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

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8-K - 8-K - Bank of Marin Bancorp	form8k-q32015.htm

EXHIBIT 99.1




FOR IMMEDIATE RELEASE	CONTACT:	Sandy Pfaff
		415-819-7447
		sandy@pfaffpr.com

BANK OF MARIN BANCORP REPORTS QUARTERLY EARNINGS OF $4.8 MILLION

NOVATO, CA, October 16, 2015 - Bank of Marin Bancorp, "Bancorp" (NASDAQ: BMRC), parent company of Bank of Marin, announced earnings of $4.8 million in the third quarter of 2015, compared to $4.3 million in the second quarter of 2015 and $5.4 million in the third quarter of 2014. Diluted earnings per share totaled $0.79 in the third quarter, compared to $0.71 in the prior quarter and $0.89 in the same quarter a year ago. Year-to-date earnings totaled $13.5 million compared to $15.1 million for the same nine-month period a year ago. Year-to-date diluted earnings per share totaled $2.23 compared to $2.51 for the same period in 2014.

“Loan originations continued to trend up for the third straight quarter. That combined with the lowest quarterly loan payoffs so far this year resulted in strong net loan growth for the quarter," said Russell A. Colombo, President and Chief Executive Officer.

Bancorp also provided the following highlights on its operating and financial performance for the third quarter of 2015:

•

Loans totaled $1,363.2 million at September 30, 2015, compared to $1,339.2 million at June 30, 2015 and $1,361.0 million at September 30, 2014. The third quarter was highlighted by strong loan volume of approximately $57 million. Although payoffs offset some of the new volume, net loans grew by $24.0 million in the quarter, including utilization and amortization on existing loans. Loan payoffs were distributed among all loan types. Less than 10% were loans lost to competition.

•

Credit quality continues to improve with non-accrual loans trending downward, representing 0.19% of total loans at September 30, 2015, down from 0.53% at June 30, 2015 and 0.73% a year ago. The Texas ratio was 1.41% at September 30, 2015, down from 3.54% at the end of the prior quarter, and 5.14% a year ago. Classified loans totaled $24.0 million, down from $27.8 million at the end of the prior quarter and $39.0 million a year ago. No provision for loan losses was recorded in the third quarter of 2015 as the continued improvement in credit quality reinforced the adequacy of the existing loan loss reserve.

•

The total risk-based capital ratio for Bancorp was 14.0% at September 30, 2015 compared to 14.1% at June 30, 2015. The common equity tier one ratio, a regulatory ratio under Basel III (Basel Committee on Bank Supervision guidelines for determining regulatory capital), was 12.7% at September 30, 2015, compared to 12.8% at June 30, 2015. All capital ratios are well above regulatory requirements for a well-capitalized institution under the new requirements that took effect January 1, 2015. Tangible common equity to tangible assets totaled 10.8% at September 30, 2015, compared to 10.6% at June 30, 2015 and 10.3% at September 30, 2014.


•	The cashless exercise of a warrant to purchase common stock at a per share exercise price of $26.63 in September 2015 resulted in a net increase of 70,591 shares of outstanding common stock. The warrant was issued to the U.S. Treasury under the United States Department of the Treasury Capital Purchase Program (the “TCPP”) in 2008 and was subsequently auctioned to two institutional investors.

Loans and Credit Quality

Loans totaled $1,363.2 million at September 30, 2015, compared to $1,339.2 million at June 30, 2015 and $1,361.0 million at September 30, 2014. There was good distribution of loan volume during the quarter across our entire footprint. Commercial real estate and commercial and industrial (and related owner-occupied commercial real estate) accounted for the vast majority of new loan volume.

Non-accrual loans totaled $2.6 million at September 30, 2015, down from $7.1 million at June 30, 2015 and $9.8 million a year ago. The decrease in non-accrual loans from the prior quarter and the same quarter a year ago primarily relates to a $2.7 million loan that was returned to accrual status and the payoff of a $1.4 million loan. Accruing loans past due 30 to 89 days totaled $3.4 million at September 30, 2015, compared to $1.2 million at June 30, 2015 and $299 thousand a year ago. The increase in past due loans is primarily due to five loans totaling $1.2 million, which paid off subsequent to quarter end.

There was no provision for loan losses recorded in the third quarter of 2015, consistent with the prior quarter and the same quarter a year ago, as the existing level of loan loss reserve and continued improvement in credit quality did not warrant a provision. The ratio of loan loss reserve to loans totaled 1.06% at September 30, 2015, compared to 1.07% at June 30, 2015 and 1.11% at September 30, 2014.

Investments

The investment portfolio grew $71.8 million to $420.3 million at September 30, 2015 from June 30, 2015, as excess cash and new deposits were deployed into short duration high quality securities and municipal bonds.

Deposits

Deposits totaled $1,635.5 million at September 30, 2015, and grew $5.0 million over June 30, 2015 and $63.9 million over September 30, 2014. Non-interest bearing deposits increased to $752.3 million, or 46.0% of total deposits, compared to 45.5% at June 30, 2015 and 45.7% at September 30, 2014.

Earnings

"The high quality of the Bank's loan and deposit relationships and credit portfolio is reflected in our consistent performance," said Tani Girton, Chief Financial Officer. "Our 1.0% return on assets and 9.0% return on equity are supported by robust capital and liquidity as well as disciplined expense management."

Net interest income totaled $16.9 million in the third quarter of 2015, compared to $16.5 million in the prior quarter and $17.5 million in the same quarter a year ago. The increase from the prior quarter primarily relates to higher investment security and loan balances, as well as an additional day in the third quarter, partially offset by lower yields on loans and securities. The decrease from the same quarter a year ago relates to lower accretion income on acquired loans and new securities and loans yielding lower rates, partially offset by higher securities balances.

The tax-equivalent net interest margin was 3.79% in the third quarter of 2015, compared to 3.86% in the prior quarter and 4.03% in the same quarter a year ago. The decrease in tax-equivalent net interest margin from the prior quarter and the same quarter a year ago primarily relates to a higher percentage of securities on the balance sheet as average deposit levels outpaced loan growth. Additionally, income recognition on acquired loans continues to fall and interest rates on new loans are somewhat lower than the rates on loans that have paid off.

Loans acquired through the acquisition of other banks are classified as Purchased Credit Impaired ("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 $3.7 million, $5.1 million, and $5.2 million at September 30, 2015, June 30, 2015 and September 30, 2014, respectively.

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



	Three months ended
	September 30, 2015				June 30, 2015				September 30, 2014
(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		$	128	3 bps		$	120	3 bps		$	126	3 bps
Accretion on non-PCI loans		$	366	8 bps		$	465	11 bps		$	774	17 bps
Gains on payoffs of PCI loans		$	1	0 bps		$	—	0 bps		$	—	0 bps



	Nine months ended

	September 30, 2015			September 30, 2014
(dollars in thousands; unaudited)	Dollar Amount		Basis point impact to net interest margin	Dollar Amount		Basis point impact to net interest margin
Accretion on PCI loans	$	367	3 bps	$	494	4 bps
Accretion on non-PCI loans	$	1,202	9 bps	$	2,817	22 bps
Gains on payoffs of PCI loans	$	44	0 bps	$	622	5 bps

Non-interest income in the third quarter of 2015 totaled $2.3 million, compared to $2.6 million in the prior quarter and $2.3 million in the same quarter a year ago. Non-interest income decreased compared to the prior quarter as the second quarter included a $305 thousand special dividend from the Federal Home Loan Bank of San Francisco and a $147 thousand payment from a bankruptcy claim recorded in miscellaneous income. The decrease is partially offset by a $72 thousand gain on the sale of four investment securities in the third quarter of 2015.

Non-interest expense totaled $11.6 million in the third quarter of 2015, compared to $12.3 million in the prior quarter and $11.4 million in the same quarter a year ago. Several non-interest expense items decreased from the prior quarter including personnel expense by $372 thousand and one-time lease accounting adjustments of $337 thousand recorded in the second quarter of 2015. Reductions were partially offset by a $324 thousand provision for losses on off-balance sheet commitments due to an increase in available commitments in the third quarter of 2015, compared to a $109 thousand reversal in the second quarter related to the reduced effect of historical charge-offs. The increase in non-interest expense from the same quarter a year ago primarily relates to the provision for losses on off-balance sheet commitments recorded in the third quarter of 2015.

Earnings Call and Webcast Information

Bank of Marin Bancorp will webcast its third quarter earnings call on Friday, October 16, 2015 at 10:30 a.m. PT/ 1:30 p.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 on the “Investor Relations” page. 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 $1.9 billion. Founded in 1989 and headquartered in Novato, Bank of Marin is the sole subsidiary of Bank of Marin Bancorp (NASDAQ: BMRC). With 20 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 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, 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
September 30, 2015

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

QUARTER-TO-DATE		September 30, 2015				June 30, 2015			September 30, 2014
	NET INCOME	$	4,773			$	4,286		$	5,378
	DILUTED EARNINGS PER COMMON SHARE	$	0.79			$	0.71		$	0.89
	RETURN ON AVERAGE ASSETS (ROA)	1.00			%	0.93		%	1.15			%
	RETURN ON AVERAGE EQUITY (ROE)	9.00			%	8.33		%	10.98			%
	EFFICIENCY RATIO	60.67			%	64.62		%	57.23			%
	TAX-EQUIVALENT NET INTEREST MARGIN¹	3.79			%	3.86		%	4.03			%
	NET CHARGE-OFFS/(RECOVERIES)	$	(102	)		$	801		$	(149	)
	NET CHARGE-OFFS/(RECOVERIES) TO AVERAGE LOANS	(0.01		)	%	0.06		%	(0.01		)	%

YEAR-TO-DATE
	NET INCOME	$	13,516						$	15,079
	DILUTED EARNINGS PER COMMON SHARE	$	2.23						$	2.51
	RETURN ON AVERAGE ASSETS (ROA)	0.97			%				1.10			%
	RETURN ON AVERAGE EQUITY (ROE)	8.75			%				10.65			%
	EFFICIENCY RATIO	62.79			%				59.24			%
	TAX-EQUIVALENT NET INTEREST MARGIN¹	3.88			%				4.17			%
	NET CHARGE-OFFS/(RECOVERIES)	$	643						$	(74	)
	NET CHARGE-OFFS/(RECOVERIES) TO AVERAGE LOANS	0.05			%				(0.01		)	%

AT PERIOD END
	TOTAL ASSETS	$	1,882,794			$	1,870,762		$	1,802,657

	LOANS:
	COMMERCIAL AND INDUSTRIAL	$	189,967			$	185,020		$	201,516
	REAL ESTATE
	COMMERCIAL OWNER-OCCUPIED	$	239,335			$	235,121		$	234,493
	COMMERCIAL INVESTOR-OWNED	$	671,677			$	663,357		$	674,428
	CONSTRUCTION	$	54,921			$	48,754		$	45,948
	HOME EQUITY	$	113,731			$	115,493		$	109,655
	OTHER RESIDENTIAL	$	71,682			$	73,721		$	75,992
	INSTALLMENT AND OTHER CONSUMER LOANS	$	21,887			$	17,739		$	18,953
	TOTAL LOANS	$	1,363,200			$	1,339,205		$	1,360,985

	NON-PERFORMING LOANS²:
	COMMERCIAL AND INDUSTRIAL	$	354			$	347		$	193
	REAL ESTATE
	COMMERCIAL OWNER-OCCUPIED	$	—			$	1,403		$	1,403
	COMMERCIAL INVESTOR-OWNED	$	2,020			$	2,278		$	2,505
	CONSTRUCTION	$	2			$	2,733		$	5,173
	HOME EQUITY	$	172			$	265		$	436
	OTHER RESIDENTIAL	$	—			$	—		$	—
	INSTALLMENT AND OTHER CONSUMER LOANS	$	90			$	42		$	128
	TOTAL NON-ACCRUAL LOANS	$	2,638			$	7,068		$	9,838

	CLASSIFIED LOANS (GRADED SUBSTANDARD & DOUBTFUL)	$	24,023			$	27,806		$	38,999
	TOTAL ACCRUING LOANS 30-89 DAYS PAST DUE	$	3,361			$	1,151		$	299
	LOAN LOSS RESERVE TO LOANS	1.06			%	1.07		%	1.11			%
	LOAN LOSS RESERVE TO NON-ACCRUAL LOANS	5.48			x	2.03		x	1.53			x
	NON-ACCRUAL LOANS TO TOTAL LOANS	0.19			%	0.53		%	0.73			%
	TEXAS RATIO³	1.41			%	3.54		%	5.14			%

	TOTAL DEPOSITS	$	1,635,482			$	1,630,483		$	1,571,624
	LOAN-TO-DEPOSIT RATIO	83.4			%	82.1		%	86.6			%
	STOCKHOLDERS' EQUITY	$	211,954			$	207,182		$	195,674
	BOOK VALUE PER SHARE	$	34.97			$	34.63		$	33.00
	TANGIBLE COMMON EQUITY TO TANGIBLE ASSETS⁴	10.8			%	10.6		%	10.3			%
	TOTAL RISK-BASED CAPITAL RATIO-BANK⁵	13.6			%	13.8		%	13.3			%
	TOTAL RISK-BASED CAPITAL RATIO-BANCORP⁵	14.0			%	14.1		%	13.6			%
	FULL-TIME EQUIVALENT EMPLOYEES	257				261			257

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 $18.8 million, $16.1 million and $16.9 million at September 30, 2015, June 30, 2015 and September 30, 2014, respectively. Excludes purchased credit-impaired (PCI) loans with carrying values of $3.7 million, $3.7 million and $3.8 million that were accreting interest at September 30, 2015, June 30, 2015 and September 30, 2014, 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 $3.7 million, $5.1 million and $5.2 million at September 30, 2015, June 30, 2015 and September 30, 2014.
³ (Non-performing assets + 90 day delinquent loans)/(tangible common equity + allowance for loan losses).
⁴Tangible 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 $9.7 million, $9.9 million and $10.4 million at September 30, 2015, June 30, 2015 and September 30, 2014, respectively. Tangible assets exclude goodwill and intangible assets.
⁵ Current period estimated.

BANK OF MARIN BANCORP

CONSOLIDATED STATEMENTS OF CONDITION

at September 30, 2015, June 30, 2015 and September 30, 2014



(in thousands, except share data; unaudited)	September 30, 2015		June 30, 2015		September 30, 2014
Assets
Cash and due from banks	$	35,315	$	117,533	$	46,424
Investment securities
Held-to-maturity, at amortized cost	86,471		94,475		118,843
Available-for-sale (at fair value; amortized cost $331,024, $252,709 and $210,676 at September 30, 2015, June 30, 2015 and September 30, 2014, respectively)	333,856		254,018		211,582
Total investment securities	420,327		348,493		330,425
Loans, net of allowance for loan losses of $14,457, $14,355 and $15,049 at September 30, 2015, June 30, 2015 and September 30, 2014, respectively	1,348,743		1,324,851		1,345,936
Bank premises and equipment, net	9,537		9,673		9,277
Goodwill	6,436		6,436		6,436
Core deposit intangible	3,268		3,423		3,925
Interest receivable and other assets	59,168		60,353		60,234
Total assets	$	1,882,794	$	1,870,762	$	1,802,657

Liabilities and Stockholders' Equity
Liabilities
Deposits
Non-interest bearing	$	752,336	$	741,107	$	717,720
Interest bearing
Transaction accounts	95,522		95,622		89,891
Savings accounts	136,021		132,377		127,774
Money market accounts	495,642		502,263		485,626
Time accounts	155,961		159,114		150,613
Total deposits	1,635,482		1,630,483		1,571,624
Federal Home Loan Bank ("FHLB") borrowings	15,000		15,000		15,000
Subordinated debentures	5,343		5,291		5,131
Interest payable and other liabilities	15,015		12,806		15,228
Total liabilities	1,670,840		1,663,580		1,606,983

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 - 6,060,744, 5,983,551 and 5,930,100 at September 30, 2015, June 30, 2015 and September 30, 2014, respectively	84,272		83,826		81,993
Retained earnings	126,082		122,625		113,115
Accumulated other comprehensive income, net	1,600		731		566
Total stockholders' equity	211,954		207,182		195,674
Total liabilities and stockholders' equity	$	1,882,794	$	1,870,762	$	1,802,657

BANK OF MARIN BANCORP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME



	Three months ended								Nine months ended
(in thousands, except per share amounts; unaudited)	September 30, 2015		June 30, 2015			September 30, 2014			September 30, 2015			September 30, 2014
Interest income
Interest and fees on loans	$	15,498	$	15,287		$	16,195		$	46,164		$	48,877
Interest on investment securities
Securities of U.S. government agencies	1,223		990			1,126			3,248			3,551
Obligations of state and political subdivisions	527		511			496			1,578			1,737
Corporate debt securities and other	162		179			254			546			778
Interest on Federal funds sold and due from banks	35		51			37			107			125
Total interest income	17,445		17,018			18,108			51,643			55,068
Interest expense
Interest on interest-bearing transaction accounts	28		30			25			88			74
Interest on savings accounts	12		13			12			37			34
Interest on money market accounts	125		123			126			375			415
Interest on time accounts	212		215			229			649			695
Interest on FHLB and overnight borrowings	80		78			79			236			235
Interest on subordinated debentures	105		105			106			314			316
Total interest expense	562		564			577			1,699			1,769
Net interest income	16,883		16,454			17,531			49,944			53,299
Provision for loan losses	—		—			—			—			750
Net interest income after provision for loan losses	16,883		16,454			17,531			49,944			52,549
Non-interest income
Service charges on deposit accounts	489		504			552			1,518			1,636
Wealth Management and Trust Services	568		603			567			1,809			1,744
Debit card interchange fees	372		368			375			1,087			1,035
Merchant interchange fees	171		129			224			430			629
Earnings on bank-owned life insurance	204		203			208			610			632
Dividends on FHLB stock	209		461			149			817			409
Gain on sale of securities	72		—			4			80			93
Other income	213		340			222			744			707
Total non-interest income	2,298		2,608			2,301			7,095			6,885
Non-interest expense
Salaries and related benefits	6,300		6,672			6,108			19,762			19,270
Occupancy and equipment	1,346		1,493			1,381			4,181			4,044
Depreciation and amortization	441		650			383			1,512			1,202
Federal Deposit Insurance Corporation insurance	250		253			261			739			780
Data processing	835		792			748			2,413			2,856
Professional services	493		515			537			1,572			1,577
Directors' expense	182		247			153			620			466
Information technology	186		216			180			554			517
Provision for (reversal of) losses on off-balance sheet commitments	324		(109		)	13			14			(2		)
Other expense	1,281		1,590			1,586			4,447			4,940
Total non-interest expense	11,638		12,319			11,350			35,814			35,650
Income before provision for income taxes	7,543		6,743			8,482			21,225			23,784
Provision for income taxes	2,770		2,457			3,104			7,709			8,705
Net income	$	4,773	$	4,286		$	5,378		$	13,516		$	15,079
Net income per common share:
Basic	$	0.80	$	0.72		$	0.91		$	2.27		$	2.56
Diluted	$	0.79	$	0.71		$	0.89		$	2.23		$	2.51
Weighted average shares used to compute net income per common share:
Basic	5,963		5,945			5,903			5,943			5,887
Diluted	6,067		6,062			6,014			6,059			5,996
Dividends declared per common share	$	0.22	$	0.22		$	0.20		$	0.66		$	0.58
Comprehensive income:
Net income	$	4,773	$	4,286		$	5,378		$	13,516		$	15,079
Other comprehensive income
Change in net unrealized gain (loss) on available-for- sale securities	1,523		(1,803		)	(344		)	1,037			2,047
Reclassification adjustment for loss (gain) on available- for-sale securities included in net income	—		—			4			(8		)	19
Net change in unrealized gain (loss) on available-for- sale securities, before tax	1,523		(1,803		)	(340		)	1,029			2,066
Deferred tax (benefit) expense	654		(691		)	(141		)	517			828
Other comprehensive income (loss), net of tax	869		(1,112		)	(199		)	512			1,238
Comprehensive income	$	5,642	$	3,174		$	5,179		$	14,028		$	16,317

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, 2015						June 30, 2015						September 30, 2014
				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	$	51,378	$	35	0.27	%	$	76,710	$	52	0.27	%	$	58,088	$	37	0.25	%
	Investment securities ^{2, 3}	389,260		2,094		2.15	%	319,032		1,842		2.31	%	332,920		1,997		2.40	%
	Loans ^{1, 3, 4}	1,352,023		15,800		4.57	%	1,336,249		15,587		4.61	%	1,349,740		16,489		4.78	%
	Total interest-earning assets ¹	1,792,661		17,929		3.91	%	1,731,991		17,481		3.99	%	1,740,748		18,523		4.16	%
	Cash and non-interest-bearing due from banks	43,054						48,955						46,258
	Bank premises and equipment, net	9,680						9,841						9,337
	Interest receivable and other assets, net	57,589						58,744						56,855
Total assets		$	1,902,984					$	1,849,531					$	1,853,198
Liabilities and Stockholders' Equity
	Interest-bearing transaction accounts	$	93,933	$	28	0.12	%	$	94,960	$	30	0.13	%	$	92,907	$	25	0.11	%
	Savings accounts	135,202		13		0.04	%	131,564		12		0.04	%	127,457		12		0.04	%
	Money market accounts	506,952		125		0.10	%	488,422		123		0.10	%	501,843		126		0.10	%
	Time accounts	157,252		212		0.53	%	157,982		215		0.55	%	152,995		229		0.59	%
	FHLB borrowing and overnight borrowings¹	15,188		79		2.07	%	15,000		79		2.07	%	15,000		79		2.07	%
	Subordinated debentures ¹	5,316		105		7.73	%	5,259		105		7.90	%	5,096		106		8.14	%
	Total interest-bearing liabilities	913,843		562		0.24	%	893,187		564		0.25	%	895,298		577		0.26	%
	Demand accounts	765,284						735,481						749,361
	Interest payable and other liabilities	13,467						14,358						14,167
	Stockholders' equity	210,390						206,505						194,372
Total liabilities & stockholders' equity		$	1,902,984					$	1,849,531					$	1,853,198
Tax-equivalent net interest income/margin ¹				$	17,367	3.79	%			$	16,917	3.86	%			$	17,946	4.03	%
Reported net interest income/margin ¹				$	16,883	3.69	%			$	16,454	3.76	%			$	17,531	3.94	%
Tax-equivalent net interest rate spread						3.67	%					3.74	%					3.91	%

		Nine months ended						Nine months ended
		September 30, 2015						September 30, 2014
				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	$	55,509	$	107	0.25	%	$	65,949	$	125	0.25	%
	Investment securities ^{2, 3}	340,373		5,864		2.30	%	348,445		6,498		2.49	%
	Loans ^{1, 3, 4}	1,346,689		47,063		4.61	%	1,307,611		49,606		5.00	%
	Total interest-earning assets ¹	1,742,571		53,034		4.01	%	1,722,005		56,229		4.31	%
	Cash and non-interest-bearing due from banks	44,368						43,280
	Bank premises and equipment, net	9,786						9,218
	Interest receivable and other assets, net	58,153						56,550
Total assets		$	1,854,878					$	1,831,053
Liabilities and Stockholders' Equity
	Interest-bearing transaction accounts	$	93,762	$	88	0.13	%	$	104,662	$	74	0.09	%
	Savings accounts	133,553		38		0.04	%	122,958		34		0.04	%
	Money market accounts	494,142		375		0.10	%	508,544		415		0.11	%
	Time accounts	156,458		648		0.55	%	156,892		695		0.59	%
	FHLB borrowing and overnight borrowings¹	15,194		236		2.07	%	15,000		235		2.07	%
	Subordinated debentures ¹	5,261		314		7.98	%	5,043		316		8.42	%
	Total interest-bearing liabilities	898,370		1,699		0.25	%	913,099		1,769		0.26	%
	Demand accounts	735,487						713,882
	Interest payable and other liabilities	14,466						14,725
	Stockholders' equity	206,555						189,347
Total liabilities & stockholders' equity		$	1,854,878					$	1,831,053
Tax-equivalent net interest income/margin ¹				$	49,944	3.88	%			$	54,460	4.17	%
Reported net interest income/margin ¹				$	51,336	3.78	%			$	53,299	4.08	%
Tax-equivalent net interest rate spread						3.76	%					4.05	%


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.
²Yields 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.
³Yields and interest income on tax-exempt securities and loans are presented on a taxable-equivalent basis using the Federal statutory rate of 35 percent.
⁴Average 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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