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Bank of Marin Bancorp Reports Fourth Quarter and Full Year 2021 Earnings

Announces $0.24 Dividend

Bank of Marin Bancorp, "Bancorp" (Nasdaq: BMRC), parent company of Bank of Marin, "Bank," announced earnings of $9.7 million in the fourth quarter of 2021, compared to $5.3 million in the third quarter of 2021 and $8.1 million in the fourth quarter of 2020. Diluted earnings per share were $0.61 in the fourth quarter of 2021, compared to $0.35 in the prior quarter and $0.60 the same quarter a year ago. Annual earnings were $33.2 million in 2021 compared to $30.2 million in 2020. Diluted earnings per share were $2.30 for the year ended December 31, 2021, compared to $2.22 per share for the year ended December 31, 2020.

“As illustrated by our fourth-quarter earnings, we are poised to reap the benefits of better scale gained through our acquisition of American River Bankshares with most of the one-time costs behind us and the increase in our balance sheet size,” said Tim Myers, President and Chief Executive Officer. “Improving economic forecasts led to reduced credit loss provisions in 2021 when compared to the prior year, and key hires helped us build substantial momentum as we finished the year with robust loan production across our Northern California footprint. We expect that traction to drive continued growth and strong results for our shareholders in 2022.”

Bancorp also provided the following highlights for the fourth quarter and year ended December 31, 2021:

  • Merger-related one-time and conversion costs reduced net income by $791 thousand, net of taxes, or 5 cents per share in the fourth quarter and by $4.9 million, net of taxes, or 34 cents per share for the year ended December 31, 2021. Return on average assets ("ROA") and return on average equity ("ROE") ratios were also significantly impacted by provisions for credit losses on acquired loans and shares issued in conjunction with the merger. As shown in the reconciliation of GAAP to non-GAAP financial measures on pages 2 and 3, without those acquisition related components, year-to-date ROA of 0.94% and ROE of 8.43% would have been 1.08% and 9.67%, respectively, compared to 1.04% and 8.60% for the same periods in 2020. For the quarter ended December 31, 2021, ROA and ROE were 0.90% and 8.50%, respectively, compared to 0.56% and 4.99%, respectively, in the prior quarter. The comparable non-GAAP ROA and ROE were 0.97% and 9.19%, respectively, for the quarter ended December 31, 2021, versus 0.98% and 8.69% in the prior quarter.
  • Loans increased $167.1 million in 2021, or 8%, to $2.256 billion at December 31, 2021, from $2.089 billion at December 31, 2020. Year-over-year growth was largely attributable to the August 6, 2021 acquisition of $419.4 million from American River Bank. Non-PPP loan originations of $181.7 million for the year were concentrated in commercial and real estate loans and compared to $165.5 million in 2020. Payoffs included $218.1 million non-PPP loans compared to $169.2 million in 2020. In 2021, PPP loan originations were $136.2 million and PPP loans forgiven and paid off were $328.5 million.
  • Bank of Marin made significant talent investments in the fourth quarter. We hired a Commercial Banking Sales Manager, a new role at the Bank, to oversee and direct commercial banking growth across the enterprise. This hire also has significant experience in the Sacramento area, and we added two new commercial bankers to support our anticipated growth in that market.
  • Credit quality remains strong, with non-accrual loans representing 0.37% of the Bank's loan portfolio as of December 31, 2021, compared to 0.36% as of September 30, 2021. Over the course of 2021, we recorded net reversals of $1.4 million and $992 thousand to our respective allowances for credit losses on loans and unfunded commitments, compared to provisions of $4.6 million and $1.6 million, respectively, in 2020. 2021 activity included the effects of the business combination with American River Bank and ongoing improvements in the underlying economic forecasts. In 2020, the current expected credit loss model was implemented at year end. During the first three quarters, allowance for credit losses were calculated under the incurred loss model and included significant qualitative adjustments for uncertainties associated with the pandemic.
  • Deposits grew $1.304 billion, or 52%, to $3.809 billion at December 31, 2021, compared to $2.504 billion at December 31, 2020. Growth was comprised of $790.0 million related to the August 6, 2021 American River Bank acquisition, new accounts and growth in the existing customer base. Non-interest bearing deposits grew by $555.6 million, or 41%, in 2021 and made up 50% of total deposits at year end. Cost of deposits remained low at 0.07% for the full year of 2021, down from 0.11% in 2020. Additionally, the Bank maintained $173.1 million in deposits off-balance sheet with deposit networks at December 31, 2021 as part of our liquidity management.
  • 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 pages 2 and 3, the efficiency ratio excluding merger-related one-time and conversion costs of 53.63% for the quarter ended December 31, 2021, improved from 56.02% and 55.93% in the quarters ended September 30, 2021 and December 31, 2020, respectively.
  • All capital ratios were above regulatory requirements for a well-capitalized institution. The total risk-based capital ratio for Bancorp was 14.6% at December 31, 2021 and 16.0% at December 31, 2020. Tangible common equity to tangible assets declined to 8.8% at December 31, 2021 from 11.3% at December 31, 2020 primarily due to share repurchases and growth in legacy Bank of Marin deposits (refer to footnote 5 on page 7 for definition of this non-GAAP financial measure). The total risk-based capital ratio for the Bank was 14.4% at December 31, 2021 and 15.8% at December 31, 2020.
  • Bank of Marin Bancorp repurchased 149,983 shares totaling $5.6 million in the fourth quarter of 2021 for a cumulative total of 1,117,666 shares and $40.8 million in 2021.
  • The Board of Directors declared a cash dividend of $0.24 per share on January 21, 2022. This is the 67th consecutive quarterly dividend paid by Bank of Marin Bancorp. The cash dividend is payable on February 11, 2022 to shareholders of record at the close of business on February 4, 2022.

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 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

 

Three months ended

 

Year ended

(in thousands, except share data; unaudited)

December 31,

2021

 

September 30,

2021

 

December 31,

2020

 

December 31,

2021

 

December 31,

2020

Net income

 

 

 

 

 

Net income (GAAP)

$

9,714

 

$

5,282

 

$

8,117

 

$

33,228

 

$

30,242

 

Merger-related one-time and conversion costs:

 

 

 

 

 

Personnel and severance

 

336

 

 

2,668

 

 

 

 

3,005

 

 

 

Professional services

 

 

 

1,778

 

 

 

 

1,976

 

 

 

Data processing

 

695

 

 

433

 

 

 

 

1,127

 

 

 

Other

 

67

 

 

263

 

 

 

 

350

 

 

 

Total merger costs before tax benefits

 

1,098

 

 

5,142

 

 

 

 

6,458

 

 

 

Income tax benefit of merger-related expenses

 

(307

)

 

(1,222

)

 

 

 

(1,547

)

 

 

Total merger-related one-time and conversion costs, net of taxes

 

791

 

 

3,920

 

 

 

 

4,911

 

 

 

Comparable net income (non-GAAP)

$

10,505

 

$

9,202

 

$

8,117

 

$

38,139

 

$

30,242

 

 

 

 

 

 

 

Reconciliation of GAAP and Non-GAAP Financial Measures (Continued)

 

Three months ended

 

Year ended

(in thousands, except share data; unaudited)

December 31,

2021

 

September 30,

2021

 

December 31,

2020

 

December 31,

2021

 

December 31,

2020

Diluted earnings per share

 

 

 

 

 

Weighted average diluted shares

 

16,027

 

 

14,993

 

 

13,615

 

 

14,422

 

 

13,617

 

Diluted earnings per share (GAAP)

$

0.61

 

$

0.35

 

$

0.60

 

$

2.30

 

$

2.22

 

Merger-related one-time and conversion costs, net of taxes

$

0.05

 

$

0.26

 

$

 

$

0.34

 

$

 

Comparable diluted earnings per share (non-GAAP)

$

0.66

 

$

0.61

 

$

0.60

 

$

2.64

 

$

2.22

 

Return on average assets

 

 

 

 

 

Average assets

$

4,298,766

 

$

3,743,968

 

$

2,958,360

 

$

3,537,163

 

$

2,897,165

 

Return on average assets (GAAP)

 

0.90

%

 

0.56

%

 

1.09

%

 

0.94

%

 

1.04

%

Comparable return on average assets (non-GAAP)

 

0.97

%

 

0.98

%

 

1.09

%

 

1.08

%

 

1.04

%

Return on average equity

 

 

 

 

 

Average stockholders' equity

$

453,468

 

$

420,124

 

$

359,481

 

$

394,363

 

$

351,494

 

Return on average equity (GAAP)

 

8.50

%

 

4.99

%

 

8.98

%

 

8.43

%

 

8.60

%

Comparable return on average equity (non-GAAP)

 

9.19

%

 

8.69

%

 

8.98

%

 

9.67

%

 

8.60

%

Efficiency ratio

 

 

 

 

 

Non-interest expense (GAAP)

$

18,984

 

$

22,686

 

$

14,220

 

$

72,638

 

$

58,458

 

Merger-related expenses

 

(1,098

)

 

(5,142

)

 

 

 

(6,458

)

 

 

Non-interest expense (non-GAAP)

$

17,886

 

$

17,544

 

$

14,220

 

$

66,180

 

$

58,458

 

Net interest income

$

30,633

 

$

27,753

 

$

23,599

 

$

104,951

 

$

96,659

 

Non-interest income

$

2,719

 

$

3,565

 

$

1,827

 

$

10,132

 

$

8,550

 

Efficiency ratio (GAAP)

 

56.92

%

 

72.44

%

 

55.93

%

 

63.12

%

 

55.56

%

Comparable efficiency ratio (non-GAAP)

 

53.63

%

 

56.02

%

 

55.93

%

 

57.51

%

 

55.56

%

 

“Thanks to sound underwriting practices, pandemic-driven downgrades within our portfolio have been manageable. We continue to help our customers navigate this environment while maintaining strong capital, liquidity and overall credit quality,” said Tani Girton, EVP and Chief Financial Officer. “The American River addition strengthened our relationship banking model and industry-leading low-cost deposit base, leaving us even better positioned financially and strategically to pursue growth opportunities in the year ahead.”

Loans and Credit Quality

Loans decreased by $61.4 million in the fourth quarter and totaled $2.256 billion at December 31, 2021. Non-PPP-related loan originations were $80.0 million and $181.7 million for the fourth quarter and full year of 2021, compared to $43.1 million and $165.5 million for the same periods in 2020. Non-PPP loan payoffs were $72.8 million and $218.1 million in the fourth quarter and full year of 2021, compared to $44.9 million and $169.2 million for the same periods of 2020. Loan payoffs in the fourth quarter and full year 2021 consisted largely of commercial borrower real estate asset sales and cash paydowns as part of ongoing deleveraging. Approximately $54 million in PPP loans were forgiven in the fourth quarter and $329 million over the course of the year.

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 December 31, 2021 there were 368 loans outstanding totaling $111.2 million (net of $2.5 million in unrecognized fees and costs). In 2021 and 2020 respectively, Bank of Marin recognized $8.3 million and $3.8 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 December 31, 2021, only two borrowing relationships with three 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, or 0.37% of the Bank's loan portfolio at December 31, 2021, compared to $8.4 million, or 0.36%, at September 30, 2021 and $9.2 million, or 0.44%, a year ago. Non-accrual loans at year end included two secured owner-occupied commercial real estate loans totaling $7.1 million, which were placed on non-accrual status in fourth quarter of 2020. Loans classified substandard totaled $36.2 million at December 31, 2021, $19.0 million at September 30, 2021, and $25.8 million at December 31, 2020. The increase in substandard loans in the fourth quarter of 2021 was primarily due to one borrowing relationship with two secured non-owner-occupied commercial real estate loans that were negatively affected by the pandemic. Classified loans included one $114 thousand loan acquired from American River Bank with a doubtful risk rating as of December 31, 2021, which is well-secured by real estate collateral. There were no loans classified doubtful at December 31, 2020. Accruing loans past due 30 to 89 days totaled $1.7 million at December 31, 2021, compared to $1.4 million at September 30, 2021 and $1.8 million a year ago.

Net recoveries for the fourth quarter of 2021 totaled $9 thousand compared to net recoveries of $9 thousand last quarter and $13 thousand in the fourth quarter of 2020. Net recoveries totaled $93 thousand for the year ended December 31, 2021, compared to net charge-offs of $1 thousand in 2020. The ratio of allowance for credit losses to loans was 1.02% at December 31, 2021, 0.97% at September 30, 2021 and 1.10% at December 31, 2020.

In the fourth quarter of 2021, we recorded a provision for credit losses on loans of $600 thousand resulting from adjustments to qualitative risk factors primarily impacted by recent changes in executive leadership, senior lending positions, and integration of the American River Bank lending staff and loan portfolio as well as further refinements to the discounted cash flow assumptions applied to acquired loans within the allowance model. However, there was a reduction in qualitative risk factors due to a decline in the volume of loans downgraded to substandard classification, fewer delinquencies, and the elimination of an allowance related to a commercial real estate loan that had been individually analyzed for potential credit losses in the previous periods and paid off in the fourth quarter. Additionally, there was an overall improvement in the underlying economic forecasts. In the fourth quarter of 2021, we also recorded a provision of $210 thousand for losses on unfunded commitments due to the adjustments to qualitative risk factors mentioned above.

Cash, Cash Equivalents and Restricted Cash

Cash, cash equivalents and restricted cash totaled $347.6 million at December 31, 2021, compared to $584.7 million at September 30, 2021. The $237.1 million decrease was primarily due to the deployment of funds into investment securities, as noted below.

Investments

The investment portfolio totaled $1.510 billion at December 31, 2021, an increase of $350.0 million from September 30, 2021 and an increase of $1.008 billion from December 31, 2020. The increase in the fourth quarter of 2021 was primarily the result of securities purchases totaling $416.9 million, partially offset by maturities, calls, paydowns, and sales totaling $51.8 million. The year-over-year increase was due to purchases of $925.6 million and acquisition of $297.8 million in securities related to the merger, partially offset by maturities, calls, paydowns and sales totaling $188.4 million.

Deposits

Deposits totaled $3.809 billion at December 31, 2021, compared to $3.728 billion at September 30, 2021 and $2.504 billion at December 31, 2020. The $80.9 million increase in deposits from the prior quarter is consistent with activity experienced throughout 2021 from larger business clients. The average cost of deposits remained consistent in the fourth quarter at 0.06%.

Earnings

Net Interest Income

Net interest income totaled $30.6 million in the fourth quarter of 2021, compared to $27.8 million in the prior quarter and $23.6 million in the same quarter a year ago. The $2.9 million increase from the prior quarter was primarily related to an increase of $1.5 million in loan interest and $1.6 million in investment securities interest income. We recognized $1.8 million in fees, net of cost on SBA PPP loans in the current quarter as compared to $2.3 million in prior quarter, and $1.0 million in the same quarter a year ago. Quarter-over-quarter, average loan balances increased $80.2 million to $2.3 billion and the yield increased 10 basis points to 4.43%, mostly due to lower rate PPP loans paying off. While average yields on investment securities decreased 36 basis points in the fourth quarter to 1.65%, the deployment of cash that resulted in a $565.3 million increase in average investments to $1.4 billion significantly contributed to the increase in quarterly net interest income.

The $7.0 million net interest income increase over the same quarter last year was primarily due to higher loan balances and a 52 bps higher average loan yield driven by accelerated fee recognition from PPP loan payoffs. Additionally, incremental balances in the investment portfolio, while pushing the average yield lower, added $2.4 million to net interest income. Fourth quarter average interest-earning assets increased $1.3 billion versus the same quarter last year, primarily due to the American River Bank acquisition, leading to a $172.9 million increase in average loans and a $911.7 million increase in average investment securities. Average interest-bearing deposit balances increased $720.9 million.

The tax-equivalent net interest margin was 3.03% for the fourth quarter of 2021, compared to 3.15% in the prior quarter and 3.40% in the fourth quarter of 2020. The 12 basis points decrease from the prior quarter was primarily due to a higher proportion of investment securities in the growing balance sheet. The positive impact of SBA PPP loans to the fourth quarter of 2021 net interest margin was 2 basis points lower than the prior quarter. The 37 basis points decrease from the same quarter a year ago was also largely due to the shift in balance sheet composition. The SBA PPP loans improved the fourth quarter of 2021 net interest margin by 11 basis points as compared to lowering the fourth quarter of 2020's net interest margin by 13 basis points.

Net interest income totaled $105.0 million and $96.7 million in 2021 and 2020, respectively. The $8.3 million increase in 2021 was primarily due to higher average loan and investment balances and higher PPP loan income. The tax-equivalent net interest margin decreased 38 basis points to 3.17% in 2021, from 3.55% in 2020 for the reasons mentioned above. The SBA PPP loans improved the 2021 net interest margin by 10 basis points as compared to lowering the 2020 net interest margin by 6 basis points.

Non-Interest Income

Non-interest income totaled $2.7 million in the fourth quarter of 2021, compared to $3.6 million in the third quarter of 2021 and $1.8 million in the fourth quarter of 2020. The decrease from prior quarter was largely attributed to the collection of $1.1 million in benefits on bank-owned life insurance policies in the third quarter of 2021. The $892 thousand increase in the fourth quarter of 2021 compared to the fourth quarter a year ago was spread across most categories and resulted from increased activity largely related to the expanded deposit base.

Non-interest income totaled $10.1 million in 2021, a $1.5 million increase from $8.6 million in 2020. The increase was primarily due to the $1.1 million in benefits collected on bank-owned life insurance policies and changes in other categories as noted above. Wealth Management and Trust Services income increased by $371 thousand due to increases in specialized trust administration matters, new accounts and price appreciation of assets under management. In addition, investment securities sales produced a net loss of $16 thousand in 2021 compared to net gains of $915 thousand in 2020.

Non-Interest Expense

Non-interest expense totaled $19.0 million in the fourth quarter of 2021, compared to $22.7 million in prior quarter and $14.2 million in the same quarter last year. Decreases from prior quarter of $2.4 million in salaries and benefits and $1.8 million in professional services were largely due to one-time merger related costs in the third quarter. Additionally, salaries and benefits expense included offsetting changes related to higher deferred loan origination costs and year-end true-ups to incentives. When compared to the fourth quarter of 2020, increases came largely from acquisition-related one-time and conversion costs, acquisition-related expense growth across categories, and 2021 true-ups to incentive and vacation accruals.

Non-interest expense increased $14.1 million to $72.6 million in 2021 from $58.5 million in 2020. The largest increase of $6.5 million came from acquisition related one-time and conversion costs. In addition to $3.0 million in one-time merger cost, salaries and related benefits rose another $4.5 million due to increased numbers of employees, regularly scheduled annual merit and related increases, and lower deferred loan origination costs. Professional services included $817 thousand more in consulting expenses for PPP loan forgiveness application processing, investment advisory services, and legal costs. Data processing increased by an additional $828 thousand primarily due to increases core processing and mobile banking systems charges, and other categories increased due to the larger size of the bank. Charitable contributions decreased due to supplemental contributions in 2020 related to the pandemic.

Share Repurchase Program

The Bancorp Board of Directors approved a 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 149,983 shares totaling $5.6 million in the fourth quarter of 2021 for a cumulative total of 1,117,666 shares and $40.8 million in 2021 under the current and prior authorizations.

Earnings Call and Webcast Information

Bank of Marin Bancorp will webcast its fourth quarter and year end 2021 earnings call on Monday, January 24, 2022 at 8:30 a.m. PT/11:30 a.m. ET. Investors will have the opportunity to listen to the conference call online through Bank of Marin’s website at https://www.bankofmarin.com under “Investor Relations.” To listen to the live call, 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 Northern California, with assets of $4.314 billion, Bank of Marin has 31 retail branches and 8 commercial banking offices located across 10 counties. Bank of Marin provides commercial banking, personal banking, and wealth management and trust services. Specializing in providing legendary service to its customers and investing in its local communities, Bank of Marin has consistently 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 American River Bankshares and American River Bank into the Company and Bank, natural disasters (such as wildfires, floods 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)

December 31,

2021

September 30,

2021

December 31,

2020

Quarter-to-Date

 

 

 

Net income

$

9,714

 

$

5,282

 

$

8,117

 

Diluted earnings per common share

$

0.61

 

$

0.35

 

$

0.60

 

Return on average assets

 

0.90

%

 

0.56

%

 

1.09

%

Return on average equity

 

8.50

%

 

4.99

%

 

8.98

%

Efficiency ratio

 

56.92

%

 

72.44

%

 

55.93

%

Tax-equivalent net interest margin 1

 

3.03

%

 

3.15

%

 

3.40

%

Cost of deposits

 

0.06

%

 

0.06

%

 

0.07

%

Net recoveries

$

(9

)

$

(9

)

$

(13

)

Year-to-Date

 

 

 

Net income

$

33,228

 

 

$

30,242

 

Diluted earnings per common share

$

2.30

 

 

$

2.22

 

Return on average assets

 

0.94

%

 

 

1.04

%

Return on average equity

 

8.43

%

 

 

8.60

%

Efficiency ratio

 

63.12

%

 

 

55.56

%

Tax-equivalent net interest margin 1

 

3.17

%

 

 

3.55

%

Cost of deposits

 

0.07

%

 

 

0.11

%

Net (recoveries) charge-offs

$

(93

)

 

$

1

 

At Period End

 

 

 

Total assets

$

4,314,209

 

$

4,261,062

 

$

2,911,926

 

Loans:

 

 

 

Commercial and industrial 2

$

301,602

 

$

377,965

 

$

498,408

 

Real estate:

 

 

 

Commercial owner-occupied

 

392,345

 

 

398,543

 

 

304,963

 

Commercial investor-owned

 

1,189,021

 

 

1,157,344

 

 

961,208

 

Construction

 

119,840

 

 

125,060

 

 

73,046

 

Home equity

 

88,746

 

 

92,396

 

 

104,813

 

Other residential

 

114,558

 

 

117,778

 

 

123,395

 

Installment and other consumer loans

 

49,533

 

 

47,933

 

 

22,723

 

Total loans

$

2,255,645

 

$

2,317,019

 

$

2,088,556

 

Non-performing loans:3

 

 

 

Real estate:

 

 

 

Commercial owner-occupied

$

7,269

 

$

7,273

 

$

7,147

 

Commercial investor-owned

 

694

 

 

709

 

 

1,610

 

Home equity

 

413

 

 

441

 

 

459

 

Installment and other consumer loans

 

 

 

 

 

17

 

Total non-accrual loans

$

8,376

 

$

8,423

 

$

9,233

 

Classified loans (graded substandard and doubtful)

$

36,235

 

$

18,988

 

$

25,829

 

Total accruing loans 30-89 days past due

$

1,673

 

$

1,354

 

$

1,827

 

Allowance for credit losses to total loans

 

1.02

%

 

0.97

%

 

1.10

%

Allowance for credit losses to total loans, excluding SBA PPP loans 4

 

1.07

%

 

1.04

%

 

1.27

%

Allowance for credit losses to non-performing loans

2.75x

2.66x

2.48x

Non-accrual loans to total loans

 

0.37

%

 

0.36

%

 

0.44

%

Total deposits

$

3,808,550

 

$

3,727,696

 

$

2,504,249

 

Loan-to-deposit ratio

 

59.2

%

 

62.2

%

 

83.4

%

Stockholders' equity

$

450,368

 

$

458,525

 

$

358,253

 

Book value per share

$

28.27

 

$

28.54

 

$

26.54

 

Tangible common equity to tangible assets 5

 

8.8

%

 

9.1

%

 

11.3

%

Total risk-based capital ratio - Bank

 

14.4

%

 

14.4

%

 

15.8

%

Total risk-based capital ratio - Bancorp

 

14.6

%

 

15.0

%

 

16.0

%

Full-time equivalent employees

 

328

 

 

348

 

 

289

 

1

Net interest income is annualized by dividing actual number of days in the period times 360 days.

2

Includes SBA PPP loans of $111.2 million, $164.8 million, and $291.6 million at December 31, 2021, September 30, 2021, and December 31, 2020, respectively.

3

Excludes accruing troubled-debt restructured loans of $2.1 million, $3.9 million, and $5.1 million at December 31, 2021, September 30, 2021 and December 31, 2020, respectively.

4

The allowance for credit losses to total loans, excluding 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. Refer to footnote 2 above for SBA PPP 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 gains on available for sale securities, net of tax, less goodwill and core deposit intangible assets of $79.4 million, $79.8 million and $34.0 million at December 31, 2021, September 30, 2021 and December 31, 2020, respectively. Tangible assets excludes goodwill and core deposit intangible assets.

 

BANK OF MARIN BANCORP

CONSOLIDATED STATEMENTS OF CONDITION

at December 31, 2021, September 30, 2021 and December 31, 2020

(in thousands, except share data; unaudited)

December 31, 2021

September 30, 2021

December 31, 2020

Assets

 

 

 

Cash, cash equivalents and restricted cash

$ 347,641

$ 584,739

$ 200,320

Investment securities:

 

 

 

Held-to-maturity (at amortized cost, net of zero allowance for credit losses at December 31, 2021, September 30, 2021, and December 31, 2020 )

342,222

196,801

109,036

Available-for-sale (at fair value; amortized cost of $1,169,520, $952,278 and $373,038 at December 31, 2021, September 30, 2021 and December 31, 2020, respectively; net of zero allowance for credit losses at December 31, 2021, September 30, 2021 and December 31, 2020)

1,167,568

963,033

392,351

Total investment securities

1,509,790

1,159,834

501,387

Loans, at amortized cost

2,255,645

2,317,019

2,088,556

Allowance for credit losses on loans

(23,023)

(22,414)

(22,874)

Loans, net of allowance for credit losses on loans 1

2,232,622

2,294,605

2,065,682

Goodwill

72,754

72,754

30,140

Bank-owned life insurance

61,473

61,171

43,552

Operating lease right-of-use assets

23,604

24,776

25,612

Bank premises and equipment, net

7,558

7,807

4,919

Core deposit intangible

6,605

6,998

3,831

Other real estate owned

800

800

Interest receivable and other assets

51,362

47,578

36,483

Total assets

$ 4,314,209

$ 4,261,062

$ 2,911,926

Liabilities and Stockholders' Equity

 

 

 

Liabilities

 

 

 

Deposits:

 

 

 

Non-interest bearing

$ 1,910,240

$ 1,837,595

$ 1,354,650

Interest bearing:

 

 

 

Transaction accounts

290,813

288,401

183,552

Savings accounts

340,959

336,867

201,507

Money market accounts

1,116,303

1,124,660

667,107

Time accounts

150,235

140,173

97,433

Total deposits

3,808,550

3,727,696

2,504,249

Borrowings and other obligations

419

451

58

Subordinated debenture

2,777

Operating lease liabilities

25,429

26,637

27,062

Interest payable and other liabilities

29,443

47,753

19,527

Total liabilities

3,863,841

3,802,537

2,553,673

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 -

15,929,243, 16,066,889 and 13,500,453 at December 31,

2021, September 30, 2021 and

December 31, 2020, respectively

212,524

217,680

125,905

Retained earnings

239,868

233,997

219,747

Accumulated other comprehensive (loss) income, net of taxes

(2,024)

6,848

12,601

Total stockholders' equity

450,368

458,525

358,253

Total liabilities and stockholders' equity

$ 4,314,209

$ 4,261,062

$ 2,911,926

BANK OF MARIN BANCORP

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

 

Three months ended

 

Years ended

(in thousands, except per share amounts; unaudited)

December 31, 2021

September 30, 2021

December 31, 2020

 

December 31, 2021

December 31, 2020

Interest income

 

 

 

 

 

 

Interest and fees on loans

$

25,495

 

$

24,027

 

$

20,794

 

 

$

91,612

 

$

84,674

 

Interest on investment securities

 

5,625

 

 

4,084

 

 

3,254

 

 

 

16,342

 

 

14,503

 

Interest on federal funds sold and due from banks

 

125

 

 

178

 

 

40

 

 

 

399

 

 

461

 

Total interest income

 

31,245

 

 

28,289

 

 

24,088

 

 

 

108,353

 

 

99,638

 

Interest expense

 

 

 

 

 

 

Interest on interest-bearing transaction accounts

 

53

 

 

41

 

 

40

 

 

 

172

 

 

186

 

Interest on savings accounts

 

28

 

 

26

 

 

18

 

 

 

94

 

 

68

 

Interest on money market accounts

 

505

 

 

417

 

 

278

 

 

 

1,520

 

 

2,009

 

Interest on time accounts

 

25

 

 

44

 

 

118

 

 

 

246

 

 

554

 

Interest on borrowings and other obligations

 

1

 

 

8

 

 

1

 

 

 

9

 

 

4

 

Interest on subordinated debentures

 

 

 

 

 

34

 

 

 

1,361

 

 

158

 

Total interest expense

 

612

 

 

536

 

 

489

 

 

 

3,402

 

 

2,979

 

Net interest income

 

30,633

 

 

27,753

 

 

23,599

 

 

 

104,951

 

 

96,659

 

Provision for (reversal of) credit losses

 

600

 

 

1,800

 

 

(856

)

 

 

(1,449

)

 

4,594

 

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

 

210

 

 

 

 

960

 

 

 

(992

)

 

1,570

 

Net interest income after provision for (reversal of) credit losses and unfunded loan commitments

 

29,823

 

 

25,953

 

 

23,495

 

 

 

107,392

 

 

90,495

 

Non-interest income

 

 

 

 

 

 

Wealth Management and Trust Services

 

607

 

 

597

 

 

476

 

 

 

2,222

 

 

1,851

 

Earnings on bank-owned life Insurance, net

 

302

 

 

1,402

 

 

232

 

 

 

2,194

 

 

973

 

Debit card interchange fees

 

544

 

 

483

 

 

387

 

 

 

1,812

 

 

1,438

 

Service charges on deposit accounts

 

531

 

 

464

 

 

286

 

 

 

1,593

 

 

1,314

 

Dividends on FHLB stock

 

255

 

 

179

 

 

151

 

 

 

760

 

 

654

 

Merchant interchange fees

 

175

 

 

129

 

 

56

 

 

 

422

 

 

239

 

(Losses) gains on investment securities, net

 

(17

)

 

1

 

 

 

 

 

(16

)

 

915

 

Other income

 

322

 

 

310

 

 

239

 

 

 

1,145

 

 

1,166

 

Total non-interest income

 

2,719

 

 

3,565

 

 

1,827

 

 

 

10,132

 

 

8,550

 

Non-interest expense

 

 

 

 

 

 

Salaries and employee benefits

 

10,716

 

 

13,127

 

 

8,414

 

 

 

41,939

 

 

34,393

 

Occupancy and equipment

 

1,929

 

 

1,871

 

 

1,843

 

 

 

7,302

 

 

6,943

 

Data processing

 

1,887

 

 

1,613

 

 

747

 

 

 

5,139

 

 

3,184

 

Professional services

 

653

 

 

2,472

 

 

432

 

 

 

4,974

 

 

2,181

 

Depreciation and amortization

 

461

 

 

431

 

 

558

 

 

 

1,740

 

 

2,149

 

Information technology

 

445

 

 

496

 

 

292

 

 

 

1,550

 

 

1,050

 

Amortization of core deposit intangible

 

393

 

 

334

 

 

214

 

 

 

1,135

 

 

853

 

Directors' expense

 

297

 

 

255

 

 

180

 

 

 

957

 

 

713

 

Federal Deposit Insurance Corporation insurance

 

292

 

 

236

 

 

175

 

 

 

889

 

 

474

 

Charitable contributions

 

90

 

 

4

 

 

113

 

 

 

587

 

 

1,034

 

Other expense

 

1,821

 

 

1,847

 

 

1,252

 

 

 

6,426

 

 

5,484

 

Total non-interest expense

 

18,984

 

 

22,686

 

 

14,220

 

 

 

72,638

 

 

58,458

 

Income before provision for income taxes

 

13,558

 

 

6,832

 

 

11,102

 

 

 

44,886

 

 

40,587

 

Provision for income taxes

 

3,844

 

 

1,550

 

 

2,985

 

 

 

11,658

 

 

10,345

 

Net income

$

9,714

 

$

5,282

 

$

8,117

 

 

$

33,228

 

$

30,242

 

Net income per common share:

 

 

 

 

 

 

Basic

$

0.61

 

$

0.35

 

$

0.60

 

 

$

2.32

 

$

2.24

 

Diluted

$

0.61

 

$

0.35

 

$

0.60

 

 

$

2.30

 

$

2.22

 

Weighted average shares:

 

 

 

 

 

 

Basic

 

15,948

 

 

14,922

 

 

13,523

 

 

 

14,340

 

 

13,525

 

Diluted

 

16,027

 

 

14,993

 

 

13,615

 

 

 

14,422

 

 

13,617

 

Comprehensive income:

 

 

 

 

 

 

Net income

$

9,714

 

$

5,282

 

$

8,117

 

 

$

33,228

 

$

30,242

 

Other comprehensive income (loss):

 

 

 

 

 

 

Change in net unrealized gains or losses on available-for-sale securities

 

(12,723

)

 

(2,274

)

 

286

 

 

 

(21,281

)

 

11,891

 

Reclassification adjustment for gains on available-for-sale securities included in net income

 

17

 

 

(1

)

 

 

 

 

16

 

 

(915

)

Amortization of net unrealized losses on securities transferred from available-for-sale to held-to-maturity

 

108

 

 

104

 

 

129

 

 

 

493

 

 

524

 

Other comprehensive income (loss), before tax

 

(12,598

)

 

(2,171

)

 

415

 

 

 

(20,772

)

 

11,500

 

Deferred tax (benefit) expense

 

(3,726

)

 

(641

)

 

124

 

 

 

(6,147

)

 

3,402

 

Other comprehensive (loss) income, net of tax

 

(8,872

)

 

(1,530

)

 

291

 

 

 

(14,625

)

 

8,098

 

Comprehensive income

$

842

 

$

3,752

 

$

8,408

 

 

$

18,603

 

$

38,340

 

BANK OF MARIN BANCORP

AVERAGE STATEMENTS OF CONDITION AND ANALYSIS OF NET INTEREST INCOME

 

Three months ended

Three months ended

Three months ended

 

 

December 31, 2021

September 30, 2021

December 31, 2020

 

 

 

Interest

 

 

Interest

 

 

Interest

 

 

 

Average

Income/

Yield/

Average

Income/

Yield/

Average

Income/

Yield/

(dollars in thousands; unaudited)

Balance

Expense

Rate

Balance

Expense

Rate

Balance

Expense

Rate

Assets

 

 

 

 

 

 

 

 

 

 

Interest-earning deposits with banks 1

$

330,894

$

125

0.15

%

$

456,405

$

178

0.15

%

$

157,389

$

40

0.10

%

 

Investment securities 2, 3

 

1,410,383

 

5,801

1.65

%

 

845,127

 

4,249

2.01

%

 

498,730

 

3,395

2.72

%

 

Loans 1, 3, 4

 

2,269,785

 

25,711

4.43

%

 

2,189,563

 

24,229

4.33

%

 

2,096,908

 

20,974

3.91

%

 

Total interest-earning assets 1

 

4,011,062

 

31,637

3.09

%

 

3,491,095

 

28,656

3.21

%

 

2,753,027

 

24,409

3.47

%

 

Cash and non-interest-bearing due from banks

 

85,869

 

 

 

68,680

 

 

 

64,600

 

 

 

Bank premises and equipment, net

 

7,777

 

 

 

6,468

 

 

 

5,213

 

 

 

Interest receivable and other assets, net

 

194,058

 

 

 

177,725

 

 

 

135,520

 

 

Total assets

$

4,298,766

 

 

$

3,743,968

 

 

$

2,958,360

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

 

 

Interest-bearing transaction accounts

$

290,394

$

53

0.07

%

$

237,883

$

41

0.07

%

$

160,827

$

40

0.10

%

 

Savings accounts

 

336,715

 

28

0.03

%

 

293,434

 

26

0.03

%

 

198,616

 

18

0.04

%

 

Money market accounts

 

1,102,943

 

505

0.18

%

 

911,294

 

417

0.18

%

 

697,203

 

278

0.16

%

 

Time accounts, including CDARS

 

144,993

 

25

0.07

%

 

124,247

 

44

0.14

%

 

97,512

 

118

0.48

%

 

Borrowings and other obligations 1, 6

 

430

 

1

0.62

%

 

3,010

 

8

1.09

%

 

72

 

1

2.37

%

 

Subordinate debentures 1, 5

 

 

%

 

 

%

 

2,768

 

34

4.85

%

 

Total interest-bearing liabilities

 

1,875,475

 

612

0.13

%

 

1,569,868

 

536

0.14

%

 

1,156,998

 

489

0.17

%

 

Demand accounts

 

1,915,309

 

 

 

1,707,142

 

 

 

1,397,349

 

 

 

Interest payable and other liabilities

 

54,514

 

 

 

46,834

 

 

 

44,532

 

 

 

Stockholders' equity

 

453,468

 

 

 

420,124

 

 

 

359,481

 

 

Total liabilities & stockholders' equity

$

4,298,766

 

 

$

3,743,968

 

 

$

2,958,360

 

 

Tax-equivalent net interest income/margin 1

 

$

31,025

3.03

%

 

$

28,120

3.15

%

 

$

23,920

3.40

%

Reported net interest income/margin 1

 

$

30,633

2.99

%

 

$

27,753

3.11

%

 

$

23,599

3.35

%

Tax-equivalent net interest rate spread

 

 

2.96

%

 

 

3.07

%

 

 

3.30

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended

Year ended

 

 

 

December 31, 2021

December 31, 2020

 

 

 

 

 

 

Interest

 

 

Interest

 

 

 

 

 

 

Average

Income/

Yield/

Average

Income/

Yield/

(dollars in thousands; unaudited)

 

 

 

Balance

Expense

Rate

Balance

Expense

Rate

Assets

 

 

 

 

 

 

 

 

 

 

Interest-earning deposits with banks 1

 

 

 

$

287,626

$

399

0.14

%

$

153,794

$

461

0.29

%

 

Investment securities 2, 3

 

 

 

 

866,790

 

16,999

1.96

%

 

533,186

 

15,025

2.82

%

 

Loans 1, 3, 4

 

 

 

 

2,155,982

 

92,376

4.23

%

 

2,023,203

 

85,398

4.15

%

 

Total interest-earning assets 1

 

 

 

 

3,310,398

 

109,774

3.27

%

 

2,710,183

 

100,884

3.66

%

 

Cash and non-interest-bearing due from banks

 

 

 

 

61,299

 

 

 

49,676

 

 

 

Bank premises and equipment, net

 

 

 

 

5,964

 

 

 

5,526

 

 

 

Interest receivable and other assets, net

 

 

 

 

159,502

 

 

 

131,780

 

 

Total assets

 

 

 

$

3,537,163

 

 

$

2,897,165

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

 

 

Interest-bearing transaction accounts

 

 

 

$

217,924

$

172

0.08

%

$

148,817

$

186

0.13

%

 

Savings accounts

 

 

 

 

268,397

 

94

0.04

%

 

184,146

 

68

0.04

%

 

Money market accounts

 

 

 

 

864,625

 

1,520

0.18

%

 

763,689

 

2,009

0.26

%

 

Time accounts, including CDARS

 

 

 

 

115,393

 

246

0.21

%

 

96,558

 

554

0.57

%

 

Borrowings and other obligations 1, 6

 

 

 

 

892

 

9

1.08

%

 

174

 

4

2.16

%

 

Subordinated debentures 1, 5

 

 

 

 

534

 

1,361

251.54

%

 

2,741

 

158

5.68

%

 

Total interest-bearing liabilities

 

 

 

 

1,467,765

 

3,402

0.23

%

 

1,196,125

 

2,979

0.25

%

 

Demand accounts

 

 

 

 

1,628,289

 

 

 

1,308,199

 

 

 

Interest payable and other liabilities

 

 

 

 

46,746

 

 

 

41,347

 

 

 

Stockholders' equity

 

 

 

 

394,363

 

 

 

351,494

 

 

Total liabilities & stockholders' equity

 

 

 

$

3,537,163

 

 

$

2,897,165

 

 

Tax-equivalent net interest income/margin 1

 

 

 

 

$

106,372

3.17

%

 

$

97,905

3.55

%

Reported net interest income/margin 1

 

 

 

 

$

104,951

3.13

%

 

$

96,659

3.51

%

Tax-equivalent net interest rate spread

 

 

 

 

 

3.04

%

 

 

3.41

%

 

 

 

 

 

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.

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.

 

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