income totaled $23.5 million in the third quarter of 2018, compared to $22.8 million in the prior quarter and $18.8 million a year ago. Average earning asset growth of $16.3 million since the second quarter of 2018 and $327.0 million since the third quarter of 2017, and higher yields across earning asset categories contributed to the net interest income increase.

Net interest income totaled $68.3 million in the nine months ended September 30, 2018, compared to $54.7 million for the same period in 2017. The $13.6 million increase primarily relates to a $367.3 million increase in average earning assets compared to 2017. Additionally, higher yields on investment securities, interest-bearing cash, and loans positively impacted interest income.

Loans obtained through the acquisition of other banks are classified as either purchased credit impaired ("PCI") or non-PCI loans and are recorded at fair value at acquisition date. For acquired loans not considered credit impaired, the level of accretion varies due to maturities and early payoffs. Accretion on PCI loans fluctuates based on changes in cash flows expected to be collected. Gains on payoffs of PCI loans are recorded as interest income when the payoff amounts exceed the recorded investment.

As our acquired loans from prior acquisitions continue to pay off, we expect the accretion on these loans to continue to decline. Accretion and gains on payoffs of purchased loans recorded to interest income were as follows:

 
Three months ended
September 30, 2018   June 30, 2018   September 30, 2017
(dollars in thousands; unaudited)  

Dollar
Amount

 

Basis point
impact to net
interest margin

 

Dollar
Amount

 

Basis point
impact to net
interest margin

 

Dollar
Amount

 

Basis point
impact to net
interest margin

Accretion on PCI loans 1 $ 63   1 bps $ 84   1 bps $ 76   2 bps
Accretion on non-PCI loans 2 $ 41 1 bps $ 133 2 bps $ 132 3 bps
Gains on payoffs of PCI loans $ 6 0 bps $ 1 0 bps $ 0 bps
 
Nine months ended
September 30, 2018   September 30, 2017
(dollars in thousands; unaudited)  

Dollar
Amount

 

Basis point
impact to net
interest margin

Dollar
Amount

 

Basis point
impact to net
interest margin

Accretion on PCI loans 1 $ 258   1 bps $ 246   2 bps
Accretion on non-PCI loans 2 $ 273 2 bps $ 460 3 bps
Gains on payoffs of PCI loans $ 135 1 bps $ 84 1 bps
1   Accretable yield on PCI loans totaled $1.0 million, $1.1 million and $1.2 million at September 30, 2018, June 30, 2018 and September 30, 2017, respectively.
2 Unaccreted purchase discounts on non-PCI loans totaled $922 thousand, $1.0 million and $1.3 million at September 30, 2018, June 30, 2018 and September 30, 2017, respectively.
 

Non-interest income totaled $2.2 million in both the third quarter of 2018 and in the prior quarter, compared to $2.1 million in the third quarter of last year. Non-interest income increased $439 thousand to $6.7 million in the nine months ended September 30, 2018, compared to $6.3 million in 2017, primarily due to an increase in deposit network income.

Non-interest expense totaled $14.0 million in the third quarter of 2018, $14.5 million in the prior quarter, and $13.0 million in the same quarter a year ago. The decrease of $538 thousand from the prior quarter was primarily due to lower salaries and benefits resulting from a decline in stock-based compensation expense and 401(k) employer contribution (as more employees reach the maximum employer match), lower Bank of Napa acquisition expenses and professional services related to core processing contract negotiations.

The $935 thousand increase from the same quarter a year ago was primarily due to higher salaries and benefits related to the addition of Bank of Napa employees, merit increases and filling open positions. Occupancy and equipment expenses increased mainly due to the acquisition of two Bank of Napa branches, partially offset by a significant reduction in acquisition expenses for the third quarter of 2018.

Non-interest expense totaled $44.6 million in the nine months ended September 30, 2018, compared to $38.7 million in the same period of 2017. The increase was primarily due to the addition of Bank of Napa employees and branches, and merit increases mentioned above. Additionally, 2018 included $1.1 million in consulting expenses related to core processing contract negotiations and Bank of Napa acquisition expenses that were higher by $450 thousand.

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 was signed into law. The law reduces the federal statutory income tax rate to 21% for tax years beginning on or after January 1, 2018. Bancorp's effective tax rate in the first nine months of 2018 was 24.5%, compared to 33.4% in the first nine months of 2017 and the reduced rate positively impacted diluted earnings per share by $0.38.

Share Repurchase Program

Bancorp’s Board of Directors approved the repurchase of up to $25.0 million of common stock through May 1, 2019. As of September 30, 2018, Bancorp repurchased 17,943 shares totaling $1.5 million.

Earnings Call and Webcast Information

Bank of Marin Bancorp will present its third quarter earnings call via webcast on Monday, October 22, 2018 at 8:30 a.m. PT/11:30 a.m. ET. Investors will have the opportunity to listen to the webcast online through Bank of Marin’s website at https://www.bankofmarin.com under “Investor Relations.” To listen to the webcast live, please go to the website at least 15 minutes early to register, download and install any necessary audio software. For those who cannot listen to the live broadcast, a replay will be available at the same website location shortly after the call.

About Bank of Marin Bancorp

Founded in 1989 and headquartered in Novato, Bank of Marin is the wholly-owned subsidiary of Bank of Marin Bancorp (BMRC). A leading business and community bank in the San Francisco Bay Area, with assets of $2.5 billion and 23 offices throughout San Francisco, Marin, Napa, Sonoma and Alameda counties, Bank of Marin provides business and personal banking, commercial lending, and wealth management and trust services. Specializing in providing legendary service to its customers and investing in its local communities, Bank of Marin has consistently been ranked one of the “Top Corporate Philanthropists” by the San Francisco Business Times and one of the “Best Places to Work” by the North Bay Business Journal. Bank of Marin Bancorp is included in the Russell 2000 Small-Cap Index and NASDAQ ABA Community Bank Index. For more information, go to www.bankofmarin.com.

Forward-Looking Statements

This release may contain certain forward-looking statements that are based on management's current expectations regarding economic, legislative, and regulatory issues that may impact Bancorp's earnings in future periods. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include the words “believe,” “expect,” “intend,” “estimate” or words of similar meaning, or future or conditional verbs such as “will,” “would,” “should,” “could” or “may.” Factors that could cause future results to vary materially from current management expectations include, but are not limited to, general economic conditions, economic uncertainty in the United States and abroad, changes in interest rates, deposit flows, real estate values, costs or effects of acquisitions, competition, changes in accounting principles, policies or guidelines, legislation or regulation (including the Tax Cuts & Jobs Act of 2017), and other economic, competitive, governmental, regulatory and technological factors (including external fraud and cyber-security threats) affecting Bancorp's operations, pricing, products and services. These and other important factors, including the impact of the Bank of Napa acquisition, are detailed in various securities law filings made periodically by Bancorp, copies of which are available from Bancorp without charge. Bancorp undertakes no obligation to release publicly the result of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date of this press release or to reflect the occurrence of unanticipated events.

 
BANK OF MARIN BANCORP
FINANCIAL HIGHLIGHTS
September 30, 2018
     
(dollars in thousands, except per share data; unaudited)  

September 30,
2018

  June 30,
2018
 

September 30,
2017

 

QUARTER-TO-DATE

NET INCOME $ 8,680 $ 7,891 $ 5,132
DILUTED EARNINGS PER COMMON SHARE $ 1.23 $ 1.12 $ 0.83
RETURN ON AVERAGE ASSETS (ROA) 1.38 % 1.28 % 0.95 %
RETURN ON AVERAGE EQUITY (ROE) 11.20 % 10.54 % 8.37 %
EFFICIENCY RATIO 54.20 % 57.85 % 62.51 %
TAX-EQUIVALENT NET INTEREST MARGIN1 3.97 % 3.92 % 3.77 %
NET CHARGE-OFFS (RECOVERIES) $ (4 ) $ (42 ) $ (16 )
NET CHARGE-OFFS (RECOVERIES) TO AVERAGE LOANS % % %
 

YEAR-TO-DATE

NET INCOME $ 22,960 $ 14,866
DILUTED EARNINGS PER COMMON SHARE $ 3.27 $ 2.41
RETURN ON AVERAGE ASSETS (ROA) 1.24 % 0.96 %
RETURN ON AVERAGE EQUITY (ROE) 10.17 % 8.35 %
EFFICIENCY RATIO 59.42 % 63.42 %
TAX-EQUIVALENT NET INTEREST MARGIN1 3.91 % 3.80 %
NET CHARGE-OFFS (RECOVERIES) $ (50 ) $ 194
NET CHARGE-OFFS (RECOVERIES) TO AVERAGE LOANS % 0.01 %

AT PERIOD END

TOTAL ASSETS $ 2,545,715 $ 2,465,042 $ 2,155,901
LOANS:
COMMERCIAL AND INDUSTRIAL $ 238,771 $ 241,994 $ 218,681
REAL ESTATE
COMMERCIAL OWNER-OCCUPIED 316,467 317,587 264,732
COMMERCIAL INVESTOR-OWNED 841,493 839,667 721,576
CONSTRUCTION 68,739 57,015 76,179
HOME EQUITY 121,243 126,031 121,366
OTHER RESIDENTIAL 113,383 108,829 96,937
INSTALLMENT AND OTHER CONSUMER LOANS 28,775   26,488   24,976  
TOTAL LOANS $ 1,728,871   $ 1,717,611   $ 1,524,447  
NON-PERFORMING LOANS2:
REAL ESTATE:
COMMERCIAL INVESTOR-OWNED $ $ $ 1,024
HOME EQUITY 318 385 292
INSTALLMENT AND OTHER CONSUMER LOANS 68      
TOTAL NON-ACCRUAL LOANS $ 386   $ 385   $ 1,316  
 
CLASSIFIED LOANS (GRADED SUBSTANDARD & DOUBTFUL) $ 12,401 $ 13,917 $ 33,483
TOTAL ACCRUING LOANS 30-89 DAYS PAST DUE $ 301 $ 88 $ 205
LOAN LOSS RESERVE TO LOANS 0.91 % 0.92 % 1.00 %
LOAN LOSS RESERVE TO NON-ACCRUAL LOANS 41.00 x 41.11 x 11.58 x
NON-ACCRUAL LOANS TO TOTAL LOANS 0.02 % 0.02 % 0.09 %
 
TOTAL DEPOSITS $ 2,212,846 $ 2,137,723 $ 1,890,970
LOAN-TO-DEPOSIT RATIO 78.1 % 80.3 % 80.6 %
STOCKHOLDERS' EQUITY $ 308,603 $ 304,198 $ 245,049
BOOK VALUE PER SHARE $ 44.20 $ 43.51 $ 39.68
TANGIBLE COMMON EQUITY TO TANGIBLE ASSETS3 10.9 % 11.0 % 11.0 %
TOTAL RISK BASED CAPITAL RATIO-BANK 13.7 % 13.5 % 14.7 %
TOTAL RISK BASED CAPITAL RATIO-BANCORP 15.3 % 15.2 % 15.1 %
FULL-TIME EQUIVALENT EMPLOYEES 287 288 272
 
1 Net interest income is annualized by dividing actual number of days in the period times 360 days.
2 Excludes accruing troubled-debt restructured loans of $15.1 million, $15.5 million and $16.4 million at September 30, 2018, June 30, 2018 and September 30, 2017, respectively. Excludes purchased credit-impaired (PCI) loans with carrying values of $2.1 million, $2.1 million and $2.3 million that were accreting interest at September 30, 2018, June 30, 2018 and September 30, 2017, respectively. These amounts are excluded as PCI loan accretable yield interest recognition is independent from the underlying contractual loan delinquency status.
3 Tangible common equity to tangible assets is considered to be a meaningful non-GAAP financial measure of capital adequacy and is useful for investors to assess Bancorp's ability to absorb potential losses. Tangible common equity includes common stock, retained earnings and unrealized gain on available for sale securities, net of tax, less goodwill and intangible assets of $35.9 million, $36.2 million and $8.7 million at September 30, 2018, June 30, 2018 and September 30, 2018, respectively. Tangible assets exclude goodwill and intangible assets.
 
 

BANK OF MARIN BANCORP

CONSOLIDATED STATEMENTS OF CONDITION

At September 30, 2018,  June 30, 2018 and September 30, 2017

 
(in thousands, except share data; unaudited)  

September 30,
2018

 

June 30,
2018

 

September 30,
2017

Assets      
Cash and due from banks $ 142,718 $ 83,855 $ 149,124
Investment securities
Held-to-maturity, at amortized cost 164,222 170,652 155,122
Available-for-sale (at fair value; amortized cost $416,732, $397,268 and $257,468 at September 30, 2018, June 30, 2018 and September 30, 2017, respectively)   405,571     388,137     258,092  
Total investment securities 569,793 558,789 413,214
Loans, net of allowance for loan losses of $15,817, $15,813 and $15,248 at September 30, 2018, June 30, 2018 and September 30, 2017, respectively 1,713,054 1,701,798 1,509,199
Bank premises and equipment, net 7,602 7,965 8,230
Goodwill 30,140 30,140 6,436
Core deposit intangible 5,802 6,032 2,226
Interest receivable and other assets   76,606     76,463     67,472  
Total assets   $ 2,545,715     $ 2,465,042     $ 2,155,901  
 
Liabilities and Stockholders' Equity
Liabilities
Deposits
Non-interest bearing $ 1,109,909 $ 1,057,745 $ 924,073
Interest bearing
Transaction accounts 138,838 132,272 102,236
Savings accounts 178,171 179,187 169,488
Money market accounts 659,788 631,479 555,013
Time accounts   126,140     137,040     140,160  
Total deposits 2,212,846 2,137,723 1,890,970
Subordinated debentures 5,831 5,802 5,703
Interest payable and other liabilities   18,435     17,319     14,179  
Total liabilities   2,237,112     2,160,844     1,910,852  
 
Stockholders' Equity

Preferred stock, no par value,

Authorized - 5,000,000 shares, none issued

Common stock, no par value,

Authorized - 15,000,000 shares; Issued and outstanding -

6,982,179, 6,991,821 and 6,175,751 at September 30,

2018, June 30, 2018 and September 30, 2017, respectively

145,498 146,195 90,052
Retained earnings 172,723 166,281 156,227
Accumulated other comprehensive loss, net of taxes   (9,618 )   (8,278 )   (1,230 )
Total stockholders' equity   308,603     304,198     245,049  
Total liabilities and stockholders' equity   $ 2,545,715     $ 2,465,042     $ 2,155,901  
 
 

BANK OF MARIN BANCORP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 
  Three months ended   Nine months ended
(in thousands, except per share amounts; unaudited)  

September 30,
2018

 

June 30,
2018

 

September 30,
2017

September 30,
2018

 

September 30,
2017

Interest income      
Interest and fees on loans $ 20,284 $ 19,624 $ 16,738 $ 58,795 $ 49,010
Interest on investment securities
Securities of U.S. government agencies 2,953 2,860 1,525 8,288 4,577
Obligations of state and political subdivisions 546 604 511 1,788 1,632
Corporate debt securities and other 25 35 31 104 104
Interest on Federal funds sold and due from banks   400     285     406   1,088     623  
Total interest income 24,208 23,408 19,211 70,063 55,946
Interest expense
Interest on interest-bearing transaction accounts 58 48 24 158 74
Interest on savings accounts 18 18 17 54 48
Interest on money market accounts 337 236 133 789 360
Interest on time accounts 130 140 138 426 423
Interest on FHLB and other borrowings 1 1 2
Interest on subordinated debentures   125     123     111   362     328  
Total interest expense   669     566     423   1,791     1,233  
Net interest income 23,539 22,842 18,788 68,272 54,713
Provision for loan losses                  
Net interest income after provision for loan losses   23,539     22,842     18,788   68,272     54,713  
Non-interest income
Service charges on deposit accounts 475 455 438 1,407 1,337
Wealth Management and Trust Services 490 488 539 1,493 1,546
Debit card interchange fees 402 360 390 1,158 1,146
Merchant interchange fees 99 118 88 297 296
Earnings on bank-owned life insurance 227 230 209 685 628
Dividends on FHLB stock 194 192 177 582 585
(Losses) gains on investment securities, net (90 ) 11 (79 ) 10
Other income   439     384     225   1,173     729  
Total non-interest income   2,236     2,238     2,066   6,716     6,277  
Non-interest expense
Salaries and related benefits 8,069 8,316 7,344 25,402 22,106
Occupancy and equipment 1,444 1,511 1,364 4,462 4,063
Depreciation and amortization 532 546 489 1,625 1,433
Federal Deposit Insurance Corporation insurance 186 191 167 568 490
Data processing 950 1,023 946 3,354 2,848
Professional services 727 810 801 2,836 1,845
Directors' expense 173 183 175 530 557
Information technology 262 264 179 795 563
Provision for losses on off-balance sheet commitments 100 57
Other expense   1,628     1,665     1,471   4,989     4,716  
Total non-interest expense   13,971     14,509     13,036   44,561     38,678  
Income before provision for income taxes 11,804 10,571 7,818 30,427 22,312
Provision for income taxes   3,124     2,680     2,686   7,467     7,446  
Net income   $ 8,680     $ 7,891     $ 5,132   $ 22,960     $ 14,866  
Net income per common share:
Basic $ 1.25 $ 1.14 $ 0.84 $ 3.31 $ 2.43
Diluted $ 1.23 $ 1.12 $ 0.83 $ 3.27 $ 2.41
Weighted average shares:
Basic 6,950 6,944 6,123 6,936 6,109
Diluted 7,055 7,033 6,191 7,031 6,179
Dividends declared per common share   $ 0.32     $ 0.31     $ 0.29   $ 0.92     $ 0.83  
Comprehensive income:
Net income $ 8,680 $ 7,891 $ 5,132 $ 22,960 $ 14,866
Other comprehensive (loss) income
Change in net unrealized gain or loss on available-for-sale securities (2,120 ) (1,131 ) (362 ) (9,421 ) 3,273
Reclassification adjustment for losses (gains) on available-for-sale securities in net income 90 (11 ) 79 (10 )
Net unrealized loss on securities transferred from available-for-sale to held-to-maturity (278 ) (278 )
Amortization of net unrealized losses on securities transferred from available-for-sale to held-to-maturity   128     132     135   396     299  
Subtotal (1,902 ) (1,288 ) (227 ) (9,224 ) 3,562
Deferred tax (benefit) expense   (562 )   (384 )   (96 ) (2,730 )   1,499  
Other comprehensive (loss) income, net of tax   (1,340 )   (904 )   (131 ) (6,494 )   2,063  
Comprehensive income   $ 7,340     $ 6,987     $ 5,001   $ 16,466     $ 16,929  
 
 

BANK OF MARIN BANCORP

AVERAGE STATEMENTS OF CONDITION AND ANALYSIS OF NET INTEREST INCOME

 
  Three months ended   Three months ended   Three months ended
September 30, 2018   June 30, 2018   September 30, 2017
  Interest     Interest     Interest  
Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
(dollars in thousands)   Balance   Expense   Rate   Balance   Expense   Rate   Balance   Expense   Rate
Assets
Interest-bearing due from banks 1 $ 79,674 $ 400 1.96 % $ 62,665 $ 285 1.80 % $ 125,846 $ 406 1.26 %
Investment securities 2, 3 558,741 3,624 2.59 % 574,669 3,611 2.51 % 400,659 2,294 2.29 %
Loans 1, 3, 4   1,715,295     20,504     4.68 %   1,700,057     19,852     4.62 %   1,500,167     17,228     4.49 %
Total interest-earning assets 1 2,353,710 24,528 4.08 % 2,337,391 23,748 4.02 % 2,026,672 19,928 3.85 %
Cash and non-interest-bearing due from banks 41,316 40,383 45,009
Bank premises and equipment, net 7,866 8,203 8,430
Interest receivable and other assets, net   86,039             87,183             60,622          
Total assets   $ 2,488,931             $ 2,473,160             $ 2,140,733          
Liabilities and Stockholders' Equity
Interest-bearing transaction accounts $ 134,293 $ 58 0.17 % $ 142,133 $ 48 0.14 % $ 96,504 $ 24 0.10 %
Savings accounts 179,429 18 0.04 % 178,956 18 0.04 % 171,187 17 0.04 %
Money market accounts 609,821 337 0.22 % 612,612 236 0.15 % 560,486 133 0.09 %
Time accounts including CDARS 132,588 130 0.39 % 140,799 140 0.40 % 140,736 138 0.39 %
Overnight borrowings 1 112 1 2.06 % 231 1 1.84 % %
Subordinated debentures 1   5,815     125     8.43 %   5,786     123     8.40 %   5,682     111     7.63 %
Total interest-bearing liabilities 1,062,058 669 0.25 % 1,080,517 566 0.21 % 974,595 423 0.17 %
Demand accounts 1,101,288 1,072,976 909,900
Interest payable and other liabilities 18,022 19,443 13,055
Stockholders' equity   307,563             300,224             243,183          
Total liabilities & stockholders' equity   $ 2,488,931             $ 2,473,160             $ 2,140,733          
Tax-equivalent net interest income/margin 1       $ 23,859     3.97 %       $ 23,182     3.92 %       $ 19,505     3.77 %
Reported net interest income/margin 1       $ 23,539     3.91 %       $ 22,842     3.87 %       $ 18,788     3.63 %
Tax-equivalent net interest rate spread           3.83 %           3.81 %           3.68 %
 
Nine months ended Nine months ended
September 30, 2018   September 30, 2017
Interest Interest
Average Income/ Yield/ Average Income/ Yield/
(dollars in thousands)               Balance   Expense   Rate   Balance   Expense   Rate
Assets
Interest-bearing due from banks 1 $ 82,304 $ 1,088 1.74 % 70,947 623 1.16 %
Investment securities 2, 3 555,414 10,512 2.52 % 407,798 7,011 2.29 %
Loans 1, 3, 4               1,697,093     59,475     4.62 %   1,488,771     50,317     4.46 %
Total interest-earning assets 1 2,334,811 71,075 4.01 % 1,967,516 57,951 3.88 %
Cash and non-interest-bearing due from banks 42,488 43,140
Bank premises and equipment, net 8,188 8,420
Interest receivable and other assets, net               87,403             59,593          
Total assets               $ 2,472,890            

2,078,669

         
Liabilities and Stockholders' Equity
Interest-bearing transaction accounts $ 148,141 $ 158 0.14 % 97,458 74 0.10 %
Savings accounts 179,543 54 0.04 % 165,212 48 0.04 %
Money market accounts 601,896 789 0.18 % 539,560 360 0.09 %
Time accounts including CDARS 142,563 426 0.40 % 144,559 423 0.39 %
Overnight borrowings 1 115 2 1.92 % %
Subordinated debentures 1               5,785     362     8.25 %   5,645     328     7.65 %
Total interest-bearing liabilities 1,078,043 1,791 0.22 % 952,434 1,233 0.17 %
Demand accounts 1,074,778 874,995
Interest payable and other liabilities 18,127 13,151
Stockholders' equity               301,942             238,089          
Total liabilities & stockholders' equity               $ 2,472,890            

2,078,669

         
Tax-equivalent net interest income/margin 1                   $ 69,284     3.91 %       56,718     3.80 %
Reported net interest income/margin 1                   $ 68,272     3.86 %       54,713     3.67 %
Tax-equivalent net interest rate spread                       3.79 %           3.71 %
 
1 Interest income/expense is divided by actual number of days in the period times 360 days to correspond to stated interest rate terms, where applicable.
2 Yields on available-for-sale securities are calculated based on amortized cost balances rather than fair value, as changes in fair value are reflected as a component of stockholders' equity. Investment security interest is earned on 30/360 day basis monthly.
3 Yields and interest income on tax-exempt securities and loans are presented on a taxable-equivalent basis using the Federal statutory rate of 21 percent in 2018 and 35 percent in 2017.
4 Average balances on loans outstanding include non-performing loans. The amortized portion of net loan origination fees is included in interest income on loans, representing an adjustment to the yield.
 

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