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

Results Reflect Strong 4th Quarter Loan Volume and Gains

NOVATO, Calif.--()--Bank of Marin Bancorp, "Bancorp" (NASDAQ:BMRC), 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 $11.1 million in the prior quarter and $11.8 million in the same quarter a year ago. Non-interest expense was higher than the prior quarter and the first quarter of 2015 due to reductions in the off-balance sheet reserve in the first and fourth quarters of 2015. First quarter 2016 non-interest expense was also higher than the prior quarter due to 401(k) employer matching contributions, a decline in deferred costs related to the lower level of loan originations and a reversal of accrued incentive bonus in December 2015.

Earnings Call and Webcast Information

Bank of Marin Bancorp will webcast its first quarter earnings call on Monday, April 25, 2016 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 “Investor Relations.” 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 $2 billion. Founded in 1989 and headquartered in Novato, Bank of Marin is the wholly-owned subsidiary of Bank of Marin Bancorp (NASDAQ: BMRC). With 20 retail offices in San Francisco, Marin, Napa, Sonoma and Alameda counties, Bank of Marin provides business and personal banking, commercial lending, and wealth management and trust services. Specializing in providing legendary service to its customers and investing in its local communities, Bank of Marin was named 2016 Community Bank of the Year by Western Independent Bankers and 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 NASDAQ ABA Community Bank Index and has been recognized as a Top 200 Community Bank by US Banker Magazine for the past five years. For more information, go to 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, general economic conditions, economic uncertainty in the United States and abroad, changes in interest rates, deposit flows, real estate values, costs or effects of future acquisitions, competition, changes in accounting principles, policies or guidelines, legislation or regulation, and other economic, competitive, governmental, regulatory and technological factors (including external fraud and cyber-security threats) 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
March 31, 2016
(dollars in thousands, except per share data; unaudited)

QUARTER-TO-DATE

    March 31, 2016      

December 31, 2015

      March 31, 2015  
NET INCOME $ 5,646 $ 4,925 $ 4,457
DILUTED EARNINGS PER COMMON SHARE $ 0.93 $ 0.81 $ 0.74
RETURN ON AVERAGE ASSETS (ROA) 1.15 % 0.98 % 1.00 %
RETURN ON AVERAGE EQUITY (ROE) 10.38 % 9.12 % 8.92 %
EFFICIENCY RATIO 57.74 % 57.57 % 63.07 %
TAX-EQUIVALENT NET INTEREST MARGIN1 4.04 % 3.70 % 4.00 %
NET CHARGE-OFFS/(RECOVERIES) $ (29 ) $ (42 ) $ (57 )
NET CHARGE-OFFS/(RECOVERIES) TO AVERAGE LOANS % % %
 

AT PERIOD END

TOTAL ASSETS $ 1,943,602 $ 2,031,134 $ 1,826,149
 
LOANS:
COMMERCIAL AND INDUSTRIAL $ 213,068 $ 219,452 $ 196,442
REAL ESTATE
COMMERCIAL OWNER-OCCUPIED $ 238,332 $ 242,309 $ 235,337
COMMERCIAL INVESTOR-OWNED $ 707,340 $ 715,879 $ 653,848
CONSTRUCTION $ 74,528 $ 65,495 $ 57,050
HOME EQUITY $ 110,893 $ 112,300 $ 113,277
OTHER RESIDENTIAL $ 73,896 $ 73,154 $ 73,375
INSTALLMENT AND OTHER CONSUMER LOANS $ 23,782   $ 22,639   $ 17,155  
TOTAL LOANS $ 1,441,839 $ 1,451,228 $ 1,346,484
 
NON-PERFORMING LOANS2:
COMMERCIAL AND INDUSTRIAL $ 21 $ 21 $ 373
REAL ESTATE
COMMERCIAL OWNER-OCCUPIED $ $ $ 1,403
COMMERCIAL INVESTOR-OWNED $ 1,789 $ 1,903 $ 2,354
CONSTRUCTION $ $ 1 $ 5,107
HOME EQUITY $ 791 $ 171 $ 166
OTHER RESIDENTIAL $ $ $
INSTALLMENT AND OTHER CONSUMER LOANS $ 65   $ 83   $ 79  
TOTAL NON-ACCRUAL LOANS $ 2,666 $ 2,179 $ 9,482
 
CLASSIFIED LOANS (GRADED SUBSTANDARD & DOUBTFUL) $ 22,309 $ 22,331 $ 34,129
TOTAL ACCRUING LOANS 30-89 DAYS PAST DUE $ 584 $ 2,104 $ 949
LOAN LOSS RESERVE TO LOANS 1.04 % 1.03 % 1.13 %
LOAN LOSS RESERVE TO NON-ACCRUAL LOANS 5.64 x 6.88 x 1.60 x
NON-ACCRUAL LOANS TO TOTAL LOANS 0.18 % 0.15 % 0.70 %
TEXAS RATIO3 1.36 % 1.18 % 4.71 %
 
TOTAL DEPOSITS $ 1,681,346 $ 1,728,226 $ 1,585,120
LOAN-TO-DEPOSIT RATIO 85.8 % 84.0 % 84.9 %
STOCKHOLDERS' EQUITY $ 221,646 $ 214,473 $ 204,506
BOOK VALUE PER SHARE $ 36.24 $ 35.34 $ 34.27
TANGIBLE COMMON EQUITY TO TANGIBLE ASSETS4 11.0 % 10.1 % 10.7 %
TOTAL RISK-BASED CAPITAL RATIO-BANK 13.6 % 13.1 % 13.5 %
TOTAL RISK-BASED CAPITAL RATIO-BANCORP 13.9 % 13.4 % 13.8 %
FULL-TIME EQUIVALENT EMPLOYEES 256 259 267
 
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 $19.7 million, $19.0 million and $15.6 million at March 31, 2016, December 31, 2015 and March 31, 2015, respectively. Excludes purchased credit-impaired (PCI) loans with carrying values of $2.8 million, $3.7 million and $3.7 million that were accreting interest at March 31, 2016, December 31, 2015 and March 31, 2015, 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 $2.8 million, $3.7 million and $5.1 million at March 31, 2016, December 31, 2015 and March 31, 2015, respectively.
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 $9.4 million, $9.5 million and $10.0 million at March 31, 2016, December 31, 2015 and March 31, 2015, respectively. Tangible assets exclude goodwill and intangible assets.

 
 
BANK OF MARIN BANCORP
CONSOLIDATED STATEMENTS OF CONDITION

at March 31, 2016, December 31, 2015 and March 31, 2015

           
March 31, December 31, March 31,
(in thousands, except share data; unaudited)     2016     2015     2015
Assets
Cash and due from banks $ 39,770 $ 26,343 $ 103,164
Investment securities
Held-to-maturity, at amortized cost 63,246 69,637 107,476
Available-for-sale, at fair value     336,234       417,787       204,680
Total investment securities 399,480 487,424 312,156
Loans, net of allowance for loan losses of $15,028, $14,999 and $15,156 at March 31, 2016, December 31, 2015 and March 31, 2015, respectively 1,426,811 1,436,229 1,331,328
Bank premises and equipment, net 8,909 9,305 9,852
Goodwill 6,436 6,436 6,436
Core deposit intangible 2,980 3,113 3,577
Interest receivable and other assets     59,216       62,284       59,636
Total assets     $ 1,943,602       $ 2,031,134       $ 1,826,149
 
Liabilities and Stockholders' Equity
Liabilities
Deposits
Non-interest bearing $ 758,869 $ 770,087 $ 716,719
Interest bearing
Transaction accounts 102,829 114,277 95,439
Savings accounts 145,874 141,316 133,792
Money market accounts 514,274 541,089 478,145
Time accounts     159,500       161,457       161,025
Total deposits 1,681,346 1,728,226 1,585,120
Federal Home Loan Bank ("FHLB") and other borrowings 19,350 67,000 15,000
Subordinated debentures 5,445 5,395 5,238
Interest payable and other liabilities     15,815       16,040       16,285
Total liabilities     1,721,956       1,816,661       1,621,643
 
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 - 6,116,473, 6,068,543 and 5,967,614 at March 31, 2016, December 31, 2015 and March 31, 2015, respectively

86,133 84,727 83,011
Retained earnings 133,681 129,553 119,652
Accumulated other comprehensive income, net     1,832       193       1,843
Total stockholders' equity     221,646       214,473       204,506
Total liabilities and stockholders' equity     $ 1,943,602       $ 2,031,134       $ 1,826,149
 
 
BANK OF MARIN BANCORP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
   
Three months ended
(in thousands, except per share amounts; unaudited)     March 31, 2016     December 31, 2015     March 31, 2015
Interest income        
Interest and fees on loans $ 17,141 $ 15,590 $ 15,379
Interest on investment securities
Securities of U.S. government agencies 1,352 1,461 1,035
Obligations of state and political subdivisions 586 577 540
Corporate debt securities and other 105 139 205
Interest on Federal funds sold and short-term investments     11       28       21  
Total interest income 19,195 17,795 17,180
Interest expense
Interest on interest-bearing transaction accounts 27 27 30
Interest on savings accounts 14 14 12
Interest on money market accounts 111 120 127
Interest on time accounts 196 204 231
Interest on FHLB and other borrowings 100 81 78
Interest on subordinated debentures     109       106       104  
Total interest expense     557       552       582  
Net interest income 18,638 17,243 16,598
Provision for loan losses           500        
Net interest income after provision for loan losses     18,638       16,743       16,598  
Non-interest income
Service charges on deposit accounts 456 461 525
Wealth Management and Trust Services 566 582 638
Debit card interchange fees 338 358 347
Merchant interchange fees 113 115 130
Earnings on bank-owned life insurance 201 204 203
Dividends on FHLB stock 169 186 148
Gains on investment securities, net 110 (1 ) 8
Other income     210       193       190  
Total non-interest income     2,163       2,098       2,189  
Non-interest expense
Salaries and related benefits 6,748 6,002 6,790
Occupancy and equipment 1,281 1,317 1,342
Depreciation and amortization 453 456 421
Federal Deposit Insurance Corporation insurance 261 258 236
Data processing 856 905 786
Professional services 498 549 564
Directors' expense 189 206 191
Information technology 193 182 152
Reversal of losses on off-balance sheet commitments (277 ) (201 )
Other expense     1,531       1,537       1,567  
Total non-interest expense     12,010       11,135       11,848  
Income before provision for income taxes 8,791 7,706 6,939
Provision for income taxes     3,145       2,781       2,482  
Net income     $ 5,646       $ 4,925       $ 4,457  
Net income per common share:
Basic $ 0.93 $ 0.82 $ 0.75
Diluted $ 0.93 $ 0.81 $ 0.74
Weighted average shares used to compute net income per common share:
Basic 6,048 6,033 5,921
Diluted 6,090 6,083 6,048
Dividends declared per common share     $ 0.25       $ 0.24       $ 0.22  
Comprehensive income:
Net income $ 5,646 $ 4,925 $ 4,457
Other comprehensive income

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

2,923 (2,456 ) 1,317

Reclassification adjustment for (gains) losses on available-for-sale securities included in net income

    (110 )     1       (8 )

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

2,813 (2,455 ) 1,309
Deferred tax expense (benefit)     1,174       (1,048 )     554  
Other comprehensive income (loss), net of tax     1,639       (1,407 )     755  
Comprehensive income     $ 7,285       $ 3,518       $ 5,212  
 
 
BANK OF MARIN BANCORP
AVERAGE STATEMENTS OF CONDITION AND ANALYSIS OF NET INTEREST INCOME
                   
Three months ended Three months ended Three months ended
March 31, 2016   December 31, 2015   March 31, 2015
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 $ 8,996 $ 11 0.48 % $ 41,604 $ 28 0.26 % $ 38,295 $ 21 0.22 %
Investment securities 2, 3 428,055 2,264 2.12 % 460,811 2,391 2.08 % 311,978 1,927 2.47 %
Loans 1, 3, 4     1,442,601     17,456     4.79 %   1,377,932     15,890     4.51 %   1,351,791     15,675     4.64 %
Total interest-earning assets 1 1,879,652 19,731 4.15 % 1,880,347 18,309 3.81 % 1,702,064 17,623 4.14 %
Cash and non-interest-bearing due from banks 29,823 45,063 41,073
Bank premises and equipment, net 9,143 9,465 9,839
Interest receivable and other assets, net     58,195             58,342             58,132          
Total assets     $ 1,976,813             $ 1,993,217             $ 1,811,108          
Liabilities and Stockholders' Equity
Interest-bearing transaction accounts $ 100,990 $ 27 0.11 % $ 101,299 $ 27 0.11 % $ 92,376 $ 30 0.13 %
Savings accounts 142,499 14 0.04 % 139,281 13 0.04 % 133,877 12 0.04 %
Money market accounts 528,984 111 0.08 % 538,330 120 0.09 % 486,830 127 0.11 %
Time accounts including CDARS 160,943 196 0.50 % 155,899 205 0.52 % 154,118 231 0.59 %
Overnight borrowings1 20,567 22 0.42 % 2,535 2 0.31 % 397 %
FHLB fixed-rate advances 15,000 78 2.07 % 15,000 79 2.07 % 15,000 78 2.07 %
Subordinated debentures 1     5,418     109     7.96 %   5,367     106     7.73 %   5,207     104     7.99 %
Total interest-bearing liabilities 974,401 557 0.23 % 957,711 552 0.23 % 887,805 582 0.27 %
Demand accounts 767,579 805,118 705,024
Interest payable and other liabilities 15,980 16,014 15,594
Stockholders' equity     218,853             214,374             202,685          
Total liabilities & stockholders' equity     $ 1,976,813             $ 1,993,217             $ 1,811,108          
Tax-equivalent net interest income/margin 1         $ 19,174     4.04 %       $ 17,757     3.70 %       $ 17,041     4.00 %
Reported net interest income/margin 1         $ 18,638     3.92 %       $ 17,243     3.59 %       $ 16,598     3.90 %
Tax-equivalent net interest rate spread             3.92 %           3.58 %           3.88 %
 
 

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.

Contacts

Bank of Marin Bancorp
Sandy Pfaff, 415-819-7447
sandy@pfaffpr.com

Release Summary

Bank of Marin Bancorp, "Bancorp" (NASDAQ: BMRC), parent company of Bank of Marin, announced record quarterly earnings of $5.6 million in the first quarter of 2016.

Contacts

Bank of Marin Bancorp
Sandy Pfaff, 415-819-7447
sandy@pfaffpr.com