What changed in this filing

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Item 1. Financial Statements

2021-08-05 compared with 2021-05-07 · 242 added, 174 removed, 870 unchanged (32% of the section changed)

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CONDITION

March 31, 2021 and December 31, 2020

(in thousands, except share data;

unaudited) March 31, 2021 December 31, 2020

unaudited) June 30, 2021 December 31, 2020

Cash, cash equivalents and restricted cash $ 257,543 $ 200,320

Investment securities:

Held-to-maturity, at amortized cost (net of zero allowance for credit losses at March 31, 2021 and December 31, 2020 )

Held-to-maturity, at amortized cost (net of zero allowance for credit losses at June 30, 2021 and December 31, 2020 )

169,038 109,036

Available-for-sale, at fair value (net of zero allowance for credit losses at March 31, 2021 and December 31, 2020 )

Available-for-sale, at fair value (net of zero allowance for credit losses at June 30, 2021 and December 31, 2020 )

517,963 392,351

1 unchanged sentence

Loans, at amortized cost 2,002,767 2,088,556

Allowance for credit losses ( 19,958 ) ( 22,874 )

Loans, net of allowance for credit losses

Allowance for credit losses on loans ( 19,100 ) ( 22,874 )

Loans, net of allowance for credit losses on loans

1,983,667 2,065,682

23 unchanged sentences

Authorized - 30,000,000 shares;

issued and outstanding - 13,326,509 and 13,500,453 at March 31, 2021 and December 31, 2020, respectively

issued and outstanding - 13,055,105 and 13,500,453 at June 30, 2021 and December 31, 2020, respectively

108,430 125,905

6 unchanged sentences

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three months ended

Three months ended Six months ended

(in thousands, except per share amounts;

unaudited) March 31, 2021 March 31, 2020

unaudited) June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020

Interest income

13 unchanged sentences

(Reversal of) provision for credit losses on loans ( 920 ) 2,000 ( 3,849 ) 4,200

(Reversal of) provision for credit losses on unfunded loan commitments ( 612 ) 260 ( 1,202 ) 362

Net interest income after (reversal of) provision for credit losses 26,066 22,115 51,616 43,932

14 unchanged sentences

Data processing 820 829 1,639 1,615

Charitable contributions 462 273 493 440

Depreciation and amortization 389 526 848 1,052

Information technology 296 252 609 502

Directors' expense 230 175 405 349

Amortization of core deposit intangible 204 213 408 426

Federal Deposit Insurance Corporation insurance 182 116 361 118

Directors' expense 175 174

Charitable contributions 31 167

(Reversal of) provision for credit losses on unfunded loan commitments ( 590 ) 102

Other expense 1,348 1,422 2,758 2,987

11 unchanged sentences

Net income $ 9,285 $ 7,406 $ 18,232 $ 14,634

Other comprehensive (loss) income

Other comprehensive income (loss):

Change in net unrealized gains on available-for-sale securities 2,798 1,494 ( 6,284 ) 11,306

1 unchanged sentence

Amortization of net unrealized losses on securities transferred from available-for-sale to held-to-maturity 138 135 281 245

Other comprehensive (loss) income, before tax ( 8,939 ) 9,122

Deferred tax (benefit) expense ( 2,644 ) 2,697

Other comprehensive (loss) income, net of tax ( 6,295 ) 6,425

Other comprehensive income (loss), before tax 2,936 1,514 ( 6,003 ) 10,636

Deferred tax expense (benefit) 864 448 ( 1,780 ) 3,145

Other comprehensive income (loss), net of tax 2,072 1,066 ( 4,223 ) 7,491

Total comprehensive income $ 11,357 $ 8,472 $ 14,009 $ 22,125

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

For the three months ended March 31, 2021 and 2020

For the three months ended June 30, 2021 and 2020

(in thousands, except share data;

4 unchanged sentences

Shares Amount

Three months ended March 31, 2021

Three months ended June 30, 2021

Balance at April 1, 2021 13,326,509 $ 118,386 $ 225,600 $ 6,306 $ 350,292

Net income — — 9,285 — 9,285

Other comprehensive income — — — 2,072 2,072

Stock options exercised, net of shares surrendered for cashless exercises and tax withholdings 14,000 314 — — 314

Stock issued under employee stock purchase plan 831 25 — — 25

Stock issued under employee stock ownership plan 9,300 336 — — 336

Restricted stock granted 2,400 — — — —

Stock-based compensation - stock options — 28 — — 28

Stock-based compensation - restricted stock — 95 — — 95

Cash dividends paid on common stock ($ 0.23 per share)

— — ( 3,044 ) — ( 3,044 )

Stock repurchased, net of commissions ( 297,935 ) ( 10,754 ) — — ( 10,754 )

Balance at June 30, 2021 13,055,105 $ 108,430 $ 231,841 $ 8,378 $ 348,649

Three months ended June 30, 2020

Balance at April 1, 2020 13,565,969 $ 127,684 $ 207,328 $ 10,928 $ 345,940

Net income — — 7,406 — 7,406

Other comprehensive income — — — 1,066 1,066

Stock options exercised, net of shares surrendered for cashless exercises and tax withholdings 14,760 453 — — 453

Stock issued under employee stock purchase plan 537 17 — — 17

Stock issued under employee stock ownership plan 11,500 324 — — 324

Restricted stock forfeited / cancelled ( 931 ) — — — —

Stock-based compensation - stock options — 42 — — 42

Stock-based compensation - restricted stock — 113 — — 113

Cash dividends paid on common stock ($ 0.23 per share)

— — ( 3,121 ) — ( 3,121 )

Balance at June 30, 2020 13,591,835 $ 128,633 $ 211,613 $ 11,994 $ 352,240

The accompanying notes are an integral part of these consolidated financial statements (unaudited).

BANK OF MARIN BANCORP

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

For the six months ended June 30, 2021 and 2020

(in thousands, except share data;

unaudited) Common Stock Retained

Earnings Accumulated Other

Comprehensive (Loss) Income,

Net of Taxes Total

Shares Amount

Six months ended June 30, 2021

Balance at January 1, 2021 13,500,453 $ 125,905 $ 219,747 $ 12,601 $ 358,253

14 unchanged sentences

Stock repurchased, net of commissions ( 521,948 ) ( 19,264 ) — — ( 19,264 )

Balance at March 31, 2021 13,326,509 $ 118,386 $ 225,600 $ 6,306 $ 350,292

Three months ended March 31, 2020

Balance at June 30, 2021 13,055,105 $ 108,430 $ 231,841 $ 8,378 $ 348,649

Six months ended June 30, 2020

Balance at January 1, 2020 13,577,008 $ 129,058 $ 203,227 $ 4,503 $ 336,788

14 unchanged sentences

Stock repurchased, net of commissions ( 92,664 ) ( 3,230 ) — — ( 3,230 )

Balance at March 31, 2020 13,565,969 $ 127,684 $ 207,328 $ 10,928 $ 345,940

Balance at June 30, 2020 13,591,835 $ 128,633 $ 211,613 $ 11,994 $ 352,240

The accompanying notes are an integral part of these consolidated financial statements (unaudited).

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the three months ended March 31, 2021 and 2020

For the six months ended June 30, 2021 and 2020

(in thousands;

unaudited) March 31, 2021 March 31, 2020

unaudited) June 30, 2021 June 30, 2020

Cash Flows from Operating Activities:

8 unchanged sentences

Amortization of investment security premiums, net of accretion of discounts 1,753 344

Accretion of (discounts) premiums on acquired loans ( 33 ) 11

Accretion of discounts on acquired loans ( 78 ) ( 55 )

Accretion of discount on subordinated debenture 1,347 35

20 unchanged sentences

Cash Flows from Financing Activities:

Net increase (decrease) in deposits 151,950 ( 29,379 )

Net increase in deposits 179,326 443,377

Proceeds from stock options exercised 351 1,277

5 unchanged sentences

Cash dividends paid on common stock ( 6,138 ) ( 6,248 )

Net cash provided by (used in) financing activities 135,838 ( 35,099 )

Net decrease in cash, cash equivalents and restricted cash ( 57,501 ) ( 27,114 )

Net cash provided by financing activities 149,619 434,961

Net increase in cash, cash equivalents and restricted cash 57,223 214,311

Cash, cash equivalents and restricted cash at beginning of period 200,320 183,388

4 unchanged sentences

Supplemental disclosure of noncash investing and financing activities:

Change in net unrealized gain or loss on available-for-sale securities $ ( 9,082 ) $ 9,812

Change in net unrealized gains on available-for-sale securities $ ( 6,284 ) $ 11,306

Amortization of net unrealized loss on available-for-sale securities transferred to held-to-maturity $ 281 $ 245

Purchase of investment security not yet settled $ 10,000 $ —

Stock issued to employee stock ownership plan $ 668 $ 648

Stock issued in payment of director fees $ 117 $ 117

Repurchase of stock not yet settled $ 132 $ —

Stock issued for director compensation expense $ 162 $ 150

Restricted cash 1

9 unchanged sentences

generally accepted accounting principles ("GAAP") have been condensed or omitted pursuant to those rules and regulations.

Certain items in prior financial statements have been reclassified to conform to the current presentation.

Certain items in prior financial statements were reclassified to conform to the current presentation, including the reclassification of the provision for credit losses on unfunded commitments in the second quarter of 2021 from non-interest expense to a separate line item under the provision for credit losses on loans in the consolidated statements of comprehensive income.

Although we believe that the disclosures are adequate and the information presented is not misleading, we suggest that these interim financial statements be read in conjunction with the annual financial statements and the notes thereto included in our 2020 Annual Report on Form 10-K.

17 unchanged sentences

Under the two-class method, the difference in EPS is nominal for these participating securities.

Three months ended

(in thousands, except per share data) March 31, 2021 March 31, 2020

Three months ended Six months ended

(in thousands, except per share data) June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020

Weighted average basic common shares outstanding 13,092 13,514 13,227 13,519

53 unchanged sentences

Changes in Fair Value Recorded In 1

March 31, 2021

June 30, 2021

Securities available-for-sale:

20 unchanged sentences

agencies or government-sponsored agencies' debt securities, mortgage-backed securities, government agency-issued, privately-issued collateralized mortgage obligations, and corporate bonds.

As of March 31, 2021 and December 31, 2020, there were no Level 1 or Level 3 securities.

As of June 30, 2021 and December 31, 2020, there were no Level 1 or Level 3 securities.

Held-to-maturity securities may be written down to fair value as a result of impairment through a provision for credit losses in investments securities.

We did no t record any write-downs during the three months ended March 31, 2021 or March 31, 2020.

We did no t record any write-downs during the six months ended June 30, 2021 or June 30, 2020.

Fair value of held-to-maturity securities is determined using the same techniques discussed above for available-for-sale securities.

2 unchanged sentences

Valuation adjustments may be made to reflect both our own credit risk and the counterparties’ credit risk in determining the fair value of the derivatives.

Level 2 inputs for the valuations are limited to observable market prices for London Interbank Offered Rate ("LIBOR") and Overnight Index Swap

("OIS") rates (for the very short term), quoted prices for LIBOR futures contracts, observable market prices for LIBOR and OIS swap rates, and one-month and three-month LIBOR basis spreads at commonly quoted intervals.

Level 2 inputs for the valuations are limited to observable market prices for London Interbank Offered Rate ("LIBOR") and Overnight Index Swap ("OIS") rates (for the very short term), quoted prices for LIBOR futures contracts, observable market prices for LIBOR and OIS swap rates, and one-month and three-month LIBOR basis spreads at commonly quoted intervals.

Mid-market pricing of the inputs is used as a practical expedient in the fair value measurements.

7 unchanged sentences

These assets are subject to fair value adjustments that result from the application of the lower of cost or fair value accounting or write-downs of individual assets, such as impaired loans that are collateral dependent and other real estate owned ("OREO").

As of March 31, 2021 and December 31, 2020, we did no t carry any assets measured at fair value on a non-recurring basis.

As of June 30, 2021 and December 31, 2020, we did no t carry any assets measured at fair value on a non-recurring basis.

Disclosures about Fair Value of Financial Instruments

The table below is a summary of fair value estimates for financial instruments as of March 31, 2021 and December 31, 2020, excluding financial instruments recorded at fair value on a recurring basis (summarized in the first table in this note).

The table below is a summary of fair value estimates for financial instruments as of June 30, 2021 and December 31, 2020, excluding financial instruments recorded at fair value on a recurring basis (summarized in the first table in this note).

The carrying amounts in the following table are recorded in the consolidated statements of condition under the indicated captions.

1 unchanged sentence

Additionally, we held shares of Federal Home Loan Bank ("FHLB") of San Francisco stock and Visa Inc.

Class B common stock, both recorded at cost, as there was no impairment or changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer as of March 31, 2021 or December 31, 2020.

The values are discussed in Note 4, Investment Securities.

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

(in thousands) Carrying Amounts Fair Value Fair Value Hierarchy Carrying Amounts Fair Value Fair Value Hierarchy

9 unchanged sentences

Fair value of loans is based on exit price techniques and obtained from an independent third-party that uses its proprietary valuation model and methodology and may not reflect actual or prospective market valuations.

The discounted cash flow valuation approach reflects key inputs and assumptions such as loan probability of default, loss given default, prepayment speed, and market discount rates.

discounted cash flow valuation approach reflects key inputs and assumptions such as loan probability of default, loss given default, prepayment speed, and market discount rates.

Fair value of fixed-rate time deposits is estimated by discounting future contractual cash flows using discount rates that reflect the current market rates offered for time deposits of similar remaining maturities.

1 unchanged sentence

The value of unrecognized financial instruments is estimated based on the fee income associated with the commitments which, in the absence of credit exposure, is considered to approximate their settlement value.

The fair value of commitment fees was not material as of March 31, 2021 or December 31, 2020.

The fair value of commitment fees was not material as of June 30, 2021 or December 31, 2020.

Investment Securities

4 unchanged sentences

We also invest in residential and commercial mortgage-backed securities (“MBS”/"CMBS") and collateralized mortgage obligations (“CMOs”) issued or guaranteed by the GSEs, as reflected in the following table.

A summary of the amortized cost, fair value and allowance for credit losses related to securities held-to-maturity as of March 31, 2021 and December 31, 2020 is presented below.

A summary of the amortized cost, fair value and allowance for credit losses related to securities held-to-maturity as of June 30, 2021 and December 31, 2020 is presented below.

Held-to-maturity:

2 unchanged sentences

(in thousands) Gains (Losses)

March 31, 2021

June 30, 2021

Securities of U.S.

8 unchanged sentences

December 31, 2020

Corporate bonds $ — $ — $ — $ — $ — $ —

Securities of U.S.

6 unchanged sentences

Total held-to-maturity $ 109,036 $ — $ 109,036 $ 6,149 $ — $ 115,185

1 Amortized cost and fair values exclude accrued interest receivable of $ 295 thousand and $ 366 thousand at March 31, 2021 and December 31, 2020, respectively, which is included in interest receivable and other assets in the consolidated statements of condition.

1 Amortized cost and fair values exclude accrued interest receivable of $ 550 thousand and $ 366 thousand at June 30, 2021 and December 31, 2020, respectively, which is included in interest receivable and other assets in the consolidated statements of condition.

Management measures expected credit losses on held-to-maturity securities on a collective basis by major security type with each type sharing similar risk characteristics, and considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts.

1 unchanged sentence

Accordingly, no allowance for credit losses has been recorded for these securities.

With regard to securities issued by states and political subdivisions, management considers (i) issuer and/or guarantor credit ratings, (ii) historical probability of default and loss given default rates for given bond ratings and remaining maturity,(iii) whether issuers continue to make timely principal and interest payments under the contractual terms of the securities, (iv) internal credit review of the financial information, and (v) whether or not such securities have credit enhancements such as guarantees, contain a defeasance clause, or are pre-refunded by the issuers.

With regard to securities issued by states and political subdivisions, management considers (i) issuer and/or guarantor credit

ratings, (ii) historical probability of default and loss given default rates for given bond ratings and remaining maturity,(iii) whether issuers continue to make timely principal and interest payments under the contractual terms of the securities, (iv) internal credit review of the financial information, and (v) whether or not such securities have credit enhancements such as guarantees, contain a defeasance clause, or are pre-refunded by the issuers.

Based on the comprehensive analysis, no credit losses are expected.

The following table summarizes the amortized cost of our portfolio of held-to-maturity securities issued by states and political subdivisions by Moody's and/or Standard & Poor's bond ratings as of March 31, 2021.

(in thousands) Obligations of state and political subdivisions

A summary of the amortized cost, fair value and allowance for credit losses related to securities available-for-sale as of March 31, 2021 and December 31, 2020 is presented below.

Obligations of state and political subdivisions

(in thousands) June 30, 2021 December 31, 2020

AA $ 376 $ 1,461

Total $ 580 $ 1,667

A summary of the amortized cost, fair value and allowance for credit losses related to securities available-for-sale as of June 30, 2021 and December 31, 2020 is presented below.

Available-for-sale:

2 unchanged sentences

(in thousands) Gains (Losses)

March 31, 2021

June 30, 2021

Securities of U.S.

20 unchanged sentences

Total available-for-sale $ 373,038 $ 19,393 $ ( 80 ) $ — $ 392,351

1 Amortized cost and fair value exclude accrued interest receivable of $ 1.9 million at both March 31, 2021 and December 31, 2020, which is included in interest receivable and other assets in the consolidated statements of condition.

The amortized cost a nd fair value of investment debt securities by contractual maturity at March 31, 2021 and December 31, 2020 are shown below.

1 Amortized cost and fair value exclude accrued interest receivable of $ 2.4 million and $ 1.9 million June 30, 2021 and December 31, 2020, which is included in interest receivable and other assets in the consolidated statements of condition.

The amortized cost a nd fair value of investment debt securities by contractual maturity at June 30, 2021 and December 31, 2020 are shown below.

Expected maturities may differ from contractual maturities if the issuers of the securities have the right to call or prepay obligations with or without call or prepayment penalties.

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Held-to-Maturity Available-for-Sale Held-to-Maturity Available-for-Sale

6 unchanged sentences

Sales of investment securities and gross gains and losses are shown in the following table:

Three months ended

(in thousands) March 31, 2021 March 31, 2020

Three months ended Six months ended

(in thousands) June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020

Available-for-sale:

1 unchanged sentence

Gross realized gains — 116 — 916

Gross realized losses — ( 1 ) — ( 1 )

Pledged investment securities are shown in the following table:

(in thousands) March 31, 2021 December 31, 2020

(in thousands) June 30, 2021 December 31, 2020

Pledged to the State of California:

4 unchanged sentences

Total pledged investment securities $ 146,494 $ 132,431

There were 29 and 10 securities in unrealized loss positions at March 31, 2021 and December 31, 2020, respectively.

There were 23 and 10 securities in unrealized loss positions at June 30, 2021 and December 31, 2020, respectively.

Those securities are summarized and classified according to the duration of the loss period in the tables below:

March 31, 2021 < 12 continuous months ≥ 12 continuous months Total securities

June 30, 2021 < 12 continuous months ≥ 12 continuous months Total securities

in a loss position

22 unchanged sentences

Total temporarily impaired securities $ 9,918 $ ( 25 ) $ 1,790 $ ( 55 ) $ 11,708 $ ( 80 )

As of March 31, 2021, the investment portfolio included 5 investment securities that had been in a continuous loss position for twelve months or more and 24 investment securities that had been in a loss position for less than twelve months.

As of June 30, 2021, the investment portfolio included 4 investment securities that had been in a continuous loss position for twelve months or more and 19 investment securities that had been in a loss position for less than twelve months.

Securities issued by government-sponsored agencies, such as FNMA and FHLMC, usually have implicit credit support by the U.S.

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Our investment in obligations of state and political subdivisions bonds are deemed credit worthy after our comprehensive analysis of the issuers' latest financial information, credit ratings by major credit agencies, and/or credit enhancements.

At March 31, 2021, management determined that it did not intend to sell any investment securities with unrealized losses, and it is more likely than not that we will not be required to sell securities with unrealized losses before recovery of their amortized cost.

Therefore, no allowances for credit losses has been recognized on available for sale securities in an unrealized loss position as management does not believe any of the securities are impaired due to reasons of credit quality at March 31, 2021.

At June 30, 2021, management determined that it did not intend to sell any investment securities with unrealized losses, and it is more likely than not that we will not be required to sell securities with unrealized losses before recovery of their amortized cost.

Non-Marketable Securities Included in Other Assets

3 unchanged sentences

Shares cannot be purchased or sold except between the FHLB and its members at the $ 100 per share par value.

We held $ 11.9 million of FHLB stock included in other assets on the consolidated statements of condition at both March 31, 2021 and December 31, 2020.

We held $ 11.9 million of FHLB stock included in other assets on the consolidated statements of condition at both June 30, 2021 and December 31, 2020.

The carrying amounts of these investments are reasonable estimates of fair value because the securities are restricted to member banks and they do not have a readily determinable market value.

Based on our analysis of FHLB's financial condition and certain qualitative factors, we determined that the FHLB stock was not impaired at March 31, 2021 and December 31, 2020.

On April 29, 2021, FHLB announced a cash dividend for the first quarter of 2021 at an annualized dividend rate of 6.00 % to be distributed in mid-May 2021.

Based on our analysis of FHLB's financial condition and certain qualitative factors, we determined that the FHLB stock was not impaired at June 30, 2021 and December 31, 2020.

On July 29, 2021, FHLB announced a cash dividend for the second quarter of 2021 at an annualized dividend rate of 6.00 % to be distributed in mid-August 2021.

Cash dividends paid on FHLB capital stock are recorded as non-interest income.

1 unchanged sentence

As a member bank of Visa U.S.A., we held 10,439 shares of Visa Inc.

Class B common stock at March 31, 2021 and December 31, 2020.

Class B common stock at June 30, 2021 and December 31, 2020.

These shares have a carrying value of zero and are restricted from resale to non-member banks of Visa U.S.A.

1 unchanged sentence

Because of the restriction and the uncertainty on the conversion rate to Class A shares, these shares lack a readily determinable fair value.

When converting this Class B common stock to Class A common stock based on the estimated conversion rate of 1.6228 both at March 31, 2021 and December 31, 2020, and the closing stock price of Class A shares at those respective dates, the converted value of our shares of Class B common stock would have been $ 3.6 million and $ 3.7 million at March 31, 2021 and December 31, 2020, respectively.

The conversion rate is subject to further adjustment upon the final settlement of the covered litigation against Visa Inc.

When converting this Class B common stock to Class A common stock based on the estimated conversion rate of 1.6228 both at June 30, 2021 and December 31, 2020, and the closing stock price of Class A shares at those respective dates, the converted value of our shares of Class B common stock would have been $ 4.0 million and $ 3.7 million at June 30, 2021 and December 31, 2020, respectively.

The conversion rate is subject to further adjustment upon the final settlement of the covered litigation

against Visa Inc.

and its member banks.

2 unchanged sentences

Low Income Housing Tax Credits

We invest in low-income housing tax credit funds as a limited partner, which totaled $ 3.4 million and $ 3.5 million recorded in other assets as of March 31, 2021 and December 31, 2020, respectively.

In the first three months of 2021, we recognized $ 160 thousand of low-income housing tax credits and other tax benefits, offset by $ 135 thousand of amortization expense of low-income housing tax credit investment, as a component of income tax expense.

As of March 31, 2021, our unfunded commitments for these low-income housing tax credit funds totaled $ 508 thousand.

We did no t recognize any impairment losses on these low-income housing tax credit investments during the first three months of 2021 or 2020, as the value of the future tax benefits exceeds the carrying value of the investments.

Loans and Allowance for Credit Losses

Under the accounting relief provisions of the Coronavirus Aid, Relief and Economic Security ("CARES") Act passed in March 2020, we postponed the adoption of the CECL standard form January 1, 2020 to December 31, 2020.

We invest in low-income housing tax credit funds as a limited partner, which totaled $ 3.3 million and $ 3.5 million recorded in other assets as of June 30, 2021 and December 31, 2020, respectively.

In the first six months of 2021, we recognized $ 323 thousand of low-income housing tax credits and other tax benefits, offset by $ 271 thousand of amortization expense of low-income housing tax credit investment, as a component of income tax expense.

As of June 30, 2021, our unfunded commitments for these low-income housing tax credit funds totaled $ 474 thousand.

We did no t recognize any impairment losses on these low-income housing tax credit investments during the first six months of 2021 or 2020, as the value of the future tax benefits exceeds the carrying value of the investments.

Loans and Allowance for Credit Losses on Loans

Under the accounting relief provisions of the Coronavirus Aid, Relief and Economic Security ("CARES") Act passed in March 2020, we postponed the adoption of the CECL standard from January 1, 2020 to December 31, 2020.

Upon adoption we used a modified retrospective method effective October 1, 2020 (the beginning of the first reporting period in which the standard was effective due to the postponement of CECL) through a cumulative adjustment to retained earnings.

2 unchanged sentences

Certain prior period credit quality disclosures related to impaired loans and individually and collectively evaluated loans were superseded with the CECL accounting standards and have not been included below.

Refer to Notes 1 and 3 under Part II, Item 8, of our 2020 Form 10-K for for additional information regarding the adoption of CECL.

In addition, refer to Note 5 under Part I, Item 1, of our March 31, 2020 Form 10-Q for prior period information.

The following table presents the amortized cost of loans by class as of March 31, 2021 and December 31, 2020.

(in thousands) March 31, 2021 December 31, 2020

Refer to Notes 1 and 3 under Part II, Item 8, of our 2020 Form 10-K for additional information regarding the adoption of CECL.

In addition, refer to Note 5 under Part I, Item 1, of our June 30, 2020 Form 10-Q for prior period information.

The following table presents the amortized cost of loans by class as of June 30, 2021 and December 31, 2020.

(in thousands) June 30, 2021 December 31, 2020

Commercial and industrial $ 423,646 $ 498,408

9 unchanged sentences

Total loans, net $ 1,983,667 $ 2,065,682

1 Amortized cost includes net deferred loan origination fees of $( 6.7 ) million and $( 4.9 ) million at March 31, 2021 and December 31, 2020, respectively.

Amounts are also net of unrecognized purchase discounts of $ 782 thousand and $ 815 thousand at March 31, 2021 and December 31, 2020, respectively.

Amortized cost excludes accrued interest, which totaled $ 8.5 million and $ 8.8 million at March 31, 2021 and December 31, 2020, respectively, and is included in interest receivable and other assets in the consolidated statements of condition.

1 Amortized cost includes net deferred loan origination fees of $( 5.2 ) million and $( 4.9 ) million at June 30, 2021 and December 31, 2020, respectively.

Amounts are also net of unrecognized purchase discounts of $ 737 thousand and $ 815 thousand at June 30, 2021 and December 31, 2020, respectively.

Amortized cost excludes accrued interest, which totaled $ 7.3 million and $ 8.8 million at June 30, 2021 and December 31, 2020, respectively, and is included in interest receivable and other assets in the consolidated statements of condition.

Lending Risks

5 unchanged sentences

We target stable businesses with guarantors who provide additional sources of repayment and have proven to be resilient in periods of economic stress.

A weakened economy, and resultant decreased consumer and/or business spending, may have an effect on the credit quality of commercial loans.

economy, and resultant decreased consumer and/or business spending, may have an effect on the credit quality of commercial loans.

In April 2020, the Bank began participating in the Small Business Administration's ("SBA") Paycheck Protection Program ("PPP").

As of March 31, 2021, there were 2,513 PPP loans outstanding.

PPP loans totaling $ 365.0 million (net of $ 8.0 million in unrecognized fees and costs) and $ 291.6 million (net of $ 5.4 million in unrecognized fees and costs) as of March 31, 2021 and December 31, 2020, respectively, were included in commercial and industrial loan balances.

Of the PPP loans outstanding as of March 31, 2021, 841 loans totaling $ 119.5 million funded during the first quarter of 2021 under the second round of the PPP stimulus plan.

As of June 30, 2021, there were 1,532 PPP loans outstanding.

PPP loans totaling $ 248.3 million (net of $ 6.5 million in unrecognized fees and costs) and $ 291.6 million (net of $ 5.4 million in unrecognized fees and costs) as of June 30, 2021 and December 31, 2020, respectively, were included in commercial and industrial loan balances.

Of the 1,532 PPP loans outstanding as of June 30, 2021, 1,060 loans totaling $ 136.0 million were funded during the first half of 2021 under the second round of the PPP stimulus plan.

PPP loans have terms of two to five years and earn interest at 1%.

1 unchanged sentence

The recognition of fees and costs is accelerated when the SBA forgives the loan and/or the loan is paid off prior to maturity.

PPP loans are fully

guaranteed by the SBA and have virtually no risk of loss.

PPP loans are fully guaranteed by the SBA and have virtually no risk of loss.

We expect the vast majority of the PPP loans to be fully forgiven by the SBA.

29 unchanged sentences

These borrowers are capable of sustaining normal economic, market or operational setbacks without significant financial consequences.

Negative external industry factors are generally not present.

Negative external industry factors are generally

The loan may be secured, unsecured or supported by non-real estate collateral for which the value is more difficult to determine and/or marketability is more uncertain.

6 unchanged sentences

A Substandard asset has a well-defined weakness or weaknesses that jeopardize(s) the liquidation of the debt.

Substandard assets are characterized by the distinct possibility that we will sustain some

loss if such weaknesses or deficiencies are not corrected.

Substandard assets are characterized by the distinct possibility that we will sustain some loss if such weaknesses or deficiencies are not corrected.

Well-defined weaknesses include adverse trends or developments of the borrower’s financial condition, managerial weaknesses and/or significant collateral deficiencies.

16 unchanged sentences

We also review loans graded “Watch” or worse, regardless of loan type, no less than quarterly.

The following tables present the loan portfolio by loan class, origination year and internal risk rating as of March 31, 2021 and December 31, 2020.

The following tables present the loan portfolio by loan class, origination year and internal risk rating as of June 30, 2021 and December 31, 2020.

Generally, existing term loans that were re-underwritten are reflected in the table in the year of renewal.

1 unchanged sentence

(in thousands) Term Loans - Amortized Cost by Origination Year Revolving Loans Amortized Cost

March 31, 2021 2021 2020 2019 2018 2017 Prior Total

June 30, 2021 2021 2020 2019 2018 2017 Prior Total

Commercial and industrial:

22 unchanged sentences

Total home equity $ — $ — $ — $ — $ — $ 897 $ 91,613 $ 92,510

(in thousands) Term Loans - Amortized Cost by Origination Year Revolving Loans Amortized Cost

June 30, 2021 2021 2020 2019 2018 2017 Prior Total

Other residential:

8 unchanged sentences

Total installment and other consumer $ 3,318 $ 2,038 $ 3,320 $ 2,305 $ 1,248 $ 7,183 $ 1,713 $ 21,125

(in thousands) Term Loans - Amortized Cost by Origination Year Revolving Loans Amortized Cost

March 31, 2021 2021 2020 2019 2018 2017 Prior Total

Pass $ 291,857 $ 397,835 $ 244,691 $ 217,209 $ 126,905 $ 468,679 $ 175,808 $ 1,922,984

42 unchanged sentences

Totals $ 578,922 $ 275,977 $ 275,069 $ 180,349 $ 138,246 $ 428,702 $ 211,291 $ 2,088,556

The following table shows the amortized cost of loans by class, payment aging and non-accrual status as of March 31, 2021 and December 31, 2020.

The following table shows the amortized cost of loans by class, payment aging and non-accrual status as of June 30, 2021 and December 31, 2020.

Loan Aging Analysis by Class

(in thousands) Commercial and industrial Commercial real estate, owner-occupied Commercial real estate, investor-owned Construction Home equity Other residential Installment and other consumer Total

March 31, 2021

June 30, 2021

30-59 days past due $ 367 $ — $ — $ — $ — $ — $ — $ 367

19 unchanged sentences

Non-accrual loans with no allowance $ — $ 7,147 $ 1,610 $ — $ 459 $ — $ 17 $ 9,233

1 There were no loans past due more than ninety days accruing interest at March 31, 2021 or December 31, 2020.

2 None of the non-accrual loans as of March 31, 2021 or December 31, 2020 were earning interest on a cash basis.

We recognized no interest income on non-accrual loans for the three months ended March 31, 2021 and 2020.

There were no new loans placed on non accrual status during the three months ended March 31, 2021.

Accrued interest of $ 13 thousand was reversed from interest income for loans that were placed on non-accrual status during the three months ended March 31, 2020.

1 There were no loans past due more than ninety days accruing interest at June 30, 2021 or December 31, 2020.

2 None of the non-accrual loans as of June 30, 2021 or December 31, 2020 were earning interest on a cash basis.

We recognized no interest income on non-accrual loans for the three and six months ended June 30, 2021 and 2020.

There were no new loans placed on non-accrual status during the six months ended June 30, 2021.

Accrued interest of $ 20 thousand was reversed from interest income for loans that were placed on non-accrual status during the six months ended June 30, 2020.

Collateral Dependent Loans

The following table presents the amortized cost basis of individually analyzed collateral-dependent non-accrual loans by class at March 31, 2021 and December 31, 2020.

The following table presents the amortized cost basis of individually analyzed collateral-dependent non-accrual loans by class at June 30, 2021 and December 31, 2020.

Amortized Cost by Collateral Type

(in thousands) Commercial Real Estate Residential Real Estate Other Total Allowance for Credit Losses

March 31, 2021

June 30, 2021

Commercial real estate, owner-occupied $ 7,148 $ — $ — $ 7,148 $ —

8 unchanged sentences

Total $ 8,757 $ 459 $ 17 $ 9,233 $ —

No collateral-dependent loans were in process of foreclosure at March 31, 2021 or December 31, 2020.

In addition, the weighted average loan-to-value of collateral dependent loans was approximately 59.2 % at both March 31, 2021 and December 31, 2020.

No collateral-dependent loans were in process of foreclosure at June 30, 2021 or December 31, 2020.

In addition, the weighted average loan-to-value of collateral dependent loans was approximately 58.7 % at June 30, 2021 and 59.2 % at December 31, 2020.

Troubled Debt Restructuring

1 unchanged sentence

These concessions typically result from our loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance or other actions.

TDRs on non-accrual status at the time of restructure may be returned to

accruing status after management considers the borrower’s sustained repayment performance for a reasonable period, generally nine months, and obtains reasonable assurance of repayment and performance.

TDRs on non-accrual status at the time of restructure may be returned to accruing status after management considers the borrower’s sustained repayment performance for a reasonable period, generally nine months, and obtains reasonable assurance of repayment and performance.

We may remove a loan from TDR designation if it meets all of the following conditions:

3 unchanged sentences

• Existing loan did not have any forgiveness of principal or interest.

There were no loans removed from TDR designation during the three months ended March 31, 2021 and 2020.

There were no loans removed from TDR designation during the six months ended June 30, 2021 and 2020.

In accordance with section 4013 of the CARES Act, subsequently amended by section 541 of the Economic Aid Act, we elected to apply the temporary accounting relief provisions for loan modifications that met certain criteria, which would otherwise be designated TDRs under existing GAAP.

As of March 31, 2021, 13 borrowing relationships with 20 loans totaling $ 65.4 million were continuing to benefit from payment relief.

Subsequent to quarter end and prior to the filing of this report, two relationships with three loans totaling $ 6.2 million transitioned out of the payment relief program and began making normal contractual payments.

The weighted average loan-to-value ratio of the remaining payment relief loans was 40 %.

As of June 30, 2021, 7 borrowing relationships with 12 loans totaling $ 49.8 million were continuing to benefit from payment relief.

Subsequent to quarter end and prior to the filing of this report, one relationship with three loans totaling $ 6.4 million transitioned out of the payment relief program and resumed normal contractual payments.

The weighted average loan-to-value ratio of the remaining payment relief loans was approximately 41 %.

We accrue and recognize interest income on loans under payment relief based on the original contractual interest rates.

When payments resume at the end of the relief period, the payments will generally be applied to accrued interest due until accrued interest is fully paid.

The following table summarizes the carrying amount of TDR loans by loan class as of March 31, 2021 and December 31, 2020.

The following table summarizes the carrying amount of TDR loans by loan class as of June 30, 2021 and December 31, 2020.

(in thousands)

Recorded Investment in Troubled Debt Restructurings 1

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Commercial and industrial $ 821 $ 1,021

4 unchanged sentences

Total $ 10,719 $ 12,506

1 TDR loans on non-accrual status totaled $ 7.4 million at both March 31, 2021 and December 31, 2020.

Unfunded commitments for TDR loans totaled $ 845 thousand a s of March 31, 2021

1 TDR loans on non-accrual status totaled $ 7.4 million at both June 30, 2021 and December 31, 2020.

Unfunded commitments for TDR loans totaled $ 845 thousand as of June 30, 2021

The following table presents information for loans modified in a TDR during the presented periods, including the number of modified contracts, the recorded investment in the loans prior to modification, and the recorded investment in the loans at period end after being restructured.

1 unchanged sentence

(dollars in thousands) Number of Contracts Modified Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment at Period End

TDRs during the three months ended March 31, 2021:

TDRs during the three months ended June 30, 2021:

None — $ — $ — $ —

TDRs during the three months ended March 31, 2020:

TDRs during the three months ended June 30, 2020:

Home equity 1 $ 276 $ 276 $ 276

Installment and other consumer 1 108 108 108

Total 2 $ 384 $ 384 $ 384

TDRs during the six months ended June 30, 2021:

None — $ — $ — $ —

TDRs during the six months ended June 30, 2020:

Commercial and industrial 1 $ 170 $ 162 $ 144

Home equity 1 276 276 276

Installment and other consumer 3 211 211 210

1 unchanged sentence

The loans modified in 2020 reflected debt consolidation, interest rate concessions, and/or other loan term and payment modifications.

During the three months ended March 31, 2021 and 2020, there were no defaults on loans that had been modified in a TDR within the prior twelve-month period.

During the six months ended June 30, 2021 and 2020, there were no defaults on loans that had been modified in a TDR within the prior twelve-month period.

We report defaulted TDRs based on a payment default definition of more than ninety days past due.

The following table discloses activity in the allowance for credit losses for the periods presented.

Allowance for Credit Losses Rollforward

The following table discloses activity in the allowance for credit losses on loans for the periods presented.

Allowance for Credit Losses on Loans Rollforward

(in thousands) Commercial and industrial Commercial real estate, owner-occupied Commercial real estate, investor-owned Construction Home equity Other residential Installment and other consumer Unallocated Total

Three months ended March 31, 2021

Three months ended June 30, 2021

Beginning balance $ 1,654 $ 2,304 $ 10,856 $ 1,312 $ 520 $ 757 $ 255 $ 2,300 $ 19,958

3 unchanged sentences

Ending balance $ 1,590 $ 2,037 $ 10,761 $ 1,142 $ 412 $ 613 $ 238 $ 2,307 $ 19,100

Three months ended March 31, 2020

Three months ended June 30, 2020

Beginning balance $ 2,784 $ 2,797 $ 9,225 $ 727 $ 982 $ 1,098 $ 363 $ 908 $ 18,884

3 unchanged sentences

Ending balance $ 2,609 $ 2,910 $ 10,403 $ 836 $ 1,044 $ 1,266 $ 426 $ 1,374 $ 20,868

Allowance for Credit Losses on Loans Rollforward

(in thousands) Commercial and industrial Commercial real estate, owner-occupied Commercial real estate, investor Construction Home equity Other residential Installment and other consumer Unallocated Total

Six months ended June 30, 2021

Beginning balance $ 2,530 $ 2,778 $ 12,682 $ 1,557 $ 738 $ 998 $ 291 $ 1,300 $ 22,874

Provision (reversal) - CECL ( 947 ) ( 741 ) ( 1,921 ) ( 433 ) ( 376 ) ( 385 ) ( 53 ) 1,007 ( 3,849 )

Charge-offs — — — — — — — — —

Recoveries 7 — — 18 50 — — — 75

Ending balance $ 1,590 $ 2,037 $ 10,761 $ 1,142 $ 412 $ 613 $ 238 $ 2,307 $ 19,100

Six months ended June 30, 2020

Beginning balance $ 2,334 $ 2,462 $ 8,483 $ 638 $ 850 $ 973 $ 284 $ 653 $ 16,677

Provision - incurred loss 287 448 1,920 195 194 293 142 721 4,200

Charge-offs ( 20 ) — — — — — — — ( 20 )

Recoveries 8 — — 3 — — — — 11

Ending balance $ 2,609 $ 2,910 $ 10,403 $ 836 $ 1,044 $ 1,266 $ 426 $ 1,374 $ 20,868

We adopted the CECL accounting standard on December 31, 2020, which we had previously postponed under the optional accounting relief provisions of the CARES Act passed in March 2020 to the earlier of the end of the national emergency or December 31, 2020.

During the first three months of 2020, we applied the incurred loss method under previous GAAP in determining the allowance for credit losses on loans.

During the first six months of 2020, we applied the incurred loss method under previous GAAP in determining the allowance for credit losses on loans.

Pledged Loans

Our FHLB line of credit is secured under terms of a blanket collateral agreement by a pledge of certain qualifying loans with unpaid principal balances of $ 1.103 billion and $ 1.165 billion at March 31, 2021 and December 31, 2020, respectively.

In addition, we pledge eligible TIC loans, which totaled $ 112.4 million and $ 113.6 million at March 31, 2021 and December 31, 2020, respectively, to secure our borrowing capacity with the Federal Reserve Bank ("FRB").

Our FHLB line of credit is secured under terms of a blanket collateral agreement by a pledge of certain qualifying loans with unpaid principal balances of $ 1.092 billion and $ 1.165 billion at June 30, 2021 and December 31, 2020, respectively.

In addition, we pledge eligible TIC loans, which totaled $ 113.0 million and $ 113.6 million at June 30, 2021 and December 31, 2020, respectively, to secure our borrowing capacity with the Federal Reserve Bank ("FRB").

Also, see Note 6, Borrowings.

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Likewise, these transactions do not involve more than the normal risk of collectability or present other unfavorable features.

Related party loans totaled $ 5.9 million at March 31, 2021 and $ 6.4 million at December 31, 2020.

In addition, undisbursed commitments to related parties totaled $ 9.1 million at March 31, 2021 and December 31, 2020.

Related party loans totaled $ 5.3 million at

June 30, 2021 and $ 6.4 million at December 31, 2020.

In addition, undisbursed commitments to related parties totaled $ 9.1 million at June 30, 2021 and December 31, 2020.

Borrowings and Other Obligations

Federal Funds Purchased – The Bank had unsecured lines of credit with correspondent banks for overnight borrowings totaling $ 135.0 million at March 31, 2021 and December 31, 2020.

Federal Funds Purchased – The Bank had unsecured available lines of credit with correspondent banks for overnight borrowings totaling $ 115.0 million at June 30, 2021 and $ 135.0 million at December 31, 2020.

In general, interest rates on these lines approximate the federal funds target rate.

We had no overnight borrowings under these credit facilities at March 31, 2021 or December 31, 2020 .

Federal Home Loan Bank Borrowings – As of March 31, 2021 and December 31, 2020, the Bank had lines of credit with the FHLB totaling $ 634.2 million and $ 642.5 million, respectively, based on eligible collateral of certain loans.

There were no FHLB overnight borrowings at March 31, 2021 or December 31, 2020.

Federal Reserve Line of Credit – The Bank has a line of credit with the FRBSF secured by certain residential loans.

At March 31, 2021 and December 31, 2020, the Bank had borrowing capacity under this line totaling $ 77.5 million and $ 78.7 million, respectively, and had no outstanding borrowings with the FRBSF.

We had no overnight borrowings under these credit facilities at June 30, 2021 or December 31, 2020 .

Federal Home Loan Bank Borrowings – As of June 30, 2021 and December 31, 2020, the Bank had available lines of credit with the FHLB totaling $ 629.9 million and $ 642.5 million, respectively, based on eligible collateral of certain loans.

There were no FHLB overnight borrowings at June 30, 2021 or December 31, 2020.

Federal Reserve Line of Credit – The Bank has an available line of credit with the FRBSF secured by certain residential loans.

At June 30, 2021 and December 31, 2020, the Bank had borrowing capacity under this line totaling $ 77.6 million and $ 78.7 million, respectively, and had no outstanding borrowings with the FRBSF.

Subordinated Debenture – As part of an acquisition in 2013, Bancorp assumed a subordinated debenture with a contractual balance of $ 4.1 million due to NorCal Community Bancorp Trust II (the "Trust"), established for the sole purpose of issuing trust preferred securities.

On March 15, 2021, Bancorp redeemed in full the $ 2.8 million (book value) subordinated debenture due to the Trust, which had an effective interest rate of 5.7 % in 2020.

The higher effective rate in the first quarter of 2021 included accelerated accretion of the $ 1.3 million remaining purchase discount due to the early redemption.

Accretion was $ 17 thousand for the three months ended March 31, 2020.

Other Obligations – The Bank leases certain equipment under finance leases, which are included in borrowings and other obligations in the consolidated statements of condition.

On March 15, 2021, Bancorp redeemed in full the $ 2.8 million (book value) subordinated debenture due to the Trust, which had an effective interest rate of 6.5 % for the first six months of 2020.

The higher effective rate for the first six months of 2021 included accelerated accretion of the $ 1.3 million remaining purchase discount due to the early redemption.

Accretion was $ 17 thousand and $ 35 thousand for the three and six months ended June 30, 2020, respectively.

Other Obligations – Finance lease liabilities totaling $ 438 thousand and $ 58 thousand at June 30, 2021 and December 31, 2020, respectively, are included in borrowings and other obligations in the consolidated statements of condition.

See Note 8, Commitments and Contingencies, for additional information.

Stockholders' Equity

On April 16, 2021, Bancorp declared a $ 0.23 per share cash dividend, payable on May 7, 2021 to shareholders of record at the close of business on April 30, 2021.

On July 16, 2021, Bancorp declared a $ 0.24 per share cash dividend, payable on August 6, 2021 to shareholders of record at the close of business on July 30, 2021.

Share-Based Payments

16 unchanged sentences

Stock options and restricted stock may be net settled in a cashless exercise by a reduction in the number of shares otherwise deliverable upon exercise or vesting in satisfaction of the exercise payment and/or applicable tax withholding requirements.

During the three months ended March 31, 2021, we withheld 27,547 shares totaling $ 1.1 million at a weighted-average price of $ 38.87 for cashless exercises.

During the three months ended March 31, 2020, we withheld 8,409 shares totaling $ 346 thousand at a weighted-average price of $ 41.17 for cashless exercises.

During the six months ended June 30, 2021, we withheld 27,547 shares totaling $ 1.1 million at a weighted-average price of $ 38.87 for cashless exercises.

During the six months ended June 30, 2020, we withheld 8,409 shares totaling $ 346 thousand at a weighted-average price of $ 41.17 for cashless exercises.

Shares withheld under net settlement arrangements are available for future grants.

2 unchanged sentences

Bancorp's Board of Directors subsequently extended the share repurchase program through February 28, 2020.

After expiration of this Share Repurchase Program, our new Share Repurchase Program began on March 1, 2020.

The new program was approved on January 24, 2020 by Bancorp Board of Directors, allowing Bancorp to repurchase up to $ 25.0 million of its outstanding common stock through February 28, 2022.

The new share repurchase program, which began on March 1, 2020, was suspended by the Board of Directors on March 20, 2020 in response to the COVID-19 pandemic.

The program was reactivated by the Board of Directors on October 23, 2020.

After expiration of this share repurchase program, a new share repurchase program began on March 5, 2020.

This new program was approved on January 24, 2020 by Bancorp Board of Directors, allowing Bancorp to repurchase up to $ 25.0 million of its outstanding common stock through February 28, 2022.

The share repurchase program, which began on March 5, 2020, was suspended by the Board of Directors on March 20, 2020 in response to the COVID-19 pandemic.

The program was reactivated by the Board of Directors on October 23, 2020 and completed in May 2021 upon depletion of repurchase funds.

A new share repurchase program was approved by Bancorp Board of Directors on July 16, 2021 under which Bancorp may repurchase up to $ 25.0 million of its outstanding common stock through July 31, 2023.

Under the share repurchase program, Bancorp may purchase shares of its common stock through various means such as open market transactions, including block purchases, and privately negotiated transactions.

5 unchanged sentences

The 10b5-1 trading plan is administered by an independent broker and is subject to price, market volume and timing restrictions.

During the three months ended March 31, 2021, Bancorp repurchased 224,013 shares totaling $ 8.5 million for a cumulative 393,594 shares amounting to $ 14.3 million under the $ 25.0 million share repurchase program that was approved by the Board of Directors on January 24, 2020.

During the six months ended June 30, 2021, Bancorp repurchased 521,948 shares totaling $ 19.3 million for a cumulative 691,519 shares amounting to $ 25.0 million under the $ 25.0 million share repurchase program that was approved by the Board of Directors on January 24, 2020.

Commitments and Contingencies

10 unchanged sentences

The contractual amount of unfunded loan commitments and standby letters of credit not reflected in the consolidated statements of condition are as follows:

(in thousands) March 31, 2021 December 31, 2020

(in thousands) June 30, 2021 December 31, 2020

Commercial lines of credit $ 282,611 $ 287,533

5 unchanged sentences

We record an allowance for credit losses on unfunded loan commitments at the balance sheet date based on estimates of the probability that these commitments will be drawn upon according to historical utilization experience of the different types of commitments and expected loss rates determined for pooled funded loans.

The allowance for credit losses on unfunded commitments totaled $ 2.2 million and $ 2.8 million as of March 31, 2021 and December 31, 2020, respectively, which is recorded in interest payable and other liabilities in the consolidated statements of condition.

The allowance for credit losses on unfunded commitments totaled $ 1.6 million and $ 2.8 million as of June 30, 2021 and December 31, 2020, respectively, which is recorded in interest payable and other liabilities in the consolidated statements of condition.

We adopted the CECL accounting standard on December 31, 2020.

We applied the incurred loss method under previous GAAP in determining the allowance for credit losses on unfunded commitments for the three month period ended March 31, 2020.

We recorded a $ 590 thousand reversal of the allowance for credit losses on unfunded commitments for the three months ended March 31, 2021, compared to a $ 102 thousand provision for credit losses on unfunded commitments for the three month period ended March 31, 2020.

We applied the incurred loss method under previous GAAP in determining the allowance for credit losses on unfunded commitments for the three and six month periods ended June 30, 2020.

We recorded reversals of the allowance for credit losses on unfunded commitments totaling $ 612 thousand and $ 1.2 million for the three and six month periods ended June 30, 2021, respectively.

This compares to provisions for credit losses on unfunded commitments for the three and six month periods ended June 30, 2020 totaling $ 260 thousand and $ 362 thousand, respectively.

In the current period, we reclassified the provision for credit losses on unfunded commitments from non-interest expense to a separate line item under the provision for credit losses on loans in the consolidated statements of comprehensive income.

We lease premises under long-term non-cancelable operating leases with remaining terms of 1 year to 11 years, most of which include escalation clauses and one or more options to extend the lease term, and some of which contain lease termination clauses.

3 unchanged sentences

The following table shows the balances of operating and finance lease right-of-use assets and lease liabilities.

(in thousands) March 31, 2021 December 31, 2020

(in thousands) June 30, 2021 December 31, 2020

Operating leases:

9 unchanged sentences

The following table shows supplemental disclosures of noncash investing and financing activities for the period presented.

Three months ended

(in thousands) March 31, 2021 March 31, 2020

Six months ended

(in thousands) June 30, 2021 June 30, 2020

Right-of-use assets obtained in exchange for operating lease liabilities $ — $ 14,030

1 unchanged sentence

The following table shows components of operating and finance lease cost.

Three months ended

(in thousands) March 31, 2021 March 31, 2020

Three months ended Six months ended

(in thousands) June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020

Operating lease cost $ 1,164 $ 1,114 $ 2,328 $ 2,169

4 unchanged sentences

Amortization of right-of-use assets 2

$ 7 $ 44 $ 34 $ 88

Interest on finance lease liabilities 3

4 unchanged sentences

3 Included in interest on borrowings and other obligations in the consolidated statements of comprehensive income.

The following table shows the future minimum lease payments, weighted average remaining lease terms, and weighted average discount rates under operating and finance lease arrangements as of March 31, 2021.

The discount rates used to calculate the present value of lease liabilities were based on the collateralized FHLB borrowing rates that were commensurate with lease terms and minimum payments on the later of the date we adopted the new lease accounting standards or lease commencement date.

(in thousands) March 31, 2021

(in thousands) June 30, 2021

Year Operating Leases Finance Leases

1 unchanged sentence

2022 4,424 118

2023 4,004 108

2024 3,300 104

2025 2,876 61

Thereafter 9,867 —

12 unchanged sentences

Under the terms of the U.S.

retrospective responsibility plan, when Visa funds the litigation escrow account, it triggers a conversion rate reduction of the Class B common stock to shares of Class A common stock, effectively reducing the aggregate value of the Class B common stock held by Visa's member banks like us.

retrospective responsibility plan, when Visa funds the litigation escrow account, it triggers a conversion rate reduction of the Class B common stock

to shares of Class A common stock, effectively reducing the aggregate value of the Class B common stock held by Visa's member banks like us.

In 2012, Visa had reached a $ 4.0 billion interchange multidistrict litigation class settlement agreement with plaintiffs representing a class of U.S.

The escrow balance of $ 894 thousand as of March 31, 2021, combined with funds previously deposited with the court, are expected to cover the settlement payment obligations.

The escrow balance of $ 894 million as of June 30, 2021, combined with funds previously deposited with the court, are expected to cover the settlement payment obligations.

The outcome of the Covered Litigation affects the conversion rate of Visa Class B common stock held by us to Visa Class A common stock, as discussed above and in Note 4, Investment Securities.

11 unchanged sentences

Collateral levels are monitored and adjusted on a regular basis for changes in interest rate swap values.

As of March 31, 2021, we had four interest rate swap agreements, which are scheduled to mature in June 2031, October 2031, July 2032, and October 2037.

As of June 30, 2021, we had four interest rate swap agreements, which are scheduled to mature in June 2031, October 2031, July 2032, and October 2037.

All of our derivatives are accounted for as fair value hedges.

1 unchanged sentence

Our interest rate swap payments are settled monthly with counterparties.

Accrued interest on the swaps totaled $ 11 thousand at both March 31, 2021 and December 31, 2020.

Accrued interest on the swaps totaled $ 10 thousand at June 30, 2021 and $ 11 thousand at December 31, 2020.

Information on our derivatives follows:

Asset Derivatives Liability Derivatives

(in thousands) March 31,

2021 December 31, 2020 March 31,

(in thousands) June 30,

2021 December 31, 2020 June 30,

2021 December 31, 2020

4 unchanged sentences

1 See Note 3, Fair Value of Assets and Liabilities, for valuation methodology.

The following table presents the carrying amount and associated cumulative basis adjustment related to the application of fair value hedge accounting that is included in the carrying amount of hedged assets as of March 31, 2021 and December 31, 2020.

Carrying Amounts of Hedged Assets Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Loans

(in thousands) March 31, 2021 December 31, 2020 March 31, 2021 December 31, 2020

(in thousands) June 30, 2021 December 31, 2020 June 30, 2021 December 31, 2020

Loans $ 14,734 $ 15,745 $ 1,216 $ 1,753

The following table presents the net losses recognized in interest income on loans on the consolidated statements of comprehensive income related to our derivatives designated as fair value hedges.

Three months ended

(in thousands) March 31, 2021 March 31, 2020

Three months ended Six months ended

(in thousands) June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020

Interest and fees on loans 1

$ 21,429 $ 21,217 $ 42,090 $ 42,104

Increase (decrease) in fair value of designated interest rate swaps due to LIBOR interest rate movements $ 719 $ ( 1,440 )

(Decrease) increase in fair value of designated interest rate swaps due to LIBOR interest rate movements $ ( 170 ) $ ( 63 ) $ 549 $ ( 1,504 )

Payment on interest rate swaps ( 93 ) ( 96 ) ( 185 ) ( 146 )

(Decrease) increase in value of hedged loans ( 714 ) 1,470

Increase (decrease) in fair value hedging adjustment of hedged loans 177 59 ( 537 ) 1,529

Decrease in value of yield maintenance agreement ( 2 ) ( 3 ) ( 6 ) ( 6 )

11 unchanged sentences

Assets Condition of Condition Instruments Received Net Amount

March 31, 2021

June 30, 2021

Derivatives by Counterparty:

10 unchanged sentences

Instruments Pledged Net Amount

March 31, 2021

June 30, 2021

Derivatives by Counterparty:

9 unchanged sentences

Under the terms of the merger agreement, AMRB shareholders will receive a fixed exchange ratio of 0.575 shares of Bancorp's common stock for each share of AMRB's common stock outstanding upon consummation of the Merger.

AMRB had total assets of $ 916.1 million, total deposits of $ 788.6 million, and total loans of $ 475.4 million as of March 31, 2021.

AMRB had total assets of $ 906.1 million, total deposits of $ 787.7 million, and total loans of $ 434.2 million as of June 30, 2021.

These amounts are subject to fair value adjustments upon the close of the Merger.

The Merger is expected to be completed in the third quarter of 2021, subject to approval by shareholders of Bancorp and AMRB, receipt of required regulatory and other approvals and satisfaction of customary closing conditions.

The merger has been approved by the Boards of Directors of each company, all applicable regulatory agencies and shareholders of AMRB and BMRC.

The Merger is expected to close on August 6, 2021 .

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-Q

Item 1. Financial Statements