Bank of Marin Bancorp Reports Second Quarter Earnings of $9.3 Million

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NOVATO, Calif.–(BUSINESS WIRE)–Bank of Marin Bancorp, “Bancorp” (Nasdaq: BMRC), parent company of Bank of Marin, “Bank,” announced earnings of $9.3 million in the second quarter of 2021, compared to $8.9 million in the first quarter of 2021 and $7.4 million in the second quarter of 2020. Diluted earnings per share were $0.71 in the second quarter, $0.66 in the prior quarter, and $0.55 in the same quarter last year. Earnings for the first six months of 2021 totaled $18.2 million compared to $14.6 million in the same period last year. Diluted earnings per share were $1.37 and $1.07 in the first six months of 2021 and 2020, respectively.

“During the second quarter, we generated strong results for our shareholders, growing both net interest income and non-interest revenue. In addition, we managed expenses closely and maintained exceptional credit quality,” said Russell A. Colombo, Chief Executive Officer. “Importantly, our acquisition of American River Bankshares is on track to close in the third quarter. This strategic acquisition will give us a well-established foothold in the growing Sacramento region and expand our Northern California footprint.”

Bancorp provided the following highlights from the second quarter of 2021:

  • Loan balances were $2.003 billion at June 30, 2021, compared to $2.122 billion at March 31, 2021 and $2.110 billion at June 30, 2020. Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) loans outstanding were $248.3 million at June 30, 2021, versus $365.0 million and $298.9 million at March 31, 2021 and June 30, 2020, respectively. As of June 30, 2021, $189.3 million of our PPP loans had been forgiven and paid off by the SBA.
  • Credit quality remains strong, with non-accrual loans representing 0.46% of total loans as of June 30, 2021, compared to 0.43% at March 31, 2021, and 0.08% at June 30, 2020. Reversals of $920 thousand to the allowance for credit losses on loans and $612 thousand to the allowance for credit losses on unfunded loan commitments in the second quarter of 2021 were driven primarily by an improvement in economic forecasts.
  • Total deposits grew $27.4 million to $2.684 billion at June 30, 2021 from $2.656 billion at March 31, 2021. The increase in the second quarter of 2021 was primarily driven by our customers depositing PPP funds into their accounts and new account openings. Non-interest bearing deposits were 54% of total deposits as of June 30, 2021 and March 31, 2021, versus 52% at the end of the second quarter a year ago. Cost of average deposits were 0.07% in the second quarter and first quarter of 2021, compared to 0.09% in the second quarter of 2020.
  • Return on average assets (“ROA”) and return on average equity (“ROE”) were 1.20% and 10.72%, respectively, for the quarter ended June 30, 2021. ROA and ROE were 1.21% and 10.22% in the prior quarter and 1.01% and 8.52%, respectively, in the second quarter a year ago.
  • All capital ratios were above well-capitalized regulatory requirements. The total risk-based capital ratio for Bancorp was 15.5% at June 30, 2021, compared to 15.7% at March 31, 2021, and 15.8% at June 30, 2020. Bancorp’s tangible common equity to tangible assets was 10.4% at June 30, 2021, compared to 10.5% at March 31, 2021 and 10.1% at June 30, 2020 (refer to footnote 5 on page 6 for a definition of this non-GAAP financial measure). The Bank’s total risk-based capital ratio was 15.3% at June 30, 2021, compared to 14.8% at March 31, 2021, and 15.0% at June 30, 2020.
  • As previously announced, on April 16, 2021 Bancorp entered into a definitive agreement to acquire American River Bankshares (“AMRB”), parent company of American River Bank (“ARB”), whereby AMRB will merge with and into Bancorp and immediately thereafter ARB will merge with and into Bank of Marin (collectively, the “Merger”). The acquisition will expand Bank of Marin’s presence throughout the Greater Sacramento, Amador and Sonoma County Regions where ARB has ten branches. Pursuant to the terms of the agreement, AMRB shareholders will have the right to receive 0.575 shares of Bank of Marin Bancorp common stock. AMRB had total assets of $916.1 million, total deposits of $788.6 million, and total loans of $475.4 million as of March 31, 2021. These amounts are subject to fair value adjustments upon the close of the Merger. The Boards of Directors of each company unanimously approved the merger. The Merger is expected to close in the third quarter of 2021, subject to regulatory approval and approval by shareholders of Bancorp and AMRB on July 28, 2021.
  • The Board of Directors declared a cash dividend of $0.24 per share on July 16, 2021, a $0.01 increase from the prior quarter. This represents the 65th consecutive quarterly dividend paid by Bank of Marin Bancorp. The dividend is payable on August 6, 2021, to shareholders of record at the close of business on July 30, 2021.
  • Given our strong capital and liquidity, the Board of Directors approved a new share repurchase program on July 16, 2021 under which Bancorp may repurchase up to $25.0 million of its outstanding common stock through July 31, 2023.

“Our relationship banking model proved itself through the pandemic and into the first half of 2021,” said Tim Myers, President and Chief Operating Officer. “Through PPP we helped our customers in need and grew our core deposit base. Our bankers are back out visiting and working with clients to address their evolving needs as the economy reopens and demand for business financing returns.”

Loans and Credit Quality

Loans decreased by $119.0 million in the second quarter and totaled $2.003 billion at June 30, 2021. The decrease was comprised of a $116.7 million net decrease in PPP loans, and a $2.3 million decrease in non-PPP loans. Non-PPP-related loan originations were $43.8 million and $69.1 million for the second quarter and first six months of 2021, compared to $41.8 million and $71.6 million for the same periods in 2020. Loan payoffs were $60.9 million and $95.4 million in the second quarter and first half of 2021, compared to $31.7 million and $83.4 million for the first quarter and first half of 2020. Loan payoffs in the second quarter of 2021 consisted largely of HELOC, tenants in common, and commercial loans on which underlying assets were sold or paid off with cash.

As of June 30, 2021, there were 1,532 PPP loans outstanding totaling $248.3 million (net of $6.5 million in unrecognized fees and costs). PPP loans funded in the Bank’s second round totaled 1,063 for $136.2 million. Forgiveness of PPP loans continues with 1,395 approved by the SBA as of July 13, 2021 totaling $201.6 million. As of June 30, 2021, PPP loans forgiven and paid off were 1,344 totaling $189.3 million. Of the loans remaining, 70% (1,072 loans) totaling $45.8 million are less than or equal to $150 thousand and have access to streamlined forgiveness processing.

As of July 16, 2021, 6 borrowing relationships with 9 loans totaling $43.4 million were benefiting from payment relief. We monitor the financial situation of these clients closely and expect the majority to resume payments as the economy continues to reopen.

Non-accrual loans totaled $9.2 million at June 30, 2021 and March 31, 2021, or 0.46% and 0.43% of total loans, respectively. Non-accrual loans totaled $1.6 million, or 0.08% of total loans a year ago. Classified loans totaled $30.8 million at June 30, 2021, compared to $26.4 million at March 31, 2021 and $13.5 million at June 30, 2020. There were no loans classified doubtful at June 30, 2021, March 31, 2021, or June 30, 2020. Accruing loans past due 30 to 89 days totaled $487 thousand at June 30, 2021, compared to $1.0 million at March 31, 2021 and $83 thousand a year ago.

In the second quarter of 2021, we recorded a reversal of the provision for credit losses on loans of $920 thousand, compared to a reversal of $2.9 million in the prior quarter and a provision of $2.0 million in the second quarter of 2020. Both the current quarter and prior quarter allowances were calculated under the current expected credit loss methodology. The reversal of the provision in the second quarter of 2021 was primarily due to improvements in economic forecasts. The second quarter of 2020 included a $2.0 million provision for credit losses on loans, as determined under the incurred loss methodology, due to economic uncertainties of the COVID-19 pandemic. We recorded a $612 thousand reversal of credit losses on unfunded commitments in the second quarter of 2021, compared to $590 thousand in the prior quarter and a $260 thousand provision in the second quarter of 2020. The reversals in the second and first quarters of 2021 were primarily driven by improvements in economic forecasts. A $39.1 million decrease in unfunded loan commitments also contributed to the reversal of the allowance for credit losses on unfunded commitments in the second quarter of 2021. Net recoveries were $62 thousand in the second quarter of 2021 and $13 thousand in the prior quarter, compared to net charge-offs of $16 thousand in the second quarter a year ago. The ratio of allowance for credit losses to total loans was 0.95% at June 30, 2021, 0.94% at March 31, 2021, and 0.99% at June 30, 2020. Excluding acquired and SBA PPP loans, the allowance for credit losses represented 1.09% of total loans as of June 30, 2021, compared to 1.14% and 1.22% as of March 31, 2021 and June 30, 2020, respectively (refer to footnote 4 on page 6 for a definition of this non-GAAP financial measure).

Cash, Cash Equivalents and Restricted Cash

Total cash, cash equivalents and restricted cash were $257.5 million at June 30, 2021, compared to $142.8 million at March 31, 2021. The increase was primarily associated with SBA PPP loan forgiveness and increase in deposits.

Investments

The investment securities portfolio increased to $687.0 million at June 30, 2021 from $670.5 million at March 31, 2021. The increase was primarily attributed to purchases of $41.2 million, partially offset by paydowns and calls of $26.7 million. The fair value of available-for-sale investment securities increased $2.8 million due to a decline in interest rates in the second quarter of 2021.

Deposits

Total deposits were $2.684 billion at June 30, 2021, compared to $2.656 billion at March 31, 2021. The increase was primarily driven by our customers depositing PPP funds into their accounts and new account openings in the second quarter of 2021. The Bank maintained $174.0 million in off-balance sheet deposits with deposit networks at June 30, 2021 as compared to $180.8 million at March 31, 2021. Average cost of deposits held steady at 0.07% in the second quarter of 2021.

On March 30, 2020, we implemented temporary fee waivers for all ATM fees, overdraft fees and early withdrawal penalties for time deposits to help ease the financial burden customers began experiencing due to the pandemic. After honoring the fee waivers for one year, we provided our customers 30 days notice, and reinstituted the fees as of May 3, 2021.

Earnings

“Bank of Marin is emerging from the pandemic with the increased profitability and strong balance sheet that we have established as hallmarks throughout our 31-year history,” said Tani Girton, Executive Vice President and Chief Financial Officer. “We produced strong net income growth during the quarter and over the past year. We are prepared for the American River Bank integration, and we fully expect the acquisition to further drive value for our shareholders.”

Net interest income totaled $24.5 million in the second quarter of 2021, compared to $22.0 million in the prior quarter and $24.4 million in the second quarter a year ago. The $2.5 million increase from the prior quarter was attributable to $1.3 million in accelerated discount accretion from the early redemption of a subordinated debenture in the first quarter of 2021, and $947 thousand higher accelerated fee income from SBA PPP loan forgiveness in the second quarter of 2021. We recognized $2.6 million in SBA PPP fees, net of cost in the second quarter of 2021 compared to $1.7 million in prior quarter, and $1.2 million in the second quarter of 2020. Additionally, higher average investment security balances and one more day in the second quarter contributed to increased interest income. Increases were partially offset by lower yields across interest-earning assets and lower average loan balances.

The $159 thousand increase from the comparative quarter a year ago was reflective of higher income from SBA PPP loans, higher average investment securities and commercial real estate loan balances, and lower rates on interest-bearing liabilities. Increases were mostly offset by lower yielding interest-earning assets and lower average commercial, home equity, and other residential loan balances.

Net interest income totaled $46.6 million in the first six months of 2021 compared to $48.5 million in the first six months a year ago. The decrease was primarily attributed to $1.3 million in accelerated discount accretion from the early redemption of a subordinated debenture in the first quarter of 2021, lower yielding interest-earning assets, lower average balances of commercial and consumer loans, and one less day in the period. Decreases were partially offset by higher income from SBA PPP loans and higher investment securities, commercial real estate, and construction loan balances, and lower rates on interest-bearing liabilities. We recognized $4.3 million in SBA PPP fees, net of cost in the first six months of 2021, compared to $1.2 million in the first six months a year ago. As of June 30, 2021 $6.5 million PPP fees, net of deferred costs remain outstanding and will be recognized into income in future periods.

The tax-equivalent net interest margin was 3.37% in the second quarter, 3.19% in the prior quarter, and 3.53% in the second quarter of 2020. The tax-equivalent net interest margin was 3.28% in the first six months of 2021 compared to 3.70% in the six months a year ago. The decreases from the same quarter and year-to-date periods of 2020 were primarily attributed to the lower interest rate environment. SBA PPP loans contributed 12 basis points to the second quarter’s net interest margin as compared to 1 basis point in the prior quarter due to higher fee accretion in the second quarter as more PPP loans were forgiven and paid off by the SBA. SBA PPP loans added 5 basis points to the first six months’ net interest margin as compared to a 2 basis points reduction to the same period a year ago. The early redemption of our last subordinated debenture reduced first quarter 2021 tax-equivalent net interest margin by approximately 18 basis points.

Non-interest income totaled $2.0 million in the second quarter of 2021, compared to $1.8 million in the prior quarter and second quarter a year ago. The $196 thousand increase from the prior quarter and $209 thousand increase from the second quarter of 2020 were mostly attributed to debit card interchange fees from increased levels of activity and higher Wealth Management and Trust Services income generated from new accounts and favorable market performance. Increases relative to the prior year were partially offset by the absence of gains on investment securities in the second quarter of 2021.

Non-interest income decreased $1.1 million to $3.8 million in the first six months of 2021 from $4.9 million in the first six months of 2020. The decrease was primarily attributed to the absence of gains on investment securities, versus $915 thousand realized in the comparative period a year ago.

Non-interest expense increased $144 thousand to $15.6 million in the second quarter of 2021 from $15.4 million in the prior quarter. The increase was primarily due to $441 thousand more in charitable contributions as the majority of our 2021 contributions were disbursed in the second quarter of 2021, $351 thousand increase in ARB acquisition-related expenses (mostly related to professional services), and $100 thousand in directors expense due to two new board members. Decreases relative to the prior quarter included $460 thousand in stock-based compensation for participants meeting retirement eligibility criteria, and resets on 401K matching and payroll taxes, all of which occurred in the first quarter.

Second quarter non-interest expense increased $1.7 million from $13.9 million in the second quarter of 2020. The increase was primarily attributed to $1.0 million in higher salaries and related benefits (mostly related to fewer deferred SBA PPP loan origination costs), $351 thousand increase in ARB acquisition-related expenses, and $189 thousand increase in charitable contributions.

Non-interest expense increased $1.7 million to $31.0 million in the first six months of 2021 compared to $29.2 million in the first six months of 2020. Higher salaries and related benefits of $755 thousand, of which over half was attributed to fewer deferred SBA PPP loan origination costs, contributed to the increase. Professional services also increased by $755 thousand due to some pandemic related delays in 2020 activities and ARB acquisition-related activities. In addition, FDIC deposit insurance expenses were $243 thousand higher.

The (reversal of) or provision for credit losses on unfunded commitments was reclassified out of non-interest expense and included as a separate line item under net interest income in the consolidated statements of comprehensive income for all periods presented. Efficiency ratios for all periods reported have been updated to reflect the reclassification.

Share Repurchase Program

The $25.0 million share repurchase program approved by the Bancorp Board of Directors on January 24, 2020 was completed in May 2021. Bancorp repurchased 297,935 shares totaling $10.7 million in the second quarter of 2021. Cumulative repurchases under this program amounted to 691,519 shares totaling $25.0 million. The Board of Directors approved a new share repurchase program on July 16, 2021 under which Bancorp may repurchase up to $25.0 million of its outstanding common stock through July 31, 2023.

Earnings Call and Webcast Information

Bank of Marin Bancorp will present its second quarter earnings call via webcast on Monday, July 19, 2021 at 8:30 a.m. PT/11:30 a.m. ET. Investors will have the opportunity to listen to the webcast online through Bank of Marin’s website at https://www.bankofmarin.com under “Investor Relations.” To listen to the webcast live, please go to the website at least 15 minutes early to register, download and install any necessary audio software. For those who cannot listen to the live broadcast, a replay will be available at the same website location shortly after the call.

About Bank of Marin Bancorp

Founded in 1990 and headquartered in Novato, Bank of Marin is the wholly owned subsidiary of Bank of Marin Bancorp (Nasdaq: BMRC). A leading business and community bank in the San Francisco Bay Area, with assets of $3.1 billion as of June 30, 2021, Bank of Marin has 21 branches and 7 commercial banking offices located across 7 Bay Area counties. Bank of Marin provides commercial banking, personal banking, specialty lending and wealth management and trust services. Specializing in providing legendary service to its customers and investing in its local communities, Bank of Marin has consistently been ranked one of the “Top Corporate Philanthropists” by the San Francisco Business Times and one of the “Best Places to Work” by the North Bay Business Journal. Bank of Marin Bancorp is included in the Russell 2000 Small-Cap Index and Nasdaq ABA Community Bank Index. For more information, go to www.bankofmarin.com.

Forward-Looking Statements

This release may contain certain forward-looking statements that are based on management’s current expectations regarding economic, legislative, and regulatory issues that may impact Bancorp’s earnings in future periods. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include the words “believe,” “expect,” “intend,” “estimate” or words of similar meaning, or future or conditional verbs such as “will,” “would,” “should,” “could” or “may.” Factors that could cause future results to vary materially from current management expectations include, but are not limited to, our ability to successfully close and integrate the acquisition of AMRB and ARB into the Company and Bank, natural disasters (such as wildfires and earthquakes), our borrowers’ actual payment performance as loan deferrals related to the COVID-19 pandemic expire, changes to statutes, regulations, or regulatory policies or practices as a result of, or in response to COVID-19, including the potential adverse impact of loan modifications and payment deferrals implemented consistent with recent regulatory guidance, general economic conditions, economic uncertainty in the United States and abroad, changes in interest rates, deposit flows, real estate values, costs or effects of acquisitions, competition, changes in accounting principles, policies or guidelines, legislation or regulation (including the Tax Cuts & Jobs Act of 2017 and the Coronavirus Aid, Relief and Economic Security Act of 2020, as amended), interruptions of utility service in our markets for sustained periods, and other economic, competitive, governmental, regulatory and technological factors (including external fraud and cybersecurity threats) affecting Bancorp’s operations, pricing, products and services. These and other important factors are detailed in various securities law filings made periodically by Bancorp, copies of which are available from Bancorp without charge. Bancorp undertakes no obligation to release publicly the result of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date of this press release or to reflect the occurrence of unanticipated events.

(BMRC-ER)

BANK OF MARIN BANCORP FINANCIAL HIGHLIGHTS

(dollars in thousands, except per share data; unaudited)

June 30, 2021

March 31, 2021

June 30, 2020

Quarter-to-Date

Net income

$

9,285

$

8,947

$

7,406

Diluted earnings per common share

$

0.71

$

0.66

$

0.55

Return on average assets

1.20

%

1.21

%

1.01

%

Return on average equity

10.72

%

10.22

%

8.52

%

Efficiency ratio

58.58

%

64.60

%

53.01

%

Tax-equivalent net interest margin 1

3.37

%

3.19

%

3.53

%

Cost of deposits

0.07

%

0.07

%

0.09

%

Net (recoveries) charge-offs

$

(62)

$

(13)

$

16

Year-to-Date

Net income

$

18,232

$

14,634

Diluted earnings per common share

$

1.37

$

1.07

Return on average assets

1.21

%

1.05

%

Return on average equity

10.47

%

8.53

%

Efficiency ratio

61.43

%

54.74

%

Tax-equivalent net interest margin 1

3.28

%

3.70

%

Cost of deposits

0.07

%

0.15

%

Net (recoveries) charge-offs

$

(75)

$

9

At Period End

Total assets

$

3,073,818

$

3,058,133

$

3,181,540

Loans:

Commercial and industrial 2

$

423,646

$

545,069

$

525,117

Real estate:

Commercial owner-occupied

296,407

308,266

296,163

Commercial investor-owned

967,335

955,021

946,389

Construction

80,841

71,066

66,368

Home equity

92,510

96,575

112,911

Other residential

120,903

124,383

136,859

Installment and other consumer loans

21,125

21,392

26,394

Total loans

$

2,002,767

$

2,121,772

$

2,110,201

Non-performing loans: 3

Real estate:

Commercial owner-occupied

$

7,148

$

7,147

$

Commercial investor-owned

1,597

1,603

907

Home equity

445

455

625

Installment and other consumer loans

55

Total non-accrual loans

$

9,190

$

9,205

$

1,587

Classified loans (graded substandard and doubtful)

$

30,813

$

26,421

$

13,545

Total accruing loans 30-89 days past due

$

487

$

1,047

$

83

Allowance for credit losses to total loans

0.95

%

0.94

%

0.99

%

Allowance for credit losses to total loans, excluding acquired and SBA PPP loans 4

1.09

%

1.14

%

1.22

%

Allowance for credit losses to non-performing loans

2.08x

2.17x

13.15x

Non-accrual loans to total loans

0.46

%

0.43

%

0.08

%

Total deposits

$

2,683,575

$

2,656,199

$

2,779,866

Loan-to-deposit ratio

74.6

%

79.9

%

75.9

%

Stockholders’ equity

$

348,649

$

350,292

$

352,240

Book value per share

$

26.71

$

26.29

$

25.92

Tangible common equity to tangible assets 5

10.4

%

10.5

%

10.1

%

Total risk-based capital ratio – Bank

15.3

%

14.8

%

15.0

%

Total risk-based capital ratio – Bancorp

15.5

%

15.7

%

15.8

%

Full-time equivalent employees

278

282

295

1 Net interest income is annualized by dividing actual number of days in the period times 360 days.

2 Includes SBA PPP loans of $248.3 million, $365.0 million, and $298.9 million at June 30, 2021, March 31, 2021, and June 30, 2020, respectively.

3 Excludes accruing troubled-debt restructured loans of $3.3 million, $3.4 million and $10.3 million at June 30, 2021, March 31, 2021, and June 30, 2020, respectively.

4 The allowance for credit losses to total loans, excluding non-impaired acquired loans and guaranteed SBA PPP loans, is considered a meaningful non-GAAP financial measure, as it represents only those loans that were considered in the calculation of the allowance for credit losses. Due to the adoption of CECL on December 31, 2020, all loans previously considered “acquired” are now included in the calculation of the allowance for credit losses. Acquired loans that were not impaired at June 30, 2020 totaled $95.6 million. Refer to footnote 2 above for SBA PPP loan totals.

5 Tangible common equity to tangible assets is considered to be a meaningful non-GAAP financial measure of capital adequacy and is useful for investors to assess Bancorp’s ability to absorb potential losses. Tangible common equity includes common stock, retained earnings and unrealized gain on available for sale securities, net of tax, less goodwill and intangible assets of $33.6 million, $33.8 million and $34.4 million at June 30, 2021, March 31, 2021, and June 30, 2020, respectively. Tangible assets exclude goodwill and intangible assets.

BANK OF MARIN BANCORP
CONSOLIDATED STATEMENTS OF CONDITION

(in thousands, except share data; unaudited)

June 30, 2021

March 31, 2021

June 30, 2020

Assets

Cash, cash equivalents and restricted cash

$

257,543

$

142,819

$

397,699

Investment securities:

Held-to-maturity, at amortized cost (net of zero allowance for credit losses at June 30, 2021 and March 31, 20211)

169,038

151,970

125,781

Available-for-sale (at fair value; amortized cost $504,934, $508,337, and $411,047 at June 30, 2021, March 31, 2021, June 30, 2020, respectively; net of zero allowance for credit losses at June 30, 2021 and March 31, 20211)

517,963

518,568

429,775

Total investment securities

687,001

670,538

555,556

Loans, at amortized cost

2,002,767

2,121,772

2,110,201

Allowance for credit losses1

(19,100)

(19,958)

(20,868)

Loans, net of allowance for credit losses

1,983,667

2,101,814

2,089,333

Bank premises and equipment, net

5,248

4,604

5,278

Goodwill

30,140

30,140

30,140

Core deposit intangible

3,423

3,627

4,258

Operating lease right-of-use assets

23,506

24,559

23,090

Interest receivable and other assets

83,290

80,032

76,186

Total assets

$

3,073,818

$

3,058,133

$

3,181,540

Liabilities and Stockholders’ Equity

Liabilities

Deposits

Non-interest bearing

$

1,460,076

$

1,445,282

$

1,442,849

Interest bearing

Transaction accounts

168,226

176,390

146,811

Savings accounts

230,730

224,748

190,561

Money market accounts

729,193

714,824

904,163

Time accounts

95,350

94,955

95,482

Total deposits

2,683,575

2,656,199

2,779,866

Borrowings and other obligations

438

30

140

Subordinated debenture

2,743

Operating lease liabilities

24,919

25,993

24,574

Interest payable and other liabilities

16,237

25,619

21,977

Total liabilities

2,725,169

2,707,841

2,829,300

Stockholders’ Equity

Preferred stock, no par value,

Authorized – 5,000,000 shares, none issued

Common stock, no par value,

Authorized – 30,000,000 shares; issued and outstanding – 13,055,105, 13,326,509 and 13,591,835 at June 30, 2021, March 31, 2021, and June 30, 2020, respectively

108,430

118,386

128,633

Retained earnings

231,841

225,600

211,613

Accumulated other comprehensive income, net of taxes

8,378

6,306

11,994

Total stockholders’ equity

348,649

350,292

352,240

Total liabilities and stockholders’ equity

$

3,073,818

$

3,058,133

$

3,181,540

1 The June 30, 2021 and March 31, 2021 allowances were calculated under current expected credit loss methodology, while the June 30, 2020 allowance was calculated under incurred loss methodology. Refer to Note 1, Summary of Accounting Policies, in our 2020 Form 10-K for further information on the adoption of ASU 2016-13.

BANK OF MARIN BANCORP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three months ended

Six months ended

(in thousands, except per share amounts; unaudited)

June 30, 2021

March 31, 2021

June 30, 2020

June 30, 2021

June 30, 2020

Interest income

Interest and fees on loans

$

21,429

$

20,661

$

21,217

$

42,090

$

42,104

Interest on investment securities

3,504

3,129

3,741

6,633

7,906

Interest on federal funds sold and due from banks

54

42

39

96

371

Total interest income

24,987

23,832

24,997

48,819

50,381

Interest expense

Interest on interest-bearing transaction accounts

39

39

39

78

105

Interest on savings accounts

21

19

17

40

33

Interest on money market accounts

312

286

383

598

1,354

Interest on time accounts

81

96

142

177

303

Interest on borrowings and other obligations

1

3

Interest on subordinated debenture

1,361

40

1,361

89

Total interest expense

453

1,801

622

2,254

1,887

Net interest income

24,534

22,031

24,375

46,565

48,494

(Reversal of) provision for credit losses on loans

(920)

(2,929)

2,000

(3,849)

4,200

(Reversal of) provision for credit losses on unfunded loan commitments

(612)

(590)

260

(1,202)

362

Net interest income after (reversal of) provision for credit losses

26,066

25,550

22,115

51,616

43,932

Non-interest income

Wealth Management and Trust Services

530

488

421

1,018

744

Debit card interchange fees

419

366

308

785

925

Service charges on deposit accounts

317

281

293

598

668

Earnings on bank-owned life insurance, net

233

257

234

490

509

Dividends on Federal Home Loan Bank stock

177

149

146

326

354

Merchant interchange fees

61

57

47

118

120

Gains on sale of investment securities, net

115

915

Other income

285

228

249

513

698

Total non-interest income

2,022

1,826

1,813

3,848

4,933

Non-interest expense

Salaries and related benefits

8,888

9,208

7,864

18,096

17,341

Occupancy and equipment

1,751

1,751

1,661

3,502

3,324

Professional services

986

863

550

1,849

1,094

Data processing

820

819

829

1,639

1,615

Depreciation and amortization

389

459

526

848

1,052

Information technology

296

313

252

609

502

Amortization of core deposit intangible

205

204

213

409

426

Federal Deposit Insurance Corporation insurance

182

179

116

361

118

Directors’ expense

230

175

175

405

349

Charitable contributions

462

31

273

493

440

Other expense

1,347

1,410

1,422

2,757

2,987

Total non-interest expense

15,556

15,412

13,881

30,968

29,248

Income before provision for income taxes

12,532

11,964

10,047

24,496

19,617

Provision for income taxes

3,247

3,017

2,641

6,264

4,983

Net income

$

9,285

$

8,947

$

7,406

$

18,232

$

14,634

Net income per common share:

Basic

$

0.71

$

0.67

$

0.55

$

1.38

$

1.08

Diluted

$

0.71

$

0.66

$

0.55

$

1.37

$

1.07

Weighted average shares:

Basic

13,092

13,363

13,514

13,227

13,519

Diluted

13,164

13,469

13,585

13,316

13,621

Comprehensive income (loss):

Net income

$

9,285

$

8,947

$

7,406

$

18,232

$

14,634

Other comprehensive income (loss):

Change in net unrealized gains on available-for-sale securities

2,798

(9,082)

1,494

(6,284)

11,306

Reclassification adjustment for gains on available-for-sale securities included in net income

(115)

(915)

Amortization of net unrealized losses on securities transferred from available-for-sale to held-to-maturity

138

143

135

281

245

Other comprehensive income (loss), before tax

2,936

(8,939)

1,514

(6,003)

10,636

Deferred tax expense (benefit)

864

(2,644)

448

(1,780)

3,145

Other comprehensive income (loss), net of tax

2,072

(6,295)

1,066

(4,223)

7,491

Total comprehensive income

$

11,357

$

2,652

$

8,472

$

14,009

$

22,125

BANK OF MARIN BANCORP

AVERAGE STATEMENTS OF CONDITION AND ANALYSIS OF NET INTEREST INCOME

Three months ended

Three months ended

Three months ended

June 30, 2021

March 31, 2021

June 30, 2020

Interest

Interest

Interest

Average

Income/

Yield/

Average

Income/

Yield/

Average

Income/

Yield/

(in thousands; unaudited)

Balance

Expense

Rate

Balance

Expense

Rate

Balance

Expense

Rate

Assets

Interest-earning deposits with banks 1

$

193,749

$

54

0.11

%

$

165,788

$

42

0.10

%

$

173,161

$

39

0.09

%

Investment securities 2, 3

661,361

3,666

2.22

%

540,970

3,282

2.43

%

550,483

3,886

2.82

%

Loans 1, 3, 4

2,062,497

21,601

4.14

%

2,099,847

20,836

3.97

%

2,043,197

21,399

4.14

%

Total interest-earning assets 1

2,917,607

25,321

3.43

%

2,806,605

24,160

3.44

%

2,766,841

25,324

3.62

%

Cash and non-interest-bearing due from banks

39,252

50,931

37,680

Bank premises and equipment, net

4,795

4,777

5,543

Interest receivable and other assets, net

131,667

133,693

133,639

Total assets

$

3,093,321

$

2,996,006

$

2,943,703

Liabilities and Stockholders’ Equity

Interest-bearing transaction accounts

$

167,787

$

39

0.09

%

$

174,135

$

39

0.09

%

$

142,778

$

39

0.11

%

Savings accounts

227,767

21

0.04

%

214,049

19

0.04

%

182,371

17

0.04

%

Money market accounts

735,784

312

0.17

%

703,577

286

0.16

%

794,654

383

0.19

%

Time accounts including CDARS

95,354

81

0.34

%

96,349

96

0.40

%

95,076

142

0.60

%

Borrowings and other obligations 1

61

1.15

%

36

1.99

%

156

1

2.62

%

Subordinated debenture 1, 5

%

2,164

1,361

251.54

%

2,733

40

5.73

%

Total interest-bearing liabilities

1,226,753

453

0.15

%

1,190,310

1,801

0.61

%

1,217,768

622

0.21

%

Demand accounts

1,478,119

1,406,123

1,332,986

Interest payable and other liabilities

40,976

44,551

43,255

Stockholders’ equity

347,473

355,022

349,694

Total liabilities & stockholders’ equity

$

3,093,321

$

2,996,006

$

2,943,703

Tax-equivalent net interest income/margin 1

$

24,868

3.37

%

$

22,359

3.19

%

$

24,702

3.53

%

Reported net interest income/margin 1

$

24,534

3.33

%

$

22,031

3.14

%

$

24,375

3.49

%

Tax-equivalent net interest rate spread

3.28

%

2.83

%

3.41

%

Six months ended

Six months ended

June 30, 2021

June 30, 2020

Interest

Interest

Average

Income/

Yield/

Average

Income/

Yield/

(in thousands; unaudited)

Balance

Expense

Rate

Balance

Expense

Rate

Assets

Interest-earning deposits with banks 1

$

179,846

$

96

0.11

%

$

136,261

$

371

0.54

%

Investment securities 2, 3

601,498

6,948

2.31

%

553,690

8,151

2.94

%

Loans 1, 3, 4

2,081,069

42,437

4.06

%

1,938,189

42,465

4.33

%

Total interest-earning assets 1

2,862,413

49,481

3.44

%

2,628,140

50,987

3.84

%

Cash and non-interest-bearing due from banks

45,059

39,262

Bank premises and equipment, net

4,786

5,741

Interest receivable and other assets, net

132,675

126,274

Total assets

$

3,044,933

$

2,799,417

Liabilities and Stockholders’ Equity

Interest-bearing transaction accounts

$

170,943

$

78

0.09

%

$

140,587

$

105

0.15

%

Savings accounts

220,946

40

0.04

%

172,905

33

0.04

%

Money market accounts

719,769

598

0.17

%

777,635

1,354

0.35

%

Time accounts including CDARS

95,849

177

0.37

%

95,616

303

0.64

%

Borrowings and other obligations 1

50

1.46

%

257

3

2.06

%

Subordinated debenture 1

1,076

1,361

251.54

%

2,724

89

6.46

%

Total interest-bearing liabilities

1,208,633

2,254

0.38

%

1,189,724

1,887

0.32

%

Demand accounts

1,442,320

1,226,481

Interest payable and other liabilities

42,753

38,150

Stockholders’ equity

351,227

345,062

Total liabilities & stockholders’ equity

$

3,044,933

$

2,799,417

Tax-equivalent net interest income/margin 1

$

47,227

3.28

%

$

49,100

3.70

%

Reported net interest income/margin 1

$

46,565

3.24

%

$

48,494

3.65

%

Tax-equivalent net interest rate spread

3.06

%

3.52

%

1 Interest income/expense is divided by actual number of days in the period times 360 days to correspond to stated interest rate terms, where applicable.

2 Yields on available-for-sale securities are calculated based on amortized cost balances rather than fair value, as changes in fair value are reflected as a component of stockholders’ equity. Investment security interest is earned on 30/360 day basis monthly.

3 Yields and interest income on tax-exempt securities and loans are presented on a taxable-equivalent basis using the Federal statutory rate of 21 percent in 2021 and 2020.

4 Average balances on loans outstanding include non-performing loans. The amortized portion of net loan origination fees is included in interest income on loans, representing an adjustment to the yield.

5 First quarter 2021 interest expense includes $1.3 million accelerated discount accretion from the early redemption of our last subordinated debenture on March 15, 2021.


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