
(in thousands)	September 30, 2022		December 31, 2021
Commercial and industrial	$	207,488	$	301,602
Real estate:
Commercial owner-occupied	368,415		392,345
Commercial investor-owned	1,211,651		1,189,021
Construction	112,154		119,840
Home equity	89,244		88,746
Other residential	114,247		114,558
Installment and other consumer loans	55,137		49,533
Total loans, at amortized cost 1	2,158,336		2,255,645
Allowance for credit losses on loans	(22,963)		(23,023)
Total loans, net of allowance for credit losses on loans	$	2,135,373	$	2,232,622

1 Amortized cost includes net deferred loan origination costs (fees) of $1.6 million and $(901) thousand at September 30, 2022 and December 31, 2021, respectively. Amounts are also net of unrecognized purchase discounts of $2.6 million and $2.5 million at September 30, 2022 and December 31, 2021, respectively. Amortized cost excludes accrued interest, which totaled $5.8 million and $7.1 million at September 30, 2022 and December 31, 2021, respectively, and is included in interest receivable and other assets in the consolidated statements of condition.

acquisitions. Management examines historical, current, and projected cash flows to determine the ability of the borrower to repay obligations as agreed. Commercial loans are made based primarily on the identified cash flows of the borrower and secondarily on the underlying collateral and guarantor support. The cash flows of borrowers, however, may not occur as expected, and the collateral securing these loans may fluctuate in value. Most commercial and industrial loans are secured by the assets being financed, such as accounts receivable and inventory, and typically include personal guarantees. We target stable businesses with guarantors who provide additional sources of repayment and have proven to be resilient in periods of economic stress. A weakened economy, and resultant decreased consumer and/or business spending, may have an effect on the credit quality of commercial loans.

Pursuant to the 2020 CARES Act, Bank of Marin originated 2,876 guaranteed loans totaling $444.1 million in two rounds of the Small Business Administration's ("SBA") Paycheck Protection Program ("PPP"). Additionally in 2021, Bank of Marin assumed 113 PPP loans totaling $18.6 million from AMRB as of the merger date. As of September 30, 2022, there were 42 PPP loans outstanding totaling $7.6 million (net of $161 thousand in unrecognized fees and costs), compared to 368 loans outstanding at December 31, 2021 totaling $111.2 million (net of $2.5 million in unrecognized fees and costs) included in commercial and industrial loan balances. PPP loans have terms of two to five years and earn interest at 1%. In addition, the SBA paid the Bank a fee of 1%-5% depending on the loan amount, which was netted with loan origination costs and accreted/amortized into interest income using the effective yield method over the contractual life of each loan. The recognition of fees and costs is accelerated when the SBA forgives the loan and/or the loan is paid off prior to maturity. PPP loans are fully guaranteed by the SBA if they meet the requirements of the program. As expected, the vast majority of the PPP loans have been fully forgiven by the SBA and we expect the majority of remaining loans to be forgiven as well.

Commercial Real Estate Loans - Commercial real estate loans, which include income producing investment properties and owner-occupied real estate used for business purposes, are subject to underwriting standards and processes similar to commercial loans discussed above. We underwrite these loans to be repaid from cash flow from either the business or investment property and supported by real property collateral. Underwriting standards for commercial real estate loans include, but are not limited to, debt coverage and loan-to-value ratios. Furthermore, a large majority of our loans are guaranteed by the owners of the properties. Conditions in the real estate markets or downturn in the general economy may adversely affect our commercial real estate loans. In the event of a vacancy, we expect guarantors to carry the loans until they find a replacement tenant. The owner's substantial equity investment provides a strong economic incentive to continue to support the commercial real estate projects. As such, we have generally experienced a relatively low level of loss and delinquencies in this portfolio.

Construction Loans - Construction loans are generally made to developers and builders to finance construction, renovation and occasionally land acquisitions in anticipation of near-term development. Construction loans include interest reserves that are used for the payment of interest during the development and marketing periods and are capitalized as part of the loan balance. When a construction loan is placed on nonaccrual status before the depletion of the interest reserve, we apply the interest funded by the interest reserve against the loan's principal balance. These loans are underwritten after evaluation of the borrower's financial strength, reputation, prior track record, and independent appraisals. We monitor all construction projects to determine whether they are on schedule, completed as planned and in accordance with the approved construction budgets. Significant events can affect the construction industry, including: the inherent volatility of real estate markets and vulnerability to delays due to weather, change orders, inability to obtain construction permits, labor or material shortages, and price changes. Estimates of construction costs and value associated with the completed project may be inaccurate. Repayment of construction loans is largely dependent on the ultimate success of the project.

Consumer Loans - Consumer loans primarily consist of home equity lines of credit, other residential loans, floating homes, and indirect luxury auto loans, along with a small number of installment loans. Our other residential loans include tenancy-in-common fractional interest loans ("TIC") located almost entirely in San Francisco County. We originate consumer loans utilizing credit score information, debt-to-income ratio and loan-to-value ratio analysis. Diversification among consumer loan types, coupled with relatively small loan amounts that are spread across many individual borrowers, mitigates risk. We do not originate sub-prime residential mortgage loans, nor is it our practice to underwrite loans commonly referred to as "Alt-A mortgages," the characteristics of which are reduced documentation, borrowers with low FICO scores or collateral with high loan-to-value ratios.

Pass and Watch - Loans to borrowers of acceptable or better credit quality. Borrowers in this category demonstrate fundamentally sound financial positions, repayment capacity, credit history and management expertise. Loans in this category must have an identifiable and stable source of repayment and meet the Bank’s policy regarding debt-service-coverage ratios. These borrowers are capable of sustaining normal economic, market or operational setbacks without significant financial consequences. Negative external industry factors are generally not present. The loan may be secured, unsecured or supported by non-real estate collateral for which the value is more difficult to determine and/or marketability is more uncertain. This category also includes “Watch” loans, where the primary source of repayment has been delayed. “Watch” is intended to be a transitional grade, with either an upgrade or downgrade within a reasonable period.

Substandard - Inadequately protected by either the current sound worth and paying capacity of the obligor or the collateral pledged, if any. A Substandard asset has a well-defined weakness or weaknesses that jeopardize(s) the liquidation of the debt. Substandard assets are characterized by the distinct possibility that we will sustain some loss if such weaknesses or deficiencies are not corrected. Well-defined weaknesses include adverse trends or developments of the borrower’s financial condition, managerial weaknesses and/or significant collateral deficiencies.

Doubtful - Critical weaknesses that make collection or liquidation in full improbable. There may be specific pending events that work to strengthen the asset; however, the amount or timing of the loss may not be determinable. Pending events generally occur within one year of the asset being classified as Doubtful. Examples include: merger, acquisition, or liquidation; capital injection; guarantee; perfecting liens on additional collateral; and refinancing. Such loans are placed on non-accrual status and usually are collateral-dependent.

We regularly review our credits for accuracy of risk grades whenever we receive new information. Borrowers are generally required to submit financial information at regular intervals. Typically, commercial borrowers with lines of credit are required to submit financial information with reporting intervals ranging from monthly to annually depending on credit size, risk and complexity. In addition, investor commercial real estate borrowers with loans exceeding a certain dollar threshold are usually required to submit rent rolls or property income statements annually. We monitor construction loans monthly. We review home equity and other consumer loans based on delinquency. We also review loans graded “Watch” or worse, regardless of loan type, no less than quarterly.

The following tables present the loan portfolio by loan class, origination year and internal risk rating as of September 30, 2022 and December 31, 2021. We early adopted the vintage disclosure requirements of ASU 2022-02 prospectively as described in Note 2 beginning with the first quarter of 2022. Accordingly, the 2022 vintage table reflects gross charge-offs by loan class and year of origination. Generally, existing term loans that were re-underwritten are reflected in the table in the year of renewal. Lines of credit that have a conversion feature at the time of origination, such as construction to perm loans, are presented by year of origination.


(in thousands)	Term Loans - Amortized Cost by Origination Year												Revolving Loans Amortized Cost
September 30, 2022	2022		2021		2020		2019		2018		Prior				Total
Commercial and industrial:
Pass and Watch	$	10,791	$	11,634	$	8,266	$	22,979	$	6,007	$	25,989	$	114,750	$	200,416
Special Mention	—		—		—		477		4,166		—		403		5,046
Substandard	—		—		1,361		—		—		665		—		2,026
Total commercial and industrial	$	10,791	$	11,634	$	9,627	$	23,456	$	10,173	$	26,654	$	115,153	$	207,488
Gross current period charge-offs	$	—	$	—	$	(9)	$	—	$	—	$	—	$	—	$	(9)

Commercial real estate, owner-occupied:
Pass and Watch	$	52,024	$	52,909	$	41,096	$	45,607	$	30,178	$	108,888	$	—	$	330,702
Special Mention	—		16,336		—		309		5,284		4,532		—		26,461
Substandard	—		—		7,127		1,758		—		2,266		—		11,151
Doubtful	—		—		101		—		—		—		—		101
Total commercial real estate, owner-occupied	$	52,024	$	69,245	$	48,324	$	47,674	$	35,462	$	115,686	$	—	$	368,415


(in thousands)	Term Loans - Amortized Cost by Origination Year												Revolving Loans Amortized Cost
September 30, 2022	2022		2021		2020		2019		2018		Prior				Total
Commercial real estate, investor-owned:
Pass and Watch	$	157,021	$	219,857	$	156,190	$	165,464	$	128,149	$	332,987	$	65	$	1,159,733
Special Mention	—		1,178		12,157		3,961		6,002		9,384		—		32,682
Substandard	—		—		—		—		—		19,236		—		19,236

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

Construction:
Pass and Watch	$	42,163	$	16,897	$	36,239	$	7,744	$	9,111	$	—	$	—	$	112,154


Total construction	$	42,163	$	16,897	$	36,239	$	7,744	$	9,111	$	—	$	—	$	112,154

Home equity:
Pass and Watch	$	—	$	—	$	—	$	—	$	—	$	742	$	87,685	$	88,427

Substandard	—		—		—		—		—		499		318		817
Total home equity	$	—	$	—	$	—	$	—	$	—	$	1,241	$	88,003	$	89,244

Other residential:
Pass and Watch	$	16,623	$	15,383	$	29,942	$	22,385	$	11,438	$	18,476	$	—	$	114,247


Total other residential	$	16,623	$	15,383	$	29,942	$	22,385	$	11,438	$	18,476	$	—	$	114,247

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

Substandard	—		—		—		—		—		92		—		92
Total installment and other consumer	$	15,579	$	14,591	$	6,168	$	6,837	$	4,428	$	6,748	$	786	$	55,137
Gross current period charge-offs	$	—	$	—	$	—	$	—	$	—	$	(18)	$	(5)	$	(23)
Total loans:
Pass and Watch	$	294,201	$	331,271	$	277,901	$	271,016	$	189,311	$	493,738	$	203,286	$	2,060,724
Total Special Mention	$	—	$	17,514	$	12,157	$	4,747	$	15,452	$	13,916	$	403	$	64,189
Total Substandard	$	—	$	—	$	8,488	$	1,758	$	—	$	22,758	$	318	$	33,322
Total Doubtful	$	—	$	—	$	101	$	—	$	—	$	—	$	—	$	101
Totals	$	294,201	$	348,785	$	298,647	$	277,521	$	204,763	$	530,412	$	204,007	$	2,158,336
Total gross current period charge-offs	$	—	$	—	$	(9)	$	—	$	—	$	(18)	$	(5)	$	(32)


(in thousands)	Term Loans - Amortized Cost by Origination Year												Revolving Loans Amortized Cost
December 31, 2021	2021		2020		2019		2018		2017		Prior				Total
Commercial and industrial:
Pass and Watch	$	96,643	$	35,967	$	25,754	$	12,763	$	2,729	$	31,280	$	90,744	$	295,880
Special Mention	—		1,700		584		273		—		—		2,088		4,645
Substandard	—		—		—		—		—		—		1,077		1,077
Total commercial and industrial	$	96,643	$	37,667	$	26,338	$	13,036	$	2,729	$	31,280	$	93,909	$	301,602
Commercial real estate, owner-occupied:
Pass and Watch	$	58,395	$	43,216	$	49,485	$	36,174	$	42,430	$	104,898	$	—	$	334,598
Special Mention	16,748		—		—		7,846		—		16,996		—		41,590
Substandard	—		7,155		285		—		—		8,603		—		16,043
Doubtful	—		114		—		—		—		—		—		114
Total commercial real estate, owner-occupied	$	75,143	$	50,485	$	49,770	$	44,020	$	42,430	$	130,497	$	—	$	392,345
Commercial real estate, investor-owned:
Pass and Watch	$	225,722	$	186,214	$	187,418	$	143,028	$	75,419	$	325,882	$	84	$	1,143,767
Special Mention	—		1,214		2,714		11,773		1,787		9,540		—		27,028
Substandard	—		—		—		695		—		17,531		—		18,226
Total commercial real estate, investor-owned	$	225,722	$	187,428	$	190,132	$	155,496	$	77,206	$	352,953	$	84	$	1,189,021
Construction:
Pass and Watch	$	31,269	$	70,528	$	8,935	$	9,108	$	—	$	—	$	—	$	119,840


Total construction	$	31,269	$	70,528	$	8,935	$	9,108	$	—	$	—	$	—	$	119,840
Home equity:
Pass and Watch	$	—	$	—	$	—	$	—	$	10	$	268	$	87,693	$	87,971

Substandard	—		—		—		—		—		377		398		775
Total home equity	$	—	$	—	$	—	$	—	$	10	$	645	$	88,091	$	88,746
Other residential:
Pass and Watch	$	15,800	$	31,981	$	25,529	$	15,411	$	7,964	$	17,873	$	—	$	114,558


Total other residential	$	15,800	$	31,981	$	25,529	$	15,411	$	7,964	$	17,873	$	—	$	114,558
Installment and other consumer:
Pass and Watch	$	17,207	$	7,748	$	9,436	$	5,633	$	1,123	$	6,620	$	1,766	$	49,533


Total installment and other consumer	$	17,207	$	7,748	$	9,436	$	5,633	$	1,123	$	6,620	$	1,766	$	49,533
Total loans:
Pass and Watch	$	445,036	$	375,654	$	306,557	$	222,117	$	129,675	$	486,821	$	180,287	$	2,146,147
Total Special Mention	$	16,748	$	2,914	$	3,298	$	19,892	$	1,787	$	26,536	$	2,088	$	73,263
Total Substandard	$	—	$	7,155	$	285	$	695	$	—	$	26,511	$	1,475	$	36,121
Doubtful	$	—	$	114	$	—	$	—	$	—	$	—	$	—	$	114
Totals	$	461,784	$	385,837	$	310,140	$	242,704	$	131,462	$	539,868	$	183,850	$	2,255,645


Loan Aging Analysis by Class
(in thousands)	Commercial and industrial		Commercial real estate, owner-occupied		Commercial real estate, investor-owned		Construction		Home equity		Other residential		Installment and other consumer		Total
September 30, 2022
30-59 days past due	$	1,007	$	—	$	—	$	—	$	520	$	—	$	—	$	1,527
60-89 days past due	1,474		—		—		—		360		—		—		1,834
90 days or more past due	255		—		—		—		54		—		—		309
Total past due	2,736		—		—		—		934		—		—		3,670
Current	204,752		368,415		1,211,651		112,154		88,310		114,247		55,137		2,154,666
Total loans 1	$	207,488	$	368,415	$	1,211,651	$	112,154	$	89,244	$	114,247	$	55,137	$	2,158,336
Non-accrual loans 2	$	—	$	9,846	$	—	$	—	$	699	$	—	$	92	$	10,637
Non-accrual loans with no allowance	$	—	$	9,846	$	—	$	—	$	699	$	—	$	92	$	10,637
December 31, 2021
30-59 days past due	$	2	$	—	$	—	$	—	$	498	$	—	$	1,036	$	1,536
60-89 days past due	394		—		—		—		67		—		—		461
90 days or more past due	229		—		—		—		88		—		—		317
Total past due	625		—		—		—		653		—		1,036		2,314
Current	300,977		392,345		1,189,021		119,840		88,093		114,558		48,497		2,253,331
Total loans 1	$	301,602	$	392,345	$	1,189,021	$	119,840	$	88,746	$	114,558	$	49,533	$	2,255,645
Non-accrual loans 2	$	—	$	7,269	$	694	$	—	$	413	$	—	$	—	$	8,376
Non-accrual loans with no allowance	$	—	$	7,269	$	694	$	—	$	413	$	—	$	—	$	8,376

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

2 None of the non-accrual loans as of September 30, 2022 or December 31, 2021 were earning interest on a cash basis. We recognized no interest income on non-accrual loans for the three and nine months ended September 30, 2022 and 2021. Accrued interest of $47 thousand was reversed from interest income for loans that were placed on non-accrual during the nine months ended September 30, 2022. No interest income was reversed for the single loan that was placed on non-accrual during the nine months ended September 30, 2021.


	Amortized Cost by Collateral Type
(in thousands)	Commercial Real Estate		Residential Real Estate		Other		Total 1		Allowance for Credit Losses

September 30, 2022
Commercial real estate, owner-occupied	$	9,846	$	—	$	—	$	9,846	$	—


Home equity	—		699		—		699		—

Installment and other consumer	—		—		92		92		—
Total	$	9,846	$	699	$	92	$	10,637	$	—
December 31, 2021
Commercial real estate, owner-occupied	$	7,269	$	—	$	—	$	7,269	$	—
Commercial real estate, investor-owned	694		—		—		694		—

Home equity	—		413		—		413		—


Total	$	7,963	$	413	$	—	$	8,376	$	—

Our loan portfolio includes certain loans modified in a troubled debt restructuring (“TDR”), where we have granted economic concessions to borrowers experiencing financial difficulties. These concessions typically result from our loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance or other actions. TDRs on non-accrual status at the time of restructure may be returned to accruing status after management considers the borrower’s sustained repayment performance for a reasonable period, generally nine months, and obtains reasonable assurance of repayment and performance.

In accordance with section 4013 of the CARES Act, subsequently amended by section 541 of the 2020 Economic Aid Act, we elected to apply the temporary accounting relief provisions for loan modifications that met certain criteria, which would otherwise be designated as TDRs under existing GAAP. As of September 30, 2022, one borrowing relationship with two loans totaling $7.1 million was continuing to benefit from payment relief. Shortly after quarter end, both of the loans, which were classified substandard and on non-accrual, were paid off.


(dollars in thousands)	Number of Contracts Modified	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment at Period End
TDRs during the three months ended September 30, 2022:
Commercial real estate, owner occupied	2	$	2,308	$	2,308	$	2,308
Home equity	2	147		147		147
Total	4	$	2,455	$	2,455	$	2,455
TDRs during the three months ended September 30, 2021:
Commercial and industrial	1	$	1,101	$	1,101	$	1,101


(dollars in thousands)	Number of Contracts Modified	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment at Period End
TDRs during the nine months ended September 30, 2022:
Commercial real estate, owner occupied	2	$	2,308	$	2,308	$	2,308
Home equity	3	247		247		247
Total	5	$	2,555	$	2,555	$	2,555
TDRs during the nine months ended September 30, 2021:
Commercial and industrial	1	$	1,101	$	1,101	$	1,101


Allowance for Credit Losses on Loans Rollforward
(in thousands)	Commercial and industrial		Commercial real estate, owner-occupied		Commercial real estate, investor-owned		Construction		Home equity		Other residential		Installment and other consumer		Unallocated		Total
Three months ended September 30, 2022
Beginning balance	$	1,699	$	2,617	$	12,439	$	1,737	$	530	$	585	$	733	$	2,199	$	22,539
Provision (reversal)	265		(81)		299		38		12		5		83		(199)		422
Charge-offs	(9)		—		—		—		—		—		(1)		—		(10)
Recoveries	3		—		—		9		—		—		—		—		12
Ending balance	$	1,958	$	2,536	$	12,738	$	1,784	$	542	$	590	$	815	$	2,000	$	22,963
Three months ended September 30, 2021
Beginning balance	$	1,590	$	2,037	$	10,761	$	1,142	$	412	$	613	$	238	$	2,307	$	19,100
Provision (reversal)	126		(30)		1,011		77		247		4		384		(19)		1,800
Initial allowance for PCD loans	405		559		533		—		—		6		2		—		1,505
Charge-offs	—		—		—		—		—		—		(2)		—		(2)
Recoveries	3		—		—		8		—		—		—		—		11
Ending balance	$	2,124	$	2,566	$	12,305	$	1,227	$	659	$	623	$	622	$	2,288	$	22,414



Allowance for Credit Losses on Loans Rollforward
(in thousands)	Commercial and industrial		Commercial real estate, owner-occupied		Commercial real estate, investor		Construction		Home equity		Other residential		Installment and other consumer		Unallocated		Total
Nine months ended September 30, 2022
Beginning balance	$	1,709	$	2,776	$	12,739	$	1,653	$	595	$	644	$	621	$	2,286	$	23,023
Provision (reversal)	248		(240)		(1)		106		(53)		(54)		217		(286)		(63)

Charge-offs	(9)		—		—		—		—		—		(23)		—		(32)
Recoveries	10		—		—		25		—		—		—		—		35
Ending balance	$	1,958	$	2,536	$	12,738	$	1,784	$	542	$	590	$	815	$	2,000	$	22,963
Nine months ended September 30, 2021
Beginning balance	$	2,530	$	2,778	$	12,682	$	1,557	$	738	$	998	$	291	$	1,300	$	22,874
Provision (reversal)	(821)		(771)		(910)		(356)		(129)		(381)		331		988		(2,049)
Initial allowance for PCD loans	405		559		533		—		—		6		2		—		1,505
Charge-offs	—		—		—		—		—		—		(2)		—		(2)
Recoveries	10		—		—		26		50		—		—		—		86
Ending balance	$	2,124	$	2,566	$	12,305	$	1,227	$	659	$	623	$	622	$	2,288	$	22,414

Our FHLB line of credit is secured under terms of a blanket collateral agreement by a pledge of certain qualifying loans with unpaid principal balances of $1.300 billion and $1.330 billion at September 30, 2022 and December 31, 2021, respectively. In addition, we pledge eligible TIC loans, which totaled $105.7 million and $106.2 million at September 30, 2022 and December 31, 2021, respectively, to secure our borrowing capacity with the Federal Reserve Bank ("FRB"). For additional information, see Note 6, Borrowings.

The Bank has, and expects to have in the future, banking transactions in the ordinary course of its business with directors, officers, principal shareholders and their businesses or associates. These transactions, including loans, are granted on substantially the same terms, including interest rates and collateral on loans, as those prevailing at the same time for comparable transactions with persons not related to us. Likewise, these transactions do not involve more than the normal risk of collectability or present other unfavorable features. Related party loans totaled