PART I [Business](index=5&type=section&id=ITEM%201.%20BUSINESS) Bank of Marin Bancorp, operating through its subsidiary, provides commercial and retail banking and wealth management services across six San Francisco Bay Area counties, focusing on relationship-based banking under extensive regulation - The company operates through its subsidiary, Bank of Marin, with **23 offices** across six San Francisco Bay Area counties[20](index=20&type=chunk) - Its core focus is providing banking services to **small to medium-sized businesses**, professionals, and non-profit organizations[20](index=20&type=chunk) - Key offerings include commercial and retail deposit and lending programs, alongside **Wealth Management and Trust Services**[21](index=21&type=chunk)[26](index=26&type=chunk) - The bank differentiates itself in a competitive market through **personalized relationship banking** and deep local market knowledge[30](index=30&type=chunk)[33](index=33&type=chunk) - As of December 31, 2019, the company employed **290 full-time equivalent staff**[35](index=35&type=chunk) - The company is subject to extensive supervision by the **California Department of Business Oversight**, **FDIC**, and the **Federal Reserve**[36](index=36&type=chunk)[37](index=37&type=chunk)[39](index=39&type=chunk) [Risk Factors](index=13&type=section&id=ITEM%201A.%20RISK%20FACTORS) The company faces material risks from geographic concentration in the San Francisco Bay Area, interest rate fluctuations, significant credit risk from commercial real estate loans, natural disasters, cybersecurity threats, and regulatory changes - The company's success is highly dependent on the local economic conditions of the San Francisco Bay Area, creating a **geographic concentration risk**[72](index=72&type=chunk) - Earnings are significantly influenced by **interest rate risk**, as **net interest income** is the primary driver of profitability, making the business vulnerable to **margin compression** in a falling or flat rate environment[73](index=73&type=chunk) - A significant portion of the loan portfolio is secured by real estate, with **Commercial Real Estate (CRE) loans** representing **330% of total risk-based capital** as of December 31, 2019, exceeding the **300% regulatory guidance threshold** for heightened scrutiny[80](index=80&type=chunk)[82](index=82&type=chunk) - The company is exposed to significant credit risk, and the adoption of the **Current Expected Credit Loss (CECL) accounting standard** on January 1, 2020, will materially change the methodology for estimating the allowance for credit losses[84](index=84&type=chunk)[88](index=88&type=chunk) - The business is located in **earthquake and wildfire-prone zones**, posing risks from natural disasters and climate change-related events which could impact operations and collateral values[83](index=83&type=chunk) - The company faces risks associated with **cybersecurity threats**, reliance on **third-party vendors** for critical operations like core processing, and the upcoming phase-out of the **LIBOR interest rate benchmark**[104](index=104&type=chunk)[107](index=107&type=chunk)[118](index=118&type=chunk) [Unresolved Staff Comments](index=20&type=section&id=ITEM%201B.%20UNRESOLVED%20STAFF%20COMMENTS) The company reports that it has no unresolved staff comments from the Securities and Exchange Commission - None[120](index=120&type=chunk) [Properties](index=21&type=section&id=ITEM%202.%20PROPERTIES) The company leases its corporate headquarters in Novato, California, as well as all of its branch and office facilities across its primary market areas - The company leases its corporate headquarters and all branch and office facilities[121](index=121&type=chunk) [Legal Proceedings](index=21&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS) The company is not aware of any pending legal proceedings that would have a material adverse effect on its financial condition - Management is not aware of any pending legal proceedings expected to have a material adverse effect on the company[122](index=122&type=chunk) - The Bank has a proportionate share of litigation indemnifications for Visa U.S.A. but does not expect to make cash payments due to an escrow account funded by Visa[123](index=123&type=chunk) [Mine Safety Disclosures](index=21&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to the company - Not applicable[124](index=124&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=22&type=section&id=ITEM%205.%20MARKET%20FOR%20REGISTRANT'S%20COMMON%20EQUITY,%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) Bank of Marin Bancorp's common stock trades on Nasdaq under BMRC, outperforming the Russell 2000 Index over five years, with **$15.0 million** in share repurchases in 2019 and a new **$25.0 million** program approved for 2020 - Bancorp common stock trades on the **Nasdaq Capital Market** under the symbol **BMRC**, with a **two-for-one stock split** occurring on November 27, 2018[127](index=127&type=chunk) Five-Year Stock Performance Comparison (Cumulative Total Return) | Period | Bank of Marin Bancorp (BMRC) | Russell 2000 Index | SNL Bank \$1B - \$5B Index | | :--- | :--- | :--- | :--- | | 2014 | 100.00 | 100.00 | 100.00 | | 2015 | 103.37 | 95.59 | 111.94 | | 2016 | 137.81 | 115.95 | 161.04 | | 2017 | 136.63 | 132.94 | 171.69 | | 2018 | 168.40 | 118.30 | 150.42 | | 2019 | 187.45 | 148.49 | 182.85 | - In 2019, Bancorp repurchased 356,000 shares for a total of **$15.0 million**, and a new **$25.0 million** share repurchase program was approved in January 2020, valid through February 28, 2022[135](index=135&type=chunk)[136](index=136&type=chunk) [Selected Financial Data](index=24&type=section&id=ITEM%206.%20SELECTED%20FINANCIAL%20DATA) The company's five-year financial data shows total assets growing to **$2.71 billion** in 2019, with net income reaching **$34.2 million** and diluted EPS at **$2.48**, while maintaining strong asset quality with non-performing loans at **0.01%** Five-Year Selected Financial Data (2015-2019) | (in thousands, except per share data) | 2019 | 2018 | 2017 | 2016 | 2015 | | :--- | :--- | :--- | :--- | :--- | :--- | | **Total assets** | $2,707,280 | $2,520,892 | $2,468,154 | $2,023,493 | $2,031,134 | | **Loans, net** | $1,826,609 | $1,748,043 | $1,663,246 | $1,471,174 | $1,436,299 | | **Deposits** | $2,336,489 | $2,174,840 | $2,148,670 | $1,772,700 | $1,728,226 | | **Stockholders' equity** | $336,788 | $316,407 | $297,025 | $230,563 | $214,473 | | **Net interest income** | $95,680 | $91,544 | $74,852 | $73,161 | $67,187 | | **Net income** | $34,241 | $32,622 | $15,976 | $23,134 | $18,441 | | **Diluted EPS** | $2.48 | $2.33 | $1.27 | $1.89 | $1.52 | | **Return on average assets** | 1.34% | 1.31% | 0.75% | 1.15% | 0.98% | | **Return on average equity** | 10.49% | 10.73% | 6.49% | 10.23% | 8.84% | | **Non-performing loans to total loans** | 0.01% | 0.04% | 0.02% | 0.01% | 0.15% | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=ITEM%207.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) In 2019, net income increased to **$34.2 million** driven by strong loan and deposit growth, with total assets reaching **$2.7 billion**, while maintaining excellent credit quality and robust capital levels [Executive Summary](index=27&type=section&id=Executive%20Summary) For 2019, the company reported **$34.2 million** in net income and **$2.48** diluted EPS, driven by **4.5% loan growth** and **7.4% deposit growth**, with strong credit quality and improved efficiency 2019 Performance Highlights vs. 2018 | Metric | 2019 | 2018 | | :--- | :--- | :--- | | Net Income | $34.2 million | $32.6 million | | Diluted EPS | $2.48 | $2.33 | | Loan Growth | 4.5% | - | | Deposit Growth | 7.4% | - | | Non-accrual Loans / Total Loans | 0.01% | - | | Efficiency Ratio | 55.3% | 57.3% | | Return on Assets | 1.34% | 1.31% | | Return on Equity | 10.49% | 10.73% | [Results of Operations](index=28&type=section&id=RESULTS%20OF%20OPERATIONS) Net interest income rose by **$4.2 million** to **$95.7 million** in 2019, while non-interest income decreased due to a prior-year one-time gain, and non-interest expense slightly declined Net Interest Income Analysis (2019 vs 2018) | (in thousands) | 2019 | 2018 | | :--- | :--- | :--- | | Total interest income | $100,437 | $95,080 | | Total interest expense | $4,757 | $3,536 | | **Net interest income** | **$95,680** | **$91,544** | | Tax-equivalent net interest margin | 3.98% | 3.90% | - A provision for loan losses of **$0.9 million** was recorded in 2019, consistent with loan growth, compared to no provision in 2018[174](index=174&type=chunk) - Non-interest income decreased to $9.1 million from **$10.1 million** in 2018, primarily due to a **$0.96 million** pre-tax gain on the sale of Visa stock in 2018 that did not recur[176](index=176&type=chunk)[177](index=177&type=chunk) - Non-interest expense decreased by **$0.3 million** to **$58.0 million**, mainly due to **$1.0 million** in consulting expenses in 2018 for core processing contract renegotiations and lower FDIC insurance expenses in 2019[180](index=180&type=chunk)[181](index=181&type=chunk) [Financial Condition](index=33&type=section&id=FINANCIAL%20CONDITION) Total assets increased to **$2.71 billion** at year-end 2019, driven by deposit and loan growth, with the loan portfolio concentrated in commercial real estate, while maintaining strong credit quality and robust capital - Total assets increased by **$186.4 million** to **$2.71 billion** at year-end 2019, primarily due to increases in cash, funded by deposit growth[186](index=186&type=chunk) - The investment securities portfolio decreased by **$61.8 million** (**10%**) to $561.3 million at amortized cost during 2019[191](index=191&type=chunk) Loan Portfolio Composition (in thousands) | Loan Type | Dec 31, 2019 | Dec 31, 2018 | | :--- | :--- | :--- | | Commercial loans | $246,687 | $230,739 | | Real estate - Commercial | $1,255,141 | $1,186,687 | | Real estate - Construction | $61,095 | $76,423 | | Real estate - Home equity | $116,024 | $124,696 | | Real estate - Other residential | $136,657 | $117,847 | | Installment and other consumer | $27,682 | $27,472 | | **Total loans** | **$1,843,286** | **$1,763,864** | - The allowance for loan losses was **$16.7 million**, representing **0.90%** of total loans, unchanged from year-end 2018, with non-performing assets minimal at **$226 thousand**[212](index=212&type=chunk)[223](index=223&type=chunk) - Total deposits grew by **$161.6 million** (**7.4%**) to **$2.34 billion**, with non-interest bearing deposits accounting for **48%** of total deposits at year-end[231](index=231&type=chunk) - Bancorp's total risk-based capital ratio was **15.1%** at December 31, 2019, exceeding the **well capitalized** regulatory requirements[250](index=250&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=46&type=section&id=ITEM%207A.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company's primary market risk is interest rate risk, managed by ALCO, with simulations showing NII sensitivity to rate changes, and interest rate swaps used to mitigate risk on fixed-rate loans - The primary market risk is **interest rate risk**, managed by the **Asset Liability Management Committee (ALCO)** to minimize exposure of net interest margin and earnings to rate changes[261](index=261&type=chunk) Estimated Impact of Interest Rate Changes on Net Interest Income (NII) | Immediate Change in Rates (bps) | Estimated Change in NII in Year 1 | Estimated Change in NII in Year 2 | | :--- | :--- | :--- | | +400 | (5.0)% | 7.1% | | +300 | (3.6)% | 6.3% | | +200 | (2.2)% | 5.3% | | +100 | (1.0)% | 3.5% | | -100 | (4.5)% | (9.5)% | - The company uses **interest rate swap contracts** as **fair value hedges** to mitigate **interest rate risk** on specified long-term fixed-rate loans[263](index=263&type=chunk) [Financial Statements and Supplementary Data](index=47&type=section&id=ITEM%208.%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA) This section presents the audited consolidated financial statements for 2019 and 2018, including the independent auditor's report, detailing the company's financial position, operations, equity, and cash flows, with comprehensive notes on accounting policies and disclosures Consolidated Statement of Condition Highlights (in thousands) | | Dec 31, 2019 | Dec 31, 2018 | | :--- | :--- | :--- | | **Total Assets** | **$2,707,280** | **$2,520,892** | | Loans, net | $1,826,609 | $1,748,043 | | Total investment securities | $569,673 | $619,670 | | **Total Liabilities** | **$2,370,492** | **$2,204,485** | | Total deposits | $2,336,489 | $2,174,840 | | **Total Stockholders' Equity** | **$336,788** | **$316,407** | Consolidated Statement of Income Highlights (in thousands) | | Year Ended Dec 31, 2019 | Year Ended Dec 31, 2018 | | :--- | :--- | :--- | | Net interest income | $95,680 | $91,544 | | Provision for loan losses | $900 | $0 | | Non-interest income | $9,084 | $10,139 | | Non-interest expense | $57,970 | $58,266 | | **Net income** | **$34,241** | **$32,622** | [Note 1: Summary of Significant Accounting Policies](index=56&type=section&id=Note%201%3A%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines key accounting policies, including the adoption of ASC 842 for leases in 2019 and the upcoming CECL model effective January 1, 2020, which is expected to increase the allowance for credit losses by **5% to 15%** - The company adopted the new lease accounting standard (**ASC 842**) on January 1, 2019, resulting in the recognition of **$13.4 million** in right-of-use assets and **$15.4 million** in lease liabilities[368](index=368&type=chunk)[369](index=369&type=chunk) - The company will adopt the **Current Expected Credit Loss (CECL) model** effective January 1, 2020, estimating a **5% to 15%** increase to its allowance for credit losses, recorded as an adjustment to retained earnings[372](index=372&type=chunk)[374](index=374&type=chunk) [Note 3: Loans and Allowance for Loan Losses](index=75&type=section&id=Note%203%3A%20Loans%20and%20Allowance%20for%20Loan%20Losses) The loan portfolio totaled **$1.84 billion** at year-end 2019, with **88%** secured by real estate, maintaining strong credit quality with minimal non-accrual loans and a **$16.7 million** allowance for loan losses - At December 31, 2019, **88%** of the total loan portfolio was secured by real estate, with a significant concentration in commercial real estate[400](index=400&type=chunk) Credit Quality Indicators | (in thousands) | Dec 31, 2019 | Dec 31, 2018 | | :--- | :--- | :--- | | Total Loans | $1,843,286 | $1,763,864 | | Non-accrual loans | $226 | $697 | | Loans 30-89 days past due | $1,481 | $1,121 | | Troubled Debt Restructurings (TDRs) | $11,333 | $14,406 | Allowance for Loan Losses (ALLL) Rollforward (Year ended Dec 31, 2019) | (in thousands) | Amount | | :--- | :--- | | Beginning balance | $15,821 | | Provision | $900 | | Charge-offs | ($78) | | Recoveries | $34 | | **Ending balance** | **$16,677** | [Note 15: Regulatory Matters](index=99&type=section&id=Note%2015%3A%20Regulatory%20Matters) Both Bancorp and its bank subsidiary exceeded all minimum Basel III regulatory capital requirements as of December 31, 2019, with the Bank significantly above 'well capitalized' thresholds Capital Ratios as of December 31, 2019 | Ratio | Bancorp Actual | Bank Actual | Well Capitalized Threshold | | :--- | :--- | :--- | :--- | | Total Capital (to risk-weighted assets) | 15.07% | 14.63% | ≥ 10.000% | | Tier 1 Capital (to risk-weighted assets) | 14.24% | 13.79% | ≥ 8.000% | | Common Equity Tier 1 (to risk-weighted assets) | 14.11% | 13.79% | ≥ 6.500% | | Tier 1 Capital (to average assets) | 11.66% | 11.29% | ≥ 5.000% | [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 reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[559](index=559&type=chunk) [Controls and Procedures](index=105&type=section&id=ITEM%209A.%20CONTROLS%20AND%20PROCEDURES) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of December 31, 2019 - Management concluded that disclosure controls and procedures were effective as of the end of the period covered by the report[559](index=559&type=chunk) - Management concluded that the company maintained effective internal control over financial reporting as of December 31, 2019[560](index=560&type=chunk) - There were no significant changes in internal control over financial reporting during the quarter ended December 31, 2019[564](index=564&type=chunk) [Other Information](index=106&type=section&id=ITEM%209B.%20OTHER%20INFORMATION) The company reports no other information for this item - None[566](index=566&type=chunk) PART III [Directors, Executive Officers and Corporate Governance](index=106&type=section&id=ITEM%2010.%20DIRECTORS,%20EXECUTIVE%20OFFICERS%20AND%20CORPORATE%20GOVERNANCE) The information required for this item is incorporated by reference from the company's Proxy Statement for the 2019 Annual Meeting of Shareholders - Information is incorporated by reference from the **Proxy Statement**[566](index=566&type=chunk) [Executive Compensation](index=106&type=section&id=ITEM%2011.%20EXECUTIVE%20COMPENSATION) The information required for this item is incorporated by reference from the company's Proxy Statement for the 2019 Annual Meeting of Shareholders - Information is incorporated by reference from the **Proxy Statement**[567](index=567&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) The information required for this item is incorporated by reference from ITEM 5 of this report, Note 8 to the financial statements, and the company's Proxy Statement for the 2019 Annual Meeting of Shareholders - Information is incorporated by reference from the **Proxy Statement** and other sections of the 10-K[568](index=568&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=106&type=section&id=ITEM%2013.%20CERTAIN%20RELATIONSHIPS%20AND%20RELATED%20TRANSACTIONS,%20AND%20DIRECTOR%20INDEPENDENCE) The information required for this item is incorporated by reference from the company's Proxy Statement for the 2019 Annual Meeting of Shareholders - Information is incorporated by reference from the **Proxy Statement**[569](index=569&type=chunk) [Principal Accountant Fees and Services](index=106&type=section&id=ITEM%2014.%20PRINCIPAL%20ACCOUNTANT%20FEES%20AND%20SERVICES) The information required for this item is incorporated by reference from the company's Proxy Statement for the 2019 Annual Meeting of Shareholders - Information is incorporated by reference from the **Proxy Statement**[570](index=570&type=chunk) PART IV [Exhibits, Financial Statement Schedules](index=107&type=section&id=ITEM%2015.%20EXHIBITS,%20FINANCIAL%20STATEMENT%20SCHEDULES) This section lists the documents filed as part of the Form 10-K report, including financial statements and a list of exhibits filed or incorporated by reference - Lists the financial statements filed under **ITEM 8** and all exhibits filed with or incorporated by reference into the report[573](index=573&type=chunk)[574](index=574&type=chunk) [Form 10-K Summary](index=108&type=section&id=ITEM%2016.%20FORM%2010-K%20SUMMARY) The company reports no summary for this item - None[576](index=576&type=chunk)

Bank of Marin Bancorp. (NASDAQ:BMRC) Q4 2019 Results Earnings Conference Call January 27, 2020 11:30 AM ET Company Participants Andrea Henderson - Director, Marketing Russ Colombo - President and Chief Executive Officer Tani Girton - Executive Vice President and Chief Financial Officer Conference Call Participants Jeff Rulis - D.A. Davidson Matthew Clark - Piper Sandler Jackie Bohlen - KBW Andrea Henderson Good morning and thank you for joining the Bank of Marin Bancorp’s Earnings Call for the Fourth Quarte ...

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 September 30, 2019 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) | - ...

Bank of Marin Bancorp (NASDAQ:BMRC) Q3 2019 Earnings Conference Call October 21, 2019 11:30 AM ET Company Participants Andrea Henderson - Director, Marketing Russ Colombo - President and Chief Executive Officer Tani Girton - Executive Vice President and Chief Financial Officer Conference Call Participants Jeff Rulis - D.A. Davidson Jackie Bohlen - KBW Tim O’Brien - Sandler O’Neill & Partners Matthew Clark - Piper Jaffray Andrea Henderson Good morning and thank you for joining Bank of Marin Bancorp’s Earning ...

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, 2019 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) (State o ...

Start Time: 11:30 End Time: 11:57 March 1, 0000 ET Q2 2019 Earnings Conference Call July 22, 2019, 11:30 AM ET Company Participants Russ Colombo - President and CEO Tani Girton - EVP and CFO Andrea Henderson - First VP, Director of Marketing Conference Call Participants Luke Wooten - KBW Jeff Rulis - D.A. Davidson Tim O’Brien - Sandler O’Neill & Partners Matthew Clark - Piper Jaffray Andrea Henderson Good morning and thank you for joining Bank of Marin Bancorp's Earnings Call for the Second Quarter ended Ju ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2019 OR o 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 net income of $7.5 million for Q1 2019, down from $9.7 million in the previous quarter but up from $6.4 million in the same quarter last year [7] - Diluted earnings per share were $0.54 in Q1 2019 compared to $0.69 last quarter and $0.46 in the same quarter a year ago [8] - Net interest income totaled $23.8 million in Q1 2019, up from $23.3 million in the prior quarter and $21.9 million in the same quarter a year ago [13] - The tax equivalent net interest margin was 4.02% in Q1 2019, an increase from 3.85% in both the prior quarter and the year-ago quarter [15] - Return on assets was 1.19% and return on equity was 9.54% for the quarter [22] Business Line Data and Key Metrics Changes - Loans increased to $1.77 billion at March 31, 2019, from $1.76 billion at December 31, 2018, and were up 6% from $1.67 billion in Q1 2018 [8] - Total deposits increased by $3.8 million in Q1 to $2.18 billion, with non-interest bearing deposits increasing by $10.3 million [9] Market Data and Key Metrics Changes - The company is expanding its presence in key markets, including opening a loan production office in Walnut Creek and making strategic hires in Napa and Santa Rosa [11] Company Strategy and Development Direction - The company is focused on organic growth and relationship banking, which has proven effective in a competitive environment [5][25] - The company is investing in talent acquisition to strengthen its foundation for future growth [26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth outlook for 2019, citing healthy loan demand and strong underlying fundamentals [6] - The competitive landscape remains intense, particularly for attracting talent, but management sees opportunities arising from mergers in the banking sector [38][40] Other Important Information - The Board declared a cash dividend of $0.19 per share, marking the 56th consecutive quarterly dividend [12] - The company is considering an extension of its $25 million share repurchase program [12] Q&A Session Summary Question: Can you provide details on the expenses and what to expect going forward? - Management indicated that many Q1 expenses are recurring, particularly related to retirement eligible employees and stock-based compensation [29][30] Question: How do you view the competitive landscape and talent acquisition? - Management noted that mergers create opportunities for talent acquisition, but competition for skilled employees remains high [38][40] Question: Can you provide an update on the parallel systems and associated costs? - Management confirmed that parallel processing costs are expected to increase in Q2, with an estimated incremental expense of $30,000 to $40,000 [48] Question: What is the outlook for loan pricing and deposit pricing? - Management indicated that loan yields are improving slightly, while deposit pricing is expected to stabilize due to the Fed's current stance [66][69]

Part I [Business](index=5&type=section&id=Item%201.%20Business) Bank of Marin Bancorp operates as a commercial and retail bank in the San Francisco Bay Area, serving small to medium-sized businesses and offering diverse financial services - The company's business is conducted through its subsidiary, Bank of Marin, which operates **23 offices** across Marin, Sonoma, San Francisco, Napa, and Alameda counties, focusing on small to medium-sized businesses, professionals, and not-for-profit organizations[19](index=19&type=chunk) - A broad range of services are offered, including commercial and real estate loans, consumer lending, various deposit accounts (checking, savings, CDARS, ICS), cash management services, and Wealth Management and Trust Services (WMTS)[20](index=20&type=chunk)[22](index=22&type=chunk)[25](index=25&type=chunk) - The banking environment is highly competitive, with rivals including large nationwide banks, credit unions, and other regional banks. Bank of Marin differentiates itself through relationship banking and local market knowledge, holding the **third-largest deposit market share in Marin County at 10.8%** as of June 30, 2018[32](index=32&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk) - As of December 31, 2018, the company employed **290 full-time equivalent staff**, none of whom are represented by a union[35](index=35&type=chunk) [Supervision and Regulation](index=7&type=section&id=Supervision%20and%20Regulation) The company is extensively regulated by federal and state authorities, with regulations covering capital adequacy, consumer protection, and community reinvestment - Bancorp is a bank holding company subject to regulation, reporting, and examination by the Federal Reserve and the California DBO. The Bank is regulated by the DBO and the FDIC[37](index=37&type=chunk)[39](index=39&type=chunk) - The company is subject to the Community Reinvestment Act (CRA) and received a **'Satisfactory' rating** in its January 2018 examination[47](index=47&type=chunk)[49](index=49&type=chunk) - The company implemented the fully phased-in Basel III capital rules as of January 1, 2019. A proposed rule under the Economic Growth Act could allow the bank to opt into a simpler Community Bank Leverage Ratio (CBLR) framework if its CBLR is **greater than 9 percent**, which would ease capital requirement calculations[56](index=56&type=chunk)[59](index=59&type=chunk) - The Dodd-Frank Act continues to impact operations, though some provisions were modified by the Economic Growth Act. The ultimate impact remains subject to rulemaking[58](index=58&type=chunk)[61](index=61&type=chunk) [Risk Factors](index=12&type=section&id=Item%201A.%20Risk%20Factors) The company faces material risks from local economic conditions, interest rate fluctuations, intense competition, and a high concentration in commercial real estate - The company's success is highly dependent on the local economic conditions of the San Francisco Bay Area, impacting loan demand, repayment ability, and collateral values[69](index=69&type=chunk) - Earnings are largely dependent on net interest income, which is vulnerable to changes in interest rates controlled by the FOMC[70](index=70&type=chunk) - Approximately **88% of the loan portfolio is secured by real estate**, with a significant concentration in Commercial Real Estate (CRE). As of December 31, 2018, CRE loans represented **340% of total risk-based capital**, exceeding the 300% supervisory criterion, which may warrant greater regulatory scrutiny[80](index=80&type=chunk)[82](index=82&type=chunk) - The company is exposed to cybersecurity risks and relies on key third-party vendors like Fidelity Information Services (FIS) for core processing, making it vulnerable to service interruptions or breaches[102](index=102&type=chunk)[105](index=105&type=chunk) - The planned cessation of LIBOR after 2021 poses a risk, as the company has floating-rate loans, securities, and swaps indexed to LIBOR that mature after this date. The transition to an alternative rate like SOFR could create additional costs and risks[115](index=115&type=chunk)[116](index=116&type=chunk) [Unresolved Staff Comments](index=19&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the SEC - None[117](index=117&type=chunk) [Properties](index=20&type=section&id=Item%202.%20Properties) The company leases its corporate headquarters and all branch and office facilities across its primary market areas - The company leases its corporate headquarters in Novato, CA, and its branch and office facilities in Marin, Sonoma, Napa, San Francisco, Alameda, and Contra Costa counties[118](index=118&type=chunk) [Legal Proceedings](index=20&type=section&id=Item%203.%20Legal%20Proceedings) Management is not aware of any pending legal proceedings that would materially affect the company's financial condition or operations - There are no pending legal proceedings expected to have a material adverse effect on the company's financial condition or results of operations[119](index=119&type=chunk) - The Bank is indemnified for certain Visa U.S.A. litigation and does not anticipate making cash payments as Visa has funded a litigation escrow account to cover liabilities[120](index=120&type=chunk) [Mine Safety Disclosures](index=20&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[121](index=121&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=21&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on NASDAQ, underwent a two-for-one split, and initiated a share repurchase program - The company's common stock (BMRC) trades on the NASDAQ Capital Market. A **two-for-one stock split** occurred on November 27, 2018[124](index=124&type=chunk) Share Repurchase Program Activity (April 23 - Dec 31, 2018) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Approximate Dollar Value Remaining ($ thousands) | | :--- | :--- | :--- | :--- | | April 23-30, 2018 | — | — | 25,000 | | May 1-31, 2018 | 2,796 | $37.03 | 24,896 | | August 1-31, 2018 | 8,888 | $44.43 | 24,501 | | September 1-30, 2018 | 24,202 | $42.99 | 23,460 | | October 1-30, 2018 | 29,890 | $40.68 | 22,244 | | November 1-30, 2018 | 34,754 | $42.10 | 20,779 | | December 1-31, 2018 | 70,687 | $39.44 | 17,988 | | **Total** | **171,217** | **$40.92** | **17,988** | [Selected Financial Data](index=23&type=section&id=Item%206.%20Selected%20Financial%20Data) This section summarizes key financial data, highlighting **$2.52 billion** in total assets and **$32.6 million** net income for 2018 Selected Financial Data (2017-2018) | (in thousands, except per share data) | 2018 | 2017 | | :--- | :--- | :--- | | **Financial Condition Data (at year-end)** | | | | Total assets | $2,520,892 | $2,468,154 | | Loans, net | $1,748,043 | $1,663,246 | | Deposits | $2,174,840 | $2,148,670 | | Stockholders' equity | $316,407 | $297,025 | | **Operating Data (for the year)** | | | | Net interest income | $91,544 | $74,852 | | Provision for (reversal of) loan losses | $— | $500 | | Net income | $32,622 | $15,976 | | Diluted EPS | $2.33 | $1.27 | | **Performance Ratios** | | | | Return on average assets | 1.31% | 0.75% | | Return on average equity | 10.73% | 6.49% | | Efficiency ratio | 57.30% | 64.70% | | **Asset Quality Ratios** | | | | Non-performing loans to total loans | 0.04% | 0.02% | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and operating results for 2018 compared to 2017 [Executive Summary](index=26&type=section&id=Executive%20Summary) In 2018, the company achieved strong performance with net income rising to **$32.6 million**, driven by loan growth and increased net interest income 2018 Performance Highlights vs. 2017 | Metric | 2018 | 2017 | | :--- | :--- | :--- | | Net Income | $32.6 million | $16.0 million | | Diluted EPS | $2.33 | $1.27 | | Loan Growth | 5.1% | - | | Net Interest Income | $91.5 million | $74.9 million | | Provision for Loan Losses | $0 | $500 thousand | | Efficiency Ratio | 57.3% | 64.7% | - Non-accrual loans were exceptionally low at **0.04% of the total loan portfolio** as of year-end 2018[149](index=149&type=chunk) - Strategic actions in 2018 included a **two-for-one stock split**, the repurchase of **171,217 shares for $7.0 million**, and an increase in the quarterly dividend[155](index=155&type=chunk)[156](index=156&type=chunk)[157](index=157&type=chunk) [Results of Operations](index=27&type=section&id=Results%20of%20Operations) In 2018, net interest income increased **22.2%** to **$91.5 million**, non-interest income grew, and the effective tax rate decreased - Net interest income increased by **$16.6 million (22.2%)** in 2018, primarily due to a **$337.7 million** increase in average earning assets and higher yields. The tax-equivalent net interest margin rose **10 basis points to 3.90%**[170](index=170&type=chunk) - No provision for loan losses was recorded in 2018, compared to a **$500 thousand** provision in 2017. This was attributed to a decrease in classified loans and continued high credit quality[176](index=176&type=chunk) - Non-interest income increased by **$1.9 million (22.6%)**, mainly due to a **$956 thousand** pre-tax gain on the sale of Visa Inc. Class B stock and a **$180 thousand** special dividend from the FHLB[180](index=180&type=chunk) - Non-interest expense increased by **$4.5 million (8.3%)**, driven by a **$3.4 million** rise in salaries and benefits from additional personnel and annual merit increases[183](index=183&type=chunk) - The provision for income taxes was **$10.8 million** at an effective tax rate of **24.9%**, down from **$12.9 million** at **44.6%** in 2017. The decrease reflects the lower federal corporate tax rate and the absence of a one-time deferred tax asset write-down that occurred in 2017[184](index=184&type=chunk) [Financial Condition](index=32&type=section&id=Financial%20Condition) As of December 31, 2018, total assets grew to **$2.52 billion**, driven by loan and investment portfolio increases, with strong capital levels Loan Portfolio Composition (in thousands) | Loan Type | Dec 31, 2018 | Dec 31, 2017 | | :--- | :--- | :--- | | Commercial loans | $230,739 | $235,835 | | Real estate - Commercial investor | $873,410 | $822,984 | | Real estate - Commercial owner-occupied | $313,277 | $300,963 | | Real estate - Construction | $76,423 | $63,828 | | Real estate - Home equity | $124,696 | $132,467 | | Other loans | $145,319 | $122,936 | | **Total loans** | **$1,763,864** | **$1,679,013** | - The allowance for loan losses was **$15.8 million (0.90% of total loans)** at year-end 2018, compared to **$15.8 million (0.94% of total loans)** at year-end 2017. Net recoveries were **$54 thousand** in 2018 versus net charge-offs of **$175 thousand** in 2017[215](index=215&type=chunk)[222](index=222&type=chunk)[224](index=224&type=chunk) - Total impaired loans decreased to **$15.0 million** at year-end 2018 from **$16.9 million** at year-end 2017, primarily due to payoffs and upgrades[225](index=225&type=chunk) - Total deposits grew by **$26.1 million** to **$2.17 billion**. Non-interest bearing deposits grew by **$51.9 million** and constituted **49% of total deposits** at year-end 2018[230](index=230&type=chunk) - Bancorp's total risk-based capital ratio was **14.9%** at December 31, 2018, consistent with the prior year and well above the regulatory minimums[249](index=249&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=45&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate risk, managed through simulations, with the bank being asset-sensitive to rising rates - The primary market risk is interest rate risk. The company is asset-sensitive and expects net interest income to increase over time in a rising rate environment[260](index=260&type=chunk)[261](index=261&type=chunk) Estimated Change in Net Interest Income (NII) from Immediate Interest Rate Shifts | Immediate Change in Interest Rates (bps) | Estimated Change in NII in Year 1 (%) | Estimated Change in NII in Year 2 (%) | | :--- | :--- | :--- | | +400 | (4.7)% | 3.8% | | +300 | (3.3)% | 3.3% | | +200 | (2.0)% | 2.6% | | +100 | (0.8)% | 2.0% | | -100 | (4.5)% | (8.2)% | | -200 | (8.6)% | (17.1)% | [Financial Statements and Supplementary Data](index=47&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the audited consolidated financial statements for 2018 and 2017, including the independent auditor's report - The independent auditor, Moss Adams LLP, issued an **unqualified opinion** on the consolidated financial statements and on the effectiveness of internal control over financial reporting as of December 31, 2018[272](index=272&type=chunk) Consolidated Statement of Condition Highlights (in thousands) | | Dec 31, 2018 | Dec 31, 2017 | | :--- | :--- | :--- | | **Assets** | | | | Total investment securities | $619,670 | $483,499 | | Loans, net | $1,748,043 | $1,663,246 | | Goodwill | $30,140 | $30,140 | | **Total Assets** | **$2,520,892** | **$2,468,154** | | **Liabilities & Equity** | | | | Total deposits | $2,174,840 | $2,148,670 | | Total liabilities | $2,204,485 | $2,171,129 | | Total stockholders' equity | $316,407 | $297,025 | | **Total Liabilities & Equity** | **$2,520,892** | **$2,468,154** | Consolidated Statement of Comprehensive Income Highlights (in thousands) | | Year Ended Dec 31, 2018 | Year Ended Dec 31, 2017 | | :--- | :--- | :--- | | Net interest income | $91,544 | $74,852 | | Provision for loan losses | $— | $500 | | Non-interest income | $10,139 | $8,268 | | Non-interest expense | $58,266 | $53,782 | | **Net income** | **$32,622** | **$15,976** | | Other comprehensive (loss) income, net of tax | $(978) | $807 | | **Comprehensive income** | **$31,644** | **$16,783** | [Notes to Consolidated Financial Statements](index=56&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide detailed information on significant accounting policies, financial statement accounts, and key disclosures including credit quality - The company adopted new revenue recognition standards (ASC 606) on January 1, 2018, with no material impact. It is preparing to adopt the new CECL model for credit losses (ASU 2016-13) for the fiscal year beginning after December 15, 2019, which is expected to potentially increase the allowance for loan losses[361](index=361&type=chunk)[380](index=380&type=chunk) - Troubled Debt Restructurings (TDRs) decreased to a carrying amount of **$14.4 million** as of Dec 31, 2018, from **$16.5 million** in the prior year[418](index=418&type=chunk)[421](index=421&type=chunk) - On October 22, 2018, a **two-for-one stock split** was announced and became effective November 27, 2018. All share and per share data have been adjusted[456](index=456&type=chunk) - Both Bancorp and the Bank exceeded all regulatory capital requirements to be considered **'well capitalized'** as of December 31, 2018. The Bank's total risk-based capital ratio was **13.98%**[528](index=528&type=chunk)[533](index=533&type=chunk) - The November 2017 acquisition of Bank of Napa, N.A. resulted in goodwill of **$23.7 million** and a core deposit intangible of **$4.4 million**[543](index=543&type=chunk)[544](index=544&type=chunk)[545](index=545&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=102&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[549](index=549&type=chunk) [Controls and Procedures](index=102&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, 2018 - Management concluded that disclosure controls and procedures were effective as of the end of the period covered by the report[549](index=549&type=chunk) - Management's assessment concluded that the company maintained effective internal control over financial reporting as of December 31, 2018. The independent registered public accounting firm issued an unqualified opinion on the effectiveness of internal control[550](index=550&type=chunk)[553](index=553&type=chunk) [Other Information](index=103&type=section&id=Item%209B.%20Other%20Information) The company reports no other information for this item - None[556](index=556&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=103&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors, executive officers, and corporate governance is incorporated by reference from the 2019 Proxy Statement - Information is incorporated by reference from the Proxy Statement for the 2019 Annual Meeting of Shareholders[556](index=556&type=chunk) [Executive Compensation](index=103&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the 2019 Proxy Statement - Information is incorporated by reference from the Proxy Statement for the 2019 Annual Meeting of Shareholders[557](index=557&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=103&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership and related stockholder matters is incorporated by reference from Item 5, Note 8, and the Proxy Statement - Information is incorporated by reference from ITEM 5, Note 8 of the financial statements, and the Proxy Statement for the 2019 Annual Meeting of Shareholders[558](index=558&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=103&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding related party transactions and director independence is incorporated by reference from the 2019 Proxy Statement - Information is incorporated by reference from the Proxy Statement for the 2019 Annual Meeting of Shareholders[559](index=559&type=chunk) [Principal Accountant Fees and Services](index=103&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information regarding principal accountant fees and services is incorporated by reference from the 2019 Proxy Statement - Information is incorporated by reference from the Proxy Statement for the 2019 Annual Meeting of Shareholders[560](index=560&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=104&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the financial statements and all exhibits filed as part of the Form 10-K, either herewith or by reference - This item lists the financial statements filed with the report and all exhibits, which are either filed with this report or incorporated by reference[563](index=563&type=chunk)[564](index=564&type=chunk) [Form 10-K Summary](index=105&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item is not applicable as no Form 10-K summary is provided - None[567](index=567&type=chunk)

Bank of Marin Bancorp (NASDAQ:BMRC) Q4 2018 Earnings Conference Call January 28, 2019 11:30 AM ET Company Participants Andrea Henderson - Director of Marketing Russ Colombo - President and Chief Executive Officer Tani Girton - Executive Vice President and Chief Financial Officer Conference Call Participants Jeff Rulis - D.A. Davidson Jackie Bohlen - KBW Tim O'Brien - Sandler O'Neill Andrea Henderson Good morning and thank you for joining the Bank of Marin Bancorp’s Earnings Call for the Fourth Quarter and Y ...