What changed in this filing

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Item 1. Business

2021-03-15 compared with 2020-03-13 · 61 added, 45 removed, 159 unchanged (40% of the section changed)

ITEM 1 BUSINESS

Bank of Marin (the “Bank”) was incorporated in August 1989, received its charter from the California Superintendent of Banks (now the California Department of Business Oversight or "DBO") and commenced operations in January 1990.

Bank of Marin (the “Bank”) was incorporated in August 1989, received its charter from the California Superintendent of Banks (now the Department of Financial Protection and Innovation or "DFPI") and commenced operations in January 1990.

The Bank is an insured bank by the Federal Deposit Insurance Corporation (“FDIC”).

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Virtually all of our business is conducted through Bancorp's subsidiary, Bank of Marin, which is headquartered in Novato, California.

In addition to our headquarters, we operate twenty-three offices in Alameda, Contra Costa, Marin, Napa, San Francisco, and Sonoma counties, with a strong emphasis on supporting the local communities.

Our customer base is made up of business and personal banking relationships from the communities near our office locations.

In addition to our headquarters, we operate twenty-five offices in Alameda, Contra Costa, Marin,

Napa, San Francisco, San Mateo and Sonoma counties, with a strong emphasis on supporting the local communities.

Our customer base is made up of commercial, business, not-for-profit and personal banking relationships from the communities within the seven Bay Area counties that we serve.

Our business banking focus is on small to medium-sized businesses, professionals and not-for-profit organizations.

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Our lending categories include commercial real estate loans, commercial and industrial loans (including small business loans), construction financing, consumer loans, and home equity lines of credit.

Merchant card services

are available for our business customers.

Through third-party vendors, we offer Visa ® credit card programs for consumers and businesses, an American Express ® credit card program, a leasing program for commercial equipment financing, prepaid business cards for handling expense reimbursements and a full suite of cash management services.

Through third-party vendors, we offer merchant and payroll services, a commercial equipment leasing program and consumer credit cards.

Other products and services include Apple Pay ® , Samsung Pay ® , Google Pay ® , Positive Pay (fraud detection tool), and solutions for clients with cash management needs such as Cash Vault and SafePoint ® .

We offer a variety of personal and business checking and savings accounts, and a number of time deposit alternatives, including time certificates of deposit, Individual Retirement Accounts (“IRAs”), Health Savings Accounts ("HSA"), Certificate of Deposit Account Registry Service ® ("CDARS"), Insured Cash Sweep ® ("ICS"), and Demand Deposit Marketplace SM ("DDM Sweep") accounts.

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A valet pick-up service is available for non-cash deposits to our professional and business clients.

Other products and services include Apple Pay ® , Samsung Pay ® , Google Pay ® , SurePayroll ® , Positive Pay (fraud detection tool), and solutions for clients with cash management needs such as Cash Vault and SafePoint ® .

Automated teller machines (“ATM's”) are available at most retail branch locations.

Automated teller machines (“ATM's”) are available at most branch locations.

Our ATM network is linked to the PLUS, CIRRUS and NYCE networks, as well as to a network of nation-wide surcharge-free ATM's called MoneyPass.

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All service marks registered by Bancorp or the Bank are registered on the United States Patent & Trademark Office Principal Register.

Our primary market area consists of Marin, San Francisco, Napa, Alameda, Sonoma, and Contra Costa counties.

Our customer base is primarily made up of business, not-for-profit and personal banking relationships within these market areas.

Our primary market area consists of Marin, Sonoma, Napa, San Francisco, Alameda, Contra Costa, and San Mateo counties.

Our customer base is primarily made up of commercial, business, not-for-profit and personal banking relationships within these market areas.

We attract deposit relationships from small to medium-sized businesses, not-for-profit organizations and professionals, merchants and individuals who live and/or work in the communities comprising our market areas.

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The banking business in California generally, and in our market area specifically, is highly competitive with respect to attracting both loan and deposit relationships.

The increasingly competitive environment is affected by changes in regulation, interest rates, technology and product delivery systems, and consolidation among financial service providers.

The increasingly competitive environment is affected by changes in regulation, interest rates, technology and product delivery systems, and consolidation among financial service

The banking industry is seeing strong competition for quality loans, with larger banks expanding their activities to attract businesses that are traditionally community bank customers.

In all of our six counties, we have significant competition from nationwide banks with much larger branch networks and greater financial resources, as well as credit unions and other local and regional banks.

In all of our seven counties, we have significant competition from nationwide banks with much larger branch networks and greater financial resources, as well as credit unions and other local and regional banks.

Nationwide banks have the competitive advantages of national advertising campaigns.

Large commercial banks also have substantially greater lending limits and the ability to offer certain services, which

are not offered directly by us.

Large commercial banks also have substantially greater lending limits and the ability to offer certain services which are not offered directly by us.

Other competitors for depositors' funds are money market mutual funds and non-bank financial institutions such as brokerage firms and insurance companies.

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The Bank's experienced professionals deliver innovative and custom financing, with a deep local market knowledge and a personal understanding of each customer's unique needs.

In Marin County, we have the fourth largest market share of total deposits at 10.8%, based upon FDIC deposit market share data as of June 30, 2019 1 .

In Marin County, we have the third largest market share of total deposits at 12.3%, based upon FDIC deposit market share data as of June 30, 2020 1 .

A significant driver of our franchise value is the growth and stability of our deposits, a low-cost funding source for our loan portfolio.

At December 31, 2019 , we employed 290 full-time equivalent (“FTE”) staff.

Human Capital Resources

At December 31, 2020, we employed 289 full-time equivalent staff.

The actual number of employees, including part-time employees, at year-end 2020 included seven executive officers, 132 other corporate officers and 169 staff.

None of our employees are presently represented by a union or covered by a collective bargaining agreement.

We offer a competitive total compensation package including a comprehensive benefits program to our employees designed to attract, retain and motivate employees, as well as to align with our performance, including employee ownership through our Employee Stock Ownership Plan.

We regularly compare compensation and benefits with peer companies and market data, making adjustments as needed to ensure compensation stays competitive.

We are continually investing in our workforce through employee development, education and training.

We strive to attract, develop, retain and plan for succession of key talent and executives to achieve our strategic objectives.

We pride ourselves on creating an open, diverse, and transparent culture that celebrates collaboration and recognizes employees at all levels.

We believe that the wide array of perspectives that result from such diversity promotes Legendary Service and business success.

We continue to learn and grow, and our current initiatives reflect our ongoing efforts around a more diverse, inclusive and equitable workplace.

In order to develop a workforce that aligns with our corporate values, we regularly sponsor local community events so that our employees can better integrate themselves in and support our communities.

We believe that our employees’ well-being and personal and professional development is fostered by our outreach to the communities we serve.

Our employees’ desire for active community involvement enables us to sponsor a number of local community events and initiatives, including funding and volunteering for youth mentorship and financial literacy programs to enhance educational opportunities and sponsoring local chambers of commerce and economic development corporations to foster economic vitality.

We recognize that employees who are engaged and committed to their work and workplace contribute meaningfully to our success.

On a regular basis, we solicit employee feedback through a confidential, company-wide survey on culture, management, career opportunities, compensation, and benefits.

The results of this survey are reviewed and used to update employee programs, initiatives, and communications.

We believe that our employee relations are good.

We have consistently been recognized as one of the “Best Places to Work” by the North Bay Business Journal.

COVID-19 Pandemic-Related Response

Since the onset of the pandemic and national emergency, we have taken actions to ensure the health and safety of employees and customers.

To protect the health of everyone, many employees are working remotely and strict social distancing and cleaning protocols have been enhanced across all locations.

Working hours for customer

S&P Global Market Intelligence of New York, New York

facing employees have been reduced while maintaining employee’s regular pay.

No employees have been laid off and no employees have had their pay reduced.

SUPERVISION AND REGULATION

Bank holding companies and banks are extensively regulated under both federal and state law.

The following discussion summarizes certain significant laws, rules and regulations affecting Bancorp and the Bank.

The following discus sion summarizes certain significant laws, rules and regulations affecting Bancorp and the Bank.

Bank Holding Company Regulation

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Bancorp is also a bank holding company within the meaning of the California Financial Code.

As such, Bancorp and its subsidiaries are subject to examination by, and may be required to file reports with, the DBO.

As such, Bancorp and its subsidiaries are subject to examination by, and may be required to file reports with, the DFPI.

Bank Regulation

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These regulations affect our lending practices, consumer protections, capital structure, investment practices and dividend policy.

As a state chartered bank, we are subject to regulation, supervision and examination by the DBO.

As a state chartered bank, we are subject to regulation, supervision and examination by the DFPI.

We are also subject to regulation, supervision and periodic examination by the FDIC.

If, as a result of an examination of the Bank, the FDIC or the DBO should determine that the financial condition, capital resources, asset quality, earnings prospects, management, liquidity, or other aspects of our operations are unsatisfactory, or that we have violated any law or regulation, various remedies are available to those regulators including issuing a “cease and desist” order, monetary penalties, restitution, restricting our growth or removing officers and directors.

If, as a result of an examination of the Bank, the FDIC or the DFPI should determine that the financial condition, capital resources, asset quality, earnings prospects, management, liquidity, or other aspects of our operations are unsatisfactory, or that we have violated any law or regulation, various remedies are available to those regulators including issuing a “cease and desist” order, monetary penalties, restitution, restricting our growth or removing officers and directors.

The Bank addresses the many state and federal regulations it is subject to through a comprehensive compliance program.

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S&P Global Market Intelligence of New York, New York

Safety and Soundness Standards (Risk Management)

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New products and services, third-party risk management and cybersecurity are critical sources of operational risk that financial institutions are expected to address in the current environment.

The Board of Directors and various sub-committees oversee Bancorp's consolidated enterprise risk management program that ensures the adequacy of policies, procedures, tolerance levels, risk measurement systems, monitoring processes, management information systems and internal controls.

The Board of Directors and various sub-committees oversee Bancorp's consolidated

enterprise risk management program that ensures the adequacy of policies, procedures, tolerance levels, risk measurement systems, monitoring processes, management information systems and internal controls.

Dividends and Stock Repurchases

Bancorp's ability to pay dividends to its shareholders may be affected by both general corporate law considerations and the policies of the Federal Reserve applicable to bank holding companies.

As a California corporation, Bancorp is subject to the limitations of California law, which allows a corporation to distribute cash or property to shareholders, including a dividend or repurchase or redemption of shares, if the corporation meets certain tests based its performance and financial condition.

Bancorp's primary source of cash is dividends received from the Bank.

Prior to any distribution from the Bank to Bancorp, we ensure that the dividend computations comply with the provisions of the California Financial Code and regulations set forth by the DBO and the FDIC.

See Note 8 to the Consolidated Financial Statements, under the heading “Dividends” in ITEM 8 of this report for more information.

Refer to Note 8 to the Consolidated Financial Statements, under the heading “Dividends” in ITEM 8 of this report for more information.

FDIC Insurance Assessments

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We also donate to, invest in and volunteer with organizations that serve the communities in which we do business, especially low- and moderate-income individuals.

These organizations offer educational and health programs to economically disadvantaged students and families,

community development services and affordable housing programs.

These organizations offer educational and health programs to economically disadvantaged students and families, community development services and affordable housing programs.

We offer CRA reportable small business, small farm and community development loans within our assessment areas.

The CRA requires a depository institution's primary federal regulator, in connection with its examination of the institution, to assess the institution's record in meeting CRA requirements.

The CRA require s a depository institution's primary federal regulator, in connection with its examination of the institution, to assess the institution's record in meeting CRA requirements.

The regulatory agency's assessment of the institution's record is made available to the public.

This record is taken into consideration when the institution establishes a new branch that accepts deposits, relocates an office, applies to merge or consolidate, or expands into other activities.

The FDIC assigned a “Satisfactory” rating to its CRA performance examination completed in January 2018, which was performed under the large bank requirements.

In December 2019, the FDIC and the OCC announced a proposal to modernize the agencies’ regulations under the CRA that have not been substantively updated for nearly 25 years.

The FDIC assigned a “Satisfactory” rating to its CRA performance examination based on their most recent examination completed in January 2018, which was performed under the large bank requirements.

In December 2019, the FDIC and the OCC announced a proposal to moderniz e the agencies’ regulations under the CRA that have not been substantively updated for nearly 25 years.

In order to increase transparency for CRA exams, the proposal clarifies what qualifies for credit under the CRA, enabling banks and their partners to better implement lending and deposit activities that can benefit communities.

The proposal also updates the definition of a small business loan and creates an additional definition of “assessment area” tied to where deposits are located, in part to address changes that have occurred due to the rise in digital banking, ensuring that banks continue to provide loans and other services to low- and moderate-income individuals and businesses in their communities.

On May 20, 2020, FDIC Chairman Jelena McWilliams released a statement that the FDIC strongly supports the efforts

to make the CRA rules clearer, more transparent, and less subjective.

However, the agency is not prepared to finalize a proposal at this time.

Chairman McWilliams recognized the "herculean effort" community banks are making to support small businesses and families during the coronavirus, and encouraged financial institutions to work constructively with borrowers affected by the COVID-19 pandemic.

Anti-Money-Laundering Regulations

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Consumer Protection Regulations

Our lending activities are subject to a variety of statutes and regulations designed to protect consumers, including the CRA, Home Mortgage Disclosure Act, Fair Credit Reporting Act, Fair Lending, Fair Debt Collection Practices Act, Flood Disaster Protection Act, Equal Credit Opportunity Act, the Fair Housing Act, Truth-in-Lending Act ("TILA"), the Real Estate Settlement Procedures Act ("RESPA"), Protecting Tenants at Foreclosure, and the Secure and Fair Enforcement for Mortgage Licensing Act ("SAFE").

Our lending activities are subject to a variety of statutes and regulations designed to protect consumers, including the CRA, Home Mortgage Disclosure Act, Fair Credit Reporting Act, Fair Lending, Fair Debt Collection Practices Act, Flood Disaster Protection Act, eSign Act, Equal Credit Opportunity Act, the Fair Housing Act, Truth-in-Lending Act ("TILA"), the Real Estate Settlement Procedures Act ("RESPA"), Protecting Tenants at Foreclosure, and the Secure and Fair Enforcement for Mortgage Licensing Act ("SAFE").

Our deposit operations are also subject to laws and regulations that protect consumer rights including Expedited Funds Availability, Truth in Savings Act ("TISA"), and Electronic Funds Transfers.

Other regulatory requirements include:

the Unfair, Deceptive or Abusive Acts and Practices ("UDAAP"), Dodd-Frank Act, Right to Financial Privacy, Telephone Consumer Protection Act and Privacy of Consumer Financial Information.

Other regulatory requirements include the Unfair, Deceptive or Abusive Acts and Practices ("UDAAP"), Dodd-Frank Act, Right to Financial Privacy, Telephone Consumer Protection Act and Privacy of Consumer Financial Information.

Additional rules govern check writing ability on certain interest earning accounts and prescribe procedures for complying with administrative subpoenas of financial records.

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Section 23A places restrictions on the Bank's “covered transactions” with Bancorp, including loans and other extensions of credit, investments in the securities of, and purchases of assets from Bancorp.

Section 23B requires that certain transactions, including all covered transactions, be on market terms and conditions.

Section 23B requires that certain transactions, including all covered

transactions, be on market terms and conditions.

Federal Reserve Regulation W combines statutory restrictions on transactions between the Bank and Bancorp with Federal Reserve interpretations in an effort to simplify compliance with Sections 23A and 23B.

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Qualifying banks may opt in and out of the CBLR framework at any time.

While we are a qualifying community banking organization, we will assess the implications of opting into this rule in the future.

While we are a qualifying community banking organization, we have not opted into the CBLR framework at this time.

See below, for further discussion of the Economic Growth Act.

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The Dodd-Frank Act, a landmark financial reform bill comprised of voluminous new rules and restrictions on bank operations, included provisions aimed at preventing a repeat of the 2008 financial crisis and a new process for winding down failing, systemically important institutions in a manner as close to a controlled bankruptcy as possible.

Among other things, the Dodd-Frank Act established new government oversight responsibilities, enhanced capital adequacy

requirements for certain institutions, established consumer protection laws and regulations, and placed limitations on certain banking activities.

Among other things, the Dodd-Frank Act established new government oversight responsibilities, enhanced capital adequacy requirements for certain institutions, established consumer protection laws and regulations, and placed limitations on certain banking activities.

In an attempt to reduce the regulatory burden on U.S.

companies, including financial institutions, in May 2018, the current Presidential Administration signed the Economic Growth Act, which repeals or modifies certain provisions of the Dodd-Frank Act and eases regulations on all but the largest banks.

The Economic Growth Act’s highlights include improving consumer access to mortgage credit, adding certain protections for consumers, including veterans and active duty military personnel, expanding credit freezes and creating an identity theft protection database.

While the Economic Growth Act modifies several provisions in the Dodd-Frank Act, the modifications are subject to implementing regulations and is expected to continue to impact smaller institutions like us over time.

In many respects, the regulations of the Dodd-Frank Act have been put in place.

We will continue to evaluate the effect of the Dodd-Frank Act and the Economic Growth Act as well as any other new legislative changes for impact on our results of operations and financial condition.

companies, including financial institutions, in May 2018, the Presidential Administration signed the Economic Growth Act, which repealed or modified certain provisions of the Dodd-Frank Act and eased regulations on all but the largest banks.

The Economic Growth Act’s highlights included improving consumer access to mortgage credit, added certain protections for consumers, included veterans and active duty military personnel, expanded credit freezes and created an identity theft protection database.

Notice and Approval Requirements Related to Control

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On our Internet web site, www.bankofmarin.com, we post the following filings as soon as reasonably practical after they are filed with or furnished to the Securities and Exchange Commission:

Annual Report to Shareholders, Form

10-K, Proxy Statement for the Annual Meeting of Shareholders, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities and Exchange Act of 1934.

Annual Report to Shareholders, Form 10-K, Proxy Statement for the Annual Meeting of Shareholders, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities and Exchange Act of 1934.

All such materials on our website are available free of charge.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business