What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-05-09 compared with 2022-11-08 · 262 added, 388 removed, 811 unchanged (44% of the section changed)

3 unchanged sentences

(in thousands, except share data;

unaudited) September 30, 2022 December 31, 2021

unaudited) March 31, 2023 December 31, 2022

Cash, cash equivalents and restricted cash $ 37,993 $ 45,424

Investment securities:

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

Held-to-maturity, at amortized cost (net of zero allowance for credit losses at March 31, 2023 and December 31, 2022)

958,560 972,207

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

Available-for-sale, at fair value (net of zero allowance for credit losses at March 31, 2023 and December 31, 2022)

797,533 802,096

20 unchanged sentences

Total deposits 3,250,574 3,573,348

Borrowings and other obligations 365 419

Short-term borrowings and other obligations 405,802 112,439

Operating lease liabilities 25,433 26,639

7 unchanged sentences

Authorized - 30,000,000 shares;

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

issued and outstanding - 16,107,210 and 16,029,138 at March 31, 2023 and December 31, 2022, respectively

215,965 215,057

5 unchanged sentences

BANK OF MARIN BANCORP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

Three months ended Nine months ended

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Three months ended

(in thousands, except per share amounts;

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

unaudited) March 31, 2023 December 31, 2022 March 31, 2022

Interest income

9 unchanged sentences

Interest on borrowings and other obligations 2,716 89 1

Interest on subordinated debenture — — — — 1,361

Total interest expense 4,448 831 578

4 unchanged sentences

Non-interest income

Earnings on bank-owned life insurance, net 705 296 413

Service charges on deposit accounts 533 519 488

Wealth Management and Trust Services 511 490 600

Debit card interchange fees, net 447 513 505

Service charges on deposit accounts 535 465 464 1,488 1,062

Earnings on bank-owned life insurance, net 222 298 1,402 933 1,892

Dividends on Federal Home Loan Bank stock 302 297 259

Merchant interchange fees, net 133 119 140

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

Other income 304 353 462

3 unchanged sentences

Occupancy and equipment 2,414 2,084 1,907

Data processing 1,093 1,199 1,613 3,569 3,252

Professional services 1,123 985 913

Information technology 573 468 496 1,519 1,105

Data processing 1,045 1,080 1,277

Depreciation and amortization 882 581 452

Information technology 370 678 478

Amortization of core deposit intangible 345 365 380

Federal Deposit Insurance Corporation insurance 300 296 236 886 597

Directors' expense 321 269 311

Federal Deposit Insurance Corporation insurance 289 293 290

Charitable contributions 49 104 45

11 unchanged sentences

Diluted 15,999 16,001 15,946

Comprehensive (loss) income:

Comprehensive income (loss):

Net income $ 9,440 $ 12,881 $ 10,465

Other comprehensive (loss) income:

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 )

Other comprehensive income (loss):

Change in net unrealized gains or losses on available-for-sale securities 16,213 8,474 ( 38,228 )

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 463 454 144

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

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 three months ended September 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

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

Other comprehensive loss, net of tax — — — ( 22,007 ) ( 22,007 )

Stock options exercised, net of shares surrendered for cashless exercises and tax withholdings 363 — — — —

Stock issued under employee stock purchase plan 574 16 — — 16

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

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

Stock-based compensation - restricted stock — 151 — — 151

Cash dividends paid on common stock ($ 0.25 per share)

— — ( 4,004 ) — ( 4,004 )

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

Other comprehensive income, net of tax — — — ( 1,530 ) ( 1,530 )

Stock options exercised, net of shares surrendered for cashless exercises and tax withholdings 3,098 72 — — 72

Stock issued under employee stock purchase plan 508 18 — — 18

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

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

Stock-based compensation - restricted stock — 98 — — 98

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

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

Other comprehensive income (loss), before tax 16,676 8,928 ( 52,931 )

Deferred tax expense (benefit) 4,930 2,639 ( 15,648 )

Other comprehensive income (loss), net of tax 11,746 6,289 ( 37,283 )

Total comprehensive income (loss) $ 21,186 $ 19,170 $ ( 26,818 )

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 nine months ended September 30, 2022 and 2021

For the three months ended March 31, 2023 and 2022

(in thousands, except share data;

4 unchanged sentences

Shares Amount

Nine months ended September 30, 2022

Three months ended March 31, 2023

Balance at January 1, 2023 16,029,138 $ 215,057 $ 270,781 $ ( 73,746 ) $ 412,092

Net income — — 9,440 — 9,440

Other comprehensive loss, net of tax — — — ( 78,011 ) ( 78,011 )

Other comprehensive income, net of tax — — — 11,746 11,746

Stock options exercised, net of shares surrendered for cashless exercises and tax withholdings 11,530 230 — — 230

3 unchanged sentences

Restricted stock surrendered for tax withholdings upon vesting ( 2,213 ) ( 65 ) — — ( 65 )

Restricted stock forfeited / cancelled ( 13,267 ) — — — —

Stock-based compensation - stock options — 116 — — 116

2 unchanged sentences

— — ( 4,012 ) — ( 4,012 )

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

Stock issued in payment of director fees 4,612 150 — — 150

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 March 31, 2023 16,107,210 $ 215,965 $ 276,209 $ ( 62,000 ) $ 430,174

Three months ended March 31, 2022

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

2 unchanged sentences

Stock options exercised, net of shares surrendered for cashless exercises and tax withholdings 35,543 739 — — 739

Stock issued under employee stock purchase plan 2,117 72 — — 72

Stock issued under employee stock ownership plan 12,000 417 — — 417

6 unchanged sentences

— — ( 3,822 ) — ( 3,822 )

Stock purchased by directors under director stock plan 1,034 34 — — 34

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

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

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

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

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

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

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the nine months ended September 30, 2022 and 2021

For the three months ended March 31, 2023 and 2022

(in thousands;

3 unchanged sentences

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

Reversal of credit losses on loans ( 63 ) ( 2,049 )

Provision for (reversal of) credit losses on loans 350 ( 485 )

Reversal of credit losses on unfunded loan commitments ( 174 ) ( 318 )

4 unchanged sentences

Amortization of investment security premiums, net of accretion of discounts 1,964 2,497

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

Accretion of discount on subordinated debenture — 1,347

(Accretion of discounts) amortization of premiums on acquired loans, net ( 168 ) 115

Net change in deferred loan origination costs/fees ( 324 ) ( 1,591 )

Write-down of other real estate owned 345 —

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

Depreciation and amortization 882 452

7 unchanged sentences

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

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

Proceeds from paydowns/maturities of held-to-maturity securities 13,634 5,067

Proceeds from paydowns/maturities of available-for-sale securities 19,288 42,966

Loan principal collected, net of originations 97,935 193,265

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

Cash receipts from bank-owned life insurance policies 350 2,478

(Increase) decrease in loans receivable, net ( 19,072 ) 54,524

Proceeds from bank-owned life insurance policies — 350

Purchase of premises and equipment ( 1,438 ) ( 130 )

Cash acquired from American River Bankshares — 140,577

Cash paid for low income housing tax credit investment ( 38 ) ( 4 )

Net cash used in investing activities ( 283,031 ) ( 18,924 )

Net cash provided by (used in) investing activities 12,374 ( 236,618 )

Cash Flows from Financing Activities:

Net increase in deposits 94,160 433,425

Net (decrease) increase in deposits ( 322,774 ) 52,792

Proceeds from short-term Federal Home Loan Bank borrowings, net 293,400 —

Repayment of finance lease obligations ( 37 ) ( 31 )

Proceeds from stock options exercised 230 739

Restricted stock surrendered for tax withholdings upon vesting ( 65 ) ( 29 )

Proceeds from stock issued under employee and director stock purchase plans 62 106

Stock repurchased, including commissions ( 1,250 ) ( 35,451 )

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 )

Cash dividends paid on common stock ( 4,012 ) ( 3,822 )

Net cash provided by financing activities 81,991 371,017

Net (decrease) increase in cash, cash equivalents and restricted cash ( 162,089 ) 384,419

Stock repurchased, including commissions — ( 1,250 )

Proceeds from stock issued under employee and director stock purchase plans 9 —

Net cash (used in) provided by financing activities ( 33,249 ) 48,399

Net decrease in cash, cash equivalents and restricted cash ( 7,431 ) ( 176,740 )

Cash, cash equivalents and restricted cash at beginning of period 45,424 347,641

4 unchanged sentences

Supplemental disclosure of noncash investing and financing activities:

Change in net unrealized gain or (loss) on available-for-sale securities $ ( 97,094 ) $ ( 8,558 )

Change in net unrealized gains or losses on available-for-sale securities $ 16,213 $ ( 38,228 )

Securities transferred from available-for-sale to held-to-maturity, at fair value $ — $ 357,482

Amortization of net unrealized loss on available-for-sale securities transferred to held-to-maturity $ 463 $ 144

Purchase of investment securities not yet settled $ — $ 19,972

Bank-owned life insurance benefit receivable $ 765 $ —

Stock issued to employee stock ownership plan $ 423 $ 417

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

$ 2,996 $ 15,805

1 Restricted cash includes reserve requirements held with the Federal Reserve Bank of San Francisco and other cash pledged.

17 unchanged sentences

The number of potentially dilutive common shares included in the quarterly diluted EPS is computed using the average market prices during the three months included in the reporting period under the treasury stock method.

The number of potentially dilutive common shares included in year-to-date diluted EPS is a year-to-date weighted average of potentially dilutive common shares included in each quarterly diluted EPS computation.

In computing diluted EPS, we exclude anti-dilutive shares such as options whose exercise prices exceed the current common stock price, as they would not reduce EPS under the treasury method.

3 unchanged sentences

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

Three months ended Nine months ended

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

Three months ended

(in thousands, except per share data) March 31, 2023 March 31, 2022

Weighted average basic common shares outstanding 15,970 15,876

2 unchanged sentences

Unvested restricted stock awards 15 18

Weighted average diluted shares outstanding 15,974 14,993 15,959 13,881

Weighted average diluted common shares outstanding 15,999 15,946

Net income $ 9,440 $ 10,465

3 unchanged sentences

Recently Adopted and Issued Accounting Standards

Accounting Standards Adopted in 2023

In March 2022, the FASB issued ASU No.

2022-02, Financial Instruments - Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures .

The amendment eliminated the recognition measurement guidance for troubled debt restructured ("TDR") loans and instead enhanced disclosure requirements for certain loan modifications when a borrower is experiencing financial difficulty.

In addition, the amendment required that an entity include in its vintage disclosures the current period gross loan charge-offs by year of origination.

We early adopted the current period charge-off disclosures in the first quarter of 2022.

We adopted the loan modification provisions as of January 1, 2023 using a modified retrospective method.

The cumulative-effect adjustment to retained earnings was considered immaterial.

Refer to Note 5, Loans and Allowance for Credit Losses on Loans, for additional information.

In March 2022, the FASB issued ASU No.

2022-01, Derivatives and Hedging (Topic 815):

Fair Value Hedging - Portfolio Layer Method .

Among other things, the ASU renamed the "last-of-layer" method to the "portfolio layer" method and made fair value hedging more accessible for hedge accounting of interest rate risk for portfolios and financial assets.

For example, the guidance permits an entity to apply the same portfolio hedging method to both prepayable and non-prepayable financial assets, thereby providing for consistency between accounting for similar hedges.

We adopted the amendments on January 1, 2023, which had no effect on our existing hedge accounting, disclosures, financial condition or results of operations.

Accounting Standards Not Yet Effective

2 unchanged sentences

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.

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 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.

The amendments in this ASU may be elected December 31, 2024 (as amended by ASU No.

2022-06 discussed below).

An entity may elect the amendments in this update at an interim period 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.

In January 2021, the FASB issued ASU No.

3 unchanged sentences

Amendments may be elected through December 31, 2022.

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 .

As of March 31, 2023, we had four interest rate swap contracts with notional values totaling $ 11.8 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 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.

In October 2021, the FASB issued ASU No.

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

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.

The amendments are to be applied prospectively to business combinations occurring on or after December 15, 2022 and early adoption is permitted.

In the event of a future business combination, we will assess the impact of the ASU on our financial condition and results of operations.

In March 2022, the FASB issued ASU No.

2022-02, Financial Instruments - Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures .

The amendment eliminates the recognition measurement guidance for troubled debt restructured ("TDR") loans, and instead requires an entity to evaluate whether a modification represents a new loan or a continuation of an existing loan in accordance with ASC Topic 310-20, Receivables - Nonrefundable Fees and Other Costs .

In addition, the amendment requires that an entity include in its vintage disclosures the current period-gross loan charge-offs by year of origination.

The amendments are effective for years beginning after December 15, 2022, and should be applied prospectively, except that an entity has the option to apply a modified retrospective method for TDR loans, resulting in a cumulative-effect adjustment to retained earnings in the period of adoption.

An entity may elect to early adopt each of the amendments separately.

As such, we early adopted the current period charge-off disclosures in the first quarter of 2022 and intend to adopt the loan modification amendments when effective in the first quarter of 2023.

Neither the early adoption of the amendments related to gross charge-off disclosures nor the future adoption of the TDR amendments had or will have a material impact on our financial condition or results of operations.

In March 2022, the FASB issued ASU No.

2022-01, Derivatives and Hedging (Topic 815):

Fair Value Hedging - Portfolio Layer Method .

Among other things, the ASU renames the "last-of-layer" method to the "portfolio layer" method and makes fair value hedging more accessible for hedge accounting of interest rate risk for portfolios and financial assets.

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

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

In December 2022, the FASB issued ASU No.

2022-06, Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848.

The objective of the guidance in Topic 848 was to provide temporary relief during the transition period, as noted in the discussion of ASU 2020-04 above, under which the sunset provision was based on an expectation that LIBOR would cease being published after December 31, 2021.

In March 2021, the UK Financial Conduct Authority ("FCA") announced that the intended cessation date of certain tenors of USD LIBOR would be June 30, 2023, which is beyond the current sunset date of Topic 848.

Therefore, this amendment deferred the sunset date of Topic 848 from December 31, 2022 to December 31, 2024.

In June 2022, the FASB issued ASU No.

10 unchanged sentences

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.

In March 2023, the FASB issued ASU No.

2023-01, Leases (Topic 842):

Common Control Arrangements .

For public companies, the amendment requires entities to amortize leasehold improvements associated with common control lease arrangements over the useful life of the improvements to the common control group, as opposed to the shorter of the remaining lease term and the useful life of the improvements for all other operating leases.

The amendments are effective for years beginning after December 15, 2023, and may be adopted either prospectively or retrospectively.

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

We currently do not

have common control lease arrangements, and therefore do not anticipate that the amendments will impact our financial condition and results of operations.

In March 2023, the FASB issued ASU No.

2023-02, Investments—Equity Method and Joint Ventures (Topic 323):

Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method .

Under current GAAP, an entity can only elect to apply the proportional amortization method to investments in low-income housing tax credit ("LIHTC") structures.

The proportional amortization method results in the cost of the investment being amortized in proportion to the income tax credits and other income tax benefits received, with the amortization of the investment and the income tax credits being presented net in the consolidated statements of income as a component of income tax expense (benefit).

The amendments will allow entities to elect to account for all other equity investments made primarily for the purpose of receiving income tax credits to using the proportional amortization method, regardless of the tax credit program through which the investment earns income tax credits, when certain conditions are met.

The amendments are effective for fiscal years beginning after December 15, 2023, and may be adopted either on a modified retrospective basis or retrospectively.

Other than investments in LIHTC funds, as disclosed in Note 4, Investment Securities, we currently have no other equity investments made primarily for the purpose of receiving income tax credits, and therefore do not anticipate that the amendments will impact our financial condition and results of operations.

Fair Value of Assets and Liabilities

15 unchanged sentences

Changes in Fair Value Recorded In 1

September 30, 2022

March 31, 2023

Securities available-for-sale:

8 unchanged sentences

Derivative financial assets (interest rate contracts) $ 404 $ — $ 404 $ — NI

Derivative financial liabilities (interest rate contracts) $ 23 $ — $ 23 $ — NI

December 31, 2022

8 unchanged sentences

Asset-backed securities $ 1,462 $ — $ 1,462 $ — OCI

Derivative financial liabilities (interest rate contracts) $ 1,085 $ — $ 1,085 $ — NI

Derivative financial assets (interest rate contracts) $ 602 $ — $ 602 $ — NI

1 Other comprehensive income ("OCI") or net income ("NI").

6 unchanged sentences

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

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.

As of March 31, 2023 and December 31, 2022, there were no Level 3 securities.

Held-to-maturity securities may be written down to fair value as a result of credit losses or other factors , and we did not record any write-downs during the three months ended March 31, 2023 or March 31, 2022.

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

5 unchanged sentences

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

We project spot rates at reset days specified by each swap contract to determine future cash flows, then discount to present value using OIS curves as of the measurement date.

We project spot rates at reset days specified by each swap contract to determine future cash flows, then discount to present value using OIS curves as

of the measurement date.

When the value of any collateral placed with counterparties is less than the interest rate derivative liability, a credit valuation adjustment ("CVA") is applied to reflect the credit risk we pose to counterparties.

10 unchanged sentences

Our current OREO resulted from the American River Bankshares ("AMRB") 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 September 30, 2022 and December 31, 2021.

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

(Level 2) Significant Unobservable Inputs

September 30, 2022

March 31, 2023

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 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 table below is a summary of fair value estimates for financial instruments as of March 31, 2023 and December 31, 2022, 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 September 30, 2022 or December 31, 2021.

The values are discussed in Note 4, Investment Securities.

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

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

6 unchanged sentences

Time deposits 144,067 144,071 Level 2 119,030 118,333 Level 2

Federal Home Loan Bank short-term borrowings 405,400 405,400 Level 2 112,000 112,000 Level 2

Interest payable 234 234 Level 2 75 75 Level 2

2 unchanged sentences

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

Due to the short-term nature of the FHLB borrowings, the carrying value approximates fair value.

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 September 30, 2022 or December 31, 2021.

The fair value of commitment fees was not material as of March 31, 2023 or December 31, 2022.

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 September 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 March 31, 2023 and December 31, 2022 is presented below.

Held-to-maturity:

2 unchanged sentences

(in thousands) Gains (Losses)

September 30, 2022

March 31, 2023

Securities of U.S.

15 unchanged sentences

CMOs issued by FNMA 111,904 — 111,904 — ( 5,419 ) 106,485

CMOs issued by GNMA 52,356 — 52,356 11 ( 3,076 ) 49,291

SBA-backed securities 2,372 — 2,372 — ( 133 ) 2,239

1 unchanged sentence

Obligations of state and political subdivisions 62,500 — 62,500 — ( 10,741 ) 51,759

Corporate bonds 30,000 — 30,000 — ( 1,552 ) 28,448

Total held-to-maturity $ 972,207 $ — $ 972,207 $ 70 $ ( 127,038 ) $ 845,239

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.

1 Amortized cost and fair values exclude accrued interest receivable of $ 2.6 million and $ 3.7 million at March 31, 2023 and December 31, 2022, 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.

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.

2 unchanged sentences

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 September 30, 2022.

Obligations of state and political subdivisions Corporate bonds

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

(in thousands) March 31, 2023 December 31, 2022 March 31, 2023 December 31, 2022

AAA / Aaa $ 42,884 $ 42,986 $ — $ —

2 unchanged sentences

Total $ 62,384 $ 62,500 $ 30,000 $ 30,000

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.

A summary of the amortized cost, fair value and allowance for credit losses related to securities available-for-sale as of March 31, 2023 and December 31, 2022 is presented below.

Available-for-sale:

2 unchanged sentences

(in thousands) Gains (Losses)

September 30, 2022

March 31, 2023

Securities of U.S.

25 unchanged sentences

Total available-for-sale $ 892,605 $ 34 $ ( 90,543 ) $ — $ 802,096

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.

1 Amortized cost and fair value exclude accrued interest receivable of $ 3.1 million and $ 3.2 million at March 31, 2023 and December 31, 2022, 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.

3 unchanged sentences

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.

The amortized cost a nd fair value of investment debt securities by contractual maturity at March 31, 2023 and December 31, 2022 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.

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

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

5 unchanged sentences

Total $ 958,560 $ 850,125 $ 871,829 $ 797,533 $ 972,207 $ 845,239 $ 892,605 $ 802,096

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) September 30, 2022 December 31, 2021

There were no sales of investment securities in the first quarter of 2023 or 2022.

Three months ended

The carrying values of pledged investment securities are shown in the following table:

(in thousands) March 31, 2023 December 31, 2022

Pledged to the State of California:

4 unchanged sentences

Bankruptcy trustee deposits pledged with Federal Reserve Bank 1,700 1,737

Pledged to FHLB Securities-Backed Credit Program 395,780 —

Pledged to the Federal Reserve Bank Term Funding Program ("BTFP") 278,638 —

Total pledged investment securities $ 906,329 $ 238,570

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

There were 397 and 407 securities in unrealized loss positions at March 31, 2023 and December 31, 2022, respectively.

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

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

March 31, 2023 < 12 continuous months ≥ 12 continuous months Total securities

in a loss position

27 unchanged sentences

Held-to-maturity:

MBS pass-through securities issued by FHLMC and FNMA $ 76,619 $ ( 712 ) $ — $ — $ 76,619 $ ( 712 )

MBS pass-through securities issued by FHLMC, FNMA and GNMA $ 62,627 $ ( 5,960 ) $ 218,507 $ ( 44,187 ) $ 281,134 $ ( 50,147 )

CMOs issued by FHLMC 78,144 ( 5,874 ) 113,796 ( 23,629 ) 191,940 ( 29,503 )

Obligations of state and political subdivisions 19,203 ( 209 ) — — 19,203 ( 209 )

CMOs issued by FNMA 106,485 ( 5,419 ) — — 106,485 ( 5,419 )

CMOs issued by GNMA 27,570 ( 1,676 ) 10,331 ( 1,400 ) 37,901 ( 3,076 )

SBA-backed securities 2,239 ( 133 ) — — 2,239 ( 133 )

Debentures of government- sponsored agencies 38,645 ( 2,530 ) 80,711 ( 23,937 ) 119,356 ( 26,467 )

Obligations of state and political subdivisions 15,155 ( 589 ) 36,603 ( 10,152 ) 51,758 ( 10,741 )

Corporate Bonds 28,448 ( 1,552 ) — — 28,448 ( 1,552 )

Total held-to-maturity 359,313 ( 23,733 ) 459,948 ( 103,305 ) 819,261 ( 127,038 )

Available-for-sale:

MBS pass-through securities issued by FHLMC and FNMA 263,474 ( 2,784 ) — — 263,474 ( 2,784 )

SBA-backed securities 7,478 ( 112 ) 1,209 ( 43 ) 8,687 ( 155 )

MBS pass-through securities issued by FHLMC, FNMA and GNMA 44,630 ( 4,501 ) 52,235 ( 7,632 ) 96,865 ( 12,133 )

CMOs issued by FHLMC 169,760 ( 15,144 ) 143,995 ( 18,538 ) 313,755 ( 33,682 )

CMOs issued by GNMA 44,790 ( 553 ) — — 44,790 ( 553 )

CMOs issued by FNMA 4,790 ( 235 ) 27,529 ( 3,617 ) 32,319 ( 3,852 )

CMOs issued by GNMA 8,214 ( 374 ) 23,612 ( 2,922 ) 31,826 ( 3,296 )

SBA-backed securities 37,845 ( 3,228 ) 6,133 ( 143 ) 43,978 ( 3,371 )

Debentures of government- sponsored agencies 19,054 ( 946 ) 116,052 ( 13,062 ) 135,106 ( 14,008 )

5 unchanged sentences

Total securities at loss position $ 714,008 $ ( 57,620 ) $ 903,222 $ ( 159,961 ) $ 1,617,230 $ ( 217,581 )

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.

As of March 31, 2023, the investment portfolio included 353 investment securities that had been in a continuous loss position for twelve months or more and 44 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 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.

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 September 30, 2022.

At March 31, 2023, management determined that it did not intend to sell any investment securities with unrealized losses, and it is more likely than not that we will not be required to sell securities with unrealized losses before recovery of their amortized cost.

Non-Marketable Securities Included in Other Assets

3 unchanged sentences

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

We held $ 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.

We held $ 16.7 million of FHLB stock included in other assets on the consolidated statements of condition at both March 31, 2023 and December 31, 2022.

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, 2023 and December 31, 2022.

On April 27, 2023, FHLB announced a cash dividend for the first quarter of 2023 at an annualized dividend rate of 7.00 % to be distributed on May 11, 2023.

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 September 30, 2022 and December 31, 2021.

Class B common stock at March 31, 2023 and December 31, 2022.

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 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.

When converting this Class B common stock to Class A common stock based on the estimated conversion rate of 1.5991 at March 31, 2023 and December 31, 2022, 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 $ 3.8 million and $ 3.5 million at March 31, 2023 and December 31, 2022, respectively.

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

3 unchanged sentences

Low Income Housing Tax Credits

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.

We invest in low-income housing tax credit funds as a limited partner, which totaled $ 2.4 million and $ 2.5 million recorded in other assets as of March 31, 2023 and December 31, 2022, respectively.

In the first three months of 2023, we recognized $ 151 thousand of low-income housing tax credits and other tax benefits, offset by $ 127 thousand of amortization expense of low-income housing tax credit investment, as a component of income tax expense.

As of March 31, 2023, our unfunded commitments for these low-income housing tax credit funds totaled $ 347 thousand.

We did not recognize any impairment losses on these low-income housing tax credit investments during the first three months of 2023 or 2022, 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 September 30, 2022 and December 31, 2021.

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

The following table presents the amortized cost of loans by class as of March 31, 2023 and December 31, 2022.

(in thousands) March 31, 2023 December 31, 2022

Commercial and industrial $ 195,964 $ 173,547

Commercial owner-occupied 352,529 354,877

Commercial investor-owned 1,211,651 1,189,021

Commercial non-owner occupied 1,189,962 1,191,889

Construction 110,386 114,373

6 unchanged sentences

Total loans, net of allowance for credit losses on loans $ 2,088,998 $ 2,069,563

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.

1 Amortized cost includes net deferred loan origination costs of $ 2.1 million and $ 1.8 million at March 31, 2023 and December 31, 2022, respectively.

Amounts are also net of unrecognized purchase discounts of $ 2.4 million and $ 2.6 million at March 31, 2023 and December 31, 2022, respectively.

Amortized cost excludes accrued interest, which totaled $ 6.1 million at both March 31, 2023 and December 31, 2022, 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.

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

4 unchanged sentences

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

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 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%.

In addition, the SBA paid the Bank a fee of 1%-5% depending on the loan amount, which was netted with loan origination costs and accreted/amortized into interest income using the effective yield method over the contractual life of each loan.

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

PPP loans are fully guaranteed by the SBA if they meet the requirements of the program.

As expected, the vast majority of the PPP loans have been fully forgiven by the SBA and we expect the majority of remaining loans to be forgiven as well.

Commercial Real Estate Loans - Commercial real estate loans, which include income producing investment properties and owner-occupied real estate used for business purposes, are subject to underwriting standards and processes similar to commercial loans discussed above.

49 unchanged sentences

Such loans are placed on non-accrual status and usually are collateral-dependent.

We regularly review our credits for accuracy of risk grades whenever we receive new information.

We regularly review our credits for accuracy of risk grades whenever we receive new information and at each quarterly and year-end reporting period.

Borrowers are generally required to submit financial information at regular intervals.

4 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 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.

Accordingly, the 2022 vintage table reflects gross charge-offs by loan class and year of origination.

The following tables present the loan portfolio by loan class, origination year and internal risk rating as of March 31, 2023 and December 31, 2022.

The current year vintage table reflects gross charge-offs by loan class and year of origination.

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

1 unchanged sentence

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

September 30, 2022 2022 2021 2020 2019 2018 Prior Total

March 31, 2023 2023 2022 2021 2020 2019 Prior Total

Commercial and industrial:

8 unchanged sentences

Substandard — — — — — 1,711 — 1,711

Doubtful — — 101 — — — — 101

Total commercial real estate, owner-occupied $ 371 $ 55,727 $ 67,125 $ 39,903 $ 47,698 $ 141,705 $ — $ 352,529

(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:

Commercial real estate, non-owner occupied:

Pass and Watch $ 5,456 $ 179,181 $ 210,546 $ 154,342 $ 162,111 $ 426,972 $ 48 $ 1,138,656

1 unchanged sentence

Substandard — — 2,246 — — 20,523 — 22,769

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

Total commercial real estate, non-owner occupied $ 5,456 $ 179,181 $ 213,958 $ 166,340 $ 166,018 $ 458,961 $ 48 $ 1,189,962

Construction:

9 unchanged sentences

Pass and Watch $ 6,591 $ 18,531 $ 12,501 $ 5,443 $ 5,951 $ 10,501 $ 950 $ 60,468

Substandard — — — — — 92 — 92

Total installment and other consumer $ 6,591 $ 18,531 $ 12,501 $ 5,443 $ 5,951 $ 10,501 $ 950 $ 60,468

19 unchanged sentences

Total commercial real estate, owner-occupied $ 54,188 $ 68,279 $ 40,468 $ 46,262 $ 35,111 $ 110,569 $ — $ 354,877

Commercial real estate, investor-owned:

Commercial real estate, non-owner occupied:

Pass and Watch $ 177,822 $ 211,228 $ 155,278 $ 160,670 $ 129,166 $ 308,509 $ 57 $ 1,142,730

1 unchanged sentence

Substandard — 2,264 — — — 19,724 — 21,988

Total commercial real estate, investor-owned $ 225,722 $ 187,428 $ 190,132 $ 155,496 $ 77,206 $ 352,953 $ 84 $ 1,189,021

Total commercial real estate, non-owner occupied $ 177,822 $ 214,664 $ 167,375 $ 164,604 $ 129,844 $ 337,523 $ 57 $ 1,191,889

Construction:

6 unchanged sentences

Pass and Watch $ 21,154 $ 14,547 $ 29,018 $ 21,890 $ 11,064 $ 14,450 $ — $ 112,123

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

December 31, 2022 2022 2021 2020 2019 2018 Prior Total

Total other residential $ 21,154 $ 14,547 $ 29,018 $ 21,890 $ 11,064 $ 14,450 $ — $ 112,123

1 unchanged sentence

Pass and Watch $ 20,054 $ 13,022 $ 5,727 $ 6,492 $ 4,181 $ 6,478 $ 944 $ 56,898

Substandard — — — — — 91 — 91

Total installment and other consumer $ 20,054 $ 13,022 $ 5,727 $ 6,492 $ 4,181 $ 6,569 $ 944 $ 56,989

2 unchanged sentences

Total Substandard $ — $ 2,264 $ 1,252 $ 1,160 $ — $ 22,619 $ 715 $ 28,010

Doubtful $ — $ 114 $ — $ — $ — $ — $ — $ 114

Total Doubtful $ — $ — $ 99 $ — $ — $ — $ — $ 99

Totals $ 338,104 $ 336,584 $ 280,304 $ 269,247 $ 198,510 $ 496,053 $ 173,744 $ 2,092,546

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.

The following table shows the amortized cost of loans by class, payment aging and non-accrual status as of March 31, 2023 and December 31, 2022.

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

September 30, 2022

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

March 31, 2023

30-59 days past due $ 822 $ — $ 924 $ — $ 399 $ — $ 1 $ 2,146

19 unchanged sentences

Non-accrual loans with no allowance $ — $ 1,563 $ — $ — $ 778 $ — $ 91 $ 2,432

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.

1 There were no non-performing loans past due more than ninety days and accruing interest as of March 31, 2023 and December 31, 2022.

2 None of the non-accrual loans as of March 31, 2023 or December 31, 2022 were earning interest on a cash basis.

We recognized no interest income on non-accrual loans for the three months ended March 31, 2023 and 2022.

We reversed interest income totaling $ 16 thousand and less than one thousand for loans placed on non-accrual status during the three months ended March 31, 2023 and March 31, 2022, respectively.

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 September 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 March 31, 2023 and December 31, 2022.

Amortized Cost by Collateral Type

1 unchanged sentence

Allowance for Credit Losses

September 30, 2022

March 31, 2023

Commercial real estate, owner-occupied $ 331 $ — $ — $ 331 $ —

Commercial real estate, non-owner occupied 924 — — 924 —

Home equity — 768 — 768 —

3 unchanged sentences

Commercial real estate, owner-occupied $ 1,563 $ — $ — $ 1,563 $ —

Commercial real estate, investor-owned 694 — — 694 —

Home equity — 778 — 778 —

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 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

Our loan portfolio includes certain loans modified in a troubled debt restructuring (“TDR”), where we have granted economic concessions to borrowers experiencing financial difficulties.

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.

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

• The loan is subsequently refinanced or restructured at current market interest rates and the new terms are consistent with the treatment of creditworthy borrowers under regular underwriting standards;

• The borrower is no longer considered to be in financial difficulty;

• Performance on the loan is reasonably assured;

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

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 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

Commercial real estate, owner-occupied 9,436 7,155

Commercial real estate, investor-owned 165 179

Home equity 629 386

Installment and other consumer — — 91 91 —

$ 11,732 $ 9,510

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 $ 1,563 $ 778 $ 91 $ 2,432 $ —

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

1 There were no collateral-dependent residential real estate mortgage loans in process of foreclosure or in substance repossessed at March 31, 2023 or December 31, 2022.

The weighted average loan-to-value of collateral dependent loans was approximately 42 % at both March 31, 2023 and December 31, 2022.

Loan Modifications

We adopted ASU No.

2022-02, Financial Instruments - Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures on January 1, 2023, as described in Note 2, Recently Adopted and Issued Accounting Standards.

The amendments enhanced disclosures related to certain types of loan modifications for borrowers experiencing financial difficulty, including principal forgiveness, interest rate reductions, other-than-insignificant payment delays, and/or term extensions.

There were no such modifications during the three months ended March 31, 2023 requiring disclosure.

Allocation of the Allowance for Credit Losses on Loans

The following table presents the details of the allowance for credit losses on loans segregated by loan portfolio segments as of March 31, 2023 and December 31, 2022.

Allocation of the Allowance for Credit Losses on Loans

March 31, 2023

Modeled expected credit losses $ 1,137 $ 1,349 $ 7,409 $ 239 $ 459 $ 535 $ 574 $ — $ 11,702

Qualitative adjustments 784 1,291 5,292 1,780 79 42 305 2,032 11,605

Specific allocations 20 — — — — — 3 — 23

Total $ 1,941 $ 2,640 $ 12,701 $ 2,019 $ 538 $ 577 $ 882 $ 2,032 $ 23,330

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.

December 31, 2022

Modeled expected credit losses $ 1,079 $ 1,497 $ 7,937 $ 453 $ 504 $ 571 $ 610 $ — $ 12,651

Qualitative adjustments 706 990 4,739 1,484 54 24 258 2,068 10,323

Specific allocations 9 — — — — — — — 9

Total $ 1,794 $ 2,487 $ 12,676 $ 1,937 $ 558 $ 595 $ 868 $ 2,068 $ 22,983

Allowance for Credit Losses on Loans Rollforward

1 unchanged sentence

Allowance for Credit Losses on Loans Rollforward

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

Three months ended September 30, 2022

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

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

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

Recoveries 3 — — 9 — — — — 12

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

Three months ended September 30, 2021

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

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 )

Recoveries 3 — — 8 — — — — 11

Ending balance $ 2,124 $ 2,566 $ 12,305 $ 1,227 $ 659 $ 623 $ 622 $ 2,288 $ 22,414

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

Nine months ended September 30, 2022

Three months ended March 31, 2023

Beginning balance $ 1,794 $ 2,487 $ 12,676 $ 1,937 $ 558 $ 595 $ 868 $ 2,068 $ 22,983

3 unchanged sentences

Ending balance $ 1,941 $ 2,640 $ 12,701 $ 2,019 $ 538 $ 577 $ 882 $ 2,032 $ 23,330

Nine months ended September 30, 2021

Three months ended March 31, 2022

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

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

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 $ 1.300 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").

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 $ 1.308 billion and $ 1.298 billion at March 31, 2023 and December 31, 2022, respectively.

In addition, we pledge eligible TIC loans, which totaled $ 106.2 million and $ 105.0 million at March 31, 2023 and December 31, 2022, 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

$ 6.5 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 September 30, 2022 and December 31, 2021.

Related party loans totaled $ 6.4 million at March 31, 2023 and at December 31, 2022.

In addition, undisbursed commitments to related parties totaled $ 562 thousand at both March 31, 2023 and December 31, 2022.

Short-Term Borrowings and Other Obligations

Federal Home Loan Bank – As of March 31, 2023 and December 31, 2022, the Bank had total lines of credit with the FHLB totaling $ 1.037 billion and $ 711.6 million, respectively, based on eligible collateral of certain loans and investment securities.

Federal Funds Lines of Credit – The Bank had unsecured lines of credit with correspondent banks for overnight borrowings totaling $ 150.0 million at March 31, 2023 and December 31, 2022.

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

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 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 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.

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

At March 31, 2023 and December 31, 2022, the Bank had total borrowing capacity under this line of $ 60.6 million and $ 58.7 million, respectively.

In addition, under the Federal Reserve’s new BTFP facility, the Bank could borrow up to an additional $ 283.6 million based on the par value of pledged investment securities as of March 31, 2023.

Other Obligations – Finance lease liabilities totaling $ 402 thousand and $ 439 thousand at March 31, 2023 and December 31, 2022, respectively, are included in short-term borrowings and other obligations in the consolidated statements of condition.

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

Outstanding balances and weighted average interest rates on short-term borrowings and other obligations as of March 31, 2023 and December 31, 2022 are summarized in the following table.

March 31, 2023 December 31, 2022

(dollars in thousands) Outstanding Balance Weighted

Average Rate Outstanding Balance Weighted Average Rate

FHLB - short-term borrowings $ 405,400 5.17 % $ 112,000 4.65 %

Federal funds lines of credit — — % — — %

FRBSF - federal funds purchased — — % — — %

FRBSF - short-term borrowings under the BTFP — — % — — %

Other obligations (finance leases) 402 1.89 % 439 1.86 %

Total short-term borrowings and other obligations $ 405,802 5.17 % $ 112,439 4.64 %

Stockholders' Equity

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.

On January 20, 2023, Bancorp declared a $ 0.25 per share cash dividend, paid February 10, 2023 to shareholders of record at the close of business on February 3, 2023.

Subsequent to quarter end on April 21, 2023, Bancorp declared a $ 0.25 per share cash dividend, payable on May 12, 2023 to shareholders of record at the close of business on May 5, 2023.

Share-Based Payments

1 unchanged sentence

Stock-based compensation also includes compensation expense related to the issuance of restricted stock awards.

The grant-date fair value of the restricted stock awards, which equals the grant date price, is recorded as compensation expense over the requisite service period with a corresponding increase in common stock as the shares vest.

The grant-date fair value of the restricted stock awards,

which equals the grant date price, is recorded as compensation expense over the requisite service period with a corresponding increase in common stock as the shares vest.

Beginning in 2018, stock option and restricted stock awards issued include a retirement eligibility clause whereby the requisite service period is satisfied at the retirement eligibility date.

5 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 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.

During the three months ended March 31, 2023, we withheld 2,847 shares totaling $ 82 thousand at a weighted-average price of $ 28.74 for cashless exercises.

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.

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

Share Repurchase Program

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 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.

Bancorp has an approved share repurchase program with $ 34.7 million outstanding at March 31, 2023.

There have been no repurchases in 2023.

Cumulative shares repurchased under the current program totaled 618,991 shares as of March 31, 2023 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) September 30, 2022 December 31, 2021

(in thousands) March 31, 2023 December 31, 2022

Commercial lines of credit $ 266,082 $ 292,204

3 unchanged sentences

Standby letters of credit 1,720 1,738

Total commitments and standby letters of credit $ 561,692 $ 634,211

Total unfunded loan commitments and standby letters of credit $ 529,477 $ 566,870

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 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.

The allowance for credit losses on unfunded commitments totaled $ 1.3 million and $ 1.5 million as of March 31, 2023 and December 31, 2022, respectively, which is included in interest payable and other liabilities in the consolidated statements of condition.

The $ 174 thousand reversal of the provision for credit losses on unfunded loan commitments in the first quarter of 2023 was due primarily to a $ 37.4 million decrease in total unfunded commitments, compared to a $ 318 thousand provision reversal in the first quarter of 2022, due mainly to an improvement in the underlying economic forecasts at the time.

We lease premises under long-term non-cancelable operating leases with remaining terms of 4 months to 19 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) September 30, 2022 December 31, 2021

(in thousands) March 31, 2023 December 31, 2022

Operating leases:

9 unchanged sentences

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

Nine months ended

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

Three months ended

(in thousands) March 31, 2023 March 31, 2022

Right-of-use assets obtained in exchange for operating lease liabilities $ — $ 1,120

Right-of-use assets obtained in exchange for finance lease liabilities $ 41 $ 444

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

Three months ended Nine months ended

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

Three months ended

(in thousands) March 31, 2023 March 31, 2022

Operating lease cost $ 1,610 $ 1,284

4 unchanged sentences

Amortization of right-of-use assets 2

$ 31 $ 31 $ 93 $ 65

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 September 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

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) March 31, 2023

Year Operating Leases Finance Leases

3 unchanged sentences

2026 3,129 36

2026 2,888 10

Thereafter 9,693 —

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.

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.

During its six month fiscal reporting period ended March 31, 2023, Visa deposited an additional $ 350 million into the litigation escrow account to address claims of certain merchants who opted out of the Amended Settlement Agreement for a balance of $ 1.6 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 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.

As of March 31, 2023, we had four interest rate swap agreements, which are scheduled to mature at various dates ranging from June 2031 to 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 $ 519 at September 30, 2022 and $ 11 thousand at December 31, 2021.

Accrued interest receivable on the swaps totaled $ 6 thousand at March 31, 2023 and $ 5 thousand at December 31, 2022.

Information on our derivatives follows:

Asset Derivatives Liability Derivatives

(in thousands) September 30,

2022 December 31, 2021 September 30,

(in thousands) March 31,

2023 December 31, 2022 March 31,

2023 December 31, 2022

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

(in thousands) March 31, 2023 December 31, 2022 March 31, 2023 December 31, 2022

Loans $ 11,284 $ 11,319 $ ( 506 ) $ ( 726 )

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 Nine months ended

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

Three months ended

(in thousands) March 31, 2023 March 31, 2022

Interest and fees on loans 1

$ 24,258 $ 23,677

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

(Decrease) increase in fair value of designated interest rate swaps due to LIBOR interest rate movements $ ( 221 ) $ 757

Receivable (payment) on interest rate swaps 51 ( 85 )

Increase (decrease) in fair value hedging adjustment of hedged loans 221 ( 752 )

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

Net losses on fair value hedging relationships recognized in interest income $ ( 13 ) $ ( 93 ) $ ( 161 ) $ ( 272 )

Net gain (losses) on fair value hedging relationships recognized in interest income $ 49 $ ( 83 )

1 Represents the income line item in the statement of comprehensive income in which the effects of fair value hedges are recorded.

9 unchanged sentences

Assets Condition of Condition Instruments Received Net Amount

September 30, 2022

Derivatives by Counterparty:

Counterparty A $ 649 $ — $ 649 $ ( 649 ) $ — $ —

March 31, 2023

Counterparty $ 404 $ — $ 404 $ ( 23 ) $ — $ 381

December 31, 2022

Derivatives by Counterparty:

Counterparty A $ — $ — $ — $ — $ — $ —

Counterparty $ 602 $ — $ 602 $ — $ — $ 602

Offsetting of Financial Liabilities and Derivative Liabilities

5 unchanged sentences

Instruments Pledged Net Amount

September 30, 2022

Derivatives by Counterparty:

Counterparty A $ — $ — $ — $ — $ — $ —

March 31, 2023

Counterparty $ 23 $ — $ 23 $ ( 23 ) $ — $ —

December 31, 2022

Derivatives by Counterparty:

Counterparty A $ 1,085 $ — $ 1,085 $ — $ ( 1,085 ) $ —

Counterparty $ — $ — $ — $ — $ — $ —

1 Amounts exclude accrued interest on swaps.

For more information on how we account for our interest rate swaps, refer to Note 1 to the Consolidated Financial Statements included in our 2022 Form 10-K filed with the SEC on March 16, 2023.

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.

Bancorp accounted for the Merger as a business combination under the acquisition method of accounting.

The assets acquired and liabilities assumed, both tangible and intangible, were recorded at their fair values as of the merger date in accordance with ASC 805, Business Combinations .

AMRB shareholders received 0.575 shares of Bancorp's common stock for each share of AMRB common stock outstanding immediately prior to the Merger resulting in the issuance of 3,441,235 shares of Bancorp common stock.

In addition, merger consideration included cash paid for outstanding stock options and cash paid in lieu of fractional shares, as summarized in the following table.

(in thousands) Merger Consideration

Value of common stock consideration paid to shareholders ( 0.575 fixed exchange ratio, stock price $ 36.15 )

Cash consideration for stock options 63

Cash paid in lieu of fractional shares 13

Total merger consideration $ 124,477

We recorded $ 42.6 million in goodwill, which represents the excess of the total merger consideration paid over the fair value of the assets acquired, net of the fair values of liabilities assumed.

Goodwill mainly reflects expected value created through the combined operations of AMRB and Bancorp and is evaluated for impairment annually.

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 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 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 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

Professional services — 1,778 67 1,979

Data processing — 433 77 433

Other expense — 263 321 279

Total merger-related one-time and conversion costs $ — $ 5,142 $ 858 $ 5,359

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