What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-08-08 compared with 2022-05-09 · 244 added, 192 removed, 908 unchanged (32% of the section changed)

3 unchanged sentences

(in thousands, except share data;

unaudited) March 31, 2022 December 31, 2021

unaudited) June 30, 2022 December 31, 2021

Cash, cash equivalents and restricted cash $ 115,905 $ 347,641

Investment securities

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

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

931,587 342,222

Available-for-sale, at fair value (net of zero allowance for credit losses at March 31, 2022 and December 31, 2021)

Available-for-sale, at fair value (net of zero allowance for credit losses at June 30, 2022 and December 31, 2021)

893,149 1,167,568

30 unchanged sentences

Authorized - 30,000,000 shares;

issued and outstanding - 16,003,847 and 15,929,243 at March 31, 2022 and December 31, 2021, respectively

issued and outstanding - 16,009,600 and 15,929,243 at June 30, 2022 and December 31, 2021, respectively

213,864 212,524

6 unchanged sentences

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

Three months ended

Three months ended Six months ended

(in thousands, except per share amounts;

unaudited) March 31, 2022 December 31, 2021 March 31, 2021

unaudited) June 30, 2022 March 31, 2022 June 30, 2021 June 30, 2022 June 30, 2021

Interest income

12 unchanged sentences

Net interest income 31,197 29,898 24,534 61,095 46,565

(Reversal of) provision for credit losses on loans ( 485 ) 600 ( 2,929 )

(Reversal of) provision for credit losses on unfunded loan commitments ( 318 ) 210 ( 590 )

Net interest income after (reversal of) provision for credit losses 30,701 29,823 25,550

Reversal of credit losses on loans — ( 485 ) ( 920 ) ( 485 ) ( 3,849 )

Reversal of credit losses on unfunded loan commitments — ( 318 ) ( 612 ) ( 318 ) ( 1,202 )

Net interest income after reversal of credit losses 31,197 30,701 26,066 61,898 51,616

Non-interest income

5 unchanged sentences

Merchant interchange fees, net 149 140 61 289 118

Losses on sale of investment securities, net — ( 17 ) —

Other income 406 462 285 868 513

22 unchanged sentences

Diluted 15,955 15,946 13,164 15,950 13,316

Comprehensive income (loss):

Comprehensive (loss) income:

Net income $ 11,066 $ 10,465 $ 9,285 $ 21,531 $ 18,232

Other comprehensive income (loss):

Other comprehensive (loss) income:

Change in net unrealized (losses) gains on available-for-sale securities ( 27,050 ) ( 38,228 ) 2,798 ( 65,278 ) ( 6,284 )

Reclassification adjustment for losses on available-for-sale securities included in net income — 17 —

Net unrealized losses on securities transferred from available-for-sale to held-to-maturity — ( 14,847 ) — ( 14,847 ) —

Amortization of net unrealized losses on securities transferred from available-for-sale to held-to-maturity 472 144 138 616 281

Other comprehensive loss, before tax ( 52,931 ) ( 12,598 ) ( 8,939 )

Deferred tax benefit ( 15,648 ) ( 3,726 ) ( 2,644 )

Other comprehensive loss, net of tax ( 37,283 ) ( 8,872 ) ( 6,295 )

Other comprehensive (loss) income, before tax ( 26,578 ) ( 52,931 ) 2,936 ( 79,509 ) ( 6,003 )

Deferred tax (benefit) expense ( 7,857 ) ( 15,648 ) 864 ( 23,505 ) ( 1,780 )

Other comprehensive (loss) income, net of tax ( 18,721 ) ( 37,283 ) 2,072 ( 56,004 ) ( 4,223 )

Total comprehensive (loss) income $ ( 7,655 ) $ ( 26,818 ) $ 11,357 $ ( 34,473 ) $ 14,009

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

For the three months ended March 31, 2022 and 2021

For the three months ended June 30, 2022 and 2021

(in thousands, except share data;

4 unchanged sentences

Shares Amount

Three months ended March 31, 2022

Three months ended June 30, 2022

Balance at April 1, 2022 16,003,847 $ 213,204 $ 246,511 $ ( 39,307 ) $ 420,408

Net income — — 11,066 — 11,066

Other comprehensive loss, net of tax — — — ( 18,721 ) ( 18,721 )

Stock options exercised, net of shares surrendered for cashless exercises and tax withholdings 4,768 81 — — 81

Stock issued under employee stock purchase plan 936 30 — — 30

Stock issued under employee stock ownership plan 13,000 412 — — 412

Restricted stock surrendered for tax withholdings upon vesting ( 333 ) ( 11 ) — — ( 11 )

Restricted stock forfeited / cancelled ( 12,618 ) — — — —

Stock-based compensation - stock options — 29 — — 29

Stock-based compensation - restricted stock — 119 — — 119

Cash dividends paid on common stock ($ 0.24 per share)

— — ( 3,840 ) — ( 3,840 )

Balance at June 30, 2022 16,009,600 $ 213,864 $ 253,737 $ ( 58,028 ) $ 409,573

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, net of tax — — — 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, including commissions ( 297,935 ) ( 10,754 ) — — ( 10,754 )

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

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, 2022 and 2021

(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, 2022

Balance at January 1, 2022 15,929,243 $ 212,524 $ 239,868 $ ( 2,024 ) $ 450,368

Net income — — 21,531 — 21,531

Other comprehensive loss — — — ( 37,283 ) ( 37,283 )

Other comprehensive loss, net of tax — — — ( 56,004 ) ( 56,004 )

Stock options exercised, net of shares surrendered for cashless exercises and tax withholdings 40,311 820 — — 820

Stock issued under employee stock purchase plan 936 30 — — 30

Stock issued under employee stock ownership plan 25,000 829 — — 829

7 unchanged sentences

Stock issued in payment of director fees 5,149 193 — — 193

Stock repurchased, including commissions ( 23,275 ) ( 877 ) — — ( 877 )

Balance at March 31, 2022 16,003,847 $ 213,204 $ 246,511 $ ( 39,307 ) $ 420,408

Three months ended March 31, 2021

Stock repurchased, net of commissions ( 23,275 ) ( 877 ) — — ( 877 )

Balance at June 30, 2022 16,009,600 $ 213,864 $ 253,737 $ ( 58,028 ) $ 409,573

Six months ended June 30, 2021

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

Net income — — 18,232 — 18,232

Other comprehensive loss — — — ( 6,295 ) ( 6,295 )

Other comprehensive loss, net of tax — — — ( 4,223 ) ( 4,223 )

Stock options exercised, net of shares surrendered for cashless exercises and tax withholdings 31,180 351 — — 351

10 unchanged sentences

Stock issued in payment of director fees 3,347 117 — — 117

Stock repurchased, including commissions ( 224,013 ) ( 8,511 ) — — ( 8,511 )

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

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

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

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, 2022 and 2021

For the six months ended June 30, 2022 and 2021

(in thousands;

unaudited) March 31, 2022 March 31, 2021

unaudited) June 30, 2022 June 30, 2021

Cash Flows from Operating Activities:

1 unchanged sentence

Adjustments to reconcile net income to net cash provided by operating activities:

(Reversal of) provision for credit losses on loans ( 485 ) ( 2,929 )

(Reversal of) provision for credit losses on unfunded loan commitments ( 318 ) ( 590 )

Reversal of credit losses on loans ( 485 ) ( 3,849 )

Reversal of credit losses on unfunded loan commitments ( 318 ) ( 1,202 )

Noncash contribution expense to employee stock ownership plan 829 668

18 unchanged sentences

Loan principal collected, net of originations 93,875 84,259

Purchase of bank-owned life insurance policies — ( 1,943 )

Cash receipts from bank-owned life insurance policies 350 —

12 unchanged sentences

Net cash provided by financing activities 13,955 149,619

Net decrease in cash, cash equivalents and restricted cash ( 176,740 ) ( 57,501 )

Net (decrease) increase in cash, cash equivalents and restricted cash ( 231,736 ) 57,223

Cash, cash equivalents and restricted cash at beginning of period 347,641 200,320

7 unchanged sentences

Amortization of net unrealized loss on available-for-sale securities transferred to held-to-maturity $ 616 $ 281

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

Purchase of investment securities not yet settled $ 40,278 $ —

Stock issued to employee stock ownership plan $ 829 $ 668

Stock issued in payment of director fees $ 193 $ 117

Repurchase of stock not yet settled $ — $ 132

Restricted cash 1

6 unchanged sentences

The consolidated financial statements include the accounts of Bancorp, a bank holding company, and its wholly-owned bank subsidiary, Bank of Marin, a California state-chartered commercial bank.

Effective August 6, 2021 (the "merger date"), American River Bankshares ("AMRB") merged with and into Bank of Marin Bancorp ("Bancorp"), with Bank of Marin Bancorp surviving, followed thereafter at 12:05 AM on August 7, 2021, by the merger of American River Bank ("ARB") with and into Bank of Marin, with Bank of Marin (the "Bank") surviving, (collectively the "Merger").

The Merger was accounted for under ASC 805, Business Combinations .

See Note 10, Merger, for further detail.

References to “we,” “our,” “us” mean Bancorp and the Bank that are consolidated for financial reporting purposes.

2 unchanged sentences

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

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.

This reclassification had no impact to net income or stockholders' equity.

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 2021 Annual Report on Form 10-K.

13 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, 2022 March 31, 2021

Three months ended Six months ended

(in thousands, except per share data) June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

Weighted average basic common shares outstanding 15,921 13,092 15,898 13,227

9 unchanged sentences

Accounting Standards Not Yet Effective

In March 2020, the FASB issued ASU No.

In March 2020, the FASB issued Accounting Standards Update ("ASU") No.

2020-04, Reference Rate Reform (Topic 848) .

The amendments in this ASU are elective and provide optional guidance for a limited period of time to ease the potential burden of accounting for, or recognizing the effects of reference rate reform.

The amendments in this ASU provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.

reference rate reform.

The amendments in this ASU may be elected as of March 12, 2020 through December 31, 2022.

An entity may choose to elect the amendments in this update at an interim period subsequent to March 12, 2020 with adoption methods varying based on transaction type.

We have not elected to apply amendments at this time and will assess the applicability of this ASU to us as we continue to monitor guidance for reference rate reform from FASB and its impact on our financial condition and results of operations.

We have elected not to apply amendments at this time and to assess the applicability of this ASU to us as we continue to monitor guidance for reference rate reform from FASB and its impact on our financial condition and results of operations.

In January 2021, the FASB issued ASU No.

2021-01, Reference Rate Reform (Topic 848).

The main amendments in this ASU are intended to clarify certain optional expedients and scope of derivative instruments.

The main amendments in this ASU intend to clarify certain optional expedients and scope of derivative instruments.

The amendments are elective and effective immediately upon issuance of this ASU.

Amendments may be elected through December 31, 2022.

As of March 31, 2022, we had four interest rate swap contracts with notional values totaling $ 12.8 million indexed to LIBOR that will either be subject to the fall-back index rate stipulated by the ISDA protocol or modified to other reference rates such as Prime or SOFR as mutually agreed by us and our counterparty .

As of June 30, 2022, we had four interest rate swap contracts with notional values totaling $ 12.5 million indexed to LIBOR that will either be subject to the fall-back index rate stipulated by the ISDA protocol or modified to other reference rates such as Prime or SOFR as mutually agreed by our counterparty an us .

We have not elected to apply the amendments at this time and will continue to assess the applicability of this ASU to us as we monitor guidance for reference rate reform from FASB and its impact on our financial condition and results of operations.

1 unchanged sentence

2021-08, Accounting for Contract Assets and Contract Liabilities From Contracts With Customers (Topic 805).

The amendments address diversity in accounting practices and requires acquiring companies to apply ASC 606, Revenue from Contracts with Customers to recognize and measure contract assets and contract liabilities from contracts with customers acquired in a business combination, as opposed to other methods such as fair value.

The amendments address diversity in accounting practices and require acquiring companies to apply ASC 606, Revenue from Contracts with Customers to recognize and measure contract assets and contract liabilities from contracts with customers acquired in a business combination, as opposed to other methods such as fair value.

The amendments improve comparability after the business combination by providing consistent recognition and measurement guidance for revenue contracts with customers acquired in a business combination.

16 unchanged sentences

The amendments are effective for years beginning after December 15, 2022.

The adoption of the amendments will not impact our existing hedge accounting, disclosures, financial condition or results of operations.

The adoption of the amendments will not affect our existing hedge accounting, disclosures, financial condition or results of operations.

In June 2022, the FASB issued ASU No.

2022-03, Fair Value Measurement (Topic 820):

Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions .

The amendment reduces diversity in practice by clarifying that a separate contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value.

In addition, this ASU provided amended examples to illustrate that a restriction that is a characteristic of the equity security, which market participants would take into account when pricing them, would be considered in measuring fair value.

This ASU also introduces new disclosure requirements.

The amendments are effective prospectively for years beginning after December 15, 2023.

Early adoption is permitted for both interim and annual financial statements.

As discussed in Note 4, Investment Securities, we hold Visa Inc.

Class B common stock that is legally restricted from resale to non-member banks of Visa U.S.A.

until the covered litigation against Visa Inc.

While the adoption of the amendments may require additional disclosures, we do not anticipate that it will impact our financial condition or results of operations.

Fair Value of Assets and Liabilities

15 unchanged sentences

Changes in Fair Value Recorded In 1

March 31, 2022

June 30, 2022

Securities available-for-sale:

28 unchanged sentences

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

As of March 31, 2022 and December 31, 2021, there were no Level 3 securities.

Held-to-maturity securities may be written down to fair value as a result of an other-than-temporary impairment, and we did no t record any write-downs during the three months ended March 31, 2022 or March 31, 2021.

As of June 30, 2022 and December 31, 2021, there were no Level 3 securities.

Held-to-maturity securities may be written down to fair value as a result of an other-than-temporary impairment , and we did no t record any write-downs during the six months ended June 30, 2022 or June 30, 2021.

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

16 unchanged sentences

The value of OREO is classified as Level 3.

Our current OREO resulted from the ARB Merger.

The following table presents the carrying value of assets measured at fair value on a non-recurring basis and that were held in the consolidated statements of condition at each respective period end, by level within the fair value hierarchy as of March 31, 2022 and December 31, 2021.

Our current OREO resulted from the American River Bankshares ("ARB") merger in 2021.

(in thousands) Carrying Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs

(Level 2) Significant Unobservable Inputs

March 31, 2022

June 30, 2022

Other real estate owned $ 800 $ — $ — $ 800

2 unchanged sentences

Disclosures about Fair Value of Financial Instruments

The table below is a summary of fair value estimates for financial instruments as of March 31, 2022 and December 31, 2021, 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, 2022 and December 31, 2021, 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.

Further, we have not disclosed the fair value of financial instruments specifically excluded from disclosure requirements such as bank-owned life insurance policies ("BOLI") and non-maturity deposit liabilities.

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, 2022 or December 31, 2021.

The values are discussed in Note 4, Investment Securities.

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

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

11 unchanged sentences

The value of off-balance-sheet 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, 2022 or December 31, 2021.

The fair value of commitment fees was not material as of June 30, 2022 or December 31, 2021.

Investment Securities

5 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, 2022 and December 31, 2021 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, 2022 and December 31, 2021 is presented below.

Held-to-maturity:

2 unchanged sentences

(in thousands) Gains (Losses)

March 31, 2022

June 30, 2022

Securities of U.S.

19 unchanged sentences

Total held-to-maturity $ 342,222 $ — $ 342,222 $ 3,400 $ ( 2,867 ) $ 342,755

1 Amortized cost and fair values exclude accrued interest receivable of $ 1.8 million and $ 1.1 million at March 31, 2022 and December 31, 2021, 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 Amortized cost and fair values exclude accrued interest receivable of $ 3.1 million and $ 1.1 million at June 30, 2022 and December 31, 2021, 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 collectively 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.

With regard to MBSs and CMOs issued or guaranteed by the GSEs, and SBA-backed securities, we expect to receive all the contractual principal and interest on these securities as such securities are backed by the full faith and credit of and/or guaranteed by the U.S.

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 and corporate bonds, 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 and corporate bonds by Moody's and/or Standard & Poor's bond ratings as of March 31, 2022.

Obligations of state and political subdivisions Corporate bonds

(in thousands) March 31, 2022 December 31, 2021 March 31, 2022 December 31, 2021

(in thousands) June 30, 2022 December 31, 2021 June 30, 2022 December 31, 2021

AAA / Aaa $ 43,188 $ 34,229 $ — $ —

2 unchanged sentences

Total $ 62,829 $ 47,203 $ 30,000 $ —

A summary of the amortized cost, fair value and allowance for credit losses related to securities available-for-sale as of March 31, 2022 and December 31, 2021 is presented below.

A summary of the amortized cost, fair value and allowance for credit losses related to securities available-for-sale as of June 30, 2022 and December 31, 2021 is presented below.

Available-for-sale:

2 unchanged sentences

(in thousands) Gains (Losses)

March 31, 2022

June 30, 2022

Securities of U.S.

25 unchanged sentences

Total available-for-sale $ 1,169,520 $ 11,074 $ ( 13,026 ) $ — $ 1,167,568

1 Amortized cost and fair value exclude accrued interest receivable of $ 3.3 million and $ 3.7 million at March 31, 2022 and December 31, 2021, respectively, which is included in interest receivable and other assets in the consolidated statements of condition.

1 Amortized cost and fair value exclude accrued interest receivable of $ 3.4 million and $ 3.7 million at June 30, 2022 and December 31, 2021, respectively, which is included in interest receivable and other assets in the consolidated statements of condition.

As part of our ongoing review of our investment securities portfolio, we reassessed the classification of certain securities issued by government sponsored agencies.

1 unchanged sentence

We intend and have the ability to hold these securities to maturity.

The net unrealized pre-tax loss of $ 14.8 million remained in accumulated other comprehensive loss and is accreted over the remaining lives of the securities.

The amortized cost a nd fair value of investment debt securities by contractual maturity at March 31, 2022 and December 31, 2021 are shown below.

The net unrealized pre-tax loss of $ 14.8 million that remained in accumulated other comprehensive loss is accreted over the remaining lives of the securities.

The amortized cost a nd fair value of investment debt securities by contractual maturity at June 30, 2022 and December 31, 2021 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, 2022 December 31, 2021

June 30, 2022 December 31, 2021

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

5 unchanged sentences

Total $ 931,587 $ 847,386 $ 960,379 $ 893,149 $ 342,222 $ 342,755 $ 1,169,520 $ 1,167,568

There were no sales of investment securities in the first quarter of 2022 or 2021.

There were no sales of investment securities in the first half of 2022 or 2021.

Three months ended

Pledged investment securities are shown in the following table:

(in thousands) March 31, 2022 December 31, 2021

(in thousands) June 30, 2022 December 31, 2021

Pledged to the State of California:

5 unchanged sentences

Total pledged investment securities $ 220,292 $ 217,849

There were 354 and 217 securities in unrealized loss positions at March 31, 2022 and December 31, 2021, respectively.

There were 409 and 217 securities in unrealized loss positions at June 30, 2022 and December 31, 2021, respectively.

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

March 31, 2022 < 12 continuous months ≥ 12 continuous months Total securities

June 30, 2022 < 12 continuous months ≥ 12 continuous months Total securities

in a loss position

8 unchanged sentences

Obligations of state and political subdivisions 51,313 ( 8,304 ) — — 51,313 ( 8,304 )

Corporate bonds 29,631 ( 369 ) — — 29,631 ( 369 )

Total held-to-maturity 721,038 ( 78,169 ) 40,899 ( 7,080 ) 761,937 ( 85,249 )

34 unchanged sentences

Total securities at loss position $ 998,985 $ ( 15,278 ) $ 14,173 $ ( 615 ) $ 1,013,158 $ ( 15,893 )

As of March 31, 2022, the investment portfolio included 17 investment securities that had been in a continuous loss position for twelve months or more and 337 investment securities that had been in a loss position for less than twelve months.

As of June 30, 2022, the investment portfolio included 18 investment securities that had been in a continuous loss position for twelve months or more and 391 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.

5 unchanged sentences

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, 2022, 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.

No allowances for credit losses have 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, 2022.

At June 30, 2022, 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.

No allowances for credit losses have 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 June 30, 2022.

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 $ 16.7 million of FHLB stock included in other assets on the consolidated statements of condition at both March 31, 2022 and December 31, 2021.

We held $ 16.7 million of FHLB stock included in other assets on the consolidated statements of condition at both June 30, 2022 and December 31, 2021.

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, 2022 and December 31, 2021.

On April 28, 2022, FHLB announced a cash dividend for the first quarter of 2022 at an annualized dividend rate of 6.00 % to be distributed in mid-May 2022.

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, 2022 and December 31, 2021.

On July 28, 2022, FHLB announced a cash dividend for the first quarter of 2022 at an annualized dividend rate of 6.00 % to be distributed in mid-August 2022.

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, 2022 and December 31, 2021.

Class B common stock at June 30, 2022 and December 31, 2021.

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 1.6181 both at March 31, 2022 and December 31, 2021, 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 $ 3.7 million at both March 31, 2022 and December 31, 2021.

When converting this Class B common stock to Class A common stock based on the estimated conversion rate of 1.6059 and 1.6181 at June 30, 2022 and December 31, 2021, 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 $ 3.3 million and $ 3.7 million at June 30, 2022 and December 31, 2021, respectively.

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

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Low Income Housing Tax Credits

We invest in low-income housing tax credit funds as a limited partner, which totaled $ 2.9 million and $ 3.0 million recorded in other assets as of March 31, 2022 and December 31, 2021, respectively.

In the first three months of 2022, we recognized $ 159 thousand of low-income housing tax credits and other tax benefits, offset by $ 134 thousand of amortization expense of low-income housing tax credit investment, as a component of income tax expense.

As of March 31, 2022, our unfunded commitments for these low-income housing tax credit funds totaled $ 419 thousand.

We did no t recognize any impairment losses on these low-income housing tax credit investments during the first three months of 2022 or 2021, as the value of the future tax benefits exceeds the carrying value of the investments.

We invest in low-income housing tax credit funds as a limited partner, which totaled $ 2.7 million and $ 3.0 million recorded in other assets as of June 30, 2022 and December 31, 2021, respectively.

In the first six months of 2022, we recognized $ 317 thousand of low-income housing tax credits and other tax benefits, offset by $ 267 thousand of amortization expense of low-income housing tax credit investment, as a component of income tax expense.

As of June 30, 2022, our unfunded commitments for these low-income housing tax credit funds totaled $ 392 thousand.

We did no t recognize any impairment losses on these low-income housing tax credit investments during the first six months of 2022 or 2021, as the value of the future tax benefits exceeds the carrying value of the investments.

Loans and Allowance for Credit Losses on Loans

The following table presents the amortized cost of loans by class as of March 31, 2022 and December 31, 2021.

(in thousands) March 31, 2022 December 31, 2021

The following table presents the amortized cost of loans by class as of June 30, 2022 and December 31, 2021.

(in thousands) June 30, 2022 December 31, 2021

Commercial and industrial $ 213,122 $ 301,602

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Total loans, net of allowance for credit losses on loans $ 2,140,093 $ 2,232,622

1 Amortized cost includes net deferred loan origination costs (fees) of $ 690 thousand and $( 901 ) thousand at March 31, 2022 and December 31, 2021, respectively.

Amounts are also net of unrecognized purchase discounts of $ 2.6 million and $ 2.5 million at March 31, 2022 and December 31, 2021, respectively.

Amortized cost excludes accrued interest, which totaled $ 6.2 million and $ 7.1 million at March 31, 2022 and December 31, 2021, respectively, and is included in interest receivable and other assets in the consolidated statements of condition.

1 Amortized cost includes net deferred loan origination costs (fees) of $ 1.4 million and $( 901 ) thousand at June 30, 2022 and December 31, 2021, respectively.

Amounts are also net of unrecognized purchase discounts of $ 2.7 million and $ 2.5 million at June 30, 2022 and December 31, 2021, respectively.

Amortized cost excludes accrued interest, which totaled $ 5.8 million and $ 7.1 million at June 30, 2022 and December 31, 2021, respectively, and is included in interest receivable and other assets in the consolidated statements of condition.

Lending Risks

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Management examines historical, current, and projected cash flows to determine the ability of the borrower to repay obligations as agreed.

Commercial loans are made based primarily on the identified cash flows

of the borrower and secondarily on the underlying collateral and guarantor support.

The cash flows of borrowers, however, may not occur as expected, and the collateral securing these loans may fluctuate in value.

Commercial loans are made based primarily on the identified cash flows of the borrower and secondarily on the underlying collateral and guarantor support.

The cash flows of borrowers,

however, may not occur as expected, and the collateral securing these loans may fluctuate in value.

Most commercial and industrial loans are secured by the assets being financed, such as accounts receivable and inventory, and typically include personal guarantees.

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Additionally in 2021, Bank of Marin assumed 113 PPP loans totaling $ 18.6 million from ARB as of the merger date.

As of March 31, 2022, there were 191 PPP loans outstanding totaling $ 40.6 million (net of $ 993 thousand in unrecognized fees and costs), compared to 368 loans outstanding at December 31, 2021 totaling $ 111.2 million (net of $ 2.5 million in unrecognized fees and costs) included in commercial and industrial loan balances.

As of June 30, 2022, there were 112 PPP loans outstanding totaling $ 17.0 million (net of $ 420 thousand in unrecognized fees and costs), compared to 368 loans outstanding at December 31, 2021 totaling $ 111.2 million (net of $ 2.5 million in unrecognized fees and costs) included in commercial and industrial loan balances.

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

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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, 2022 and December 31, 2021.

The following tables present the loan portfolio by loan class, origination year and internal risk rating as of June 30, 2022 and December 31, 2021.

We early adopted the vintage disclosure requirements of ASU 2022-02 prospectively as described in Note 2 beginning with the first quarter of 2022.

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

March 31, 2022 2022 2021 2020 2019 2018 Prior Total

June 30, 2022 2022 2021 2020 2019 2018 Prior Total

Commercial and industrial:

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Total commercial real estate, owner-occupied $ 55,263 $ 69,716 $ 48,813 $ 48,019 $ 35,805 $ 125,281 $ — $ 382,897

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

March 31, 2022 2022 2021 2020 2019 2018 Prior Total

Commercial real estate, investor-owned:

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Total commercial real estate, investor-owned $ 118,868 $ 221,908 $ 169,296 $ 174,388 $ 135,375 $ 370,511 $ 73 $ 1,190,419

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

June 30, 2022 2022 2021 2020 2019 2018 Prior Total

Construction:

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Pass and Watch $ — $ 24 $ — $ — $ — $ 600 $ 89,369 $ 89,993

Special Mention — — — — — — 66 66

Substandard — — — — — 433 203 636

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Pass and Watch $ 10,938 $ 15,523 $ 6,850 $ 7,441 $ 4,696 $ 6,888 $ 1,721 $ 54,057

Substandard — — — — — 16 — 16

Total installment and other consumer $ 10,938 $ 15,523 $ 6,850 $ 7,441 $ 4,696 $ 6,888 $ 1,721 $ 54,057

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Totals $ 461,784 $ 385,837 $ 310,140 $ 242,704 $ 131,462 $ 539,868 $ 183,850 $ 2,255,645

The following table shows the amortized cost of loans by class, payment aging and non-accrual status as of March 31, 2022 and December 31, 2021.

The following table shows the amortized cost of loans by class, payment aging and non-accrual status as of June 30, 2022 and December 31, 2021.

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, 2022

June 30, 2022

30-59 days past due $ 1,065 $ 660 $ — $ — $ 100 $ — $ 166 $ 1,991

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Non-accrual loans with no allowance $ — $ 7,269 $ 694 $ — $ 413 $ — $ — $ 8,376

1 There were no loans past due more than ninety days accruing interest at March 31, 2022.

There were two SBA PPP loans past due more than ninety days totaling $ 229 thousand accruing interest as of December 31, 2021 for which we requested "guarantee" payment from the SBA.

The SBA subsequently purchased both loans in January 2022.

2 None of the non-accrual loans as of March 31, 2022 or December 31, 2021 were earning interest on a cash basis.

We recognized no interest income on non-accrual loans for the three months ended March 31, 2022 and 2021.

There was one loan with amortized cost of $ 16 thousand placed on non-accrual status during the three months ended March 31, 2022 for which we reversed less than one thousand in interest income at the time of change in status.

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

1 There were no non-performing loans past due more than ninety days and accruing interest as of June 30, 2022 and December 31, 2021.

2 None of the non-accrual loans as of June 30, 2022 or December 31, 2021 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, 2022 and 2021.

There were three loans totaling $ 397 thousand placed on non-accrual status during the six months ended June 30, 2022 for which we reversed $ 8 thousand in interest income at the time of change in status, one of which for $ 16 thousand was subsequently charged off in the second quarter.

Collateral Dependent Loans

The following table presents the amortized cost basis of individually analyzed collateral-dependent non-accrual loans by class at March 31, 2022 and December 31, 2021.

The following table presents the amortized cost basis of individually analyzed collateral-dependent loans, which are all on non-accrual status, by class at June 30, 2022 and December 31, 2021.

Amortized Cost by Collateral Type

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

March 31, 2022

(in thousands) Commercial Real Estate Residential Real Estate Other Total 1

Allowance for Credit Losses

June 30, 2022

Commercial real estate, owner-occupied $ 7,564 $ — $ — $ 7,564 $ —

Home equity — 454 — 454 —

Installment and other consumer — — 16 16 $ —

Total $ 7,564 $ 454 $ — $ 8,018 $ —

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Total $ 7,963 $ 413 $ — $ 8,376 $ —

No collateral-dependent loans were in process of foreclosure at March 31, 2022 or December 31, 2021.

In addition, the weighted average loan-to-value of collateral dependent loans was approximately 69 % at March 31, 2022 and 67 % at December 31, 2021.

1 There were no collateral-dependent residential real estate mortgage loans in process of foreclosure or in substance repossessed at June 30, 2022 or December 31, 2021.

The weighted average loan-to-value of collateral dependent loans was approximately 67 % at both June 30, 2022 and December 31, 2021.

Troubled Debt Restructuring

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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:

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• 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, 2022 and 2021.

There were no loans removed from TDR designation during the six months ended June 30, 2022 and 2021.

In accordance with section 4013 of the CARES Act, subsequently amended by section 541 of the 2020 Economic Aid Act, we elected to apply the temporary accounting relief provisions for loan modifications that met certain criteria, which would otherwise be designated as TDRs under existing GAAP.

As of March 31, 2022, two borrowing relationships with three loans totaling $ 23.6 million were continuing to benefit from payment relief.

As of June 30, 2022, two borrowing relationships with three loans totaling $ 23.6 million were continuing to benefit from payment relief.

The weighted average loan-to-value ratio of the remaining payment relief loans was approximately 44 %.

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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.

We monitor the financial situation of these clients closely and expect them to resume payments as the economy continues to recover.

The following table summarizes the amortized cost of TDR loans by loan class as of March 31, 2022 and December 31, 2021.

(in thousands) March 31, 2022 December 31, 2021

We will continue to work closely with both of these clients and monitor their performance.

The following table summarizes the amortized cost of TDR loans by loan class as of June 30, 2022 and December 31, 2021.

(in thousands) June 30, 2022 December 31, 2021

Commercial and industrial $ 1,178 $ 1,183

4 unchanged sentences

$ 9,539 $ 9,510

1 TDR loans on non-accrual status totaled $ 7.4 million at both March 31, 2022 and December 31, 2021.

Unfunded commitments for TDR loans totaled $ 241 thousand and $ 441 thousand as of March 31, 2022 and December 31, 2021, respectively.

There were no loans modified in a TDR during the three months ended March 31, 2022 and 2021.

During the three months ended March 31, 2022 and March 31, 2021, there were no defaults on loans that had been modified in a TDR within the prior twelve-month period.

1 TDR loans on non-accrual status totaled $ 7.4 million at both June 30, 2022 and December 31, 2021.

Unfunded commitments for TDR loans totaled $ 241 thousand and $ 441 thousand as of June 30, 2022 and December 31, 2021, respectively.

There was one loan modified in a TDR during the three and six months ended June 30, 2022 with a pre- and post-modification and end of period amortized cost of $ 100 thousand, and no loans modified in a TDR during the three and six months ended June 30, 2021.

The modification in the second quarter of 2022 included a maturity date extension and interest rate concession.

During the three and six months ended June 30, 2022 and 2021, 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.

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(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, 2022

Three months ended June 30, 2022

Beginning balance $ 1,784 $ 2,622 $ 12,301 $ 1,717 $ 549 $ 628 $ 641 $ 2,305 $ 22,547

Provision (reversal) 72 ( 154 ) ( 438 ) 56 ( 46 ) ( 16 ) 22 19 ( 485 )

(Reversal) Provision ( 89 ) ( 5 ) 138 12 ( 19 ) ( 43 ) 112 ( 106 ) —

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

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Ending balance $ 1,699 $ 2,617 $ 12,439 $ 1,737 $ 530 $ 585 $ 733 $ 2,199 $ 22,539

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

Provision (reversal) ( 880 ) ( 474 ) ( 1,826 ) ( 254 ) ( 218 ) ( 241 ) ( 36 ) 1,000 ( 2,929 )

(Reversal) Provision ( 68 ) ( 267 ) ( 95 ) ( 178 ) ( 158 ) ( 144 ) ( 17 ) 7 ( 920 )

Charge-offs — — — — — — — — —

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

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, 2022

Beginning balance $ 1,709 $ 2,776 $ 12,739 $ 1,653 $ 595 $ 644 $ 621 $ 2,286 $ 23,023

(Reversal) Provision ( 17 ) ( 159 ) ( 300 ) 68 ( 65 ) ( 59 ) 134 ( 87 ) ( 485 )

Charge-offs — — — — — — ( 22 ) — ( 22 )

Recoveries 7 — — 16 — — — — 23

Ending balance $ 1,699 $ 2,617 $ 12,439 $ 1,737 $ 530 $ 585 $ 733 $ 2,199 $ 22,539

Six months ended June 30, 2021

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

(Reversal) Provision ( 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

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 $ 1.295 billion and $ 1.330 billion at March 31, 2022 and December 31, 2021, respectively.

In addition, we pledge eligible TIC loans, which totaled $ 102.2 million and $ 106.2 million at March 31, 2022 and December 31, 2021, 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 $ 1.293 billion and $ 1.330 billion at June 30, 2022 and December 31, 2021, respectively.

In addition, we pledge eligible TIC loans, which totaled $ 102.6 million and $ 106.2 million at June 30, 2022 and December 31, 2021, respectively, to secure our borrowing capacity with the Federal Reserve Bank ("FRB").

For additional information, 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 $ 5.1 million at March 31, 2022 and $ 7.9 million at December 31, 2021.

In addition, undisbursed commitments to related parties totaled $ 562 thousand at March 31, 2022 and $ 8.6 million at December 31, 2021.

The decreases in both the outstanding amount and undisbursed commitment as of March 31, 2022 were primarily due to a Director retirement in the first quarter.

Related party loans totaled $ 6.6 million at June 30, 2022 and $ 7.9 million at December 31, 2021.

In addition, undisbursed commitments to related parties totaled $ 562 thousand at June 30, 2022 and $ 8.6 million at December 31, 2021.

The decreases in both the outstanding amount and undisbursed commitment as of June 30, 2022 were primarily due to a Director retirement in the first quarter.

Borrowings and Other Obligations

Federal Funds Purchased – The Bank had unsecured available lines of credit with correspondent banks for overnight borrowings totaling $ 150.0 million at March 31, 2022 and December 31, 2021.

Federal Funds Purchased – The Bank had unsecured available lines of credit with correspondent banks for overnight borrowings totaling $ 150.0 million at June 30, 2022 and December 31, 2021.

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, 2022 or December 31, 2021 .

Federal Home Loan Bank Borrowings – As of March 31, 2022 and December 31, 2021, the Bank had available lines of credit with the FHLB totaling $ 799.5 million and $ 820.5 million, respectively, based on eligible collateral of certain loans.

There were no FHLB overnight borrowings at March 31, 2022 or December 31, 2021.

As part of our acquisition of ARB, we assumed FHLB advances in the amount of $ 13.8 million that we paid off on August 25, 2021.

We had no overnight borrowings under these credit facilities at June 30, 2022 or December 31, 2021 .

Federal Home Loan Bank Borrowings – As of June 30, 2022 and December 31, 2021, the Bank had available lines of credit with the FHLB totaling $ 762.6 million and $ 820.5 million, respectively, based on eligible collateral of certain loans.

There were no FHLB overnight borrowings at June 30, 2022 or December 31, 2021.

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

At March 31, 2022 and December 31, 2021, the Bank had borrowing capacity under this line totaling $ 57.3 million and $ 70.8 million, respectively, and had no outstanding borrowings with the FRBSF.

At June 30, 2022 and December 31, 2021, the Bank had borrowing capacity under this line totaling $ 57.3 million and $ 70.8 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 a 251.5 % effective rate for the first three months of 2021, and included accelerated accretion of the $ 1.3 million remaining purchase discount due to the early redemption.

Other Obligations – Finance lease liabilities totaling $ 388 thousand and $ 419 thousand at March 31, 2022 and December 31, 2021, respectively, 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 a 251.5 % effective rate for the first six months of 2021, and included accelerated accretion of the $ 1.3 million remaining purchase discount due to the early redemption.

Other Obligations – Finance lease liabilities totaling $ 356 thousand and $ 419 thousand at June 30, 2022 and December 31, 2021, 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 22, 2022, Bancorp declared a $ 0.24 per share cash dividend, payable on May 13, 2022 to shareholders of record at the close of business on May 6, 2022.

On July 22, 2022, Bancorp declared a $ 0.25 per share cash dividend, payable on August 12, 2022 to shareholders of record at the close of business on August 5, 2022.

Share-Based Payments

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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, 2022, we withheld 8,003 shares totaling $ 278 thousand at a weighted-average price of $ 34.76 for cashless exercises.

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 six months ended June 30, 2022, we withheld 10,208 shares totaling $ 351 thousand at a weighted-average price of $ 34.38 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.

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

Share Repurchase Program

On April 23, 2018, Bancorp announced that its Board of Directors approved a share repurchase program under which Bancorp may repurchase up to $ 25.0 million of its outstanding common stock through May 1, 2019.

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

A new share repurchase program was approved by the Board of Directors on January 24, 2020, which began on March 1, 2020 and allowed Bancorp to repurchase up to $ 25.0 million of its outstanding common stock and ended May 2021.

On July 16, 2021, Bancorp Board of Directors approved a share repurchase program under which Bancorp could repurchase up to $ 25.0 million of its outstanding common stock through July 31, 2023.

On October 22, 2021, Bancorp's Board of Directors approved an amendment to the current share repurchase program, which increased the total authorization from $ 25.0 million to $ 57.0 million and left the expiration date unchanged.

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.

The number of shares repurchased and the timing, manner, price and amount of any repurchases will be determined at Bancorp's discretion.

Factors include, but are not limited to, stock price, trading volume and general market conditions, along with Bancorp’s general business conditions.

The program may be suspended or discontinued at any time and does not obligate Bancorp to acquire any specific number of shares of its common stock.

As part of the share repurchase program, Bancorp entered into a trading plan adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended.

The 10b5-1 trading plan permits common stock to be repurchased at times that might otherwise be prohibited under insider trading laws or self-imposed trading restrictions.

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

Bancorp repurchased 23,275 shares totaling $ 877 thousand in the first quarter of 2022.

Cumulative shares repurchased under the current program totaled 618,991 shares as of March 31, 2022 at an average price of $ 36.04 per share.

Commitments and Contingencies

Bancorp has an approved share repurchase program with $ 34.7 million outstanding.

The last activity under the program was in the first quarter of 2022.

Bancorp repurchased 23,275 shares totaling $ 877 thousand in the first half of 2022.

Cumulative shares repurchased under the current program totaled 618,991 shares as of June 30, 2022 at an average price of $ 36.04 per share.

Bancorp continues to evaluate the resumption of share repurchases in the context of other capital and strategic initiatives.

Commitments and Contingent Liabilities

Financial Instruments with Off-Balance Sheet Risk

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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, 2022 December 31, 2021

(in thousands) June 30, 2022 December 31, 2021

Commercial lines of credit $ 318,400 $ 330,234

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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 $ 1.5 million and 1.8 million as of March 31, 2022 and December 31, 2021, respectively, which is included in interest payable and other liabilities in the consolidated statements of condition.

We recorded a reversals of the allowance for credit losses on unfunded commitments of $ 318 thousand and $ 590 thousand for the three months ended March 31, 2022 and 2021 due to improved economic forecasts.

The allowance for credit losses on unfunded commitments totaled $ 1.5 million and $ 1.8 million as of June 30, 2022 and December 31, 2021, respectively, which is included in interest payable and other liabilities in the consolidated statements of condition.

There was no adjustment to the allowance for credit losses on unfunded commitments for the second quarter of 2022, compared to a reversal of $ 612 thousand for the second quarter of 2021.

This compares to year-to-date reversals of $ 318 thousand and $ 1.2 million in the six months ended June 30, 2022 and 2021 respectively, due to improved economic forecasts at the time.

We lease premises under long-term non-cancelable operating leases with remaining terms of 5 months to 10 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, 2022 December 31, 2021

(in thousands) June 30, 2022 December 31, 2021

Operating leases:

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2 Included in borrowings and other obligations in the consolidated statements of condition.

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

Three months ended

(in thousands) March 31, 2022 March 31, 2021

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

Six months ended

(in thousands) June 30, 2022 June 30, 2021

Right-of-use assets obtained in exchange for operating lease liabilities $ 1,124 $ —

Right-of-use assets obtained in exchange for finance lease liabilities $ — $ 412

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

Three months ended

(in thousands) March 31, 2022 March 31, 2021

Three months ended Six months ended

(in thousands) June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

Operating lease cost $ 1,295 $ 1,164 $ 2,579 $ 2,328

4 unchanged sentences

Amortization of right-of-use assets 2

$ 31 $ 7 $ 62 $ 34

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, 2022.

Total minimum lease payments do not include obligations of approximately $ 1.7 million for an operating lease agreement related to a retail branch location that is expected to commence in the third quarter of 2022.

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, 2022

(in thousands) June 30, 2022

Year Operating Leases Finance Leases

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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 $ 882 million as of March 31, 2022, combined with funds previously deposited with the court, are expected to cover the settlement payment obligations.

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

During the three months ended June 30, 2022, Visa deposited an additional $ 600 million into the litigation escrow account to address claims of certain merchants who opted out of the Amended Settlement Agreement for a balance of $ 1.5 billion.

Combined with funds previously deposited with the court, these funds 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, 2022, 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, 2022, 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 $ 10 thousand at March 31, 2022 and $ 11 thousand at December 31, 2021.

Accrued interest on the swaps totaled $ 5 thousand at June 30, 2022 and $ 11 thousand at December 31, 2021.

Information on our derivatives follows:

Asset Derivatives Liability Derivatives

(in thousands) March 31,

2022 December 31, 2021 March 31,

(in thousands) June 30,

2022 December 31, 2021 June 30,

2022 December 31, 2021

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, 2022 and December 31, 2021.

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, 2022 December 31, 2021 March 31, 2022 December 31, 2021

(in thousands) June 30, 2022 December 31, 2021 June 30, 2022 December 31, 2021

Loans $ 12,305 $ 13,976 $ ( 241 ) $ 939

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, 2022 March 31, 2021

Three months ended Six months ended

(in thousands) June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

Interest and fees on loans 1

$ 23,334 $ 21,429 $ 47,011 $ 42,090

Increase in fair value of designated interest rate swaps due to LIBOR interest rate movements $ 757 $ 719

Increase (decrease) in fair value of designated interest rate swaps due to LIBOR interest rate movements $ 430 $ ( 170 ) $ 1,187 $ 549

Payment on interest rate swaps ( 65 ) ( 93 ) ( 150 ) ( 185 )

Decrease in fair value hedging adjustment of hedged loans ( 752 ) ( 714 )

Decrease (increase) in fair value hedging adjustment of hedged loans ( 428 ) 177 ( 1,180 ) ( 537 )

Decrease in value of yield maintenance agreement ( 2 ) ( 2 ) ( 5 ) ( 6 )

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Assets Condition of Condition Instruments Received Net Amount

March 31, 2022

June 30, 2022

Derivatives by Counterparty:

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Instruments Pledged Net Amount

March 31, 2022

June 30, 2022

Derivatives by Counterparty:

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For more information on how we account for our interest rate swaps, refer to Note 1 to the Consolidated Financial Statements included in our 2021 Form 10-K filed with the SEC on March 15, 2022.

As described in Note 1, Basis of Presentation, Bancorp completed its merger with American River Bankshares in August 2021.

Bancorp completed its merger and acquired all assets and assumed all liabilities of American River Bankshares on August 6, 2021.

The Merger expanded Bank of Marin's presence throughout the Greater Sacramento, Amador and Sonoma County Regions where ARB had ten branches.

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The core deposit intangible ("CDI") represents the estimated future benefits of acquired deposits and is recorded separately from the related deposits.

We recorded a core deposit intangible asset of $ 3.9 million related to the ARB merger, of w hich $ 184 thousand was amort ized in the first quarter of 2022 and no amortization was recognized in the comparable quarter of 2021.

We recorded a core deposit intangible asset of $ 3.9 million related to the ARB merger, of w hich $ 179 thousand and $ 363 thousand, respectively, were amort ized in the three and six month periods ended June 30, 2022.

No amortization was recognized in the comparable periods of 2021.

The CDI is amortized on an accelerated basis over an estimated ten-year life and is evaluated periodically for impairment.

No impairment loss was recognized as of March 31, 2022.

No impairment loss was recognized as of June 30, 2022.

Merger-related one time and conversion costs are recognized as incurred and continue until all systems have been converted and operational functions are fully integrated.

Bancorp's merger-related costs reflected in the consolidated statements of comprehensive income are summarized in the following table.

Three months ended

(in thousands, unaudited) March 31, 2022 March 31, 2021

Three months ended Six months ended

(in thousands, unaudited) June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

Personnel and severance $ 58 $ — $ 393 $ —

4 unchanged sentences

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