Business Wire | Jan 25, 2021 08:00AM EST

Bank of Marin Bancorp Reports Fourth Quarter and Full Year 2020 Earnings

Jan. 25, 2021

NOVATO, Calif.--(BUSINESS WIRE)--Jan. 25, 2021--Bank of Marin Bancorp, "Bancorp" (Nasdaq: BMRC), parent company of Bank of Marin, "Bank," announced earnings of $8.1 million in the fourth quarter of 2020, compared to $7.5 million in the third quarter of 2020 and $9.1 million in the fourth quarter of 2019. Diluted earnings per share were $0.60 in the fourth quarter of 2020, compared to $0.55 in the prior quarter and $0.66 the same quarter a year ago. Annual earnings were $30.2 million in 2020 compared to $34.2 million in 2019. Diluted earnings per share were $2.22 for the year ended December 31, 2020, compared to $2.48 per share for the year ended December 31, 2019.

"We effectively served our clients and produced strong results for our shareholders in an extraordinary and challenging year," said Russell A. Colombo, President and Chief Executive Officer. "We have gained actionable insight into the future of our relationship banking model, adapting to customers' increased adoption of technology and leveraging remote work to recruit and retain the best talent."

Bancorp also provided the following highlights for the fourth quarter and year ended December 31, 2020:

* Loans increased $245.3 million in 2020, or 13%, to $2.089 billion at December 31, 2020, from $1.843 billion at December 31, 2019. SBA PPP loans outstanding at December 31, 2020 were $291.6 million. Loans decreased $19.4 million, or 1%, in the fourth quarter from $2.108 billion at September 30, 2020, which included $10.9 million of PPP loans forgiven in the fourth quarter of 2020.

* Credit quality remains strong, with non-accrual loans representing 0.44% of the Bank's loan portfolio as of December 31, 2020. We adopted the current expected credit loss ("CECL") standard in the fourth quarter of 2020, which resulted in an increase to the allowance for credit losses for loans of $748 thousand and a $1.1 million increase to the allowance for unfunded loan commitments. See the Loan and Credit Quality section, below, for detail on the adoption of CECL.

* Deposits grew $167.8 million, or 7%, to $2.504 billion at December 31, 2020, compared to $2.336 billion at December 31, 2019. Non-interest bearing deposits grew by $225.8 million, or 20%, in 2020 and made up 54% of total deposits at year end. Cost of deposits remained low at 0.11% for the full year of 2020, down from 0.20% in 2019. Cost of deposits was 0.07% for the fourth quarter of 2020, compared to 0.09% in the prior quarter. Additionally, the Bank maintained $173.4 million deposits off-balance sheet with deposit networks as part of our liquidity management.

* For the full year 2020, return on assets ("ROA") and return on equity ("ROE") were 1.04% and 8.60%, respectively, compared to 1.34% and 10.49% in the prior year. For the quarter ended December 31, 2020, ROA was 1.09% and ROE was 8.98%, compared to 0.98% and 8.37%, respectively, in the prior quarter.

* All capital ratios were above regulatory requirements for a well-capitalized institution. The total risk-based capital ratio for Bancorp was 16.0% at December 31, 2020 and 15.1% at December 31, 2019. Tangible common equity to tangible assets was 11.3% at both December 31, 2020 and December 31, 2019 (refer to footnote 5 on page 6 for definition of this non-GAAP financial measure). The total risk-based capital ratio for the Bank was 15.8% at December 31, 2020 and 14.6% at December 31, 2019.

* The Board of Directors declared a cash dividend of $0.23 per share on January 22, 2021. This is the 63rd consecutive quarterly dividend paid by Bank of Marin Bancorp. The cash dividend is payable on February 12, 2021 to shareholders of record at the close of business on February 5, 2021.

* Our strong capital and liquidity position affords us the opportunity to eliminate a high cost funding source. On March 15, 2021 we intend to redeem the $2.8 million subordinated debentures, which carried a rate of 4.85% in the fourth quarter. The redemption will consist of $4.1 million principal balance, quarterly interest due, and $1.3 million in accelerated accretion of purchase discount. The contractual interest rate on the subordinated debentures is 3-month LIBOR plus 1.40%, or 1.62% as of December 31, 2020.

Pandemic-Related Response Update

As of December 31, 2020, there were 1,777 PPP loans outstanding totaling $291.6 million, net of $5.4 million in unaccreted fees and costs. During the fourth quarter Bank of Marin opened a secure PPP loan forgiveness application portal and gave all PPP borrowers access to apply. As of December 31, 2020 we received SBA loan forgiveness payments totaling $10.9 million for 35 loans that were forgiven. Of the total PPP loans remaining, 74% (1,309 loans) totaling $58.7 million are less than or equal to $150 thousand and have access to streamlined forgiveness processing. On January 19, 2021, the Bank launched the application process and began accepting loan requests for the PPP program as revised by the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act.

Of the 269 loans totaling $402.9 million granted payment relief since the onset of the pandemic, 222 loans or $324.2 million have resumed normal payments and 18 loans or $7.7 million paid off. As of December 31, 2020, 14 borrowing relationships with 29 loans totaling $71.0 million had requested additional payment relief. We know each of these clients very well and anticipate that the vast majority will work through current adverse conditions and resume payments. The following table summarizes these loans by industry or collateral type.

Payment Relief by Type

Outstanding Weighted AverageIndustry/Collateral Type Loan Balance LTV (in thousands)

Education $ 17,580 26 %

Health Clubs 16,551 38 %

Office and Mixed Use 15,883 44 %

Hospitality 12,439 49 %

Retail Related CRE 6,899 52 %

Auto Dealership 393 49 %

Non-CRE Related 121 N/A

Residential Real Estate 1,130 60 %

Payment Relief Totals $ 70,996 40 %

Loans and Credit Quality

Loans declined $19.4 million in the fourth quarter of 2020 and totaled $2.089 billion at December 31, 2020. For the quarter and year ended December 31, 2020, new non-PPP-related loan originations were $43.1 million and $165.5 million, respectively, compared to 2019 loan originations of $103.4 million and $259.6 million for the same periods. New loan originations were more than offset by payoffs of $55.4 million in the fourth quarter and $180.1 million for the full year ended December 31, 2020. Fourth quarter and year to date 2020 loan payoffs were concentrated in consumer and retail loans (mostly tenant in common and HELOC) and commercial loans on which underlying assets were sold or paid off with cash. Other sources of payoffs were loans refinanced with other banks and SBA PPP loans forgiven.

Non-accrual loans totaled $9.2 million, or 0.44% of the Bank's loan portfolio at December 31, 2020, an increase from $1.4 million, or 0.07%, at September 30, 2020 and $226 thousand, or 0.01%, a year ago. The increase from the prior quarter was primarily due to one well-secured commercial real estate loan where the primary tenant is a health club that was severely affected by the prolonged shutdown due to the pandemic. Loans classified substandard totaled $25.8 million at December 31, 2020, $11.0 million at September 30, 2020, and $9.9 million at December 31, 2019. There were no loans classified doubtful at December 31, 2020 or December 31, 2019. The increase in substandard loans was primarily due to two well-secured loans for hotel properties and one well-secured commercial real estate loan, mentioned above, that were negatively impacted by the pandemic. Accruing loans past due 30 to 89 days totaled $1.8 million at December 31, 2020, compared to $318 thousand at September 30, 2020 and $1.5 million a year ago.

Net recoveries for the fourth quarter of 2020 totaled $13 thousand compared to net charge-offs of $4 thousand last quarter and $63 thousand in the fourth quarter of 2019. Net charge-offs totaled $1 thousand for the year ended December 31, 2020, compared to $44 thousand in 2019. The ratio of loan loss reserve to loans was 1.10% at December 31, 2020, 1.05% at September 30, 2020 and 0.90% at December 31, 2019.

Adoption of CECL

We adopted the CECL accounting standard on December 31, 2020, which was previously postponed under the optional accounting relief provisions of the Coronavirus Aid, Relief and Economic Security ("CARES") Act passed in March 2020 to the earlier of the end of the national emergency or December 31, 2020. During the first nine months of 2020, we applied the incurred loss method in determining the allowance for credit losses on loans ("ACL") and recorded a $5.5 million provision for credit losses and a $610 thousand provision for credit losses on unfunded loan commitments. Upon adoption of the CECL standard, we increased the ACL by $748 thousand and the allowance for credit losses on unfunded loan commitments by $1.1 million, which represented the difference between allowances calculated under the CECL method as of December 31, 2020 and the incurred loss method as of September 30, 2020. The $1.1 million increase in the allowance for unfunded loan commitments includes approximately $550 thousand related to a $36.9 million increase in available commitments during the fourth quarter of 2020.

The following table shows the impact to our financial statement due to adoption of CECL as of and during the quarter ended December 31, 2020.

Pre-tax increase Deferred After tax impact(in thousands) (decrease) upon the tax of adoption of adoption of CECL effect CECL

Impact to allowance for credit losses on loans:

Allowance for credit losses $ 748 on loans

Retained earnings(cumulative transition $ (1,604 ) $ 474 $ (1,130 )adjustment)

Net income (reversal ofprovision for credit losses $ 856 $ (253 ) $ 603 on loans)

Impact to allowance forcredit losses on unfunded loan commitments:

Allowance for credit losses $ 1,082 on unfunded commitments

Retained earnings(cumulative transition $ (122 ) $ 36 $ (86 )adjustment)

Net income (provision forcredit losses on unfunded $ (960 ) $ 284 $ (676 )commitments)

Cash, Cash Equivalents and Restricted Cash

Total cash, cash equivalents and restricted cash were $200.3 million at December 31, 2020, compared to $213.6 million at September 30, 2020. The $13.3 million decrease was primarily due to temporary transfers of deposits to third-party deposit networks as part of our liquidity management. Effective March 26, 2020, the Federal Reserve reduced the reserve requirement ratios to zero percent in response to the COVID-19 pandemic, resulting in no restricted cash requirements as of December 31, 2020 and September 30, 2020.

Investments

The investment portfolio totaled $501.4 million at December 31, 2020, a decrease of $29.4 million from September 30, 2020 and a decrease of $68.3 million from December 31, 2019. The decrease in the fourth quarter of 2020 was primarily attributed to calls of $25.4 million, principal paydowns of $28.7 million, and maturities of $1.1 million, partially offset by purchases of securities totaling $25.8 million. The year-over-year decrease was a combination of principal paydowns of $89.8 million, calls of $38.4 million, sales of $32.8 million, and maturities of $15.0 million, partially offset by purchases of $97.5 million, and an $11.0 million increase in the fair value of available-for-sale securities.

Deposits

Deposits totaled $2.504 billion at December 31, 2020, compared to $2.569 billion at September 30, 2020 and $2.336 billion at December 31, 2019. The $65.1 million decrease in deposits from the prior quarter primarily resulted from normal year-end cash fluctuations in some of our large clients' business accounts and continued PPP spending. The average cost of deposits decreased 2 basis points in the fourth quarter to 0.07%. The average cost of deposits for the full year of 2020 was 0.11%, down 9 basis points from 2019.

Earnings

"Bank of Marin remains true to our disciplined fundamentals of solid credit quality, capital, liquidity and expense management. Our low-cost deposit franchise is a testament to our relationship banking model," said Tani Girton, EVP and Chief Financial Officer. "We enter 2021 confident in our ability to shift into growth mode when we transition to a post-pandemic economy."

Net Interest Income

Net interest income totaled $23.6 million in the fourth quarter of 2020, compared to $24.6 million in the prior quarter and $23.9 million in the same quarter a year ago. The $1.0 million decrease from the prior quarter primarily related to lower SBA PPP loan income, lower average loan balances across all categories (with the exception of commercial real-estate), lower average investment securities balances, and lower yields on commercial real-estate loans. Yields on investment securities partially offset the negative variances.

The $295 thousand net interest income decrease from the same quarter last year was primarily due to lower yields across interest-earning assets and lower average balances across several loan categories and investment securities. Decreases were largely offset by higher SBA PPP loan income, lower rates on interest-bearing deposits, and higher average commercial real-estate and construction loan balances.

The tax-equivalent net interest margin was 3.40% for the fourth quarter of 2020, compared to 3.44% in the prior quarter and 3.82% in the fourth quarter of 2019. The 4 basis point decrease from the prior quarter was primarily due to extension of payment deferral from six months to sixteen months on SBA PPP loans, which extended the period over which the net fees are accreted, lower loan volume, and lower rates on loans. The impact of the SBA PPP loans lowered the fourth quarter 2020 net interest margin by 13 basis points as compared to 4 basis points in the prior quarter. The 42 basis point decrease from the same quarter a year ago was due to lower yields on most interest-earning asset categories, partially offset by lower rates on interest-bearing deposits.

Net interest income totaled $96.7 million and $95.7 million in 2020 and 2019, respectively. The $1.0 million increase in 2020 was primarily due to SBA PPP loans and lower rates on interest-bearing deposits, largely offset by lower yields on earning-assets. Notable balance increases occurred in interest-earning balances with other banks, commercial real estate loans and deposits. The tax-equivalent net interest margin decreased 43 basis points to 3.55% in 2020, from 3.98% in 2019 for the reasons mentioned above, somewhat offset by higher loan balances.

Non-Interest Income

Non-interest income totaled $1.8 million in the fourth and third quarter of 2020, compared to $2.3 million in the fourth quarter of 2019. The $491 thousand decrease in the fourth quarter of 2020, compared to the fourth quarter a year ago, primarily resulted from lower fee income related to lower interest rates on one-way deposit sales to third-party networks, fewer service charges on deposit accounts, and lower dividends on Federal Home Loan Bank ("FHLB") stock.

Non-interest income totaled $8.6 million in 2020, a $534 thousand decrease from $9.1 million in 2019. The decline was primarily due to $699 thousand fewer service charges on deposit accounts and ATM fees, lower income from bank-owned life insurance ("BOLI") policies due to the $562 thousand benefit collected on BOLI policies in the third quarter of 2019 (partially offset by $283 thousand underwriting expenses for two new BOLI policies in the first quarter of 2019), $182 thousand lower fee income from one-way deposit sales to third-party deposit networks and $145 thousand lower dividends on FHLB stock, partially offset by $860 thousand net gains on the sale of investment securities.

Non-Interest Expense

Non-interest expense totaled $15.2 million in the fourth and third quarter of 2020. Decreases in charitable contributions, salaries and related benefits, and professional service fees were almost entirely offset by a higher provision for credit losses on unfunded loan commitments.

The $1.9 million increase in non-interest expense from $13.3 million in fourth quarter of 2019 was mainly attributed to a $960 thousand provision for losses on unfunded loan commitments in the fourth quarter of 2020, $587 thousand higher salaries and related benefits primarily due to annual merit increases and incentive bonuses, $316 thousand higher occupancy and equipment expenses mostly due to lease renewals for our existing headquarters offices and new lease for a loan production office in San Mateo, and $168 thousand higher Federal Deposit Insurance Corporation ("FDIC") insurance expense due to the receipt of FDIC assessment credits in 2019.

Non-interest expense increased $2.0 million from $58.0 million in 2019 to $60.0 million in 2020. The largest increases came from the provision for unfunded loan commitments, occupancy expenses (primarily due to lease renewals mentioned above, common area maintenance and janitorial expenses), and charitable contributions. The decrease in data processing costs was due to our digital platform conversion in 2019. While salaries and related benefits were relatively unchanged year over year, annual merit and related increases were mostly offset by $915 thousand in SBA PPP-related deferred loan origination costs.

Share Repurchase Program

On October 23, 2020, the Board reactivated the $25.0 million share repurchase program that was suspended in March 2020. Bancorp repurchased 111,045 shares totaling $4.0 million in the fourth quarter of 2020 for a cumulative total of 169,571 shares totaling $5.8 million under this program. Repurchases for the full year 2020, under our current and prior repurchase program, were 203,709 shares totaling $7.2 million.

Earnings Call and Webcast Information

Bank of Marin Bancorp will webcast its fourth quarter and year end 2020 earnings call on Monday, January 25, 2021 at 8:30 a.m. PT/11:30 a.m. ET. Investors will have the opportunity to listen to the conference call online through Bank of Marin's website at https://www.bankofmarin.com under "Investor Relations." To listen to the live call, 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 $2.9 billion, Bank of Marin has 21 retail branches, 5 commercial banking offices and 2 loan production offices located across 7 Bay Area counties. Bank of Marin provides commercial banking, personal banking, 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, 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 December 31, September 30, December 31,share data; unaudited) 2020 2020 2019

Quarter-to-Date

Net income $ 8,117 $ 7.491 $ 9,079

Diluted earnings per common share $ 0.60 $ 0.55 $ 0.66

Return on average assets 1.09 % 0.98 % 1.37 %

Return on average equity 8.98 % 8.37 % 10.75 %

Efficiency ratio 59.70 % 57.82 % 50.84 %

Tax-equivalent net interest margin ^ 3.40 % 3.44 % 3.82 %1

Cost of deposits 0.07 % 0.09 % 0.23 %

Net (recoveries) charge-offs $ (13 ) $ 4 $ 63

Year-to-Date

Net income $ 30,242 $ 34,241

Diluted earnings per common share $ 2.22 $ 2.48

Return on average assets 1.04 % 1.34 %

Return on average equity 8.60 % 10.49 %

Efficiency ratio 57.06 % 55.33 %

Tax-equivalent net interest margin^ 3.55 % 3.98 %1

Cost of deposits 0.11 % 0.20 %

Net charge-offs $ 1 $ 44

At Period End

Total assets $ 2,911,926 $ 2,975,225 $ 2,707,280

Loans:

Commercial and industrial ^2 $ 498,408 $ 512,973 $ 246,687

Real estate:

Commercial owner-occupied 304,963 299,754 308,824

Commercial investor-owned 961,208 966,517 946,317

Construction 73,046 66,663 61,095

Home Equity 104,813 107,364 116,024

Other residential 123,395 130,915 136,657

Installment and other consumer loans 22,723 23,805 27,682

Total loans $ 2,088,556 $ 2,107,991 $ 1,843,286

Non-performing loans:^3

Real estate:

Commercial owner-occupied $ 7,147 $ - $ -

Commercial investor-owned 1,610 886 -

Home equity 459 532 168

Installment and other consumer loans 17 24 58

Total non-accrual loans $ 9,233 $ 1,442 $ 226

Classified loans (graded substandard $ 25,829 $ 10,999 $ 9,934 and doubtful)

Total accruing loans 30-89 days past $ 1,827 $ 318 $ 1,481 due

Allowance for credit losses to total 1.10 % 1.05 % 0.90 %loans

Allowance for credit losses to totalloans, excluding acquired and SBA 1.27 % 1.29 % 0.96 %PPP loans ^4

Allowance for credit losses to 2.48 x 15.34 x 73.86 xnon-performing loans

Non-accrual loans to total loans 0.44 % 0.07 % 0.01 %

Total deposits $ 2,504,249 $ 2,569,289 $ 2,336,489

Loan-to-deposit ratio 83.4 % 82.0 % 78.9 %

Stockholders' equity $ 358,253 $ 357,570 $ 336,788

Book value per share $ 26.54 $ 26.28 $ 24.81

Tangible common equity to tangible 11.3 % 11.0 % 11.3 %assets ^5

Total risk-based capital ratio - 15.8 % 15.5 % 14.6 %Bank

Total risk-based capital ratio - 16.0 % 16.1 % 15.1 %Bancorp

Full-time equivalent employees 289 291 290

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

^2 Includes SBA PPP loans of $291.6 million and $301.7 million at December 31,2020 and September 30, 2020, respectively. There were no SBA PPP loans atDecember 31, 2019.

^3 Excludes accruing troubled-debt restructured loans of $12.5 million, $12.6million and $11.3 million at December 31, 2020, September 30, 2020 and December31, 2019, respectively.

^4 The allowance for credit losses to total loans, excluding non-impairedacquired loans and guaranteed SBA PPP loans, is considered a meaningfulnon-GAAP financial measure, as it represents only those loans that wereconsidered in the calculation of the allowance for credit losses. Due to theadoption of CECL on December 31, 2020, all loans previously considered"acquired" are now included in the calculation of the allowance for creditlosses. Acquired loans that were not impaired at September 30, 2020 andDecember 31, 2019 totaled $90.4 million and $106.8 million, respectively. Referto footnote 2 above for SBA PPP loan totals.

^5 Tangible common equity to tangible assets is considered to be a meaningfulnon-GAAP financial measure of capital adequacy and is useful for investors toassess Bancorp's ability to absorb potential losses. Tangible common equityincludes common stock, retained earnings and unrealized gains on available forsale securities, net of tax, less goodwill and core deposit intangible assetsof $34.0 million, $34.2 million and $34.8 million at December 31, 2020,September 30, 2020 and December 31, 2019, respectively. Tangible assetsexcludes goodwill and core deposit intangible assets.

BANK OF MARIN BANCORP

CONSOLIDATED STATEMENTS OF CONDITION

at December 31, 2020, September 30, 2020 and December 31, 2019

(in thousands, except share data; unaudited)

December 31, 2020

September 30, 2020

December 31, 2019

Assets

Cash, cash equivalents and restricted cash

$

200,320

$

213,584

$

183,388

Investment securities:

Held-to-maturity, at amortized cost; net of zero allowance for credit losses, respectively

109,036

117,350

137,413

Available-for-sale (at fair value; amortized cost of $373,038, $394,437 and $423,923 at December 31, 2020, September 30, 2020 and December 31, 2019, respectively)

392,351

413,464

432,260

Total investment securities

501,387

530,814

569,673

Loans, amortized cost

2,088,556

2,107,991

1,843,286

Allowance for credit losses

(22,874

)

(22,113

)

(16,677

)

Loans, net of allowance for credit losses

2,065,682

2,085,878

1,826,609

Bank premises and equipment, net

4,919

5,266

6,070

Goodwill

30,140

30,140

30,140

Core deposit intangible

3,831

4,045

4,684

Operating lease right-of-use assets

25,612

26,041

11,002

Interest receivable and other assets

80,035

79,457

75,714

Total assets

$

2,911,926

$

2,975,225

$

2,707,280

Liabilities and Stockholders' Equity

Liabilities

Deposits

Non-interest bearing

$

1,354,650

$

1,383,719

$

1,128,823

Interest bearing

Transaction accounts

183,552

156,061

142,329

Savings accounts

201,507

192,764

162,817

Money market accounts

667,107

738,661

804,710

Time accounts

97,433

98,084

97,810

Total deposits

2,504,249

2,569,289

2,336,489

Borrowings and other obligations

58

99

212

Subordinated debentures

2,777

2,760

2,708

Operating lease liabilities

27,062

27,527

12,615

Interest payable and other liabilities

19,527

17,980

18,468

Total liabilities

2,553,673

2,617,655

2,370,492

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 - 13,500,453, 13,605,363 and 13,577,008 at December 31, 2020, September 30, 2020 and December 31, 2019, respectively

125,905

129,284

129,058

Retained earnings

219,747

215,976

203,227

Accumulated other comprehensive income, net of taxes

12,601

12,310

4,503

Total stockholders' equity

358,253

357,570

336,788

Total liabilities and stockholders' equity

$

2,911,926

$

2,975,225

$

2,707,280

BANK OF MARIN BANCORP

CONSOLIDATED STATEMENTS OF CONDITION

at December 31, 2020, September 30, 2020 and December 31, 2019

(in thousands, except share data; December 31, September 30, December 31,unaudited) 2020 2020 2019

Assets

Cash, cash equivalents and $ 200,320 $ 213,584 $ 183,388 restricted cash

Investment securities:

Held-to-maturity, at amortizedcost; net of zero allowance for 109,036 117,350 137,413 credit losses, respectively

Available-for-sale (at fair value;amortized cost of $373,038,$394,437 and $423,923 at December 392,351 413,464 432,260 31, 2020, September 30, 2020 andDecember 31, 2019, respectively)

Total investment securities 501,387 530,814 569,673

Loans, amortized cost 2,088,556 2,107,991 1,843,286

Allowance for credit losses (22,874 ) (22,113 ) (16,677 )

Loans, net of allowance for credit 2,065,682 2,085,878 1,826,609 losses

Bank premises and equipment, net 4,919 5,266 6,070

Goodwill 30,140 30,140 30,140

Core deposit intangible 3,831 4,045 4,684

Operating lease right-of-use 25,612 26,041 11,002 assets

Interest receivable and other 80,035 79,457 75,714 assets

Total assets $ 2,911,926 $ 2,975,225 $ 2,707,280

Liabilities and Stockholders' Equity

Liabilities

Deposits

Non-interest bearing $ 1,354,650 $ 1,383,719 $ 1,128,823

Interest bearing

Transaction accounts 183,552 156,061 142,329

Savings accounts 201,507 192,764 162,817

Money market accounts 667,107 738,661 804,710

Time accounts 97,433 98,084 97,810

Total deposits 2,504,249 2,569,289 2,336,489

Borrowings and other obligations 58 99 212

Subordinated debentures 2,777 2,760 2,708

Operating lease liabilities 27,062 27,527 12,615

Interest payable and other 19,527 17,980 18,468 liabilities

Total liabilities 2,553,673 2,617,655 2,370,492

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 -13,500,453, 125,905 129,284 129,058 13,605,363 and 13,577,008 atDecember 31, 2020, September 30,2020 andDecember 31, 2019, respectively

Retained earnings 219,747 215,976 203,227

Accumulated other comprehensive 12,601 12,310 4,503 income, net of taxes

Total stockholders' equity 358,253 357,570 336,788

Total liabilities and $ 2,911,926 $ 2,975,225 $ 2,707,280 stockholders' equity

BANK OF MARIN BANCORPCONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

Three months ended

Years ended

(in thousands, except per share amounts; unaudited)

December 31, 2020

September 30, 2020

December 31, 2019

December 31, 2020

December 31, 2019

Interest income

Interest and fees on loans

$

20,794

$

21,776

$

21,123

$

84,674

$

84,331

Interest on investment securities

3,254

3,343

3,543

14,503

14,785

Interest on federal funds sold and due from banks

40

50

567

461

1,321

Total interest income

24,088

25,169

25,233

99,638

100,437

Interest expense

Interest on interest-bearing transaction accounts

40

41

78

186

347

Interest on savings accounts

18

17

18

68

70

Interest on money market accounts

278

377

1,033

2,009

3,439

Interest on time accounts

118

133

154

554

595

Interest on borrowings and other obligations

1

-

2

4

77

Interest on subordinated debentures

34

35

54

158

229

Total interest expense

489

603

1,339

2,979

4,757

Net interest income

23,599

24,566

23,894

96,659

95,680

(Reversal of) provision for credit losses

(856

)

1,250

500

4,594

900

Net interest income after provision for credit losses

24,455

23,316

23,394

92,065

94,780

Non-interest income

Service charges on deposit accounts

286

284

462

1,314

1,865

Wealth Management and Trust Services

476

450

501

1,851

1,907

Debit card interchange fees, net

387

383

386

1,438

1,586

Merchant interchange fees, net

56

63

78

239

331

Earnings on bank-owned life Insurance, net

232

232

226

973

1,196

Dividends on FHLB stock

151

149

208

654

799

Gains on investment securities, net

-

-

-

915

55

Other income

239

229

457

1,166

1,345

Total non-interest income

1,827

1,790

2,318

8,550

9,084

Non-interest expense

Salaries and related benefits

8,414

8,638

7,827

34,393

34,253

Occupancy and equipment

1,843

1,776

1,527

6,943

6,143

Depreciation and amortization

558

539

527

2,149

2,228

Federal Deposit Insurance Corporation insurance

175

181

7

474

361

Data processing

747

822

775

3,184

3,717

Professional services

432

655

431

2,181

2,132

Directors' expense

180

184

180

713

735

Information technology

292

256

243

1,050

1,065

Amortization of core deposit intangible

214

213

222

853

887

Provision for credit losses on unfunded loan commitments

960

248

-

1,570

129

Charitable contributions

113

481

130

1,034

508

Other expense

1,252

1,245

1,457

5,484

5,812

Total non-interest expense

15,180

15,238

13,326

60,028

57,970

Income before provision for income taxes

11,102

9,868

12,386

40,587

45,894

Provision for income taxes

2,985

2,377

3,307

10,345

11,653

Net income

$

8,117

$

7,491

$

9,079

$

30,242

$

34,241

Net income per common share:

Basic

$

0.60

$

0.55

$

0.67

$

2.24

$

2.51

Diluted

$

0.60

$

0.55

$

0.66

$

2.22

$

2.48

Weighted average shares:

Basic

13,523

13,539

13,521

13,525

13,620

Diluted

13,615

13,610

13,703

13,617

13,794

Comprehensive income:

Net income

$

8,117

$

7,491

$

9,079

$

30,242

$

34,241

Other comprehensive income (loss):

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

286

299

(2,018

)

11,891

11,839

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

-

-

-

(915

)

(55

)

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

129

149

117

524

445

Subtotal

415

448

(1,901

)

11,500

12,229

Deferred tax expense (benefit)

124

132

(558

)

3,402

3,624

Other comprehensive income (loss), net of tax

291

316

(1,343

)

8,098

8,605

Comprehensive income

$

8,408

$

7,807

$

7,736

$

38,340

$

42,846

BANK OF MARIN BANCORPCONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

Three months ended Years ended

(in thousands, December September December December Decemberexcept per share 31, 30, 31, 31, 31,amounts; unaudited) 2020 2020 2019 2020 2019

Interest income

Interest and fees $ 20,794 $ 21,776 $ 21,123 $ 84,674 $ 84,331 on loans

Interest oninvestment 3,254 3,343 3,543 14,503 14,785 securities

Interest on federalfunds sold and due 40 50 567 461 1,321 from banks

Total interest 24,088 25,169 25,233 99,638 100,437 income

Interest expense

Interest oninterest-bearing 40 41 78 186 347 transactionaccounts

Interest on savings 18 17 18 68 70 accounts

Interest on money 278 377 1,033 2,009 3,439 market accounts

Interest on time 118 133 154 554 595 accounts

Interest onborrowings and 1 - 2 4 77 other obligations

Interest onsubordinated 34 35 54 158 229 debentures

Total interest 489 603 1,339 2,979 4,757 expense

Net interest income 23,599 24,566 23,894 96,659 95,680

(Reversal of)provision for (856 ) 1,250 500 4,594 900 credit losses

Net interest incomeafter provision for 24,455 23,316 23,394 92,065 94,780 credit losses

Non-interest income

Service charges on 286 284 462 1,314 1,865 deposit accounts

Wealth Management 476 450 501 1,851 1,907 and Trust Services

Debit cardinterchange fees, 387 383 386 1,438 1,586 net

Merchantinterchange fees, 56 63 78 239 331 net

Earnings onbank-owned life 232 232 226 973 1,196 Insurance, net

Dividends on FHLB 151 149 208 654 799 stock

Gains on investment - - - 915 55 securities, net

Other income 239 229 457 1,166 1,345

Total non-interest 1,827 1,790 2,318 8,550 9,084 income

Non-interest expense

Salaries and 8,414 8,638 7,827 34,393 34,253 related benefits

Occupancy and 1,843 1,776 1,527 6,943 6,143 equipment

Depreciation and 558 539 527 2,149 2,228 amortization

Federal DepositInsurance 175 181 7 474 361 Corporationinsurance

Data processing 747 822 775 3,184 3,717

Professional 432 655 431 2,181 2,132 services

Directors' expense 180 184 180 713 735

Information 292 256 243 1,050 1,065 technology

Amortization ofcore deposit 214 213 222 853 887 intangible

Provision forcredit losses on 960 248 - 1,570 129 unfunded loancommitments

Charitable 113 481 130 1,034 508 contributions

Other expense 1,252 1,245 1,457 5,484 5,812

Total non-interest 15,180 15,238 13,326 60,028 57,970 expense

Income beforeprovision for 11,102 9,868 12,386 40,587 45,894 income taxes

Provision for 2,985 2,377 3,307 10,345 11,653 income taxes

Net income $ 8,117 $ 7,491 $ 9,079 $ 30,242 $ 34,241

Net income per common share:

Basic $ 0.60 $ 0.55 $ 0.67 $ 2.24 $ 2.51

Diluted $ 0.60 $ 0.55 $ 0.66 $ 2.22 $ 2.48

Weighted average shares:

Basic 13,523 13,539 13,521 13,525 13,620

Diluted 13,615 13,610 13,703 13,617 13,794

Comprehensive income:

Net income $ 8,117 $ 7,491 $ 9,079 $ 30,242 $ 34,241

Other comprehensive income (loss):

Change in netunrealized gains orlosses on 286 299 (2,018 ) 11,891 11,839 available-for-salesecurities

Reclassificationadjustment forgains on - - - (915 ) (55 )available-for-salesecurities includedin net income

Amortization of netunrealized losseson securities 129 149 117 524 445 transferred fromavailable-for-saleto held-to-maturity

Subtotal 415 448 (1,901 ) 11,500 12,229

Deferred tax 124 132 (558 ) 3,402 3,624 expense (benefit)

Other comprehensiveincome (loss), net 291 316 (1,343 ) 8,098 8,605 of tax

Comprehensive $ 8,408 $ 7,807 $ 7,736 $ 38,340 $ 42,846 income

BANK OF MARIN BANCORP

AVERAGE STATEMENTS OF CONDITION AND ANALYSIS OF NET INTEREST INCOME

Three months ended

Three months ended

Three months ended

December 31, 2020

September 30, 2020

December 31, 2019

Interest

Interest

Interest

Average

Income/

Yield/

Average

Income/

Yield/

Average

Income/

Yield/

(dollars in thousands; unaudited)

Balance

Expense

Rate

Balance

Expense

Rate

Balance

Expense

Rate

Assets

Interest-earning deposits with banks 1

$

157,389

$

40

0.10

%

$

184,883

$

50

0.11

%

$

136,320

$

567

1.63

%

Investment securities 2, 3

498,730

3,395

2.72

%

527,077

3,488

2.64

%

530,596

3,625

2.73

%

Loans 1, 3, 4

2,096,908

20,975

3.91

%

2,117,679

21,957

4.06

%

1,804,667

21,276

4.61

%

Total interest-earning assets 1

2,753,027

24,410

3.47

%

2,829,639

25,495

3.53

%

2,471,583

25,468

4.03

%

Cash and non-interest-bearing due from banks

64,600

55,353

39,882

Bank premises and equipment, net

5,213

5,412

6,326

Interest receivable and other assets, net

135,520

138,938

112,895

Total assets

$

2,958,360

$

3,029,342

$

2,630,686

Liabilities and Stockholders' Equity

Interest-bearing transaction accounts

$

160,827

$

41

0.10

%

$

153,089

$

41

0.11

%

$

145,237

$

79

0.22

%

Savings accounts

198,616

18

0.04

%

191,915

17

0.04

%

164,664

17

0.04

%

Money market accounts

697,203

279

0.16

%

802,585

377

0.19

%

725,192

1,033

0.57

%

Time accounts, including CDARS

97,512

118

0.48

%

97,465

133

0.54

%

97,302

154

0.63

%

Borrowings and other obligations 1

72

-

2.37

%

113

-

2.51

%

226

2

2.80

%

Subordinate debentures 1

2,768

34

4.85

%

2,751

35

4.97

%

2,698

54

7.79

%

Total interest-bearing liabilities

1,156,998

490

0.17

%

1,247,918

603

0.19

%

1,135,319

1,339

0.47

%

Demand accounts

1,397,349

1,380,708

1,129,068

Interest payable and other liabilities

44,532

44,486

31,270

Stockholders' equity

359,481

356,230

335,029

Total liabilities & stockholders' equity

$

2,958,360

$

3,029,342

$

2,630,686

Tax-equivalent net interest income/margin 1

$

23,920

3.40

%

$

24,892

3.44

%

$

24,129

3.82

%

Reported net interest income/margin 1

$

23,599

3.35

%

$

24,566

3.40

%

$

23,894

3.78

%

Tax-equivalent net interest rate spread

3.30

%

3.33

%

3.56

%

Year ended

Year ended

December 31, 2020

December 31, 2019

Interest

Interest

Average

Income/

Yield/

Average

Income/

Yield/

(dollars in thousands; unaudited)

Balance

Expense

Rate

Balance

Expense

Rate

Assets

Interest-earning deposits with banks 1

$

153,794

$

461

0.29

%

$

67,192

$

1,321

1.94

%

Investment securities 2, 3

533,186

15,025

2.82

%

555,618

15,102

2.72

%

Loans 1, 3, 4

2,023,203

85,398

4.15

%

1,775,193

85,062

4.73

%

Total interest-earning assets 1

2,710,183

100,884

3.66

%

2,398,003

101,485

4.17

%

Cash and non-interest-bearing due from banks

49,676

35,956

Bank premises and equipment, net

5,526

6,911

Interest receivable and other assets, net

131,780

109,837

Total assets

$

2,897,165

$

2,550,707

Liabilities and Stockholders' Equity

Interest-bearing transaction accounts

$

148,817

$

186

0.13

%

$

133,922

$

347

0.26

%

Savings accounts

184,146

68

0.04

%

172,273

70

0.04

%

Money market accounts

763,689

2,009

0.26

%

680,296

3,439

0.51

%

Time accounts, including CDARS

96,558

554

0.57

%

106,783

595

0.56

%

Borrowings and other obligations 1

174

4

2.16

%

2,935

77

2.57

%

Subordinated debentures 1

2,741

158

5.68

%

2,673

229

8.44

%

Total interest-bearing liabilities

1,196,125

2,979

0.25

%

1,098,882

4,757

0.43

%

Demand accounts

1,308,199

1,094,806

Interest payable and other liabilities

41,347

30,578

Stockholders' equity

351,494

326,441

Total liabilities & stockholders' equity

$

2,897,165

$

2,550,707

Tax-equivalent net interest income/margin 1

$

97,905

3.55

%

$

96,728

3.98

%

Reported net interest income/margin 1

$

96,659

3.51

%

$

95,680

3.94

%

Tax-equivalent net interest rate spread

3.41

%

3.74

%

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.

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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210125005149/en/

CONTACT: Beth Drummey Marketing & Corporate Communications Manager 415-763-4529 | bethdrummey@bankofmarin.com