NOVATO -- On the eve of celebrating its 23rd anniversary, Bank of Marin Bancorp (NASDAQ: BMRQ), parent company of Bank of Marin, announced record annual earnings for 2012, up 14.5 percent from the prior year.

That net income -- $17.8 million -- was equivalent to $3.28 per share, up 13.5 percent from 2012. The bank's board of directors declared a quarterly cash dividend of 18 cents per share, payable on Feb. 15 to shareholders of record as of Feb. 1.

The bank's loan portfolio in the fourth quarter, ended Dec. 31, had net growth of $60.2 million, or 5.9 percent. That growth was largely driven by more than $70 million in new investor-owned commercial real estate loans, primarily in the Marin County and San Francisco markets, that helped to bring the bank's gross loan portfolio to $1.1 billion. For the year, net loans increased 4.2 percent.

"We had a great quarter and a record year," said Russell Colombo, president and chief executive officer of Bank of Marin. "We've had tremendous loan growth over the past year."

Nonperforming loans declined to 1.64 percent of total loans at the end of the quarter, down from 1.9 percent of loans as of Sept. 30. Loans 30 to 89 days behind on payments declined to $588,000 at the end of the year from $2.1 million in the prior quarter.

The total provision for loan losses was $2.9 million for the year, down from more than $7 million in 2011. The total provision for 2012 was largely attributable to the year's third quarter, when a distressed $4.2 million commercial real estate loan contributed to a heightened provision of $2.1 million. For the fourth quarter, the provision was $700,000.

Total investments securities grew 50.59 percent over the year, part of an effort to deploy excess liquidity. The bank now has $293.4 million in total investment securities. Municipal and corporate bonds represent most of the recent increase.

"What we tried to do is buy some fairly short-term municipal securities, to generate a little bit of a better return," said Christina Cook, chief financial officer.

Bank of Marin saw an average tax-equivalent net interest margin of 4.74 percent for 2012, down from 5.13 percent in the prior year. The bank cited continuing pressure from low interest rates for the decline, noting that the fourth-quarter margin of 4.62 percent was greater than the 4.44 margin in the thirdquarter.

The $1.4 billion-asset bank had an average efficiency ratio of 55 percent for 2012, up from 54.6 percent in 2011. The bank's average return on assets was 1.24 percent for the year, up from 1.16 percent in 2011. The return on average equity was 12.36 percent, up by 0.35 percent.

The bank had an 85.7 percent loan-to-deposit ratio at the end of 2012, up 5.7 percent from the prior quarter and level with the end of 2011. Deposits increased $50.3 million -- 4.2 percent -- in 2012, totaling $1.3 billion. The asset mix has shifted to a greater amount of non-interest-bearing deposits, up to 31.1 percent of total deposits from 28.1 percent at the end of 2011.

Loans in Napa County have grown 29.8 percent -- by $16.8 million -- year-over-year, following the bank's increased efforts in the region, Mr. Colombo said. The bank now has 13 employees in the valley, working from branches that Bank of Marin acquired after the Federal Deposit Insurance Corp.-assisted acquisition of the former Charter Oak Bank in early 2011.

 "As we go forward into this year, we expect to grow in Napa," Mr. Colombo said.

Bank of Marin has received a five-star rating from Bauer Financial for more than 13 years. The bancorp's stock price was $39.49 at the end of trading Tuesday, up 71 cents a share, or 1.83 percent.