Acquisition

On November 21, 2017, we completed the merger of Bank of Napa, N.A. (OTCQB: BNNP), to enhance our market presence in Napa, California. Bank of Napa was a national bank with two branch offices serving Napa. The acquisition added $134.7 million in loans, $249.9 million in deposits and $75.5 million in investment securities to Bank of Marin as of the acquisition date. Bank of Napa shareholders received 0.307 shares of Bancorp common stock for each share of Bank of Napa common stock outstanding. We accounted for the acquisition of Bank of Napa as a business combination under the acquisition method of accounting. 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.

The Bank of Napa acquisition resulted in $23.7 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 Napa and Bank of Marin, which we evaluate for impairment annually. We determined that the fair value of our traditional community banking activities (provided through our branch network) exceeded the carrying amount of the Bank, which is the reporting unit to which the goodwill is assigned. The goodwill is not deductible for tax purposes.

The core deposit intangible represents the estimated future benefits of acquired deposits and is booked separately from the related deposits. We recorded a core deposit intangible asset of $4.4 million from the Bank of Napa acquisition on November 21, 2017, of which $508 thousand and $56 thousand were amortized in 2018 and 2017, respectively. The core deposit intangible is amortized on an accelerated basis over an estimated ten-year life, and is evaluated periodically for impairment. No impairment loss was recognized in 2018 or 2017.

Acquisition-related expenses are recognized as incurred. Bank of Marin Bancorp recognized acquisition-related expenses in the consolidated statements of comprehensive income in 2018 and 2017 for the Bank of Napa acquisition as follows:



(in thousands)	Year Ended December 31, 2018		Year Ended December 31, 2017
Data processing¹	$	586	$	1,108
Professional services	191		952
Personnel severance	141		35
Other	44		114
Total	$	962	$	2,209
¹ Primarily relates to Bank of Napa's core processing system contract termination and deconversion fees.

On November 29, 2013, we acquired NorCal Community Bancorp, parent company of Bank of Alameda and recorded $6.4 million in goodwill and a $4.6 million core deposit intangible at acquisition. The core deposit intangible continues to be amortized on an accelerated basis over an estimated ten-year life. For information on the future amortization expenses on core deposit intangibles (from the acquisitions of Bank of Napa and Bank of Alameda combined), refer to Note 1, Summary of Significant Accounting Policies.