Aug. 11--BUSINESS is bustling at Circle Bank in Novato.

"We will have our best year ever," said Kimberly Kaselionis, chief executive officer. "We are on track e barring anything unforeseen."

As financial institutions across the nation swirl in a tailspin fanned by the credit crisis, the slumping housing market and other woes, banks that call Marin home are reporting solid, even stellar earnings.

- The privately held Circle Bank, with 42 employees and four branches in Marin and Sonoma counties, reported an 83 percent increase in second-quarter earnings. Net income grew to $426,000, up from $233,000 in last year's second quarter. Income grew 68 percent the first six months this year to $857,000, up from $509,000 a year ago.

- Bank of Marin Bancorp's earnings rose 17 percent over the second quarter last year. The Novato-based bank, with 190 employees and 12 branches, earned $3.4 million in this year's second quarter, up $483,000 from a year ago. For the six-month period ended June 30, the bank earned $6.7 million, up 13.4 percent from last year.

- Tamalpais Bancorp of San Rafael, with 77 employees in seven branches, reported record second-quarter earnings, with net income increasing 18.6 percent to $1.3 million. Net income for the six months ended June 30 grew 19.6 percent to $2.5 million, up from $2.1 million in 2007.

- Westamerica Bancorp, the parent of Westamerica Bank, reported net income of $12.2 million in the second quarter after an $18.2 million "temporary impairment

charge," related to the sinking value of its Fannie Mae and Freddie Mac preferred stock securities. Last year, the company earned $22.4 million.

Analysts said that while Westamerica, with 842 employees in 86 offices in 21 counties, including 11 in Marin, posted earnings that were down 45 percent from last year, they expect positive earnings growth in the third and fourth quarters this year.

Banking success Officials say conservative lending practices, Marin's stable home prices and an affluent population add up to banking success.

Westamerica and Circle Bank are in the mortgage lending business but say they have strict criteria for borrowers.

Marin banking executives anticipate strong year-end results, saying the county seems to be somewhat immune to the severe economic doldrums gripping the nation.

Russell Colombo, chief executive of Bank of Marin, said part of Marin banks' success has been the commitment to the market they serve.

"We are paying attention to what we do and keeping it local, and closely monitoring our credit," Colombo said. "If there is a problem, we do something about it quickly."

Colombo said Marin's steady increase in "wealth accumulation" has offset a flat population growth.

Robert Thorson, chief financial officer at Westamerica Bank, said his bank has strong credit quality because of its conservative underwriting and solid capital base that cushions investors' money.

"We have a lot of customers that are also shareholders but as Westamerica has grown and become larger, that attracts more institutional investors," Thorson said. "Shareholders represent a source of raising capital and once it is raised, it depends how well management invests that capital to keep the bank in a healthy position."

As for Westamerica's stock securities problem, Joe Morford, an analyst with RBC Capital Markets in San Francisco, said traders had concerns about banks -- including Westamerica -- because of their holdings in Fannie Mae and Freddie Mac.

"I think we will look back and find that Westamerica Bank had one of the stronger earnings reports of the banks," Morford said. "Their credit trends are relatively stable."

Unbroken circle Circle Bank's Kaselionis said her customers are well-educated residents who value relationships and rely on a bank that provides financial solutions. She said Circle will benefit even if the economy continues to slide.

"When credit becomes unavailable by the big mortgage lenders, there is still a need in the community for loans," Kaselionis said. "We haven't had a hiccup, so we are always available to help businesses and consumers in Marin and Sonoma."

She also noted that despite the down cycle, many Marin businesses continue to grow.

Michael Rice, senior vice president and chief lending officer at Tamalpais Bank, said the credit crisis has had little effect on how the bank does business.

"Tamalpais Bank has never been a significant lender in construction or land transactions and we have never been a big residential spec lender," Rice said. "We have kept to our core and we haven't changed anything."

Tough time ahead Industry analysts suggest bank officials remain cautious because the economy may be in rough waters for some time.

Tim O'Brien, an analyst with Sandler O'Neill & Partners in San Francisco, said that for the most part, Marin's banks avoided the subprime market and do not have a portfolios loaded with construction loans.

"They all have tended to avoid some of the credit troubles that some of the thrifts -- like IndyMac -- have had," O'Brien said, speaking of the three publicly traded banks. "They are not out of the woods, though."

O'Brien, who covers Tamalpais Bancorp, said the bank has a strong history of managing credit well.

But he noted distressed markets in the Central Valley, the Inland Empire and the San Diego area have taken a disastrous toll on big mortgage and construction lenders, and added the market could still see reverberations.

"In 2008, the story has been the weakening Bay Area, Los Angeles and core urban housing markets," O'Brien said. "These three banks don't have the exposure to that but the slowing of business in their markets will have an effect."

O'Brien noted that Westamerica has branches in some of the tumultuous markets but said the bank has a reputation for conservative underwriting. "In this kind of environment, that is an approach that appears to serve them well," O'Brien said.

"In 2008, it is more likely that the economy will weaken in the Bay Area and the credit costs for Bay Area banks will rise," he said, noting that unemployment rates have been creeping up in San Francisco, Santa Clara, Contra Costa and other Bay Area counties, including Marin.

Marin's resilience Jim Wishner, managing director at Keefe, Bruyette & Woods in San Francisco, said that while the banking industry is under pressure, Marin is resilient.

"The build-up you saw in other areas -- because Marin is anti-growth -- they didn't have the huge housing developments go up and then retail centers going up around them," Wishner said.

National banking institutions see plenty of value, and opportunity, in Marin.

Wells Fargo Bank recently announced it is opening its 15th Marin branch at the Hamilton Marketplace in Novato later this month, offering small business services, home mortgages, investments, insurance and other services.

David Galasso, Wells Fargo's Marin Golden Gate Regional president, said the outlet will represent the fifth branch the bank has opened in Marin in 18 months.

"We were in San Rafael in 1860," Galasso said. "People recognize that and they really vote with their feet and their wallets. People are looking for peace of mind with the current times and they get nervous and that's what our vision really speaks to."

Economist Robert Eyler, an assistant professor at Sonoma State University, said Wells Fargo is "seeing an opportunity to gravitate into good markets."

James Demmert, managing partner with Main Street Research in Sausalito, cautions that the housing crisis is just half over, noting that experts predicted losses of $1 trillion -- and only half of that had been written off. He said losses will continue through the first quarter of 2009.

"I am really happy we live in a community where the banks are doing well," Demmert said. "We are immune for a quarter or two but, if it goes for more quarters, there are fringes that will be affected -- the longer it goes, the more people will be affected."

Back at Circle Bank, business is brisk.

San Rafael branch manager Dorie Young said lots of inquiries have been made since the Independent Journal reported a week ago that the company's earnings soared.

New customer Jean Pumphrey said she liked the fact that Circle Bank is largely owned and operated by women.

"As a new customer my impressions were: friendly staff, cookies and coffee, and no big sales pitch aside from mentioning the current 4 percent money market," Pumphrey said.

San Rafael resident Bob Crane, who was doing business at the Novato branch, said he chooses to bank at Circle because it is small.

"You get better service," Crane said. "They treat you like they know -- they do know you. You don't feel like a cog."

MARIN'S COMMUNITY BANKS

Bank of Marin Bancorp

- Headquarters: 50 Madera Blvd., Corte Madera

- Branches: 12

- Employees: 190

- Assets: $953 million

- Stock: 52-week range, $24 to $37; Friday close, $28.75

Circle Bank

- Headquarters: 1400A Grant Ave., Novato

- Branches: Four

- Employees: 42

- Assets: $248 million

- Stock: Private company

Tamalpais Bancorp

- Headquarters: 630 Las Gallinas Ave., San Rafael

- Branches: Seven

- Employees: 77

- Assets: $649 million

- Stock: 52-week range, $9 to $14; Friday close, $11.70

Westamerica Bancorp

- Headquarters: 1108 Fifth Ave., San Rafael

- Branches: 86

- Employees: 842

- Assets: $4.2 billion

- Stock: 52-week range, $36 to $61; Friday close, $53.48

Read more Business and stocks stories at the IJ's Business and stocks section.

Contact Nancy Isles Nation via e-mail at nnation@marinij.com

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Story Source: Marin Independent Journal