Bank of Marin Bancorp - FORM 8-K - EX-99.1 - EXHIBIT 99.1

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8-K - BANK OF MARIN BANCORP 8-K 7-25-2011 - Bank of Marin Bancorp	form8k.htm

EXHIBIT 99.1

FOR IMMEDIATE RELEASE

CONTACT: Sandy Pfaff

415-459-8800

sandy@pfaffpr.com

BANK OF MARIN BANCORP REPORTS SOLID SECOND QUARTER EARNINGS

DISCIPLINED ACQUISITION APPROACH AND STRONG DEPOSIT GROWTH DRIVES POSITIVE RESULTS

NOVATO, CA, July 25, 2011 – Bank of Marin Bancorp (“Bancorp”, NASDAQ: BMRC) announced second quarter 2011 earnings of $3.4 million, up 3% from $3.3 million in the second quarter of 2010. Diluted earnings per share were $0.64, up $0.01 from the same quarter a year ago. Earnings for the six-month period ended June 30, 2011 totaled $7.9 million, up 26% from $6.3 million in the same period a year ago. Diluted earnings per share (EPS) for the six-month period ended June 30, 2011 totaled $1.48, up $0.29 from $1.19 for the same period a year ago. Earnings for the first half of 2011 include the impact of the FDIC1-assisted acquisition of certain assets and the assumption of certain liabilities of the former Charter Oak Bank on February 18, 2011 (the “Acquisition”).

“Our earnings reflect the positive impact of the recently acquired Charter Oak portfolio, as well as certain one-time Acquisition related costs. We expect the uncharacteristic fluctuations related to the accounting for the acquired loan portfolio to be reduced over the next several quarters," said Russell A. Colombo, President and CEO. "In June we successfully completed the conversion and integration of our Napa operations, and are very pleased with our results to date.”

Bancorp also provided the following highlights on its operating and financial performance for the second quarter of 2011:

Accretion on purchased non-credit impaired loans recorded to interest income totaled $887 thousand and $1.3 million in the second and first quarter of 2011, respectively. The current level of accretion is expected to continue to decline. Non-recurring pre-tax Acquisition-related third-party costs totaled $642 thousand (7 cents of EPS) in the second quarter of 2011 and $348 thousand (4 cents of EPS) in the first quarter of 2011.

Total deposits grew $139.7 million or 14.0%, over a year ago, with non-interest bearing deposits growing $88.7 million or 34.4%. The increase reflects the impact of the assumption of $93.9 million of deposits at fair value of the former Charter Oak Bank, as well as growth in other markets, partly offset by decreases in CDARS® time deposits and the disposition of the internet time deposits assumed as part of the Acquisition.

The tax equivalent net interest margin totaled 5.51% in the second quarter of 2011, up from 5.01% in the same quarter a year ago, and 5.44% last quarter, reflecting the impact of accounting for acquired loans.

Loans grew $47.3 million, or 5.0%, over a year ago, including loans purchased as part of the Acquisition.

Credit quality remains solid with non-performing loans at 0.88% of loans, down from 1.15% a year ago, and 0.92% at March 31, 2011. Accruing loans past due 30 to 89 days decreased from $3.7 million a year ago and $21.9 million at March 31, 2011 to $763 thousand at June 30, 2011. Results also include a $2.0 million higher loan loss provision from the prior quarter, primarily relating to the charge-offs of four non-performing loans, and to a lesser extent, newly identified specific reserves on certain acquired loans.

In a conscious effort to deploy excess liquidity, Bancorp grew the investment securities portfolio by $59.3 million (primarily securities of U.S. Government agencies) in the second quarter of 2011.

__________________________

1 Federal Deposit Insurance Corporation

Loans and Credit Quality

Total loans reached $986.6 million at June 30, 2011, representing an increase of $47.3 million, or 5.0%, over a year ago, and an increase of $7.7 million or 0.8% from March 31, 2011. The increase from the same quarter a year ago largely reflects $61.8 million of loans purchased at fair value without loss share as part of the Acquisition, partially offset by a decreased emphasis on certain product lines, including construction lending, as well as payoffs due to the successful resolution of several high credit risk loans.

"We experienced modest loan growth this quarter which was in line with our expectations based on current market demand, and a conscious effort to de-emphasize certain product lines," said Christina Cook, Chief Financial Officer. "Our credit quality continues to be healthy as a result of our disciplined lending practices and strong relationships with our customers."

Non-performing loans decreased to $8.7 million or 0.88% of Bancorp’s loan portfolio at June 30, 2011, from $10.8 million or 1.15% a year ago and $9.0 million, or 0.92% at March 31, 2011. Accruing loans past due 30 to 89 days decreased from $3.7 million a year ago and $21.9 million at March 31, 2011 to $763 thousand at June 30, 2011. The decrease in past due loans from last quarter relates to $21.1 million of past due loans that have become current or paid off.

Non-performing loans exclude purchased credit-impaired (“PCI”) loans, unless such loans experience credit quality deterioration post Acquisition. PCI loans totaled $7.2 million at June 30th, 2011 (excluding loans totaling $701 thousand that have experienced credit deterioration post Acquisition), compared to PCI loans of $9.2 million at March 31, 2011. These loans were reflected at fair value as of the Acquisition date, and are excluded from the non-performing designation as their accretable yield interest recognition is independent from the underlying contractual loan delinquency status.

Bancorp’s loan loss provision totaled $3.0 million in the second quarter of 2011, an increase of $1.7 million from the same quarter a year ago, and an increase of $2.0 million from the first quarter of 2011. The provision for loan losses totaled $4.1 million and $2.9 million in the first half of 2011 and 2010, respectively. Net charge-offs in the second quarter of 2011 totaled $2.1 million compared to $225 thousand in the same quarter a year ago, and $372 thousand in the prior quarter. The increase to the provision for loan losses and net charge-offs primarily reflects the write-off of two unsecured commercial loans, as well as declines in the values of real estate collateral securing one problem commercial loan and one problem construction loan. These loans were part of Bancorp’s originated loan portfolio. The allowance for loan losses of $13.9 million totaled 1.41% of loans at June 30, 2011, compared to 1.25% and 1.34% at June 30, 2010 and March 31, 2011, respectively. The increases in the allowance for loan losses as a percentage of loans from both a year ago and a quarter ago reflect newly identified specific reserves on certain acquired loans.

Deposits

Total deposits grew $139.7 million, or 14%, over a year ago to $1.1 billion. The higher level of deposits reflects growth in most deposit categories, except for CDARS® time deposits which decreased $49.8 million. Demand deposits comprised 30.4% of total deposits at June 30, 2011, compared to 25.8% a year ago. In addition, Management has strategically allowed the $9.0 million internet deposits assumed as part of the Acquisition to run off.

"Our deposit growth continues to be very strong, driven by our successful Acquisition of Charter Oak Bank in Napa and our expansion into new markets," said Russell A. Colombo. "We have also experienced significant deposit increases in our core markets, which is a testament to the confidence our customers have in us."

Earnings

Net interest income of $17.0 million in the quarter ended June 30, 2011 increased $3.2 million, or 23.6%, from the same period last year, and increased $1.1 million, or 7.1%, from the prior quarter. The net interest income for the first half of 2011 totaled $32.9 million, representing an increase of $6.0 million, or 22.3% from the same period last year. The increases primarily reflect the Acquisition of loans from the former Charter Oak Bank and a reduction in the cost of deposits. The tax-equivalent net interest margin was 5.51% in the second quarter of 2011, compared to 5.01% in the same quarter last year and 5.44% in the first quarter of 2011. The tax-equivalent net interest margin was 5.48% in the first half of 2011 compared to 5.00% in the first half of 2010.

The acquired non-credit impaired loans were initially measured and recorded at their estimated fair values at Acquisition date and are being accreted back to their unpaid principal balances over the remaining lives of the loans through interest income. Excluding accretion, one-time third-party Acquisition-related costs, allocated overhead, allocated cost of funds and bargain purchase gain, the acquired operations of the former Charter Oak Bank contributed approximately $618 thousand, after tax, to Bancorp’s earnings in the first half of 2011.

Non-interest income in the second quarter of 2011 totaled $1.6 million and remained relatively unchanged from the same period last year and from the prior quarter. Non-interest income for the first half of 2011 totaled $3.2 million, an increase of $326 thousand, or 11% from the first half of 2010. The increase relates to the pre-tax bargain purchase gain of $146 thousand from the Acquisition and higher Wealth Management and Trust Services fees.

Non-interest expense totaled $10.0 million in the second quarter of 2011, an increase of $1.4 million, or 16.4%, from the same quarter a year ago and increased $868 thousand, or 9.5%, from the prior quarter. Non-interest expense totaled $19.1 million and $16.8 million in the first half of 2011 and 2010, respectively, representing a 13.8% increase. The increases primarily reflect higher personnel costs associated with franchise expansion, as well as data processing costs associated with the Acquisition. Bancorp incurred one-time Acquisition-related third-party costs of approximately $642 thousand in the second quarter of 2011 and $348 thousand in the first quarter of 2011. Bancorp does not expect to incur significant one-time Acquisition-related third-party costs going forward.

About Bank of Marin Bancorp

Bank of Marin Bancorp's assets total $1.3 billion. Bank of Marin, as the sole subsidiary of Bank of Marin Bancorp, is the largest community bank in Marin County with seventeen offices in Marin, San Francisco, Napa and Sonoma counties. The Bank's Administrative offices are located in Novato, California. Bank of Marin offers business and personal banking, private banking and wealth management services, with a strong focus on supporting the local community. Bank of Marin Bancorp is included in the Russell 2000 Small-Cap Index, is recognized as a Top 200 Community Bank, ranked number 43 in the U.S. by US Banker Magazine, and has received the highest five star rating from Bauer Financial for more than ten years (www.bauerfinancial.com). Celebrating its 21st anniversary in 2011, Bank of Marin has been recognized 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.

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.

BANK OF MARIN BANCORP

FINANCIAL HIGHLIGHTS

Year To Year Comparison

June 30, 2011

(dollars in thousands, except per share data; unaudited)

SECOND QUARTER	QTD 2011			QTD 2010			CHANGE			% CHANGE

NET INCOME	$	3,439		$	3,338		$	101			3.0	%
DILUTED EARNINGS PER COMMON SHARE	$	0.64		$	0.63		$	0.01			1.6	%
RETURN ON AVERAGE ASSETS (ROA)		1.04	%		1.14	%		(0.10	%)		(8.8	%)
RETURN ON AVERAGE EQUITY (ROE)		10.78	%		11.71	%		(0.93	%)		(7.9	%)
EFFICIENCY RATIO		53.80	%		56.29	%		(2.49	%)		(4.4	%)
TAX-EQUIVALENT NET INTEREST MARGIN 1		5.51	%		5.01	%		0.50	%		10.0	%
NET CHARGE-OFFS	$	2,149		$	225		$	1,924			855.1	%
NET CHARGE-OFFS TO AVERAGE LOANS		0.22	%		0.02	%		0.20	%		1000.0	%

YEAR-TO-DATE	YTD 2011			YTD 2010			CHANGE			% CHANGE

NET INCOME	$	7,948		$	6,285		$	1,663			26.5	%
DILUTED EARNINGS PER COMMON SHARE	$	1.48		$	1.19		$	0.29			24.4	%
RETURN ON AVERAGE ASSETS (ROA)		1.23	%		1.09	%		0.14	%		12.8	%
RETURN ON AVERAGE EQUITY (ROE)		12.72	%		11.24	%		1.48	%		13.2	%
EFFICIENCY RATIO		53.04	%		56.54	%		(3.50	%)		(6.2	%)
TAX-EQUIVALENT NET INTEREST MARGIN 1		5.48	%		5.00	%		0.48	%		9.6	%
NET CHARGE-OFFS	$	2,522		$	1,745		$	777			44.5	%
NET CHARGE-OFFS TO AVERAGE LOANS		0.26	%		0.19	%		0.07	%		36.8	%

AT PERIOD END	June 30, 2011			June 30, 2010			CHANGE			% CHANGE

TOTAL ASSETS	$	1,337,393		$	1,185,536		$	151,857			12.8	%

LOANS:
COMMERCIAL	$	177,255		$	164,711		$	12,544			7.6	%
REAL ESTATE
COMMERCIAL OWNER-OCCUPIED	$	164,990		$	152,504		$	12,486			8.2	%
COMMERCIAL INVESTOR-OWNED	$	390,549		$	347,436		$	43,113			12.4	%
CONSTRUCTION	$	66,504		$	88,358		$	(21,854	)		(24.7	%)
HOME EQUITY	$	95,212		$	87,947		$	7,265			8.3	%
OTHER RESIDENTIAL	$	66,886		$	70,719		$	(3,833	)		(5.4	%)
INSTALLMENT AND OTHER CONSUMER LOANS	$	25,238		$	27,618		$	(2,380	)		(8.6	%)
TOTAL LOANS	$	986,634		$	939,293		$	47,341			5.0	%

NON-PERFORMING LOANS 2:
COMMERCIAL	$	3,669		$	1,354		$	2,315			171.0	%
REAL ESTATE
COMMERCIAL OWNER-OCCUPIED	$	293		$	3,455		$	(3,162	)		(91.5	%)
CONSTRUCTION	$	3,263		$	5,654		$	(2,391	)		(42.3	%)
HOME EQUITY	$	710		$	0		$	710		NM
OTHER RESIDENTIAL	$	138		$	0		$	138		NM
INSTALLMENT AND OTHER CONSUMER LOANS	$	621		$	310		$	311			100.3	%
TOTAL NON-PERFORMING LOANS	$	8,694		$	10,773		$	(2,079	)		(19.3	%)

TOTAL ACCRUING LOANS 30-89 DAYS PAST DUE3	$	763		$	3,675		$	(2,912	)		(79.2	%)
LOAN LOSS RESERVE TO LOANS		1.41	%		1.25	%		0.16	%		12.8	%
LOAN LOSS RESERVE TO NON-PERFORMING LOANS		1.60	x		1.09	x		0.51	x		46.8	%
NON-PERFORMING LOANS TO TOTAL LOANS		0.88	%		1.15	%		(0.27	%)		(23.5	%)
TEXAS RATIO 4		6.11	%		8.52	%		(2.41	%)		(28.3	%)

TOTAL DEPOSITS	$	1,138,906		$	999,178		$	139,728			14.0	%
LOAN TO DEPOSIT RATIO		86.6	%		94.0	%		(7.4	%)		(7.9	%)
STOCKHOLDERS' EQUITY	$	129,058		$	115,968		$	13,090			11.3	%
BOOK VALUE PER SHARE	$	24.25		$	22.06		$	2.19			9.9	%
TANGIBLE COMMON EQUITY TO TANGIBLE ASSETS 5		9.60	%		9.78	%		(0.18	%)		(1.8	%)
TOTAL RISK BASED CAPITAL RATIO-BANK 6		12.6	%		12.2	%		0.4	%		3.3	%
TOTAL RISK BASED CAPITAL RATIO-BANCORP6		13.0	%		12.8	%		0.2	%		1.6	%

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 $1.5 million and $908 thousand at June 30, 2011 and 2010, respectively. Excludes purchased-credit impaired (PCI) loans that have not experienced credit quality deterioration post-acquisition with a carrying value of $7.2 million at June 30, 2011 and zero at June 30, 2010. These amounts are excluded as PCI loan accretable yield interest recognition is independent from the underlying contractual loan delinquency status.

3 Excludes purchased-credit impaired loans.

4 (Non-performing assets + 90 day delinquent loans)/(tangible common equity + allowance for loan losses).

5 Tangible common equity includes common stock, retained earnings and unrealized gain on available for sale securities, net of tax, less intangible assets. Tangible assets exclude core deposit intangibles totaling $707 thousand at June 30, 2011 and zero at June 30, 2010.

6 Current period estimated.

BANK OF MARIN BANCORP

CONSOLIDATED STATEMENTS OF CONDITION

at June 30, 2011, March 31, 2011 and June 30, 2010

(in thousands, except share data; unaudited)	June 30, 2011		March 31, 2011		June 30, 2010

Assets
Cash and due from banks	$	88,043	$	109,850	$	50,477
Short-term investments		22,116		19,110		18,706
Cash and cash equivalents		110,159		128,960		69,183

Investment securities
Held to maturity, at amortized cost		35,514		34,866		30,324
Available for sale (at fair value; amortized cost $164,731, $107,118 and $108,004 at June 30, 2011, March 31, 2011,and June 30, 2010, respectively)		167,406		108,726		111,781
Total investment securities		202,920		143,592		142,105

Loans, net of allowance for loan losses of $13,920, $13,069 and $11,773 at June 30, 2011, March 31, 2011 and June 30, 2010, respectively		972,714		965,881		927,520
Bank premises and equipment, net		9,280		8,750		8,047
Interest receivable and other assets		42,320		43,516		38,681

Total assets	$	1,337,393	$	1,290,699	$	1,185,536

Liabilities and Stockholders' Equity

Liabilities
Deposits
Non-interest bearing	$	346,317	$	313,599	$	257,643
Interest bearing
Transaction accounts		133,429		119,331		98,375
Savings accounts		72,458		67,711		52,041
Money market accounts		403,782		393,867		382,277
CDARS® time accounts		31,674		31,670		81,463
Other time accounts		151,246		162,182		127,379
Total deposits		1,138,906		1,088,360		999,178

Federal Home Loan Bank borrowings		55,000		55,000		55,000
Subordinated debenture		5,000		5,000		5,000
Interest payable and other liabilities		9,429		16,855		10,390

Total liabilities		1,208,335		1,165,215		1,069,568

Stockholders' Equity
Preferred stock, no par value, $1,000 per share liquidation preference
Authorized - 5,000,000 shares; none issued		---		---		---
Common stock, no par value
Authorized - 15,000,000 shares
Issued and outstanding - 5,321,227 shares, 5,307,247 shares and 5,256,174 shares at June 30, 2011, March 31, 2011 and June 30, 2010, respectively		56,265		55,898		54,420
Retained earnings		71,241		68,653		59,357
Accumulated other comprehensive income, net		1,552		933		2,191

Total stockholders' equity		129,058		125,484		115,968

Total liabilities and stockholders' equity	$	1,337,393	$	1,290,699	$	1,185,536

BANK OF MARIN BANCORP

CONSOLIDATED STATEMENTS OF INCOME

	Three months ended						Six months ended
(in thousands, unaudited)	June 30, 2011		Mar. 31, 2011		June 30, 2010		June 30, 2011		June 30, 2010

Interest income
Interest and fees on loans	$	16,862	$	15,900	$	14,169	$	32,762	$	27,850
Interest on investment securities
Securities on U.S. Government agencies		745		733		885		1,478		1,613
Obligations of state and political subdivisions		303		302		285		605		571
Corporate debt securities and other		171		111		138		282		308
Interest on Federal funds sold and short-term investments		56		40		28		96		50
Total interest income		18,137		17,086		15,505		35,223		30,392

Interest expense
Interest on interest-bearing transaction accounts		48		38		26		86		49
Interest on savings accounts		25		29		27		54		52
Interest on money market accounts		341		337		729		678		1,526
Interest on CDARS® time accounts		48		94		233		142		442
Interest on other time accounts		315		358		377		673		731
Interest on borrowed funds		357		352		356		709		707
Total interest expense		1,134		1,208		1,748		2,342		3,507

Net interest income		17,003		15,878		13,757		32,881		26,885
Provision for loan losses		3,000		1,050		1,350		4,050		2,900
Net interest income after provision for loan losses		14,003		14,828		12,407		28,831		23,985

Non-interest income
Service charges on deposit accounts		468		443		463		911		909
Wealth Management and Trust Services		469		434		368		903		763
Other income		644		722		674		1,366		1,182
Total non-interest income		1,581		1,599		1,505		3,180		2,854

Non-interest expense
Salaries and related benefits		5,220		4,929		4,561		10,149		9,167
Occupancy and equipment		1,093		907		914		2,000		1,812
Depreciation and amortization		314		308		360		622		698
FDIC insurance		214		387		375		601		737
Data processing		909		582		485		1,491		931
Professional services		740		733		454		1,473		886
Other expense		1,508		1,284		1,442		2,792		2,582
Total non-interest expense		9,998		9,130		8,591		19,128		16,813
Income before provision for income taxes		5,586		7,297		5,321		12,883		10,026

Provision for income taxes		2,147		2,788		1,983		4,935		3,741
Net income	$	3,439	$	4,509	$	3,338	$	7,948	$	6,285


Net income per common share:
Basic	$	0.65	$	0.85	$	0.64	$	1.50	$	1.20
Diluted	$	0.64	$	0.84	$	0.63	$	1.48	$	1.19

Weighted average shares used to compute net income per common share:
Basic		5,300		5,283		5,234		5,292		5,226
Diluted		5,385		5,366		5,308		5,376		5,302

Dividends declared per common share	$	0.16	$	0.16	$	0.15	$	0.32	$	0.30

Average Statements of Condition and Analysis of Net Interest Income

	Three months ended							Three months ended							Three months ended
	June 30, 2011							March 31, 2011							June 30, 2010
			Interest							Interest							Interest
	Average		Income/		Yield/			Average		Income/		Yield/			Average		Income/		Yield/
(in thousands, unaudited)	Balance		Expense		Rate			Balance		Expense		Rate			Balance		Expense		Rate
Assets
Interest-bearing due from banks (1)	$	89,952	$	56		0.25	%	$	62,374	$	40		0.26	%	$	31,457	$	28		0.35	%
Investment securities
U.S. Government agencies (2)		117,057		745		2.55	%		92,172		733		3.18	%		96,255		885		3.68	%
Corporate CMOs and other (2)		16,401		171		4.17	%		15,872		111		2.80	%		12,586		138		4.39	%
Obligations of state and political subdivisions (3)		34,986		460		5.26	%		34,900		460		5.27	%		30,347		433		5.71	%
Loans and banker's acceptances (1) (3) (4)		979,550		16,955		6.85	%		979,674		15,988		6.53	%		932,468		14,236		6.04	%
Total interest-earning assets (1)		1,237,946		18,387		5.88	%		1,184,992		17,332		5.85	%		1,103,113		15,720		5.64	%
Cash and non-interest-bearing due from banks		45,133							42,378							31,192
Bank premises and equipment, net		8,971							8,468							7,994
Interest receivable and other assets, net		38,391							31,400							30,807
Total assets	$	1,330,441						$	1,267,238						$	1,173,106
Liabilities and Stockholders' Equity
Interest-bearing transaction accounts	$	127,544	$	48		0.15	%	$	115,067	$	38		0.13	%	$	96,768	$	26		0.11	%
Savings accounts		69,357		25		0.14	%		62,574		29		0.19	%		50,954		27		0.21	%
Money market accounts		395,159		341		0.35	%		382,794		337		0.36	%		386,755		729		0.76	%
CDARS® time accounts		31,879		48		0.60	%		54,432		94		0.70	%		76,498		233		1.22	%
Other time accounts		156,008		315		0.81	%		157,631		358		0.92	%		122,972		377		1.23	%
FHLB fixed-rate advances		55,000		320		2.33	%		58,934		316		2.17	%		55,000		319		2.33	%
Subordinated debenture (1)		5,000		37		2.93	%		5,000		36		2.88	%		5,000		37		2.93	%
Total interest-bearing liabilities		839,947		1,134		0.54	%		836,432		1,208		0.59	%		793,947		1,748		0.88	%
Demand accounts		346,469							298,075							256,211
Interest payable and other liabilities		16,062							8,635							8,622
Stockholders' equity		127,963							124,096							114,326
Total liabilities & stockholders' equity	$	1,330,441						$	1,267,238						$	1,173,106
Tax-equivalent net interest income/margin (1)			$	17,253		5.51	%			$	16,124		5.44	%			$	13,972		5.01	%
Reported net interest income/margin (1)			$	17,003		5.43	%			$	15,878		5.36	%			$	13,757		4.93	%
Tax-equivalent net interest rate spread						5.34	%						5.26	%						4.76	%

	Six months ended							Six months ended
	June 30, 2011							June 30, 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)	$	76,240	$	96		0.25	%	$	29,122	$	50		0.34	%
Investment securities
U.S. Government agencies (2)		104,683		1,478		2.82	%		88,602		1,613		3.64	%
Corporate CMOs and other (2)		16,138		282		3.49	%		13,365		308		4.61	%
Obligations of state and political subdivisions (3)		34,943		921		5.27	%		30,365		870		5.73	%
Loans and banker's acceptances (1) (3) (4)		979,611		32,943		6.69	%		925,599		27,978		6.01	%
Total interest-earning assets (1)		1,211,615		35,720		5.86	%		1,087,053		30,819		5.64	%
Cash and non-interest-bearing due from banks		43,763							33,233
Bank premises and equipment, net		8,721							7,985
Interest receivable and other assets, net		34,915							30,410
Total assets	$	1,299,014						$	1,158,681
Liabilities and Stockholders' Equity
Interest-bearing transaction accounts	$	121,340	$	86		0.14	%	$	93,714	$	49		0.11	%
Savings accounts		65,984		54		0.17	%		49,768		52		0.21	%
Money market accounts		389,011		678		0.35	%		396,897		1,526		0.78	%
CDARS® time accounts		43,093		142		0.66	%		68,429		442		1.30	%
Other time accounts		156,815		673		0.87	%		117,984		731		1.25	%
FHLB borrowings		56,956		636		2.25	%		55,000		635		2.33	%
Subordinated debenture (1)		5,000		73		2.90	%		5,000		72		2.86	%
Total interest-bearing liabilities		838,199		2,342		0.56	%		786,792		3,507		0.90	%
Demand accounts		322,406							250,694
Interest payable and other liabilities		12,369							8,427
Stockholders' equity		126,040							112,768
Total liabilities & stockholders' equity	$	1,299,014						$	1,158,681
Tax-equivalent net interest income/margin (1)			$	33,378		5.48	%			$	27,312		5.00	%
Reported net interest income/margin (1)			$	32,881		5.40	%			$	26,885		4.92	%
Tax-equivalent net interest rate spread						5.30	%						4.74	%

(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 asa component of stockholders' equity.

(3) Yields and interest income on tax-exempt securities and loans are presented on a taxable-equivalent basis using the Federal statutory rate of 35percent.

(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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