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Bank of Marin Bancorp Reports Second Quarter Earnings of $7.9 Million; Increases Dividend

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

Bank of Marin Bancorp, "Bancorp" (BMRC), parent company of Bank of Marin, "Bank," announced earnings of $7.9 million in the second quarter of 2018, compared to $6.4 million in the first quarter of 2018 and $5.2 million in the second quarter of 2017. Diluted earnings per share were $1.12 in the second quarter of 2018, compared to $0.91 in the prior quarter and $0.84 in the same quarter last year. Earnings for the first six months of 2018 totaled $14.3 million, compared to $9.7 million in the same period last year. Diluted earnings per share were $2.03 and $1.58 in the first six months of 2018 and 2017, respectively. Earnings in both the first and second quarters of 2018 were favorably impacted by recent tax reform and higher earning assets from the Bank of Napa acquisition.

“Our excellent financial results in the second quarter demonstrate the continued successful execution of our long-term strategic plan,” said Russell A. Colombo, President and Chief Executive Officer. “We remain a high performance bank by closely managing expenses, growing loans and deposits, and maintaining strong credit quality. This strategy serves our customers well while also building shareholder value.”

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

  • Pre-tax net income was up $2.5 million from the first quarter of 2018 and $2.8 million from the second quarter of 2017. Reported net interest margin was 3.87% in the second quarter of 2018. The eight basis points increase compared to the prior quarter and sixteen basis points increase compared to the same quarter last year resulted from higher loan and investment yields.
  • Loans increased $45.9 million to $1,717.6 million at June 30, 2018, compared to $1,671.7 million at March 31, 2018. Loan growth was primarily driven by new volume of $75.8 million in the second quarter, which was well-distributed between Commercial Banking markets and to a lesser extent 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 June 30, 2018. There were no provisions for loan losses or off-balance sheet commitments recorded in the second quarter of 2018.
  • Total deposits decreased $48.9 million in the second quarter to $2,137.7 million. Non-interest bearing deposits represented 49.5% of total deposits versus 48.7% last quarter. The cost of total deposits was 0.08% for both quarters.
  • All capital ratios are well above regulatory requirements for a well-capitalized institution. The total risk-based capital ratio for Bancorp was 15.2% at June 30, 2018, compared to 15.1% at March 31, 2018. Tangible common equity to tangible assets was 11.0% at June 30, 2018, compared to 10.6% at March 31, 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 $0.32 per share on July 20, 2018, a $0.01 increase from the prior quarter. This represents the 53rd consecutive quarterly dividend paid by Bank of Marin Bancorp. The dividend is payable on August 10, 2018, to shareholders of record at the close of business on August 3, 2018.

Loans and Credit Quality

Loans grew $45.9 million in the second quarter and totaled $1,717.6 million at June 30, 2018, raising the loan to deposit ratio from 76.5% to 80.3%. For the second quarter and first six months of 2018, new loan originations of $75.8 million and $113.2 million, respectively, exceeded 2017 loan originations of $55.5 million and $79.4 million for the same periods. Loan payoffs of $37.3 million in the second quarter and $68.8 million in the first six months of 2018, were less than the same periods of 2017, which totaled $48.1 million and $80.8 million, respectively. The largest portion of payoffs in 2018 came from the sale of assets underlying loans, including the successful completion of construction projects.

Non-accrual loans totaled $385 thousand, or 0.02% of the loan portfolio at June 30, 2018, compared to $392 thousand, or 0.02% at March 31, 2018, and $1.2 million, or 0.08% a year ago. Classified loans totaled $13.9 million at June 30, 2018, compared to $27.8 million at March 31, 2018 and $29.3 million at June 30, 2017. The decrease in classified loans is primarily due to two borrowing relationships whose risk grades were upgraded from substandard to special mention in the second quarter of 2018. There were no loans classified doubtful at June 30, 2018 or December 31, 2017. Accruing loans past due 30 to 89 days totaled $88 thousand at June 30, 2018, compared to $388 thousand at March 31, 2018 and $393 thousand a year ago.

There was no provision for loan losses recorded in either the second or first quarters of 2018 or the second quarter of 2017. The two classified borrowing relationships that were upgraded in the second quarter (mentioned above) reduced the calculated general allowance for loan losses. This reduction was primarily offset by general allowances resulting from significant loan growth and refinement of certain loan concentration qualitative factors, and an increase in specific reserves related to a loan that was modified as a troubled debt restructuring in the second quarter. Net recoveries were $42 thousand in the second quarter of 2018, compared to $4 thousand in the prior quarter and $13 thousand in the same quarter a year ago. The ratio of loan loss reserves to loans, including acquired loans, was 0.92% at June 30, 2018, 0.94% at March 31, 2018, and 1.02% at June 30, 2017.

Investments

The investment securities portfolio totaled $558.8 million at June 30, 2018, compared to $572.9 million at March 31, 2018. Principal paydowns, maturities, and $5.0 million in investments sold during the second quarter were partially offset by purchases of $11.6 million in securities issued by U.S. government-sponsored agencies.

Deposits

Total deposits were $2,137.7 million at June 30, 2018, compared to $2,186.6 million at March 31, 2018, while higher average balances of non-interest bearing deposits contributed to net interest margin expansion. The decrease in deposit balances at June 30, 2018, was primarily due to normal cash fluctuations of our large business clients. Additionally, some businesses moved balances into time accounts through deposit networks to realize higher interest rates while maintaining their relationships with the Bank. A small number of account holders who were focused solely on obtaining the highest rates in the marketplace moved to other institutions. The average cost of deposits in the second quarter of 2018 was the same as the prior quarter.

Earnings

“Bank of Marin's exceptional deposit franchise has paved the way for net interest margin expansion as interest rates rise,” said Tani Girton, Executive Vice President and Chief Financial Officer. “Our strong earnings produced a return on assets of 1.28%, return on equity of 10.54%, and efficiency ratio of 57.85%.”

Net interest income totaled $22.8 million in the second quarter of 2018, compared to $21.9 million in the prior quarter and $18.3 million a year ago. Average earning assets growth of $24.5 million compared to the first quarter of 2018 and $385.0 million compared to the second quarter of 2017, and higher yields across all asset categories contributed to the net interest income increase of $951 thousand and $4.5 million, respectively.

Net interest income totaled $44.7 million in the first six months of 2018, compared to $35.9 million for the same period in 2017. The $8.8 million increase primarily relates to a $387.8 million increase in average earning assets compared to 2017. Additionally, the higher yield 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
June 30, 2018   March 31, 2018   June 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 $ 84   1 bps $ 112   2 bps $ 80   2 bps
Accretion on non-PCI loans 2 $ 133 2 bps $ 99 2 bps $ 178 3 bps
Gains on payoffs of PCI loans $ 1 0 bps $ 128 2 bps $ 84 2 bps
 

Six months ended

June 30, 2018

 

June 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

 

$ 195   2 bps $ 170   2 bps

Accretion on non-PCI loans 2

 

$ 233 2 bps $ 328 3 bps

Gains on payoffs of PCI loans

 

$ 129 1 bps $ 84 1 bps
1   Accretable yield on PCI loans totaled $1.1 million, $1.1 million and $1.3 million at June 30, 2018, March 31, 2018 and June 30, 2017, respectively.
2 Unaccreted purchase discounts on non-PCI loans totaled $1.0 million, $1.1 million and $1.4 million at June 30, 2018, March 31, 2018 and June 30, 2017, respectively.
 

Non-interest income totaled $2.2 million in both the second quarter of 2018 and in the prior quarter, compared to $2.1 million in the same quarter of last year. Non-interest income increased $269 thousand to $4.5 million in the first six months of 2018, compared to $4.2 million in 2017, primarily due to an increase in deposit network income.

Non-interest expense totaled $14.5 million in the second quarter of 2018, $16.1 million in the prior quarter, and $12.6 million in the same quarter a year ago. The decrease from the prior quarter was primarily due to lower salaries and benefits as the first quarter included $340 thousand related to stock-based compensation for certain participants meeting retirement eligibility requirements. Loan growth increased deferrals of loan origination costs in the second quarter. Professional services in the second quarter included $300 thousand in consulting expenses related to core processing contract negotiations (compared to $750 thousand in the first quarter) that will result in future technology cost savings. Bank of Napa acquisition expenses totaled $250 thousand in the second quarter of 2018, compared to $615 thousand in the first quarter, and we expect any related expenses to be minimal in the remainder of 2018.

Non-interest expense increased $1.9 million from the same quarter a year ago 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 primarily due to the two additional branches from the Bank of Napa acquisition, as well as the opening of the Healdsburg branch in August 2017. Professional fees and acquisition-related expenses mentioned above also increased non-interest expense. In addition, the second quarter of 2017 included a $208 thousand reversal of the provision for losses on off-balance sheet commitments.

Non-interest expense totaled $30.6 million in the first half of 2018, compared to $25.6 million in the first half of 2017. The increase was primarily due to the reasons mentioned above.

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 six months of 2018 was 23.3%, compared to 32.8% in the first six months of 2017 and the reduced rate positively impacted diluted earnings per share by $0.25. The effective tax rate in the second quarter of 2018 was 25.4%, compared to 20.7% in the first quarter of 2018. Excess tax benefits of $399 thousand resulting from stock-based compensation activity reduced the effective tax rate in the first quarter of 2018.

Share Repurchase Program

Bancorp’s Board of Directors approved the repurchase of up to $25.0 million of the Bancorp’s common stock through May 1, 2019. As of June 30, 2018, we repurchased 1,398 shares totaling $103,540.

Earnings Call and Webcast Information

Bank of Marin Bancorp will webcast its second quarter earnings call on Monday, July 23, 2018 at 8:30 a.m. PT/11:30 a.m. ET. Investors will have the opportunity to listen to the conference call online through Bank of Marin’s website at https://www.bankofmarin.com under “Investor Relations.” To listen to the live call, 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
June 30, 2018
     
(dollars in thousands, except per share data; unaudited)   June 30, 2018   March 31, 2018   June 30, 2017  

QUARTER-TO-DATE

NET INCOME $ 7,891 $ 6,389 $ 5,186
DILUTED EARNINGS PER COMMON SHARE $ 1.12 $ 0.91 $ 0.84
RETURN ON AVERAGE ASSETS (ROA) 1.28 % 1.05 % 1.01 %
RETURN ON AVERAGE EQUITY (ROE) 10.54 % 8.70 % 8.74 %
EFFICIENCY RATIO 57.85 % 66.64 % 61.92 %
TAX-EQUIVALENT NET INTEREST MARGIN1 3.92 % 3.85 % 3.85 %
NET CHARGE-OFFS (RECOVERIES) $ (42 ) $ (4 ) $ (13 )
NET CHARGE-OFFS (RECOVERIES) TO AVERAGE LOANS % % %
 

YEAR-TO-DATE

NET INCOME $ 14,280 $ 9,734
DILUTED EARNINGS PER COMMON SHARE $ 2.03 $ 1.58
RETURN ON AVERAGE ASSETS (ROA) 1.17 % 0.96 %
RETURN ON AVERAGE EQUITY (ROE) 9.63 % 8.34 %
EFFICIENCY RATIO 62.16 % 63.89 %
TAX-EQUIVALENT NET INTEREST MARGIN1 3.89 % 3.82 %
NET CHARGE-OFFS (RECOVERIES) $ (46 ) $ 210
NET CHARGE-OFFS (RECOVERIES) TO AVERAGE LOANS % 0.01 %

AT PERIOD END

TOTAL ASSETS $ 2,465,042 $ 2,510,043 $ 2,100,716
LOANS:
COMMERCIAL AND INDUSTRIAL $ 241,994 $ 231,680 $ 217,417
REAL ESTATE
COMMERCIAL OWNER-OCCUPIED 317,587 300,377 265,249
COMMERCIAL INVESTOR-OWNED 839,667 828,945 717,197
CONSTRUCTION 57,015 64,978 54,990
HOME EQUITY 126,031 124,699 119,500
OTHER RESIDENTIAL 108,829 95,621 92,421
INSTALLMENT AND OTHER CONSUMER LOANS 26,488   25,440   24,711  
TOTAL LOANS $ 1,717,611   $ 1,671,740   $ 1,491,485  
NON-PERFORMING LOANS2:
REAL ESTATE:
COMMERCIAL INVESTOR-OWNED 1,041
HOME EQUITY 385 392 87
INSTALLMENT AND OTHER CONSUMER LOANS     51  
TOTAL NON-ACCRUAL LOANS $ 385   $ 392   $ 1,179  
 
CLASSIFIED LOANS (GRADED SUBSTANDARD & DOUBTFUL) $ 13,917 $ 27,807 $ 29,262
TOTAL ACCRUING LOANS 30-89 DAYS PAST DUE $ 88 $ 388 $ 393
LOAN LOSS RESERVE TO LOANS 0.92 % 0.94 % 1.02 %
LOAN LOSS RESERVE TO NON-ACCRUAL LOANS 41.11 x 40.26 x 12.92 x
NON-ACCRUAL LOANS TO TOTAL LOANS 0.02 % 0.02 % 0.08 %
 
TOTAL DEPOSITS $ 2,137,723 $ 2,186,594 $ 1,840,540
LOAN-TO-DEPOSIT RATIO 80.3 % 76.5 % 81.0 %
STOCKHOLDERS' EQUITY $ 304,198 $ 298,464 $ 240,733
BOOK VALUE PER SHARE $ 43.51 $ 42.73 $ 39.07
TANGIBLE COMMON EQUITY TO TANGIBLE ASSETS3 11.0 % 10.6 % 11.1 %
TOTAL RISK BASED CAPITAL RATIO-BANK 13.5 % 14.7 % 14.8 %
TOTAL RISK BASED CAPITAL RATIO-BANCORP 15.2 % 15.1 % 15.0 %
FULL-TIME EQUIVALENT EMPLOYEES 288 288 264
 
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 $15.5 million, $16.2 million and $17.0 million at June 30, 2018, March 31, 2018 and June 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 June 30, 2018, March 31, 2018 and June 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 $36.2 million, $36.4 million and $8.8 million at June 30, 2018, March 31, 2018 and June 30, 2017, respectively. Tangible assets exclude goodwill and intangible assets.
 
 

BANK OF MARIN BANCORP

CONSOLIDATED STATEMENTS OF CONDITION

At June 30, 2018, March 31, 2018 and June 30, 2017

(in thousands, except share data; unaudited)   June 30, 2018   March 31, 2018   June 30, 2017
Assets      
Cash and due from banks $ 83,855 $ 159,347 $ 137,906
Investment securities
Held-to-maturity, at amortized cost 170,652 149,013 163,018
Available-for-sale (at fair value; amortized cost $397,268, $431,871 and $237,884 at June 30, 2018, March 31, 2018 and June 30, 2017, respectively)   388,137     423,882     238,870  
Total investment securities 558,789 572,895 401,888
Loans, net of allowance for loan losses of $15,813, $15,771 and $15,232 at June 30, 2018, March 31, 2018 and June 30, 2017, respectively 1,701,798 1,655,969 1,476,253
Bank premises and equipment, net 7,965 8,297 8,390
Goodwill 30,140 30,140 6,436
Core deposit intangible 6,032 6,262 2,344
Interest receivable and other assets   76,463     77,133     67,499  
Total assets   $ 2,465,042     $ 2,510,043     $ 2,100,716  
 
Liabilities and Stockholders' Equity
Liabilities
Deposits
Non-interest bearing $ 1,057,745 $ 1,065,470 $ 892,988
Interest bearing
Transaction accounts 132,272 166,117 87,866
Savings accounts 179,187 180,730 165,596
Money market accounts 631,479 628,335 546,586
Time accounts   137,040     145,942     147,504  
Total deposits 2,137,723 2,186,594 1,840,540
Subordinated debentures 5,802 5,772 5,666
Interest payable and other liabilities   17,319     19,213     13,777  
Total liabilities   2,160,844     2,211,579     1,859,983  
 
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 -
6,991,821, 6,985,126 and 6,160,952 at June 30, 2018,
March 31, 2018 and June 30, 2017, respectively
146,195 145,282 88,949
Retained earnings 166,281 160,556 152,883
Accumulated other comprehensive loss, net of taxes   (8,278 )   (7,374 )   (1,099 )
Total stockholders' equity   304,198     298,464     240,733  
Total liabilities and stockholders' equity   $ 2,465,042     $ 2,510,043     $ 2,100,716  
 
 

BANK OF MARIN BANCORP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

  Three months ended   Six months ended
(in thousands, except per share amounts; unaudited)   June 30, 2018   March 31, 2018   June 30, 2017 June 30, 2018   June 30, 2017
Interest income      
Interest and fees on loans $ 19,624 $ 18,887 $ 16,423 $ 38,511 $ 32,272
Interest on investment securities
Securities of U.S. government agencies 2,860 2,475 1,534 5,335 3,052
Obligations of state and political subdivisions 604 638 553 1,242 1,121
Corporate debt securities and other 35 44 36 79 73
Interest on Federal funds sold and due from banks   285     403     157   688     217  
Total interest income 23,408 22,447 18,703 45,855 36,735
Interest expense
Interest on interest-bearing transaction accounts 48 52 21 100 50
Interest on savings accounts 18 18 16 36 31
Interest on money market accounts 236 216 114 452 227
Interest on time accounts 140 156 139 296 285
Interest on FHLB and other borrowings 1 1
Interest on subordinated debentures   123     114     109   237     217  
Total interest expense   566     556     399   1,122     810  
Net interest income 22,842 21,891 18,304 44,733 35,925
Provision for loan losses                  
Net interest income after provision for loan losses   22,842     21,891     18,304   44,733     35,925  
Non-interest income
Service charges on deposit accounts 455 477 447 932 899
Wealth Management and Trust Services 488 515 504 1,003 1,007
Debit card interchange fees 360 396 384 756 756
Merchant interchange fees 118 80 112 198 208
Earnings on bank-owned life insurance 230 228 210 458 419
Dividends on FHLB stock 192 196 176 388 408
Gains on investment securities, net 11 10 11 10
Other income   384     350     253   734     504  
Total non-interest income   2,238     2,242     2,096   4,480     4,211  
Non-interest expense
Salaries and related benefits 8,316 9,017 7,287 17,333 14,762
Occupancy and equipment 1,511 1,507 1,380 3,018 2,699
Depreciation and amortization 546 547 463 1,093 944
Federal Deposit Insurance Corporation insurance 191 191 162 382 323
Data processing 1,023 1,381 963 2,404 1,902
Professional services 810 1,299 522 2,109 1,044
Directors' expense 183 174 224 357 382
Information technology 264 269 186 533 384
Provision for losses on off-balance sheet commitments (208 ) (43 )
Other expense   1,665     1,696     1,652   3,361     3,245  
Total non-interest expense   14,509     16,081     12,631   30,590     25,642  
Income before provision for income taxes 10,571 8,052 7,769 18,623 14,494
Provision for income taxes 2,680   1,663   2,583   4,343   4,760  
Net income   $ 7,891     $ 6,389     $ 5,186   $ 14,280     $ 9,734  
Net income per common share:
Basic $ 1.14 $ 0.92 $ 0.85 $ 2.06 $ 1.60
Diluted $ 1.12 $ 0.91 $ 0.84 $ 2.03 $ 1.58
Weighted average shares:
Basic 6,944 6,914 6,110 6,929 6,101
Diluted 7,033 7,005 6,174 7,019 6,173
Dividends declared per common share   $ 0.31     $ 0.29     $ 0.27   $ 0.60     $ 0.54  
Comprehensive income:
Net income $ 7,891 $ 6,389 $ 5,186 $ 14,280 $ 9,734
Other comprehensive (loss) income
Change in net unrealized gain or loss on available-for-sale securities (1,131 ) (6,170 ) 1,961 (7,301 ) 3,635
Reclassification adjustment for gains on available-for-sale securities in net income (11 ) (10 ) (11 ) (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   132     136     124   268     165  
Subtotal (1,288 ) (6,034 ) 2,075 (7,322 ) 3,790
Deferred tax (benefit) expense   (384 )   (1,784 )   892   (2,168 )   1,596  
Other comprehensive (loss) income, net of tax   (904 )   (4,250 )   1,183   (5,154 )   2,194  
Comprehensive income   $ 6,987     $ 2,139     $ 6,369   $ 9,126     $ 11,928  
 
 
 

BANK OF MARIN BANCORP

AVERAGE STATEMENTS OF CONDITION AND ANALYSIS OF NET INTEREST INCOME

  Three months ended   Three months ended   Three months ended
June 30, 2018   March 31, 2018   June 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 $ 62,665 $ 285 1.80 % $ 104,850 $ 403 1.54 % $ 56,597 $ 157 1.10 %
Investment securities 2, 3 574,669 3,611 2.51 % 532,544 3,276 2.46 % 408,335 2,355 2.31 %
Loans 1, 3, 4   1,700,057     19,852     4.62 %   1,675,490     19,119     4.56 %   1,487,419     16,868     4.49 %
Total interest-earning assets 1 2,337,391 23,748 4.02 % 2,312,884 22,798 3.94 % 1,952,351 19,380 3.93 %
Cash and non-interest-bearing due from banks 40,383 45,815 46,204
Bank premises and equipment, net 8,203 8,501 8,390
Interest receivable and other assets, net   87,183             89,018             60,115          
Total assets   $ 2,473,160             $ 2,456,218             $ 2,067,060          
Liabilities and Stockholders' Equity
Interest-bearing transaction accounts $ 142,133 $ 48 0.14 % $ 168,371 $ 52 0.13 % $ 94,799 $ 21 0.09 %
Savings accounts 178,956 18 0.04 % 180,253 18 0.04 % 163,424 16 0.04 %
Money market accounts 612,612 236 0.15 % 582,961 216 0.15 % 539,192 114 0.08 %
Time accounts including CDARS 140,799 140 0.40 % 154,543 156 0.41 % 146,042 139 0.38 %
Overnight borrowings 1 231 1 1.84 % % %
Subordinated debentures 1   5,786     123     8.40 %   5,753     114     7.90 %   5,646     109     7.59 %
Total interest-bearing liabilities 1,080,517 566 0.21 % 1,091,881 556 0.21 % 949,103 399 0.17 %
Demand accounts 1,072,976 1,049,502 868,070
Interest payable and other liabilities 19,443 16,903 11,771
Stockholders' equity   300,224             297,932             238,116          
Total liabilities & stockholders' equity   $ 2,473,160             $ 2,456,218             $ 2,067,060          
Tax-equivalent net interest income/margin 1       $ 23,182     3.92 %       $ 22,242     3.85 %       $ 18,981     3.85 %
Reported net interest income/margin 1       $ 22,842     3.87 %       $ 21,891     3.79 %       $ 18,304     3.71 %
Tax-equivalent net interest rate spread           3.81 %           3.74 %           3.76 %
 
Six months ended Six months ended
June 30, 2018   June 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 $ 83,641 $ 688 1.64 % 43,043 217 1.00 %
Investment securities 2, 3 553,723 6,887 2.49 % 411,427 4,716 2.29 %
Loans 1, 3, 4               1,687,841     38,971     4.59 %   1,482,977     33,090     4.44 %
Total interest-earning assets 1 2,325,205 46,546 3.98 % 1,937,447 38,023 3.90 %
Cash and non-interest-bearing due from banks 43,084 42,189
Bank premises and equipment, net 8,351 8,415
Interest receivable and other assets, net               88,096             59,071          
Total assets               $ 2,464,736             2,047,122          
Liabilities and Stockholders' Equity
Interest-bearing transaction accounts $ 155,180 $ 100 0.13 % 97,943 50 0.10 %
Savings accounts 179,601 36 0.04 % 162,175 31 0.04 %
Money market accounts 597,868 452 0.15 % 528,923 227 0.09 %
Time accounts including CDARS 147,633 296 0.40 % 146,501 285 0.39 %
Overnight borrowings 1 116 1 1.84 % %
Subordinated debentures 1               5,770     237     8.16 %   5,627     217     7.67 %
Total interest-bearing liabilities 1,086,168 1,122 0.21 % 941,169 810 0.17 %
Demand accounts 1,061,304 857,253
Interest payable and other liabilities 18,180 13,200
Stockholders' equity               299,084             235,500          
Total liabilities & stockholders' equity               $ 2,464,736             2,047,122          
Tax-equivalent net interest income/margin 1                   $ 45,424     3.89 %       37,213     3.82 %
Reported net interest income/margin 1                   $ 44,733     3.83 %       35,925     3.69 %
Tax-equivalent net interest rate spread                       3.77 %           3.73 %
 
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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