What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-11-08 compared with 2022-08-08 · 219 added, 172 removed, 980 unchanged (29% of the section changed)

3 unchanged sentences

(in thousands, except share data;

unaudited) June 30, 2022 December 31, 2021

unaudited) September 30, 2022 December 31, 2021

Cash, cash equivalents and restricted cash $ 185,552 $ 347,641

Investment securities

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

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

959,867 342,222

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

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

812,493 1,167,568

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Authorized - 30,000,000 shares;

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

issued and outstanding - 16,029,048 and 15,929,243 at September 30, 2022 and December 31, 2021, respectively

214,720 212,524

6 unchanged sentences

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

Three months ended Six months ended

Three months ended Nine months ended

(in thousands, except per share amounts;

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

unaudited) September 30, 2022 June 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021

Interest income

12 unchanged sentences

Net interest income 33,027 31,197 27,753 94,122 74,318

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

Provision for (reversal of) credit losses on loans 422 — 1,800 ( 63 ) ( 2,049 )

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

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

Net interest income after provision for (reversal of) credit losses 32,605 31,197 25,953 94,503 77,569

Non-interest income

5 unchanged sentences

Merchant interchange fees, net 141 149 129 430 247

(Losses) gains on sale of investment securities, net ( 63 ) — 1 ( 63 ) 1

Other income 628 406 310 1,496 823

8 unchanged sentences

Amortization of core deposit intangible 370 374 334 1,124 742

Directors' expense 294 311 230 605 405

Federal Deposit Insurance Corporation insurance 300 296 236 886 597

Directors' expense 233 294 255 838 660

Charitable contributions 49 511 4 605 497

Other real estate owned 350 3 — 355 —

Other expense 2,062 2,471 1,847 6,305 4,605

13 unchanged sentences

Change in net unrealized (losses) gains on available-for-sale securities ( 31,816 ) ( 27,050 ) ( 2,274 ) ( 97,094 ) ( 8,558 )

Reclassification adjustment for losses (gains) on available-for-sale securities included in net income 63 — ( 1 ) 63 ( 1 )

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

Amortization of net unrealized losses on securities transferred from available-for-sale to held-to-maturity 510 472 104 1,126 385

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 )

Other comprehensive loss, before tax ( 31,243 ) ( 26,578 ) ( 2,171 ) ( 110,752 ) ( 8,174 )

Deferred tax benefit ( 9,236 ) ( 7,857 ) ( 641 ) ( 32,741 ) ( 2,421 )

Other comprehensive loss, net of tax ( 22,007 ) ( 18,721 ) ( 1,530 ) ( 78,011 ) ( 5,753 )

Total comprehensive (loss) income $ ( 9,833 ) $ ( 7,655 ) $ 3,752 $ ( 44,306 ) $ 17,761

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

For the three months ended June 30, 2022 and 2021

For the three months ended September 30, 2022 and 2021

(in thousands, except share data;

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Shares Amount

Three months ended June 30, 2022

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

Three months ended September 30, 2022

Balance at July 1, 2022 16,009,600 $ 213,864 $ 253,737 $ ( 58,028 ) $ 409,573

Net income — — 12,174 — 12,174

3 unchanged sentences

Stock issued under employee stock ownership plan 13,000 404 — — 404

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

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

Stock-based compensation - stock options — 106 — — 106

2 unchanged sentences

— — ( 4,004 ) — ( 4,004 )

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

Stock purchased by directors under director stock plan 515 16 — — 16

Stock issued in payment of director fees 4,996 163 — — 163

Balance at September 30, 2022 16,029,048 $ 214,720 $ 261,907 $ ( 80,035 ) $ 396,592

Three months ended September 30, 2021

Balance at July 1, 2021 13,055,105 $ 108,430 $ 231,841 $ 8,378 $ 348,649

Net income — — 5,282 — 5,282

3 unchanged sentences

Stock issued under employee stock ownership plan 9,100 332 — — 332

Restricted stock granted 2,400 — — — —

Stock-based compensation - stock options — 115 — — 115

2 unchanged sentences

— — ( 3,126 ) — ( 3,126 )

Stock purchased by directors under director stock plan 515 17 — — 17

Stock issued in payment of director fees 3,063 99 — — 99

Stock issued to American River Bankshares shareholders 3,441,235 124,401 — — 124,401

Stock repurchased, including commissions ( 445,735 ) ( 15,902 ) — — ( 15,902 )

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

Balance at September 30, 2021 16,066,889 $ 217,680 $ 233,997 $ 6,848 $ 458,525

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

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

For the six months ended June 30, 2022 and 2021

For the nine months ended September 30, 2022 and 2021

(in thousands, except share data;

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Shares Amount

Six months ended June 30, 2022

Nine months ended September 30, 2022

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

11 unchanged sentences

— — ( 11,666 ) — ( 11,666 )

Stock purchased by directors under director stock plan 515 16 — — 16

Stock issued in payment of director fees 10,145 355 — — 355

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

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

Balance at September 30, 2022 16,029,048 $ 214,720 $ 261,907 $ ( 80,035 ) $ 396,592

Nine months ended September 30, 2021

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

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Stock issued in payment of director fees 6,410 216 — — 216

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

Stock issued to American River Bankshares shareholders 3,441,235 124,401 — — 124,401

Stock repurchased, including commissions ( 967,683 ) ( 35,165 ) — — ( 35,165 )

Balance at September 30, 2021 16,066,889 $ 217,680 $ 233,997 $ 6,848 $ 458,525

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

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the six months ended June 30, 2022 and 2021

For the nine months ended September 30, 2022 and 2021

(in thousands;

unaudited) June 30, 2022 June 30, 2021

unaudited) 2022 2021

Cash Flows from Operating Activities:

8 unchanged sentences

Amortization of investment security premiums, net of accretion of discounts 7,139 3,222

Accretion of premiums (discounts) on acquired loans 281 ( 78 )

Amortization of premiums (accretion of discounts) on acquired loans, net 143 ( 201 )

Accretion of discount on subordinated debenture — 1,347

Net change in deferred loan origination costs/fees ( 2,484 ) ( 1,135 )

Write-down of other real estate owned 345 —

Losses (gains) on sale of investment securities, net 63 ( 1 )

Depreciation and amortization 1,259 1,279

7 unchanged sentences

Purchase of available-for-sale securities ( 243,459 ) ( 355,156 )

Proceeds from sale of available-for-sale securities 10,664 4,099

Proceeds from paydowns/maturities of held-to-maturity securities 33,198 65,497

4 unchanged sentences

Purchase of premises and equipment ( 762 ) ( 833 )

Cash acquired from American River Bankshares — 140,577

Cash paid for low income housing tax credit investment ( 30 ) ( 396 )

7 unchanged sentences

Repayment of subordinated debenture including execution costs — ( 4,126 )

Repayment of Federal Home Loan Bank borrowings — ( 13,885 )

Repayment of finance lease obligations ( 96 ) ( 55 )

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Stock issued in payment of director fees $ 355 $ 216

Repurchase of stock not yet settled $ — $ 127

Fair value of assets acquired, excluding cash acquired $ — $ 757,844

Fair value of liabilities assumed $ — $ 816,558

Restricted cash 1

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

Three months ended Six months ended

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

Three months ended Nine months ended

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

Weighted average basic common shares outstanding 15,939 14,922 15,912 13,798

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Amendments may be elected through December 31, 2022.

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 .

As of September 30, 2022, we had four interest rate swap contracts with notional values totaling $ 12.3 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 and 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.

50 unchanged sentences

Changes in Fair Value Recorded In 1

June 30, 2022

September 30, 2022

Securities available-for-sale:

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Derivative financial assets (interest rate contracts) $ 649 $ — $ 649 $ — NI

Derivative financial liabilities (interest rate contracts) $ 104 $ — $ 104 $ — NI

December 31, 2021

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

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.

As of September 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 not record any write-downs during the nine months ended September 30, 2022 or September 30, 2021.

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.

These unobservable inputs are not considered significant inputs to the fair value measurement overall.

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.

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The value of OREO is classified as Level 3.

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

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 June 30, 2022 and December 31, 2021.

Our current OREO resulted from the American River Bankshares ("AMRB") 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

June 30, 2022

September 30, 2022

Other real estate owned $ 455 $ — $ — $ 455

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 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 table below is a summary of fair value estimates for financial instruments as of September 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.

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 June 30, 2022 or December 31, 2021.

The values are discussed in Note 4, Investment Securities.

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

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

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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 June 30, 2022 or December 31, 2021.

The fair value of commitment fees was not material as of September 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 June 30, 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 September 30, 2022 and December 31, 2021 is presented below.

Held-to-maturity:

2 unchanged sentences

(in thousands) Gains (Losses)

June 30, 2022

September 30, 2022

Securities of U.S.

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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 $ 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.

1 Amortized cost and fair values exclude accrued interest receivable of $ 2.6 million and $ 1.1 million at September 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.

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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 June 30, 2022.

Obligations of state and political subdivisions Corporate bonds

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

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

AAA / Aaa $ 43,087 $ 34,229 $ — $ —

2 unchanged sentences

Total $ 62,614 $ 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 June 30, 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 September 30, 2022 and December 31, 2021 is presented below.

Available-for-sale:

2 unchanged sentences

(in thousands) Gains (Losses)

June 30, 2022

September 30, 2022

Securities of U.S.

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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 $ 3.4 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.

1 Amortized cost and fair value exclude accrued interest receivable of $ 3.1 million and $ 3.7 million at September 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 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.

The net unrealized pre-tax loss of $ 14.8 million that remained and the related accumulated other comprehensive loss are accreted to interest income over the remaining lives of the securities.

Because these entries offset each other, there is no impact to net income.

The amortized cost a nd fair value of investment debt securities by contractual maturity at September 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.

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

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

5 unchanged sentences

Total $ 959,867 $ 829,048 $ 911,476 $ 812,493 $ 342,222 $ 342,755 $ 1,169,520 $ 1,167,568

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

Three months ended

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

Three months ended Nine months ended

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

Available-for-sale:

Sales proceeds $ 10,664 $ 4,099 $ 10,664 $ 4,099

Gross realized gains 17 1 17 1

Gross realized losses ( 80 ) — ( 80 ) —

Pledged investment securities are shown in the following table:

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

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

Pledged to the State of California:

5 unchanged sentences

Total pledged investment securities $ 196,533 $ 217,849

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

There were 409 and 217 securities in unrealized loss positions at September 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:

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

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

in a loss position

45 unchanged sentences

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

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.

As of September 30, 2022, the investment portfolio included 173 investment securities that had been in a continuous loss position for twelve months or more and 236 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 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.

At September 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.

Non-Marketable Securities Included in Other Assets

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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 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 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.

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

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 September 30, 2022 and December 31, 2021.

On October 27, 2022, FHLB announced a cash dividend for the third quarter of 2022 at an annualized dividend rate of 7.00 % to be distributed in mid-November 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 June 30, 2022 and December 31, 2021.

Class B common stock at September 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 1.6059 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.

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 September 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 $ 3.0 million and $ 3.7 million at September 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 $ 2.7 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.

We invest in low-income housing tax credit funds as a limited partner, which totaled $ 2.6 million and $ 3.0 million recorded in other assets as of September 30, 2022 and December 31, 2021, respectively.

In the first nine months of 2022, we recognized $ 475 thousand of low-income housing tax credits and other tax benefits, offset by $ 400 thousand of amortization expense of low-income housing tax credit investment, as a component of income tax expense.

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

We did not recognize any impairment losses on these low-income housing tax credit investments during the first nine 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 June 30, 2022 and December 31, 2021.

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

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

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

Commercial and industrial $ 207,488 $ 301,602

9 unchanged sentences

Total loans, net of allowance for credit losses on loans $ 2,135,373 $ 2,232,622

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.

1 Amortized cost includes net deferred loan origination costs (fees) of $ 1.6 million and $( 901 ) thousand at September 30, 2022 and December 31, 2021, respectively.

Amounts are also net of unrecognized purchase discounts of $ 2.6 million and $ 2.5 million at September 30, 2022 and December 31, 2021, respectively.

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

Lending Risks

Commercial and Industrial Loans - Commercial loans are generally made to established small and mid-sized businesses to provide financing for their growth and working capital needs, equipment purchases and acquisitions.

acquisitions.

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.

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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Pursuant to the 2020 CARES Act, Bank of Marin originated 2,876 guaranteed loans totaling $ 444.1 million in two rounds of the Small Business Administration's ("SBA") Paycheck Protection Program ("PPP").

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

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.

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

As of September 30, 2022, there were 42 PPP loans outstanding totaling $ 7.6 million (net of $ 161 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%.

61 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 June 30, 2022 and December 31, 2021.

The following tables present the loan portfolio by loan class, origination year and internal risk rating as of September 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.

3 unchanged sentences

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

June 30, 2022 2022 2021 2020 2019 2018 Prior Total

September 30, 2022 2022 2021 2020 2019 2018 Prior Total

Commercial and industrial:

3 unchanged sentences

Total commercial and industrial $ 10,791 $ 11,634 $ 9,627 $ 23,456 $ 10,173 $ 26,654 $ 115,153 $ 207,488

Gross current period charge-offs $ — $ — $ ( 9 ) $ — $ — $ — $ — $ ( 9 )

Commercial real estate, owner-occupied:

4 unchanged sentences

Total commercial real estate, owner-occupied $ 52,024 $ 69,245 $ 48,324 $ 47,674 $ 35,462 $ 115,686 $ — $ 368,415

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

September 30, 2022 2022 2021 2020 2019 2018 Prior Total

Commercial real estate, investor-owned:

3 unchanged sentences

Total commercial real estate, investor-owned $ 157,021 $ 221,035 $ 168,347 $ 169,425 $ 134,151 $ 361,607 $ 65 $ 1,211,651

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

June 30, 2022 2022 2021 2020 2019 2018 Prior Total

Construction:

9 unchanged sentences

Pass and Watch 15,579 $ 14,591 $ 6,168 $ 6,837 $ 4,428 $ 6,656 $ 786 $ 55,045

Substandard — — — — — 92 — 92

Total installment and other consumer $ 15,579 $ 14,591 $ 6,168 $ 6,837 $ 4,428 $ 6,748 $ 786 $ 55,137

41 unchanged sentences

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 June 30, 2022 and December 31, 2021.

The following table shows the amortized cost of loans by class, payment aging and non-accrual status as of September 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

June 30, 2022

September 30, 2022

30-59 days past due $ 1,007 $ — $ — $ — $ 520 $ — $ — $ 1,527

19 unchanged sentences

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

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.

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

2 None of the non-accrual loans as of September 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 nine months ended September 30, 2022 and 2021.

Accrued interest of $ 47 thousand was reversed from interest income for loans that were placed on non-accrual during the nine months ended September 30, 2022.

No interest income was reversed for the single loan that was placed on non-accrual during the nine months ended September 30, 2021.

Collateral Dependent Loans

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.

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

Amortized Cost by Collateral Type

1 unchanged sentence

Allowance for Credit Losses

June 30, 2022

September 30, 2022

Commercial real estate, owner-occupied $ 9,846 $ — $ — $ 9,846 $ —

Home equity — 699 — 699 —

Installment and other consumer — — 92 92 —

Total $ 9,846 $ 699 $ 92 $ 10,637 $ —

4 unchanged sentences

Total $ 7,963 $ 413 $ — $ 8,376 $ —

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.

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

The weighted average loan-to-value of collateral dependent loans was approximately 66 % at September 30, 2022 and 67 % at December 31, 2021.

Troubled Debt Restructuring

7 unchanged sentences

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

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

There were no loans removed from TDR designation during the nine months ended September 30, 2022.

We removed one commercial loan with a remaining amortized cost of $ 2 thousand and an unfunded commitment of $ 600 thousand from TDR designation during the nine months ended September 30, 2021 after meeting all of the conditions above.

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 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 %.

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.

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

As of September 30, 2022, one borrowing relationship with two loans totaling $ 7.1 million was continuing to benefit from payment relief.

Shortly after quarter end, both of the loans, which were classified substandard and on non-accrual, were paid off.

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

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

Commercial and industrial $ 941 $ 1,183

4 unchanged sentences

$ 11,732 $ 9,510

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.

1 TDR loans on non-accrual status totaled $ 9.9 million and $ 7.4 million at September 30, 2022 and December 31, 2021, respectively.

Unfunded commitments for TDR loans totaled $ 218 thousand and $ 441 thousand as of September 30, 2022 and December 31, 2021, respectively.

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

The table excludes fully charged-off TDR loans and loans modified in a TDR and subsequently paid-off during the years presented, if applicable.

(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 September 30, 2022:

Commercial real estate, owner occupied 2 $ 2,308 $ 2,308 $ 2,308

Home equity 2 147 147 147

Total 4 $ 2,455 $ 2,455 $ 2,455

TDRs during the three months ended September 30, 2021:

Commercial and industrial 1 $ 1,101 $ 1,101 $ 1,101

TDRs during the nine months ended September 30, 2022:

Commercial real estate, owner occupied 2 $ 2,308 $ 2,308 $ 2,308

Home equity 3 247 247 247

Total 5 $ 2,555 $ 2,555 $ 2,555

TDRs during the nine months ended September 30, 2021:

Commercial and industrial 1 $ 1,101 $ 1,101 $ 1,101

The loan modifications in 2022 included one or more of the following:

payment deferment, maturity date extension, interest rate concession, and/or other payment modifications.

Three of the modifications in 2022 (or 93%) were for

one borrowing relationship.

The loan modified in 2021 reflected a maturity date extension and other loan term and payment modifications.

During the three and nine months ended September 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.

3 unchanged sentences

(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 June 30, 2022

Three months ended September 30, 2022

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

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

Provision (reversal) 265 ( 81 ) 299 38 12 5 83 ( 199 ) 422

Charge-offs ( 9 ) — — — — — ( 1 ) — ( 10 )

1 unchanged sentence

Ending balance $ 1,958 $ 2,536 $ 12,738 $ 1,784 $ 542 $ 590 $ 815 $ 2,000 $ 22,963

Three months ended June 30, 2021

Three months ended September 30, 2021

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

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

Provision (reversal) 126 ( 30 ) 1,011 77 247 4 384 ( 19 ) 1,800

Initial allowance for PCD loans 405 559 533 — — 6 2 — 1,505

Charge-offs — — — — — — ( 2 ) — ( 2 )

3 unchanged sentences

(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

Nine months ended September 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 )

Provision (reversal) 248 ( 240 ) ( 1 ) 106 ( 53 ) ( 54 ) 217 ( 286 ) ( 63 )

Charge-offs ( 9 ) — — — — — ( 23 ) — ( 32 )

1 unchanged sentence

Ending balance $ 1,958 $ 2,536 $ 12,738 $ 1,784 $ 542 $ 590 $ 815 $ 2,000 $ 22,963

Six months ended June 30, 2021

Nine months ended September 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 )

Provision (reversal) ( 821 ) ( 771 ) ( 910 ) ( 356 ) ( 129 ) ( 381 ) 331 988 ( 2,049 )

Initial allowance for PCD loans 405 559 533 — — 6 2 — 1,505

Charge-offs — — — — — — ( 2 ) — ( 2 )

2 unchanged sentences

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 $ 1.293 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").

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 $ 1.300 billion and $ 1.330 billion at September 30, 2022 and December 31, 2021, respectively.

In addition, we pledge eligible TIC loans, which totaled $ 105.7 million and $ 106.2 million at September 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 $ 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.

Related party loans totaled

$ 6.5 million at September 30, 2022 and $ 7.9 million at December 31, 2021.

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

The decreases in both the outstanding amount and undisbursed commitment as of September 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 June 30, 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 September 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 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.

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

Federal Home Loan Bank Borrowings – As of September 30, 2022 and December 31, 2021, the Bank had available lines of credit with the FHLB totaling $ 739.6 million and $ 820.5 million, respectively, based on eligible collateral of certain loans.

There were no FHLB overnight borrowings at September 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 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.

At September 30, 2022 and December 31, 2021, the Bank had borrowing capacity under this line totaling $ 54.2 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 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.

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 nine 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 $ 365 thousand and $ 419 thousand at September 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.

1 unchanged sentence

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.

Subsequent to quarter end on October 21, 2022, Bancorp declared a $ 0.25 per share cash dividend, payable on November 14, 2022 to shareholders of record at the close of business on November 7, 2022.

Share-Based Payments

9 unchanged sentences

These performance-based stock awards were granted at a maximum opportunity level, and based on the achievement of the pre-established goals, the actual payouts can range from 0 % to 200 % of the target award.

For performance-based stock awards, an estimate is made of the number of shares expected to vest based on the probability that the performance criteria will be achieved to determine the amount of compensation expense to be recognized.

For performance-based stock awards, an estimate is made of the number of shares expected to vest based on the

probability that the performance criteria will be achieved to determine the amount of compensation expense to be recognized.

The estimate is re-evaluated quarterly and total compensation expense is adjusted for any change in the current period.

4 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 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.

During the nine months ended September 30, 2022, we withheld 11,505 shares totaling $ 393 thousand at a weighted-average price of $ 34.13 for cashless exercises.

During the nine months ended September 30, 2021, we withheld 27,679 shares totaling $ 1.1 million at a weighted-average price of $ 38.86 for cashless exercises.

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

2 unchanged sentences

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.

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

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

Commitments and Contingent Liabilities

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) June 30, 2022 December 31, 2021

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

Commercial lines of credit $ 283,731 $ 330,234

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 $ 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.

The allowance

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

We recorded no provision for credit losses on unfunded commitments for the third quarters of 2022 and 2021.

This compares to reversals of $ 318 thousand and $ 1.2 million for the nine months ended September 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 3 months to 20 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) June 30, 2022 December 31, 2021

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

Operating leases:

9 unchanged sentences

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

Nine months ended

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

Right-of-use assets obtained in exchange for operating lease liabilities $ 4,989 $ 2,376

1 unchanged sentence

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

Three months ended Six months ended

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

Three months ended Nine months ended

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

Operating lease cost $ 1,328 $ 1,216 $ 3,907 $ 3,543

11 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 June 30, 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) June 30, 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 lease commencement date.

(in thousands) September 30, 2022

Year Operating Leases Finance Leases

3 unchanged sentences

2025 3,676 76

2026 2,888 10

Thereafter 11,938 5

14 unchanged sentences

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.

For the fiscal year ended September 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.

12 unchanged sentences

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

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.

As of September 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 $ 5 thousand at June 30, 2022 and $ 11 thousand at December 31, 2021.

Accrued interest on the swaps totaled $ 519 at September 30, 2022 and $ 11 thousand at December 31, 2021.

Information on our derivatives follows:

Asset Derivatives Liability Derivatives

(in thousands) June 30,

2022 December 31, 2021 June 30,

(in thousands) September 30,

2022 December 31, 2021 September 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 June 30, 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) June 30, 2022 December 31, 2021 June 30, 2022 December 31, 2021

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

Loans $ 11,519 $ 13,976 $ ( 779 ) $ 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 Six months ended

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

Three months ended Nine months ended

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

Interest and fees on loans 1

$ 23,357 $ 24,027 $ 70,368 $ 66,117

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

Increase in fair value of designated interest rate swaps due to LIBOR interest rate movements $ 547 $ 97 $ 1,734 $ 646

Payment on interest rate swaps ( 19 ) ( 93 ) ( 169 ) ( 278 )

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

Decrease in fair value hedging adjustment of hedged loans ( 538 ) ( 94 ) ( 1,718 ) ( 631 )

Decrease in value of yield maintenance agreement ( 3 ) ( 3 ) ( 8 ) ( 9 )

11 unchanged sentences

Assets Condition of Condition Instruments Received Net Amount

June 30, 2022

September 30, 2022

Derivatives by Counterparty:

10 unchanged sentences

Instruments Pledged Net Amount

June 30, 2022

September 30, 2022

Derivatives by Counterparty:

5 unchanged sentences

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.

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.

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

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

T he Merger added $ 297.8 million in investment securities, $ 419.4 million in loans and $ 790.0 million in deposits to Bank of Marin as of the merger date.

11 unchanged sentences

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 $ 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.

We recorded a core deposit intangible asset of $ 3.9 million related to the AMRB merger, of w hic h $ 174 thousand and $ 537 thousand, respe ctively, were amort ized in the three and nine month periods ended September 30, 2022.

Amortization for both the three and nine month periods ended September 30, 2021 totaled $ 129 thousand.

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 June 30, 2022.

No impairment losses were recognized as of September 30, 2022 and September 30, 2021.

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 Six months ended

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

Three months ended Nine months ended

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

Personnel and severance $ — $ 2,668 $ 393 $ 2,668

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