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

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8-K - 8-K - Bank of Marin Bancorp	form8k-q22014.htm

EXHIBIT 99.1




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

BANK OF MARIN BANCORP REPORTS RECORD QUARTERLY EARNINGS OF $5.2 MILLION

NOVATO, CA, July 21, 2014 - Bank of Marin Bancorp, "Bancorp" (NASDAQ: BMRC), parent company of Bank of Marin, announced record earnings of $5.2 million in the second quarter of 2014, compared to $4.5 million in the first quarter of 2014 and $3.1 million in the second quarter of 2013. Diluted earnings per share totaled $0.86 in the second quarter, compared to $0.76 in the prior quarter and $0.55 in the same quarter a year ago. June 30, 2014 year-to-date earnings totaled $9.7 million compared to $7.9 million for the same period a year ago. Diluted earnings per share for the six-month period totaled $1.62 as compared to $1.44 for the same period in 2013.

“We are pleased to report record earnings this quarter, driven by new loan and core deposit growth across the franchise,” said Russell A. Colombo, President and Chief Executive Officer. “The Bank is built on a foundation of strong credit quality and a commitment to our long-term strategy as a relationship-driven, community bank.”

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

•

Loans grew to $1.3 billion, an increase of $60.5 million, or 4.7%, over March 31, 2014, and $247.0 million, or 22.6% over June 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 0.76% of total loans at June 30, 2014, down from 0.79% at March 31, 2014 and 1.69% a year ago. Net recoveries for the second quarter totaled $68 thousand, compared to net charge-offs of $142 thousand in the prior quarter and net charge-offs of $177 thousand in the same quarter a year ago.

•

Non-interest expense totaled $11.5 million in the second quarter of 2014, a decrease of $1.4 million, or 10.8%, compared to the prior quarter. The second quarter of 2104 reflects normalization of non-interest expense with significant drops in salaries and related benefits, data processing costs and professional services as the expenses of the merger with NorCal Community Bancorp (NorCal”), parent company of Bank of Alameda, were fully absorbed in the fourth quarter of 2013 and the first quarter of 2014.

•

Developments during the quarter included the relocation of our Sausalito branch, the third in the Bank’s strategy to reduce square footage as customers increasingly utilize online banking channels. Regarding key products, the Bank reinstated its floating home loan program as of July 1 and has been successful with Tenant in Common loans in the San Francisco market. After an extensive review, the Bank is discontinuing the small mortgage brokerage acquired from NorCal as the broker model is not consistent with Bank of Marin's underwriting philosophy. The financial impact is not material.

•

The total risk-based capital ratio for Bancorp was 13.5% at both June 30, 2014 and March 31, 2014, compared to 14.0% at June 30, 2013. The ratio declined as compared to the same quarter a year ago due to $10.6 million in goodwill and intangibles related to the NorCal acquisition, which are excluded from regulatory capital. The risk-based capital ratio continues to be well above regulatory requirements for a well-capitalized institution as well as 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 9.9% at June 30, 2014, compared to 9.8% at the end of the prior quarter.


•	Quarterly return on assets (“ROA”) of 1.14% at June 30, 2014, increased from 1.01% at March 31, 2014 and 0.86% a year ago. Quarterly return on equity (“ROE”) totaled 10.96% at June 30, 2014, compared to 9.97% at March 31, 2014 and 7.72% at June 30, 2013. The increase in ROA and ROE in the current quarter was driven by record earnings.


•	On July 18, 2014, the Board of Directors declared a quarterly cash dividend of $0.20 per share, a $0.01 increase from prior quarter. The cash dividend is payable to shareholders of record at the close of business on August 1, 2014 and will be payable on August 8, 2014.

Loans and Credit Quality

Gross loans increased $60.5 million from the prior quarter, which was driven by an increase in commercial real estate and commercial and industrial loans. Loans increased $247.0 million from a year ago which reflects both loans acquired from NorCal and organic growth. Non-accrual loans decreased from $18.5 million a year ago to $10.1 million at June 30, 2014 and March 31, 2014. The decrease in non-accrual loans from June 30, 2013 primarily relates to $6.5 million in pay-offs and pay-downs associated with two borrowers. Accruing loans past due 30 to 89 days totaled $1.5 million at June 30, 2014, compared to $2.8 million at March 31, 2014 and $566 thousand a year ago.

The provision for loan losses of $600 thousand in the second quarter of 2014 relates to loan growth and compares to $150 thousand in the prior quarter and $1.1 million in the same quarter a year ago. The ratio of loan loss reserve to loans remained unchanged from March 31, 2014 at 1.11%. The decline compared to 1.32% at June 30, 2013 is primarily due to the loans acquired from Bank of Alameda marked down to fair value without allowances established.

Deposits

Deposits totaled $1.6 billion at both June 30, 2014 and March 31, 2014, an increase of $374 million compared to $1.2 billion at June 30, 2013. The increase in deposits from a year ago reflects the Bank's move into the East Bay market as well as organic growth in the Marin and Sonoma markets, with higher balances seen in all deposit categories except CDARS time deposits. Non-interest bearing deposits totaled $724 million at June 30, 2014, an increase of $23.4 million when compared to March 31, 2014, and represented 45.3% of total deposits as of June 30, 2014, up from 44.5% at the prior quarter-end and 40.7% at June 30, 2013.

Earnings

“Discipline around balance sheet and expense management contributed to the strong results for the quarter as did the absence of nonrecurring acquisition expenses” said Tani Girton, Chief Financial Officer. “The Bank’s stable net interest margin, improved efficiency ratio, and solid return on assets reflect our continued focus on those areas.”

Net interest income totaled $17.9 million in both the second quarter of 2014 and the prior quarter, compared to $14.3 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 and gains on pay-offs of acquired loans. The tax-equivalent net interest margin was 4.23%, 4.25% and 4.30% for those respective periods. The decrease in the second quarter of 2014 compared to the same quarter a year ago primarily relates to the impact of the low interest rate environment on the loan portfolio and higher cash balances as a percentage of interest-earning assets, partially offset by the accretion and gains on pay-offs of acquired loans.

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



	Three months ended
	June 30, 2014				March 31, 2014				June 30, 2013
(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		$	187	4 bps		$	180	4 bps		$	156	5 bps
Accretion on non-PCI loans		$	713	17 bps		$	1,330	31 bps		$	246	7 bps
Gains on pay-offs of PCI loans		$	622	14 bps		$	—	0 bps		$	149	4 bps



	Six months ended

	June 30, 2014			June 30, 2013
(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	4 bps	$	392	6 bps
Accretion on non-PCI loans	$	2,043	24 bps	$	378	6 bps
Gains on pay-offs of PCI loans	$	622	7 bps	$	469	7 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 second quarter of 2014 totaled $2.4 million, compared to $2.2 million in the prior quarter and $1.9 million in the same quarter a year ago. The increase from the same quarter a year ago primarily relates to gains on the sale of investment securities, higher dividend income from the Federal Home Loan Bank of San Francisco and higher debit card interchange fees.

Non-interest expense totaled $11.5 million in the second quarter of 2014, compared to $12.8 million in the prior quarter and $10.4 million in the same quarter a year ago. Second quarter 2014 non-interest expense decreased $1.4 million, or 10.8%, compared to the prior quarter, primarily related to the absence of acquisition-related expenses and miscellaneous cost savings in the second quarter. 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 second quarter earnings call on Monday, July 21, 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 web site 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
June 30, 2014

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

QUARTER-TO-DATE		June 30, 2014				March 31, 2014			June 30, 2013
	NET INCOME	$	5,168			$	4,533		$	3,055
	DILUTED EARNINGS PER COMMON SHARE	$	0.86			$	0.76		$	0.55
	RETURN ON AVERAGE ASSETS (ROA)	1.14			%	1.01		%	0.86		%
	RETURN ON AVERAGE EQUITY (ROE)	10.96			%	9.97		%	7.72		%
	EFFICIENCY RATIO	56.60			%	63.86		%	64.12		%
	TAX-EQUIVALENT NET INTEREST MARGIN¹	4.23			%	4.25		%	4.30		%
	NET CHARGE-OFFS/(RECOVERIES)	$	(68	)		$	142		$	177
	NET CHARGE-OFFS/(RECOVERIES) TO AVERAGE LOANS	(0.01		)	%	0.01		%	0.02		%

YEAR-TO-DATE
	NET INCOME	$	9,701						$	7,921
	DILUTED EARNINGS PER COMMON SHARE	$	1.62						$	1.44
	RETURN ON AVERAGE ASSETS (ROA)	1.08			%				1.12		%
	RETURN ON AVERAGE EQUITY (ROE)	10.47			%				10.19		%
	EFFICIENCY RATIO	60.22			%				60.67		%
	TAX-EQUIVALENT NET INTEREST MARGIN¹	4.24			%				4.39		%
	NET CHARGE-OFFS/(RECOVERIES)	$	75						$	174
	NET CHARGE-OFFS/(RECOVERIES) TO AVERAGE LOANS	0.01			%				0.02		%

AT PERIOD END
	TOTAL ASSETS	$	1,823,901			$	1,797,852		$	1,428,518

	LOANS:
	COMMERCIAL AND INDUSTRIAL	$	194,402			$	177,995		$	170,443
	REAL ESTATE
	COMMERCIAL OWNER-OCCUPIED	$	233,267			$	232,117		$	206,191
	COMMERCIAL INVESTOR-OWNED	$	669,225			$	640,843		$	535,260
	CONSTRUCTION	$	40,197			$	32,512		$	27,728
	HOME EQUITY	$	106,201			$	99,723		$	90,296
	OTHER RESIDENTIAL	$	80,399			$	78,772		$	43,290
	INSTALLMENT AND OTHER CONSUMER LOANS	$	14,820			$	16,028		$	18,274
	TOTAL LOANS	$	1,338,511			$	1,277,990		$	1,091,482

	NON-PERFORMING LOANS²:
	COMMERCIAL AND INDUSTRIAL	$	335			$	154		$	2,022
	REAL ESTATE
	COMMERCIAL OWNER-OCCUPIED	$	1,403			$	1,403		$	1,403
	COMMERCIAL INVESTOR-OWNED	$	2,618			$	2,694		$	6,024
	CONSTRUCTION	$	5,197			$	4,813		$	7,046
	HOME EQUITY	$	444			$	228		$	524
	OTHER RESIDENTIAL	$	—			$	646		$	1,148
	INSTALLMENT AND OTHER CONSUMER LOANS	$	152			$	161		$	321
	TOTAL NON-ACCRUAL LOANS	$	10,149			$	10,099		$	18,488

	CLASSIFIED LOANS (GRADED SUBSTANDARD & DOUBTFUL)	$	33,246			$	34,285		$	27,602
	TOTAL ACCRUING LOANS 30-89 DAYS PAST DUE	$	1,471			$	2,809		$	566
	LOAN LOSS RESERVE TO LOANS	1.11			%	1.11		%	1.32		%
	LOAN LOSS RESERVE TO NON-ACCRUAL LOANS	1.47			x	1.41		x	0.78		x
	NON-ACCRUAL LOANS TO TOTAL LOANS	0.76			%	0.79		%	1.69		%
	TEXAS RATIO³	5.43			%	5.57		%	10.82		%

	TOTAL DEPOSITS	$	1,598,823			$	1,576,340		$	1,224,437
	LOAN TO DEPOSIT RATIO	83.7			%	81.1		%	89.1		%
	STOCKHOLDERS' EQUITY	$	190,906			$	186,165		$	158,359
	BOOK VALUE PER SHARE	$	32.29			$	31.51		$	29.10
	TANGIBLE COMMON EQUITY TO TANGIBLE ASSETS⁴	9.9			%	9.8		%	11.1		%
	TOTAL RISK BASED CAPITAL RATIO-BANK⁵	13.0			%	13.0		%	13.7		%
	TOTAL RISK BASED CAPITAL RATIO-BANCORP⁵	13.5			%	13.5		%	14.0		%
	FULL TIME EQUIVALENT EMPLOYEES	263				277			243

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 $14.3 million, $14.5 million and $10.0 million at June 30, 2014, March 31, 2014 and June 30, 2013, respectively. Excludes purchased credit-impaired (PCI) loans with carrying values of $3.8 million, $5.8 million and $2.1 million that were accreting interest at June 30, 2014, March 30, 2014 and June 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, $7.2 million and $3.5 million at June 30, 2014, March 31, 2014 and June 30, 2013.
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 $10.6 million and $10.7 million at June 30, 2014 and March 31, 2014, respectively. Tangible assets excludes goodwill and intangible assets.
⁵ Current period estimated.

BANK OF MARIN BANCORP

CONSOLIDATED STATEMENTS OF CONDITION

at June 30, 2014, March 31, 2013 and June 30, 2013



(in thousands, except share data; unaudited)	June 30, 2014		March 31, 2014		June 30, 2013
Assets
Cash and due from banks	$	81,380	$	91,567	$	32,175
Investment securities
Held-to-maturity, at amortized cost	123,085		132,019		131,839
Available-for-sale (at fair value; amortized cost $214,627, $230,067 and $127,989 at June 30, 2014, March 31, 2014 and June 30, 2013, respectively)	215,873		230,337		129,562
Total investment securities	338,958		362,356		261,401
Loans, net of allowance for loan losses of $14,900, $14,232 and $14,357 at June 30, 2014, March 31, 2014 and June 30, 2013, respectively	1,323,611		1,263,758		1,077,125
Bank premises and equipment, net	9,296		9,036		9,178
Goodwill	6,436		6,436		—
Core deposit intangible	4,117		4,310		—
Interest receivable and other assets	60,103		60,389		48,639
Total assets	$	1,823,901	$	1,797,852	$	1,428,518

Liabilities and Stockholders' Equity
Liabilities
Deposits
Non-interest bearing	$	724,975	$	701,561	$	498,572
Interest bearing
Transaction accounts	95,052		96,550		80,221
Savings accounts	121,890		119,361		95,317
Money market accounts	500,720		499,909		410,676
CDARS® time accounts	—		—		4,296
Other time accounts	156,186		158,959		135,355
Total deposits	1,598,823		1,576,340		1,224,437
Federal Home Loan Bank borrowings	15,000		15,000		32,200
Subordinated debentures	5,077		5,023		—
Interest payable and other liabilities	14,095		15,324		13,522
Total liabilities	1,632,995		1,611,687		1,270,159

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 - 5,912,774, 5,906,881 and 5,442,628 at June 30, 2014, March 31, 2014 and June 30, 2013, respectively	81,219		81,049		60,312
Retained earnings	108,922		104,877		97,135
Accumulated other comprehensive income, net	765		239		912
Total stockholders' equity	190,906		186,165		158,359
Total liabilities and stockholders' equity	$	1,823,901	$	1,797,852	$	1,428,518

BANK OF MARIN BANCORP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME



	Three months ended								Six months ended
(in thousands, except per share amounts; unaudited)	June 30, 2014		March 31, 2014			June 30, 2013			June 30, 2014		June 30, 2013
Interest income
Interest and fees on loans	$	16,363	$	16,319		$	13,366		$	32,682	$	27,001
Interest on investment securities
Securities of U.S. Government agencies	1,193		1,232			585			2,425		1,210
Obligations of state and political subdivisions	607		634			437			1,241		1,075
Corporate debt securities and other	256		268			339			524		663
Interest due from banks and other	37		51			3			88		11
Total interest income	18,456		18,504			14,730			36,960		29,960
Interest expense
Interest on interest bearing transaction accounts	26		23			12			49		23
Interest on savings accounts	11		11			8			22		16
Interest on money market accounts	131		158			95			289		194
Interest on CDARS® time accounts	—		—			2			—		7
Interest on other time accounts	231		235			224			466		456
Interest on FHLB and overnight borrowings	78		78			84			156		163
Interest on subordinated debentures	105		105			—			210		—
Total interest expense	582		610			425			1,192		859
Net interest income	17,874		17,894			14,305			35,768		29,101
Provision for loan losses	600		150			1,100			750		870
Net interest income after provision for loan losses	17,274		17,744			13,205			35,018		28,231
Non-interest income
Service charges on deposit accounts	528		556			515			1,084		1,036
Wealth Management and Trust Services	613		564			539			1,177		1,086
Debit card interchange fees	360		300			280			660		532
Merchant interchange fees	207		198			222			405		427
Earnings on Bank-owned life Insurance	211		213			186			424		587
Gain (loss) on sale of securities	97		(8		)	—			89		—
Other income	352		393			202			745		382
Total non-interest income	2,368		2,216			1,944			4,584		4,050
Non-interest expense
Salaries and related benefits	6,232		6,930			5,430			13,162		10,728
Occupancy and equipment	1,329		1,334			1,052			2,663		2,125
Depreciation and amortization	403		416			353			819		689
Federal Deposit Insurance Corporation insurance	269		250			223			519		437
Data processing	748		1,360			696			2,108		1,245
Professional services	412		628			814			1,040		1,341
Other expense	2,064		1,925			1,851			3,989		3,549
Total non-interest expense	11,457		12,843			10,419			24,300		20,114
Income before provision for income taxes	8,185		7,117			4,730			15,302		12,167
Provision for income taxes	3,017		2,584			1,675			5,601		4,246
Net income	$	5,168	$	4,533		$	3,055		$	9,701	$	7,921
Net income per common share:
Basic	$	0.88	$	0.77		$	0.56		$	1.65	$	1.47
Diluted	$	0.86	$	0.76		$	0.55		$	1.62	$	1.44
Weighted average shares used to compute net income per common share:
Basic	5,888		5,870			5,419			5,879		5,404
Diluted	5,993		5,980			5,509			5,987		5,498
Dividends declared per common share	$	0.19	$	0.19		$	0.18		$	0.38	$	0.36
Comprehensive income:
Net income	$	5,168	$	4,533		$	3,055		$	9,701	$	7,921
Other comprehensive income (loss)
Change in net unrealized gain (loss) on available-for-sale securities	976		1,415			(1,666		)	2,391		(1,969		)
Reclassification adjustment for loss on sale of available-for-sale securities included in net income	—		15			—			15		—
Net change in unrealized gain (loss) on available-for-sale securities, before tax	976		1,430			(1,666		)	2,406		(1,969		)
Deferred tax expense (benefit)	450		519			(700		)	969		(826		)
Other comprehensive income (loss), net of tax	526		911			(966		)	1,437		(1,143		)
Comprehensive income	$	5,694	$	5,444		$	2,089		$	11,138	$	6,778

BANK OF MARIN BANCORP

AVERAGE STATEMENTS OF CONDITION AND ANALYSIS OF NET INTEREST INCOME




		Three months ended						Three months ended						Three months ended
		June 30, 2014						March 31, 2014						June 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	$	54,313	$	37	0.27	%	$	85,750	$	51	0.24	%	$	4,485	$	3	0.26	%
	Investment securities ^{2, 3}	350,938		2,208		2.52	%	361,795		2,293		2.54	%	266,774		1,452		2.18	%
	Loans ^{1, 3, 4}	1,303,363		16,597		5.04	%	1,268,841		16,511		5.20	%	1,070,333		13,537		5.00	%
	Total interest-earning assets ¹	1,708,614		18,842		4.36	%	1,716,386		18,855		4.39	%	1,341,592		14,992		4.42	%
	Cash and non-interest-bearing due from banks	41,739						41,793						27,331
	Bank premises and equipment, net	9,228						9,088						9,313
	Interest receivable and other assets, net	56,954						55,829						38,981
Total assets		$	1,816,535					$	1,823,096					$	1,417,217
Liabilities and Stockholders' Equity
	Interest-bearing transaction accounts	$	94,358	$	26	0.11	%	$	127,098	$	23	0.07	%	$	83,285	$	12	0.06	%
	Savings accounts	120,071		11		0.04	%	121,278		11		0.04	%	95,083		8		0.03	%
	Money market accounts	504,597		131		0.10	%	518,930		158		0.12	%	410,823		95		0.09	%
	CDARS® time accounts	—		—		—	%	36		—		—	%	5,194		2		0.15	%
	Other time accounts	157,239		231		0.59	%	160,942		235		0.59	%	136,759		224		0.66	%
	FHLB borrowings ¹	15,000		78		2.07	%	15,000		78		2.07	%	27,785		84		1.20	%
	Subordinated debentures ¹	5,043		105		8.24	%	4,988		105		8.58	%	—		—		—	%
	Total interest-bearing liabilities	896,308		582		0.26	%	948,272		610		0.26	%	758,929		425		0.22	%
	Demand accounts	716,774						674,689						486,410
	Interest payable and other liabilities	14,281						15,748						13,092
	Stockholders' equity	189,172						184,387						158,786
Total liabilities & stockholders' equity		$	1,816,535					$	1,823,096					$	1,417,217
Tax-equivalent net interest income/margin ¹				$	18,260	4.23	%			$	18,244	4.25	%			$	14,567	4.30	%
Reported net interest income/margin ¹				$	17,874	4.14	%			$	17,894	4.17	%			$	14,305	4.21	%
Tax-equivalent net interest rate spread						4.10	%					4.13	%					4.20	%

		Six months ended						Six months ended
		June 30, 2014						June 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	$	69,945	$	88	0.25	%	$	5,094	$	11	0.43	%
	Investment securities ^{2, 3}	356,336		4,501		2.53	%	275,553		3,236		2.35	%
	Loans ^{1, 3, 4}	1,286,197		33,117		5.12	%	1,066,665		27,346		5.10	%
	Total interest-earning assets ¹	1,712,478		37,706		4.38	%	1,347,312		30,593		4.52	%
	Cash and non-interest-bearing due from banks	41,766						27,788
	Bank premises and equipment, net	9,158						9,369
	Interest receivable and other assets, net	56,395						38,440
Total assets		$	1,819,797					$	1,422,909
Liabilities and Stockholders' Equity
	Interest-bearing transaction accounts	$	110,637	$	49	0.09	%	$	106,205	$	23	0.04	%
	Savings accounts	120,671		22		0.04	%	95,818		16		0.03	%
	Money market accounts	511,743		289		0.11	%	421,430		194		0.09	%
	CDARS® time accounts	—		—		—	%	9,009		7		0.16	%
	Other time accounts	159,080		466		0.59	%	138,496		456		0.66	%
	FHLB borrowings ¹	15,000		156		2.07	%	23,175		163		1.40	%
	Subordinated debentures ¹	5,015		210		8.48	%	—		—		—	%
	Total interest-bearing liabilities	922,146		1,192		0.26	%	794,133		859		0.22	%
	Demand accounts	695,848						458,030
	Interest payable and other liabilities	15,010						13,987
	Stockholders' equity	186,793						156,759
Total liabilities & stockholders' equity		$	1,819,797					$	1,422,909
Tax-equivalent net interest income/margin ¹				$	36,514	4.24	%			$	29,734	4.39	%
Reported net interest income/margin ¹				$	35,768	4.15	%			$	29,101	4.30	%
Tax-equivalent net interest rate spread						4.12	%					4.30	%


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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