NOVATO -- Bank of Marin Bancorp (Nasdaq: BMRC), the parent company of Bank of Marin, today reported net income fell nearly 24 percent in the third quarter but was up nearly 8 percent in the first nine months of this year.
For the third quarter ended Sept. 30, net income totaled $3.2 million, a 23.8 percent decrease from the same three months in 2011. The bancorp attributed that decrease largely to a heightened quarterly loss provision of $2.1 million primarily due to a $4.2 million commercial real estate loan. It is currently in the process of foreclosure, according to the bank.
For the nine-month period, earnings increased 7.7 percent to $13.1 million from $12.2 million earned during the same nine months in 2011.
Nonperforming loans totaled $19.2 million at the end of the quarter -- 1.9 percent of the bank's loan portfolio, versus 1.08 percent a year before. The increase was largely attributed to two loans totaling $7.2 million that became nonperforming during the quarter, and the bank expects to ultimately recover those amounts with at least $3 million paid off before the end of this year.
Despite the increased provision for the quarter, the bank's total loss provision for the period was less than half the $4.6 million allocated in the first nine months of 2011. The bank had allocated $100,000 in the prior quarter. Bank of Marin's total risk-based capital ratio was 14 percent as of Sept. 30, up from 13.3 percent at the same point in 2011.
Part of the increased loss provision in 2011 was attributed to troubled loans obtained during the Federal Deposit Insurance Corp.-assisted acquisition of Napa's Charter Oak Bank. In addition to helping to boost earnings, the acquisition has provided a growing market for Bank of Marin, according to the bank. It has underwritten $13.5 million in new Napa County loans, representing an increase of 22.2 percent for the third quarter.
"Long-term, it can't just be about the financial impact of the FDIC deal," said Russell Colombo, president and CEO of Bank of Marin. "It's about -- can we bring in new customers. Now, we're seeing growth in that market."
Gross loans totaled $1 billion as of Sept. 30, level with the prior quarter. Deposits totaled $1.3 billion at the end of the third quarter, up from $1.2 billion a year before. Accounts not bearing interest were 32.5 percent of deposits, up from 31.8 percent 12 months prior. Total assets grew to $1.44 billion from $1.36 billion over 12 months.
The bank's expansion to San Francisco also has provided a strong pipeline, such as banking activity in the shipping-container industry that serves exporters throughout the Bay Area, according to bank executives
"It's a small world," Mr. Colombo said. "Even small businesses in Sonoma, Marin and Napa are shipping their products internationally."
There were $31.8 million in loans funded in the third quarter, offset by payoffs of $36.1 million.
The bank has captured an increasing share of market deposits, according to executives. As of June, Bank of Marin held 10.8 percent of deposits in Marin, compared with 10.1 percent in 2011. The bank has 6 percent of deposits in Petaluma, and has seen volume increase elsewhere in Sonoma County.
Net interest income for the first nine months of 2012 was $47.4 million, compared with $48.1 million a year before. The tax-equivalent net interest margin was 4.78 percent for the period and 5.25 percent 12 months prior. Executives cited a low interest rate environment for that decrease, though the same trend has also decreased expenses on interest-bearing deposits.