UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________________ to __________________ Commission File Number 001-33572 Bank of Marin Bancorp (Exact name of Registrant as specified in its charter) | --- | ...

Financial Data and Key Metrics Changes - The company reported a net income of $8.9 million for Q1 2021, with diluted earnings per share of $0.66, exceeding results from both the prior quarter and Q1 2020 [5] - Total deposits grew by $152 million to $2.7 billion, with noninterest-bearing deposits comprising 54% of total deposits [7] - The total risk-based capital ratio was 15.7% at March 31, well above regulatory requirements [7] Business Line Data and Key Metrics Changes - The loan portfolio grew modestly to $2.1 billion, reflecting a 15% increase year-over-year, driven by new loan origination and participation in the SBA's Paycheck Protection Program (PPP) [6] - The company funded $25 million in new PPP loans during the quarter, with a total of $127 million funded as of April 15 [7] Market Data and Key Metrics Changes - The Greater Sacramento region is projected to see population and household income growth exceeding national estimates by 2026, making it an attractive market for business growth [13] - The merger with American River Bank positions the company to become a $4 billion bank, enhancing its presence in Northern California [9] Company Strategy and Development Direction - The acquisition of American River Bank is seen as a strategic fit, allowing the company to expand its franchise and improve efficiency in a low-interest-rate environment [5][9] - The merger is expected to generate 14% accretion to 2022 earnings and a 15% internal rate of return, with a focus on maintaining strong credit quality and customer service [10][18] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the economic outlook and the potential for growth, particularly in the Sacramento and Sonoma markets [30][32] - The company anticipates that the integration of American River Bank will provide opportunities for growth and expansion in new markets [36][42] Other Important Information - The company reversed $2.9 million in provisions for credit losses on loans, indicating improved credit quality [6] - A cash dividend of $0.23 per share was declared, marking the 64th consecutive quarterly dividend [8] Q&A Session Summary Question: Margin impact and core margin numbers - Management indicated that the Q1 margin was only affected by 1 basis point from PPP, with Q4 impacted by 13 basis points due to lack of forgiveness [19][20] Question: Cost savings from the merger - The company expects 35% cost savings from the merger, primarily from branch overlaps and administrative efficiencies [24] Question: Growth pipeline and loan demand - The pipeline is improving, but loan demand remains relatively weak, with ongoing deleveraging attitudes observed [30] Question: Fee income opportunities - Management noted that fee waivers during the pandemic negatively impacted fee income, but they expect a resurgence as fees are reinstated [34] Question: Future M&A considerations - The company is open to further M&A opportunities post-integration, particularly in the Sacramento market [36] Question: Reserve levels and economic forecasts - Management indicated that reserves would likely diminish as the economy improves, but specific estimates were not provided [37] Question: Integration and branding post-merger - The company plans to maintain the American River Bank branding during integration but may consider rebranding to Bank of Marin in the long term [52]

Part I [Business](index=6&type=section&id=ITEM%201.%20BUSINESS) Bank of Marin Bancorp operates as a commercial bank through its subsidiary, serving businesses and professionals in the San Francisco Bay Area - Bank of Marin Bancorp operates through its sole subsidiary, Bank of Marin, with **25 offices** across seven Bay Area counties serving small to medium-sized businesses and professionals[20](index=20&type=chunk)[21](index=21&type=chunk)[23](index=23&type=chunk) - The bank offers a comprehensive suite of services including commercial and retail lending, deposit accounts, and Wealth Management and Trust Services[23](index=23&type=chunk)[24](index=24&type=chunk) - In its primary market of Marin County, the bank holds the **third-largest market share** of total deposits at **12.3%** as of June 30, 2020[31](index=31&type=chunk) - As of December 31, 2020, the company employed **289 full-time equivalent staff**[31](index=31&type=chunk) - In response to the COVID-19 pandemic, the company implemented remote work, enhanced safety protocols, and maintained regular pay for all staff with **no layoffs**[36](index=36&type=chunk)[38](index=38&type=chunk) - The company is extensively regulated by federal and state agencies, including the Federal Reserve, FDIC, and California's DFPI[39](index=39&type=chunk)[40](index=40&type=chunk)[42](index=42&type=chunk) [Risk Factors](index=14&type=section&id=ITEM%201A.%20RISK%20FACTORS) The company faces significant risks from the COVID-19 pandemic, credit concentration, interest rate fluctuations, and cybersecurity threats - The COVID-19 pandemic poses a significant risk, potentially leading to **increased loan delinquencies** and **net interest margin compression**[74](index=74&type=chunk) - The company has significant credit risk, with **77% of its loans secured by real estate** and a CRE loan concentration of **314% of total risk-based capital**, exceeding regulatory guidance[95](index=95&type=chunk)[97](index=97&type=chunk) - Lending is focused on small to medium-sized businesses, which may have fewer resources to withstand economic downturns[92](index=92&type=chunk) - Earnings are highly dependent on net interest income and are vulnerable to the **prolonged low interest rate environment**[104](index=104&type=chunk)[106](index=106&type=chunk) - The company faces risks related to the planned cessation of LIBOR after 2021, affecting a small number of loans and all interest rate swap agreements[115](index=115&type=chunk)[116](index=116&type=chunk) - Operational risks include potential cybersecurity breaches, adapting to technological changes, and reliance on third-party vendors for critical functions[117](index=117&type=chunk)[120](index=120&type=chunk)[122](index=122&type=chunk) [Unresolved Staff Comments](index=23&type=section&id=ITEM%201B.%20UNRESOLVED%20STAFF%20COMMENTS) The company reports no unresolved comments from the staff of the Securities and Exchange Commission - There are no unresolved staff comments[126](index=126&type=chunk) [Properties](index=23&type=section&id=ITEM%202.%20PROPERTIES) The company leases all of its physical locations, including its corporate headquarters and branch facilities - The company leases its corporate headquarters and all branch and office facilities[126](index=126&type=chunk) [Legal Proceedings](index=23&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS) Information regarding legal proceedings is incorporated by reference from the Consolidated Financial Statements - For information on litigation matters, refer to Note 12, Commitment and Contingencies[127](index=127&type=chunk) [Mine Safety Disclosures](index=23&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to the company - Not applicable[128](index=128&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=24&type=section&id=ITEM%205.%20MARKET%20FOR%20REGISTRANT'S%20COMMON%20EQUITY%2C%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) The company's common stock trades on Nasdaq, and it maintains an active share repurchase program that was reactivated in late 2020 - The company's common stock is traded on the Nasdaq Capital Market under the symbol **BMRC**, with **13,359,479 shares outstanding** as of February 28, 2021[8](index=8&type=chunk)[131](index=131&type=chunk) - A new Share Repurchase Program was approved in January 2020, allowing for the repurchase of up to **$25.0 million** of common stock through February 28, 2022[137](index=137&type=chunk) 2020 Share Repurchases | Period | Total Number of Shares Purchased | Average Price Paid per Share | Approximate Dollar Value That May yet Be Purchased Under the Program (in thousands) | | :--- | :--- | :--- | :--- | | January 1-31, 2020 | 13,283 | $44.42 | $2,376 | | February 1-28, 2020 | 20,855 | $42.17 | $1,495 | | March 1-31, 2020 | 58,526 | $30.00 | $23,241 | | October 1-30, 2020 | 100 | $30.00 | $23,238 | | November 1-30, 2020 | 44,815 | $34.73 | $21,680 | | December 1-31, 2020 | 66,130 | $36.48 | $19,264 | | **Total** | **203,709** | **$35.33** | **$19,264** | [Selected Financial Data](index=26&type=section&id=ITEM%206.%20SELECTED%20FINANCIAL%20DATA) A five-year summary shows asset growth in 2020, but a decline in net income, EPS, and net interest margin compared to 2019 Selected Financial Highlights (2019 vs. 2020) | Metric (in thousands, except per share data) | 2020 | 2019 | | :--- | :--- | :--- | | Total assets | $2,911,926 | $2,707,280 | | Loans, net | $2,065,682 | $1,826,609 | | Deposits | $2,504,249 | $2,336,489 | | Stockholders' equity | $358,253 | $336,788 | | Net interest income | $96,659 | $95,680 | | Net income | $30,242 | $34,241 | | Diluted EPS | $2.22 | $2.48 | | Return on average assets | 1.04% | 1.34% | | Return on average equity | 8.60% | 10.49% | | Tax-equivalent net interest margin | 3.55% | 3.98% | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=ITEM%207.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Net income declined in 2020 due to a higher credit loss provision and margin compression, despite strong loan and deposit growth [Executive Summary](index=29&type=section&id=Executive%20Summary) Earnings declined in 2020 due to a lower net interest margin and pandemic-related provisions, despite strong loan and deposit growth Key Performance Indicators (2020 vs. 2019) | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Net Income | $30.2 million | $34.2 million | | Diluted EPS | $2.22 | $2.48 | | Total Loan Growth | 13% | - | | Deposit Growth | 7% | - | | Net Interest Margin | 3.55% | 3.98% | | Return on Assets | 1.04% | 1.34% | | Return on Equity | 8.60% | 10.49% | - The bank originated over 1,800 PPP loans totaling **$291.6 million** outstanding at year-end, supporting nearly 28,000 employees[161](index=161&type=chunk)[164](index=164&type=chunk) - Of the $402.9 million in loans granted payment relief, **$71.0 million remained on additional relief programs** as of December 31, 2020[165](index=165&type=chunk)[166](index=166&type=chunk) [Results of Operations](index=31&type=section&id=RESULTS%20OF%20OPERATIONS) Net interest income rose slightly, but a compressed margin and a surged credit loss provision drove lower overall profitability in 2020 - Net interest income increased by $1.0 million to $96.7 million, but the tax-equivalent net interest margin **decreased 43 basis points to 3.55%**[175](index=175&type=chunk) - The provision for credit losses **increased significantly to $4.6 million** in 2020 from $900 thousand in 2019, due to the pandemic and CECL adoption[182](index=182&type=chunk) - Non-interest income decreased by $534 thousand to $8.6 million, primarily due to a **$551 thousand decline in waived service charges**[184](index=184&type=chunk) - Non-interest expense increased by $2.1 million to $60.0 million, driven by a **$1.4 million provision for unfunded loan commitments** and higher charitable contributions[190](index=190&type=chunk)[191](index=191&type=chunk) [Financial Condition](index=35&type=section&id=FINANCIAL%20CONDITION) Total assets grew to $2.91 billion, driven by PPP loans and deposit growth, while the allowance for credit losses increased due to CECL - The investment securities portfolio **decreased by $79.3 million (14%)** during 2020 to $482.1 million[204](index=204&type=chunk) - Total loans **increased by $245.3 million (13%)** to $2.089 billion, driven by **$291.6 million in SBA PPP loans**[210](index=210&type=chunk) - The allowance for credit losses to total loans **increased to 1.10%** from 0.90% in 2019, reflecting CECL adoption and the pandemic's impact[224](index=224&type=chunk) - Non-performing assets **increased to $9.2 million** from $226 thousand in 2019, primarily due to two TDR loans placed on non-accrual status[232](index=232&type=chunk)[233](index=233&type=chunk) - Total deposits **grew by $167.8 million to $2.504 billion**, with non-interest bearing deposits constituting 54% of the total[242](index=242&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=49&type=section&id=ITEM%207A.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company's primary market risk is interest rate risk, with simulation models indicating an asset-sensitive position benefiting from rising rates - The company's primary market risk is interest rate risk, managed by the Asset Liability Management Committee (ALCO)[272](index=272&type=chunk)[273](index=273&type=chunk) Estimated Change in Net Interest Income (NII) from Immediate Rate Changes | Rate Change (bps) | Estimated Change in NII (Year 1) | Estimated Change in NII (Year 2) | | :--- | :--- | :--- | | up 400 | 8.9% | 23.3% | | up 300 | 6.7% | 17.6% | | up 200 | 4.4% | 11.3% | | up 100 | 1.8% | 4.6% | | down 100 | (1.2)% | (2.3)% | [Financial Statements and Supplementary Data](index=51&type=section&id=ITEM%208.%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA) This section includes audited financial statements, with the adoption of the CECL accounting standard noted as a critical audit matter - The independent auditor's report provides an **unqualified opinion** on the financial statements and internal controls[280](index=280&type=chunk) - The adoption of the **CECL accounting standard (ASC Topic 326)** is identified as a Critical Audit Matter due to its subjectivity[281](index=281&type=chunk)[289](index=289&type=chunk)[290](index=290&type=chunk) Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | Total Assets | $2,911,926 | $2,707,280 | | Loans, net | $2,065,682 | $1,826,609 | | Total Deposits | $2,504,249 | $2,336,489 | | Total Liabilities | $2,553,673 | $2,370,492 | | Total Stockholders' Equity | $358,253 | $336,788 | Consolidated Income Statement Highlights (in thousands) | Account | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Net Interest Income | $96,659 | $95,680 | $91,544 | | Provision for Credit Losses | $4,594 | $900 | $0 | | Non-interest Income | $8,550 | $9,084 | $10,139 | | Non-interest Expense | $60,028 | $57,970 | $58,266 | | Net Income | $30,242 | $34,241 | $32,622 | [Note 1: Summary of Significant Accounting Policies](index=61&type=section&id=Note%201%3A%20Summary%20of%20Significant%20Accounting%20Policies) The company adopted the CECL standard on December 31, 2020, resulting in a $1.2 million after-tax reduction to retained earnings - The company adopted the **CECL standard (ASC 326)** effective December 31, 2020, replacing the incurred loss model[312](index=312&type=chunk)[313](index=313&type=chunk) Impact of CECL Adoption (Pre-Tax) | Item | Cumulative Transition Adjustment (to Retained Earnings) | Impact on Q4 2020 Net Income | | :--- | :--- | :--- | | Allowance for Credit Losses on Loans | ($1,604 thousand) | $856 thousand (reversal of provision) | | Allowance for Unfunded Commitments | ($122 thousand) | ($960 thousand) (provision) | [Note 3: Loans and Allowance for Credit Losses](index=78&type=section&id=Note%203%3A%20Loans%20and%20Allowance%20for%20Credit%20Losses) The loan portfolio grew to $2.09 billion driven by PPP loans, while the allowance for credit losses increased to $22.9 million - The increase in commercial and industrial loans was primarily due to **$291.6 million in PPP loans** originated under the CARES Act[418](index=418&type=chunk)[419](index=419&type=chunk)[422](index=422&type=chunk) - The allowance for credit losses rollforward shows a beginning balance of $16.7 million, a **$1.6 million CECL adjustment**, a $4.6 million provision, and an ending balance of $22.9 million[449](index=449&type=chunk) - Total Troubled Debt Restructurings (TDRs) were **$12.5 million** at year-end, with **$71.0 million** in loans remaining on pandemic-related payment relief[443](index=443&type=chunk)[445](index=445&type=chunk) [Note 8: Stockholders' Equity and Stock Plans](index=87&type=section&id=Note%208%3A%20Stockholders'%20Equity%20and%20Stock%20Plans) The company paid $12.5 million in dividends and repurchased $7.2 million of stock under its authorized program in 2020 - The company has several equity compensation plans, including the 2017 Equity Plan, 2020 Director Stock Plan, and an Employee Stock Purchase Plan (ESPP)[472](index=472&type=chunk)[473](index=473&type=chunk)[474](index=474&type=chunk) - Dividend payments from the Bank to the Bancorp are restricted, with **$30.6 million** available for dividend payment as of December 31, 2020[488](index=488&type=chunk) - In 2020, the company **repurchased 203,709 shares for a total of $7.2 million** under its share repurchase program[496](index=496&type=chunk) Cash Dividends Paid | Year | Total (in thousands) | Per Common Share | | :--- | :--- | :--- | | 2020 | $12,506 | $0.92 | | 2019 | $10,958 | $0.80 | | 2018 | $8,860 | $0.64 | [Note 15: Regulatory Matters](index=100&type=section&id=Note%2015%3A%20Regulatory%20Matters) The company and its bank subsidiary exceeded all minimum capital requirements to be considered "well capitalized" as of year-end 2020 - Both the Bancorp and the Bank were categorized as **well capitalized** under the regulatory framework as of December 31, 2020[547](index=547&type=chunk) Bank Capital Ratios as of December 31, 2020 | Capital Ratio | Actual Ratio | Well Capitalized Threshold | | :--- | :--- | :--- | | Total Capital (to risk-weighted assets) | 15.80% | ≥ 10.00% | | Tier 1 Capital (to risk-weighted assets) | 14.59% | ≥ 8.00% | | Tier 1 Capital (to average assets) | 10.64% | ≥ 5.00% | | Common Equity Tier 1 (to risk-weighted assets) | 14.59% | ≥ 6.50% | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=105&type=section&id=ITEM%209.%20CHANGES%20IN%20AND%20DISAGREEMENTS%20WITH%20ACCOUNTANTS%20ON%20ACCOUNTING%20AND%20FINANCIAL%20DISCLOSURE) The company reported no disagreements with its accountants on any matter of accounting or financial disclosure - None reported[563](index=563&type=chunk) [Controls and Procedures](index=105&type=section&id=ITEM%209A.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2020 - The CEO and CFO concluded that **disclosure controls and procedures were effective** as of the end of the reporting period[564](index=564&type=chunk) - Management concluded that the company maintained **effective internal control over financial reporting** as of December 31, 2020[565](index=565&type=chunk) - During the fourth quarter of 2020, new and modified controls were implemented as part of the **adoption of the CECL accounting standard**[569](index=569&type=chunk) [Other Information](index=106&type=section&id=ITEM%209B.%20OTHER%20INFORMATION) The company reported no other information for this item - None[571](index=571&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=106&type=section&id=ITEM%2010.%20DIRECTORS%2C%20EXECUTIVE%20OFFICERS%20AND%20CORPORATE%20GOVERNANCE) Required information is incorporated by reference from the company's 2021 Proxy Statement - Information is incorporated by reference from the Proxy Statement for the 2021 Annual Meeting of Shareholders[571](index=571&type=chunk) [Executive Compensation](index=106&type=section&id=ITEM%2011.%20EXECUTIVE%20COMPENSATION) Required information regarding executive compensation is incorporated by reference from the company's 2021 Proxy Statement - Information is incorporated by reference from the Proxy Statement for the 2021 Annual Meeting of Shareholders[572](index=572&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=106&type=section&id=ITEM%2012.%20SECURITY%20OWNERSHIP%20OF%20CERTAIN%20BENEFICIAL%20OWNERS%20AND%20MANAGEMENT%20AND%20RELATED%20STOCKHOLDER%20MATTERS) Required information is incorporated by reference from this report and the company's 2021 Proxy Statement - Information is incorporated by reference from the Proxy Statement for the 2021 Annual Meeting of Shareholders[573](index=573&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=106&type=section&id=ITEM%2013.%20CERTAIN%20RELATIONSHIPS%20AND%20RELATED%20TRANSACTIONS%2C%20AND%20DIRECTOR%20INDEPENDENCE) Required information is incorporated by reference from the company's 2021 Proxy Statement - Information is incorporated by reference from the Proxy Statement for the 2021 Annual Meeting of Shareholders[574](index=574&type=chunk) [Principal Accountant Fees and Services](index=106&type=section&id=ITEM%2014.%20PRINCIPAL%20ACCOUNTANT%20FEES%20AND%20SERVICES) Required information regarding accountant fees is incorporated by reference from the company's 2021 Proxy Statement - Information is incorporated by reference from the Proxy Statement for the 2021 Annual Meeting of Shareholders[575](index=575&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=107&type=section&id=ITEM%2015.%20EXHIBITS%2C%20FINANCIAL%20STATEMENT%20SCHEDULES) This section lists the financial statements and exhibits filed as part of the Form 10-K report - Lists the financial statements filed under Item 8 and specifies that all financial statement schedules have been omitted[578](index=578&type=chunk)[579](index=579&type=chunk) - Provides a list of exhibits filed with the report or incorporated by reference, including corporate governance documents and SEC certifications[582](index=582&type=chunk) [Form 10-K Summary](index=108&type=section&id=ITEM%2016.%20FORM%2010-K%20SUMMARY) The company indicates that no Form 10-K summary is provided - None[583](index=583&type=chunk)

Bank of Marin Bancorp (NASDAQ:BMRC) Q4 2020 Earnings Conference Call January 25, 2021 11:30 AM ET Company Participants Andrea Henderson - Director, Marketing Russ Colombo - President and Chief Executive Officer Tim Myers - Executive Vice President and Chief Operating Officer Tani Girton - Executive Vice President and Chief Financial Officer Beth Reizman - Chief Credit Officer Conference Call Participants David Feaster - Raymond James Jeff Rulis - D.A. Davidson Matthew Clark - Piper Sandler Jackie Bohlen - K ...

Financial Performance - Net income for Q3 2020 was $7.5 million, down from $9.4 million in Q3 2019, with diluted earnings per share at $0.55 compared to $0.69 a year ago[158] - Net income for the three months ended September 30, 2020, was $7,491,000, down from $9,448,000 in the same quarter of 2019[168] - Basic net income per common share decreased to $0.55 from $0.70 year-over-year[168] - Return on average assets was 0.98% for the quarter, down from 1.49% in the same period last year[168] - Return on average equity decreased to 8.37% from 11.34% year-over-year[168] Loan and Deposit Growth - Total loans increased by $264.7 million to $2,108.0 million as of September 30, 2020, primarily due to $301.7 million in SBA PPP loans, representing 14% of loan balances[161] - Total deposits rose by $232.8 million to $2,569.3 million at September 30, 2020, with non-interest bearing deposits increasing to 54% of total deposits from 48% at December 31, 2019[161] - Non-interest bearing deposits rose to $1,383.7 million, representing 53.9% of total deposits as of September 30, 2020[218] - Loans increased by $264.7 million to $2,108.0 million, driven mainly by $308.2 million in SBA PPP loans[217] Provision for Loan Losses - The provision for loan losses for the first nine months of 2020 was $5.45 million, significantly higher than $400 thousand for the same period in 2019, reflecting the economic impact of the pandemic[159] - Provision for loan losses increased to $1,250,000 for the quarter, compared to $400,000 in the prior year[168] - The ratio of allowance for loan losses to total loans was 1.05% at September 30, 2020, compared to 0.90% at December 31, 2019[190] - The provision for loan losses was $5.45 million for the nine months ended September 30, 2020, compared to $400 thousand for the same period in the prior year, reflecting the economic uncertainties from the COVID-19 pandemic[189] Non-Interest Income and Expenses - Non-interest income decreased by $931 thousand in Q3 2020 to $1.8 million, compared to $2.7 million in Q3 2019, primarily due to lower service charges and benefits from BOLI policies[196] - Total non-interest income for the first nine months of 2020 was $6.7 million, a slight decrease from $6.8 million in the same period in 2019, with higher gains on sales of investment securities partially offsetting declines in other categories[197] - Non-interest expense increased by $1.0 million to $15.2 million in Q3 2020, compared to $14.2 million in Q3 2019, primarily due to higher charitable contributions and provisions for losses on off-balance sheet commitments[202] - Total non-interest expense for the first nine months of 2020 was $44.8 million, a slight increase of $204 thousand from $44.6 million in the same period of 2019[203] Capital and Liquidity - The total risk-based capital ratio was 15.5% at September 30, 2020, up from 14.6% at December 31, 2019, indicating strong capital position[161] - The Bank's total capital to risk-weighted assets ratio was 16.05% as of September 30, 2020, exceeding the well-capitalized threshold of 10.00%[225] - Tier 1 capital to risk-weighted assets ratio was 14.92% as of September 30, 2020, above the required minimum of 8.50%[225] - Management anticipates that the current strong liquidity position will provide adequate liquidity to fund operations going forward[230] Tax and Regulatory Matters - The effective tax rate for Q3 2020 was 24.1%, compared to 23.0% in Q3 2019, reflecting a decrease in pre-tax income[205] - The provision for income taxes for the first nine months of 2020 was $7.4 million at an effective tax rate of 25.0%, compared to $8.3 million at 24.9% in the same period of 2019[206] - The Bank had no accruals for interest or penalties related to unrecognized tax benefits as of September 30, 2020[209] Charitable Contributions - The company made $360 thousand in charitable contributions during Q3 2020 to support remote learning resources for underserved students[160] - Charitable contributions increased by $370 thousand in Q3 2020, reflecting a 333.3% increase compared to the same period last year[202]

Financial Data and Key Metrics Changes - Bank of Marin generated net income of $7.5 million with diluted earnings per share of $0.55, compared to $0.69 in the same quarter of 2019, primarily due to the pandemic's economic impact [10][24] - Total loans remained steady at $6.1 billion, while total deposits decreased by $210.6 million to $2.6 billion, reflecting normal fluctuations in large business accounts [10][11] - The tax equivalent net interest margin was 3.44%, down 9 basis points from the prior quarter and 60 basis points from Q3 2019 [26] Business Line Data and Key Metrics Changes - Net interest income was $24.6 million, slightly up from $24.4 million in the prior quarter, driven by SBA PPP loan income [25] - Non-interest income was $1.8 million, down from $2.7 million in Q3 2019, primarily due to lower ATM fees and service charges [30] - Non-accrual loans represented only 0.07% of the loan portfolio, with loan loss provisions totaling $1.25 million in Q3 [27] Market Data and Key Metrics Changes - The number of borrowers needing loan payment relief declined significantly, with only $47 million of the original $389 million in loans still requiring assistance [18] - The bank's exposure to industries most affected by the pandemic is relatively small, with most borrowers resuming normal payments [35] Company Strategy and Development Direction - The bank is focused on disciplined risk management and maintaining a strong capital base, with a reactivation of the $25 million share repurchase program approved by the Board [13] - The bank aims to adapt to the pandemic environment by exploring remote work opportunities and potential branch consolidations to enhance efficiency [42] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strength of the loan portfolio, citing a decline in classified and non-accrual loans [34] - The bank remains optimistic about growth opportunities in new markets while continuing to support existing clients [21] Other Important Information - The bank declared a cash dividend of $0.23 per share, marking the 62nd consecutive quarterly dividend [14] - The bank plans to adopt the current expected credit loss accounting standard (CECL) on December 31, 2020, which will result in an increase to the allowance for credit losses [28][29] Q&A Session Summary Question: Strategy on balancing expense management with reinvestment - Management emphasized a focus on efficiency and potential remote work opportunities while maintaining customer relationships [40][41] Question: Comments on capital usage and buyback program - Management indicated comfort with the loan portfolio and reinstated the stock repurchase plan, while also monitoring M&A opportunities [49][51] Question: Rationale for off-balance-sheet strategy - The bank typically pushes significant deposits off-balance sheet for liquidity management, especially in a volatile environment [57] Question: Thoughts on commercial real estate market - Management acknowledged uncertainty in the commercial real estate market but expressed confidence in their conservative underwriting approach [61][62] Question: Loan originations outlook - Management indicated that loan originations are hard to predict but are actively seeking to grow the pipeline [86][88] Question: Status of PPP loan forgiveness process - The bank is ready to start the forgiveness process as soon as final guidance is received [91][94] Question: Customer fee waivers during the pandemic - Management plans to continue waiving fees to support customers until it is prudent to revert back [98] Question: Balance sheet liquidity and customer behavior - Management noted mixed customer behavior with some deposits being paid down, making future predictions challenging [100]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________________ to __________________ Commission File Number 001-33572 Bank of Marin Bancorp (Exact name of Registrant as specified in its charter) | --- | ...

Financial Data and Key Metrics Changes - The company generated net income of $7.4 million with diluted earnings per share of $0.55, compared to $0.53 in the prior quarter and $0.60 in the same quarter last year [30] - Total loans increased by approximately 14% to $2.1 billion, driven by growth in commercial and industrial loans, particularly from PPP loans [12][30] - Total deposits rose by $473 million to $2.8 billion, influenced by PPP loan proceeds and increased liquidity in the banking system [13] - The average cost of deposits decreased to nine basis points, with non-interest bearing deposits representing 52% of total deposits [14] Business Line Data and Key Metrics Changes - The bank's loan portfolio exposure to the most affected industries is low, with total exposure to vulnerable segments at $430 million, or 20% of the loan portfolio [22] - Non-accrual loans represented only 0.08% of the loan portfolio, indicating strong asset quality [35] - Classified loans increased by $1.5 million to $13.5 million, but are still down compared to the first quarter of 2019 [16] Market Data and Key Metrics Changes - The bank funded over $300 million in PPP loans, assisting over 1,800 local small businesses and nearly 28,000 employees [7] - The bank's exposure to retail businesses and related commercial real estate totaled $198 million, or 9% of the total portfolio [23] Company Strategy and Development Direction - The company is focused on relationship banking, disciplined fundamentals, and community commitments to assist customers during the pandemic [6] - The bank is looking for strategic opportunities for expansion, including the establishment of a commercial banking office in San Mateo [28] - Management emphasized the importance of maintaining a strong capital position and high-quality loan portfolio as they navigate the pandemic [39] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the bank's conservative lending philosophy and strong asset quality, despite the economic pressures from COVID-19 [16][38] - The bank anticipates that the full impact of the COVID-19 crisis will take time to materialize, but remains well-capitalized and prepared for future challenges [14][38] Other Important Information - The Board of Directors declared a cash dividend of $0.23 per share, marking the 61st consecutive quarterly dividend [17] - The bank's efficiency ratio was reported at 54%, reflecting continued expense control [36] Q&A Session Summary Question: Impact of lowering interest rate floors on margin - Management is reviewing the impact on a case-by-case basis, with expectations that the lowering of floors may continue to affect margins [40][42] Question: Resumption of service charges - Management indicated that while they are currently waiving fees to support customers, they expect to resume normal fee structures as the situation stabilizes [43] Question: Changes in borrower behavior - There has been a trend of reduced credit usage among borrowers, with some initially drawing on lines of credit but later paying them down [44][45] Question: Balance sheet size and PPP loan pay-off modeling - Management expects a significant portion of PPP loans to be forgiven by the end of 2020, impacting deposit flows accordingly [46][47] Question: Excess liquidity and its duration - There is excess liquidity in the banking system, but its duration is uncertain as it is influenced by various factors including tax payments [48] Question: Growth expectations for the San Mateo office - The bank plans to hire additional commercial banking officers and is optimistic about growth in the region, although specific growth targets are currently under review [50][52] Question: Loan deferrals and risk rating downgrades - The bank's deferral program provided immediate relief without extensive underwriting, and management is monitoring the situation closely for potential risk rating adjustments [79][80]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________________ to __________________ Commission File Number 001-33572 Bank of Marin Bancorp (Exact name of Registrant as specified in its charter) | --- | ...

Financial Data and Key Metrics Changes - The company generated net income of $7.2 million with diluted earnings per share of $0.53 in Q1 2020, compared to $9.1 million and $0.66 in the prior quarter [14][18] - Total loans increased slightly to $1.8 billion from the record fourth quarter of 2019, while deposits remained steady at $2.3 billion [14][18] - The tax-equivalent net interest margin improved to 3.88% from 3.82% in the prior quarter [19] - Non-interest income rose to $3.1 million from $2.3 million in the previous quarter, primarily due to gains on the sale of investment securities [20] Business Line Data and Key Metrics Changes - The loan portfolio exposure to the most affected industries includes 10.4% in retail properties, 4.6% in wine-related businesses, and 2.7% in hospitality [11] - Non-accrual loans increased by $1.4 million to $1.6 million, representing 0.09% of total loans [16] - The company recorded a $2.2 million loan loss provision in Q1 2020, up from $500,000 in the previous quarter, reflecting adjustments for economic uncertainties due to COVID-19 [20][45] Market Data and Key Metrics Changes - Approximately 93% of loan relief requests are secured by real estate with loan-to-value ratios averaging less than 45% [10] - The company has received around $322 million in loan relief requests or conversions to interest-only or payment deferral [10] Company Strategy and Development Direction - The company is participating in the Small Business Administration Paycheck Protection Program, having received approximately 1,300 applications for an estimated total of $350 million [7][25] - The Board of Directors suspended the share repurchase program indefinitely in response to the pandemic, planning to monitor the situation closely [15] - The company is focused on maintaining strong capital positions and supporting customers through the crisis [24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's conservative lending philosophy and strong historic asset quality performance despite the economic pressures from the pandemic [16][24] - The company emphasized the importance of supporting clients and communities during challenging times, highlighting the retention of all employees at full pay with no layoffs [12][24] Other Important Information - The company has waived all ATM and overdraft fees and is providing 120 days of payment relief to borrowers with hardship requests [9] - The company declared a cash dividend of $0.23 per share, marking the 60th consecutive quarterly dividend [17] Q&A Session Summary Question: Can you walk through the segment operations in the wine industry? - Management noted that while tasting room sales are down 100%, direct shipments and sales to grocery stores are still ongoing, indicating a mixed impact on the wine-related businesses [27][28] Question: What impact did waiving fees have in Q1? - The impact was minimal in Q1 as the fee waiving measures were implemented late in the quarter, but it is expected to affect earnings in Q2 [32] Question: Will there be additional reserve builds in the near term? - Management indicated that the reserve build was based on conditions as of March 31, but further deterioration in the economy could lead to additional reserve builds [35][37] Question: What is the company's outlook on loan pay-offs? - Management expects that pay-offs will not be substantial in the current environment, as borrowers are focusing on their day-to-day operations [76][81] Question: How will the company account for PPP loans? - The expectation is that origination fees from PPP loans will run through net interest income, with potential acceleration upon loan forgiveness [46][92]