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Bank of Marin Bancorp Reports Record Quarterly Earnings of $5.6 Million

NOVATO, Calif., Apr 25, 2016 (BUSINESS WIRE) -- Bank of Marin Bancorp, "Bancorp" BMRC, -0.51% parent company of Bank of Marin, announced record quarterly earnings of $5.6 million in the first quarter of 2016, compared to $4.9 million in the fourth quarter of 2015 and $4.5 million in the first quarter of 2015. Diluted earnings per share totaled $0.93 in the first quarter, an increase from $0.81 in the prior quarter and $0.74 in the same quarter a year ago.

“We built up considerable earnings momentum coming out of 2015 which is reflected in our first quarter results. Gains on acquired loan payoffs and securities sales also had a positive impact on earnings in the first quarter,” said Russell A. Colombo, President and Chief Executive Officer. “Our deposit and loan pipelines are healthy and we made some important commercial banking hires in the quarter, primarily in the East Bay and Santa Rosa markets.”

Bancorp also provided the following highlights on its operating and financial performance for the first quarter of 2016:

  • Loans totaled $1,441.8 million at March 31, 2016, compared to $1,451.2 million at December 31, 2015 and $1,346.5 million at March 31, 2015. New loan volume of approximately $29 million in the first quarter of 2016 was offset by payoffs of approximately $37 million.
  • Deposits continue to reflect the strength of our customer relationships. Non-interest bearing deposits make up 45.1% of total deposits and the cost of total deposits is 0.08%.
  • Credit quality remains a cornerstone of our credit culture. Non-accrual loans represent 0.18% of total loans as of March 31, 2016 with the Texas Ratio at 1.36%. There was no provision for loan losses recorded in the quarter.
  • At 10.38%, return on equity is up from 9.12% in the fourth quarter of 2015 and 8.92% in the first quarter of 2015. Return on assets is also up to 1.15% from 0.98% in the prior quarter and 1.00% a year ago.
  • All capital ratios are well above regulatory requirements for a well-capitalized institution. The total risk-based capital ratio for Bancorp was 13.9% at March 31, 2016 compared to 13.4% at December 31, 2015 and tangible common equity to tangible assets increased to 11.0% at March 31, 2016 from 10.1% at December 31, 2015.
  • To reflect the strength of the Bank and its future prospects, the Board of Directors declared a quarterly cash dividend of $0.25 per share on April 22, 2016. The cash dividend is payable to shareholders of record at the close of business on May 6, 2016 and will be payable on May 13, 2016.

Loans and Credit Quality

Geographically, loan originations were distributed across our markets. By loan type, investor commercial real estate and commercial and industrial, including related owner-occupied commercial real estate, accounted for the majority of the new loan volume for the quarter.

Non-accrual loans totaled $2.7 million, or 0.18% of Bancorp's loan portfolio at March 31, 2016, compared to $2.2 million, or 0.15%, at December 31, 2015 and $9.5 million, or 0.70% a year ago. The decrease in non-accrual loans from a year ago primarily relates to a previously non-performing loan that was returned to accrual status, the payoff of a commercial real estate loan, and a land development loan that was sold. Accruing loans past due 30 to 89 days totaled $584 thousand at March 31, 2016, compared to $2.1 million at December 31, 2015 and $949 thousand a year ago.

There was no provision for loan losses recorded in the first quarter of 2016 as the existing level of loan loss reserve did not warrant a provision, consistent with the same quarter a year ago. A provision for loan losses of $500 thousand was recorded in the prior quarter primarily due to the significant loan growth in the fourth quarter. Net recoveries for the first quarter totaled $29 thousand compared to $42 thousand in the prior quarter and $57 thousand in the same quarter a year ago. The ratio of loan loss reserve to loans totaled 1.04% at March 31, 2016, compared to 1.03% at December 31, 2015 and 1.13% at March 31, 2015.

Investments and Borrowings

The investment portfolio totaled $399.5 million at March 31, 2016, a decline of $87.9 million from December 31, 2015. In addition to paydowns and maturities in the securities portfolio, $54.9 million in securities were sold at gains totaling $110 thousand, and overnight borrowings were reduced by $47.7 million.

Deposits

Deposits totaled $1,681.3 million at March 31, 2016, compared to $1,728.2 million at December 31, 2015 and $1,585.1 million at March 31, 2015. The $46.9 million decline was due to normal seasonal factors in several deposit customers' balances related to their business models. Non-interest bearing deposits totaled $758.9 million, or 45.1% of total deposits, compared to 44.6% at December 31, 2015 and 45.2% at March 31, 2015.

Earnings

“We are pleased to have increased our net interest margin while staying true to our credit culture,” said Tani Girton, Chief Financial Officer. “Our expense discipline is evident in the 57.74% efficiency ratio, and strong capital and liquidity positions will support continued growth in 2016.”

Net interest income totaled $18.6 million in the first quarter of 2016, compared to $17.2 million in the prior quarter and $16.6 million in the same quarter a year ago. Interest income increased due to higher average loan balances in the first quarter of 2016 related to substantial loan growth late in the fourth quarter of 2015. Gains on payoffs of Purchased Credit Impaired ("PCI") loans in the first quarter of 2016 also contributed to the increase.

The tax-equivalent net interest margin was 4.04% in the first quarter of 2016, compared to 3.70% in the prior quarter and 4.00% in the same quarter a year ago. The increase from last quarter includes 10 basis points related to a shift in the mix of interest-earning assets from lower yielding interest-bearing cash and investment securities to higher yielding loans. Another 21 basis points came from PCI loan payoffs and market value adjustments on interest rate swaps.

Loans acquired through the acquisition of other banks are classified as PCI or non-PCI loans and are recorded at fair value at acquisition date. For acquired loans not considered credit impaired, the level of accretion varies due to maturities and early payoffs. Accretion on PCI loans fluctuates based on changes in cash flows expected to be collected. Gains on payoffs of PCI loans are recorded as interest income when the payoff amounts exceed the recorded investment. PCI loans totaled $2.8 million, $3.7 million, and $5.1 million at March 31, 2016, December 31, 2015 and March 31, 2015, respectively.

Accretion and gains on payoffs of purchased loans recorded to interest income were as follows:

Three months ended
March 31, 2016 December 31, 2015 March 31, 2015
(dollars in thousands; unaudited)

Dollar
Amount

Basis point
impact to net
interest margin

Dollar
Amount

Basis point
impact to net
interest margin

Dollar
Amount

Basis point
impact to net
interest margin

Accretion on PCI loans $ 98 2 bps $ 128 3 bps $ 119 3 bps
Accretion on non-PCI loans $ 330 7 bps $ 243 5 bps $ 371 9 bps
Gains on payoffs of PCI loans $ 740 16 bps $ 0 bps $ 43 1 bps

Non-interest income in the first quarter of 2016 totaled $2.2 million, compared to $2.1 million in the prior quarter and $2.2 million in the same quarter a year ago. The increase compared to the prior quarter relates to a $110 thousand net gain on the sale of four government agency debentures.

Non-interest expense totaled $12.0 million in the first quarter of 2016, compared to...


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