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Bank of Marin Bancorp Reports Record Earnings of $5.4 Million

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Bank of Marin Bancorp, “Bancorp” (NASDAQ:BMRC) , parent company of Bank of Marin, announced record earnings of $5.4 million in the third quarter of 2014, compared to $5.2 million in the second quarter of 2014 and $4.0 million in the third quarter of 2013. Diluted earnings per share totaled $0.89 in the third quarter, compared to $0.86 in the prior quarter and $0.72 in the same quarter a year ago. September 30, 2014 year-to-date earnings totaled $15.1 million compared to $11.9 million for the same period a year ago. Diluted earnings per share for the nine-month period totaled $2.51 as compared to $2.16 for the same period in 2013.

“We are pleased to report record earnings again this quarter and are seeing tangible results from our recent acquisition,” said Russell A. Colombo, President and Chief Executive Officer. “Our ongoing commitment to strong credit quality and relationship banking continues to pay off in this competitive environment.”

Bancorp also provided the following highlights on its operating and financial performance for the third quarter of 2014:

  • Loans grew to $1.4 billion, an increase of $22.5 million, or 1.7%, over June 30, 2014, and $268.1 million, or 24.5% over September 30, 2013. The increase in loans from a year ago reflects both acquired loans and organic growth. Credit quality improved with non-accrual loans representing 0.73% of total loans at September 30, 2014, down from 0.76% at June 30, 2014 and 1.58% a year ago. Net recoveries for the third quarter totaled $149 thousand, compared to net recoveries of $68 thousand in the prior quarter and net charge-offs of $68 thousand in the same quarter a year ago.
  • Quarterly return on assets (“ROA”) of 1.15% for the quarter ended September 30, 2014, increased from 1.14% in the previous quarter and 1.07% a year ago. Quarterly return on equity (“ROE”) totaled 10.98% for the quarter ended September 30, 2014, compared to 10.96% for the quarter ended June 30, 2014 and 9.91% for the quarter ended September 30, 2013. The increase in ROA and ROE in the current quarter was driven by strong earnings.
  • The total risk-based capital ratio for Bancorp was 13.6% at September 30, 2014, compared to 13.5% at June 30, 2014 and 14.1% at September 30, 2013. The ratio declined compared to a year ago due to the NorCal Community Bancorp (“NorCal”) acquisition. The risk-based capital ratio continues to be well above both current regulatory requirements for a well-capitalized institution and new requirements that will take effect in 2015 (Basel Committee on Bank Supervision guidelines for determining regulatory capital). Tangible common equity to tangible assets totaled 10.3% at September 30, 2014, compared to 9.9% at the end of the prior quarter.
  • On October 17, 2014, the Board of Directors declared a quarterly cash dividend of $0.22 per share, a $0.02 increase from the prior quarter. The cash dividend is payable to shareholders of record at the close of business on October 31, 2014 and will be payable on November 7, 2014.

Loans and Credit Quality

Gross loans increased $22.5 million from the prior quarter, which was driven substantially by commercial and industrial lending and related owner-occupied commercial real estate lending in the Marin, Oakland and Napa markets. Loans increased $268.1 million from a year ago which reflects both loans acquired from NorCal and organic growth.

Non-accrual loans decreased to $9.8 million at September 30, 2014 from $17.3 million a year ago and $10.1 million at June 30, 2014. The decrease in non-accrual loans from June 30, 2014 primarily relates to pay-downs associated with two borrowers. Accruing loans past due 30 to 89 days decreased to $299 thousand at September 30, 2014, from $1.5 million at June 30, 2014 and $2.2 million a year ago. Classified loans increased $5.8 million in the third quarter when compared to the prior quarter. The newly classified loans are well secured and present minimal risk of loss.

There was no provision for loan losses in the third quarter of 2014 compared to $600 thousand in the prior quarter and reversal of $480 thousand in the same quarter a year ago. The ratio of loan loss reserve to loans remained unchanged from June 30, 2014 at 1.11%. The decline compared to 1.26% at September 30, 2013 is primarily due to purchase accounting rules which call for acquired loans to be marked down to fair value without separate allowances established.

Deposits

Deposits totaled $1.6 billion at both September 30, 2014 and June 30, 2014, compared to $1.3 billion at September 30, 2013. The $279 million increase in deposits from a year ago reflects the Bank’s expansion into the East Bay market as well as organic growth in Marin and Sonoma markets. The $27.2 million decrease compared to June 30, 2014 is primarily due to normal business activity among several large depositors. Non-interest bearing deposits totaled $718 million at September 30, 2014, a decrease of $7.3 million when compared to June 30, 2014. This represents 45.7% of total deposits as of September 30, 2014, up from 41.6% at September 30, 2013.

Earnings

“We are successfully balancing a disciplined growth strategy combined with expense management,” said Tani Girton, Chief Financial Officer. “As a result, we are seeing continued strength in our ROA, ROE and efficiency ratio this quarter.”

Net interest income totaled $17.5 million in the third quarter of 2014, compared to $17.9 million in the prior quarter and $14.0 million in the same quarter a year ago. The increase from the same quarter a year ago relates to higher balances on loans and investments, as well as accretion on acquired loans. The tax-equivalent net interest margin was 4.03%, 4.23% and 3.99% for those respective periods. The decrease in the third quarter of 2014 compared to the prior quarter is primarily due to the absence of gains on pay-offs of purchased credit impaired (“PCI”) loans in the third quarter of 2014.

Summary of Charter Oak and NorCal acquisitions’ impact on net interest margin:

Three months ended
September 30, 2014 June 30, 2014 September 30, 2013

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

$

126

3 bps

$

187

4 bps

$

154 4 bps

Accretion on non-PCI loans

$

774

17 bps

$

713

17 bps

$

214

6 bps

Gains on pay-offs of PCI loans

$

0 bps

$

622 14 bps

$

0 bps

Nine months ended
September 30, 2014 September 30, 2013

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 $ 494 4 bps $ 545 5 bps
Accretion on non-PCI loans $ 2,817 22 bps $ 591 6 bps
Gains on pay-offs of PCI loans $ 622 5 bps $ 469 5 bps

For acquired loans not considered credit impaired, the level of accretion varies due to maturities and early pay-offs of these loans. Accretion on PCI loans fluctuates based on changes in cash flows expected to be collected. 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 third quarter of 2014 totaled $2.3 million, compared to $2.4 million in the prior quarter and $2.0 million in the same quarter a year ago. The decrease from the prior quarter primarily relates to lower gains on the sale of investment securities. The increase from the same quarter a year ago reflects higher service charges due to higher transaction volume from the acquisition, higher dividend income from the Federal Home Loan Bank of San Francisco and higher recent debit card interchange fees.

Non-interest expense totaled $11.4 million in the third quarter of 2014, compared to $11.5 million in the prior quarter and $10.1 million in the same quarter a year ago. The increase in non-interest expense from the same quarter a year ago reflects the higher cost base associated with a larger-sized bank, expansion into the East Bay, and increased lending staff in the North Bay.

Earnings Call and Webcast Information

Bank of Marin Bancorp will webcast its third quarter earnings call on Monday, October 20, 2014 at 8:30 a.m. PT/ 11:30 a.m. ET. Investors will have the opportunity to listen to the conference call online through Bank of Marin’s website at http://www.bankofmarin.com under “Latest Press and News.” To listen to the live call, please go to the website at least 15 minutes early to register, download and install any necessary audio software. For those who cannot listen to the live broadcast, a replay will be available at the same website location shortly after the call.

About Bank of Marin Bancorp

Bank of Marin is a leading business and community bank in the San Francisco Bay Area, with assets of $1.8 billion. Founded in 1989 and headquartered in Novato, Bank of Marin is the sole subsidiary of Bank of Marin Bancorp (NASDAQ:BMRC) . With 21 offices in San Francisco, Marin, Napa, Sonoma and Alameda counties, Bank of Marin provides business and personal banking, commercial lending, and wealth management services. Specializing in providing legendary service to its customers and investing in its local communities, Bank of Marin has consistently been ranked one of the “Top Corporate Philanthropists” by the San Francisco Business Times and one of the “Best Places to Work” by the North Bay Business Journal. Bank of Marin Bancorp is included in the Russell 2000 Small-Cap Index and has been recognized as a Top 200 Community Bank by US Banker Magazine for the past five years. 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, our ability to integrate the business of NorCal, general economic conditions, economic uncertainty in the United States and abroad, changes in interest rates, deposit flows, real estate values, expected future cash flows on acquired loans, competition, changes in accounting principles, policies or guidelines, 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, including the impact of the NorCal acquisition, are detailed in various securities law filings made periodically by Bancorp, copies of which are available from Bancorp without charge. Bancorp undertakes no obligation to release publicly the result of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date of this press release or to reflect the occurrence of unanticipated events.

BANK OF MARIN BANCORP
FINANCIAL HIGHLIGHTS
September 30, 2014
(dollars in thousands, except per share data; unaudited)

QUARTER-TO-DATE

September 30, 2014

June 30, 2014

September 30, 2013

NET INCOME $ 5,378 $ 5,168 $ 4,004
DILUTED EARNINGS PER COMMON SHARE $ 0.89 $ 0.86 $ 0.72
RETURN ON AVERAGE ASSETS (ROA) 1.15 % 1.14 % 1.07 %
RETURN ON AVERAGE EQUITY (ROE) 10.98 % 10.96 % 9.91 %
EFFICIENCY RATIO 57.23 % 56.60 % 63.19 %
TAX-EQUIVALENT NET INTEREST MARGIN1 4.03 % 4.23 % 3.99 %
NET CHARGE-OFFS/(RECOVERIES) $ (149 ) $ (68 ) $ 68
NET CHARGE-OFFS/(RECOVERIES) TO AVERAGE LOANS (0.01 ) % (0.01 ) % 0.01 %

YEAR-TO-DATE

NET INCOME $ 15,079 $ 9,701 $ 11,925
DILUTED EARNINGS PER COMMON SHARE $ 2.51 $ 1.62 $ 2.16
RETURN ON AVERAGE ASSETS (ROA) 1.10 % 1.08 % 1.10 %
RETURN ON AVERAGE EQUITY (ROE) 10.65 % 10.47 % 10.09 %
EFFICIENCY RATIO 59.24 % 60.22 % 61.49 %
TAX-EQUIVALENT NET INTEREST MARGIN1 4.17 % 4.24 % 4.25 %
NET CHARGE-OFFS/(RECOVERIES) $ (74 ) $ 75 $ 242
NET CHARGE-OFFS/(RECOVERIES) TO AVERAGE LOANS (0.01 ) % 0.01 % 0.02 %

AT PERIOD END

TOTAL ASSETS $ 1,802,657 $ 1,823,901 $ 1,483,603
LOANS:
COMMERCIAL AND INDUSTRIAL $ 201,516 $ 194,402 $ 168,840
REAL ESTATE
COMMERCIAL OWNER-OCCUPIED $ 234,493 $ 233,267 $ 206,173
COMMERCIAL INVESTOR-OWNED $ 674,428 $ 669,225 $ 547,337
CONSTRUCTION $ 45,948 $ 40,197 $ 24,993
HOME EQUITY $ 109,655 $ 106,201 $ 86,204
OTHER RESIDENTIAL $ 75,992 $ 80,399 $ 43,572
INSTALLMENT AND OTHER CONSUMER LOANS $ 18,953 $ 14,820 $ 15,732
TOTAL LOANS $ 1,360,985 $ 1,338,511 $ 1,092,851
NON-PERFORMING LOANS2:
COMMERCIAL AND INDUSTRIAL $ 193 $ 335 $ 1,229
REAL ESTATE
COMMERCIAL OWNER-OCCUPIED $ 1,403 $ 1,403 $ 1,403
COMMERCIAL INVESTOR-OWNED $ 2,505 $ 2,618 $ 5,832
CONSTRUCTION $ 5,173 $ 5,197 $ 7,045
HOME EQUITY $ 436 $ 444 $ 359
OTHER RESIDENTIAL $ $ $ 1,117
INSTALLMENT AND OTHER CONSUMER LOANS $ 128 $ 152 $ 311
TOTAL NON-ACCRUAL LOANS $ 9,838 $ 10,149 $ 17,296
CLASSIFIED LOANS (GRADED SUBSTANDARD & DOUBTFUL) $ 38,999 $ 33,246 $ 30,913
TOTAL ACCRUING LOANS 30-89 DAYS PAST DUE $ 299 $ 1,471 $ 2,213
LOAN LOSS RESERVE TO LOANS 1.11 % 1.11 % 1.26 %
LOAN LOSS RESERVE TO NON-ACCRUAL LOANS 1.53 x 1.47 x 0.80 x
NON-ACCRUAL LOANS TO TOTAL LOANS 0.73 % 0.76 % 1.58 %
TEXAS RATIO3 5.14 % 5.43 % 9.85 %
TOTAL DEPOSITS $ 1,571,624 $ 1,598,823 $ 1,292,476
LOAN-TO-DEPOSIT RATIO 86.6 % 83.7 % 84.6 %
STOCKHOLDERS’ EQUITY $ 195,674 $ 190,906 $ 161,711
BOOK VALUE PER SHARE $ 33.00 $ 32.29 $ 29.61
TANGIBLE COMMON EQUITY TO TANGIBLE ASSETS4 10.3 % 9.9 % 10.9 %
TOTAL RISK-BASED CAPITAL RATIO-BANK5 13.3 % 13.0 % 13.9 %
TOTAL RISK-BASED CAPITAL RATIO-BANCORP5 13.6 % 13.5 % 14.1 %
FULL-TIME EQUIVALENT EMPLOYEES 257 263 234
1 Net interest income is annualized by dividing actual number of days in the period times 360 days.
2 Excludes accruing troubled-debt restructured loans of $16.9 million, $14.3 million and $12.6 million at September 30, 2014, June 30, 2014 and September 30, 2013, respectively. Excludes purchased credit-impaired (PCI) loans with carrying values of $3.8 million, $3.8 million and $2.2 million that were accreting interest at September 30, 2014, June 30, 2014 and September 30, 2013, 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 $5.2 million, $5.2 million and $3.6 million at September 30, 2014, June 30, 2014 and September 30, 2013.
3 (Non-performing assets + 90 day delinquent loans)/(tangible common equity + allowance for loan losses).
4 Tangible common equity to tangible assets is considered to be a meaningful non-GAAP financial measure of capital adequacy and is useful for investors to assess Bancorp’s ability to absorb potential losses. Tangible common equity includes common stock, retained earnings and unrealized gain on available for sale securities, net of tax, less goodwill and intangible assets of $10.4 million and $10.6 million at September 30, 2014 and June 30, 2014, respectively. Tangible assets excludes goodwill and intangible assets.
5 Current period estimated.
BANK OF MARIN BANCORP
CONSOLIDATED STATEMENTS OF CONDITION

at September 30, 2014, June 30, 2014 and September 30, 2013

(in thousands, except share data; unaudited) September 30, 2014 June 30, 2014 September 30, 2013
Assets
Cash and due from banks $ 46,424 $ 81,380 $ 99,358
Investment securities
Held-to-maturity, at amortized cost 118,843 123,085 130,085
Available-for-sale (at fair value; amortized cost $210,676, $214,627, and $118,353 at September 30, 2014, June 30, 2014, and September 30, 2013, respectively) 211,582 215,873 119,340
Total investment securities 330,425 338,958 249,425
Loans, net of allowance for loan losses of $15,049, $14,900 and $13,808 at September 30, 2014, June 30, 2014 and September 30, 2013, respectively 1,345,936 1,323,611 1,079,043
Bank premises and equipment, net 9,277 9,296 8,947
Goodwill 6,436 6,436
Core deposit intangible 3,925 4,117
Interest receivable and other assets 60,234 60,103 46,830
Total assets $ 1,802,657 $ 1,823,901 $ 1,483,603
Liabilities and Stockholders’ Equity
Liabilities
Deposits
Non-interest bearing $ 717,720 $ 724,975 $ 537,104
Interest bearing
Transaction accounts 89,891 95,052 76,221
Savings accounts 127,774 121,890 102,898
Money market accounts 485,626 500,720 437,247
Time accounts 150,613 156,186 139,006
Total deposits 1,571,624 1,598,823 1,292,476
Federal Home Loan Bank borrowings 15,000 15,000 15,000
Subordinated debentures 5,131 5,077
Interest payable and other liabilities 15,228 14,095 14,416
Total liabilities 1,606,983 1,632,995 1,321,892
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 – 5,930,100, 5,912,774 and 5,462,061 at September 30, 2014, June 30, 2014 and September 30, 2013, respectively

81,993 81,219 60,982
Retained earnings 113,115 108,922 100,157
Accumulated other comprehensive income, net 566 765 572
Total stockholders’ equity 195,674 190,906 161,711
Total liabilities and stockholders’ equity $ 1,802,657 $ 1,823,901 $ 1,483,603
BANK OF MARIN BANCORP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three months ended Nine months ended
(in thousands, except per share amounts; unaudited) September 30, 2014 June 30, 2014 September 30, 2013 September 30, 2014 September 30, 2013
Interest income
Interest and fees on loans $ 16,195 $ 16,363 $ 13,049 $ 48,877 $ 40,050
Interest on investment securities
Securities of U.S. Government agencies 1,126 1,193 553 3,551 1,763
Obligations of state and political subdivisions 496 607 524 1,737 1,599
Corporate debt securities and other 254 256 311 778 974
Interest due from banks and other 37 37 34 125 45
Total interest income 18,108 18,456 14,471 55,068 44,431
Interest expense
Interest on interest-bearing transaction accounts 25 26 12 74 35
Interest on savings accounts 12 11 9 34 25
Interest on money market accounts 126 131 101 415 295
Interest on time accounts 229 231 227 695 690
Interest on FHLB and overnight borrowings 79 78 80 235 243
Interest on subordinated debentures 106 105 316
Total interest expense 577 582 429 1,769 1,288
Net interest income 17,531 17,874 14,042 53,299 43,143
Provision for loan losses 600 (480 ) 750 390
Net interest income after provision for loan losses 17,531 17,274 14,522 52,549 42,753
Non-interest income
Service charges on deposit accounts 552 528 509 1,636 1,545
Wealth Management and Trust Services 567 613 532 1,744 1,618
Debit card interchange fees 375 360 288 1,035 820
Merchant interchange fees 224 207 196 629 623
Earnings on Bank-owned life Insurance 208 211 179 632 766
Gain (loss) on sale of securities 4 97 (35 ) 93 (35 )
Other income 371 352 284 1,116 666
Total non-interest income 2,301 2,368 1,953 6,885 6,003
Non-interest expense
Salaries and related benefits 6,108 6,232 5,389 19,270 16,117
Occupancy and equipment 1,381 1,329 1,040 4,044 3,165
Depreciation and amortization 383 403 343 1,202 1,032
Federal Deposit Insurance Corporation insurance 261 269 244 780 681
Data processing 748 748 612 2,856 1,857
Professional services 537 412 775 1,577 2,116
Other expense 1,932 2,064 1,704 5,921 5,253
Total non-interest expense 11,350 11,457 10,107 35,650 30,221
Income before provision for income taxes 8,482 8,185 6,368 23,784 18,535
Provision for income taxes 3,104 3,017 2,364 8,705 6,610
Net income $ 5,378 $ 5,168 $ 4,004 $ 15,079 $ 11,925
Net income per common share:
Basic $ 0.91 $ 0.88 $ 0.74 $ 2.56 $ 2.20
Diluted $ 0.89 $ 0.86 $ 0.72 $ 2.51 $ 2.16
Weighted average shares used to compute net income per common share:
Basic 5,903 5,888 5,433 5,887 5,414
Diluted 6,014 5,993 5,538 5,996 5,511
Dividends declared per common share $ 0.20 $ 0.19 $ 0.18 $ 0.58 $ 0.54
Comprehensive income:
Net income $ 5,378 $ 5,168 $ 4,004 $ 15,079 $ 11,925
Other comprehensive income (loss)

Change in net unrealized (loss) gain on available-for-sale securities

(344 ) 976 (621 ) 2,047 (2,591 )

Reclassification adjustment for loss on sale of available-for-sale securities included in net income

4 35 19 35

Net change in unrealized (loss) gain on available-for-sale securities, before tax

(340 ) 976 (586 ) 2,066 (2,556 )
Deferred tax (benefit) expense (141 ) 450 (246 ) 828 (1,073 )
Other comprehensive (loss) income, net of tax (199 ) 526 (340 ) 1,238 (1,483 )
Comprehensive income $ 5,179 $ 5,694 $ 3,664 $ 16,317 $ 10,442

BANK OF MARIN BANCORP

AVERAGE STATEMENTS OF CONDITION AND ANALYSIS OF NET INTEREST INCOME

Three months ended Three months ended Three months ended
September 30, 2014 June 30, 2014 September 30, 2013
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 $ 58,088 $ 37 0.25 % $ 54,313 $ 37 0.27 % $ 61,409 $ 34 0.22 %
Investment securities 2, 3 332,920 1,997 2.40 % 350,938 2,208 2.52 % 254,515 1,539 2.42 %
Loans 1, 3, 4 1,349,740 16,489 4.78 % 1,303,363 16,597 5.04 % 1,093,846 13,248 4.74 %
Total interest-earning assets 1 1,740,748 18,523 4.16 % 1,708,614 18,842 4.36 % 1,409,770 14,821 4.11 %
Cash and non-interest-bearing due from banks 46,258 41,739 32,482
Bank premises and equipment, net 9,337 9,228 9,092
Interest receivable and other assets, net 56,855 56,954 34,796
Total assets $ 1,853,198 $ 1,816,535 $ 1,486,140
Liabilities and Stockholders’ Equity
Interest-bearing transaction accounts $ 92,907 $ 25 0.11 % $ 94,358 $ 26 0.11 % $ 78,109 $ 12 0.06 %
Savings accounts 127,457 12 0.04 % 120,071 11 0.04 % 100,730 9 0.03 %
Money market accounts 501,843 126 0.10 % 504,597 131 0.10 % 431,332 101 0.09 %
Time accounts 152,995 229 0.59 % 157,239 231 0.59 % 140,606 227 0.64 %
FHLB borrowing 1 15,000 79 2.07 % 15,000 78 2.07 % 15,000 80 2.07 %
Subordinated debentures 1 5,096 106 8.14 % 5,043 105 8.24 % %
Total interest-bearing liabilities 895,298 577 0.26 % 896,308 582 0.26 % 765,777 429 0.22 %
Demand accounts 749,361 716,774 547,634
Interest payable and other liabilities 14,167 14,281 12,409
Stockholders’ equity 194,372 189,172 160,320
Total liabilities & stockholders’ equity $ 1,853,198 $ 1,816,535 $ 1,486,140
Tax-equivalent net interest income/margin 1 $ 17,946 4.03 % $ 18,260 4.23 % $ 14,392 3.99 %
Reported net interest income/margin 1 $ 17,531 3.94 % $ 17,874 4.14 % $ 14,042 3.90 %
Tax-equivalent net interest rate spread 3.91 % 4.10 % 3.89 %
Nine months ended Nine months ended
September 30, 2014 September 30, 2013
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 $ 65,949 $ 125 0.25 % $ 24,072 $ 45 0.25 %
Investment securities 2, 3 348,445 6,498 2.49 % 268,463 4,775 2.37 %
Loans 1, 3, 4 1,307,611 49,606 5.00 % 1,075,825 40,595 4.98 %
Total interest-earning assets 1 1,722,005 56,229 4.31 % 1,368,360 45,415 4.38 %
Cash and non-interest-bearing due from banks 43,280 29,370
Bank premises and equipment, net 9,218 9,277
Interest receivable and other assets, net 56,550 37,211
Total assets $ 1,831,053 $ 1,444,218
Liabilities and Stockholders’ Equity
Interest-bearing transaction accounts $ 104,662 $ 74 0.09 % $ 96,736 $ 35 0.05 %
Savings accounts 122,958 34 0.04 % 97,474 25 0.03 %
Money market accounts 508,544 415 0.11 % 424,767 295 0.09 %
Time accounts 156,892 695 0.59 % 145,180 690 0.64 %
Overnight borrowings 1 % 5,420 7 0.17 %
FHLB borrowings 1 15,000 235 2.07 % 15,000 236 2.07 %
Subordinated debentures 1 5,043 316 8.42 % %
Total interest-bearing liabilities 913,099 1,769 0.26 % 784,577 1,288 0.22 %
Demand accounts 713,882 488,227
Interest payable and other liabilities 14,725 13,455
Stockholders’ equity 189,347 157,959
Total liabilities & stockholders’ equity $ 1,831,053 $ 1,444,218
Tax-equivalent net interest income/margin 1 $ 54,460 4.17 % $ 44,127 4.25 %
Reported net interest income/margin 1 $ 53,299 4.08 % $ 43,143 4.16 %
Tax-equivalent net interest rate spread 4.05 % 4.16 %
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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