Bank Of Marin Bancorp Reports Record Annual Earnings Of $15.6 Million

Bank of Marin Bancorp (“Bancorp”, NASDAQ: BMRC) announces 2011 annual earnings of $15.6 million, an increase of $2.0 million, or 14.8%, from $13.6 million a year ago. Earnings per share for the year ended December 31, 2011 totaled $2.89 on a diluted basis, up $0.34 from $2.55 in the prior year. 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”).

Earnings for the fourth quarter of 2011 totaled $3.4 million compared to $3.9 million in the fourth quarter of 2010. Diluted earnings per share for the fourth quarter of 2011 totaled $0.63 compared to $0.73 in the fourth quarter of 2010.

“We are pleased to report record earnings and strong loan growth this year driven by our Napa and San Francisco markets,” said Russell A. Colombo, Chief Executive Officer. “In this environment, we are encouraged by the lending relationships we are building in new and core markets, which should position us well for future growth.”

Bancorp also provides the following highlights on its operating and financial performance for the year and fourth quarter of 2011:
  • Fourth-quarter 2011 earnings include a pre-tax $683 thousand write-off of the Napa core deposit intangible asset (included in other expense), primarily due to a significant decline in alternative funding costs since the Acquisition. This write-off reduced diluted earnings per share by 7 cents in the fourth quarter and year ended December 31, 2011.
  • Fourth-quarter 2011 earnings reflect a $2.5 million provision for loan losses, an increase of $1.5 million from the same quarter a year ago. The increase primarily represents the provision for loan losses on acquired loans, as well as an increase in general reserves related to loan growth.
  • Total loans grew $89.8 million, or 9.5% in 2011, primarily due to the loans acquired in Napa and growth in the San Francisco market. In the fourth quarter loans grew $38.5 million, or 3.9%, primarily in the Marin and San Francisco markets.
  • Total deposits grew $187.2 million, or 18.4%, over a year ago, with non-interest bearing deposits growing $77.4 million or 27.4%. Non-interest bearing deposits totaled 29.9% of deposits at December 31, 2011, compared to 27.8% at December 31, 2010.
  • Credit quality remains solid with non-performing loans at 1.16% of total loans, down from 1.37% a year ago. The loan loss reserve as a percentage of non-performing loans totaled 122% at December 31st, compared to 96% a year ago.
  • On January 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 February 1, 2012 and will be payable on February 10, 2012.

Loans and Credit Quality

The loan portfolio reached $1.0 billion at December 31, 2011, representing an increase of $89.8 million, or 9.5%, over December 31, 2010. The increase reflects $61.8 million of loans purchased at fair value without loss share as part of the Acquisition, as well as growth in the Bank’s commercial real estate, commercial and industrial, and home equity portfolios, partially offset by a decreased emphasis on certain product lines, including construction and other residential lending.

Non-performing loans totaled $12.0 million or 1.16% of Bancorp’s loan portfolio at December 31, 2011, compared to $10.7 million or 1.08% at September 30, 2011 and $12.9 million, or 1.37%, a year ago. Accruing loans past due 30 to 89 days totaled $7.4 million at December 31, 2011, compared to $5.0 million at September 30, 2011 and $352 thousand a year ago.

“We continue to realize the benefit of our consistent, disciplined, and proactive approach to managing loans, resulting in a high quality portfolio,” said Kevin Coonan, Chief Credit Officer. “We focus on strong underwriting practices and active account management to maintain our strong credit quality, which protects our customers, shareholders and the overall health of the Bank.”

Non-performing loans exclude certain PCI 2 loans from the Acquisition that are accreting interest. PCI loans totaled $6.0 million at December 31, 2011 (including loans totaling $3.4 million that are accreting interest), compared to $6.5 million at September 30, 2011, and $9.4 million at the Acquisition. The decline reflects the Bank’s conscious efforts in resolving problem loans.

The provision for loan losses totaled $7.1 million and $5.4 million in 2011 and 2010, respectively. The increase in the provision for loan losses is primarily driven by $2.3 million of loan loss provision related to the acquired loans, where credit quality has deteriorated since the Acquisition. The allowance for loan losses of $14.6 million totaled 1.42% of loans at December 31, 2011, compared to 1.33% and 1.32% at September 30, 2011 and December 31, 2010, respectively. Net charge-offs in 2011 totaled $4.8 million compared to $3.6 million in the prior year. The increase in net charge-offs primarily relates to $1.5 million of charge-offs related to the acquired loans.

Bancorp’s loan loss provision totaled $2.5 million in the fourth quarter of 2011, compared to $500 thousand in the prior quarter. This increase primarily reflects a higher level of specific reserves on Bank of Marin-originated commercial and industrial loans, as well as personal loans. In addition, the increase reflects newly identified reserves on acquired loans and an increase in general reserves relating to loan growth. The loan loss provision increased $1.5 million from the fourth quarter of 2010, which is primarily related to the provision for loan losses on acquired loans, as well as an increase in general reserves related to loan growth. Net charge-offs in the fourth quarter of 2011 totaled $1.1 million, compared to $1.2 million in the prior quarter and $682 thousand in the same quarter a year ago.

Deposits

Total deposits grew $187.2 million, or 18.4%, from a year ago to $1.2 billion at December 31, 2011. The higher level of deposits reflects growth in most deposit categories, except for CDARS® time deposits, which decreased $20.6 million. Non-interest bearing deposits comprised 29.9% of total deposits at December 31, 2011, compared to 31.8% at September 30, 2011 and 27.8% a year ago.

“The significant increase in deposits we’ve seen this year, particularly core deposits, is an indication of the strength of our customer relationships,” said Christina Cook, Chief Financial Officer. “As a local community bank, our goal is to provide the highest level of personalized service across all the markets we serve.”

Earnings

The acquired operations of the former Charter Oak Bank contributed approximately $3.2 million to Bancorp’s pre-tax 2011 income, including $2.9 million of accretion on purchased non-credit impaired loans, $2.3 million in loan loss provision, $1.9 million of gains recognized in interest income on pay-offs of PCI loans, $1.0 million in Acquisition-related third-party costs, $683 thousand impairment write-off of the core deposit intangible asset (discussed previously) and $146 thousand in pre-tax bargain purchase gain. The acquired operations of the former Charter Oak Bank reduced Bancorp’s pre-tax fourth-quarter income by approximately $769 thousand, including $1.3 million in loan loss provision, $683 thousand impairment write-off of the core deposit intangible asset, $241 thousand of accretion on purchased non-credit impaired loans and $208 thousand of gains recognized in interest income on pay-offs of PCI loans. 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 5.13% in 2011 compared to 4.95% in 2010. The net interest income for 2011 totaled $63.8 million, representing an increase of $8.9 million, or 16.2%, from 2010. 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 $924 thousand pre-payment penalty on the FHLB advance in the third quarter of 2011.

The tax-equivalent net interest margin was 4.79% in the fourth quarter of 2011, compared to 4.76% in the prior quarter and 4.92% in the same quarter last year. Net interest income totaled $15.7 million in the fourth quarter of 2011, an increase of $498 thousand, or 3.3%, from the prior quarter, and an increase of $1.7 million, or 11.8% from the same quarter last year. The increase from the fourth quarter of 2010 primarily reflects the effect of the Acquisition of loans from the former Charter Oak Bank and a reduction in the cost of deposits due to the low interest rate environment.

The 2011 non-interest income totaled $6.3 million, an increase of $748 thousand, or 13.5%, from last year. The increase from last year relates to higher Wealth Management and Trust Services fee income, higher ATM and debit card interchange fee income (due to a higher level of customers and activity) and the pre-tax bargain purchase gain of $146 thousand from the Acquisition. Non-interest income in the fourth quarter of 2011 totaled $1.5 million, compared to $1.4 million in the same period last year, and remained relatively unchanged from the prior quarter.

Non-interest expense totaled $38.3 million and $33.4 million in 2011 and 2010, respectively, representing a $4.9 million or 14.8% increase. The increase primarily reflects higher personnel and occupancy costs associated with branch expansion, approximately $1.0 million of one-time Acquisition-related third-party costs, $725 thousand of impairment and amortization of the core deposit intangible asset, as well as higher data processing and marketing costs, partially offset by lower FDIC insurance expense.

Non-interest expense totaled $9.7 million in the fourth quarter of 2011, an increase of $313 thousand, or 3.3%, from the prior quarter, primarily due to the write-off of the core deposit intangible asset, partially offset by lower personnel costs. Non-interest expense increased $1.7 million, or 21.1% from the same quarter a year ago, primarily due to $725 thousand of impairment and amortization of the core deposit intangible asset, higher personnel and occupancy costs associated with branch expansion and higher marketing costs, partially offset by lower FDIC insurance expense due to a change in the FDIC assessment base.

About Bank of Marin Bancorp

Bank of Marin, as the sole subsidiary of Bank of Marin Bancorp, 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 of $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.

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 Purchased Credit-Impaired Loans
BANK OF MARIN BANCORP
FINANCIAL HIGHLIGHTS
Year To Year Comparison
December 31, 2011
(dollars in thousands, except per share data; unaudited)        
 

FOURTH QUARTER

QTD 2011

QTD 2010

CHANGE

% CHANGE
 
NET INCOME $3,383 $3,908 ($525) (13.4%)
DILUTED EARNINGS PER COMMON SHARE $0.63 $0.73 ($0.10) (13.7%)
RETURN ON AVERAGE ASSETS (ROA) 0.96% 1.28% (0.32%) (25.0%)
RETURN ON AVERAGE EQUITY (ROE) 9.97% 12.81% (2.84%) (22.2%)
EFFICIENCY RATIO 56.46% 52.12% 4.34% 8.3%
TAX-EQUIVALENT NET INTEREST MARGIN 1 4.79% 4.92% (0.13%) (2.6%)
NET CHARGE-OFFS $1,085 $682 $403 59.1%
NET CHARGE-OFFS TO AVERAGE LOANS 0.11% 0.07% 0.04% 57.1%
 

YEAR-TO-DATE

YTD 2011

YTD 2010

CHANGE

% CHANGE
 
NET INCOME $15,564 $13,552 $2,012 14.8%
DILUTED EARNINGS PER COMMON SHARE $2.89 $2.55 $0.34 13.3%
RETURN ON AVERAGE ASSETS (ROA) 1.16% 1.14% 0.02% 1.8%
RETURN ON AVERAGE EQUITY (ROE) 12.01% 11.67% 0.34% 2.9%
EFFICIENCY RATIO 54.62% 55.20% (0.58%) (1.1%)
TAX-EQUIVALENT NET INTEREST MARGIN 1 5.13% 4.95% 0.18% 3.6%
NET CHARGE-OFFS $4,803 $3,577 $1,226 34.3%
NET CHARGE-OFFS TO AVERAGE LOANS 0.49% 0.38% 0.11% 28.9%
 

AT PERIOD END

December 31, 2011

December 31, 2010

CHANGE

% CHANGE
 
TOTAL ASSETS $1,393,263 $1,208,150 $185,113 15.3%
 
LOANS:
COMMERCIAL AND INDUSTRIAL $175,790 $153,836 $21,954 14.3%
REAL ESTATE
COMMERCIAL OWNER-OCCUPIED $174,705 $142,590 $32,115 22.5%
COMMERCIAL INVESTOR-OWNED $446,425 $383,553 $62,872 16.4%
CONSTRUCTION $51,957 $77,619 ($25,662) (33.1%)
HOME EQUITY $98,043 $86,932 $11,111 12.8%
OTHER RESIDENTIAL $61,502 $69,991 ($8,489) (12.1%)
INSTALLMENT AND OTHER CONSUMER LOANS $22,732 $26,879 ($4,147) (15.4%)
TOTAL LOANS $1,031,154 $941,400 $89,754 9.5%
 
NON-PERFORMING LOANS 2:
COMMERCIAL $2,955 $2,486 $469 18.9%
REAL ESTATE
COMMERCIAL OWNER-OCCUPIED $2,033 $632 $1,401 221.7%
COMMERCIAL INVESTOR $741 $0 $741 NM
CONSTRUCTION $3,014 $9,297 ($6,283) (67.6%)
HOME EQUITY $766 $0 $766 NM
OTHER RESIDENTIAL $1,942 $148 $1,794 1212.2%
INSTALLMENT AND OTHER CONSUMER LOANS $519 $362 $157 43.4%
TOTAL NON-PERFORMING LOANS $11,970 $12,925 ($955) (7.4%)
 
TOTAL ACCRUING LOANS 30-89 DAYS PAST DUE $7,382 $352 $7,030 1997.2%
LOAN LOSS RESERVE TO LOANS 1.42% 1.32% 0.10% 7.6%
LOAN LOSS RESERVE TO NON-PERFORMING LOANS 1.22x 0.96x 0.26x 27.1%
NON-PERFORMING LOANS TO TOTAL LOANS 1.16% 1.37% (0.21%) (15.3%)
TEXAS RATIO 3 7.99% 9.72% (1.73%) (17.8%)
 
TOTAL DEPOSITS $1,202,972 $1,015,739 $187,233 18.4%
LOAN TO DEPOSIT RATIO 85.7% 92.7% (7.0%) (7.6%)
STOCKHOLDERS' EQUITY $135,551 $121,920 $13,631 11.2%
BOOK VALUE PER SHARE $25.40 $23.05 $2.35 10.2%
TANGIBLE COMMON EQUITY TO TANGIBLE ASSETS 4 9.73% 10.09% (0.36%) (3.6%)
TOTAL RISK BASED CAPITAL RATIO-BANK 5 12.9% 12.7% 0.2% 1.6%
TOTAL RISK BASED CAPITAL RATIO-BANCORP 5 13.1% 13.3% (0.2%) (1.5%)
 

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 $6.3 million and $1.2 million at December 31, 2011 and 2010, respectively. Excludes purchased credit-impaired (PCI) loans with a carrying value of $3.4 million that are accreting interest at December 31, 2011 and zero at December 31, 2010. These amounts are excluded as PCI loan accretable yield interest recognition is independent from the underlying contractual loan delinquency status.

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.

5 Current period estimated.
 
 
BANK OF MARIN BANCORP
CONSOLIDATED STATEMENTS OF CONDITION
at December 31, 2011, September 30, 2011 and December 31, 2010
     
(in thousands, except share data; unaudited)   December 31, 2011   September 30, 2011   December 31, 2010
 
Assets
Cash and due from banks $ 127,732 $ 130,675 $ 65,724
Short-term investments     2,011     2,111     19,508
Cash and cash equivalents 129,743 132,786 85,232
 
Investment securities
Held to maturity, at amortized cost 59,738 39,077 34,917

Available for sale (at fair value; amortized cost $132,348, $156,531 and $109,070 at December 31, 2011, September 30, 2011, and December 31, 2010, respectively)
    135,104     159,478     111,736
Total investment securities 194,842 198,555 146,653
 

Loans, net of allowance for loan losses of $14,639, $13,224 and $12,392 at December 31, 2011, September 30, 2011 and December 31, 2010, respectively
1,016,515 979,419 929,008
Bank premises and equipment, net 9,498 9,624 8,419
Interest receivable and other assets     42,665     42,333     38,838
 
Total assets   $ 1,393,263   $ 1,362,717   $ 1,208,150
 
Liabilities and Stockholders' Equity
 
Liabilities
Deposits
Non-interest bearing $ 359,591 $ 373,844 $ 282,195
Interest bearing
Transaction accounts 134,673 128,916 105,177
Savings accounts 75,617 74,392 56,760
Money market accounts 434,461 417,505 371,352
CDARS® time accounts 46,630 32,592 67,261
Other time accounts     152,000     149,276     132,994
Total deposits 1,202,972 1,176,525 1,015,739
 
Federal Home Loan Bank borrowings 35,000 35,000 55,000
Subordinated debenture 5,000 5,000 5,000
Interest payable and other liabilities     14,740     13,191     10,491
 
Total liabilities     1,257,712     1,229,716     1,086,230
 
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 - 5,336,927 shares, 5,331,368 shares and 5,290,082 shares at December 31, 2011, September 30, 2011 and December 31, 2010, respectively
56,854 56,670 55,383
Retained earnings 77,098 74,622 64,991
Accumulated other comprehensive income, net     1,599     1,709     1,546
 
Total stockholders' equity     135,551     133,001     121,920
 
Total liabilities and stockholders' equity   $ 1,393,263   $ 1,362,717   $ 1,208,150
 
 
BANK OF MARIN BANCORP
CONSOLIDATED STATEMENTS OF INCOME
 
  Three months ended   Twelve months ended
(in thousands, unaudited)  

December. 31,2011
 

September. 30,2011
 

December. 31,2010
 

December. 31,2011
 

December. 31,2010
     
Interest income
Interest and fees on loans $ 15,150 $ 15,567 $ 14,093 $ 63,479 $ 56,239
Interest on investment securities
Securities on U.S. Government agencies 847 1,153 792 3,478 3,234
Obligations of state and political subdivisions 396 298 291 1,299 1,146
Corporate debt securities and other 203 151 141 636 593
Interest on Federal funds sold and short-term investments     70     56     47   222     145
Total interest income 16,666 17,225 15,364 69,114 61,357
 
Interest expense
Interest on interest-bearing transaction accounts 30 35 29 151 110
Interest on savings accounts 23 21 25 98 104
Interest on money market accounts 282 326 339 1,286 2,467
Interest on CDARS® time accounts 45 50 179 237 842
Interest on other time accounts 336 305 373 1,314 1,495
Interest on borrowed funds     232     1,268     360   2,209     1,430
Total interest expense     948     2,005     1,305   5,295     6,448
 
Net interest income 15,718 15,220 14,059 63,819 54,909
Provision for loan losses     2,500     500     1,050   7,050     5,350
Net interest income after provision for loan losses     13,218     14,720     13,009   56,769     49,559
 
Non-interest income
Service charges on deposit accounts 447 478 442 1,836 1,797
Wealth Management and Trust Services 445 486 394 1,834 1,521
Other income     632     601     524   2,599     2,203
Total non-interest income     1,524     1,565     1,360   6,269     5,521
 
Non-interest expense
Salaries and related benefits 4,742 5,320 4,408 20,211 18,240
Occupancy and equipment 981 1,021 884 4,002 3,576
Depreciation and amortization 342 329 311 1,293 1,344
FDIC insurance 210 189 381 1,000 1,506
Data processing 557 642 494 2,690 1,916
Professional services 561 465 481 2,499 1,917
Other expense     2,341     1,455     1,078   6,588     4,858
Total non-interest expense     9,734     9,421     8,037   38,283     33,357
Income before provision for income taxes 5,008 6,864 6,332 24,755 21,723
 
Provision for income taxes     1,625     2,631     2,424   9,191     8,171
Net income   $ 3,383   $ 4,233   $ 3,908 $ 15,564   $ 13,552
 
Net income per common share:
Basic $ 0.64 $ 0.80 $ 0.74 $ 2.94 $ 2.59
Diluted $ 0.63 $ 0.79 $ 0.73 $ 2.89 $ 2.55
 

Weighted average shares used to compute net income per common share:
Basic 5,313 5,310 5,259 5,302 5,238
Diluted 5,394 5,390 5,342 5,384 5,314
 
Dividends declared per common share $ 0.17 $ 0.16 $ 0.16 $ 0.65 $ 0.61
 
 
Average Statements of Condition and Analysis of Net Interest Income
                 
Three months ended Three months ended Three months ended
December 31, 2011   September 30, 2011   December 31, 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) $ 104,190 $ 70 0.26 % $ 94,153 $ 56 0.23 % $ 60,050 $ 47 0.31 %
Investment securities
U.S. Government agencies (2) 128,143 847 2.64 % 142,459 1,153 3.24 % 95,910 792 3.30 %
Corporate CMOs and other (2) 18,632 203 4.36 % 18,053 151 3.35 % 15,628 141 3.61 %
Obligations of state and political subdivisions (3) 47,758 566 4.74 % 35,064 449 5.12 % 32,756 443 5.41 %
Loans and banker's acceptances (1) (3) (4)     1,009,916     15,289   5.92 %     982,165     15,676   6.25 %     932,570     14,184   5.95 %
Total interest-earning assets (1) 1,308,639 16,975 5.08 % 1,271,894 17,485 5.38 % 1,136,914 15,607 5.37 %
Cash and non-interest-bearing due from banks 52,574 46,799 36,567
Bank premises and equipment, net 9,610 9,484 8,531
Interest receivable and other assets, net     34,324                 32,825                 32,144            
Total assets   $ 1,405,147               $ 1,361,002               $ 1,214,156            
Liabilities and Stockholders' Equity
Interest-bearing transaction accounts $ 130,894 $ 30 0.09 % $ 129,862 $ 35 0.11 % $ 102,117 $ 29 0.11 %
Savings accounts 75,217 23 0.12 % 72,288 21 0.12 % 55,259 25 0.18 %
Money market accounts 432,728 282 0.26 % 413,186 326 0.31 % 380,165 339 0.35 %
CDARS® time accounts 39,850 45 0.45 % 32,139 50 0.62 % 70,453 179 1.01 %
Other time accounts 152,619 336 0.87 % 150,199 305 0.81 % 132,062 373 1.12 %
FHLB fixed-rate advances 35,000 195 2.21 % 52,391 1,232 9.33 % 55,008 323 2.33 %
Subordinated debenture (1)     5,000     37   2.90 %     5,000     36   2.82 %     5,000     37   2.90 %
Total interest-bearing liabilities 871,308 948 0.43 % 855,065 2,005 0.93 % 800,064 1,305 0.65 %
Demand accounts 386,066 364,502 281,563
Interest payable and other liabilities 13,214 10,035 11,524
Stockholders' equity     134,559                 131,400                 121,005            
Total liabilities & stockholders' equity   $ 1,405,147               $ 1,361,002               $ 1,214,156            
Tax-equivalent net interest income/margin (1)         $ 16,027   4.79 %         $ 15,480   4.76 %         $ 14,302   4.92 %
Reported net interest income/margin (1)         $ 15,718   4.70 %         $ 15,220   4.68 %         $ 14,059   4.84 %
Tax-equivalent net interest rate spread               4.65 %               4.45 %               4.72 %
 
 
Twelve months ended Twelve months ended
December 31, 2011   December 31, 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) $ 87,365 $ 222 0.25 % $ 43,028 $ 143 0.33 %
Federal funds sold --- --- --- 3,049 2 0.07 %
Investment securities
U.S. Government agencies (2) 120,118 3,478 2.90 % 91,869 3,234 3.52 %
Corporate CMOs and other (2) 17,249 636 3.69 % 13,675 593 4.34 %
Obligations of state and political subdivisions (3) 38,204 1,935 5.06 % 30,893 1,741 5.64 %
Loans and banker's acceptances (1) (3) (4)     984,211     63,914   6.40 %     929,755     56,542   6.00 %
Total interest-earning assets (1) 1,247,147 70,185 5.55 % 1,112,269 62,255 5.52 %
Cash and non-interest-bearing due from banks 46,673 34,383
Bank premises and equipment, net 9,136 8,259
Interest receivable and other assets, net     34,183                 31,262            
Total assets   $ 1,337,139               $ 1,186,173            
Liabilities and Stockholders' Equity
Interest-bearing transaction accounts $ 125,316 $ 151 0.12 % $ 98,168 $ 110 0.11 %
Savings accounts 69,792 98 0.14 % 51,738 104 0.20 %
Money market accounts 405,726 1,286 0.32 % 390,575 2,467 0.63 %
CDARS® time accounts 39,514 237 0.60 % 71,432 842 1.18 %
Other time accounts 151,866 1,314 0.87 % 124,631 1,495 1.20 %
FHLB borrowings 49,722 2,062 4.15 % 55,002 1,281 2.33 %
Subordinated debenture (1)     5,000     147   2.90 %     5,000     149   2.94 %
Total interest-bearing liabilities 846,936 5,295 0.63 % 796,546 6,448 0.81 %
Demand accounts 347,682 263,742
Interest payable and other liabilities 12,983 9,791
Stockholders' equity     129,538                 116,094            
Total liabilities & stockholders' equity   $ 1,337,139               $ 1,186,173            
Tax-equivalent net interest income/margin (1)         $ 64,890   5.13 %         $ 55,807   4.95 %
Reported net interest income/margin (1)         $ 63,819   5.05 %         $ 54,909   4.87 %
Tax-equivalent net interest rate spread               4.92 %               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. 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.

Copyright Business Wire 2010

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