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Bank attributes positive earnings partly to Charter Oak acquisition

NOVATO -- Bank of Marin Bancorp reported first-quarter earnings increased 53 percent from a year before and 15 percent from the end of 2010.

Earnings rose to $4.5 million from $2.9 million in the first quarter of 2010 and from $3.9 million in the fourth quarter.

First-quarter 2011 results include the impact of the Federal Deposit Insurance Corp.-assisted acquisition of certain assets and the assumption of certain liabilities of the former Charter Oak Bank in Napa in February.

"We achieved our strategic goals for this quarter including a successful acquisition of certain assets and assumption of certain liabilities of Charter Oak Bank, and are very pleased with the financial results, teamwork and smooth transition," said Russell Colombo, president and chief executive officer of the bank. "Our expansion into Napa aligns well with our long term plans, and we're looking forward to serving the Napa community."

The bank purchased $61.8 million of Charter Oak loans at fair value without loss share, assumed $93.9 million of deposits at fair value and recorded an $85,000 acquisition gain, net of tax and subject to more details of acquisition-date fair values.

The FDIC kept $24.4 million in Charter Oak loans, representing loans delinquent more than 60 days as of the bid-valuation date -- Oct. 18 -- and certain land and construction loans as of the acquisition date.

Bank of Marin's loan portfolio at the end of the first quarter totaled $979.0 million, which was $58.6 million, or 6.4 percent, more than a year before. That includes loans purchased as part of the Charter Oak acquisition -- partially offset by the successful resolution through payoffs of several high-credit-risk loans -- as well as the prepayment of certain large credits in a low interest rate environment.

Nonperforming loans in the first quarter were $9.0 million, or 0.92 percent, of total loans.  Net chargeoffs decreased to $372,000 from $682,000 in the fourth quarter and from $1.5 million in first quarter of 2010.

The provision for loan losses of $1.1 million remained the same as in the prior quarter and decreased $500,000 from the same quarter a year ago.

“Our credit quality remains strong as a result of disciplined lending practices and proactive management of the portfolio which have kept loan charge-offs at a low level.” said Christina Cook, chief financial officer of the bank. “We are applying our same active credit management practices to the acquired loan portfolio as we manage and expand these relationships.”

All acquired loans, whether or not credit-impaired, were recorded at their estimated fair value at the acquisition date. The bank reported no significant change in the credit quality or expected cash flows of the acquired loan portfolio from February through the end of March. That's the explanation for not providing significant reserves for loan losses on the acquired loans in the first quarter.

Total bank deposits totaled $1.1 billion, an increase of $101.1 million, or 10.2 percent, from a year before. The growth is mainly due to the assumption of Charter Oak deposits, according to the bank.

"We have further solidified our strong core deposit base, in part due to the assumption of the deposits of the former Charter Oak Bank.” said Mr. Colombo.  “Deposits are a reflection of the trust our customers place in us and we earn that trust by providing the highest level of service and support in each market where we operate."

Bank of Marin's stock price was $38.10 a share with two hours left in the trading session today. The price has been ranging from $30.08 to $39.39 over the past 52 weeks.