Bank of Marin Bancorp (“Bancorp”, NASDAQ: BMRC) announced third quarter 2011 earnings of $4.2 million, up 26%, from $3.4 million in the third quarter of 2010. Diluted earnings per share were $0.79, up $0.16 from the same quarter a year ago. Earnings for the nine-month period ended September 30, 2011 totaled $12.2 million, up 26%, from $9.6 million in the same period a year ago. Diluted earnings per share for the nine-month period ended September 30, 2011 totaled $2.26, up $0.44 from $1.82 for the same period a year ago. 2011 earnings include the impact of the FDIC 1-assisted acquisition of certain assets and the assumption of certain liabilities of the former Charter Oak Bank on February 18, 2011 (the “Acquisition”).

“We are pleased to report strong earnings this quarter driven by high credit quality and the Napa acquisition. This year we have also opened two new offices in Santa Rosa and Sonoma, which position the Bank for continued growth,” said Russell A. Colombo, Chief Executive Officer. “By investing in our branch network and operational infrastructure, including hiring senior-level talent, we are creating value for our customers, employees and shareholders.”

Bancorp also provided the following highlights on its operating and financial performance for the third quarter of 2011:
  • The acquired operations of the former Charter Oak Bank contributed approximately $1.6 million to Bancorp’s pre-tax, third-quarter income, and $4.0 million to Bancorp’s pre-tax year-to-date income.
  • Credit quality remains solid with non-performing loans at 1.08% of loans, down from 1.13% a year ago. Results include a $2.5 million lower loan loss provision from the prior quarter, primarily due to fewer newly identified loans requiring a specific reserve and a decrease in the construction portfolio, which is assigned a higher allowance factor.
  • Loans grew $6.0 million, or 0.6%, over last quarter, primarily related to new relationships.
  • Total deposits grew $37.6 million, or 3.3%, over last quarter, with non-interest bearing deposits growing $27.5 million or 7.9%. Non-interest bearing deposits totaled 31.8% of deposits at September 30, 2011, compared to 30.4% at the prior quarter-end.
  • On October 3, 2010, Bank of Marin opened its seventeenth full service branch in Sonoma, California. With pre-opening business development efforts, the Sonoma branch has already generated $1.8 million in deposits and $2.4 million in loans as of September 30, 2011.
  • In a conscious effort to address excess liquidity, Bancorp paid off a $20 million FHLB 2 fixed-rate advance at 2.54%. The pre-payment penalty of $924 thousand, pre-tax, reduced the net interest margin by 28 basis points for the third quarter and 10 basis points on a year-to-date basis.
  • On October 21, 2011, the Board of Directors declared a quarterly cash dividend of $0.17 per share, a $0.01 increase from prior quarter. The cash dividend is payable to shareholders of record at the close of business on November 3, 2011 and will be payable on November 14, 2011.

Loans and Credit Quality

Total loans reached $992.6 million at September 30, 2011, representing an increase of $54.5 million, or 5.8%, over a year ago, and an increase of $6.0 million, or 0.6%, from June 30, 2011. The increase from the same quarter a year ago largely reflects $61.8 million of loans purchased and measured at fair value without loss share as part of the Acquisition, partially offset by a decreased emphasis on certain product lines, including construction lending, as well as payoffs due to the successful resolution of several high credit risk loans.

Non-performing loans totaled $10.7 million or 1.08% of Bancorp’s loan portfolio at September 30, 2011, compared to $10.6 million or 1.13% a year ago and $8.7 million, or 0.88%, at June 30, 2011. Accruing loans past due 30 to 89 days totaled $5.0 million at September 30, 2011, compared to $4.6 million a year ago and $763 thousand at June 30, 2011.

“We have a consistent, disciplined, and proactive approach to managing our loans which results in a high quality portfolio,” said Kevin Coonan, Chief Credit Officer. “Our process focuses on early risk recognition, and active account management to help maintain our strong credit quality and ultimately the overall health of the Bank.”

Non-performing loans exclude certain PCI 3 loans that are accreting interest. PCI loans totaled $6.5 million at September 30, 2011 (including loans totaling $3.9 million that are accreting interest), compared to $7.9 million at June 30, 2011.

Bancorp’s loan loss provision totaled $500 thousand in the third quarter of 2011, a decrease of $900 thousand from the same quarter a year ago, and a decrease of $2.5 million from the second quarter of 2011. The decreases to the provision for loan losses reflect fewer newly identified loans requiring a specific reserve and a decrease in the construction portfolio, which is assigned a higher allowance factor. Net charge-offs in the third quarter of 2011 totaled $1.2 million and remained relatively unchanged from the same quarter a year ago, compared to $2.1 million in the prior quarter. The provision for loan losses for the nine-month period ended September 30, 2011 totaled $4.6 million, compared to $4.3 million in the same period a year ago. The allowance for loan losses of $13.2 million totaled 1.33% of loans at September 30, 2011, compared to 1.28% and 1.41% at September 30, 2010 and June 30, 2011, respectively. The decrease in the allowance for loan losses as a percentage of loans from the prior quarter primarily reflects third-quarter charge-offs of loans with previously established specific reserves.

Deposits

Total deposits grew $153.2 million, or 15%, over a year ago to $1.2 billion. The higher level of deposits reflects growth in most deposit categories, except for CDARS® time deposits, which decreased $38.1 million. Demand deposits comprised 31.8% of total deposits at September 30, 2011, compared to 30.4% at June 30, 2011 and 27.0% a year ago.

Earnings

The acquired operations of the former Charter Oak Bank contributed approximately $1.6 million to Bancorp’s pre-tax, third-quarter income, including $448 thousand of gains recognized in interest income on pay-offs of PCI loans, $405 thousand of accretion on purchased non-credit impaired loans, and $34 thousand in loan loss provision. The acquired operations of the former Charter Oak Bank contributed approximately $4.0 million to Bancorp’s pre-tax, year-to-date income, including $2.6 million of accretion on purchased non-credit impaired loans, $1.7 million of gains recognized in interest income on pay-offs of PCI loans, $1.0 million in Acquisition-related third-party costs, $1.0 million in loan loss provision, and $146 thousand in bargain purchase gain. The quarterly and year-to-date income amounts discussed above exclude allocated overhead and allocated cost of funds. The current level of accretion is expected to continue to decline.

The tax-equivalent net interest margin was 4.76% in the third quarter of 2011, compared to 4.88% in the same quarter last year and 5.51% in the second quarter of 2011. Net interest income in the third quarter of 2011 totaled $15.2 million, increasing $1.3 million, or 9.0%, from the same period last year. The increase primarily reflects the acquisition of loans from the former Charter Oak Bank and a reduction in the cost of deposits, partially offset by a $924 thousand pre-payment penalty on an FHLB advance. Net interest income decreased $1.8 million, or 10.5%, from the prior quarter, primarily related to the pre-payment penalty on an FHLB advance discussed above, a lower level of gains resulting from PCI loan pay-offs, as well as a lower level of accretion on purchased non-credit impaired loans as loans mature.

The tax-equivalent net interest margin was 5.25% in the first nine months of 2011 compared to 4.96% in the first nine months of 2010. The net interest income for the first nine months of 2011 totaled $48.1 million, representing an increase of $7.3 million, or 17.8%, from the same period last year. The increase primarily reflects the acquisition of loans from the former Charter Oak Bank and a reduction in the cost of deposits, partially offset by the pre-payment penalty on the FHLB advance discussed above.

“As we expand the Bank of Marin franchise, we also look to create efficiencies by offsetting the costs of growth with expense savings,“ said Christina Cook, Chief Financial Officer. “From renewing office space leases at market rates to improving processes through automation, our goal is to closely manage expenses overall.”

Non-interest income in the third quarter of 2011 totaled $1.6 million, compared to $1.3 million in the same period last year, and remained relatively unchanged from the prior quarter. The increase from the same quarter a year ago reflects higher Wealth Management and Trust Services fees and other income. Non-interest income for the first nine months of 2011 totaled $4.7 million, an increase of $584 thousand, or 14.0%, from the first nine months of 2010. The increase relates to the pre-tax bargain purchase gain of $146 thousand from the Acquisition and higher Wealth Management and Trust Services fees.

Non-interest expense totaled $9.4 million in the third quarter of 2011, an increase of $914 thousand, or 10.7%, from the same quarter a year ago. The increase primarily reflects higher personnel costs and higher occupancy and equipment cost associated with branch expansion, as well as data processing costs associated with the Acquisition. Non-interest expense decreased $577 thousand, or 5.8%, from the prior quarter due to the absence of one-time Acquisition related third-party costs, which totaled $642 thousand in the prior quarter. Non-interest expense totaled $28.5 million and $25.3 million in the first nine months of 2011 and 2010, respectively, representing a 12.8% increase. The increase primarily reflects higher personnel and occupancy costs associated with branch expansion, as well as one-time Acquisition-related third-party costs of approximately $1.0 million, partially offset by lower FDIC insurance expense due to a change in the FDIC assessment base.

About Bank of Marin Bancorp

Bank of Marin Bancorp's assets total $1.4 billion. Bank of Marin, as the sole subsidiary of Bank of Marin Bancorp, is the largest community bank in Marin County with seventeen offices in Marin, San Francisco, Napa and Sonoma counties. The Bank's Administrative offices are located in Novato, California. Bank of Marin offers business and personal banking, private banking and wealth management services, with a strong focus on supporting the local community. Bank of Marin Bancorp is included in the Russell 2000 Small-Cap Index, is recognized as a Top 200 Community Bank, ranked number 43 in the U.S. by US Banker Magazine, and has received the highest five star rating from Bauer Financial for more than ten years ( www.bauerfinancial.com). Celebrating its 21st anniversary in 2011, Bank of Marin has been recognized 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.

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, estimated fair values related to the assets acquired and liabilities assumed of the former Charter Oak Bank, general economic conditions, the economic downturn in the United States and abroad, changes in interest rates, deposit flows, real estate values, 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.

1 Federal Deposit Insurance Corporation

2 Federal Home Loan Bank of San Francisco

3 Purchase Credit Impaired Loans
           
BANK OF MARIN BANCORP
FINANCIAL HIGHLIGHTS
Year To Year Comparison
September 30, 2011
(dollars in thousands, except per share data; unaudited)
   

THIRD QUARTER

QTD 2011

QTD 2010

CHANGE

% CHANGE
 
NET INCOME $4,233 $3,359 $874 26.0 %
DILUTED EARNINGS PER COMMON SHARE $0.79 $0.63 $0.16 25.4 %
RETURN ON AVERAGE ASSETS (ROA) 1.23 % 1.10 % 0.13 % 11.8 %
RETURN ON AVERAGE EQUITY (ROE) 12.78 % 11.32 % 1.46 % 12.9 %
EFFICIENCY RATIO 56.13 % 55.70 % 0.43 % 0.8 %
TAX-EQUIVALENT NET INTEREST MARGIN 1 4.76 % 4.88 % (0.12 %) (2.5 %)
NET CHARGE-OFFS $1,196 $1,150 $46 4.0 %
NET CHARGE-OFFS TO AVERAGE LOANS 0.12 % 0.12 % 0.00 % 0.0 %
 

YEAR-TO-DATE

YTD 2011

YTD 2010

CHANGE

% CHANGE
 
NET INCOME $12,181 $9,644 $2,537 26.3 %
DILUTED EARNINGS PER COMMON SHARE $2.26 $1.82 $0.44 24.2 %
RETURN ON AVERAGE ASSETS (ROA) 1.24 % 1.10 % 0.14 % 12.7 %
RETURN ON AVERAGE EQUITY (ROE) 12.74 % 11.27 % 1.47 % 13.0 %
EFFICIENCY RATIO 54.02 % 56.25 % (2.23 %) (4.0 %)
TAX-EQUIVALENT NET INTEREST MARGIN 1 5.25 % 4.96 % 0.29 % 5.8 %
NET CHARGE-OFFS $3,718 $2,895 $823 28.4 %
NET CHARGE-OFFS TO AVERAGE LOANS 0.38 % 0.31 % 0.07 % 22.6 %
 

AT PERIOD END

September 30, 2011

September 30, 2010

CHANGE

% CHANGE
 
TOTAL ASSETS $1,362,717 $1,219,214 $143,503 11.8 %
 
LOANS:
COMMERCIAL $172,389 $152,188 $20,201 13.3 %
REAL ESTATE
COMMERCIAL OWNER-OCCUPIED $160,558 $144,931 $15,627 10.8 %
COMMERCIAL INVESTOR-OWNED $420,427 $374,030 $46,397 12.4 %
CONSTRUCTION $54,806 $82,581 ($27,775 ) (33.6 %)
HOME EQUITY $97,323 $89,052 $8,271 9.3 %
OTHER RESIDENTIAL $63,850 $67,914 ($4,064 ) (6.0 %)
INSTALLMENT AND OTHER CONSUMER LOANS $23,290 $27,438 ($4,148 ) (15.1 %)
TOTAL LOANS $992,643 $938,134 $54,509 5.8 %
 
NON-PERFORMING LOANS 2 :
COMMERCIAL $3,147 $1,562 $1,585 101.5 %
REAL ESTATE
COMMERCIAL OWNER-OCCUPIED $2,169 $3,388 ($1,219 ) (36.0 %)
CONSTRUCTION $3,028 $4,955 ($1,927 ) (38.9 %)
HOME EQUITY $583 $150 $433 288.7 %
OTHER RESIDENTIAL $1,400 $150 $1,250 833.3 %
INSTALLMENT AND OTHER CONSUMER LOANS $413 $404 $9 2.2 %
TOTAL NON-PERFORMING LOANS $10,740 $10,609 $131 1.2 %
 
TOTAL ACCRUING LOANS 30-89 DAYS PAST DUE 3 $4,967 $4,636 $331 7.1 %
LOAN LOSS RESERVE TO LOANS 1.33 % 1.28 % 0.05 % 3.9 %
LOAN LOSS RESERVE TO NON-PERFORMING LOANS 1.23x 1.13x 0.10x 8.8 %
NON-PERFORMING LOANS TO TOTAL LOANS 1.08 % 1.13 % (0.05 %) (4.4 %)
TEXAS RATIO 4 7.52 % 8.23 % (0.71 %) (8.6 %)
 
TOTAL DEPOSITS $1,176,525 $1,023,278 $153,247 15.0 %
LOAN TO DEPOSIT RATIO 84.4 % 91.7 % (7.3 %) (8.0 %)
STOCKHOLDERS' EQUITY $133,001 $118,614 $14,387 12.1 %
BOOK VALUE PER SHARE $24.95 $22.56 $2.39 10.6 %
TANGIBLE COMMON EQUITY TO TANGIBLE ASSETS 5 9.71 % 9.73 % (0.02 %) (0.2 %)
TOTAL RISK BASED CAPITAL RATIO-BANK 6 13.0 % 12.5 % 0.5 % 4.0 %
TOTAL RISK BASED CAPITAL RATIO-BANCORP 6 13.3 % 12.9 % 0.4 % 3.1 %
 

1 Net interest income is annualized by dividing actual number of days in the period times 360 days.
2 Excludes purchased-credit impaired (PCI) loans with a carrying value of $3.9 million that are accreting interest at September 30, 2011 and zero at September 30, 2010. These amounts are excluded as PCI loan accretable yield interest recognition is independent from the underlying contractual loan delinquency status.
3 Excludes purchased-credit impaired loans.
4 (Non-performing assets + 90 day delinquent loans)/(tangible common equity + allowance for loan losses).
5 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 $695 thousand at September 30, 2011 and zero at September 30, 2010.
6 Current period estimated.
                   
BANK OF MARIN BANCORP
CONSOLIDATED STATEMENTS OF CONDITION
at September 30, 2011, June 30, 2011 and September 30, 2010
           
(in thousands, except share data; unaudited)     September 30, 2011     June 30, 2011     September 30, 2010
 
Assets
Cash and due from banks $ 130,675 $ 88,043 $ 73,546
Short-term investments     2,111     22,116     24,208
Cash and cash equivalents 132,786 110,159 97,754
 
Investment securities
Held to maturity, at amortized cost 39,077 35,514 29,809

Available for sale (at fair value; amortized cost $156,531, $164,371 and $114,625 at September 30, 2011, June 30, 2011, and September 30, 2010, respectively)
 
    159,478     167,406     118,113
Total investment securities 198,555 202,920 147,922
 
Loans, net of allowance for loan losses of $13,224, $13,920 and $12,023 at September 30, 2011, June 30, 2011 and September 30, 2010, respectively
 
979,419 972,714 926,111
Bank premises and equipment, net 9,624 9,280 8,584
Interest receivable and other assets     42,333     42,320     38,843
 
Total assets     $ 1,362,717     $ 1,337,393     $ 1,219,214
 
Liabilities and Stockholders' Equity
 
Liabilities
Deposits
Non-interest bearing $ 373,844 $ 346,317 $ 276,320
Interest bearing
Transaction accounts 128,916 133,429 99,367
Savings accounts 74,392 72,458 52,991
Money market accounts 417,505 403,782 392,381
CDARS® time accounts 32,592 31,674 70,661
Other time accounts     149,276     151,246     131,558
Total deposits 1,176,525 1,138,906 1,023,278
 
Federal Home Loan Bank borrowings 35,000 55,000 55,000
Subordinated debenture 5,000 5,000 5,000
Interest payable and other liabilities     13,191     9,429     17,322
 
Total liabilities     1,229,716     1,208,335     1,100,600
 
Stockholders' Equity
Preferred stock, no par value, $1,000 per share liquidation preference
Authorized - 5,000,000 shares; none issued --- --- ---
Common stock, no par value
Authorized - 15,000,000 shares
Issued and outstanding - 5,331,368 shares, 5,321,227 shares and 5,258,487 shares at September 30, 2011, June 30, 2011 and September 30, 2010, respectively
 
56,670 56,265 54,664
Retained earnings 74,622 71,241 61,927
Accumulated other comprehensive income, net     1,709     1,552     2,023
 
Total stockholders' equity     133,001     129,058     118,614
 
Total liabilities and stockholders' equity     $ 1,362,717     $ 1,337,393     $ 1,219,214
                                         
BANK OF MARIN BANCORP
CONSOLIDATED STATEMENTS OF INCOME
      Three months ended           Nine months ended
(in thousands, unaudited)       Sept. 30, 2011     June 30, 2011     Sept. 30, 2010           Sept. 30, 2011     Sept. 30, 2010
           
Interest income
Interest and fees on loans $ 15,567 $ 16,862 $ 14,296 $ 48,329 $ 42,146
Interest on investment securities
Securities on U.S. Government agencies 1,153 745 829 2,631 2,442
Obligations of state and political subdivisions 298 303 284 903 855
Corporate debt securities and other 151 171 144 433 452
Interest on Federal funds sold and short-term investments         56       56       48               152       98
Total interest income 17,225 18,137 15,601 52,448 45,993
 
Interest expense
Interest on interest-bearing transaction accounts 35 48 32 121 81
Interest on savings accounts 21 25 27 75 79
Interest on money market accounts 326 341 602 1,004 2,128
Interest on CDARS® time accounts 50 48 221 192 663
Interest on other time accounts 305 315 391 978 1,122
Interest on borrowed funds         1,268       357       363               1,977       1,070
Total interest expense         2,005       1,134       1,636               4,347       5,143
 
Net interest income 15,220 17,003 13,965 48,101 40,850
Provision for loan losses         500       3,000       1,400               4,550       4,300
Net interest income after provision for loan losses         14,720       14,003       12,565               43,551       36,550
 
Non-interest income
Service charges on deposit accounts 478 468 446 1,389 1,355
Wealth Management and Trust Services 486 469 364 1,389 1,127
Other income         601       644       497               1,967       1,679
Total non-interest income         1,565       1,581       1,307               4,745       4,161
 
Non-interest expense
Salaries and related benefits 5,320 5,220 4,665 15,469 13,832
Occupancy and equipment 1,021 1,093 880 3,021 2,692
Depreciation and amortization 329 314 335 951 1,033
FDIC insurance 189 214 388 790 1,125
Data processing 642 909 491 2,133 1,422
Professional services 465 740 550 1,938 1,436
Other expense         1,455       1,508       1,198               4,247       3,780
Total non-interest expense         9,421       9,998       8,507               28,549       25,320
Income before provision for income taxes 6,864 5,586 5,365 19,747 15,391
 
Provision for income taxes         2,631       2,147       2,006               7,566       5,747
Net income       $ 4,233     $ 3,439     $ 3,359             $ 12,181     $ 9,644
 
 
Net income per common share:
Basic $ 0.80 $ 0.65 $ 0.64 $ 2.30 $ 1.84
Diluted $ 0.79 $ 0.64 $ 0.63 $ 2.26 $ 1.82
 
Weighted average shares used to compute
net income per common share:
Basic 5,310 5,300 5,241 5,298 5,231
Diluted 5,390 5,385 5,311 5,381 5,305
 
Dividends declared per common share $ 0.16 $ 0.16 $ 0.15 $ 0.48 $ 0.45
 
Average Statements of Condition and Analysis of Net Interest Income
                                               
Three months ended Three months ended Three months ended
September 30, 2011         June 30, 2011         September 30, 2010
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) $ 94,153 $ 56 0.23% $ 89,952 $ 56 0.25% $ 65,461 $ 48 0.29%
Investment securities
U.S. Government agencies (2) 142,459 1,153 3.24% 117,057 745 2.55% 94,255 829 3.52%
Corporate CMOs and other (2) 18,053 151 3.35% 16,401 171 4.17% 12,333 144 4.67%
Obligations of state and political subdivisions (3) 35,064 449 5.12% 34,986 460 5.26% 30,068 431 5.73%
Loans and banker's acceptances (1) (3) (4)           982,165       15,676     6.25%           979,550       16,955     6.85%           935,116       14,374     6.01%
Total interest-earning assets (1) 1,271,894 17,485 5.38% 1,237,946 18,387 5.88% 1,137,233 15,826 5.45%
Cash and non-interest-bearing due from banks 46,799 45,133 34,464
Bank premises and equipment, net 9,484 8,971 8,524
Interest receivable and other assets, net           32,825                       38,391                       32,056            
Total assets         $ 1,361,002                     $ 1,330,441                     $ 1,212,277            
Liabilities and Stockholders' Equity
Interest-bearing transaction accounts $ 129,862 $ 35 0.11% $ 127,544 $ 48 0.15% $ 102,982 $ 32 0.12%
Savings accounts 72,288 21 0.12% 69,357 25 0.14% 52,091 27 0.21%
Money market accounts 413,186 326 0.31% 395,159 341 0.35% 388,549 602 0.61%
CDARS® time accounts 32,139 50 0.62% 31,879 48 0.60% 78,318 221 1.12%
Other time accounts 150,199 305 0.81% 156,008 315 0.81% 130,276 391 1.19%
FHLB fixed-rate advances 52,391 1,232 9.33% 55,000 320 2.33% 55,000 323 2.33%
Subordinated debenture (1)           5,000       36     2.82%           5,000       37     2.93%           5,000       40     3.13%
Total interest-bearing liabilities 855,065 2,005 0.93% 839,947 1,134 0.54% 812,216 1,636 0.80%
Demand accounts 364,502 346,469 271,591
Interest payable and other liabilities 10,035 16,062 10,744
Stockholders' equity           131,400                       127,963                       117,726            
Total liabilities & stockholders' equity         $ 1,361,002                     $ 1,330,441                     $ 1,212,277            
Tax-equivalent net interest income/margin (1)               $ 15,480     4.76%               $ 17,253     5.51%               $ 14,190     4.88%
Reported net interest income/margin (1)               $ 15,220     4.68%               $ 17,003     5.43%               $ 13,965     4.81%
Tax-equivalent net interest rate spread                     4.45%                     5.34%                     4.65%
             
Nine months ended Nine months ended
September 30, 2011         September 30, 2010
    Interest         Interest    
Average Income/ Yield/ Average Income/ Yield/
(Dollars in thousands; unaudited)       Balance     Expense     Rate         Balance     Expense     Rate
Assets
Interest-bearing due from banks (1) $ 81,609 $ 152 0.25% $ 37,292 $ 96 0.34%
Federal funds sold 86 --- 0.01% 4,076 2 0.06%
Investment securities
U.S. Government agencies (2) 117,413 2,631 2.99% 90,507 2,442 3.60%
Corporate CMOs and other (2) 16,783 433 3.44% 13,017 452 4.63%
Obligations of state and political subdivisions (3) 34,984 1,370 5.22% 30,265 1,298 5.98%
Loans and banker's acceptances (1) (3) (4)         975,548       48,621     6.57%           928,807       42,358     5.49%
Total interest-earning assets (1) 1,226,423 53,207 5.72% 1,103,964 46,648 5.57%
Cash and non-interest-bearing due from banks 44,684 33,648
Bank premises and equipment, net 8,977 8,167
Interest receivable and other assets, net         34,136                       30,964            
Total assets       $ 1,314,220                     $ 1,176,743            
Liabilities and Stockholders' Equity
Interest-bearing transaction accounts $ 123,436 $ 121 0.13% $ 96,837 $ 81 0.11%
Savings accounts 67,963 75 0.15% 50,551 79 0.21%
Money market accounts 396,626 1,004 0.34% 394,084 2,128 0.72%
CDARS® time accounts 39,402 192 0.65% 71,762 663 1.24%
Other time accounts 151,612 978 0.86% 122,126 1,122 1.23%
FHLB borrowings 54,683 1,868 4.57% 55,000 958 2.33%
Subordinated debenture (1)         5,000       109     2.87%           5,000       112     2.95%
Total interest-bearing liabilities 838,722 4,347 0.69% 795,360 5,143 0.86%
Demand accounts 334,747 257,736
Interest payable and other liabilities 12,904 9,208
Stockholders' equity         127,847                       114,439            
Total liabilities & stockholders' equity       $ 1,314,220                     $ 1,176,743            
Tax-equivalent net interest income/margin (1)             $ 48,860     5.25%               $ 41,505     4.96%
Reported net interest income/margin (1)             $ 48,101     5.17%               $ 40,850     4.88%
Tax-equivalent net interest rate spread                   5.03%                     4.71%
 
(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.
(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.

Copyright Business Wire 2010

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