Bank Of Marin Bancorp Reports Record Annual Earnings

Bank of Marin Bancorp, "Bancorp" (NASDAQ: BMRC), parent company of Bank of Marin, announced earnings for the quarter ended December 31, 2012 of $4.7 million, an increase of $1.5 million, or 45.8% from $3.2 million in the third quarter of 2012, and an increase of $1.3 million, or 39.0% from $3.4 million in the fourth quarter of 2011. Diluted earnings per share totaled $0.86 in the fourth quarter of 2012, up $0.27, or 45.8% from $0.59 in the prior quarter, and up $0.23, or 36.5% from $0.63 in the same quarter a year ago. Earnings for the fourth quarter of 2012 reflect a $1.0 million pre-tax gain on the pay-off of a purchased-credit impaired ("PCI") loan. This gain increased fourth quarter diluted earnings per share by 12 cents on an after-tax basis.

2012 record annual earnings totaled $17.8 million, an increase of $2.3 million, or 14.5%, from $15.6 million a year ago. Diluted earnings per share for the year ended December 31, 2012 totaled $3.28, up $0.39, or 13.5%, from $2.89 in the prior year.

“The Bank's overall strong performance demonstrates the solid relationships we have built with customers while also maintaining our high credit quality standards," said Russell A. Colombo, President and Chief Executive Officer. "Our robust loan growth in the fourth quarter reflects our continued focus on business development to build the loan portfolio."

Bancorp also provided the following highlights on its operating and financial performance for the fourth quarter and year ended December 31, 2012:
  • Loan growth in the fourth quarter of 2012 totaled $60.2 million, or 5.9%, primarily due to investor-owned commercial real estate loan originations in the Marin and San Francisco markets. Gross loans totaled $1.1 billion at December 31, 2012.
  • Credit quality remains solid with non-performing loans at 1.64% of total loans, down from 1.90% in the prior quarter. Accruing loans past due 30 to 89 days decreased from $2.1 million in the prior quarter to $588 thousand at December 31, 2012.
  • Deposits increased $50.3 million, or 4.2% in 2012 to $1.3 billion, reflecting a favorable shift in the deposit mix from higher-interest bearing time accounts to core deposits. Non-interest bearing deposits comprised 31.1% of total deposits at December 31, 2012.
  • In a conscious effort to deploy excess liquidity, Bancorp grew the investment portfolio by $52.1 million in the fourth quarter of 2012 and $98.6 million in the year ended December 31, 2012 (primarily investment-grade municipal securities and corporate bonds).
  • On January 17, 2013, the Board of Directors declared a quarterly cash dividend of $0.18 per share. The cash dividend is payable to shareholders of record at the close of business on February 1, 2013 and will be payable on February 15, 2013.

"By funding a significant volume of new loans, increasing security purchases, and strategically running off higher-cost, non-relationship deposit accounts, we reduced our excess liquidity and managed our net interest margin," said Christina Cook, Chief Financial Officer. "The strong lending effort also increased the loan-to-deposit ratio from last quarter, reflecting improved utilization of our funding sources."

Loans and Credit Quality

Gross loans totaled $1.1 billion at December 31, 2012 and increased $60.2 million, or 5.9% over last quarter, and increased $42.8 million, or 4.2% over a year ago. The uncertainty of the current economic environment makes the predictability of loan growth for the industry difficult going forward. Non-performing loans totaled $17.7 million, or 1.64%, of Bancorp's loan portfolio at December 31, 2012, compared to $19.2 million, or 1.90%, at September 30, 2012 and $12.0 million, or 1.16%, a year ago. The decrease in non-performing loans from the prior quarter includes a $3.0 million construction loan that was paid off as expected in November 2012, which had been placed on non-accrual status in the preceding quarter. Accruing loans past due 30 to 89 days totaled $588 thousand at December 31, 2012, down from $2.1 million at September 30, 2012 and $7.4 million a year ago.

The provision for loan losses totaled $700 thousand in the fourth quarter of 2012, compared to $2.1 million in the prior quarter and $2.5 million in the same quarter a year ago. The decreases in the fourth quarter of 2012 compared to the prior quarter and same quarter a year ago are primarily due to fewer newly identified problem loans that have significant credit loss exposure. The provision for loan loss totaled $2.9 million and $7.1 million in 2012 and 2011, respectively.

The allowance for loan losses totaled 1.27% of loans at December 31, 2012, compared to 1.30% at September 30, 2012 and 1.42% at December 31, 2011. The decline from the prior quarter end primarily relates to a shift in the mix of loans towards those that have a lower reserve factor. The decline from prior year primarily relates to current year charge-offs of specific reserves established in 2011. Net charge-offs in the fourth quarter of 2012 totaled $178 thousand, compared to $2.4 million in the prior quarter and $1.1 million in the fourth quarter of 2011. Net charge-offs in 2012 totaled $3.9 million compared to $4.8 million in the prior year.

Deposits

Deposits totaled $1.3 billion at both December 31, 2012 and September 30, 2012, and increased $50.3 million, or 4.2% from $1.2 billion at December 31, 2011. The increase in deposits from the prior year primarily reflects increases of $35.0 million in transaction accounts, $30.1 million in non-interest bearing accounts, $17.8 million in savings accounts and $9.3 million in money market accounts, partially offset by decreases of $30.9 million in CDARS ® time accounts and $10.9 million in other time accounts.

Earnings

Net interest income totaled $15.8 million in the fourth quarter of 2012, up from $14.9 million in the prior quarter and $15.7 million in the same quarter last year. The tax-equivalent net interest margin was 4.62%, 4.44% and 4.79% for those respective periods. The increase in the fourth quarter of 2012 compared to the prior quarter primarily relates to a $1.0 million gain on the pay-off of a purchased-credit impaired loan.

Net interest income totaled $63.2 million and $63.8 million in 2012 and 2011, respectively. The tax-equivalent net interest margin was 4.74% in 2012 compared to 5.13% in 2011. The decreases in 2012 compared to 2011 primarily relate to a lower level of accretion on purchased loans. In addition, rate concessions and downward repricing on existing loans, as well as new loans yielding lower rates continue to negatively impact the loan yield. The decreases are partially offset by a reduction in the cost of interest-bearing liabilities, as the prior year reflects a $924 thousand pre-payment penalty on a Federal Home Loan Bank ("FHLB") advance in September 2011. Furthermore, the current year reflects the maturity of another FHLB advance in January 2012, as well as the downward repricing on deposits.

Key components of our net interest margin were as follows:
    Three months ended
December 31, 2012     September 30, 2012     December 31, 2011
    Basis point     Basis point     Basis point
Dollar impact to net Dollar impact to net Dollar impact to net
(dollars in thousands; unaudited)     Amount     interest margin     Amount     interest margin     Amount     interest margin
Accretion on PCI loans $ 423 12 bps $ 231 7 bps $ 639 19 bps
Accretion on non-PCI loans $ 42 1 bps $ 232 7 bps $ 241 7 bps
Gains on pay-offs of PCI loans $ 1,022 29 bps $ 101 3 bps $ 208 6 bps
 
Interest recoveries $ 182 5 bps $ $ 6
Interest reversals     $ (40 )     (1 bps)     $ (115 )     (3 bps)     $ (30 )     (1 bps)
     
Years ended
December 31, 2012     December 31, 2011
    Basis point     Basis point
Dollar impact to net Dollar impact to net
(dollars in thousands; unaudited)       Amount     interest margin     Amount     interest margin
Accretion on PCI loans $ 1,641 12 bps $ 1,418 11 bps
Accretion on non-PCI loans $ 789 6 bps $ 2,857 23 bps
Gains on pay-offs of PCI loans $ 1,714 13 bps $ 1,879 15 bps
 
Interest recoveries $ 182 1 bps $ 6
Interest reversals $ (231 ) (2 bps) $ (233 ) (2 bps)
FHLB Prepayment Penalty - September 2011       N/A     N/A     $ (924 )     (7 bps)
 

Accretion on PCI loans fluctuates based on changes in cash flows expected to be collected. For acquired loans not considered credit-impaired, the level of accretion varies due to maturities and early pay-offs of these loans. Gains on pay-offs of PCI loans are recorded as interest income when the pay-off amounts exceed the recorded investment.

Non-interest income in the fourth quarter of 2012 totaled $1.8 million and remained relatively consistent with the prior quarter and increased $292 thousand, or 19.2%, from the same quarter a year ago. The 2012 non-interest income totaled $7.1 million, an increase of $843 thousand, or 13.4% from last year. The increases in the year and fourth quarter of 2012 compared to the same periods a year ago primarily relate to higher merchant interchange income and service charges on deposit accounts.

Non-interest expense totaled $9.6 million in both the fourth quarter of 2012 and the prior quarter. Non-interest expense decreased from $9.7 million in the same quarter a year ago, which included a $683 thousand core deposit intangible asset write-off, partially offset by higher personnel costs in the fourth quarter of 2012. Non-interest expense totaled $38.7 million and $38.3 million in 2012 and 2011, respectively, representing a $411 thousand or 1.1% increase. The increase in the full year of 2012 compared to 2011 primarily reflects higher personnel costs associated with merit increases, and to a lesser extent, new hires in the lending and deposit services areas.

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 thirteen years ( www.bauerfinancial.com) and has been recognized for several years as one of the "Best Places to Work in the North Bay" by the North Bay Business Journal 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.

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 uncertainty 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
December 31, 2012
 
(dollars in thousands, except per share data; unaudited)     Dec. 31, 2012     Sept. 30, 2012     Dec. 31, 2011
 

QUARTER-TO-DATE
NET INCOME $ 4,702 $ 3,224 $ 3,383
DILUTED EARNINGS PER COMMON SHARE $ 0.86 $ 0.59 $ 0.63
RETURN ON AVERAGE ASSETS (ROA) 1.28 % 0.89 % 0.96 %
RETURN ON AVERAGE EQUITY (ROE) 12.50 % 8.76 % 9.97 %
EFFICIENCY RATIO 54.42 % 57.38 % 56.46 %
TAX-EQUIVALENT NET INTEREST MARGIN 1 4.62 % 4.44 % 4.79 %
NET CHARGE-OFFS $ 178 $ 2,396 $ 1,085
NET CHARGE-OFFS TO AVERAGE LOANS 0.02 % 0.24 % 0.11 %

YEAR-TO-DATE
NET INCOME $ 17,817 $ 15,564
DILUTED EARNINGS PER COMMON SHARE $ 3.28 $ 2.89
RETURN ON AVERAGE ASSETS (ROA) 1.24 % 1.16 %
RETURN ON AVERAGE EQUITY (ROE) 12.36 % 12.01 %
EFFICIENCY RATIO 55.04 % 54.62 %
TAX-EQUIVALENT NET INTEREST MARGIN 1 4.74 % 5.13 %
NET CHARGE-OFFS $ 3,878 $ 4,803
NET CHARGE-OFFS TO AVERAGE LOANS 0.38 % 0.49 %

AT PERIOD END
TOTAL ASSETS $ 1,434,749 $ 1,435,114 $ 1,393,263
LOANS:
COMMERCIAL AND INDUSTRIAL $ 176,431 $ 171,662 $ 175,790
REAL ESTATE
COMMERCIAL OWNER-OCCUPIED $ 196,406 $ 191,397 $ 174,705
COMMERCIAL INVESTOR-OWNED $ 509,006 $ 438,685 $ 446,425
CONSTRUCTION $ 30,665 $ 42,857 $ 51,957
HOME EQUITY $ 93,237 $ 94,939 $ 98,043
OTHER RESIDENTIAL $ 49,432 $ 53,590 $ 61,502
INSTALLMENT AND OTHER CONSUMER LOANS $ 18,775   $ 20,580   $ 22,732  
TOTAL LOANS $ 1,073,952 $ 1,013,710 $ 1,031,154
NON-PERFORMING LOANS 2:
COMMERCIAL AND INDUSTRIAL $ 4,893 $ 6,048 $ 2,955
REAL ESTATE
COMMERCIAL OWNER-OCCUPIED $ 1,403 $ 1,403 $ 2,033
COMMERCIAL INVESTOR-OWNED $ 6,843 $ 3,725 $ 741
CONSTRUCTION $ 2,239 $ 5,787 $ 3,014
HOME EQUITY $ 545 $ 881 $ 766
OTHER RESIDENTIAL $ 1,196 $ 736 $ 1,942
INSTALLMENT AND OTHER CONSUMER LOANS $ 533   $ 652   $ 519  
TOTAL NON-PERFORMING LOANS $ 17,652 $ 19,232 $ 11,970
CLASSIFIED LOANS (GRADED SUBSTANDARD & DOUBTFUL) $ 36,916 $ 42,602 $ 64,670
TOTAL ACCRUING LOANS 30-89 DAYS PAST DUE $ 588 $ 2,055 $ 7,382
LOAN LOSS RESERVE TO LOANS 1.27 % 1.30 % 1.42 %
LOAN LOSS RESERVE TO NON-PERFORMING LOANS 0.77 x 0.68 x 1.22 x
NON-PERFORMING LOANS TO TOTAL LOANS 1.64 % 1.90 % 1.16 %
TEXAS RATIO 3 10.69 % 12.01 % 7.99 %
TOTAL DEPOSITS $ 1,253,289 $ 1,258,873 $ 1,202,972
LOAN TO DEPOSIT RATIO 85.7 % 80.5 % 85.7 %
STOCKHOLDERS' EQUITY $ 151,792 $ 147,336 $ 135,551
BOOK VALUE PER SHARE $ 28.17 $ 27.45 $ 25.40
TANGIBLE COMMON EQUITY TO TANGIBLE ASSETS 4 10.58 % 10.27 % 9.73 %
TOTAL RISK BASED CAPITAL RATIO-BANK 5 13.6 % 13.8 % 12.9 %
TOTAL RISK BASED CAPITAL RATIO-BANCORP 5 13.7 % 14.0 % 13.1 %
FULL TIME EQUIVALENT EMPLOYEES 238 234 232
 
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 $10.8 million, $15.7 million and $6.3 million at December 31, 2012, September 30, 2012 and December 31, 2011, respectively. Excludes purchased credit-impaired (PCI) loans with carrying values of $3.0 million, $3.1 million and $3.4 million that were accreting interest at December 31, 2012, September 30, 2012 and December 31, 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 $4.5 million at December 31, 2012, $4.7 million at September 30, 2012 and $6.0 million at December 31, 2011.
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.
5 Current period estimated.
 
 
BANK OF MARIN BANCORP
CONSOLIDATED STATEMENTS OF CONDITION
at December 31, 2012, September 30, 2012 and December 31, 2011
             
(in thousands, except share data; unaudited)       Dec. 31, 2012     Sept. 30, 2012     Dec. 31, 2011
Assets
Cash and due from banks $ 28,349 $ 141,438 $ 127,732
Short-term investments                   2,011
Cash and cash equivalents 28,349 141,438 129,743
Investment securities
Held to maturity, at amortized cost 139,452 94,571 59,738

Available for sale (at fair value; amortized cost $150,420, $143,263 and $132,348 at December 31, 2012, September 30, 2012 and December 31, 2011, respectively)
      153,962       146,789       135,104
Total investment securities 293,414 241,360 194,842

Loans, net of allowance for loan losses of $13,661, $13,139 and $14,639 at December 31, 2012, September 30, 2012 and December 31, 2011, respectively
1,060,291 1,000,571 1,016,515
Bank premises and equipment, net 9,344 8,989 9,498
Interest receivable and other assets       43,351       42,756       42,665

Total assets
      $ 1,434,749       $ 1,435,114       $ 1,393,263
 
Liabilities and Stockholders' Equity
Liabilities
Deposits
Non-interest bearing $ 389,722 $ 408,565 $ 359,591
Interest bearing
Transaction accounts 169,647 158,957 134,673
Savings accounts 93,404 91,506 75,617
Money market accounts 443,742 422,874 434,461
CDARS® time accounts 15,718 33,699 46,630
Other time accounts       141,056       143,272       152,000
Total deposits 1,253,289 1,258,873 1,202,972
Federal Home Loan Bank borrowings 15,000 15,000 35,000
Subordinated debenture 5,000
Interest payable and other liabilities       14,668       13,905       14,740
Total liabilities       1,282,957       1,287,778       1,257,712
 
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 - 5,389,210, 5,368,386 and 5,336,927 at December 31, 2012, September 30, 2012 and December 31, 2011, respectively
58,573 57,862 56,854
Retained earnings 91,164 87,429 77,098
Accumulated other comprehensive income, net       2,055       2,045       1,599
Total stockholders' equity       151,792       147,336       135,551
Total liabilities and stockholders' equity       $ 1,434,749       $ 1,435,114       $ 1,393,263
 
 
BANK OF MARIN BANCORP
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
         
Three months ended Years ended
(in thousands, except per share amounts; unaudited)       Dec. 31, 2012     Sept. 30, 2012     Dec. 31, 2011 Dec. 31, 2012     Dec. 31, 2011
Interest income            
Interest and fees on loans $ 14,634 $ 14,117 $ 15,150 $ 59,403 $ 63,479
Interest on investment securities
Securities of U.S. government agencies 680 731 847 3,195 3,478
Obligations of state and political subdivisions 565 382 396 1,789 1,299
Corporate debt securities and other 353 326 203 1,165 636
Interest on Federal funds sold and short-term investments       66       42       70   214       222
Total interest income 16,298 15,598 16,666 65,766 69,114
Interest expense
Interest on interest bearing transaction accounts 14 48 30 151 151
Interest on savings accounts 16 26 23 88 98
Interest on money market accounts 145 181 282 689 1,286
Interest on CDARS® time accounts 11 19 45 83 237
Interest on other time accounts 241 254 336 1,068 1,314
Interest on borrowed funds       80       153       232   497       2,209
Total interest expense       507       681       948   2,576       5,295
Net interest income 15,791 14,917 15,718 63,190 63,819
Provision for loan losses       700       2,100       2,500   2,900       7,050
Net interest income after provision for loan losses       15,091       12,817       13,218   60,290       56,769
Non-interest income
Service charges on deposit accounts 529 528 447 2,130 1,836
Wealth Management and Trust Services 513 507 445 1,964 1,834
Debit card interchange fees 261 261 233 1,015 845
Merchant interchange fees 177 183 30 739 353
Earnings on Bank-owned life Insurance 190 192 196 762 752
Other income       146       130       173   502       649
Total non-interest income       1,816       1,801       1,524   7,112       6,269
Non-interest expense
Salaries and related benefits 5,010 5,211 4,742 21,139 20,211
Occupancy and equipment 1,098 1,089 981 4,230 4,002
Depreciation and amortization 334 339 342 1,355 1,293
Federal Deposit Insurance Corporation insurance 245 221 210 917 1,000
Data processing 652 596 557 2,514 2,690
Professional services 720 519 561 2,340 2,499
Other expense       1,523       1,617       2,341   6,199       6,588
Total non-interest expense       9,582       9,592       9,734   38,694       38,283
Income before provision for income taxes 7,325 5,026 5,008 28,708 24,755
Provision for income taxes       2,623       1,802       1,625   10,891       9,191
Net income       $ 4,702       $ 3,224       $ 3,383   $ 17,817       $ 15,564
Net income per common share:
Basic $ 0.88 $ 0.60 $ 0.64 $ 3.34 $ 2.94
Diluted $ 0.86 $ 0.59 $ 0.63 $ 3.28 $ 2.89
Weighted average shares used to compute net income per common share:
Basic 5,357 5,344 5,313 5,341 5,302
Diluted 5,451 5,455 5,394 5,438 5,384
Dividends declared per common share       $ 0.18       $ 0.18       $ 0.17   $ 0.70       $ 0.65
Comprehensive income
Net income $ 4,702 $ 3,224 $ 3,383 $ 17,817 $ 15,564
Other comprehensive income (loss)
Change in net unrealized gain on available for sale securities 16 747 (191 ) 752 90
Reclassification adjustment for loss on sale of securities included in net income                     34      
Net change in unrealized gain on available for sale securities, before tax 16 747 (191 ) 786 90
Deferred tax expense (benefit)       6       314       (81 ) 330       37
Other comprehensive income (loss), net of tax       10       433       (110 ) 456       53
Comprehensive income       $ 4,712       $ 3,657       $ 3,273   $ 18,273       $ 15,617
 
 
BANK OF MARIN BANCORP
AVERAGE STATEMENTS OF CONDITION AND ANALYSIS OF NET INTEREST INCOME
                   
Three months ended Three months ended Three months ended
December 31, 2012   September 30, 2012   December 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 $ 80,884 $ 66 0.32 % $ 84,539 $ 42 0.19 % $ 104,190 $ 70 0.26 %
Investment securities 2, 3 265,316 1,779 2.68 % 241,461 1,578 2.61 % 194,533 1,616 3.32 %
Loans 1, 3, 4     1,020,737     14,788     5.67 %   1,014,708     14,265     5.50 %   1,009,916     15,289     5.92 %
Total interest-earning assets 1 1,366,937 16,633 4.76 % 1,340,708 15,885 4.64 % 1,308,639 16,975 5.08 %
Cash and non-interest-bearing due from banks 44,225 55,727 52,574
Bank premises and equipment, net 9,173 9,042 9,610
Interest receivable and other assets, net     37,512             36,474             34,324          
Total assets     $ 1,457,847             $ 1,441,951             $ 1,405,147          
Liabilities and Stockholders' Equity
Interest-bearing transaction accounts $ 160,605 $ 14 0.03 % $ 159,721 $ 48 0.12 % $ 130,894 $ 30 0.09 %
Savings accounts 91,609 16 0.07 % 91,020 26 0.11 % 75,217 23 0.12 %
Money market accounts 442,006 145 0.13 % 435,110 181 0.17 % 432,728 282 0.26 %
CDARS® time accounts 22,497 11 0.19 % 29,519 19 0.25 % 39,850 45 0.45 %
Other time accounts 141,375 241 0.68 % 143,668 254 0.70 % 152,619 336 0.87 %
FHLB borrowings and overnight borrowings 1 15,010 80 2.08 % 15,000 79 2.07 % 35,000 195 2.21 %
Subordinated debenture 1                 4,239     74     6.83 %   5,000     37     2.90 %
Total interest-bearing liabilities 873,102 507 0.23 % 878,277 681 0.31 % 871,308 948 0.43 %
Demand accounts 420,517 404,677 386,066
Interest payable and other liabilities 14,524 12,548 13,214
Stockholders' equity     149,704             146,449             134,559          
Total liabilities & stockholders' equity     $ 1,457,847             $ 1,441,951             $ 1,405,147          
Tax-equivalent net interest income/margin 1         $ 16,126     4.62 %       $ 15,204     4.44 %       $ 16,027     4.79 %
Reported net interest income/margin 1         $ 15,791     4.52 %       $ 14,917     4.35 %       $ 15,718     4.70 %
Tax-equivalent net interest rate spread             4.53 %           4.33 %           4.65 %
 
Year ended Year ended
December 31, 2012   December 31, 2011
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 $ 80,643 $ 214 0.26 % $ 87,365 $ 222 0.25 %
Investment securities 2, 3 234,014 6,829 2.92 % 175,571 6,049 3.45 %
Loans 1, 3, 4     1,023,165     59,991     5.77 %   984,211     63,914     6.40 %
Total interest-earning assets 1 1,337,822 67,034 4.93 % 1,247,147 70,185 5.55 %
Cash and non-interest-bearing due from banks 51,301 46,673
Bank premises and equipment, net 9,183 9,136
Interest receivable and other assets, net     36,155             34,183          
Total assets     $ 1,434,461             $ 1,337,139          
Liabilities and Stockholders' Equity
Interest-bearing transaction accounts $ 152,778 $ 151 0.10 % $ 125,316 $ 151 0.12 %
Savings accounts 86,670 88 0.10 % 69,792 98 0.14 %
Money market accounts 436,281 689 0.16 % 405,726 1,286 0.32 %
CDARS® time accounts 30,016 83 0.28 % 39,514 237 0.60 %
Other time accounts 144,106 1,068 0.74 % 151,866 1,314 0.87 %
FHLB borrowings and overnight borrowings 1 16,205 345 2.09 % 49,722 2,062 4.15 %
Subordinated debenture 1     3,552     152     4.21 %   5,000     147     2.90 %
Total interest-bearing liabilities 869,608 2,576 0.30 % 846,936 5,295 0.63 %
Demand accounts 406,861 347,682
Interest payable and other liabilities 13,881 12,983
Stockholders' equity     144,111             129,538          
Total liabilities & stockholders' equity     $ 1,434,461             $ 1,337,139          
Tax-equivalent net interest income/margin 1         $ 64,458     4.74 %       $ 64,890     5.13 %
Reported net interest income/margin 1         $ 63,190     4.65 %       $ 63,819     5.05 %
Tax-equivalent net interest rate spread             4.63 %           4.92 %
 
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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