Bank of Marin Bancorp, "Bancorp" (NASDAQ:BMRC), parent company of Bank of Marin, announced quarterly earnings of $4.8 million in the second quarter of 2016, compared to $5.6 million in the first quarter of 2016 and $4.3 million in the second quarter of 2015. Diluted earnings per share were $0.79 in the second quarter, compared to $0.93 in the prior quarter and $0.71 in the same quarter a year ago. Year-to-date earnings of $10.5 million grew 20.7% compared to $8.7 million for the same six-month period a year ago. Diluted earnings per share were $1.72 in the first six months of 2016, an increase from $1.44 for the same period in 2015.

"Thanks to our consistent approach, we performed well in the first half of 2016, producing excellent results," said Russell A. Colombo, President and Chief Executive Officer. "We continue to build our franchise and maintain our credit and expense discipline. We remain focused on high-quality, organic growth through relationship banking in our existing markets while actively seeking strategic acquisitions."

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

  • We welcomed a number of new large marquee customers during the quarter, affirming the value of our relationship-based model. Our loan-to-deposit ratio was 84.9%, and our loan and deposit pipelines are vibrant.
  • Loans totaled $1,448.4 million at June 30, 2016, compared to $1,441.8 million at March 31, 2016 and $1,339.2 million at June 30, 2015. New loan volume of approximately $44.5 million in the second quarter of 2016 increased $15.5 million compared to the first quarter.
  • Deposit growth in the second quarter continued to reflect the strength of our customer relationships. Non-interest bearing deposits now represent 47.2% of total deposits and the cost of total deposits is stable at 0.08%.
  • Strong credit quality remains the hallmark of our culture. Non-accrual loans represented 0.19% of total loans as of June 30, 2016 resulting in a Texas ratio of 1.35%. There was no provision for loan losses recorded in the quarter, and a $150 thousand provision for off-balance sheet commitments primarily related to an increase in commitments and a decrease in the utilization of lines of credit.
  • All capital ratios are well above regulatory requirements for a well-capitalized institution. The total risk-based capital ratio for Bancorp was 14.1% at June 30, 2016 compared to 13.9% at March 31, 2016, and tangible common equity to tangible assets increased to 11.2% at June 30, 2016 from 11.0% at March 31, 2016.
  • The Board of Directors declared a cash dividend of $0.25 per share on July 22, 2016. This represents the 45th consecutive quarterly dividend paid by Bank of Marin Bancorp. The dividend is payable on August 12, 2016, to shareholders of record at the close of business on August 5, 2016.

Loans and Credit Quality

Loan originations in the second quarter of 2016 were spread throughout our markets with the majority focused in Marin County, Sonoma County and San Francisco. By loan type, investor commercial real estate and commercial and industrial accounted for the majority of the new loan volume for the quarter.

Year-to-date loan originations appear to be on track with 2015 while year-to-date payoffs are almost 20% lower than the first half of 2015. Payoffs of $40.2 million in the quarter ended June 30, 2016 were primarily the result of property sales or planned events.

Non-accrual loans totaled $2.7 million, or 0.19% of Bancorp's loan portfolio at June 30, 2016, compared to $2.7 million, or 0.18%, at March 31, 2016 and $7.1 million, or 0.53% 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 and the payoff of a commercial real estate loan. Accruing loans past due 30 to 89 days totaled $135 thousand at June 30, 2016, compared to $584 thousand at March 31, 2016 and $1.2 million a year ago.

There was no provision for loan losses recorded in the second quarter of 2016 as the quality of the loan portfolio did not warrant a provision, consistent with the prior quarter and the same quarter a year ago. Net recoveries for the second quarter totaled $59 thousand compared to $29 thousand in the prior quarter and net charge offs of $801 thousand in the same quarter a year ago. The ratio of loan loss reserve to loans totaled 1.04% at both June 30, 2016 and March 31, 2016, compared to 1.07% at June 30, 2015.

Investments and Borrowings

The investment portfolio totaled $381.9 million at June 30, 2016, a decline of $17.6 million from March 31, 2016 mainly due to the sale of investment securities. The Bank retired a $15 million fixed rate Federal Home Loan Bank ("FHLB") advance which resulted in a prepayment penalty of $312 thousand reflected in the quarter’s net interest margin. The prepayment penalty was substantially offset by a $284 thousand gain on the sale of securities which is reflected in non-interest income. These actions are expected to improve the net interest margin by 4 basis points going forward.

Deposits

Deposits totaled $1,705.6 million at June 30, 2016, compared to $1,681.3 million at March 31, 2016 and $1,630.5 million at June 30, 2015. While day-to-day volatility continues due to the normal business activity of our customers, the trend is upward in both average and ending balances. Non-interest bearing deposits totaled $804.4 million, or 47.2% of total deposits, compared to 45.1% at March 31, 2016 and 45.5% at June 30, 2015.

Earnings

"The positive year-over-year trends in earnings and financial measures reflect Bank of Marin's robust business model," said Tani Girton, Chief Financial Officer. "Our 0.99% return on assets and 61.35% efficiency ratio in the second quarter are the result of the Bank's consistent earnings and expense control which flow from diligent balance sheet management, sound underwriting and relationship management."

Net interest income totaled $35.8 million in the first six months of 2016 compared to $33.1 million for the same period of 2015. The increase of $2.7 million was primarily due to an increase in average earning assets of $152.0 million. Additionally, an increase in acquired loan income of $453 thousand in 2016 as seen in the table below was partially offset by the FHLB prepayment penalty of $312 thousand.

Net interest income totaled $17.2 million in the second quarter of 2016, compared to $18.6 million in the prior quarter and $16.5 million in the same quarter a year ago. Net interest income decreased $1.4 million in the second quarter compared to the prior quarter partially due to $740 thousand in gains on payoffs of Purchased Credit Impaired ("PCI") loans and a $106 thousand loan principal and interest recovery recorded in the first quarter. The prepayment penalty of $312 thousand on the retirement of the FHLB fixed rate advance also contributed to the decrease.

The tax-equivalent net interest margin was 3.77% in the second quarter of 2016, compared to 4.04% in the prior quarter and 3.86% in the same quarter a year ago. The decrease from last quarter includes 16 basis points related to the absence of payoffs of PCI loans and 7 basis points related to the FHLB prepayment penalty.

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 $2.9 million, $2.8 million, and $5.1 million at June 30, 2016, March 31, 2016 and June 30, 2015, respectively.

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

       
    Three months ended
June 30, 2016     March 31, 2016     June 30, 2015
  Basis point   Basis point   Basis point
Dollar impact to net Dollar impact to net Dollar impact to net
(dollars in thousands; unaudited)     Amount   interest margin     Amount   interest margin     Amount   interest margin
Accretion on PCI loans 1   $ 87   2 bps   $ 98   2 bps   $ 120   3 bps
Accretion on non-PCI loans 2 $ 317 7 bps $ 330 7 bps $ 465 11 bps
Gains on payoffs of PCI loans       $ —       0 bps       $ 740       16 bps             0 bps
 
                     
    Six months ended
June 30, 2016     June 30, 2015
  Basis point   Basis point
Dollar impact to net Dollar impact to net
(dollars in thousands; unaudited)     Amount   interest margin     Amount   interest margin
Accretion on PCI loans 1 $ 185 2 bps $ 239 3 bps
Accretion on non-PCI loans 2 $ 647 7 bps $ 837 10 bps
Gains on payoffs of PCI loans     $ 740     8 bps     $ 43     0 bps
 

1 Accretable yield on PCI loans totaled $1.7 million, $1.7 million and $3.7 million at June, 30, 2016, March 31, 2016 and June 30, 2015, respectively.

2 Unaccreted purchase discounts on non-PCI loans totaled $2.5 million, $2.8 million and $3.7 million at June, 30, 2016, March 31, 2016 and June 30, 2015, respectively.

   

Non-interest income in the second quarter of 2016 totaled $2.4 million, compared to $2.2 million in the prior quarter and $2.6 million in the same quarter a year ago. The increase compared to the prior quarter primarily relates to a $284 thousand gain on the sale of four securities in the second quarter of 2016 compared to a $110 thousand gain in the first quarter of this year. The decrease from the same quarter last year is primarily due to a $305 thousand special dividend from the FHLB and a $147 thousand one-time settlement received in the second quarter of 2015, partially offset by this quarter's $284 thousand gain on sale of securities.

Non-interest expense totaled $12.0 million in the second quarter of 2016, unchanged from the prior quarter and down from $12.3 million in the same quarter a year ago. The decline from the second quarter of 2015 was due to a decrease in rent expense related to the relocation of some offices in 2016, and one-time lease accounting adjustments recorded in 2015. These decreases were partially offset by a $150 thousand provision for off-balance sheet commitments recorded in the second quarter of 2016 compared to a reversal of $109 thousand in the same quarter last year.

Earnings Call and Webcast Information

Bank of Marin Bancorp will webcast its second quarter earnings call on Monday, July 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 $1.9 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
         

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

 

QUARTER-TO-DATE

June 30, 2016 March 31, 2016 June 30, 2015
NET INCOME $ 4,837 $ 5,646 $ 4,286
DILUTED EARNINGS PER COMMON SHARE $ 0.79 $ 0.93 $ 0.71
RETURN ON AVERAGE ASSETS (ROA) 0.99 % 1.15 % 0.93 %
RETURN ON AVERAGE EQUITY (ROE) 8.68 % 10.38 % 8.33 %
EFFICIENCY RATIO 61.35 % 57.74 % 64.62 %
TAX-EQUIVALENT NET INTEREST MARGIN1 3.77 % 4.04 % 3.86 %
NET CHARGE-OFFS/(RECOVERIES) $ (59 ) $ (29 ) $ 801
NET CHARGE-OFFS/(RECOVERIES) TO AVERAGE LOANS — % — % 0.06 %
 

YEAR-TO-DATE

NET INCOME $ 10,483 $ 8,743
DILUTED EARNINGS PER COMMON SHARE $ 1.72 $ 1.44
RETURN ON AVERAGE ASSETS (ROA) 1.07 % 0.96 %
RETURN ON AVERAGE EQUITY (ROE) 9.52 % 8.62 %
EFFICIENCY RATIO 59.49 % 63.86 %
TAX-EQUIVALENT NET INTEREST MARGIN1 3.90 % 3.93 %
NET CHARGE-OFFS/(RECOVERIES) $ (89 ) $ 744
NET CHARGE-OFFS/(RECOVERIES) TO AVERAGE LOANS (0.01 ) % 0.06 %
 

AT PERIOD END

TOTAL ASSETS $ 1,950,452 $ 1,943,602 $ 1,870,762
 
LOANS:
COMMERCIAL AND INDUSTRIAL $ 215,257 $ 213,068 $ 185,020
REAL ESTATE
COMMERCIAL OWNER-OCCUPIED $ 242,103 $ 238,332 $ 235,121
COMMERCIAL INVESTOR-OWNED $ 703,458 $ 707,340 $ 663,357
CONSTRUCTION $ 77,024 $ 74,528 $ 48,754
HOME EQUITY $ 112,240 $ 110,893 $ 115,493
OTHER RESIDENTIAL $ 73,761 $ 73,896 $ 73,721
INSTALLMENT AND OTHER CONSUMER LOANS $ 24,556   $ 23,782   $ 17,739  
TOTAL LOANS $ 1,448,399 $ 1,441,839 $ 1,339,205
 
NON-PERFORMING LOANS2:
COMMERCIAL AND INDUSTRIAL $ 21 $ 21 $ 347
REAL ESTATE
COMMERCIAL OWNER-OCCUPIED $ 176 $ — $ 1,403
COMMERCIAL INVESTOR-OWNED $ 1,676 $ 1,789 $ 2,278
CONSTRUCTION $ — $ — $ 2,733
HOME EQUITY $ 789 $ 791 $ 265
OTHER RESIDENTIAL $ — $ — $ —
INSTALLMENT AND OTHER CONSUMER LOANS $ 63   $ 65   $ 42  
TOTAL NON-ACCRUAL LOANS $ 2,725 $ 2,666 $ 7,068
 
CLASSIFIED LOANS (GRADED SUBSTANDARD & DOUBTFUL) $ 20,399 $ 22,309 $ 27,806
TOTAL ACCRUING LOANS 30-89 DAYS PAST DUE $ 135 $ 584 $ 1,151
LOAN LOSS RESERVE TO LOANS 1.04 % 1.04 % 1.07 %
LOAN LOSS RESERVE TO NON-ACCRUAL LOANS 5.54 x 5.64 x 2.03 x
NON-ACCRUAL LOANS TO TOTAL LOANS 0.19 % 0.18 % 0.53 %
TEXAS RATIO3 1.35 % 1.36 % 3.54 %
 
TOTAL DEPOSITS $ 1,705,615 $ 1,681,346 $ 1,630,483
LOAN-TO-DEPOSIT RATIO 84.9 % 85.8 % 82.1 %
STOCKHOLDERS' EQUITY $ 226,452 $ 221,646 $ 207,182
BOOK VALUE PER SHARE $ 37.00 $ 36.24 $ 34.63
TANGIBLE COMMON EQUITY TO TANGIBLE ASSETS4 11.2 % 11.0 % 10.6 %
TOTAL RISK-BASED CAPITAL RATIO-BANK 13.8 % 13.6 % 13.8 %
TOTAL RISK-BASED CAPITAL RATIO-BANCORP 14.1 % 13.9 % 14.1 %
FULL-TIME EQUIVALENT EMPLOYEES 255 256 261
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 $19.9 million, $19.7 million and $16.1 million at June 30, 2016, March 31, 2016 and June 30, 2015, respectively. Excludes purchased credit-impaired (PCI) loans with carrying values of $2.9 million, $2.8 million and $3.7 million that were accreting interest at June 30, 2016, March 31, 2016 and June 30, 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 $2.9 million, $2.8 million and $5.1 million at June 30, 2016, March 31, 2016 and June 30, 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 $9.3 million, $9.4 million and $9.9 million at June 30, 2016, March 31, 2016 and June 30, 2015, respectively. Tangible assets exclude goodwill and intangible assets.

 
 
BANK OF MARIN BANCORP
CONSOLIDATED STATEMENTS OF CONDITION

At June 30, 2016, March 31, 2016 and June 30, 2015

         
(in thousands, except share data; unaudited)       June 30, 2016   March 31, 2016   June 30, 2015
Assets
Cash and due from banks $ 55,438 $ 39,770 $ 117,533
Investment securities
Held-to-maturity, at amortized cost 58,491 63,246 94,475
Available-for-sale (at fair value; amortized cost $318,335, $333,044 and $252,709 at June 30, 2016, March 31, 2016 and June 30, 2015, respectively)       323,361     336,234     254,018
Total investment securities 381,852 399,480 348,493
Loans, net of allowance for loan losses of $15,087, $15,028 and $14,354 at June 30, 2016, March 31, 2016 and June 30, 2015, respectively 1,433,312 1,426,811 1,324,851
Bank premises and equipment, net 8,650 8,909 9,673
Goodwill 6,436 6,436 6,436
Core deposit intangible 2,846 2,980 3,423
Interest receivable and other assets       61,918     59,216     60,353
Total assets       $ 1,950,452     $ 1,943,602     $ 1,870,762
 
Liabilities and Stockholders' Equity
Liabilities
Deposits
Non-interest bearing $ 804,447 $ 758,869 $ 741,107
Interest bearing
Transaction accounts 88,365 102,829 95,622
Savings accounts 149,745 145,874 132,377
Money market accounts 502,476 514,274 502,263
Time accounts       160,582     159,500     159,114
Total deposits 1,705,615 1,681,346 1,630,483
Federal Home Loan Bank ("FHLB") and other borrowings — 19,350 15,000
Subordinated debentures 5,493 5,445 5,291
Interest payable and other liabilities       12,892     15,815     12,806
Total liabilities       1,724,000     1,721,956     1,663,580
 
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 - 6,120,684, 6,116,473 and 5,983,551 at June 30, 2016, March 31, 2016 and June 30, 2015, respectively

86,569 86,133 83,826
Retained earnings 136,992 133,681 122,625
Accumulated other comprehensive income, net       2,891     1,832     731
Total stockholders' equity       226,452     221,646     207,182
Total liabilities and stockholders' equity       $ 1,950,452     $ 1,943,602     $ 1,870,762
 
 
BANK OF MARIN BANCORP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
      Three months ended     Six months ended

 

June 30,   March 31,   June 30, June 30,

 

 

June 30,

(in thousands, except per share amounts; unaudited)

      2016   2016     2015 2016

 

 

2015

 
Interest income
Interest and fees on loans $ 16,097 $ 17,141 $ 15,287   $ 33,238 $ 30,666
Interest on investment securities
Securities of U.S. government agencies 1,191 1,352 990 2,543 2,025
Obligations of state and political subdivisions 588 586 511 1,174 1,051
Corporate debt securities and other 77 105 179 182 384
Interest on Federal funds sold and short-term investments       40     11     51 51     72  
Total interest income 17,993 19,195 17,018 37,188 34,198
Interest expense
Interest on interest-bearing transaction accounts 28 27 30 55 60
Interest on savings accounts 14 14 13 28 25
Interest on money market accounts 107 111 123 218 250
Interest on time accounts 193 196 215 389 437
Interest on FHLB and other borrowings 378 100 78 478 156
Interest on subordinated debentures       107     109     105 216     209  
Total interest expense       827     557     564 1,384     1,137  

Net interest income

17,166 18,638 16,454 35,804 33,061
Provision for loan losses       —     —     — —     —  
Net interest income after provision for loan losses       17,166     18,638     16,454 35,804     33,061  
Non-interest income
Service charges on deposit accounts 441 456 504 897 1,029
Wealth Management and Trust Services 527 566 603 1,093 1,241
Debit card interchange fees 381 338 368 719 715
Merchant interchange fees 128 113 129 241 259
Earnings on bank-owned life insurance 209 201 203 410 406
Dividends on FHLB stock 185 169 461 354 608
Gains on investment securities, net 284 110 — 394 8
Other income       266     210     340   476     531  
Total non-interest income       2,421     2,163     2,608   4,584     4,797  
Non-interest expense
Salaries and related benefits 6,724 6,748 6,672 13,472 13,462
Occupancy and equipment 1,175 1,281 1,493 2,456 2,835
Depreciation and amortization 441 453 650 894 1,071
Federal Deposit Insurance Corporation insurance 246 261 253 507 489
Data processing 916 856 792 1,772 1,578
Professional services 554 498 515 1,052 1,079
Directors' expense 116 189 247 305 438
Information technology 165 193 216 358 368
Provision for (reversal of) losses on off-balance sheet commitments 150 — (109 ) 150 (310 )
Other expense       1,530     1,531     1,590   3,061     3,166  
Total non-interest expense       12,017     12,010     12,319   24,027     24,176  
Income before provision for income taxes 7,570 8,791 6,743 16,361 13,682
Provision for income taxes       2,733     3,145     2,457   5,878     4,939  
Net income       $ 4,837     $ 5,646     $ 4,286   $ 10,483     $ 8,743  
Net income per common share:
Basic $ 0.80 $ 0.93 $ 0.72 $ 1.73 $ 1.47
Diluted $ 0.79 $ 0.93 $ 0.71 $ 1.72 $ 1.44
Weighted average shares used to compute net income per common share:
Basic 6,078 6,048 5,945 6,063 5,933
Diluted 6,109 6,092 6,062 6,100 6,055
Dividends declared per common share       $ 0.25     $ 0.25     $ 0.22   $ 0.50     $ 0.44  
Comprehensive income:
Net income $ 4,837 $ 5,646 $ 4,286 $ 10,483 $ 8,743
Other comprehensive income

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

2,119 2,923 (1,803 ) 5,042 (486 )

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

      (284 )   (110 )   —   (394 )   (8 )

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

1,835 2,813 (1,803 ) 4,648 (494 )
Deferred tax expense (benefit)       776     1,174     (691 ) 1,950     (137 )
Other comprehensive income (loss), net of tax       1,059     1,639     (1,112 ) 2,698     (357 )
Comprehensive income       $ 5,896     $ 7,285     $ 3,174   $ 13,181     $ 8,386  
 
 
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, 2016   March 31, 2016   June 30, 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 $ 28,766 $ 39 0.54 % $ 8,996 $ 11 0.48 % $ 76,710 $ 52 0.27 %
Investment securities 2, 3 389,023 2,080 2.14 % 428,055 2,264 2.12 % 319,032 1,842 2.31 %
Loans 1, 3, 4       1,440,847     16,416     4.51 %   1,442,601     17,456     4.79 %   1,336,249     15,587     4.61 %
Total interest-earning assets 1 1,858,636 18,535 3.95 % 1,879,652 19,731 4.15 % 1,731,991 17,481 3.99 %
Cash and non-interest-bearing due from banks 40,540 29,823 48,955
Bank premises and equipment, net 8,827 9,143 9,841
Interest receivable and other assets, net       60,205             58,195             58,744          
Total assets       $ 1,968,208             $ 1,976,813             $ 1,849,531          
Liabilities and Stockholders' Equity
Interest-bearing transaction accounts $ 93,355 $ 28 0.12 % $ 100,990 $ 27 0.11 % $ 94,960 $ 30 0.13 %
Savings accounts 149,234 14 0.04 % 142,499 14 0.04 % 131,564 12 0.04 %
Money market accounts 510,727 107 0.08 % 528,984 111 0.08 % 488,422 123 0.10 %
Time accounts including CDARS 160,031 192 0.48 % 160,943 196 0.50 % 157,982 215 0.55 %
Overnight borrowings1 1,082 1 0.40 % 20,567 22 0.42 % — — — %
FHLB fixed-rate advances 12,363 377 12.07 % 15,000 78 2.07 % 15,000 79 2.07 %
Subordinated debentures 1       5,471     108     7.78 %   5,418     109     7.96 %   5,259     105     7.90 %
Total interest-bearing liabilities 932,263 827 0.36 % 974,401 557 0.23 % 893,187 564 0.25 %
Demand accounts 797,935 767,579 735,481
Interest payable and other liabilities 13,853 15,980 14,358
Stockholders' equity       224,157             218,853             206,505          
Total liabilities & stockholders' equity       $ 1,968,208             $ 1,976,813             $ 1,849,531          
Tax-equivalent net interest income/margin 1           $ 17,708     3.77 %       $ 19,174     4.04 %       $ 16,917     3.86 %
Reported net interest income/margin 1           $ 17,166     3.65 %       $ 18,638     3.92 %       $ 16,454     3.76 %
Tax-equivalent net interest rate spread               3.59 %           3.92 %           3.74 %
 
Six months ended Six months ended
June 30, 2016   June 30, 2015
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 $ 18,881 $ 51 0.53 % $ 57,608 $ 72 0.25 %
Investment securities 2, 3 408,539 4,344 2.13 % 315,525 3,770 2.39 %
Loans 1, 3, 4       1,441,724     33,872     4.65 %   1,343,977     31,263     4.63 %
Total interest-earning assets 1 1,869,144 38,267 4.05 % 1,717,110 35,105 4.07 %
Cash and non-interest-bearing due from banks 35,182 45,036
Bank premises and equipment, net 8,985 9,840
Interest receivable and other assets, net       59,200             58,440          
Total assets       $ 1,972,511             $ 1,830,426          
Liabilities and Stockholders' Equity
Interest-bearing transaction accounts $ 97,173 $ 55 0.11 % $ 93,676 $ 60 0.13 %
Savings accounts 145,866 28 0.04 % 132,714 25 0.04 %
Money market accounts 519,856 218 0.08 % 487,630 250 0.10 %
Time accounts including CDARS 160,486 389 0.49 % 156,055 437 0.56 %
Overnight borrowings 1 10,825 23 0.42 % 197 — — %
FHLB borrowing and overnight borrowings1 13,681 456 6.59 % 15,000 156 2.07 %
Subordinated debentures 1       5,445     216     7.86 %   5,233     209     8.05 %
Total interest-bearing liabilities 953,332 1,385 0.29 % 890,505 1,137 0.26 %
Demand accounts 782,757 720,342
Interest payable and other liabilities 14,917 14,973
Stockholders' equity       221,505             204,606          
Total liabilities & stockholders' equity       $ 1,972,511             $ 1,830,426          
Tax-equivalent net interest income/margin 1           $ 36,882     3.90 %       $ 33,968     3.93 %
Reported net interest income/margin 1           $ 35,804     3.79 %       $ 33,061     3.83 %
Tax-equivalent net interest rate spread               3.76 %           3.81 %
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.