Business Wire | Oct 25, 2021 08:00AM EDT

Bank of Marin Bancorp Reports Third Quarter Earnings of $5.3 Million

Oct. 25, 2021

NOVATO, Calif.--(BUSINESS WIRE)--Oct. 25, 2021--Bank of Marin Bancorp, "Bancorp" (Nasdaq: BMRC), parent company of Bank of Marin, "Bank," announced earnings of $5.3 million in the third quarter of 2021 compared to $9.3 million in the second quarter of 2021 and $7.5 million in the third quarter of 2020. Diluted earnings per share were $0.35 in the third quarter, $0.71 in the prior quarter, and $0.55 in the same quarter last year. Third quarter 2021 earnings were significantly reduced by the costs associated with our recent acquisition. For the first nine months of 2021, Bancorp earned $23.5 million compared to $22.1 million in the same period last year. Diluted earnings per share were $1.69 and $1.62 in the first nine months of 2021 and 2020, respectively.

The results for the third quarter of 2021 reflect the consolidated operations of American River Bankshares ("AMRB"), including AMRB's subsidiary American River Bank ("ARB"), effective August 6, 2021 (the "merger date"). AMRB merged with and into Bancorp, with Bank of Marin Bancorp surviving, followed thereafter at 12:05 AM on August 7, 2021, by the merger of ARB with and into the Bank, with Bank of Marin surviving, (collectively the "Merger"). The Merger contributed $419.4 million in loans and $790.0 million in deposits as of the merger date, resulting in $42.6 million of goodwill and increasing total assets to $4.261 billion and total stockholder's equity to $458.5 million as of September 30, 2021.

"Bank of Marin is on solid ground financially and in an excellent strategic position. Our integration of American River Bankshares is progressing smoothly, setting the stage for long-term growth across a much larger and more diverse footprint," said Russell A. Colombo, Chief Executive Officer.

As previously announced, Russell A. Colombo will formally retire as Chief Executive Officer of Bank of Marin and Bank of Marin Bancorp, effective October 31, 2021. The Board of Directors named Tim Myers, currently President and Chief Operating Officer, as his successor. Mr. Colombo will remain on the Boards of Bancorp and the Bank, and Mr. Myers will join both Boards. "I'm very proud of the bank we have built over the past two decades and the team that drives our success," said Mr. Colombo. "As I prepare to retire, I'm confident that Tim is more than ready to succeed me, leading our deep bench of talented bankers to deliver strong returns for our shareholders for years to come."

"Our merger with American River brought together two institutions that share complementary values and disciplined fundamentals," said Mr. Myers. "I look forward to leading the combined team as we roll up our sleeves to ensure a seamless integration. By committing significant resources to this process, we are building a strong foundation on which to grow our franchise on a regional scale."

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

* Loan balances of $2.317 billion at September 30, 2021 increased by $314.3 million in the third quarter from $2.003 billion at June 30, 2021 largely due to the ARB acquisition. Loan balances were $2.108 billion at September 30, 2020. Total Small Business Administration ("SBA") Paycheck Protection Program ("PPP") loans outstanding were $164.8 million at September 30, 2021, down $83.4 million from June 30, 2021.

* Credit quality remains strong, with non-accrual loans representing 0.36% of total loans as of September 30, 2021, compared to 0.46% at June 30, 2021, and 0.07% at September 30, 2020. The allowance for credit losses increased by $3.3 million and was comprised of a $1.8 million provision, mainly related to purchased ARB loans without credit deterioration, and a $1.5 million merger-date allowance established for purchased credit deteriorated loans. There was no provision for credit losses on unfunded loan commitments in the third quarter of 2021.

* Total deposits of $3.728 billion at September 30, 2021 increased by $1.044 billion in the third quarter from $2.684 billion at June 30, 2021, mainly due to the ARB acquisition. Non-interest bearing deposits were 49% of total deposits as of September 30, 2021, versus 54% as of June 30, 2021 and September 30, 2020. The decrease in this ratio was primarily due to an increase in interest bearing deposits from one existing customer and a lower ratio of non-interest-bearing deposits acquired from ARB. The cost of average deposits was 0.06% in the third quarter, 0.07% in the second quarter of 2021, and 0.09% in the third quarter of 2020.

* Merger-related one-time and conversion costs reduced net income by $3.9 million, net of taxes, or 26 cents per share in the quarter and by $4.1 million, net of taxes, or 30 cents per share year-to-date. As shown in the reconciliation of GAAP to non-GAAP financial measures on page 3, year-to-date return on average assets ("ROA") of 0.96% and return on average equity ("ROE") of 8.40% were also significantly impacted by those expenses and would have been 1.13% and 9.87%, respectively, compared to 1.03% and 8.47% for the comparable period in 2020.

* ROA and ROE ratios were also significantly impacted by provisions for credit losses on acquired loans and shares issued in conjunction with the merger. A good indicator of the merger's positive impact on operating earnings is the efficiency ratio, as it neither includes provisions for losses on loans and unfunded commitments, nor is it impacted by changes in share counts. As shown in the reconciliation of GAAP to non-GAAP financial measures on page 3, the efficiency ratio excluding merger-related one-time and conversion costs of 56.02% for the quarter ended September 30, 2021, improved from 57.76% and 56.88% in the quarters ended June 30, 2021 and September 30, 2020, respectively.

* All capital ratios were above well-capitalized regulatory requirements. The total risk-based capital ratio for Bancorp was 15.0% at September 30, 2021, compared to 15.5% at June 30, 2021, and 16.1% at September 30, 2020. Bancorp's tangible common equity to tangible assets was 9.1% at September 30, 2021, compared to 10.4% at June 30, 2021 and 11.0% at September 30, 2020 (refer to footnote 5 on page 8 for a discussion of this non-GAAP financial measure). The Bank's total risk-based capital ratio was 14.4% at September 30, 2021, compared to 15.3% at June 30, 2021, and 15.5% at September 30, 2020.

* The Board of Directors declared a cash dividend of $0.24 per share on October 22, 2021, which represents the 66th consecutive quarterly dividend paid by Bank of Marin Bancorp. The dividend is payable on November 12, 2021, to shareholders of record at the close of business on November 5, 2021.

* On October 22, 2021, the Board of Directors approved an amendment to the current share repurchase program which increased the total authorization from $25.0 million to $57.0 million. The July 31, 2023 expiration date of the program remained unchanged

Statement Regarding use of Non-GAAP Financial Measures

In this press release, Bancorp's financial results are presented in accordance with GAAP and refer to certain non-GAAP financial measures. Management believes that presentation of operating results using non-GAAP financial measures provides useful supplemental information to investors and facilitates the analysis of Bancorp's core operating results and comparison of operating results across reporting periods. Management also uses non-GAAP financial measures to establish budgets and manage Bancorp's business. A reconciliation of the GAAP financial measures to comparable non-GAAP financial measures is presented below.

Reconciliation of GAAP and Non-GAAP Financial Measures

(in thousand, Three months ended Nine months endedunaudited)

Net income September 30, June 30, September 30, September 30, September 30, 2021 2021 2020 2021 2020

Net income $ 5,282 $ 9,285 $ 7,491 $ 23,514 $ 22,125 (GAAP)

Merger-relatedone-time and conversioncosts:

Personnel and 2,668 - - 2,668 - severance

Professional 1,778 201 - 1,979 - services

Data 433 - - 433 - processing

Other 263 16 - 279 -

Income taxbenefit of (1,222 ) (17 ) - (1,239 ) - merger-relatedexpenses

Totalmerger-relatedone-time and 3,920 200 - 4,120 - conversioncosts, net oftaxes

Comparable netincome $ 9,202 $ 9,485 $ 7,491 $ 27,634 $ 22,125 (non-GAAP)

Dilutedearnings per share

Weightedaverage 14,993 13,164 13,610 13,881 13,617 diluted shares

Dilutedearnings per $ 0.35 $ 0.71 $ 0.55 $ 1.69 $ 1.62 share (GAAP)

Comparabledilutedearnings per $ 0.61 $ 0.72 $ 0.55 $ 1.99 $ 1.62 share(non-GAAP)

Return on average assets

Average assets $ 3,743,968 $ 3,093,321 $ 3,029,342 $ 3,280,505 $ 2,876,618

Return onaverage assets 0.56 % 1.20 % 0.98 % 0.96 % 1.03 %(GAAP)

Comparablereturn on 0.98 % 1.23 % 0.98 % 1.13 % 1.03 %average assets(non-GAAP)

Return on average equity

Averagestockholders' $ 420,124 $ 347,473 $ 356,230 $ 374,445 $ 348,812 equity

Return onaverage equity 4.99 % 10.72 % 8.37 % 8.40 % 8.47 %(GAAP)

Comparablereturn on 8.69 % 10.95 % 8.37 % 9.87 % 8.47 %average equity(non-GAAP)

Efficiency ratio

Non-interest $ 22,686 $ 15,556 $ 14,990 $ 53,654 $ 44,238 expense (GAAP)

Merger-related (5,142 ) (217 ) - (5,359 ) - expenses

Non-interestexpense $ 17,544 $ 15,339 $ 14,990 $ 48,295 $ 44,238 (non-GAAP)

Net interest $ 27,753 $ 24,534 $ 24,566 $ 74,318 $ 73,060 income

Non-interest $ 3,565 $ 2,022 $ 1,790 $ 7,413 $ 6,723 income

Efficiency 72.44 % 58.58 % 56.88 % 65.65 % 55.45 %ratio (GAAP)

Comparableefficiency 56.02 % 57.76 % 56.88 % 59.09 % 55.45 %ratio(non-GAAP)

Loans and Credit Quality

Loans increased by $314.3 million in the third quarter and totaled $2.317 billion at September 30, 2021. The increase included $419.4 million loans acquired from American River Bank on August 6th. Non-PPP-related loan originations were $32.6 million and $101.7 million for the third quarter and first nine months of 2021, compared to $50.8 million and $122.4 million for the same periods in 2020. Loan payoffs were $49.9 million and $145.3 million in the third quarter and first nine months of 2021, compared to $41.3 million and $124.7 million for the third quarter and first nine months of 2020. Loan payoffs in the third quarter of 2021 consisted largely of commercial borrower cash paydowns as part of ongoing deleveraging, real estate asset sales and third-party refinancing. A significant portion of the commercial third-party refinancing was attributable to price or structural elements outside the bank's desired credit profile.

Bank of Marin and American River Bank originated a combined total of 3,556 loans amounting to $550.3 million in two rounds of SBA PPP loan financing. Of these amounts, as of September 30, 2021 there were 871 loans outstanding totaling $164.8 million (net of $4.2 million in unrecognized fees and costs). Of the 2,876 PPP loans totaling $444.1 million funded by Bank of Marin, 2,036 loans for $284.7 million have been forgiven and paid off. Year-to-date, Bank of Marin has recognized $6.6 million in PPP fees, net of costs.

During the onset of the pandemic, Bank of Marin granted payment relief for 269 loans totaling $402.9 million. As of September 30, 2021, only two borrowing relationships with five loans totaling $23.6 million were continuing to benefit from payment relief. We monitor the financial situation of these clients closely and expect them to resume payments as the economy continues to recover.

Non-accrual loans totaled $8.4 million and $9.2 million at September 30, 2021 and June 30, 2021, or 0.36% and 0.46% of total loans, respectively. Non-accrual loans totaled $1.4 million, or 0.07% of total loans a year ago. Our non-accrual loans at September 30, 2021 and June 30, 2021 included two well-secured owner-occupied commercial real estate loans totaling $7.1 million, which were placed on non-accrual status in fourth quarter of 2020. Classified loans totaled $19.0 million at September 30, 2021, compared to $30.8 million at June 30, 2021 and $11.0 million at September 30, 2020. Classified loans included one $118 thousand loan acquired from ARB with a doubtful risk rating as of September 30, 2021, which is well-secured by real estate collateral. There were no loans classified doubtful at June 30, 2021 or September 30, 2020. Accruing loans past due 30 to 89 days totaled $1.4 million at September 30, 2021, compared to $487 thousand at June 30, 2021 and $318 thousand a year ago.

In the third quarter of 2021, we recorded a provision for credit losses on loans of $1.8 million, compared to a reversal of $920 thousand in the prior quarter and a provision of $1.3 million in the third quarter of 2020. The allowance for credit loss was increased by an additional $1.5 million in the third quarter due to the allowance for purchased credit deteriorated ("PCD") loans, which offset the fair value discount on PCD loans at the merger date. Both the current quarter and prior quarter allowances were calculated under the current expected credit loss methodology. Significant factors contributing to the third quarter 2021 provision were portfolio growth from acquired loans partially offset by an improvement in underlying economic forecasts. The third quarter of 2020 included a $1.3 million provision for credit losses on loans, as determined under the incurred loss methodology, due to adjustments to qualitative factors impacted by the COVID-19 pandemic. There was no provision for credit losses on unfunded commitments in the third quarter of 2021, compared to a $612 thousand reversal in the prior quarter and a $248 thousand provision in the third quarter of 2020.

Net recoveries were $9 thousand in the third quarter of 2021 and $62 thousand in the prior quarter, compared to net charge-offs of $4 thousand in the third quarter a year ago. The ratio of allowance for credit losses to total loans was 0.97% at September 30, 2021, 0.95% at June 30, 2021, and 1.05% at September 30, 2020. Excluding acquired loans for periods prior to the adoption of the current expected credit loss methodology and fully-guaranteed SBA PPP loans for which there are zero expected credit losses, the allowance for credit losses on loans represented 1.04% of total loans as of September 30, 2021, compared to 1.09% and 1.29% as of June 30, 2021 and September 30, 2020, respectively (refer to footnote 4 on page 8 for a discussion of this non-GAAP financial measure).

Cash, Cash Equivalents and Restricted Cash

Total cash, cash equivalents and restricted cash were $584.7 million at September 30, 2021, compared to $257.5 million at June 30, 2021. The $327.2 million increase was primarily associated with the $166.1 million in cash and cash equivalents from ARB, SBA PPP loans paid off and an increase in customer deposits, partially offset by investment purchases noted below.

Investments

The investment securities portfolio increased to $1.160 billion at September 30, 2021 from $687.0 million at June 30, 2021. The increase was primarily attributed to $297.8 million in securities acquired from ARB, purchases of $263.9 million, partially offset by maturities, paydowns and calls of $81.2 million and sales of $4.1 million. In addition, the fair value of available-for-sale investment securities decreased by $2.3 million due to the increase in interest rates in the third quarter of 2021.

Deposits

Total deposits were $3.728 billion at September 30, 2021, compared to $2.684 billion at June 30, 2021. The $1.044 billion increase was driven by $807.7 million in deposit balances from ARB, SBA PPP loan forgiveness and other increases in customer deposits. The Bank maintained $179.9 million in off-balance sheet deposits with deposit networks at September 30, 2021, compared to $174.0 million at June 30, 2021. Average cost of deposits decreased slightly to 0.06% in the third quarter of 2021, compared to 0.07% in the prior quarter and 0.09% in the same quarter a year ago. Non-interest bearing deposits were 49% of total deposits as of September 30, 2021, versus 54% as of June 30, 2021 and September 30, 2020, as discussed above.

Earnings

"Though merger-related factors impacted our results, we generated strong core net income, carefully managed ongoing costs and maintained pristine credit quality - all key pillars of Bank of Marin's steady, reliable performance over our more than 30 years," said Tani Girton, Executive Vice President and Chief Financial Officer. "Now, with the addition of our American River Bank teammates and new opportunities in the Sacramento market, we are well-positioned for success across Northern California's key growth markets."

Net interest income totaled $27.8 million in the third quarter of 2021, compared to $24.5 million in the prior quarter and $24.6 million in the third quarter a year ago. The $3.2 million increase from the prior quarter was primarily attributable to the addition of ARB earning asset balances. We recognized $2.3 million in SBA PPP fees, net of cost in the third quarter of 2021 compared to $2.6 million in the prior quarter, and $1.7 million in the third quarter of 2020.

The $3.2 million increase from the comparative quarter a year ago was reflective of the ARB merger and higher income from SBA PPP loans.

Net interest income totaled $74.3 million in the first nine months of 2021, compared to $73.1 million in the first nine months a year ago. The $1.3 million increase was primarily attributed to the ARB merger and $3.7 million increase in SBA PPP fees, net of costs year-to-date. Increases were partially offset by $1.3 million in accelerated discount accretion from the early redemption of a subordinated debenture in the first quarter of 2021 and lower yielding interest-earning assets. As of September 30, 2021, $4.2 million in PPP fees, net of deferred costs, remain outstanding and will be recognized into income in future periods.

The tax-equivalent net interest margin was 3.15% in the third quarter, 3.37% in the prior quarter, and 3.44% in the third quarter of 2020. The decrease in tax-equivalent margin from prior quarter was primarily attributed to a $262.7 million increase in due from banks interest-earning balances, which lowered the third quarter margin by 24 basis points as these assets only earned a yield of 15 basis points. The decrease in tax-equivalent margin from third quarter of 2020 was primarily attributable to both $271.5 million increase in low yielding due from banks interest-earning balances and the lower interest rate environment. The tax-equivalent net interest margin was 3.23% in the first nine months of 2021 compared to 3.61% in the same period a year ago. The decrease was primarily attributed to a $1.3 million in accelerated discount accretion from the early redemption of a subordinated debenture in the first quarter of 2021, the lower interest rate environment and higher cash balances, partially offset by higher income from PPP loans.

Non-interest income totaled $3.6 million in the third quarter of 2021, compared to $2.0 million in the prior quarter and $1.8 million in the third quarter a year ago. The $1.5 million increase from the prior quarter and $1.8 million increase from the third quarter of 2020 were mostly attributed to the collection of $1.1 million in benefits on bank-owned life insurance policies and increases in fee income from deposit accounts and debit card interchange activity.

Non-interest income increased by $690 thousand to $7.4 million in the first nine months of 2021 from $6.7 million in the first nine months of 2020. The increase was primarily due to BOLI payments noted above, increases in Wealth Management and Trust Services income generated from new accounts and favorable market performance, and fees from deposit accounts and debit card interchange activity. The increase was partially offset by the absence of gains on investment securities, as $915 thousand in gains were recognized in the comparative period a year ago.

Non-interest expense increased by $7.1 million to $22.7 million in the third quarter of 2021 from $15.6 million in the prior quarter. The increase was primarily due to a $4.9 million increase in merger-related one-time and conversion costs (mostly related to professional services, data processing contract termination, and personnel costs), salaries and benefits for retained ARB employees and other ARB-related operating expenses incurred since the merger date. The increase was partially offset by a $458 thousand decrease in charitable contributions as the bank has transitioned to a more defined contributions disbursement schedule with funding occurring in the second and fourth quarters.

Third quarter non-interest expense increased by $7.7 million from $15.0 million in the third quarter of 2020. The increase was primarily due to a $5.1 million increase in merger-related expenses detailed above, partially offset by a $477 thousand decrease in charitable contributions due to both the disbursement schedule change mentioned above and large pandemic-related contributions in 2020.

Non-interest expense increased by $9.4 million to $53.7 million in the first nine months of 2021 compared to $44.2 million in the first nine months of 2020. Higher salaries and related benefits of $5.2 million included $2.7 million in personnel costs related to the merger. The increase in salaries and benefits was also attributed to fewer deferred SBA PPP loan origination costs. Professional services increased by $2.6 million and data processing expenses increased by $815 thousand, mainly due to merger-related expenses. In addition, FDIC deposit insurance expenses were $298 thousand higher. Charitable contributions were lower than 2020 for the reasons mentioned above.

In the second quarter of 2021, we reclassified the allowance for credit losses on unfunded commitments from non-interest expense to a separate line item under net interest income in the consolidated statements of comprehensive income for all periods presented. Efficiency ratios for prior periods were updated to reflect the reclassification.

Share Repurchase Program

The $25.0 million share repurchase program approved by the Bancorp Board of Directors on January 24, 2020 was completed in May 2021. The Board of Directors approved a new share repurchase program on July 16, 2021 under which Bancorp may repurchase up to $25.0 million of its outstanding common stock through July 31, 2023. On October 22, 2021, the Board of Directors approved an amendment that increased the total authorization from $25.0 million to $57.0 million. Bancorp repurchased 445,735 shares totaling $15.9 million in the third quarter of 2021 for a cumulative total of 967,683 shares and $35.2 million in the first nine months of 2021.

Earnings Call and Webcast Information

Bank of Marin Bancorp will present its third quarter earnings call via webcast on Monday, October 25, 2021 at 8:30 a.m. PT/11:30 a.m. ET. Investors will have the opportunity to listen to the webcast online through Bank of Marin's website at https://www.bankofmarin.com under "Investor Relations." To listen to the webcast live, please go to the website at least 15 minutes early to register, download and install any necessary audio software. For those who cannot listen to the live broadcast, a replay will be available at the same website location shortly after the call.

About Bank of Marin Bancorp

Founded in 1990 and headquartered in Novato, Bank of Marin is the wholly owned subsidiary of Bank of Marin Bancorp (Nasdaq: BMRC). A leading business and community bank in the San Francisco Bay Area, with assets of $4.261 billion as of September 30, 2021, Bank of Marin has 31 branches and 8 commercial banking offices located across 10 Northern California counties. Bank of Marin provides commercial banking, personal banking, specialty lending and wealth management and trust services. Specializing in providing legendary service to its customers and investing in its local communities, Bank of Marin has frequently been ranked one of the "Top Corporate Philanthropists" by the San Francisco Business Times and one of the "Best Places to Work" by the North Bay Business Journal. Bank of Marin Bancorp is included in the Russell 2000 Small-Cap Index and Nasdaq ABA Community Bank Index. For more information, go to www.bankofmarin.com.

Forward-Looking Statements

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

(BMRC-ER)

BANK OF MARIN BANCORP FINANCIAL HIGHLIGHTS

(dollars in thousands, except per September 30, June 30, September 30,share data; unaudited) 2021 2021 2020

Quarter-to-Date

Net income $ 5,282 $ 9,285 $ 7,491

Diluted earnings per common share $ 0.35 $ 0.71 $ 0.55

Return on average assets 0.56 % 1.20 % 0.98 %

Return on average equity 4.99 % 10.72 % 8.37 %

Efficiency ratio 72.44 % 58.58 % 56.88 %

Tax-equivalent net interest margin 3.15 % 3.37 % 3.44 %^1

Cost of deposits 0.06 % 0.07 % 0.09 %

Net (recoveries) charge-offs $ (9 ) $ (62 ) $ 4

Year-to-Date

Net income $ 23,514 $ 22,125

Diluted earnings per common share $ 1.69 $ 1.62

Return on average assets 0.96 % 1.03 %

Return on average equity 8.40 % 8.47 %

Efficiency ratio 65.65 % 55.45 %

Tax-equivalent net interest margin 3.23 % 3.61 %^1

Cost of deposits 0.07 % 0.13 %

Net (recoveries) charge-offs $ (83 ) $ 13

At Period End

Total assets $ 4,261,062 $ 3,073,818 $ 2,975,225

Loans:

Commercial and industrial ^2 $ 377,965 $ 423,646 $ 512,973

Real estate:

Commercial owner-occupied 398,543 296,407 299,754

Commercial investor-owned 1,157,344 967,335 966,517

Construction 125,060 80,841 66,663

Home equity 92,396 92,510 107,364

Other residential 117,778 120,903 130,915

Installment and other consumer 47,933 21,125 23,805 loans

Total loans $ 2,317,019 $ 2,002,767 $ 2,107,991

Non-performing loans:^ 3

Real estate:

Commercial owner-occupied $ 7,273 $ 7,148 $ -

Commercial investor-owned 709 1,597 886

Home equity 441 445 532

Installment and other consumer - - 24 loans

Total non-accrual loans $ 8,423 $ 9,190 $ 1,442

Classified loans (graded $ 18,988 $ 30,813 $ 10,999 substandard and doubtful)

Total accruing loans 30-89 days $ 1,354 $ 487 $ 318 past due

Allowance for credit losses to 0.97 % 0.95 % 1.05 %total loans

Allowance for credit losses tototal loans, excluding acquired 1.04 % 1.09 % 1.29 %and SBA PPP loans ^4

Allowance for credit losses to 2.66 x 2.08 x 15.34 xnon-performing loans

Non-accrual loans to total loans 0.36 % 0.46 % 0.07 %

Total deposits $ 3,727,696 $ 2,683,575 $ 2,569,289

Loan-to-deposit ratio 62.2 % 74.6 % 82.0 %

Stockholders' equity $ 458,525 $ 348,649 $ 357,570

Book value per share $ 28.54 $ 26.71 $ 26.28

Tangible common equity to tangible 9.1 % 10.4 % 11.0 %assets ^5

Total risk-based capital ratio - 14.4 % 15.3 % 15.5 %Bank

Total risk-based capital ratio - 15.0 % 15.5 % 16.1 %Bancorp

Full-time equivalent employees 348 278 291

1

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

2

Includes SBA PPP loans of $164.8 million, $248.3 million, and $301.7 million at September 30, 2021, June 30, 2021, and September 30, 2020, respectively.

3

Excludes accruing troubled-debt restructured loans of $3.9 million, $3.3 million and $12.3 million at September 30, June 30, 2021, and September 30, 2020, respectively.

4

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

5

Tangible common equity to tangible assets is considered to be a meaningful non-GAAP financial measure of capital adequacy and is useful for investors to assess Bancorp's ability to absorb potential losses. Tangible common equity includes common stock, retained earnings and unrealized gain on available for sale securities, net of tax, less goodwill and intangible assets of $79.8 million, $33.6 million and $34.2 million at September 30, 2021, June 30, 2021, and September 30, 2020, respectively. Tangible assets exclude goodwill and intangible assets.

^ Net interest income is annualized by dividing actual number of days in the1 period times 360 days.

^ Includes SBA PPP loans of $164.8 million, $248.3 million, and $301.7 million2 at September 30, 2021, June 30, 2021, and September 30, 2020, respectively.

^ Excludes accruing troubled-debt restructured loans of $3.9 million, $3.33 million and $12.3 million at September 30, June 30, 2021, and September 30, 2020, respectively.

The allowance for credit losses to total loans, excluding non-impaired acquired loans and guaranteed SBA PPP loans, is considered a meaningful non-GAAP financial measure, as it represents only those loans that were^ considered in the calculation of the allowance for credit losses. Due to the4 adoption of CECL on December 31, 2020, all loans previously considered "acquired" are now included in the calculation of the allowance for credit losses. Acquired loans that were not impaired at September 30, 2020 totaled $90.4 million. Refer to footnote 2 above for SBA PPP loan totals.

Tangible common equity to tangible assets is considered to be a meaningful non-GAAP financial measure of capital adequacy and is useful for investors to assess Bancorp's ability to absorb potential losses. Tangible common^ equity includes common stock, retained earnings and unrealized gain on5 available for sale securities, net of tax, less goodwill and intangible assets of $79.8 million, $33.6 million and $34.2 million at September 30, 2021, June 30, 2021, and September 30, 2020, respectively. Tangible assets exclude goodwill and intangible assets.

BANK OF MARIN BANCORP CONSOLIDATED STATEMENTS OF CONDITION

(in thousands, except share data; unaudited)

September 30, 2021

June 30, 2021

September 30, 2020

Assets

Cash, cash equivalents and restricted cash

$

584,739

$

257,543

$

213,584

Investment securities

Held-to-maturity, at amortized cost (net of zero allowance for credit losses at September 30, 2021, June 30, 2021 and September 30, 20201)

196,801

169,038

117,350

Available-for-sale (at fair value; amortized cost $952,278, $504,934, and $394,437 at September 30, 2021, June 30, 2021, and September 30, 2020, respectively; net of zero allowance for credit losses at September 30, 2021, June 30, 2021 and September 30, 20201)

963,033

517,963

413,464

Total investment securities

1,159,834

687,001

530,814

Loans, at amortized cost

2,317,019

2,002,767

2,107,991

Allowance for credit losses on loans1

(22,414

)

(19,100

)

(22,113

)

Loans, net of allowance for credit losses on loans

2,294,605

1,983,667

2,085,878

Goodwill

72,754

30,140

30,140

Bank-owned life insurance

61,171

45,986

43,320

Operating lease right-of-use assets

24,776

23,506

26,041

Bank premises and equipment, net

7,807

5,248

5,266

Core deposit intangible

6,998

3,423

4,045

Other real estate owned

800

-

-

Interest receivable and other assets

47,578

37,304

36,137

Total assets

$

4,261,062

$

3,073,818

$

2,975,225

Liabilities and Stockholders' Equity

Liabilities

Deposits

Non-interest bearing

$

1,837,595

$

1,460,076

$

1,383,719

Interest bearing

Transaction accounts

288,401

168,226

156,061

Savings accounts

336,867

230,730

192,764

Money market accounts

1,124,660

729,193

738,661

Time accounts

140,173

95,350

98,084

Total deposits

3,727,696

2,683,575

2,569,289

Borrowings and other obligations

451

438

99

Subordinated debenture

-

-

2,760

Operating lease liabilities

26,637

24,919

27,527

Interest payable and other liabilities

47,753

16,237

17,980

Total liabilities

3,802,537

2,725,169

2,617,655

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 - 16,066,889, 13,055,105 and 13,605,363 at Sept 30, 2021, June 30, 2021, and Sept 30, 2020, respectively

217,680

108,430

129,284

Retained earnings

233,997

231,841

215,976

Accumulated other comprehensive income, net of taxes

6,848

8,378

12,310

Total stockholders' equity

458,525

348,649

357,570

Total liabilities and stockholders' equity

$

4,261,062

$

3,073,818

$

2,975,225

BANK OF MARIN BANCORPCONSOLIDATED STATEMENTS OF CONDITION

(in thousands, except share data; September 30, June 30, September 30,unaudited) 2021 2021 2020

Assets

Cash, cash equivalents and $ 584,739 $ 257,543 $ 213,584 restricted cash

Investment securities

Held-to-maturity, at amortizedcost (net of zero allowance forcredit losses at September 30, 196,801 169,038 117,350 2021, June 30, 2021 and September30, 2020^1)

Available-for-sale (at fair value;amortized cost $952,278, $504,934,and $394,437 at September 30,2021, June 30, 2021, and September 963,033 517,963 413,464 30, 2020, respectively; net ofzero allowance for credit lossesat September 30, 2021, June 30,2021 and September 30, 2020^1)

Total investment securities 1,159,834 687,001 530,814

Loans, at amortized cost 2,317,019 2,002,767 2,107,991

Allowance for credit losses on (22,414 ) (19,100 ) (22,113 )loans^1

Loans, net of allowance for credit 2,294,605 1,983,667 2,085,878 losses on loans

Goodwill 72,754 30,140 30,140

Bank-owned life insurance 61,171 45,986 43,320

Operating lease right-of-use 24,776 23,506 26,041 assets

Bank premises and equipment, net 7,807 5,248 5,266

Core deposit intangible 6,998 3,423 4,045

Other real estate owned 800 - -

Interest receivable and other 47,578 37,304 36,137 assets

Total assets $ 4,261,062 $ 3,073,818 $ 2,975,225



Liabilities and Stockholders' Equity

Liabilities

Deposits

Non-interest bearing $ 1,837,595 $ 1,460,076 $ 1,383,719

Interest bearing

Transaction accounts 288,401 168,226 156,061

Savings accounts 336,867 230,730 192,764

Money market accounts 1,124,660 729,193 738,661

Time accounts 140,173 95,350 98,084

Total deposits 3,727,696 2,683,575 2,569,289

Borrowings and other obligations 451 438 99

Subordinated debenture - - 2,760

Operating lease liabilities 26,637 24,919 27,527

Interest payable and other 47,753 16,237 17,980 liabilities

Total liabilities 3,802,537 2,725,169 2,617,655



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 -16,066,889, 13,055,105 and 217,680 108,430 129,284 13,605,363 at Sept 30, 2021, June30, 2021, and Sept 30, 2020,respectively

Retained earnings 233,997 231,841 215,976

Accumulated other comprehensive 6,848 8,378 12,310 income, net of taxes

Total stockholders' equity 458,525 348,649 357,570

Total liabilities and $ 4,261,062 $ 3,073,818 $ 2,975,225 stockholders' equity

1

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

The September 30, 2021 and June 30, 2021 allowances were calculated under^ current expected credit loss methodology, while the September 30, 20201 allowance was calculated under incurred loss methodology. Refer to Note 1, Summary of Accounting Policies, in our 2020 Form 10-K for further information on the adoption of ASU 2016-13.

BANK OF MARIN BANCORPCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMEThree months ended

Nine months ended

(in thousands, except per share amounts; unaudited)

September 30, 2021

June 30, 2021

September 30, 2020

September 30, 2021

September 30, 2020

Interest income

Interest and fees on loans

$

24,027

$

21,429

$

21,776

$

66,117

$

63,880

Interest on investment securities

4,084

3,504

3,343

10,717

11,249

Interest on federal funds sold and due from banks

178

54

50

274

421

Total interest income

28,289

24,987

25,169

77,108

75,550

Interest expense

Interest on interest-bearing transaction accounts

41

39

41

119

146

Interest on savings accounts

26

21

17

66

50

Interest on money market accounts

417

312

377

1,015

1,731

Interest on time accounts

44

81

133

221

436

Interest on borrowings and other obligations

8

-

-

8

3

Interest on subordinated debenture

-

-

35

1,361

124

Total interest expense

536

453

603

2,790

2,490

Net interest income

27,753

24,534

24,566

74,318

73,060

Provision for (reversal of) credit losses on loans

1,800

(920

)

1,250

(2,049

)

5,450

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

-

(612

)

248

(1,202

)

610

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

25,953

26,066

23,068

77,569

67,000

Non-interest income

Earnings on bank-owned life insurance, net

1,402

233

232

1,892

741

Wealth Management and Trust Services

597

530

450

1,615

1,028

Debit card interchange fees

483

419

383

1,268

1,375

Service charges on deposit accounts

464

317

284

1,062

1,051

Dividends on Federal Home Loan Bank stock

179

177

149

505

503

Merchant interchange fees

129

61

63

247

183

Gains on sale of investment securities, net

1

-

-

1

915

Other income

310

285

229

823

927

Total non-interest income

3,565

2,022

1,790

7,413

6,723

Non-interest expense

Salaries and related benefits

13,127

8,888

8,638

31,223

25,979

Occupancy and equipment

1,871

1,751

1,776

5,373

5,100

Professional services

2,472

986

655

4,321

1,749

Data processing

1,613

820

822

3,252

2,437

Depreciation and amortization

431

389

539

1,279

1,591

Information technology

496

296

256

1,105

758

Amortization of core deposit intangible

334

204

213

742

639

Directors' expense

255

230

184

660

533

Federal Deposit Insurance Corporation insurance

236

182

181

597

299

Charitable contributions

4

462

481

497

921

Other expense

1,847

1,348

1,245

4,605

4,232

Total non-interest expense

22,686

15,556

14,990

53,654

44,238

Income before provision for income taxes

6,832

12,532

9,868

31,328

29,485

Provision for income taxes

1,550

3,247

2,377

7,814

7,360

Net income

$

5,282

$

9,285

$

7,491

$

23,514

$

22,125

Net income per common share:

Basic

$

0.35

$

0.71

$

0.55

$

1.70

$

1.64

Diluted

$

0.35

$

0.71

$

0.55

$

1.69

$

1.62

Weighted average shares:

Basic

14,922

13,092

13,539

13,798

13,526

Diluted

14,993

13,164

13,610

13,881

13,617

Comprehensive income (loss):

Net income

$

5,282

$

9,285

$

7,491

$

23,514

$

22,125

Other comprehensive income (loss):

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

(2,274

)

2,798

299

(8,558

)

11,605

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

(1

)

-

-

(1

)

(915

)

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

104

138

149

385

394

Other comprehensive income (loss), before tax

(2,171

)

2,936

448

(8,174

)

11,084

Deferred tax (benefit) expense

(641

)

864

132

(2,421

)

3,277

Other comprehensive income (loss), net of tax

(1,530

)

2,072

316

(5,753

)

7,807

Total comprehensive income

$

3,752

$

11,357

$

7,807

$

17,761

$

29,932

BANK OF MARIN BANCORPCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Three months ended Nine months ended

(in thousands, September September September Septemberexcept per share 30, June 30, 30, 30, 30,amounts; 2021 2021 2020 2021 2020unaudited)

Interest income

Interest and fees $ 24,027 $ 21,429 $ 21,776 $ 66,117 $ 63,880 on loans

Interest oninvestment 4,084 3,504 3,343 10,717 11,249 securities

Interest onfederal funds sold 178 54 50 274 421 and due from banks

Total interest 28,289 24,987 25,169 77,108 75,550 income

Interest expense

Interest oninterest-bearing 41 39 41 119 146 transactionaccounts

Interest on 26 21 17 66 50 savings accounts

Interest on money 417 312 377 1,015 1,731 market accounts

Interest on time 44 81 133 221 436 accounts

Interest onborrowings and 8 - - 8 3 other obligations

Interest onsubordinated - - 35 1,361 124 debenture

Total interest 536 453 603 2,790 2,490 expense

Net interest 27,753 24,534 24,566 74,318 73,060 income

Provision for(reversal of) 1,800 (920 ) 1,250 (2,049 ) 5,450 credit losses onloans

(Reversal of)provision forcredit losses on - (612 ) 248 (1,202 ) 610 unfunded loancommitments

Net interestincome after(reversal of) 25,953 26,066 23,068 77,569 67,000 provision forcredit losses

Non-interest income

Earnings onbank-owned life 1,402 233 232 1,892 741 insurance, net

Wealth Management 597 530 450 1,615 1,028 and Trust Services

Debit card 483 419 383 1,268 1,375 interchange fees

Service charges on 464 317 284 1,062 1,051 deposit accounts

Dividends onFederal Home Loan 179 177 149 505 503 Bank stock

Merchant 129 61 63 247 183 interchange fees

Gains on sale ofinvestment 1 - - 1 915 securities, net

Other income 310 285 229 823 927

Total non-interest 3,565 2,022 1,790 7,413 6,723 income

Non-interest expense

Salaries and 13,127 8,888 8,638 31,223 25,979 related benefits

Occupancy and 1,871 1,751 1,776 5,373 5,100 equipment

Professional 2,472 986 655 4,321 1,749 services

Data processing 1,613 820 822 3,252 2,437

Depreciation and 431 389 539 1,279 1,591 amortization

Information 496 296 256 1,105 758 technology

Amortization ofcore deposit 334 204 213 742 639 intangible

Directors' expense 255 230 184 660 533

Federal DepositInsurance 236 182 181 597 299 Corporationinsurance

Charitable 4 462 481 497 921 contributions

Other expense 1,847 1,348 1,245 4,605 4,232

Total non-interest 22,686 15,556 14,990 53,654 44,238 expense

Income beforeprovision for 6,832 12,532 9,868 31,328 29,485 income taxes

Provision for 1,550 3,247 2,377 7,814 7,360 income taxes

Net income $ 5,282 $ 9,285 $ 7,491 $ 23,514 $ 22,125

Net income per common share:

Basic $ 0.35 $ 0.71 $ 0.55 $ 1.70 $ 1.64

Diluted $ 0.35 $ 0.71 $ 0.55 $ 1.69 $ 1.62

Weighted average shares:

Basic 14,922 13,092 13,539 13,798 13,526

Diluted 14,993 13,164 13,610 13,881 13,617

Comprehensive income (loss):

Net income $ 5,282 $ 9,285 $ 7,491 $ 23,514 $ 22,125

Othercomprehensive income (loss):

Change in netunrealized(losses) gains on (2,274 ) 2,798 299 (8,558 ) 11,605 available-for-salesecurities

Reclassificationadjustment forgains onavailable-for-sale (1 ) - - (1 ) (915 )securitiesincluded in netincome

Amortization ofnet unrealizedlosses onsecurities 104 138 149 385 394 transferred fromavailable-for-saletoheld-to-maturity

Othercomprehensive (2,171 ) 2,936 448 (8,174 ) 11,084 income (loss),before tax

Deferred tax (641 ) 864 132 (2,421 ) 3,277 (benefit) expense

Othercomprehensive (1,530 ) 2,072 316 (5,753 ) 7,807 income (loss), netof tax

Totalcomprehensive $ 3,752 $ 11,357 $ 7,807 $ 17,761 $ 29,932 income

BANK OF MARIN BANCORP AVERAGE STATEMENTS OF CONDITION AND ANALYSIS OF NET INTEREST INCOME

Three months ended

Three months ended

Three months ended

September 30, 2021

June 30, 2021

September 30, 2020

Interest

Interest

Interest

Average

Income/

Yield/

Average

Income/

Yield/

Average

Income/

Yield/

(in thousands)

Balance

Expense

Rate

Balance

Expense

Rate

Balance

Expense

Rate

Assets

Interest-earning deposits with banks 1

$

456,405

$

178

0.15

%

$

193,749

$

54

0.11

%

$

184,883

$

50

0.11

%

Investment securities 2, 3

845,127

4,249

2.01

%

661,361

3,666

2.22

%

527,077

3,481

2.64

%

Loans 1, 3, 4

2,189,563

24,229

4.33

%

2,062,497

21,601

4.14

%

2,117,679

21,957

4.06

%

Total interest-earning assets 1

3,491,095

28,656

3.21

%

2,917,607

25,321

3.43

%

2,829,639

25,488

3.52

%

Cash and non-interest-bearing due from banks

68,680

39,252

55,353

Bank premises and equipment, net

6,468

4,795

5,412

Interest receivable and other assets, net

177,725

131,667

138,938

Total assets

$

3,743,968

$

3,093,321

$

3,029,342

Liabilities and Stockholders' Equity

Interest-bearing transaction accounts

$

237,883

$

41

0.07

%

$

167,787

$

39

0.09

%

$

153,089

$

41

0.11

%

Savings accounts

293,434

26

0.03

%

227,767

21

0.04

%

191,915

17

0.04

%

Money market accounts

911,294

417

0.18

%

735,784

312

0.17

%

802,585

377

0.19

%

Time accounts including CDARS

124,247

44

0.14

%

95,354

81

0.34

%

97,465

133

0.54

%

Borrowings and other obligations 1, 6

3,010

8

1.09

%

61

-

1.15

%

113

-

2.51

%

Subordinated debenture 1, 5

-

-

-

%

-

-

-

%

2,751

35

4.97

%

Total interest-bearing liabilities

1,569,868

536

0.14

%

1,226,753

453

0.15

%

1,247,918

603

0.19

%

Demand accounts

1,707,142

1,478,119

1,380,708

Interest payable and other liabilities

46,834

40,976

44,486

Stockholders' equity

420,124

347,473

356,230

Total liabilities & stockholders' equity

$

3,743,968

$

3,093,321

$

3,029,342

Tax-equivalent net interest income/margin 1

$

28,120

3.15

%

$

24,868

3.37

%

$

24,885

3.44

%

Reported net interest income/margin 1

$

27,753

3.11

%

$

24,534

3.33

%

$

24,566

3.40

%

Tax-equivalent net interest rate spread

3.07

%

3.28

%

3.33

%

Nine months ended

Nine months ended

September 30, 2021

September 30, 2020

Interest

Interest

Average

Income/

Yield/

Average

Income/

Yield/

(in thousands)

Balance

Expense

Rate

Balance

Expense

Rate

Assets

Interest-earning deposits with banks 1

$

273,045

$

274

0.13

%

$

152,587

$

421

0.36

%

Investment securities 2, 3

683,600

11,196

2.18

%

544,754

11,632

2.85

%

Loans 1, 3, 4

2,117,631

66,665

4.15

%

1,998,456

64,423

4.24

%

Total interest-earning assets 1

3,074,276

78,135

3.35

%

2,695,797

76,476

3.73

%

Cash and non-interest-bearing due from banks

53,020

44,665

Bank premises and equipment, net

5,353

5,631

Interest receivable and other assets, net

147,856

130,525

Total assets

$

3,280,505

$

2,876,618

Liabilities and Stockholders' Equity

Interest-bearing transaction accounts

$

193,502

$

119

0.08

%

$

144,784

$

146

0.13

%

Savings accounts

245,374

66

0.04

%

179,288

50

0.04

%

Money market accounts

784,313

1,015

0.17

%

786,012

1,731

0.29

%

Time accounts including CDARS

105,419

221

0.28

%

96,237

436

0.61

%

Borrowings and other obligations 1, 6

1,047

8

1.10

%

208

3

2.14

%

Subordinated debenture 1, 5

713

1,361

251.54

%

2,733

124

5.96

%

Total interest-bearing liabilities

1,330,368

2,790

0.28

%

1,209,262

2,490

0.27

%

Demand accounts

1,531,564

1,278,265

Interest payable and other liabilities

44,128

40,279

Stockholders' equity

374,445

348,812

Total liabilities & stockholders' equity

$

3,280,505

$

2,876,618

Tax-equivalent net interest income/margin 1

$

75,345

3.23

%

$

73,986

3.61

%

Reported net interest income/margin 1

$

74,318

3.19

%

$

73,060

3.56

%

Tax-equivalent net interest rate spread

3.07

%

3.45

%

BANK OF MARIN BANCORPAVERAGE STATEMENTS OF CONDITION AND ANALYSIS OF NET INTEREST INCOME

Three months ended Three months ended Three months ended

September 30, 2021 June 30, 2021 September 30, 2020

Interest Interest Interest

Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/

(in thousands) Balance Expense Rate Balance Expense Rate Balance Expense Rate

Assets

Interest-earningdeposits with banks^ $ 456,405 $ 178 0.15 % $ 193,749 $ 54 0.11 % $ 184,883 $ 50 0.11 %1

Investment 845,127 4,249 2.01 % 661,361 3,666 2.22 % 527,077 3,481 2.64 %securities^ 2, 3

Loans ^1, 3, 4 2,189,563 24,229 4.33 % 2,062,497 21,601 4.14 % 2,117,679 21,957 4.06 %

Totalinterest-earning 3,491,095 28,656 3.21 % 2,917,607 25,321 3.43 % 2,829,639 25,488 3.52 %assets^ 1

Cash andnon-interest-bearing 68,680 39,252 55,353 due from banks

Bank premises and 6,468 4,795 5,412 equipment, net

Interest receivableand other assets, 177,725 131,667 138,938 net

Total assets $ 3,743,968 $ 3,093,321 $ 3,029,342

Liabilities and Stockholders' Equity

Interest-bearing $ 237,883 $ 41 0.07 % $ 167,787 $ 39 0.09 % $ 153,089 $ 41 0.11 %transaction accounts

Savings accounts 293,434 26 0.03 % 227,767 21 0.04 % 191,915 17 0.04 %

Money market 911,294 417 0.18 % 735,784 312 0.17 % 802,585 377 0.19 %accounts

Time accounts 124,247 44 0.14 % 95,354 81 0.34 % 97,465 133 0.54 %including CDARS

Borrowings and other 3,010 8 1.09 % 61 - 1.15 % 113 - 2.51 %obligations ^1, 6

Subordinated - - - % - - - % 2,751 35 4.97 %debenture ^1, 5

Totalinterest-bearing 1,569,868 536 0.14 % 1,226,753 453 0.15 % 1,247,918 603 0.19 %liabilities

Demand accounts 1,707,142 1,478,119 1,380,708

Interest payable and 46,834 40,976 44,486 other liabilities

Stockholders' equity 420,124 347,473 356,230

Total liabilities & $ 3,743,968 $ 3,093,321 $ 3,029,342 stockholders' equity

Tax-equivalent netinterest income/ $ 28,120 3.15 % $ 24,868 3.37 % $ 24,885 3.44 %margin ^1

Reported netinterest income/ $ 27,753 3.11 % $ 24,534 3.33 % $ 24,566 3.40 %margin ^1

Tax-equivalent net 3.07 % 3.28 % 3.33 %interest rate spread



Nine months ended Nine months ended

September 30, 2021 September 30, 2020

Interest Interest

Average Income/ Yield/ Average Income/ Yield/

(in thousands) Balance Expense Rate Balance Expense Rate

Assets

Interest-earningdeposits with banks $ 273,045 $ 274 0.13 % $ 152,587 $ 421 0.36 %^1

Investment 683,600 11,196 2.18 % 544,754 11,632 2.85 %securities ^2, 3

Loans^ 1, 3, 4 2,117,631 66,665 4.15 % 1,998,456 64,423 4.24 %

Totalinterest-earning 3,074,276 78,135 3.35 % 2,695,797 76,476 3.73 %assets ^1

Cash andnon-interest-bearing 53,020 44,665 due from banks

Bank premises and 5,353 5,631 equipment, net

Interest receivableand other assets, 147,856 130,525 net

Total assets $ 3,280,505 $ 2,876,618

Liabilities and Stockholders' Equity

Interest-bearing $ 193,502 $ 119 0.08 % $ 144,784 $ 146 0.13 %transaction accounts

Savings accounts 245,374 66 0.04 % 179,288 50 0.04 %

Money market 784,313 1,015 0.17 % 786,012 1,731 0.29 %accounts

Time accounts 105,419 221 0.28 % 96,237 436 0.61 %including CDARS

Borrowings and other 1,047 8 1.10 % 208 3 2.14 %obligations ^1, 6

Subordinated 713 1,361 251.54 % 2,733 124 5.96 %debenture ^1, 5

Totalinterest-bearing 1,330,368 2,790 0.28 % 1,209,262 2,490 0.27 %liabilities

Demand accounts 1,531,564 1,278,265

Interest payable and 44,128 40,279 other liabilities

Stockholders' equity 374,445 348,812

Total liabilities & $ 3,280,505 $ 2,876,618 stockholders' equity

Tax-equivalent netinterest income/ $ 75,345 3.23 % $ 73,986 3.61 %margin ^1

Reported netinterest income/ $ 74,318 3.19 % $ 73,060 3.56 %margin^ 1

Tax-equivalent net 3.07 % 3.45 %interest rate spread

1

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

2

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

3

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

4

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

5

2021 interest on subordinated debenture included $1.3 million in accelerated discount accretion from the early redemption of our last subordinated debenture on March 15, 2021.

6

Average balances and rate consider $13.9 million in FHLB borrowings acquired from American River Bank that were redeemed on August 25, 2021.

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