April 23, 2012 at 08:00 AM EDT
Bank of Marin Bancorp Reports First Quarter Earnings of $4.9 Million and Declares 28th Consecutive Quarterly Dividend

Bank of Marin Bancorp, "Bancorp" (NASDAQ: BMRC), parent company of Bank of Marin, announced first quarter 2012 earnings of $4.9 million, up 46.0%, from $3.4 million in the fourth quarter of 2011, and up 9.6% from $4.5 million in the first quarter of 2011. Diluted earnings per share were $0.91, up $0.28 from the fourth quarter of 2011 and up $0.07 from the same quarter a year ago.

“We are pleased to report another strong quarter with record earnings,” said Russell A. Colombo, President and CEO of Bank of Marin. “Our success is driven by maintaining excellent credit standards, establishing and strengthening relationships with our customers, as well as driving operational consistency throughout the organization. We are off to a very good start in 2012 and look forward to building on our positive results."

Bancorp also provided the following highlights on its operating and financial performance for the first quarter of 2012:

  • No additional loan loss provision was recorded in the quarter. The majority of loans deemed uncollectible and charged-off in the first quarter of 2012 had been adequately reserved at December 31, 2011. In addition, non-performing loans are well-collateralized and/or adequately reserved.
  • Total deposits grew $42.7 million, or 3.5%, over last quarter, with non-interest bearing deposits up $49.8 million or 13.9%. Non-interest bearing deposits totaled 32.9% of deposits at March 31, 2012, compared to 29.9% in the prior quarter and 28.8% a year ago.
  • Total risk-based capital ratio for Bancorp grew to 13.6%, up from 13.1% at December 31, 2011 and 13.0% at March 31, 2011, and continues to be well above industry requirements for a well-capitalized institution.
  • On April 19, 2012, the Board of Directors declared a quarterly cash dividend of $0.17 per share. The cash dividend is payable to shareholders of record at the close of business on May 3, 2012 and will be payable on May 11, 2012. Bancorp has paid a dividend for the past twenty-eight quarters.

Loans and Credit Quality

Gross loans totaled $1.0 billion at March 31, 2012 and December 31, 2011 and $979.0 million at March 31, 2011. Non-performing loans totaled $14.4 million or 1.40% of Bancorp's loan portfolio at March 31, 2012, compared to $12.0 million, or 1.16%, at December 31, 2011 and $9.0 million, or 0.92%, a year ago. While non-performing loans increased by $2.4 million from the prior quarter, the current estimated value of the collateral of newly identified problem loans suggests no credit loss exposure. Accruing loans past due 30 to 89 days decreased significantly and totaled $1.8 million at March 31, 2012, compared to $7.4 million at December 31, 2011 and $21.9 million a year ago.

“Our solid credit quality is a result of disciplined lending practices and proactive portfolio management. We identify and reserve for problem loans early and adequately," said Kevin Coonan, Chief Credit Officer. "The successful management of loans acquired in the Charter Oak Bank acquisition contributed to our positive results."

Net charge-offs in the first quarter of 2012 remained consistent with the prior quarter at $1.1 million and totaled $372 thousand in the first quarter of 2011. The majority of loans deemed uncollectible and charged-off in the first quarter of 2012 had been adequately reserved at December 31, 2011. In addition, the absence of newly identified problem loans that have credit loss exposure and limited loan growth warrant no provision during the first quarter. The provision for loan losses totaled $2.5 million in the prior quarter and $1.1 million in the same quarter a year ago. The allowance for loan losses of $13.5 million totaled 1.31% of loans at March 31, 2012, compared to 1.42% and 1.34% at December 31, 2011 and March 31, 2011, respectively.

Deposits

Total deposits grew $42.7 million, or 3.5%, over December 31, 2011 and grew $157.3 million, or 14.5%, over a year ago to $1.2 billion. The higher level of deposits reflects increases in most deposit categories and growth across most of our markets. Non-interest bearing deposits comprised 32.9% of total deposits at March 31, 2012, compared to 29.9% at December 31, 2011 and 28.8% a year ago.

“Our deposit growth continues to be very strong and reflects our commitment to customer service,” said Christina Cook, Chief Financial Officer. “We are seeing positive growth in core deposits with solid increases in both consumer and business accounts.”

Earnings

Net interest income in the first quarter of 2012 totaled $16.2 million, an increase of $483 thousand, or 3.1%, from the prior quarter. The tax-equivalent net interest margin was 4.97% in the first quarter of 2012 compared to 4.79% in the prior quarter. The increase primarily reflects a higher level of gains recognized in interest income on pay-offs of purchased credit-impaired ("PCI") loans and a reduction in the cost of deposits due to the low interest rate environment.

Net interest income increased $323 thousand, or 2.0%, from the quarter ended March 31, 2011. The tax-equivalent net interest margin decreased 47 basis points from the same quarter last year, primarily relating to a lower level of accretion on purchased non-credit impaired loans, partially offset by gains on pay-offs of PCI loans in the current quarter and a reduction in the cost of deposits due to the low interest rate environment.

Accretion on purchased non-credit impaired loans recorded to interest income totaled $203 thousand, $241 thousand and $1.3 million for the quarters ended March 31, 2012, December 31, 2011, and March 31, 2011, respectively. Gains recognized in interest income on pay-offs of PCI loans totaled $522 thousand, $208 thousand, and zero for the quarters ended March 31, 2012, December 31, 2011, and March 31, 2011, respectively.

Non-interest income in the first quarter of 2012 totaled $1.7 million, compared to $1.5 million in the prior quarter and $1.6 million from the same quarter a year ago. The increase from the prior quarter primarily reflects higher merchant interchange fees.

Non-interest expense totaled $9.8 million in the first quarter of 2012, an increase of $101 thousand, or 1.0%, from last quarter and increased $705 thousand, or 7.7% from the same quarter a year ago. The increase from the same quarter a year ago primarily reflects higher personnel and occupancy costs associated with branch expansion, partially offset by lower Federal Deposit Insurance Corporation ("FDIC") insurance expense and lower acquisition-related expenses.

About Bank of Marin Bancorp

Bank of Marin, as the sole subsidiary of Bank of Marin Bancorp (NASDAQ: BMRC), is the premier community and business bank in Marin County with 17 offices in Marin, San Francisco, Napa and Sonoma counties. Bank of Marin offers business and personal banking, private banking and wealth management services, with a strong focus on supporting local businesses in the community. Incorporated in 1989, Bank of Marin has received the highest five star rating from Bauer Financial for more than twelve years (www.bauerfinancial.com) and has been recognized for several years as one of the "Best Places to Work in the Bay Area" and one of the "Top Corporate Philanthropists" by the San Francisco Business Times. With assets exceeding $1.4 billion, Bank of Marin Bancorp is included in the Russell 2000 Small-Cap Index and has been recognized as a Top 200 Community Bank for the past five years by US Banker Magazine. For more information, visit 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, the economic downturn in the United States and abroad, changes in interest rates, deposit flows, real estate values, expected future cash flows on acquired loans, and competition; changes in accounting principles, policies or guidelines; changes in legislation or regulation; and other economic, competitive, governmental, regulatory and technological factors affecting Bancorp's operations, pricing, products and services. These and other important factors 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
Year To Year Comparison
March 31, 2012
(dollars in thousands, except per share data; unaudited)

FIRST QUARTER

QTD 2012

QTD 2011

CHANGE

% CHANGE

NET INCOME $ 4,940 $ 4,509 $ 431 9.6 %
DILUTED EARNINGS PER COMMON SHARE $ 0.91 $ 0.84 $ 0.07 8.3 %
RETURN ON AVERAGE ASSETS (ROA) 1.41 % 1.44 % (0.03 ) % (2.1 ) %
RETURN ON AVERAGE EQUITY (ROE) 14.39 % 14.74 % (0.35 ) % (2.4 ) %
EFFICIENCY RATIO 54.96 % 52.24 % 2.72 % 5.2 %
TAX-EQUIVALENT NET INTEREST MARGIN1 4.97 % 5.44 % (0.47 ) % (8.6 ) %
NET CHARGE-OFFS $ 1,117 $ 372 $ 745 200.3 %
NET CHARGE-OFFS TO AVERAGE LOANS 0.11 % 0.04 % 0.07 % 175.0 %

AT PERIOD END

March 31, 2012

March 31, 2011

CHANGE

% CHANGE

TOTAL ASSETS $ 1,421,284 $ 1,290,699 $ 130,585 10.1 %
LOANS:
COMMERCIAL AND INDUSTRIAL $ 176,655 $ 165,322 $ 11,333 6.9 %
REAL ESTATE
COMMERCIAL OWNER-OCCUPIED $ 172,354 $ 165,908 $ 6,446 3.9 %
COMMERCIAL INVESTOR-OWNED $ 451,909 $ 380,100 $ 71,809 18.9 %
CONSTRUCTION $ 54,640 $ 76,044 $ (21,404 ) (28.1 ) %
HOME EQUITY $ 97,830 $ 95,448 $ 2,382 2.5 %
OTHER RESIDENTIAL $ 57,249 $ 67,807 $ (10,558 ) (15.6 ) %
INSTALLMENT AND OTHER CONSUMER LOANS $ 21,570 $ 28,321 $ (6,751 ) (23.8 ) %
TOTAL LOANS $ 1,032,207 $ 978,950 $ 53,257 5.4 %
NON-PERFORMING LOANS2:
COMMERCIAL AND INDUSTRIAL $ 2,282 $ 3,337 $ (1,055 ) (31.6 ) %
REAL ESTATE
COMMERCIAL OWNER-OCCUPIED $ 1,403 $ 632 $ 771 122.0 %
COMMERCIAL INVESTOR-OWNED $ 6,529 $ $ 6,529 NM
CONSTRUCTION $ 2,831 $ 4,145 $ (1,314 ) (31.7 ) %
HOME EQUITY $ 795 $ 323 $ 472 146.1 %
OTHER RESIDENTIAL $ $ 141 $ (141 ) (100.0 ) %
INSTALLMENT AND OTHER CONSUMER LOANS $ 566 $ 426 $ 140 32.9 %
TOTAL NON-PERFORMING LOANS $ 14,406 $ 9,004 $ 5,402 60.0 %
TOTAL ACCRUING LOANS 30-89 DAYS PAST DUE $ 1,801 $ 21,867 $ (20,066 ) (91.8 ) %
LOAN LOSS RESERVE TO LOANS 1.31 % 1.34 % (0.03 ) % (2.2 ) %
LOAN LOSS RESERVE TO NON-PERFORMING LOANS 0.94 x 1.45 x (0.51 ) x (35.2 ) %
NON-PERFORMING LOANS TO TOTAL LOANS 1.40 % 0.92 % 0.48 % 52.2 %
TEXAS RATIO3 9.38 % 6.70 % 2.68 % 40.0 %
TOTAL DEPOSITS $ 1,245,641 $ 1,088,360 $ 157,281 14.5 %
LOAN TO DEPOSIT RATIO 82.9 % 89.9 % (7.0 ) % (7.8 ) %
STOCKHOLDERS' EQUITY $ 140,021 $ 125,484 $ 14,537 11.6 %
BOOK VALUE PER SHARE $ 26.18 $ 23.64 $ 2.54 10.7 %
TANGIBLE COMMON EQUITY TO TANGIBLE ASSETS4 9.85 % 9.67 % 0.18 % 1.9 %
TOTAL RISK BASED CAPITAL RATIO-BANK5 13.4 % 12.4 % 1.0 % 8.1 %
TOTAL RISK BASED CAPITAL RATIO-BANCORP5 13.6 % 13.0 % 0.6 % 4.6 %
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 $25.6 million and $1.6 million at March 31, 2012 and 2011, respectively. Excludes purchased credit-impaired (PCI) loans with carrying values of $4.4 million and $9.2 million that were accreting interest at March 31, 2012 and 2011, respectively. These amounts are excluded as PCI loan accretable yield interest recognition is independent from the underlying contractual loan delinquency status. Total PCI loans were $6.0 million and $9.2 million at March 31, 2012 and 2011, respectively.
3 (Non-performing assets + 90 day delinquent loans)/(tangible common equity + allowance for loan losses).
4 Tangible common equity includes common stock, retained earnings and unrealized gain on available for sale securities, net of tax, less intangible assets. Tangible assets exclude core deposit intangibles totaling zero at March 31, 2012 and $719 thousand at March 31, 2011.
5 Current period estimated.

BANK OF MARIN BANCORP

CONSOLIDATED STATEMENTS OF CONDITION

at March 31, 2012, December 31, 2011 and March 31, 2011

(in thousands, except share data; March 2012 and March 2011 unaudited) March 31, 2012 December 31, 2011 March 31, 2011
Assets
Cash and due from banks $ 139,827 $ 127,732 $ 109,850
Short-term investments 2,012 2,011 19,110
Cash and cash equivalents 141,839 129,743 128,960
Investment securities
Held to maturity, at amortized cost 73,912 59,738 34,866
Available for sale (at fair market value; amortized cost $131,621, $132,348 and $107,118 at March 31, 2012, December 31, 2011 and March 31, 2011, respectively) 134,443 135,104 108,726
Total investment securities 208,355 194,842 143,592
Loans, net of allowance for loan losses of $13,522, $14,639 and $13,069 at March 31, 2012, December 31, 2011 and March 31, 2011, respectively 1,018,685 1,016,515 965,881
Bank premises and equipment, net 9,183 9,498 8,750
Interest receivable and other assets 43,222 42,665 43,516
Total assets$1,421,284$1,393,263$1,290,699
Liabilities and Stockholders' Equity
Liabilities
Deposits
Non-interest bearing $ 409,409 $ 359,591 $ 313,599
Interest bearing
Transaction accounts 153,244 134,673 119,331
Savings accounts 82,151 75,617 67,711
Money market accounts 426,175 434,461 393,867
CDARS® time accounts 31,562 46,630 31,670
Other time accounts 143,100 152,000 162,182
Total deposits 1,245,641 1,202,972 1,088,360
Federal Home Loan Bank borrowings 15,000 35,000 55,000
Subordinated debenture 5,000 5,000 5,000
Interest payable and other liabilities 15,622 14,740 16,855
Total liabilities 1,281,263 1,257,712 1,165,215
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 - 5,348,659, 5,336,927 and
5,307,247 at March 31, 2012, December 31,
2011 and March 31, 2011, respectively
57,254 56,854 55,898
Retained earnings 81,130 77,098 68,653
Accumulated other comprehensive income, net 1,637 1,599 933
Total stockholders' equity 140,021 135,551 125,484
Total liabilities and stockholders' equity$1,421,284$1,393,263$1,290,699

BANK OF MARIN BANCORP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three months ended
(in thousands, except per share amounts; unaudited) March 31, 2012 December 31, 2011 March 31, 2011
Interest income
Interest and fees on loans $ 15,328 $ 15,150 $ 15,900
Interest on investment securities
Securities of U.S. Government agencies 967 847 733
Obligations of state and political subdivisions 387 396 302
Corporate debt securities and other 201 203 111
Interest on Federal funds sold and short-term investments 50 70 40
Total interest income 16,933 16,666 17,086
Interest expense
Interest on interest bearing transaction accounts 44 30 38
Interest on savings accounts 22 23 29
Interest on money market accounts 183 282 337
Interest on CDARS® time accounts 32 45 94
Interest on other time accounts 304 336 358
Interest on borrowed funds 147 232 352
Total interest expense 732 948 1,208
Net interest income 16,201 15,718 15,878

Provision for loan losses

2,500 1,050
Net interest income after provision for loan losses 16,201 13,218 14,828
Non-interest income
Service charges on deposit accounts 524 447 443
Wealth Management and Trust Services 456 445 434
Debit card interchange fees 234 233 188
Earnings on Bank-owned life insurance 188 197 169
Other income 293 202 365
Total non-interest income 1,695 1,524 1,599
Non-interest expense
Salaries and related benefits 5,604 4,742 4,929
Occupancy and equipment 987 981 907
Depreciation and amortization 341 342 308
Federal Deposit Insurance Corporation insurance 233 210 387
Data processing 606 557 582
Professional services 585 561 733
Other expense 1,479 2,341 1,284
Total non-interest expense 9,835 9,734 9,130
Income before provision for income taxes 8,061 5,008 7,297
Provision for income taxes 3,121 1,625 2,788
Net income$4,940$3,383$4,509
Net income per common share:
Basic $ 0.93 $ 0.64 $ 0.85
Diluted $ 0.91 $ 0.63 $ 0.84
Weighted average shares used to compute net income per common share:
Basic 5,326 5,313 5,283
Diluted 5,425 5,394 5,366
Dividends declared per common share $ 0.17 $ 0.17 $ 0.16
Comprehensive income
Net income $ 4,940 $ 3,383 $ 4,509
Other comprehensive income
Net change in unrealized gain on available for sale securities (net of tax effect of $28, $(81), $445 at March 31, 2012, December 31, 2011 and March 31, 2011, respectively) 38 (110 ) (613 )
Comprehensive income$ 4,978$ 3,273$ 3,896

BANK OF MARIN BANCORP

AVERAGE STATEMENTS OF CONDITION AND ANALYSIS OF NET INTEREST INCOME

Three months ended Three months ended Three months ended
March 31, 2012 December 31, 2011 March 31, 2011
Interest Interest Interest
Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
(Dollars in thousands; unaudited) Balance Expense Rate Balance Expense Rate Balance Expense Rate
Assets
Interest-bearing due from banks (1) $ 87,101 $ 50 0.23 % $ 104,190 $ 70 0.26 % $ 62,374 $ 40 0.26 %
Investment securities
U.S. Government agencies (2) 111,695 967 3.46 % 128,143 847 2.64 % 92,172 733 3.18 %
Corporate CMOs and other (2) 26,968 201 2.98 % 18,632 203 4.36 % 15,872 111 2.80 %
Obligations of state and political subdivisions (3) 59,580 542 3.64 % 47,758 566 4.74 % 34,900 460 5.27 %
Loans and banker's acceptances (1) (3) (4) 1,028,573 15,473 5.95 % 1,009,916 15,289 5.92 % 979,674 15,988 6.53 %
Total interest-earning assets (1) 1,313,917 17,233 5.19 % 1,308,639 16,975 5.08 % 1,184,992 17,332 5.85 %
Cash and non-interest-bearing due from banks 52,011 52,574 42,378
Bank premises and equipment, net 9,383 9,610 8,468
Interest receivable and other assets, net 34,808 34,324 31,400
Total assets$1,410,119$1,405,147$1,267,238
Liabilities and Stockholders' Equity
Interest-bearing transaction accounts $ 143,159 $ 44 0.12 % $ 130,894 $ 30 0.09 % $ 115,067 $ 38 0.13 %
Savings accounts 78,831 22 0.11 % 75,217 23 0.12 % 62,574 29 0.19 %
Money market accounts 436,333 183 0.17 % 432,728 282 0.26 % 382,794 337 0.36 %
CDARS® time accounts 40,091 32 0.32 % 39,850 45 0.45 % 54,432 94 0.70 %
Other time accounts 149,228 304 0.82 % 152,619 336 0.87 % 157,631 358 0.92 %
FHLB fixed-rate advances 19,835 107 2.13 % 35,000 195 2.21 % 58,934 316 2.17 %
Subordinated debenture (1) 5,000 40 3.16 % 5,000 37 2.90 % 5,000 36 2.88 %
Total interest-bearing liabilities 872,477 732 0.34 % 871,308 948 0.43 % 836,432 1,208 0.59 %
Demand accounts 384,774 386,066 298,075
Interest payable and other liabilities 14,814 13,214 8,635
Stockholders' equity 138,054 134,559 124,096
Total liabilities & stockholders' equity$1,410,119$1,405,147$1,267,238
Tax-equivalent net interest income/margin (1) $ 16,501 4.97 % $ 16,027 4.79 % $ 16,124 5.44 %
Reported net interest income/margin (1) $ 16,201 4.88 % $ 15,718 4.70 % $ 15,878 5.36 %
Tax-equivalent net interest rate spread 4.85 % 4.65 % 5.26 %
(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.

Contacts:

Bank of Marin Bancorp
Sandy Pfaff, 415-819-7447
sandy@pfaffpr.com
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