Market Overview

Bank of Marin Bancorp Reports Fourth Quarter and Full Year 2017 Results

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Bank of Marin Bancorp, "Bancorp" (NASDAQ:BMRC), parent company of Bank
of Marin, "Bank," announced earnings of $1.1 million in the fourth
quarter of 2017, which reflected $3.0 million in a deferred tax asset
write-down and $1.7 million in acquisition expenses ($1.1 million net of
taxes), compared to $5.1 million in the third quarter of 2017 and $5.7
million in the fourth quarter of 2016. Diluted earnings per share were
$0.17 in the fourth quarter of 2017, compared to $0.83 in the prior
quarter and $0.93 in the same quarter a year ago. Annual earnings were
$16.0 million in 2017 compared to $23.1 million a year ago. Diluted
earnings per share were $2.55 for the year ended December 31, 2017,
compared to $3.78 per share for the year ended December 31, 2016.

Earnings in the fourth quarter and full year 2017 included a $3.0
million one-time deferred tax asset write-down due to the enactment of
the new federal tax law on December 22, 2017, and expenses related to
the acquisition of Bank of Napa. Without these expenses, diluted
earnings per share would have been $0.80 for the fourth quarter and
$3.28 for the full year, and net income would have been $5.2 million and
$20.5 million for the quarter and the year ended December 31, 2017,
respectively. Refer to Page 5 for a detailed reconciliation of these
financial measures presented according to the Generally Accepted
Accounting Principles ("GAAP") vs. non-GAAP. Additionally, annual
earnings in 2016 were higher than 2017 due to loan recoveries and early
payoff of several acquired loans purchased at a discount, which
positively impacted the 2016 EPS by $0.47.

"Every area of the Bank executed exceptionally well in 2017, and this
allowed us to deliver another year of healthy financial performance and
significant growth in loans and deposits," said Russell A. Colombo,
President and CEO of Bank of Marin. "Our acquisition of Bank of Napa and
our investment in organic growth are already contributing to our
performance. These investments, in combination with our relationship
banking model and our strong market position and reputation in the
attractive San Francisco Bay area, should position us well for another
year of growth and robust performance in 2018."

Bancorp also provided the following highlights for the year ended
December 31, 2017:

  • In 2017, Bank of Marin acquired Bank of Napa. As a result, Bank of
    Marin is the largest community bank in Napa County by deposit share.
    This is the third acquisition in the past six years that strengthens
    the Bank's presence in the San Francisco Bay Area.
  • As part of its organic growth plan, the Bank expanded its executive
    and lending teams with several strategic hires in 2017, including
    James Kimball, EVP and Chief Operating Officer, and Scott McAdams, SVP
    and Commercial Banking Regional Manager for the Bank's Napa and Sonoma
    markets.
  • The Bank achieved organic loan growth of $59.5 million, or 4.0% in
    2017. Including loans acquired from Bank of Napa, the total loan
    portfolio grew 12.9% from $1,486.6 million at December 31, 2016 to
    $1,679.0 million at December 31, 2017.
  • Organic deposit growth was $144.5 million, or 8.2% for the year.
    Combined organic growth and deposits acquired from Bank of Napa
    resulted in 21.2% total deposit growth to $2,148.7 million at
    December 31, 2017, compared to $1,772.7 million at December 31, 2016.
    Non-interest bearing deposits, including those acquired, grew by $90.0
    million in the fourth quarter of 2017 and made up 47% of total
    deposits at year end.
  • Strong credit quality remains a cornerstone of the Bank's consistent
    performance. Non-accrual loans represent 0.02% of the Bank's loan
    portfolio as of December 31, 2017. A $500 thousand provision for loan
    losses was recorded in the fourth quarter due to continuing loan
    growth and elevated risk factors associated with the unknown long-term
    impacts of the 2017 North Bay wildfires and effects of the Bank of
    Napa acquisition.
  • While the long-term impact of the October 2017 wildfires on the North
    Bay economy is still unknown, the immediate impact to our loan
    portfolio and to our customer base was minimal. Bank of Marin is
    committed to helping our customers and our communities recover and
    rebuild.
  • The efficiency ratio increased to 68.3% in the fourth quarter from
    62.5% in the third quarter of 2017, primarily due to
    acquisition-related expenses. The efficiency ratio was 64.7% for the
    full year, up from 57.9% in 2016. Acquisition expenses increased the
    efficiency ratio by 6 percentage points in the fourth quarter and 2.2
    percentage points for the year.
  • For the year ended December 31, 2017, return on assets ("ROA") was
    0.75% and return on equity ("ROE") was 6.49%. Acquisition expenses and
    the deferred tax asset write-down reduced ROA by 0.22 percentage
    points and ROE by 1.86 percentage points.
  • All capital ratios are well above regulatory requirements for a
    well-capitalized institution. The total risk-based capital ratio for
    Bancorp was 14.9% at December 31, 2017, compared to 14.3% at
    December 31, 2016. Tangible common equity to tangible assets decreased
    to 10.7% at December 31, 2017, from 11.0% at December 31, 2016 (refer
    to footnote 3 on page 9 for definition of this non-GAAP financial
    measure). The deferred tax asset write-down of $3.0 million
    represented 1.16% of tangible equity.
  • The Board of Directors declared a cash dividend of $0.29 per share on
    January 19, 2018. This represents the 51st consecutive
    quarterly dividend paid by Bank of Marin Bancorp. The cash dividend is
    payable on February 9, 2018 to shareholders of record at the close of
    business on February 2, 2018.

Loans and Credit Quality

Organic loan originations totaled approximately $51.5 million in the
fourth quarter of 2017, compared to $42.3 million in the third quarter
and $61.8 million in the fourth quarter of 2016. New loan originations
were partially offset by payoffs of $26.4 million, and combined with
utilization on lines of credit and amortization on existing loans,
resulted in a net increase of $21.7 million. Payoffs in the quarter
ended December 31, 2017 were down from $41.8 million in the same quarter
last year.

Full-year organic loan originations totaled $173.1 million, compared to
$191.8 million last year, with increasing contributions from commercial
banking offices in our newer markets. Originations increased in the Napa
market and were enhanced by the acquisition, and lending activity has
increased in Oakland. Loan payoffs of $132.5 million were down from
$157.9 million in 2016 and remain largely due to asset sales and the
successful completion of construction projects.

Non-accrual loans totaled $406 thousand, or 0.02%, of the Bank's loan
portfolio at December 31, 2017, a decrease from $1.3 million, or 0.09%,
at September 30, 2017 and an increase from $145 thousand, or 0.01%, a
year ago. Loans classified substandard totaled $27.9 million at December
31, 2017, compared to $33.5 million at September 30, 2017 and $19.6
million at December 31, 2016. There were no loans classified doubtful at
December 31, 2017 or December 31, 2016. Accruing loans past due 30 to 89
days totaled $1.9 million at December 31, 2017, compared to $205
thousand at September 30, 2017 and $410 thousand a year ago.

The provision for loan losses totaled $500 thousand in the fourth
quarter of 2017, which was consistent with our organic loan growth and
changing risk factors, compared to a reversal of $300 thousand in the
fourth quarter a year ago. The provision for loan losses totaled $500
thousand in 2017, compared to reversal of loan losses of $1.9 million in
2016 due to the resolution of a problem credit upon payoff. Net
recoveries for the fourth quarter totaled $21 thousand compared to $16
thousand in the prior quarter and $29 thousand in the fourth quarter a
year ago. Net charge-offs totaled $175 thousand for the year ended
December 31, 2017, compared to net recoveries of $2.3 million in 2016,
primarily related to the resolution of a problem commercial real estate
credit. The ratio of loan loss reserve to loans, including acquired
loans, was 0.94% at December 31, 2017, 1.00% at September 30, 2017 and
1.04% at December 31, 2016. Based on legacy portfolio only, the ratio of
loan loss reserve to loans was 1.06% at December 31, 2017 compared to
1.05% at September 30, 2017.

Investments

The investment portfolio totaled $483.5 million at December 31, 2017, an
increase of $70.3 million from September 30, 2017 and $66.5 million from
December 31, 2016, primarily due to $75.4 million acquired from Bank of
Napa, of which $16.8 million were sold post-acquisition due to changes
in credit and tax law implications.

Deposits

Deposits totaled $2,148.7 million at December 31, 2017, compared to
$1,891.0 million at September 30, 2017 and $1,772.7 million at
December 31, 2016. The increase in deposits from the prior quarter and
last year reflects both organic growth and deposits acquired from Bank
of Napa. The average cost of deposits for 2017 dropped one basis point
from 2016 to 0.07%.

Earnings

"Our solid results for 2017 reflect the economic health of our market
and consistent execution by our team," said Tani Girton, EVP and Chief
Financial Officer. "We are pleased we were able to maintain our
profitability while at the same time making significant investments in
our platform to drive organic growth in the years to come. We are
excited about 2018. We have a substantial pipeline of opportunities
going into the new year and our credit metrics remain excellent."

Net interest income totaled $20.1 million in the fourth quarter of 2017
compared to $18.8 million in the prior quarter and $18.0 million in the
same quarter a year ago. The increase from the prior quarter primarily
relates to a $116.2 million increase in earning assets which includes
the acquisition. The tax-equivalent net interest margin was 3.80%, 3.77%
and 3.78% for those respective periods.

Net interest income totaled $74.9 million and $73.2 million in 2017 and
2016, respectively. The increase of $1.7 million in 2017 is primarily
due to an increase in earning assets of $114.4 million, partially offset
by a decrease in gains on payoffs and accretion on purchased loans, and
a $1.4 million interest recovery in 2016. The tax-equivalent net
interest margin decreased to 3.80% in 2017 compared to 3.91% in 2016 for
the same reasons.

Loans acquired through the acquisition of other banks are classified as
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. PCI loans totaled $2.1 million at December 31, 2017, $2.3
million at September 30, 2017, and $2.9 million at December 31, 2016.

Accretion and gains on payoffs of purchased loans recorded to interest
income were as follows:

     
  Three months ended
December 31, 2017   September 30, 2017   December 31, 2016
(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 $ 85   2 bps $ 76   2 bps $ 90   2 bps
Accretion on non-PCI loans 2 $ 110 2 bps $ 132 3 bps $ 159 3 bps
Gains on pay-offs of PCI loans   $ 100     2 bps   $     0 bps   $ 287     6 bps
     
  Years ended
December 31, 2017   December 31, 2016
(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 $ 331   2 bps $ 364   2 bps
Accretion on non-PCI loans 2 $ 571 3 bps $ 1,411 7 bps
Gains on pay-offs of PCI loans   $ 184     1 bps   $ 1,027     5 bps

1 Accretable yield on PCI loans totaled $1.3 million, $1.2
million and $1.5 million at December 31, 2017, September 30, 2017 and
December 31, 2016, respectively.

2 Unaccreted purchase discounts on non-PCI loans totaled $1.2
million, $1.3 million and $1.8 million at December 31, 2017,
September 30, 2017 and December 31, 2016, respectively.

Non-interest income in the fourth quarter of 2017 totaled $2.0 million,
compared to $2.1 million in the prior quarter and $2.5 million in the
same quarter a year ago. The decrease compared to the same quarter a
year ago primarily relates to a special dividend of $347 thousand from
the Federal Home Loan Bank of San Francisco ("FHLB") in the fourth
quarter of 2016 and $195 thousand net losses on the sale of investment
securities in the same period of 2017. Non-interest income of $8.3
million in 2017 decreased from $9.2 million in 2016 primarily due to the
special FHLB dividend and $425 thousand net gains on the sale of
investment securities recorded in 2016.

Non-interest expense totaled $15.1 million in the fourth quarter of
2017, compared to $13.0 million in the prior quarter and $11.8 million
in the same quarter a year ago, mainly due to acquisition-related
expenses. Non-interest expense increased $6.1 million to $53.8 million
in 2017 from $47.7 million in 2016, resulting from a $3.3 million
increase in salaries and benefits related to additional full-time
equivalent personnel, annual merit increases, and higher employee
insurance, and $2.2 million in acquisition expenses. Increases were
partially offset by lower FDIC assessments.

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 was signed into
law. The law reduces the federal corporate income tax rate to 21% for
tax years beginning on or after January 1, 2018. Due to the passage of
the Tax Cuts and Jobs Act of 2017, the Bank has valued all of its
deferred tax assets and liabilities at the 21% rate. The adjustment to
the net deferred tax assets valuation as of December 22, 2017 was $3.0
million as recorded in provision for income taxes in the fourth quarter
of 2017. The effective tax rate increased from 36.6% in 2016 to 44.6% in
2017, 10.5 percentage points of which was attributable to the write-down
of the net deferred tax assets.

Statement regarding use of non-GAAP financial measures

In this press release, Bancorp's financial results and financial
guidance are provided in accordance with GAAP and use certain non-GAAP
financial measures. Management believes that presentation of operating
results using non-GAAP financial measures provides useful supplemental
information to investors and facilitates the analysis of Bancorp's core
operating results and comparison of operating results across reporting
periods. Management also uses non-GAAP financial measures to establish
budgets and manage Bancorp's business. A reconciliation of the GAAP
financial results to non-GAAP financial results is included in the
following table.

     
Reconciliation of GAAP and Non-GAAP Financial Measures
  Years ended Three months ended
(in thousand, unaudited)  

December 31,
2017

 

December 31,
2016

December 31,
2017

 

September 30,
2017

 

December 31,
2016

Net income (GAAP) $ 15,976   $ 23,134 $ 1,110 $ 5,132 $ 5,687
Acquisition-related expenses 2,209 1,705 495
Tax effect associated with acquisition-related expenses (657 ) (596 ) (61 )
Deferred tax asset write-down 3,017     3,017        
Comparable net income (Non-GAAP) $ 20,545     $ 23,134 $ 5,236     $ 5,566     $ 5,687
 
Diluted earnings per share (GAAP) $ 2.55 $ 3.78 $ 0.17 $ 0.83 $ 0.93
Acquisition-related expenses 0.35 0.26 0.08
Tax effect associated with acquisition-related expenses (0.10 ) (0.09 ) (0.01 )
Deferred tax asset write-down 0.48     0.46        
Comparable diluted earnings per share (Non-GAAP) $ 3.28     $ 3.78 $ 0.80     $ 0.90     $ 0.93

Following is a description of the adjustments made to GAAP financial
measures:

  • Acquisition-related costs: Costs related to closing and integration of
    the acquired bank.
  • Tax expense associated with write-down of the net deferred tax assets
    due to the Tax Cuts and Jobs Act of 2017 discussed earlier.

Acquisition

The following table presents the acquisition-related expenses recognized:

(dollars in thousands, unaudited)  

Three months ended
December 31, 2017

 

Three months ended
September 30, 2017

 

Year Ended
December 31, 2017

 
Data processing1 $ 1,108 $ $ 1,108
Professional services2 494 449 952
Personnel severance 35 35
Other 68   46   114
Total2 $ 1,705   $ 495   $ 2,209
 
1 Primarily relates to Bank of Napa's core processing
system contract termination and deconversion fees.

2 Year-to-date professional services and total expenses
includes $9 thousand expensed in the second quarter of 2017.

The following table reflects the estimated fair values of the assets
acquired and liabilities assumed related to the acquisition:

(dollars in thousands, unaudited)  

Acquisition Date
November 21, 2017

Assets:  
Cash and cash equivalents $ 59,779
Investment securities 75,469
Loans 134,720
Core deposit intangible 4,441
Goodwill 23,705
Bank premises and equipment 599
Other assets 6,408
Total assets acquired $ 305,121
 
Liabilities:
Deposits:
Non-interest bearing $ 77,266
Interest bearing
Transaction accounts 50,080
Savings accounts 12,157
Money market accounts 85,045
Other time accounts 25,338
Total deposits 249,886
 
Other liabilities 2,050
Total liabilities assumed $ 251,936
Merger consideration of $53,185 (735,264 common shares and 70,145
shares of replacement stock options issued by Bank of Marin Bancorp).
$ 53,185

The acquired assets and assumed liabilities were recorded at fair value
at closing. The following table presents the net assets acquired from
Bank of Napa and the estimated fair value adjustments:

(dollars in thousands, unaudited)  

Acquisition Date
November 21, 2017

Book value of net assets acquired from Bank of Napa   26,152
 
Fair value adjustments:
Loans 1,301
Core deposit intangible asset 4,441  
Total purchase accounting adjustments 5,742
 
Deferred tax liabilities (tax effect of purchase accounting
adjustments at 42.05%)
(2,414 )
Fair value of net assets acquired from Bank of Napa $ 29,480  
 
Merger consideration $ 53,185
Less: fair value of net assets acquired (29,480 )
Goodwill $ 23,705  

Earnings Call and Webcast Information

Bank of Marin Bancorp will webcast its fourth quarter earnings call on
Monday, January 22, 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 http://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 (NASDAQ:BMRC). A
leading business and community bank in the San Francisco Bay Area, with
assets of $2.5 billion and 23 retail 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 was
named 2016 Community Bank of the Year by Western Independent Bankers and
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
December
31, 2017
 
(dollars in thousands, except per share data; unaudited)   December 31,
2017
  September 30,
2017
  December 31,
2016

Quarter-to-Date

Net income $ 1,110 $ 5,132 $ 5,687
Diluted earnings per common share $ 0.17 $ 0.83 $ 0.93
Return on average assets 0.19 % 0.95 % 1.11 %
Return on average equity 1.63 % 8.37 % 9.74 %
Efficiency ratio 68.25 % 62.51 % 57.51 %
Tax-equivalent net interest margin 1 3.80 % 3.77 % 3.78 %
Net (recoveries) charge-offs $ (21 ) $ (16 ) $ (29 )
Net (recoveries) charge-offs to average loans % % %

Year-to-Date

Net income $ 15,976 $ 23,134
Diluted earnings per common share $ 2.55 $ 3.78
Return on average assets 0.75 % 1.15 %
Return on average equity 6.49 % 10.23 %
Efficiency ratio 64.70 % 57.93 %
Tax-equivalent net interest margin 1 3.80 % 3.91 %
Net (recoveries) charge-offs $ 175 $ (2,294 )
Net (recoveries) charge-offs to average loans 0.01 % (0.15 )%

At Period End

Total assets $ 2,468,154 $ 2,155,901 $ 2,023,493
Loans:
Commercial and industrial $ 231,166 $ 218,681 $ 218,615
Real estate:
Commercial owner-occupied $ 268,872 $ 264,732 $ 247,713
Commercial investor-owned $ 858,603 $ 721,576 $ 724,228
Construction $ 63,828 $ 76,179 $ 74,809
Home equity $ 132,466 $ 121,366 $ 117,207
Other residential $ 96,668 $ 96,937 $ 78,549
Installment and other consumer loans $ 27,410     $ 24,976     $ 25,495  
Total loans $ 1,679,013 $ 1,524,447 $ 1,486,616
 
Non-performing loans2:
Real estate:
Commercial investor-owned $ $ 1,024 $
Home equity $ 406 $ 292 $ 90
Installment and other consumer loans $     $     $ 55  
Total non-accrual loans $ 406 $ 1,316 $ 145
 
Classified loans (graded substandard and doubtful) $ 27,906 $ 33,483 $ 19,601
Total accruing loans 30-89 days past due $ 1,925 $ 205 $ 410
Allowance for loan losses to total loans 0.94 % 1.00 % 1.04 %
Allowance for loan losses to non-performing loans 38.88x 11.58x 106.5x
Non-accrual loans to total loans 0.02 % 0.09 % 0.01 %
 
Total deposits $ 2,148,670 $ 1,890,970 $ 1,772,700
Loan-to-deposit ratio 78.1 % 80.6 % 83.9 %
Stockholders' equity $ 297,025 $ 245,049 $ 230,563
Book value per share $ 42.91 $ 39.68 $ 37.63
Tangible common equity to tangible assets 3 10.7 % 11.0 % 11.0 %
Total risk-based capital ratio - Bank 14.7 % 14.7 % 14.1 %
Total risk-based capital ratio - Bancorp 14.9 % 15.1 % 14.3 %
Full-time equivalent employees 291 272 262
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
$16.5 million, $16.4 million and $18.1 million at December 31, 2017,
September 30, 2017 and December 31, 2016, respectively. Excludes
purchased credit-impaired (PCI) loans with carrying values of $2.1
million, $2.3 million and $2.9 million that were accreting interest
at December 31, 2017, September 30, 2017 and December 31, 2016,
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 $36.6 million, $8.7 million and $9.0 million
at December 31, 2017, September 30, 2017 and December 31, 2016,
respectively. Tangible assets excludes goodwill and intangible
assets.

 

BANK OF MARIN BANCORP

CONSOLIDATED STATEMENTS OF CONDITION

at December 31, 2017, September 30, 2017 and December 31, 2016

     
(in thousands, except share data; unaudited)  

December 31,
2017

 

September 30,
2017

 

December 31,
2016

Assets
Cash and due from banks $ 203,545 $ 149,124 $ 48,804
Investment securities
Held-to-maturity, at amortized cost 151,032 155,122 44,438
Available-for-sale (at fair value; amortized cost of $334,285,
$257,468 and $378,254 at December 31, 2017, September 30, 2017 and
December 31, 2016, respectively)
  332,467     258,092     372,580  
Total investment securities 483,499 413,214 417,018
Loans, net of allowance for loan losses of $15,767, $15,248 and
$15,442 at December 31, 2017, September 30, 2017 and December 31,
2016, respectively
1,663,246 1,509,199 1,471,174
Bank premises and equipment, net 8,612 8,230 8,520
Goodwill 30,140 6,436 6,436
Core deposit intangible 6,492 2,226 2,580
Interest receivable and other assets   72,620     67,472     68,961  
Total assets   $ 2,468,154     $ 2,155,901     $ 2,023,493  
 
Liabilities and Stockholders' Equity
Liabilities
Deposits
Non-interest bearing $ 1,014,103 $ 924,073 $ 817,031
Interest bearing
Transaction accounts 169,195 102,236 100,723
Savings accounts 178,473 169,488 163,516
Money market accounts 626,783 555,013 539,967
Time accounts   160,116     140,160     151,463  
Total deposits 2,148,670 1,890,970 1,772,700
Subordinated debentures 5,739 5,703 5,586
Interest payable and other liabilities   16,720     14,179     14,644  
Total liabilities   2,171,129     1,910,852     1,792,930  
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 - 6,921,542, 6,175,751 and 6,127,314 at December
31, 2017, September 30, 2017 and December 31, 2016, respectively

143,967 90,052 87,392
Retained earnings 155,544 156,227 146,464
Accumulated other comprehensive loss, net   (2,486 )   (1,230 )   (3,293 )
Total stockholders' equity   297,025     245,049     230,563  
Total liabilities and stockholders' equity   $ 2,468,154     $ 2,155,901     $ 2,023,493  
 

BANK OF MARIN BANCORP

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

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

December 31,
2017

 

September 30,
2017

 

December 31,
2016

December 31,
2017

 

December 31,
2016

Interest income      
Interest and fees on loans $ 17,789 $ 16,738 $ 16,394 $ 66,799 $ 67,472
Interest on investment securities
Securities of U.S. government agencies 1,886 1,525 1,329 6,463 5,155
Obligations of state and political subdivisions 563 511 596 2,195 2,339
Corporate debt securities and other 40 31 36 144 256
Interest on federal funds sold and due from banks   372     406     53   995     208  
Total interest income 20,650 19,211 18,408 76,596 75,430
Interest expense
Interest on interest-bearing transaction accounts 34 24 27 108 109
Interest on savings accounts 18 17 15 66 58
Interest on money market accounts 195 133 115 555 445
Interest on time accounts 153 138 164 576 743
Interest on FHLB and overnight borrowings 478
Interest on subordinated debentures   111     111     111     439     436  
Total interest expense   511     423     432   1,744     2,269  
Net interest income 20,139 18,788 17,976 74,852 73,161
Provision for (reversal of) loan losses   500         (300 ) 500     (1,850 )
Net interest income after provision for loan losses   19,639     18,788     18,276   74,352     75,011  
Non-interest income
Service charges on deposit accounts 447 438 445 1,784 1,789
Wealth Management and Trust Services 544 539 491 2,090 2,090
Debit card interchange fees 385 390 391 1,531 1,503
Merchant interchange fees 102 88 94 398 449
Earnings on bank-owned life Insurance 217 209 218 845 844
Dividends on FHLB stock 181 177 576 766 1,153
(Losses) gains on investment securities, net (195 ) 31 (185 ) 425
Other income   310     225     217   1,039     908  
Total non-interest income   1,991     2,066     2,463   8,268     9,161  
Non-interest expense
Salaries and related benefits 7,852 7,344 6,508 29,958 26,663
Occupancy and equipment 1,409 1,364 1,350 5,472 5,081
Depreciation and amortization 508 489 479 1,941 1,822
Federal Deposit Insurance Corporation insurance 176 167 65 666 825
Data processing 2,058 946 959 4,906 3,625
Professional services 1,013 801 516 2,858 2,044
Directors' expense 163 175 105 720 553
Information technology 206 179 197 769 862
Provision for losses on off-balance sheet commitments 100 57 150
Other expense   1,719     1,471     1,576   6,435     6,067  
Total non-interest expense   15,104     13,036     11,755   53,782     47,692  
Income before provision for income taxes 6,526 7,818 8,984 28,838 36,480
Provision for income taxes   5,416     2,686     3,297   12,862     13,346  
Net income   $ 1,110     $ 5,132     $ 5,687   $ 15,976     $ 23,134  
Net income per common share:
Basic $ 0.17 $ 0.84 $ 0.93 $ 2.58 $ 3.81
Diluted $ 0.17 $ 0.83 $ 0.93 $ 2.55 $ 3.78
Weighted average shares:
Basic 6,455 6,123 6,085 6,196 6,073
Diluted 6,550 6,191 6,142 6,273 6,115
Dividends declared per common share   $ 0.29     $ 0.29     $ 0.27   $ 1.12     $ 1.02  
Comprehensive income:
Net income $ 1,110 $ 5,132 $ 5,687 $ 15,976 $ 23,134
Other comprehensive (loss) income
Change in net unrealized gain or loss on available-for-sale
securities
(2,511 ) (362 ) (9,869 ) 1,061 (5,658 )
Reclassification adjustment for losses (gains) on available-for-sale
securities included in net income
  195     135       185     (394 )
Net change in unrealized gain or loss on available-for-sale
securities, before tax
(2,316 ) (227 ) (9,869 ) 1,246 (6,052 )
Deferred tax (benefit) expense   (1,060 )   (96 )   (4,149 ) 439     (2,566 )
Other comprehensive (loss) income, net of tax   (1,256 )   (131 )   (5,720 ) 807     (3,486 )
Comprehensive (loss) income   $ (146 )   $ 5,001     $ (33 ) $ 16,783     $ 19,648  
 

BANK OF MARIN BANCORP
AVERAGE STATEMENTS OF
CONDITION AND ANALYSIS OF NET INTEREST INCOME

                 
Three months ended
December 31, 2017
  Three months ended
September 30, 2017
  Three months ended
December 31, 2016
(dollars in thousands; unaudited)   Average
Balance
  Interest
Income/
Expense
  Yield/
Rate
  Average
Balance
  Interest
Income/
Expense
  Yield/
Rate
  Average
Balance
  Interest
Income/
Expense
  Yield/
Rate
Assets
Interest-bearing due from banks 1 $ 108,255 $ 372 1.34 % $ 125,846 $ 406 1.26 % $ 35,398 $ 53 0.59 %
Investment securities 2, 3 455,706 2,722 2.39 % 400,659 2,294 2.29 % 414,544 2,214 2.14 %
Loans 1, 3, 4   1,578,959     18,245     4.52 %   1,500,167     17,228     4.49 %   1,471,134     16,723     4.45 %
Total interest-earning assets 1 2,142,920 21,339 3.89 % 2,026,672 19,928 3.85 % 1,921,076 18,990 3.87 %
Cash and non-interest-bearing due from banks 40,648 45,009 49,184
Bank premises and equipment, net 8,384 8,430 8,568
Interest receivable and other assets, net   74,299             60,622             59,890          
Total assets   $ 2,266,251             $ 2,140,733             $ 2,038,718          
Liabilities and Stockholders' Equity
Interest-bearing transaction accounts $ 129,538 $ 34 0.10 % $ 96,504 $ 24 0.10 % $ 91,692 $ 27 0.12 %
Savings accounts 173,057 18 0.04 % 171,187 17 0.04 % 160,638 16 0.04 %
Money market accounts 551,591 195 0.14 % 560,486 133 0.09 % 529,003 115 0.09 %
Time accounts, including CDARS 150,552 153 0.40 % 140,736 138 0.39 % 153,976 163 0.42 %
Overnight borrowings 1 6 1.75 % % 3 %
Subordinate debentures 1   5,720     111     7.63 %   5,682     111     7.63 %   5,564     111     7.82 %
Total interest-bearing liabilities 1,010,464 511 0.20 % 974,595 423 0.17 % 940,876 432 0.18 %
Demand accounts 971,381 909,900 848,881
Interest payable and other liabilities 14,558 13,055 16,604
Stockholders' equity   269,848             243,183             232,357          
Total liabilities & stockholders' equity   $ 2,266,251             $ 2,140,733             $ 2,038,718          
Tax-equivalent net interest income/margin 1       $ 20,828     3.80 %       $ 19,505     3.77 %       $ 18,558     3.78 %
Reported net interest income/margin 1       $ 20,139     3.68 %       $ 18,788     3.63 %       $ 17,976     3.66 %
Tax-equivalent net interest rate spread           3.69 %           3.68 %           3.69 %
 
Year ended
December 31, 2017
  Year ended
December 31, 2016
(dollars in thousands; unaudited) Average
Balance
  Interest
Income/
Expense
  Yield/
Rate
  Average
Balance
  Interest
Income/
Expense
  Yield/
Rate
Assets
Interest-bearing due from banks 1 $ 80,351 $ 995 1.22 % $ 38,314 $ 209 0.54 %
Investment securities 2, 3 419,873 9,732 2.32 % 406,640 8,671 2.13 %
Loans 1, 3, 4   1,511,503     68,562     4.47 %   1,452,357     68,794     4.66 %
Total interest-earning assets 1 2,011,727 79,289 3.89 % 1,897,311 77,674 4.03 %
Cash and non-interest-bearing due from banks 42,511 42,150
Bank premises and equipment, net 8,411 8,836
Interest receivable and other assets, net   63,301             59,989          
Total assets   $ 2,125,950             $ 2,008,286          
Liabilities and Stockholders' Equity
Interest-bearing transaction accounts $ 105,544 $ 108 0.10 % $ 94,252 $ 109 0.12 %
Savings accounts 167,190 66 0.04 % 151,214 58 0.04 %
Money market accounts 542,592 555 0.10 % 524,989 445 0.08 %
Time accounts, including CDARS 146,069 576 0.39 % 158,878 742 0.47 %
Overnight borrowings 1 1 1.75 % 5,383 23 0.42 %
FHLB fixed-rate advances 1 % 6,803 456 6.59 %
Subordinated debentures 1   5,664     439     7.65 %   5,493     436     7.80 %
Total interest-bearing liabilities 967,060 1,744 0.18 % 947,012 2,269 0.24 %
Demand accounts 899,289 819,916
Interest payable and other liabilities 13,506 15,142
Stockholders' equity   246,095             226,216          
Total liabilities & stockholders' equity   $ 2,125,950             $ 2,008,286          
Tax-equivalent net interest income/margin 1       $ 77,545     3.80 %       $ 75,405     3.91 %
Reported net interest income/margin 1       $ 74,852     3.67 %       $ 73,161     3.79 %
Tax-equivalent net interest rate spread           3.71 %           3.79 %
 
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 35 percent.

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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