Acquisition

On November 29, 2013, we completed the acquisition of NorCal, parent company of Bank of Alameda, to enhance our market presence. The acquisition added $173.8 million in loans, $241.0 million in deposits and $53.7 million in investment securities to Bank of Marin as well as four branch offices serving Alameda, Emeryville, and Oakland. Effective October 31, 2014, the Emeryville branch was closed after Management determined that our customers and the business community can be easily supported from our Oakland location. The assets acquired and liabilities assumed, both tangible and intangible, were recorded at their fair values as of the acquisition date in accordance with ASC 805, Business Combinations. The acquisition was treated as a "reorganization" within the definition of section 368(a) of the Internal Revenue Code and is generally considered tax-free for U.S. federal income tax purposes.

Goodwill

As a result of the NorCal Acquisition, we recorded $6.4 million in goodwill, which represents the excess of the total purchase price paid over the fair value of the assets acquired, net of the fair values of liabilities assumed. Goodwill mainly reflects expected value created through the combined operations of Bank of Alameda and Bank of Marin and our expanded footprint in the East Bay. At December 31, 2015 and 2014, we determined that the fair value of our traditional community banking activities (provided through our branch network) exceeded the carrying amount. Therefore, no impairment on goodwill has been recorded. The goodwill is not deductible for tax purposes.

Core Deposit Intangible

The core deposit intangible represents the estimated future benefits of acquired deposits and is booked separately from the related deposits. The value of the core deposit intangible asset was determined using a discounted cash flow approach to arrive at the cost differential between the core deposits (non-maturity deposits such as transaction, savings and money market accounts) and alternative funding sources. It was calculated as the present value of the difference in cash flows between maintaining the core deposits (interest and net maintenance costs) and the cost of an equal amount of funds with a similar term from an alternative source. The core deposit intangible is amortized on an accelerated basis over an estimated ten-year life, and it is evaluated periodically for impairment. No impairment loss was recognized in 2015 or 2014.

We recorded a core deposit intangible asset of $4.6 million at acquisition, of which $69 thousand was amortized in 2013, $771 thousand was amortized in 2014 and $619 thousand was amortized in 2015. At December 31, 2015, the future estimated amortization expense is as follows:



(in thousands)	2016		2017		2018		2019		2020		Thereafter		Total
Core deposit intangible amortization	$	533	$	472	$	413	$	388	$	365	$	942	$	3,113

Pro Forma Results of Operations

The contribution of the acquired operations of the former NorCal Community Bancorp to our results of operations for the period November 29 to December 31, 2013 is as follows: interest income of $1.1 million, interest expense of $68 thousand, non-interest income of $95 thousand, non-interest expense of $1.1 million and income before income taxes of $109 thousand. These amounts include acquisition-related costs, accretion of the discount on the acquired loans, amortization of the fair value mark on time deposits, core deposit intangible amortization, and subordinated debentures amortization. NorCal Community Bancorp's results of operations prior to the acquisition date are not included in our operating results for 2013.

The following table presents NorCal Community Bancorp's revenue (interest income and non-interest income) and earnings included in our consolidated statement of comprehensive income for the year ended December 31, 2013. This pro forma information does not necessarily reflect the results of operations that would have resulted had the acquisition been completed on January 1, 2013, nor is it indicative of the results of operations in future periods.



Pro Forma Revenue and Earnings
(in thousands)	Revenue		Earnings
Actual from November 29, 2013 to December 31, 2013 of NorCal only	$	1,239	$	70
2013 supplemental pro forma of the combined entity from January 1, 2013 to December 31, 2013¹	$	79,586	$	14,514

¹ 2013 supplemental pro forma earnings include $3.7 million of one-time acquisition related expenses booked at Bank of Marin Bancorp and $1.9 million of one-time acquisition related expenses booked at NorCal Community Bancorp in 2013.

Acquisition-related expenses are recognized as incurred and continue until all systems have been converted and operational functions become fully integrated. We did not incur any one-time acquisition-related expenses in 2015. We incurred one-time third-party acquisition-related expenses in the consolidated statements of comprehensive income in 2014 and 2013 as follows:



(in thousands)	2014		2013

Data processing	$	442	$	2,807	*
Professional services	—		660
Personnel severance	304		203
Other	—		74
Total	$	746	$	3,744

*Primarily relates to NorCal's core processing system contract termination and deconversion fees.