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Bank of Marin Bancorp Reports Record Earnings of $11.1 Million

Increases Dividend to 25 Cents

Bank of Marin Bancorp, "Bancorp" (Nasdaq: BMRC), parent company of Bank of Marin, "Bank," announced record earnings of $11.1 million in the second quarter of 2022, compared to $10.5 million in the first quarter of 2022. Diluted earnings per share were $0.69 in the second quarter of 2022, compared to $0.66 in the immediately preceding quarter. Earnings for the first six months of 2022 totaled $21.5 million, compared to $18.2 million in the same period last year. Diluted earnings per share were $1.35 and $1.37 in the first six months of 2022 and 2021, respectively. All periods of earnings presented were impacted by the costs associated with our most recent acquisition, the details of which are discussed throughout this report. In particular, diluted earnings per share for the first half of 2022 would have increased by one cent per share over 2021 without those costs.

“We generated record earnings and robust loan production during the second quarter, building further momentum with our enhanced business development efforts. During the first six months of 2022, our loan originations ex-PPP totaled $152 million, more than double the same period a year earlier,” said Tim Myers, President and Chief Executive Officer. “Our asset quality remains excellent as we continue our traditional focus on disciplined and prudent underwriting. We will not sacrifice credit standards as we grow."

“We are executing on a long-term plan to invest in key talent and technology that we believe will enable us to continue exceeding our customers’ expectations and drive growth while realizing efficiencies,” Myers added. “We are also working to identify cost saving opportunities to offset those investments, managing expenses to deliver strong returns to our shareholders.”

Bancorp also provided the following highlights from the second quarter of 2022:

  • Return on Assets of 1.03% and Return on Equity of 10.74% for the three months ended June 30, 2022, would have been 1.05% and 10.95%, respectively, without one-time and conversion costs related to the 2021 merger with American River Bankshares ("ARB"). That compares to 0.98% and 9.61% (GAAP) and 1.01% and 9.96% (non-GAAP), respectively, for the three months ended March 31, 2022. As shown in the reconciliation of GAAP to non-GAAP financial measures on page 3, merger-related costs reduced net income by $219 thousand, net of taxes, or $0.02 per share in the second quarter.
  • The second quarter tax-equivalent net interest margin improved 9 basis points over the preceding quarter despite the 7 basis point drag of declining PPP loan fee recognition. Rising interest rates had a positive impact on the Bank's asset sensitive portfolio, as did the deployment of excess cash into securities and flat deposit costs.
  • Deposits decreased by $30.7 million to $3.831 billion at June 30, 2022, compared to $3.861 billion at March 31, 2022. Non-interest bearing deposits made up 53% of total deposits as of June 30, 2022 versus 51% as of March 31, 2022. The cost of average deposits in the second quarter of 2022 was 0.06%, unchanged from the preceding quarter.
  • Loan balances of $2.163 billion at June 30, 2022 reflected record second quarter originations of $102.2 million. While our production was strong, total loans decreased modestly in the quarter due to payoffs including expected construction project completions, borrowers' sales of underlying assets, PPP loan payoffs, and third party refinancing of acquired loans outside the Bank's credit risk appetite.
  • Credit quality remains strong, with non-accrual loans representing 0.37% of total loans as of June 30, 2022, compared to 0.35% at March 31, 2022. There was not a significant change in classified loans. There was no provision made to the allowance for credit losses on loans or to the allowance for credit losses on unfunded loan commitments this quarter as an improvement in the California unemployment rate forecast decreased the quantitative portion of estimated credit losses while ongoing supply chain issues, inflation and recession risks increased qualitative factors.
  • Our declining efficiency ratios quarter over quarter and year over year are a testament to the improved operating leverage attained through the ARB acquisition. The efficiency ratios of 55.73% for the second quarter and 57.40% year to date compare to 59.13% and 61.43% for the first quarter of 2022 and year to date 2021, respectively. Changes from the prior quarter were primarily visible in salaries, benefits and professional services expenses.
  • All capital ratios were above well-capitalized regulatory requirements. The total risk-based capital ratio for Bancorp was 14.7% at June 30, 2022, compared to 14.4% at March 31, 2022. Bancorp's tangible common equity to tangible assets was 7.8% at June 30, 2022, compared to 8.0% at March 31, 2022 (refer to footnote 5 on page 7 for a discussion of this non-GAAP financial measure). The total risk-based capital ratio for the Bank was 14.2% at June 30, 2022, compared to 14.3% at March 31, 2022. The Bank's tangible common equity to tangible assets was 7.5% at June 30, 2022, compared to 8.0% at March 31, 2022. Declines in the Bank's and Bancorp's tangible common equity were primarily related to an increase in after-tax unrealized losses on available-for-sales securities associated with interest rate increases since March 31, 2022.
  • The Board of Directors declared a cash dividend of $0.25 per share, an increase from $0.24 per share in the prior quarter, on July 22, 2022, which represents the 69th consecutive quarterly dividend paid by Bancorp. The dividend is payable on August 12, 2022, to shareholders of record at the close of business on August 5, 2022.

Statement Regarding use of Non-GAAP Financial Measures

In this press release, Bancorp's financial results are presented in accordance with GAAP and with reference 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 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 thousands, unaudited)

Three months ended

Six months ended

Net income

June 30, 2022

March 31, 2022

June 30, 2022

June 30, 2021

Net income (GAAP)

$

11,066

 

$

10,465

 

$

21,531

 

$

18,232

 

Merger-related one-time and conversion costs:

 

 

 

 

Personnel and severance

 

58

 

 

335

 

 

393

 

 

 

Professional services

 

 

 

67

 

 

67

 

 

201

 

Data processing

 

29

 

 

48

 

 

77

 

 

 

Other

 

224

 

 

97

 

 

321

 

 

16

 

Total merger costs before tax benefits

 

311

 

 

547

 

 

858

 

 

217

 

Income tax benefit of merger-related expenses

 

(92

)

 

(162

)

 

(254

)

 

(17

)

Total merger-related one-time and conversion costs, net of tax benefits

 

219

 

 

385

 

 

604

 

 

200

 

Comparable net income (non-GAAP)

$

11,285

 

$

10,850

 

$

22,135

 

$

18,432

 

Diluted earnings per share

 

 

 

 

Weighted average diluted shares

 

15,955

 

 

15,946

 

 

15,950

 

 

13,316

 

Diluted earnings per share (GAAP)

$

0.69

 

$

0.66

 

$

1.35

 

$

1.37

 

Merger-related one-time and conversion costs, net of tax benefits

 

0.02

 

 

0.02

 

 

0.04

 

 

0.01

 

Comparable diluted earnings per share (non-GAAP)

$

0.71

 

$

0.68

 

$

1.39

 

$

1.38

 

Return on average assets

 

 

 

 

Average assets

$

4,312,919

 

$

4,345,258

 

$

4,328,999

 

$

3,044,933

 

Return on average assets (GAAP)

 

1.03

%

 

0.98

%

 

1.00

%

 

1.21

%

Comparable return on average assets (non-GAAP)

 

1.05

%

 

1.01

%

 

1.03

%

 

1.22

%

Return on average equity

 

 

 

 

Average stockholders' equity

$

413,271

 

$

441,626

 

$

427,370

 

$

351,227

 

Return on average equity (GAAP)

 

10.74

%

 

9.61

%

 

10.16

%

 

10.47

%

Comparable return on average equity (non-GAAP)

 

10.95

%

 

9.96

%

 

10.44

%

 

10.58

%

Efficiency ratio

 

 

 

 

Non-interest expense (GAAP)

$

18,906

 

$

19,375

 

$

38,281

 

$

30,968

 

Merger-related expenses

 

(311

)

 

(547

)

 

(858

)

 

(217

)

Non-interest expense (non-GAAP)

$

18,595

 

$

18,828

 

$

37,423

 

$

30,751

 

Net interest income

$

31,197

 

$

29,898

 

$

61,095

 

$

46,565

 

Non-interest income

$

2,728

 

$

2,867

 

$

5,595

 

$

3,848

 

Efficiency ratio (GAAP)

 

55.73

%

 

59.13

%

 

57.40

%

 

61.43

%

Comparable efficiency ratio (non-GAAP)

 

54.81

%

 

57.46

%

 

56.11

%

 

61.00

%

"Our record second quarter earnings reflect the Bank’s consistent execution on our strategic priorities. The ARB acquisition is achieving earnings accretion above projected levels, one-time costs were negotiated lower, and expense savings are on target with more to be realized," said Tani Girton, EVP and Chief Financial Officer. “Our credit quality, liquidity and capital are strong and the Bank is well-positioned to support the initiatives underway."

Loans and Credit Quality

Loans totaled $2.163 billion at June 30, 2022, compared to $2.202 billion at March 31, 2022, a decrease of $39.2 million, largely due to net declines of $23.6 million in PPP loans and $12.9 million in construction loans. Record loan originations of $102.2 million compared to $49.8 million for the first quarter of 2022. Our consistent calling practices and relationship banking model, coupled with a rising rate environment, drove customer urgency and strong originations in the quarter. Non-PPP loan payoffs of $109.8 million in the second quarter included $34.5 million in expected construction project completions and $28.5 million whereby borrowers sold underlying assets. By comparison, first quarter non-PPP loan payoffs were $49.3 million.

The $93.0 million decrease in loans during the six months ended June 30, 2022 was mostly attributable to a $94.2 million decrease in PPP loans. This compared to an $85.8 million decrease in total loans during the six months ended June 30, 2021. Non-PPP loan originations were $152.0 million for the six months ended June 30, 2022, compared to $69.1 million for the six months ended June 30, 2021. Non-PPP loan payoffs were $159.1 million in the six months ended June 30, 2022, compared to $95.4 million in the six months ended June 30, 2021.

Bank of Marin and ARB 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 June 30, 2022 there were 112 loans still outstanding totaling $17.0 million (net of $420 thousand in unrecognized fees and costs) compared to 191 loans outstanding at March 31, 2022 for a total of $40.6 million (net of $993 thousand in unrecognized fees and costs). In the second quarter of 2022, Bank of Marin recognized $573 thousand in PPP fees, net of costs, compared to $1.5 million in the preceding quarter.

During the onset of the pandemic, Bank of Marin granted payment relief for 269 loans totaling $402.9 million. As of June 30, 2022, two borrowing relationships with three loans totaling $23.6 million were continuing to benefit from payment relief under the provisions of the 2020 CARES Act. We will continue to work closely with both of these clients and monitor their performance.

Non-accrual loans totaled $8.0 million, or 0.37%, of the Bank's portfolio at June 30, 2022, compared to $7.7 million, or 0.35% at March 31, 2022. Non-accrual loans at June 30, 2022 included the addition of two loans totaling $381 thousand including one owner-occupied commercial real estate loan and one home equity loan. Also, during the quarter, one personal loan for $16 thousand was charged off and three loans paid down a total of $26 thousand.

Classified loans totaled $37.0 million at June 30, 2022, compared to $36.5 million at March 31, 2022, increasing due to an addition of four loans totaling $2.4 million in the second quarter within commercial real estate and home equity, offset by paydowns of $1.8 million, and one charge off of $16 thousand, as mentioned above. Accruing loans past due 30 to 89 days totaled $3.2 million at June 30, 2022, compared to $2.3 million at March 31, 2022.

Net charge-offs for the second quarter of 2022 totaled $8 thousand, compared to net recoveries of $9 thousand in the first quarter of 2022. The ratio of allowance for credit losses to total loans was 1.04% at June 30, 2022, compared to 1.02% at March 31, 2022.

In the second quarter of 2022 there was no provision for credit losses on loans, compared to first quarter of 2022 when we recorded a reversal of provision of $485 thousand. There was no provision for credit losses on unfunded commitments in the second quarter of 2022, compared to a reversal of $318 thousand in the first quarter of 2022. No adjustments were made this quarter as an improvement in the California unemployment rate forecast decreased the quantitative portion of estimated credit losses while ongoing supply chain issues, inflation and recession risks increased qualitative factors. The preceding quarter's provision reversals were due primarily to the improvement in the underlying California unemployment rate forecast at the time.

Cash, Cash Equivalents and Restricted Cash

Total cash, cash equivalents and restricted cash were $115.9 million at June 30, 2022, compared to $170.9 million at March 31, 2022. The $55.0 million decrease was primarily due to the deployment of funds into investment securities, as noted below.

Investments

The investment securities portfolio totaled $1.825 billion at June 30, 2022, an increase of $79.0 million from March 31, 2022. The increase was primarily the result of securities purchases totaling $153.1 million, partially offset by maturities, calls, and paydowns totaling $45.1 million and an increase in pre-tax unrealized losses of $27.1 million on available-for-sale investment securities primarily due to a continuing rise in market interest rates during the second quarter of 2022. The growth in the portfolio and increase in yield contributed significantly to net interest income during the quarter.

Year-to-date we have recorded other comprehensive losses of $56.0 million after tax. First quarter losses were more significant due to the rapid and dramatic increases in rates as well as the larger available-for-sale portfolio. During the first quarter we transferred $357.5 million in available-for-sale securities to held-to-maturity to mitigate further losses associated with rising interest rates.

Deposits

Deposits totaled $3.831 billion at June 30, 2022, compared to $3.861 billion at March 31, 2022. The $96.0 million decrease in money markets was partially related to a transfer to non-interest bearing deposits by a significant customer in preparation for a withdrawal occurring early in July consistent with that customer's normal business activity. The average cost of deposits for the second quarter was unchanged from the first quarter at 0.06%. The average cost of deposits for the six months ended June 30, 2022 was 0.06% compared to 0.07% in the first half of 2021. Additionally, as part of our liquidity management, the Bank maintained $152.4 million in deposits off-balance sheet with deposit networks at June 30, 2022, compared to $180.0 million at March 31, 2022.

Earnings

Net Interest Income

Net interest income totaled $31.2 million in the second quarter of 2022, compared to $29.9 million in the prior quarter. The $1.3 million increase from the prior quarter was primarily attributable to higher average balances and yields on investment securities causing an increase of $1.6 million, quarter over quarter, in investment interest income.

Net interest income totaled $61.1 million for the six months ended June 30, 2022, compared to $46.6 million for the same period in the prior year. The $14.5 million increase from prior year was primarily due to the larger investment portfolio generating an incremental $8.3 million, and $4.9 million from higher balances and yields on the loan portfolio. First half 2022 average balances and fee recognition on PPP loans decreased $275.5 million and $2.3 million, respectively, from the first half of 2021.

The tax-equivalent net interest margin was 3.05% in the second quarter of 2022, compared to 2.96% in the prior quarter. The increase from the prior quarter was primarily due to continued deployment of cash into higher yielding investment securities and higher interest rates on non-PPP loans, partially offset by lower interest and fee income on PPP loans. Average yields on the investment portfolio increased from 1.69% in the first quarter to 1.87% in the second quarter reflecting recent increases in market interest rates, and the average rate on gross loans increased 10 basis points, which excludes the impact of loan origination fees/costs and purchase discounts/premiums.

The tax-equivalent net interest margin was 3.01% in the six months ended June 30, 2022, compared to 3.28% in the same period in the prior year. The decrease was primarily attributed to a higher proportion of investment securities in the larger balance sheet associated with ARB's lower loan-to-deposit ratio and other deposit growth over the period. The decrease was partially offset by a shift to a higher percentage of non-PPP loans within the loan portfolio and the absence of trust preferred securities redemption which occurred in 2021.

Non-Interest Income

Non-interest income totaled $2.7 million in the second quarter of 2022, compared to $2.9 million in the preceding quarter. The $139.0 thousand decrease was primarily related to payments on bank-owned life insurance in the prior quarter.

Non-interest income totaled $5.6 million in the six months ended June 30, 2022, compared to $3.8 million in the same period of the prior year. The $1.7 million increase from the prior year period was mostly attributable to increased activity associated with the ARB acquisition and higher Wealth Management and Trust Services income.

Non-Interest Expense

Non-interest expense totaled $18.9 million in the second quarter of 2022, compared to $19.4 million in the prior quarter. The decrease from the prior quarter was primarily due to a $1.2 million reduction in salaries and benefits after the completion of the acquisition-related conversion in March 2022 and 22 fewer full-time equivalent employees. Decreases were partially offset by a $466 thousand increase in charitable contributions in the quarter due to the annual distribution of grant funding related to the Bank's corporate giving program.

Non-interest expense totaled $38.3 million in the six months ended June 30, 2022, compared to $31.0 million in the same period of prior year. The largest increases over prior year expenses came from salaries and related benefits, which rose $3.8 million due to increased numbers of employees in acquired branch and loan offices, regularly scheduled annual merit and related increases, and lower deferred loan origination costs. Higher expenses across most other categories reflect the acquisition, including one-time and conversion costs of $858 thousand, an increase in other data processing of $762 thousand, and an additional $346 thousand in amortization associated with the ARB core deposit intangible asset in the first half of 2022.

Share Repurchase Program

Bancorp has an approved share repurchase program with $34.7 million outstanding. The last activity under the program was in the first quarter of 2022. Bancorp continues to evaluate the resumption of share repurchases in the context of other capital and strategic initiatives.

Earnings Call and Webcast Information

Bank of Marin Bancorp will webcast its second quarter of 2022 earnings call on Monday, July 25, 2022 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 Northern California, with assets of $4.3 billion, Bank of Marin has 31 retail branches and 8 commercial banking offices located across 10 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, general economic conditions and the economic uncertainty in the United States and abroad, including economic or other disruptions to financial markets caused by acts of terrorism, war or other conflicts such as Russia's military action in Ukraine, impacts from inflation, supply change disruptions, changes in interest rates (including the actions taken by the Federal Reserve to control inflation), California's unemployment rate, deposit flows, real estate values, and expected future cash flows on loans and securities; costs or effects of acquisitions; competition; changes in accounting principles, policies or guidelines; changes in legislation or regulation; natural disasters (such as wildfires and earthquakes in our area); adverse weather conditions; 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 our operations, pricing, products and services; and successful integration of acquisitions. 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

 

Three months ended

Six months ended

(in thousands, except per share amounts; unaudited)

June 30, 2022

March 31, 2022

June 30, 2022

June 30, 2021

Selected operating data and performance ratios:

 

 

 

 

Net income

$

11,066

 

$

10,465

 

$

21,531

 

$

18,232

 

Diluted earnings per common share

$

0.69

 

$

0.66

 

$

1.35

 

$

1.37

 

Return on average assets

 

1.03

%

 

0.98

%

 

1.00

%

 

1.21

%

Return on average equity

 

10.74

%

 

9.61

%

 

10.16

%

 

10.47

%

Efficiency ratio

 

55.73

%

 

59.13

%

 

57.40

%

 

61.43

%

Tax-equivalent net interest margin 1

 

3.05

%

 

2.96

%

 

3.01

%

 

3.28

%

Cost of deposits

 

0.06

%

 

0.06

%

 

0.06

%

 

0.07

%

Net charge-offs (recoveries)

$

8

 

$

(9

)

$

(1

)

$

(75

)

(in thousands; unaudited)

June 30, 2022

March 31, 2022

December 31, 2021

Selected financial condition data:

 

 

 

Total assets

$

4,326,904

 

$

4,330,424

 

$

4,314,209

 

Loans:

 

 

 

Commercial and industrial 2

$

213,122

 

$

248,625

 

$

301,602

 

Real estate:

 

 

 

Commercial owner-occupied

 

382,897

 

 

391,924

 

 

392,345

 

Commercial investor-owned

 

1,190,419

 

 

1,176,918

 

 

1,189,021

 

Construction

 

118,147

 

 

131,015

 

 

119,840

 

Home equity

 

90,629

 

 

88,092

 

 

88,746

 

Other residential

 

113,361

 

 

114,277

 

 

114,558

 

Installment and other consumer loans

 

54,057

 

 

51,003

 

 

49,533

 

Total loans

$

2,162,632

 

$

2,201,854

 

$

2,255,645

 

Non-accrual loans: 3

 

 

 

Real estate:

 

 

 

Commercial owner-occupied

$

7,564

 

$

7,272

 

$

7,269

 

Commercial investor-owned

 

 

 

 

 

694

 

Home equity

 

454

 

 

390

 

 

413

 

Installment and other consumer loans

 

 

 

16

 

 

 

Total non-accrual loans

$

8,018

 

$

7,678

 

$

8,376

 

Classified loans (graded substandard and doubtful)

$

37,043

 

$

36,460

 

$

36,235

 

Total accruing loans 30-89 days past due

$

3,153

 

$

2,323

 

$

1,673

 

Allowance for credit losses to total loans

 

1.04

%

 

1.02

%

 

1.02

%

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

 

1.05

%

 

1.04

%

 

1.07

%

Allowance for credit losses to non-performing loans

2.81x

2.94x

2.75x

Non-accrual loans to total loans

 

0.37

%

 

0.35

%

 

0.37

%

Total deposits

$

3,830,670

 

$

3,861,342

 

$

3,808,550

 

Loan-to-deposit ratio

 

56.5

%

 

57.0

%

 

59.2

%

Stockholders' equity

$

409,573

 

$

420,408

 

$

450,368

 

Book value per share

$

25.58

 

$

26.27

 

$

28.27

 

Tangible common equity to tangible assets - Bank 5

 

7.5

%

 

8.0

%

 

8.6

%

Tangible common equity to tangible assets - Bancorp 5

 

7.8

%

 

8.0

%

 

8.8

%

Total risk-based capital ratio - Bank

 

14.2

%

 

14.3

%

 

14.4

%

Total risk-based capital ratio - Bancorp

 

14.7

%

 

14.4

%

 

14.6

%

Full-time equivalent employees

 

290

 

 

312

 

 

328

 

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

2 Includes SBA PPP loans of $17.0 million, $40.6 million and $111.2 million at June 30, 2022, March 31, 2022 and December 31, 2021, respectively.

3 There were no non-performing loans over 90 days past due and accruing interest as of June 30, 2022, March 31, 2022 and December 31, 2021.

4 The allowance for credit losses to total loans, excluding 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. 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 gains (losses) on available-for-sale securities, net of tax, less goodwill and intangible assets of $78.6 million, $79.0 million and $79.4 million at June 30, 2022, March 31, 2022 and December 31, 2021, respectively. Tangible assets exclude goodwill and intangible assets.

BANK OF MARIN BANCORP

CONSOLIDATED STATEMENTS OF CONDITION

 

(in thousands, except share data; unaudited)

June 30, 2022

March 31, 2022

December 31, 2021

Assets

 

 

 

Cash, cash equivalents and restricted cash

$

115,905

 

$

170,901

 

$

347,641

 

Investment securities

 

 

 

Held-to-maturity, at amortized cost (net of zero allowance for credit losses at June 30, 2022, March 31, 2022 and December 31, 2021)

 

931,587

 

 

790,264

 

 

342,222

 

Available-for-sale (at fair value; amortized cost of $960,379, $995,637 and $1,169,520 at June 30, 2022, March 31, 2022 and December 31, 2021, respectively; net of zero allowance for credit losses at June 30, 2022, March 31, 2022 and December 31, 2021)

 

893,149

 

 

955,457

 

 

1,167,568

 

Total investment securities

 

1,824,736

 

 

1,745,721

 

 

1,509,790

 

Loans, at amortized cost

 

2,162,632

 

 

2,201,854

 

 

2,255,645

 

Allowance for credit losses on loans

 

(22,539

)

 

(22,547

)

 

(23,023

)

Loans, net of allowance for credit losses on loans

 

2,140,093

 

 

2,179,307

 

 

2,232,622

 

Goodwill

 

72,754

 

 

72,754

 

 

72,754

 

Bank-owned life insurance

 

61,834

 

 

61,536

 

 

61,473

 

Operating lease right-of-use assets

 

22,353

 

 

23,544

 

 

23,604

 

Bank premises and equipment, net

 

7,067

 

 

7,236

 

 

7,558

 

Core deposit intangible, net

 

5,851

 

 

6,225

 

 

6,605

 

Other real estate owned

 

800

 

 

800

 

 

800

 

Interest receivable and other assets

 

75,511

 

 

62,400

 

 

51,362

 

Total assets

$

4,326,904

 

$

4,330,424

 

$

4,314,209

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

Liabilities

 

 

 

Deposits

 

 

 

Non-interest bearing

$

2,034,717

 

$

1,960,684

 

$

1,910,240

 

Interest bearing

 

 

 

Transaction accounts

 

297,871

 

 

299,336

 

 

290,813

 

Savings accounts

 

343,585

 

 

347,335

 

 

340,959

 

Money market accounts

 

1,012,823

 

 

1,108,852

 

 

1,116,303

 

Time accounts

 

141,674

 

 

145,135

 

 

150,235

 

Total deposits

 

3,830,670

 

 

3,861,342

 

 

3,808,550

 

Borrowings and other obligations

 

356

 

 

388

 

 

419

 

Operating lease liabilities

 

24,117

 

 

25,351

 

 

25,429

 

Interest payable and other liabilities

 

62,188

 

 

22,935

 

 

29,443

 

Total liabilities

 

3,917,331

 

 

3,910,016

 

 

3,863,841

 

 

 

 

 

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 - 16,009,600, 16,003,847 and 15,929,243 at June 30, 2022, March 31, 2022 and December 31, 2021, respectively

 

213,864

 

 

213,204

 

 

212,524

 

Retained earnings

 

253,737

 

 

246,511

 

 

239,868

 

Accumulated other comprehensive loss, net of taxes

 

(58,028

)

 

(39,307

)

 

(2,024

)

Total stockholders' equity

 

409,573

 

 

420,408

 

 

450,368

 

Total liabilities and stockholders' equity

$

4,326,904

 

$

4,330,424

 

$

4,314,209

 

BANK OF MARIN BANCORP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

 

 

Three months ended

Six months ended

(in thousands, except per share amounts; unaudited)

June 30, 2022

March 31, 2022

June 30, 2022

June 30, 2021

Interest income

 

 

 

 

Interest and fees on loans

$

23,334

 

$

23,677

 

$

47,011

 

$

42,090

 

Interest on investment securities

 

8,273

 

 

6,693

 

 

14,966

 

 

6,633

 

Interest on federal funds sold and due from banks

 

180

 

 

106

 

 

286

 

 

96

 

Total interest income

 

31,787

 

 

30,476

 

 

62,263

 

 

48,819

 

Interest expense

 

 

 

 

Interest on interest-bearing transaction accounts

 

53

 

 

56

 

 

109

 

 

78

 

Interest on savings accounts

 

32

 

 

29

 

 

61

 

 

40

 

Interest on money market accounts

 

438

 

 

478

 

 

916

 

 

598

 

Interest on time accounts

 

67

 

 

14

 

 

81

 

 

177

 

Interest on borrowings and other obligations

 

 

 

1

 

 

1

 

 

 

Interest on subordinated debenture

 

 

 

 

 

 

 

1,361

 

Total interest expense

 

590

 

 

578

 

 

1,168

 

 

2,254

 

Net interest income

 

31,197

 

 

29,898

 

 

61,095

 

 

46,565

 

Reversal of credit losses on loans

 

 

 

(485

)

 

(485

)

 

(3,849

)

Reversal of credit losses on unfunded loan commitments

 

 

 

(318

)

 

(318

)

 

(1,202

)

Net interest income after reversal of credit losses

 

31,197

 

 

30,701

 

 

61,898

 

 

51,616

 

Non-interest income

 

 

 

 

Wealth Management and Trust Services

 

630

 

 

600

 

 

1,230

 

 

1,018

 

Debit card interchange fees, net

 

531

 

 

505

 

 

1,036

 

 

785

 

Service charges on deposit accounts

 

465

 

 

488

 

 

953

 

 

598

 

Earnings on bank-owned life insurance, net

 

298

 

 

413

 

 

711

 

 

490

 

Dividends on Federal Home Loan Bank stock

 

249

 

 

259

 

 

508

 

 

326

 

Merchant interchange fees, net

 

149

 

 

140

 

 

289

 

 

118

 

Other income

 

406

 

 

462

 

 

868

 

 

513

 

Total non-interest income

 

2,728

 

 

2,867

 

 

5,595

 

 

3,848

 

Non-interest expense

 

 

 

 

Salaries and related benefits

 

10,341

 

 

11,548

 

 

21,889

 

 

18,096

 

Occupancy and equipment

 

1,894

 

 

1,909

 

 

3,803

 

 

3,502

 

Data processing

 

1,199

 

 

1,277

 

 

2,476

 

 

1,639

 

Professional services

 

665

 

 

913

 

 

1,578

 

 

1,849

 

Information technology

 

468

 

 

478

 

 

946

 

 

609

 

Depreciation and amortization

 

393

 

 

452

 

 

845

 

 

848

 

Amortization of core deposit intangible

 

374

 

 

380

 

 

754

 

 

408

 

Directors' expense

 

294

 

 

311

 

 

605

 

 

405

 

Federal Deposit Insurance Corporation insurance

 

296

 

 

290

 

 

586

 

 

361

 

Charitable contributions

 

511

 

 

45

 

 

556

 

 

493

 

Other expense

 

2,471

 

 

1,772

 

 

4,243

 

 

2,758

 

Total non-interest expense

 

18,906

 

 

19,375

 

 

38,281

 

 

30,968

 

Income before provision for income taxes

 

15,019

 

 

14,193

 

 

29,212

 

 

24,496

 

Provision for income taxes

 

3,953

 

 

3,728

 

 

7,681

 

 

6,264

 

Net income

$

11,066

 

$

10,465

 

$

21,531

 

$

18,232

 

Net income per common share:

 

 

 

 

Basic

$

0.70

 

$

0.66

 

$

1.35

 

$

1.38

 

Diluted

$

0.69

 

$

0.66

 

$

1.35

 

$

1.37

 

Weighted average shares:

 

 

 

 

Basic

 

15,921

 

 

15,876

 

 

15,898

 

 

13,227

 

Diluted

 

15,955

 

 

15,946

 

 

15,950

 

 

13,316

 

Comprehensive (loss) income:

 

 

 

 

Net income

$

11,066

 

$

10,465

 

$

21,531

 

$

18,232

 

Other comprehensive (loss) income:

 

 

 

 

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

 

(27,050

)

 

(38,228

)

 

(65,278

)

 

(6,284

)

Net unrealized losses on securities transferred from available-for-sale to held-to-maturity

 

 

 

(14,847

)

 

(14,847

)

 

 

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

 

472

 

 

144

 

 

616

 

 

281

 

Other comprehensive loss, before tax

 

(26,578

)

 

(52,931

)

 

(79,509

)

 

(6,003

)

Deferred tax (benefit) liability

 

(7,857

)

 

(15,648

)

 

(23,505

)

 

(1,780

)

Other comprehensive loss, net of tax

 

(18,721

)

 

(37,283

)

 

(56,004

)

 

(4,223

)

Total comprehensive (loss) income

$

(7,655

)

$

(26,818

)

$

(34,473

)

$

14,009

 

BANK OF MARIN BANCORP

AVERAGE STATEMENTS OF CONDITION AND ANALYSIS OF NET INTEREST INCOME

 

 

Three months ended

Three months ended

 

June 30, 2022

March 31, 2022

 

 

Interest

 

 

Interest

 

 

Average

Income/

Yield/

Average

Income/

Yield/

(in thousands)

Balance

Expense

Rate

Balance

Expense

Rate

Assets

 

 

 

 

 

 

Interest-earning deposits with banks 1

$

95,326

$

180

0.75

%

$

231,555

$

106

0.18

%

Investment securities 2, 3

 

1,807,710

 

8,469

1.87

%

 

1,626,537

 

6,871

1.69

%

Loans 1, 3, 4

 

2,194,810

 

23,522

4.24

%

 

2,227,495

 

23,881

4.29

%

Total interest-earning assets 1

 

4,097,846

 

32,171

3.11

%

 

4,085,587

 

30,858

3.02

%

Cash and non-interest-bearing due from banks

 

56,408

 

 

 

69,019

 

 

Bank premises and equipment, net

 

7,182

 

 

 

7,430

 

 

Interest receivable and other assets, net

 

151,483

 

 

 

183,222

 

 

Total assets

$

4,312,919

 

 

$

4,345,258

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Interest-bearing transaction accounts

$

300,258

$

53

0.07

%

$

295,183

$

56

0.08

%

Savings accounts

 

343,338

 

32

0.04

%

 

343,327

 

29

0.03

%

Money market accounts

 

1,076,912

 

438

0.16

%

 

1,122,215

 

478

0.17

%

Time accounts including CDARS

 

144,432

 

67

0.19

%

 

147,707

 

14

0.04

%

Borrowings and other obligations 1

 

370

 

0.61

%

 

399

 

1

0.62

%

Total interest-bearing liabilities

 

1,865,310

 

590

0.13

%

 

1,908,831

 

578

0.12

%

Demand accounts

 

1,984,629

 

 

 

1,942,804

 

 

Interest payable and other liabilities

 

49,709

 

 

 

51,997

 

 

Stockholders' equity

 

413,271

 

 

 

441,626

 

 

Total liabilities & stockholders' equity

$

4,312,919

 

 

$

4,345,258

 

 

Tax-equivalent net interest income/margin 1

 

$

31,581

3.05

%

 

$

30,280

2.96

%

Reported net interest income/margin 1

 

$

31,197

3.01

%

 

$

29,898

2.93

%

Tax-equivalent net interest rate spread

 

 

2.98

%

 

 

2.90

%

 

 

 

 

 

 

 

 

Six months ended

Six months ended

 

June 30, 2022

June 30, 2021

 

 

Interest

 

 

Interest

 

 

Average

Income/

Yield/

Average

Income/

Yield/

(in thousands)

Balance

Expense

Rate

Balance

Expense

Rate

Assets

 

 

 

 

 

 

Interest-earning deposits with banks 1

$

163,064

$

286

0.35

%

$

179,846

$

96

0.11

%

Investment securities 2, 3

 

1,717,624

 

15,340

1.79

%

 

601,498

 

6,948

2.31

%

Loans 1, 3, 4

 

2,211,062

 

47,403

4.26

%

 

2,081,069

 

42,437

4.06

%

Total interest-earning assets 1

 

4,091,750

 

63,029

3.06

%

 

2,862,413

 

49,481

3.44

%

Cash and non-interest-bearing due from banks

 

62,679

 

 

 

45,059

 

 

Bank premises and equipment, net

 

7,305

 

 

 

4,786

 

 

Interest receivable and other assets, net

 

167,265

 

 

 

132,675

 

 

Total assets

$

4,328,999

 

 

$

3,044,933

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Interest-bearing transaction accounts

$

297,734

$

109

0.07

%

$

170,943

$

78

0.09

%

Savings accounts

 

343,333

 

61

0.04

%

 

220,946

 

40

0.04

%

Money market accounts

 

1,099,439

 

916

0.17

%

 

719,769

 

598

0.17

%

Time accounts including CDARS

 

146,061

 

81

0.11

%

 

95,849

 

177

0.37

%

Borrowings and other obligations 1

 

384

 

1

0.62

%

 

50

 

1.46

%

Subordinated debenture 1, 5

 

 

%

 

1,076

 

1,361

251.54

%

Total interest-bearing liabilities

 

1,886,951

 

1,168

0.12

%

 

1,208,633

 

2,254

0.38

%

Demand accounts

 

1,963,832

 

 

 

1,442,320

 

 

Interest payable and other liabilities

 

50,846

 

 

 

42,753

 

 

Stockholders' equity

 

427,370

 

 

 

351,227

 

 

Total liabilities & stockholders' equity

$

4,328,999

 

 

$

3,044,933

 

 

Tax-equivalent net interest income/margin 1

 

$

61,861

3.01

%

 

$

47,227

3.28

%

Reported net interest income/margin 1

 

$

61,095

2.97

%

 

$

46,565

3.24

%

Tax-equivalent net interest rate spread

 

 

2.94

%

 

 

3.06

%

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 2022 and 2021.

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.

 

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