Bank of Marin Bancorp Reports Third Quarter Earnings of $5.3 Million

Rhea-AI Summary

Bank of Marin Bancorp (BMRC) reported third-quarter 2021 earnings of $5.3 million, down from $9.3 million in Q2 2021 and $7.5 million in Q3 2020. Diluted EPS fell to $0.35 from $0.71 in the previous quarter. The decrease was attributed to merger-related costs from the American River Bankshares acquisition, completed on August 6, 2021. Total assets increased to $4.261 billion, with loans growing to $2.317 billion thanks to the merger. The bank declared a cash dividend of $0.24 per share and increased its share repurchase program authorization from $25 million to $57 million.

Positive

• Total loans increased by $314.3 million in Q3 2021, largely due to the acquisition, totaling $2.317 billion.
• Total deposits grew to $3.728 billion, an increase of $1.044 billion from Q2 2021.
• The efficiency ratio improved to 56.02% excluding one-time merger costs, compared to 57.76% in Q2 2021.
• Declared a cash dividend of $0.24 per share, marking the 66th consecutive quarterly dividend.

Negative

• Net income dropped to $5.3 million in Q3 2021, down from $9.3 million in Q2 2021 due to $3.9 million in merger-related costs.
• Diluted EPS decreased to $0.35 from $0.71 in the prior quarter, primarily impacted by merger expenses.
• The tax-equivalent net interest margin decreased to 3.15% in Q3 2021 from 3.37% in Q2 2021.

American River Acquisition Complete, Integration Begins

NOVATO, Calif.--(BUSINESS WIRE)-- Bank of Marin Bancorp, "Bancorp" (Nasdaq: BMRC), parent company of Bank of Marin, "Bank," announced earnings of $5.3 million in the third quarter of 2021 compared to $9.3 million in the second quarter of 2021 and $7.5 million in the third quarter of 2020. Diluted earnings per share were $0.35 in the third quarter, $0.71 in the prior quarter, and $0.55 in the same quarter last year. Third quarter 2021 earnings were significantly reduced by the costs associated with our recent acquisition. For the first nine months of 2021, Bancorp earned $23.5 million compared to $22.1 million in the same period last year. Diluted earnings per share were $1.69 and $1.62 in the first nine months of 2021 and 2020, respectively.

The results for the third quarter of 2021 reflect the consolidated operations of American River Bankshares ("AMRB"), including AMRB's subsidiary American River Bank ("ARB"), effective August 6, 2021 (the "merger date"). AMRB merged with and into Bancorp, with Bank of Marin Bancorp surviving, followed thereafter at 12:05 AM on August 7, 2021, by the merger of ARB with and into the Bank, with Bank of Marin surviving, (collectively the "Merger"). The Merger contributed $419.4 million in loans and $790.0 million in deposits as of the merger date, resulting in $42.6 million of goodwill and increasing total assets to $4.261 billion and total stockholder's equity to $458.5 million as of September 30, 2021.

“Bank of Marin is on solid ground financially and in an excellent strategic position. Our integration of American River Bankshares is progressing smoothly, setting the stage for long-term growth across a much larger and more diverse footprint,” said Russell A. Colombo, Chief Executive Officer.

As previously announced, Russell A. Colombo will formally retire as Chief Executive Officer of Bank of Marin and Bank of Marin Bancorp, effective October 31, 2021. The Board of Directors named Tim Myers, currently President and Chief Operating Officer, as his successor. Mr. Colombo will remain on the Boards of Bancorp and the Bank, and Mr. Myers will join both Boards. “I’m very proud of the bank we have built over the past two decades and the team that drives our success," said Mr. Colombo. "As I prepare to retire, I’m confident that Tim is more than ready to succeed me, leading our deep bench of talented bankers to deliver strong returns for our shareholders for years to come.”

"Our merger with American River brought together two institutions that share complementary values and disciplined fundamentals,” said Mr. Myers. “I look forward to leading the combined team as we roll up our sleeves to ensure a seamless integration. By committing significant resources to this process, we are building a strong foundation on which to grow our franchise on a regional scale."

Bancorp provided the following highlights from the third quarter of 2021:

• Loan balances of $2.317 billion at September 30, 2021 increased by $314.3 million in the third quarter from $2.003 billion at June 30, 2021 largely due to the ARB acquisition. Loan balances were $2.108 billion at September 30, 2020. Total Small Business Administration ("SBA") Paycheck Protection Program ("PPP") loans outstanding were $164.8 million at September 30, 2021, down $83.4 million from June 30, 2021.

• Credit quality remains strong, with non-accrual loans representing 0.36% of total loans as of September 30, 2021, compared to 0.46% at June 30, 2021, and 0.07% at September 30, 2020. The allowance for credit losses increased by $3.3 million and was comprised of a $1.8 million provision, mainly related to purchased ARB loans without credit deterioration, and a $1.5 million merger-date allowance established for purchased credit deteriorated loans. There was no provision for credit losses on unfunded loan commitments in the third quarter of 2021.

• Total deposits of $3.728 billion at September 30, 2021 increased by $1.044 billion in the third quarter from $2.684 billion at June 30, 2021, mainly due to the ARB acquisition. Non-interest bearing deposits were 49% of total deposits as of September 30, 2021, versus 54% as of June 30, 2021 and September 30, 2020. The decrease in this ratio was primarily due to an increase in interest bearing deposits from one existing customer and a lower ratio of non-interest-bearing deposits acquired from ARB. The cost of average deposits was 0.06% in the third quarter, 0.07% in the second quarter of 2021, and 0.09% in the third quarter of 2020.

• Merger-related one-time and conversion costs reduced net income by $3.9 million, net of taxes, or 26 cents per share in the quarter and by $4.1 million, net of taxes, or 30 cents per share year-to-date. As shown in the reconciliation of GAAP to non-GAAP financial measures on page 3, year-to-date return on average assets ("ROA") of 0.96% and return on average equity ("ROE") of 8.40% were also significantly impacted by those expenses and would have been 1.13% and 9.87%, respectively, compared to 1.03% and 8.47% for the comparable period in 2020.

• ROA and ROE ratios were also significantly impacted by provisions for credit losses on acquired loans and shares issued in conjunction with the merger. A good indicator of the merger's positive impact on operating earnings is the efficiency ratio, as it neither includes provisions for losses on loans and unfunded commitments, nor is it impacted by changes in share counts. As shown in the reconciliation of GAAP to non-GAAP financial measures on page 3, the efficiency ratio excluding merger-related one-time and conversion costs of 56.02% for the quarter ended September 30, 2021, improved from 57.76% and 56.88% in the quarters ended June 30, 2021 and September 30, 2020, respectively.

• All capital ratios were above well-capitalized regulatory requirements. The total risk-based capital ratio for Bancorp was 15.0% at September 30, 2021, compared to 15.5% at June 30, 2021, and 16.1% at September 30, 2020. Bancorp's tangible common equity to tangible assets was 9.1% at September 30, 2021, compared to 10.4% at June 30, 2021 and 11.0% at September 30, 2020 (refer to footnote 5 on page 8 for a discussion of this non-GAAP financial measure). The Bank's total risk-based capital ratio was 14.4% at September 30, 2021, compared to 15.3% at June 30, 2021, and 15.5% at September 30, 2020.

• The Board of Directors declared a cash dividend of $0.24 per share on October 22, 2021, which represents the 66th consecutive quarterly dividend paid by Bank of Marin Bancorp. The dividend is payable on November 12, 2021, to shareholders of record at the close of business on November 5, 2021.

• On October 22, 2021, the Board of Directors approved an amendment to the current share repurchase program which increased the total authorization from $25.0 million to $57.0 million. The July 31, 2023 expiration date of the program remained unchanged

Statement Regarding use of Non-GAAP Financial Measures

In this press release, Bancorp's financial results are presented in accordance with GAAP and refer to certain non-GAAP financial measures. Management believes that presentation of operating results using non-GAAP financial measures provides useful supplemental information to investors and facilitates the analysis of Bancorp's core operating results and comparison of operating results across reporting periods. Management also uses non-GAAP financial measures to establish budgets and manage Bancorp's business. A reconciliation of the GAAP financial measures to comparable non-GAAP financial measures is presented below.

Reconciliation of GAAP and Non-GAAP Financial Measures
(in thousand, unaudited)		Three months ended												Nine months ended
Net income		September 30, 2021				June 30, 2021				September 30, 2020				September 30, 2021				September 30, 2020
Net income (GAAP)		$	5,282			$	9,285			$	7,491			$	23,514			$	22,125
Merger-related one-time and conversion costs:
Personnel and severance		2,668				—				—				2,668				—
Professional services		1,778				201				—				1,979				—
Data processing		433				—				—				433				—
Other		263				16				—				279				—
Income tax benefit of merger-related expenses		(1,222		)		(17		)		—				(1,239		)		—
Total merger-related one-time and conversion costs, net of taxes		3,920				200				—				4,120				—
Comparable net income (non-GAAP)		$	9,202			$	9,485			$	7,491			$	27,634			$	22,125
Diluted earnings per share
Weighted average diluted shares		14,993				13,164				13,610				13,881				13,617
Diluted earnings per share (GAAP)		$	0.35			$	0.71			$	0.55			$	1.69			$	1.62
Comparable diluted earnings per share (non-GAAP)		$	0.61			$	0.72			$	0.55			$	1.99			$	1.62
Return on average assets
Average assets		$	3,743,968			$	3,093,321			$	3,029,342			$	3,280,505			$	2,876,618
Return on average assets (GAAP)		0.56		%		1.20		%		0.98		%		0.96		%		1.03		%
Comparable return on average assets (non-GAAP)		0.98		%		1.23		%		0.98		%		1.13		%		1.03		%
Return on average equity
Average stockholders' equity		$	420,124			$	347,473			$	356,230			$	374,445			$	348,812
Return on average equity (GAAP)		4.99		%		10.72		%		8.37		%		8.40		%		8.47		%
Comparable return on average equity (non-GAAP)		8.69		%		10.95		%		8.37		%		9.87		%		8.47		%
Efficiency ratio
Non-interest expense (GAAP)		$	22,686			$	15,556			$	14,990			$	53,654			$	44,238
Merger-related expenses		(5,142		)		(217		)		—				(5,359		)		—
Non-interest expense (non-GAAP)		$	17,544			$	15,339			$	14,990			$	48,295			$	44,238
Net interest income		$	27,753			$	24,534			$	24,566			$	74,318			$	73,060
Non-interest income		$	3,565			$	2,022			$	1,790			$	7,413			$	6,723
Efficiency ratio (GAAP)		72.44		%		58.58		%		56.88		%		65.65		%		55.45		%
Comparable efficiency ratio (non-GAAP)		56.02		%		57.76		%		56.88		%		59.09		%		55.45		%

Loans and Credit Quality

Loans increased by $314.3 million in the third quarter and totaled $2.317 billion at September 30, 2021. The increase included $419.4 million loans acquired from American River Bank on August 6^th. Non-PPP-related loan originations were $32.6 million and $101.7 million for the third quarter and first nine months of 2021, compared to $50.8 million and $122.4 million for the same periods in 2020. Loan payoffs were $49.9 million and $145.3 million in the third quarter and first nine months of 2021, compared to $41.3 million and $124.7 million for the third quarter and first nine months of 2020. Loan payoffs in the third quarter of 2021 consisted largely of commercial borrower cash paydowns as part of ongoing deleveraging, real estate asset sales and third-party refinancing. A significant portion of the commercial third-party refinancing was attributable to price or structural elements outside the bank's desired credit profile.

Bank of Marin and American River Bank originated a combined total of 3,556 loans amounting to $550.3 million in two rounds of SBA PPP loan financing. Of these amounts, as of September 30, 2021 there were 871 loans outstanding totaling $164.8 million (net of $4.2 million in unrecognized fees and costs). Of the 2,876 PPP loans totaling $444.1 million funded by Bank of Marin, 2,036 loans for $284.7 million have been forgiven and paid off. Year-to-date, Bank of Marin has recognized $6.6 million in PPP fees, net of costs.

During the onset of the pandemic, Bank of Marin granted payment relief for 269 loans totaling $402.9 million. As of September 30, 2021, only two borrowing relationships with five loans totaling $23.6 million were continuing to benefit from payment relief. We monitor the financial situation of these clients closely and expect them to resume payments as the economy continues to recover.

Non-accrual loans totaled $8.4 million and $9.2 million at September 30, 2021 and June 30, 2021, or 0.36% and 0.46% of total loans, respectively. Non-accrual loans totaled $1.4 million, or 0.07% of total loans a year ago. Our non-accrual loans at September 30, 2021 and June 30, 2021 included two well-secured owner-occupied commercial real estate loans totaling $7.1 million, which were placed on non-accrual status in fourth quarter of 2020. Classified loans totaled $19.0 million at September 30, 2021, compared to $30.8 million at June 30, 2021 and $11.0 million at September 30, 2020. Classified loans included one $118 thousand loan acquired from ARB with a doubtful risk rating as of September 30, 2021, which is well-secured by real estate collateral. There were no loans classified doubtful at June 30, 2021 or September 30, 2020. Accruing loans past due 30 to 89 days totaled $1.4 million at September 30, 2021, compared to $487 thousand at June 30, 2021 and $318 thousand a year ago.

In the third quarter of 2021, we recorded a provision for credit losses on loans of $1.8 million, compared to a reversal of $920 thousand in the prior quarter and a provision of $1.3 million in the third quarter of 2020. The allowance for credit loss was increased by an additional $1.5 million in the third quarter due to the allowance for purchased credit deteriorated ("PCD") loans, which offset the fair value discount on PCD loans at the merger date. Both the current quarter and prior quarter allowances were calculated under the current expected credit loss methodology. Significant factors contributing to the third quarter 2021 provision were portfolio growth from acquired loans partially offset by an improvement in underlying economic forecasts. The third quarter of 2020 included a $1.3 million provision for credit losses on loans, as determined under the incurred loss methodology, due to adjustments to qualitative factors impacted by the COVID-19 pandemic. There was no provision for credit losses on unfunded commitments in the third quarter of 2021, compared to a $612 thousand reversal in the prior quarter and a $248 thousand provision in the third quarter of 2020.

Net recoveries were $9 thousand in the third quarter of 2021 and $62 thousand in the prior quarter, compared to net charge-offs of $4 thousand in the third quarter a year ago. The ratio of allowance for credit losses to total loans was 0.97% at September 30, 2021, 0.95% at June 30, 2021, and 1.05% at September 30, 2020. Excluding acquired loans for periods prior to the adoption of the current expected credit loss methodology and fully-guaranteed SBA PPP loans for which there are zero expected credit losses, the allowance for credit losses on loans represented 1.04% of total loans as of September 30, 2021, compared to 1.09% and 1.29% as of June 30, 2021 and September 30, 2020, respectively (refer to footnote 4 on page 8 for a discussion of this non-GAAP financial measure).

Cash, Cash Equivalents and Restricted Cash

Total cash, cash equivalents and restricted cash were $584.7 million at September 30, 2021, compared to $257.5 million at June 30, 2021. The $327.2 million increase was primarily associated with the $166.1 million in cash and cash equivalents from ARB, SBA PPP loans paid off and an increase in customer deposits, partially offset by investment purchases noted below.

Investments

The investment securities portfolio increased to $1.160 billion at September 30, 2021 from $687.0 million at June 30, 2021. The increase was primarily attributed to $297.8 million in securities acquired from ARB, purchases of $263.9 million, partially offset by maturities, paydowns and calls of $81.2 million and sales of $4.1 million. In addition, the fair value of available-for-sale investment securities decreased by $2.3 million due to the increase in interest rates in the third quarter of 2021.

Deposits

Total deposits were $3.728 billion at September 30, 2021, compared to $2.684 billion at June 30, 2021. The $1.044 billion increase was driven by $807.7 million in deposit balances from ARB, SBA PPP loan forgiveness and other increases in customer deposits. The Bank maintained $179.9 million in off-balance sheet deposits with deposit networks at September 30, 2021, compared to $174.0 million at June 30, 2021. Average cost of deposits decreased slightly to 0.06% in the third quarter of 2021, compared to 0.07% in the prior quarter and 0.09% in the same quarter a year ago. Non-interest bearing deposits were 49% of total deposits as of September 30, 2021, versus 54% as of June 30, 2021 and September 30, 2020, as discussed above.

Earnings

“Though merger-related factors impacted our results, we generated strong core net income, carefully managed ongoing costs and maintained pristine credit quality – all key pillars of Bank of Marin’s steady, reliable performance over our more than 30 years,” said Tani Girton, Executive Vice President and Chief Financial Officer. “Now, with the addition of our American River Bank teammates and new opportunities in the Sacramento market, we are well-positioned for success across Northern California’s key growth markets.”

Net interest income totaled $27.8 million in the third quarter of 2021, compared to $24.5 million in the prior quarter and $24.6 million in the third quarter a year ago. The $3.2 million increase from the prior quarter was primarily attributable to the addition of ARB earning asset balances. We recognized $2.3 million in SBA PPP fees, net of cost in the third quarter of 2021 compared to $2.6 million in the prior quarter, and $1.7 million in the third quarter of 2020.

The $3.2 million increase from the comparative quarter a year ago was reflective of the ARB merger and higher income from SBA PPP loans.

Net interest income totaled $74.3 million in the first nine months of 2021, compared to $73.1 million in the first nine months a year ago. The $1.3 million increase was primarily attributed to the ARB merger and $3.7 million increase in SBA PPP fees, net of costs year-to-date. Increases were partially offset by $1.3 million in accelerated discount accretion from the early redemption of a subordinated debenture in the first quarter of 2021 and lower yielding interest-earning assets. As of September 30, 2021, $4.2 million in PPP fees, net of deferred costs, remain outstanding and will be recognized into income in future periods.

The tax-equivalent net interest margin was 3.15% in the third quarter, 3.37% in the prior quarter, and 3.44% in the third quarter of 2020. The decrease in tax-equivalent margin from prior quarter was primarily attributed to a $262.7 million increase in due from banks interest-earning balances, which lowered the third quarter margin by 24 basis points as these assets only earned a yield of 15 basis points. The decrease in tax-equivalent margin from third quarter of 2020 was primarily attributable to both $271.5 million increase in low yielding due from banks interest-earning balances and the lower interest rate environment. The tax-equivalent net interest margin was 3.23% in the first nine months of 2021 compared to 3.61% in the same period a year ago. The decrease was primarily attributed to a $1.3 million in accelerated discount accretion from the early redemption of a subordinated debenture in the first quarter of 2021, the lower interest rate environment and higher cash balances, partially offset by higher income from PPP loans.

Non-interest income totaled $3.6 million in the third quarter of 2021, compared to $2.0 million in the prior quarter and $1.8 million in the third quarter a year ago. The $1.5 million increase from the prior quarter and $1.8 million increase from the third quarter of 2020 were mostly attributed to the collection of $1.1 million in benefits on bank-owned life insurance policies and increases in fee income from deposit accounts and debit card interchange activity.

Non-interest income increased by $690 thousand to $7.4 million in the first nine months of 2021 from $6.7 million in the first nine months of 2020. The increase was primarily due to BOLI payments noted above, increases in Wealth Management and Trust Services income generated from new accounts and favorable market performance, and fees from deposit accounts and debit card interchange activity. The increase was partially offset by the absence of gains on investment securities, as $915 thousand in gains were recognized in the comparative period a year ago.

Non-interest expense increased by $7.1 million to $22.7 million in the third quarter of 2021 from $15.6 million in the prior quarter. The increase was primarily due to a $4.9 million increase in merger-related one-time and conversion costs (mostly related to professional services, data processing contract termination, and personnel costs), salaries and benefits for retained ARB employees and other ARB-related operating expenses incurred since the merger date. The increase was partially offset by a $458 thousand decrease in charitable contributions as the bank has transitioned to a more defined contributions disbursement schedule with funding occurring in the second and fourth quarters.

Third quarter non-interest expense increased by $7.7 million from $15.0 million in the third quarter of 2020. The increase was primarily due to a $5.1 million increase in merger-related expenses detailed above, partially offset by a $477 thousand decrease in charitable contributions due to both the disbursement schedule change mentioned above and large pandemic-related contributions in 2020.

Non-interest expense increased by $9.4 million to $53.7 million in the first nine months of 2021 compared to $44.2 million in the first nine months of 2020. Higher salaries and related benefits of $5.2 million included $2.7 million in personnel costs related to the merger. The increase in salaries and benefits was also attributed to fewer deferred SBA PPP loan origination costs. Professional services increased by $2.6 million and data processing expenses increased by $815 thousand, mainly due to merger-related expenses. In addition, FDIC deposit insurance expenses were $298 thousand higher. Charitable contributions were lower than 2020 for the reasons mentioned above.

In the second quarter of 2021, we reclassified the allowance for credit losses on unfunded commitments from non-interest expense to a separate line item under net interest income in the consolidated statements of comprehensive income for all periods presented. Efficiency ratios for prior periods were updated to reflect the reclassification.

Share Repurchase Program

The $25.0 million share repurchase program approved by the Bancorp Board of Directors on January 24, 2020 was completed in May 2021. The Board of Directors approved a new share repurchase program on July 16, 2021 under which Bancorp may repurchase up to $25.0 million of its outstanding common stock through July 31, 2023. On October 22, 2021, the Board of Directors approved an amendment that increased the total authorization from $25.0 million to $57.0 million. Bancorp repurchased 445,735 shares totaling $15.9 million in the third quarter of 2021 for a cumulative total of 967,683 shares and $35.2 million in the first nine months of 2021.

Earnings Call and Webcast Information

Bank of Marin Bancorp will present its third quarter earnings call via webcast on Monday, October 25, 2021 at 8:30 a.m. PT/11:30 a.m. ET. Investors will have the opportunity to listen to the webcast online through Bank of Marin’s website at https://www.bankofmarin.com under “Investor Relations.” To listen to the webcast live, please go to the website at least 15 minutes early to register, download and install any necessary audio software. For those who cannot listen to the live broadcast, a replay will be available at the same website location shortly after the call.

About Bank of Marin Bancorp

Founded in 1990 and headquartered in Novato, Bank of Marin is the wholly owned subsidiary of Bank of Marin Bancorp (Nasdaq: BMRC). A leading business and community bank in the San Francisco Bay Area, with assets of $4.261 billion as of September 30, 2021, Bank of Marin has 31 branches and 8 commercial banking offices located across 10 Northern California counties. Bank of Marin provides commercial banking, personal banking, specialty lending and wealth management and trust services. Specializing in providing legendary service to its customers and investing in its local communities, Bank of Marin has frequently been ranked one of the “Top Corporate Philanthropists" by the San Francisco Business Times and one of the “Best Places to Work” by the North Bay Business Journal. Bank of Marin Bancorp is included in the Russell 2000 Small-Cap Index and Nasdaq ABA Community Bank Index. For more information, go to www.bankofmarin.com.

Forward-Looking Statements

This release may contain certain forward-looking statements that are based on management's current expectations regarding economic, legislative, and regulatory issues that may impact Bancorp's earnings in future periods. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include the words “believe,” “expect,” “intend,” “estimate” or words of similar meaning, or future or conditional verbs such as “will,” “would,” “should,” “could” or “may.” Factors that could cause future results to vary materially from current management expectations include, but are not limited to, our ability to successfully integrate the acquisition of AMRB and ARB into the Company and Bank, natural disasters (such as wildfires and earthquakes), our borrowers’ actual payment performance as loan deferrals related to the COVID-19 pandemic expire, changes to statutes, regulations, or regulatory policies or practices as a result of, or in response to COVID-19, including the potential adverse impact of loan modifications and payment deferrals implemented consistent with recent regulatory guidance, general economic conditions, economic uncertainty in the United States and abroad, changes in interest rates, deposit flows, real estate values, costs or effects of acquisitions, competition, changes in accounting principles, policies or guidelines, legislation or regulation (including the Tax Cuts & Jobs Act of 2017 and the Coronavirus Aid, Relief and Economic Security Act of 2020, as amended), interruptions of utility service in our markets for sustained periods, and other economic, competitive, governmental, regulatory and technological factors (including external fraud and cybersecurity threats) affecting Bancorp's operations, pricing, products and services. These and other important factors are detailed in various securities law filings made periodically by Bancorp, copies of which are available from Bancorp without charge. Bancorp undertakes no obligation to release publicly the result of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date of this press release or to reflect the occurrence of unanticipated events.

(BMRC-ER)

BANK OF MARIN BANCORP FINANCIAL HIGHLIGHTS
(dollars in thousands, except per share data; unaudited)		September 30, 2021				June 30, 2021				September 30, 2020
Quarter-to-Date
Net income		$	5,282			$	9,285			$	7,491
Diluted earnings per common share		$	0.35			$	0.71			$	0.55
Return on average assets		0.56		%		1.20		%		0.98		%
Return on average equity		4.99		%		10.72		%		8.37		%
Efficiency ratio		72.44		%		58.58		%		56.88		%
Tax-equivalent net interest margin 1		3.15		%		3.37		%		3.44		%
Cost of deposits		0.06		%		0.07		%		0.09		%
Net (recoveries) charge-offs		$	(9	)		$	(62	)		$	4
Year-to-Date
Net income		$	23,514							$	22,125
Diluted earnings per common share		$	1.69							$	1.62
Return on average assets		0.96		%						1.03		%
Return on average equity		8.40		%						8.47		%
Efficiency ratio		65.65		%						55.45		%
Tax-equivalent net interest margin 1		3.23		%						3.61		%
Cost of deposits		0.07		%						0.13		%
Net (recoveries) charge-offs		$	(83	)						$	13
At Period End
Total assets		$	4,261,062			$	3,073,818			$	2,975,225
Loans:
Commercial and industrial 2		$	377,965			$	423,646			$	512,973
Real estate:
Commercial owner-occupied		398,543				296,407				299,754
Commercial investor-owned		1,157,344				967,335				966,517
Construction		125,060				80,841				66,663
Home equity		92,396				92,510				107,364
Other residential		117,778				120,903				130,915
Installment and other consumer loans		47,933				21,125				23,805
Total loans		$	2,317,019			$	2,002,767			$	2,107,991
Non-performing loans: 3
Real estate:
Commercial owner-occupied		$	7,273			$	7,148			$	—
Commercial investor-owned		709				1,597				886
Home equity		441				445				532
Installment and other consumer loans		—				—				24
Total non-accrual loans		$	8,423			$	9,190			$	1,442
Classified loans (graded substandard and doubtful)		$	18,988			$	30,813			$	10,999
Total accruing loans 30-89 days past due		$	1,354			$	487			$	318
Allowance for credit losses to total loans		0.97		%		0.95		%		1.05		%
Allowance for credit losses to total loans, excluding acquired and SBA PPP loans 4		1.04		%		1.09		%		1.29		%
Allowance for credit losses to non-performing loans		2.66		x		2.08		x		15.34		x
Non-accrual loans to total loans		0.36		%		0.46		%		0.07		%
Total deposits		$	3,727,696			$	2,683,575			$	2,569,289
Loan-to-deposit ratio		62.2		%		74.6		%		82.0		%
Stockholders' equity		$	458,525			$	348,649			$	357,570
Book value per share		$	28.54			$	26.71			$	26.28
Tangible common equity to tangible assets 5		9.1		%		10.4		%		11.0		%
Total risk-based capital ratio - Bank		14.4		%		15.3		%		15.5		%
Total risk-based capital ratio - Bancorp		15.0		%		15.5		%		16.1		%
Full-time equivalent employees		348				278				291

1		Net interest income is annualized by dividing actual number of days in the period times 360 days.
2		Includes SBA PPP loans of $164.8 million, $248.3 million, and $301.7 million at September 30, 2021, June 30, 2021, and September 30, 2020, respectively.
3		Excludes accruing troubled-debt restructured loans of $3.9 million, $3.3 million and $12.3 million at September 30, June 30, 2021, and September 30, 2020, respectively.
4		The allowance for credit losses to total loans, excluding non-impaired acquired loans and guaranteed SBA PPP loans, is considered a meaningful non-GAAP financial measure, as it represents only those loans that were considered in the calculation of the allowance for credit losses. Due to the adoption of CECL on December 31, 2020, all loans previously considered "acquired" are now included in the calculation of the allowance for credit losses. Acquired loans that were not impaired at September 30, 2020 totaled $90.4 million. Refer to footnote 2 above for SBA PPP loan totals.
5		Tangible common equity to tangible assets is considered to be a meaningful non-GAAP financial measure of capital adequacy and is useful for investors to assess Bancorp's ability to absorb potential losses. Tangible common equity includes common stock, retained earnings and unrealized gain on available for sale securities, net of tax, less goodwill and intangible assets of $79.8 million, $33.6 million and $34.2 million at September 30, 2021, June 30, 2021, and September 30, 2020, respectively. Tangible assets exclude goodwill and intangible assets.

BANK OF MARIN BANCORP CONSOLIDATED STATEMENTS OF CONDITION
(in thousands, except share data; unaudited)		September 30, 2021				June 30, 2021				September 30, 2020
Assets
Cash, cash equivalents and restricted cash		$	584,739			$	257,543			$	213,584
Investment securities
Held-to-maturity, at amortized cost (net of zero allowance for credit losses at September 30, 2021, June 30, 2021 and September 30, 20201)		196,801				169,038				117,350
Available-for-sale (at fair value; amortized cost $952,278, $504,934, and $394,437 at September 30, 2021, June 30, 2021, and September 30, 2020, respectively; net of zero allowance for credit losses at September 30, 2021, June 30, 2021 and September 30, 20201)		963,033				517,963				413,464
Total investment securities		1,159,834				687,001				530,814
Loans, at amortized cost		2,317,019				2,002,767				2,107,991
Allowance for credit losses on loans1		(22,414		)		(19,100		)		(22,113		)
Loans, net of allowance for credit losses on loans		2,294,605				1,983,667				2,085,878
Goodwill		72,754				30,140				30,140
Bank-owned life insurance		61,171				45,986				43,320
Operating lease right-of-use assets		24,776				23,506				26,041
Bank premises and equipment, net		7,807				5,248				5,266
Core deposit intangible		6,998				3,423				4,045
Other real estate owned		800				—				—
Interest receivable and other assets		47,578				37,304				36,137
Total assets		$	4,261,062			$	3,073,818			$	2,975,225
Liabilities and Stockholders' Equity
Liabilities
Deposits
Non-interest bearing		$	1,837,595			$	1,460,076			$	1,383,719
Interest bearing
Transaction accounts		288,401				168,226				156,061
Savings accounts		336,867				230,730				192,764
Money market accounts		1,124,660				729,193				738,661
Time accounts		140,173				95,350				98,084
Total deposits		3,727,696				2,683,575				2,569,289
Borrowings and other obligations		451				438				99
Subordinated debenture		—				—				2,760
Operating lease liabilities		26,637				24,919				27,527
Interest payable and other liabilities		47,753				16,237				17,980
Total liabilities		3,802,537				2,725,169				2,617,655
Stockholders' Equity
Preferred stock, no par value, Authorized - 5,000,000 shares, none issued		—				—				—
Common stock, no par value, Authorized - 30,000,000 shares; issued and outstanding - 16,066,889, 13,055,105 and 13,605,363 at Sept 30, 2021, June 30, 2021, and Sept 30, 2020, respectively		217,680				108,430				129,284
Retained earnings		233,997				231,841				215,976
Accumulated other comprehensive income, net of taxes		6,848				8,378				12,310
Total stockholders' equity		458,525				348,649				357,570
Total liabilities and stockholders' equity		$	4,261,062			$	3,073,818			$	2,975,225

1		The September 30, 2021 and June 30, 2021 allowances were calculated under current expected credit loss methodology, while the September 30, 2020 allowance was calculated under incurred loss methodology. Refer to Note 1, Summary of Accounting Policies, in our 2020 Form 10-K for further information on the adoption of ASU 2016-13.

BANK OF MARIN BANCORP CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
		Three months ended											Nine months ended
(in thousands, except per share amounts; unaudited)		September 30, 2021				June 30, 2021				September 30, 2020			September 30, 2021				September 30, 2020
Interest income
Interest and fees on loans		$	24,027			$	21,429			$	21,776		$	66,117			$	63,880
Interest on investment securities		4,084				3,504				3,343			10,717				11,249
Interest on federal funds sold and due from banks		178				54				50			274				421
Total interest income		28,289				24,987				25,169			77,108				75,550
Interest expense
Interest on interest-bearing transaction accounts		41				39				41			119				146
Interest on savings accounts		26				21				17			66				50
Interest on money market accounts		417				312				377			1,015				1,731
Interest on time accounts		44				81				133			221				436
Interest on borrowings and other obligations		8				—				—			8				3
Interest on subordinated debenture		—				—				35			1,361				124
Total interest expense		536				453				603			2,790				2,490
Net interest income		27,753				24,534				24,566			74,318				73,060
Provision for (reversal of) credit losses on loans		1,800				(920		)		1,250			(2,049		)		5,450
(Reversal of) provision for credit losses on unfunded loan commitments		—				(612		)		248			(1,202		)		610
Net interest income after (reversal of) provision for credit losses		25,953				26,066				23,068			77,569				67,000
Non-interest income
Earnings on bank-owned life insurance, net		1,402				233				232			1,892				741
Wealth Management and Trust Services		597				530				450			1,615				1,028
Debit card interchange fees		483				419				383			1,268				1,375
Service charges on deposit accounts		464				317				284			1,062				1,051
Dividends on Federal Home Loan Bank stock		179				177				149			505				503
Merchant interchange fees		129				61				63			247				183
Gains on sale of investment securities, net		1				—				—			1				915
Other income		310				285				229			823				927
Total non-interest income		3,565				2,022				1,790			7,413				6,723
Non-interest expense
Salaries and related benefits		13,127				8,888				8,638			31,223				25,979
Occupancy and equipment		1,871				1,751				1,776			5,373				5,100
Professional services		2,472				986				655			4,321				1,749
Data processing		1,613				820				822			3,252				2,437
Depreciation and amortization		431				389				539			1,279				1,591
Information technology		496				296				256			1,105				758
Amortization of core deposit intangible		334				204				213			742				639
Directors' expense		255				230				184			660				533
Federal Deposit Insurance Corporation insurance		236				182				181			597				299
Charitable contributions		4				462				481			497				921
Other expense		1,847				1,348				1,245			4,605				4,232
Total non-interest expense		22,686				15,556				14,990			53,654				44,238
Income before provision for income taxes		6,832				12,532				9,868			31,328				29,485
Provision for income taxes		1,550				3,247				2,377			7,814				7,360
Net income		$	5,282			$	9,285			$	7,491		$	23,514			$	22,125
Net income per common share:
Basic		$	0.35			$	0.71			$	0.55		$	1.70			$	1.64
Diluted		$	0.35			$	0.71			$	0.55		$	1.69			$	1.62
Weighted average shares:
Basic		14,922				13,092				13,539			13,798				13,526
Diluted		14,993				13,164				13,610			13,881				13,617
Comprehensive income (loss):
Net income		$	5,282			$	9,285			$	7,491		$	23,514			$	22,125
Other comprehensive income (loss):
Change in net unrealized (losses) gains on available-for-sale securities		(2,274		)		2,798				299			(8,558		)		11,605
Reclassification adjustment for gains on available-for-sale securities included in net income		(1		)		—				—			(1		)		(915		)
Amortization of net unrealized losses on securities transferred from available-for-sale to held-to-maturity		104				138				149			385				394
Other comprehensive income (loss), before tax		(2,171		)		2,936				448			(8,174		)		11,084
Deferred tax (benefit) expense		(641		)		864				132			(2,421		)		3,277
Other comprehensive income (loss), net of tax		(1,530		)		2,072				316			(5,753		)		7,807
Total comprehensive income		$	3,752			$	11,357			$	7,807		$	17,761			$	29,932

BANK OF MARIN BANCORP AVERAGE STATEMENTS OF CONDITION AND ANALYSIS OF NET INTEREST INCOME
		Three months ended									Three months ended									Three months ended
		September 30, 2021									June 30, 2021									September 30, 2020
					Interest									Interest									Interest
		Average			Income/			Yield/			Average			Income/			Yield/			Average			Income/			Yield/
(in thousands)		Balance			Expense			Rate			Balance			Expense			Rate			Balance			Expense			Rate
Assets
Interest-earning deposits with banks 1		$	456,405		$	178		0.15	%		$	193,749		$	54		0.11	%		$	184,883		$	50		0.11	%
Investment securities 2, 3		845,127			4,249			2.01	%		661,361			3,666			2.22	%		527,077			3,481			2.64	%
Loans 1, 3, 4		2,189,563			24,229			4.33	%		2,062,497			21,601			4.14	%		2,117,679			21,957			4.06	%
Total interest-earning assets 1		3,491,095			28,656			3.21	%		2,917,607			25,321			3.43	%		2,829,639			25,488			3.52	%
Cash and non-interest-bearing due from banks		68,680									39,252									55,353
Bank premises and equipment, net		6,468									4,795									5,412
Interest receivable and other assets, net		177,725									131,667									138,938
Total assets		$	3,743,968								$	3,093,321								$	3,029,342
Liabilities and Stockholders' Equity
Interest-bearing transaction accounts		$	237,883		$	41		0.07	%		$	167,787		$	39		0.09	%		$	153,089		$	41		0.11	%
Savings accounts		293,434			26			0.03	%		227,767			21			0.04	%		191,915			17			0.04	%
Money market accounts		911,294			417			0.18	%		735,784			312			0.17	%		802,585			377			0.19	%
Time accounts including CDARS		124,247			44			0.14	%		95,354			81			0.34	%		97,465			133			0.54	%
Borrowings and other obligations 1, 6		3,010			8			1.09	%		61			—			1.15	%		113			—			2.51	%
Subordinated debenture 1, 5		—			—			—	%		—			—			—	%		2,751			35			4.97	%
Total interest-bearing liabilities		1,569,868			536			0.14	%		1,226,753			453			0.15	%		1,247,918			603			0.19	%
Demand accounts		1,707,142									1,478,119									1,380,708
Interest payable and other liabilities		46,834									40,976									44,486
Stockholders' equity		420,124									347,473									356,230
Total liabilities & stockholders' equity		$	3,743,968								$	3,093,321								$	3,029,342
Tax-equivalent net interest income/margin 1					$	28,120		3.15	%					$	24,868		3.37	%					$	24,885		3.44	%
Reported net interest income/margin 1					$	27,753		3.11	%					$	24,534		3.33	%					$	24,566		3.40	%
Tax-equivalent net interest rate spread								3.07	%								3.28	%								3.33	%
											Nine months ended									Nine months ended
											September 30, 2021									September 30, 2020
														Interest									Interest
											Average			Income/			Yield/			Average			Income/			Yield/
(in thousands)											Balance			Expense			Rate			Balance			Expense			Rate
Assets
Interest-earning deposits with banks 1											$	273,045		$	274		0.13	%		$	152,587		$	421		0.36	%
Investment securities 2, 3											683,600			11,196			2.18	%		544,754			11,632			2.85	%
Loans 1, 3, 4											2,117,631			66,665			4.15	%		1,998,456			64,423			4.24	%
Total interest-earning assets 1											3,074,276			78,135			3.35	%		2,695,797			76,476			3.73	%
Cash and non-interest-bearing due from banks											53,020									44,665
Bank premises and equipment, net											5,353									5,631
Interest receivable and other assets, net											147,856									130,525
Total assets											$	3,280,505								$	2,876,618
Liabilities and Stockholders' Equity
Interest-bearing transaction accounts											$	193,502		$	119		0.08	%		$	144,784		$	146		0.13	%
Savings accounts											245,374			66			0.04	%		179,288			50			0.04	%
Money market accounts											784,313			1,015			0.17	%		786,012			1,731			0.29	%
Time accounts including CDARS											105,419			221			0.28	%		96,237			436			0.61	%
Borrowings and other obligations 1, 6											1,047			8			1.10	%		208			3			2.14	%
Subordinated debenture 1, 5											713			1,361			251.54	%		2,733			124			5.96	%
Total interest-bearing liabilities											1,330,368			2,790			0.28	%		1,209,262			2,490			0.27	%
Demand accounts											1,531,564									1,278,265
Interest payable and other liabilities											44,128									40,279
Stockholders' equity											374,445									348,812
Total liabilities & stockholders' equity											$	3,280,505								$	2,876,618
Tax-equivalent net interest income/margin 1														$	75,345		3.23	%					$	73,986		3.61	%
Reported net interest income/margin 1														$	74,318		3.19	%					$	73,060		3.56	%
Tax-equivalent net interest rate spread																	3.07	%								3.45	%

1		Interest income/expense is divided by actual number of days in the period times 360 days to correspond to stated interest rate terms, where applicable.
2		Yields on available-for-sale securities are calculated based on amortized cost balances rather than fair value, as changes in fair value are reflected as a component of stockholders' equity. Investment security interest is earned on 30/360 day basis monthly.
3		Yields and interest income on tax-exempt securities and loans are presented on a taxable-equivalent basis using the Federal statutory rate of 21 percent in 2021 and 2020.
4		Average balances on loans outstanding include non-performing loans. The amortized portion of net loan origination fees is included in interest income on loans, representing an adjustment to the yield.
5		2021 interest on subordinated debenture included $1.3 million in accelerated discount accretion from the early redemption of our last subordinated debenture on March 15, 2021.
6		Average balances and rate consider $13.9 million in FHLB borrowings acquired from American River Bank that were redeemed on August 25, 2021.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20211025005179/en/

MEDIA CONTACT:

Andrea Henderson

Director of Marketing

415-884-4757 | andreahenderson@bankofmarin.com

Source: Bank of Marin Bancorp

FAQ

What were Bank of Marin's earnings results for Q3 2021?

Bank of Marin reported earnings of $5.3 million in Q3 2021, a decrease from $9.3 million in Q2 2021.

How did the American River acquisition affect Bank of Marin's financials?

The acquisition contributed $419.4 million in loans and $790.0 million in deposits, significantly impacting the balance sheet.

What is the future outlook for Bank of Marin after the merger?

The bank's management is optimistic about long-term growth opportunities across a larger market after the successful merger.

What is the latest on Bank of Marin's share repurchase program?

The program's authorization was increased from $25 million to $57 million, allowing for more significant share buybacks.