What changed in this filing

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Item 1. Business

2022-03-15 compared with 2021-03-15 · 36 added, 37 removed, 183 unchanged (29% 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 Department of Financial Protection and Innovation or "DFPI") and commenced operations in January 1990.

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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-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.

In addition to our headquarters, we operate 31 retail branches and 8 commercial banking offices across 10 counties - Alameda, Amador, Contra Costa, Marin, Napa, Placer, Sacramento, San Francisco, San Mateo and Sonoma counties, with a strong emphasis on supporting the local communities.

Our customer base is made up of business, not-for-profit and personal banking relationships from the communities within our Northern California footprint.

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

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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 ® .

Other products and services include Apple Pay ® , Samsung Pay ® , Google Pay ® , Zelle ® , 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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We also offer deposit options including mobile deposit, remote deposit capture, Automated Clearing House (“ACH”) services, wire transfers, and image lockbox services.

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

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

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We also offer our depositors 24-hour access to their accounts by telephone and through digital banking services available to personal and business account holders.

We offer Wealth Management and Trust Services (“WMTS”), which include customized investment portfolio management, trust administration, estate settlement and custody services.

We offer Wealth Management and Trust Services (“WMTS”), which include customized investment portfolio management, financial planning, trust administration, estate settlement and custody services.

We also offer 401(k) plan services to small and medium-sized businesses through a third-party vendor.

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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, 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.

As of December 31, 2020, the majority of our deposits were in Marin County and southern Sonoma County, and approximately 60% of our deposits were from businesses and 40% from individuals.

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

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

As of December 31, 2021, the majority of our deposits were in Marin, Sacramento and southern Sonoma counties, and approximately 60% of our deposits were from businesses and 40% from individuals.

As discussed in Note 18 to the Consolidated Financial Statements in ITEM 8 of this report, in August 2021, we expanded our presence in Amador, Placer, Sacramento and Sonoma counties through the acquisition of American River Bankshares and its subsidiary American River Bank.

This resulted in the addition of $898.4 million of assets and the assumption of $816.6 million of liabilities as of the August 6, 2021 merger date, as well as the addition of 10 branch offices.

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

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

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 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.

In all of our ten 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 developing data analytics and artificial intelligence tools and other technological platforms.

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

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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 third largest market share of total deposits at 12.3%, based upon FDIC deposit market share data as of June 30, 2020 1 .

In Marin County, we have the fourth largest market share of total deposits at 10.5%, based upon FDIC deposit market share data as of June 30, 2021 1 (most recent data available).

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

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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.

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

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

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.

To protect the health of everyone, we have implemented COVID-19 safety protocols and continue to actively monitor federal, state and local guidelines and information related to COVID-19 to ensure the safety of our employees and customers.

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

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The agencies have identified a spectrum of risks facing a banking institution including, but not limited to, credit, market, liquidity, operational, legal, and reputational.

In particular, recent regulatory pronouncements have focused on operational risk, which arises from the potential that inadequate information systems, operational problems, breaches in internal controls, fraud, or unforeseen catastrophes will result in unexpected losses.

In particular, recent regulatory pronouncements have focused on operational risk, which arises from

the potential that inadequate information systems, operational problems, breaches in internal controls, fraud, or unforeseen catastrophes will result in unexpected losses.

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

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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 based on their most recent examination completed in January 2018, which was performed under the large bank requirements.

The FDIC assigned a “Satisfactory” rating to Bank of Marin's CRA performance examination based on their most recent examination completed in January 2021, 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.

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.

Although the proposed rule was never finalized by the FDIC, it is expected that there will be interagency efforts to update and finalize a rule soon.

Anti-Money-Laundering Regulations

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These rules contained explicit customer due diligence requirements, which included a new requirement to identify and verify the identity of beneficial owners of legal entity customers.

In 2020, the Anti-Money Laundering Act ("AMLA 2020") became law.

Among its many provisions, AMLA 2020 provides for:

1) expanded whistleblower rewards and protections;

2) the establishment of a beneficial ownership registration database that will be implemented by the Financial Crimes Enforcement Network ("FinCEN");

and 3) new Bank Secrecy Act violations and enhanced penalties for repeat and egregious violators.

Privacy and Data Security

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There are also California breach notification and disclosure requirements.

On November 23, 2021, the federal banking agencies issued a final rule requiring banking organizations that experience a computer-security incident to notify their primary Federal regulator of the occurrence of an event that rises to the level of a “notification incident.” Generally, a notification incident occurs when a banking organization has suffered a computer-security incident that has a reasonable likelihood of materially disrupting or degrading the banking organization or its operations.

The rule requires an affected banking organization to notify its primary Federal regulator as soon as possible and no later than 36 hours after the banking organization has determined that a notification incident has occurred.

The rule also requires bank service providers to notify each affected banking organization if that bank service provider experiences a computer-security incident that has caused, or is reasonably likely to cause, a material service disruption or degradation for four or more hours.

The rule becomes effective on April 1, 2022, with a compliance date of May 1, 2022.

Consumer Protection Regulations

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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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Bancorp's ratios exceed the required minimum ratios for capital adequacy purposes and the Bank meets the definition for "well capitalized." Undercapitalized depository institutions may be subject to significant restrictions.

Banks that are categorized as "critically undercapitalized" are subject to dividend restrictions.

In July 2013, the federal banking regulators approved a final rule to implement the revised capital adequacy standards of the Basel Committee on Banking Supervision, commonly called Basel III, which became effective January 1, 2015 (subject to a phase-in period).

The final rule strengthened the definition of regulatory capital, increased risk-based capital requirements, made selected changes to the calculation of risk-weighted assets, and adjusted the prompt corrective action thresholds.

We have implemented the fully phased-in capital rules as of January 1, 2019 and have been in compliance throughout the implementation period of Basel III.

For additional information on our risk-based capital positions, refer to the Capital Adequacy section within ITEM 7 to Management's Discussion and Analysis and Note 15 of the Consolidated Financial Statements within ITEM 8 of this report.

Banks that are categorized as "critically undercapitalized" are subject to dividend and other restrictions.

Effective January 1, 2020, the federal banking agencies' jointly-issued final rule on the community bank leverage ratio ("CBLR") provides for an optional, simplified measure of capital adequacy for qualifying community banking organizations, consistent with Section 201 of the Economic Growth, Regulatory Relief, and Consumer Protection Act (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.

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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