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What changed in Bank of Marin Bancorp's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Bank of Marin Bancorp's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+226 added−232 removedSource: 10-K (2025-03-14) vs 10-K (2024-03-14)

Top changes in Bank of Marin Bancorp's 2024 10-K

226 paragraphs added · 232 removed · 164 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeWe believe that our employee relations are good. We have been recognized as one of the “Best Places to Work” by the North Bay Business Journal. SUPERVISION AND REGULATION Bank holding companies and banks are extensively regulated under both federal and state law. The following discus sion summarizes certain significant laws, rules and regulations affecting Bancorp and the Bank.
Biggest changeWe believe that our employee relations are good. In 2024, we were inducted into NorthBay Biz's "Best of" Hall of Fame and were named one of North Bay Business Journal's "Best Places to Work". SUPERVISION AND REGULATION Bank holding companies and banks are extensively regulated under both federal and state law.
Large commercial banks 5 also have substantially greater lending limits and the ability to offer certain services, which are not offered directly by us. Other competitors for depositors' funds are money market mutual funds and non-bank financial institutions such as brokerage firms and insurance companies.
Large commercial banks also have substantially greater lending limits and the ability to offer certain services, which are not offered directly by 5 us. Other competitors for depositors' funds are money market mutual funds and non-bank financial institutions such as brokerage firms and insurance companies.
Available Information On our Internet website, www.bankofmarin.com, we post the following filings as soon as reasonably practical after they are filed with or furnished to the Securities and Exchange Commission: Annual Report to Shareholders, Form 10-K, Proxy Statement for the Annual Meeting of Shareholders, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities and Exchange Act of 1934.
Available Information On our Internet website, www.bankofmarin.com, we post the following filings as soon as reasonably practical after they are filed with or furnished to the Securities and Exchange Commission: Annual Report to Shareholders, Form 10-K, Proxy Statement for the Annual Meeting of Shareholders, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the 11 Securities and Exchange Act of 1934.
Consumer Protection Regulations Our lending activities are subject to a variety of statutes and regulations designed to protect consumers, including the CRA, Home Mortgage Disclosure Act, Fair Credit Reporting Act, Fair Lending, Fair Debt Collection Practices Act, Flood Disaster Protection Act, eSign Act, Equal Credit Opportunity Act, the Fair Housing Act, Truth-in-Lending Act ("TILA"), the Real Estate Settlement Procedures Act ("RESPA"), Protecting Tenants at Foreclosure, and the Secure and Fair Enforcement for Mortgage Licensing Act ("SAFE").
Consumer Protection Regulations Our lending activities are subject to a variety of statutes and regulations designed to protect consumers, including the CRA, Home Mortgage Disclosure Act, Fair Credit Reporting Act, Fair Lending, Fair Debt Collection Practices Act, Flood Disaster Protection Act, eSign Act, Equal Credit Opportunity Act, the Fair Housing Act, Truth-in-Lending Act ("TILA"), the Real Estate Settlement Procedures Act ("RESPA"), Protecting Tenants at Foreclosure, and the 9 Secure and Fair Enforcement for Mortgage Licensing Act ("SAFE").
Under the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, financial institutions are subject to prohibitions 8 against specified financial transactions and account relationships, requirements regarding the Customer Identification Program, as well as enhanced due diligence and “know your customer” standards in their dealings with high risk customers, foreign financial institutions, and foreign individuals and entities.
Under the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, financial institutions are subject to prohibitions against specified financial transactions and account relationships, requirements regarding the Customer Identification Program, as well as enhanced due diligence and “know your customer” standards in their dealings with high risk customers, foreign financial institutions, and foreign individuals and entities.
Our deposit operations are also subject to laws 9 and regulations that protect consumer rights including Expedited Funds Availability, Truth in Savings Act ("TISA"), and Electronic Funds Transfers. Other regulatory requirements include the Unfair, Deceptive or Abusive Acts and Practices ("UDAAP"), Dodd-Frank Act, Right to Financial Privacy, Telephone Consumer Protection Act and Privacy of Consumer Financial Information.
Our deposit operations are also subject to laws and regulations that protect consumer rights including Expedited Funds Availability, Truth in Savings Act ("TISA"), and Electronic Funds Transfers. Other regulatory requirements include the Unfair, Deceptive or Abusive Acts and Practices ("UDAAP"), Dodd-Frank Act, Right to Financial Privacy, Telephone Consumer Protection Act and Privacy of Consumer Financial Information.
In all of our 10 counties, we have significant competition from nationwide banks with much larger branch networks and greater financial resources, as well as credit unions and other local and regional banks. Nationwide banks have the competitive advantages of developing data analytics and artificial intelligence tools and other technological platforms.
In all of our counties, we have significant competition from nationwide banks with much larger branch networks and greater financial resources, as well as credit unions and other local and regional banks. Nationwide banks have the competitive advantages of developing data analytics and artificial intelligence tools and other technological platforms.
Market Area Our primary market area encompasses Alameda, Amador, Contra Costa, Marin, Napa, Placer, Sacramento, San Francisco, San Mateo and Sonoma counties. Our customer base is primarily made up of business, not-for-profit and personal banking relationships within these market areas.
Market Area Our primary market area encompasses Alameda, Amador, Contra Costa, Marin, Napa, Placer, Sacramento, San Francisco, San Mateo, Solano and Sonoma counties. Our customer base is primarily made up of business, not-for-profit and personal banking relationships within these market areas.
Anti-Money-Laundering Regulations A series of banking laws and regulations beginning with the Bank Secrecy Act in 1970 requires banks to prevent, detect, and report illicit or illegal financial activities to the federal government to prevent money laundering, international drug trafficking, and terrorism.
Anti-Money-Laundering Regulations A series of banking laws and regulations beginning with the Bank Secrecy Act in 1970 requires banks to prevent, detect, and report illicit or illegal financial activities to the federal government to prevent money laundering, 8 international drug trafficking, and terrorism.
All such materials on our website are available free of charge. This website 11 address is for information only and is not intended to be an active link, or to incorporate any website information into this document.
All such materials on our website are available free of charge. This website address is for information only and is not intended to be an active link, or to incorporate any website information into this document.
In addition, copies of our filings are available by requesting them in writing or by phone from: Corporate Secretary Bank of Marin Bancorp 504 Redwood Boulevard, Suite 100 Novato, CA 94947 415-763-4523 These materials are also available at the SEC’s internet website (https://www.sec.gov). 12
In addition, copies of our filings are available by requesting them in writing or by phone from: Corporate Secretary Bank of Marin Bancorp 504 Redwood Boulevard, Suite 100 Novato, CA 94947 415-763-4524 These materials are also available at the SEC’s internet website (https://www.sec.gov). 12
As of December 31, 2023, the majority of our deposits were in Marin, Sacramento and southern Sonoma counties, and approximately 59% of our deposits were from businesses and 41% from consumers. Competition The banking business in California generally, and in our market area specifically, is highly competitive with respect to attracting both loan and deposit relationships.
As of December 31, 2024, the majority of our deposits were in Marin, Napa, Sacramento and southern Sonoma counties, and approximately 59% of our deposits were from businesses and 41% from consumers. Competition The banking business in California generally, and in our market area specifically, is highly competitive with respect to attracting both loan and deposit relationships.
The Bank's experienced professionals deliver innovative and custom financing, with a deep local market knowledge and a personal understanding of each customer's unique needs. Human Capital Resources As of December 31, 2023, we employed 329 full-time equivalent staff. The actual number of employees, including part-time employees, at year-end 2023 included eight executive officers, 153 other corporate officers and 176 staff.
The Bank's experienced professionals deliver innovative and custom financing, with a deep local market knowledge and a personal understanding of each customer's unique needs. Human Capital Resources As of December 31, 2024, we employed 285 full-time equivalent staff. The actual number of employees, including part-time employees, at year-end 2024 included seven executive officers, 147 other corporate officers and 136 staff.
Our customer base is comprised of business, not-for-profit, and personal banking relationships wit hin our Northern California footprint. Our business banking focus is on small to medium-sized businesses, not-for-profit organizations, and commercial real estate investors. We offer a suite of business and personal financial products and services designed to meet the needs of our customers.
Our business banking focus is on small to medium-sized businesses, not-for-profit organizations, and commercial real estate investors. We offer a suite of business and personal financial products and services designed to meet the needs of our customers.
The rule also requires bank service providers to notify each affected banking organization if that bank service provider experiences a computer-security incident that has caused, or is reasonably likely to cause, a material service disruption or degradation for four or more hours. The rule became effective on April 1, 2022, with a compliance date of May 1, 2022.
The rule also requires bank service providers to notify each affected banking organization if that bank service provider experiences a computer-security incident that has caused, or is reasonably likely to cause, a material service disruption or degradation for four or more hours.
Bank Holding Company Regulation Upon formation of the bank holding company on July 1, 2007, we became subject to regulation under the Bank Holding Company Act of 1956, as amended (“BHCA”) which subjects Bancorp to Federal Reserve reporting and examination requirements.
The following discus sion summarizes certain significant laws, rules and regulations affecting Bancorp and the Bank. Bank Holding Company Regulation Upon formation of the bank holding company on July 1, 2007, we became subject to regulation under the Bank Holding Company Act of 1956, as amended (“BHCA”) which subjects Bancorp to Federal Reserve reporting and examination requirements.
The determination whether an investor "controls" a depository institution is based on all of the facts and circumstances surrounding the investment. As a general matter, a party is deemed to control a depository institution or other company if the party owns or controls 25% or more of any class of voting stock.
As a general matter, a party is deemed to control a depository institution or other company if the party owns or controls 25% or more of any class of voting stock.
These laws include the BHCA and the Change in Bank Control Act. Among other things, these laws require regulatory filings by a shareholder or other party that seeks to acquire direct or indirect "control" of an FDIC-insured depository institution or bank holding company.
Among other things, these laws require regulatory filings by a shareholder or other party that seeks to acquire direct or indirect "control" of an FDIC-insured depository institution or bank holding company. The determination whether an investor "controls" a depository institution is based on all of the facts and circumstances surrounding the investment.
We will continue to evaluate the impact of any changes to the regulations implementing the CRA and their impact to our financial condition, results of operations, and/or liquidity, which cannot be predicted at this time.
Since issuance, the effective date of the final rule has been delayed pending the outcome of litigation that challenged the statutory authority of federal regulators. We will continue to evaluate the impact of any changes to the regulations implementing the CRA and their impact to our financial condition, results of operations, and/or liquidity, which cannot be predicted at this time.
The Economic Growth Act’s highlights included improving consumer access to mortgage credit, added certain protections for consumers, included veterans and active duty military personnel, expanded credit freezes and created an identity theft protection database. 10 Notice and Approval Requirements Related to Control Banking laws impose notice, approval and ongoing regulatory requirements on any shareholder or other party that seeks to acquire direct or indirect "control" of an FDIC-insured depository institution.
The Economic Growth Act’s highlights included 10 improving consumer access to mortgage credit, added certain protections for consumers, included veterans and active duty military personnel, expanded credit freezes and created an identity theft protection database.
This record is taken into consideration when the institution establishes a new branch that accepts deposits, relocates an office, applies to merge or consolidate, or expands into other activities. The FDIC assigned a “Satisfactory” rating to Bank of Marin's CRA performance examination based on their most recent examination completed in January 2021, which was performed under the large bank requirements.
This record is taken into consideration when the institution establishes a new branch that accepts deposits, relocates an office, applies to merge or consolidate, or expands into other activities.
In addition to our headquarters and a regional office in the Greater Sacramento region, we 4 operate 27 retail branches and 8 commercial banking offices across 10 counties - Alameda, Amador, Contra Costa, Marin, Napa, Placer, Sacramento, San Francisco, San Mateo and Sonoma - with a strong emphasis on supporting local communities.
In addition to our headquarters and a regional office in the Greater Sacramento region, we operate 27 retail branches and 8 commercial banking offices across Northern California with a strong emphasis on 4 supporting local communities. Our customer base is comprised of business, not-for-profit, and personal banking relationships wit hin our Northern California footprint.
In October 2023, the federal banking agencies issued a final rule to strengthen and modernize regulations implementing the CRA.
Th e FDIC assigned a “Satisfactory” rating to Bank of Marin's CRA performance examination based on their most recent examination completed in November 2023, which was performed under the large bank requirements. In October 2023, the federal banking agencies issued a final rule to strengthen and modernize regulations implementing the CRA.
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Notice and Approval Requirements Related to Control Banking laws impose notice, approval and ongoing regulatory requirements on any shareholder or other party that seeks to acquire direct or indirect "control" of an FDIC-insured depository institution. These laws include the BHCA and the Change in Bank Control Act.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIn addition, media and market coverage of the Bay Area economy and local financial institutions, have generated significant market volatility among publicly traded bank holding companies and, in particular, regional and community banks like the Company. These market developments have negatively impacted customer confidence in the safety and soundness of regional and community banks.
Biggest changeIn addition, media and market coverage of the Bay Area economy and local financial institutions, have generated significant market volatility among publicly traded bank holding companies and, in particular, regional and community banks like the Company.
Rising interest rates and first quarter disruptions in the banking industry resulted in rapid increases in the cost of funds through rising deposit costs and increased borrowings, putting pressure on net interest margin starting in the second quarter of 2023.
Rising interest rates and first quarter 2023 disruptions in the banking industry resulted in rapid increases in the cost of funds through rising deposit costs and increased borrowings, putting pressure on net interest margin starting in the second quarter of 2023.
These securities make up a majority of the securities portfolio of most banks in the U.S., including the Company’s, resulting in unrealized losses embedded in the held-to-maturity portion of U.S. banks’ securities portfolios and unrealized losses on available-for-sale securities reflected in the Company’s accumulated other comprehensive 16 income (loss).
These securities make up a majority of the securities portfolio of most banks in the U.S., including the Company’s, resulting in unrealized losses embedded in the held-to-maturity portion of U.S. banks’ securities portfolios and unrealized losses on available-for-sale securities reflected in the Company’s accumulated other comprehensive income (loss).
We maintain an investment securities portfolio to provide liquidity and to generate earnings on funds that have not been loaned to customers while managing our liquidity and interest rate position, seeking a reasonable yield balanced with risk exposure.
We maintain an investment securities portfolio to provide liquidity and to generate earnings on funds 16 that have not been loaned to customers while managing our liquidity and interest rate position, seeking a reasonable yield balanced with risk exposure.
Unexpected Early Termination of Interest Rate Swap Agreements May Affect Earnings We have entered into interest-rate swap agreements, primarily as an asset/liability risk management tool, in order to mitigate the interest rate risk that causes fluctuations in the fair value of specified long-term fixed-rate loans and securities or firm commitments to originate long-term fixed rate loans.
Unexpected Early Termination of Interest Rate Swap Agreements May Affect Earnings We have entered into interest-rate swap agreements, primarily as an asset/liability risk management tool, in order to mitigate the interest rate risk that causes fluctuations in the fair value of specified long-term fixed-rate loans or firm commitments to originate long-term fixed rate loans.
Although Congress has taken steps to improve regulation and consumer protection related to the housing finance system (e.g., the Dodd-Frank Act), FNMA and FHLMC have entered their 16th year of U.S. government conservatorship via the Federal Housing Finance Agency ("FHFA").
Although Congress has taken steps to improve regulation and consumer protection related to the housing finance system (e.g., the Dodd-Frank Act), FNMA and FHLMC have entered their 17th year of U.S. government conservatorship via the Federal Housing Finance Agency ("FHFA").
Any Regulatory Examination Scrutiny or New Regulatory Requirements Arising From the Recent Events in the Banking Industry Could Increase the Company’s Expenses and Affect the Company’s Operations The Company anticipates increased regulatory scrutiny – in the course of routine examinations and otherwise – and new regulations directed towards banks of similar size to the Bank, designed to address the recent negative developments in the banking industry, all of which may increase the Company’s costs of doing business and reduce its profitability. 21 ITEM 1B.
Any Regulatory Examination Scrutiny or New Regulatory Requirements Arising From the Recent Events in the Banking Industry Could Increase the Company’s Expenses and Affect the Company’s Operations The Company could be subject to increased regulatory scrutiny – in the course of routine examinations and otherwise – and new regulations directed towards banks of similar size to the Bank, designed to address the recent 21 negative developments in the banking industry, all of which may increase the Company’s costs of doing business and reduce its profitability. 22 ITEM 1B.
In fact, the FOMC’s aggressive interest rate increases, discussed more fully below, negatively affected each of these areas of our business recently. Our portfolio of loans and securities will generally decline in value if market interest rates increase, and increase in value if market interest rates decline.
In fact, the FOMC’s aggressive interest rate increases, discussed more fully below, negatively affected each of these areas of our business in recent years. Our portfolio of loans and securities will generally decline in value if market interest rates increase, and increase in value if market interest rates decline.
Our funding costs increased significantly in 2023 and may continue to increase if our deposits decline and we replace them with more expensive sources of funding, such as FHLB and FRB borrowings, and/or brokered deposits, if customers shift their deposits into higher cost products, or if we raise interest rates to avoid losing deposits.
Our funding costs increased significantly in 2023 and could increase again if our deposits decline and we replace them with more expensive sources of funding, such as FHLB and FRB borrowings, and/or brokered deposits, if customers shift their deposits into higher cost products, or if we raise interest rates to avoid losing deposits.
In addition, our top ten depositor relationships accounted for approximately 8% of total deposit balances at both December 31, 2023 and 2022. The business models and cash cycles of some of our large commercial depositors may also cause short-term volatility in their deposit balances held with us.
In addition, our top ten depositor relationships accounted for approximately 9% and 8% of total deposit balances at December 31, 2024 and 2023, respectively. The business models and cash cycles of some of our large commercial depositors may also cause short-term volatility in their deposit balances held with us.
The Value of Goodwill and Other Intangible Assets May Decline in the Future As of December 31, 2023, we had goodwill totaling $72.8 million and a core deposit intangible asset totaling $3.8 million from business acquisitions.
The Value of Goodwill and Other Intangible Assets May Decline in the Future As of December 31, 2024, we had goodwill totaling $72.8 million and a core deposit intangible asset totaling $2.8 million from business acquisitions.
As of December 31, 2023, approximately 90% of our loans had real estate as a primary or secondary component of collateral, which were comprised of 75% commercial real estate and 25% residential real estate. Real estate valuations are influenced by demand, and demand is driven by economic factors such as employment rates and interest rates.
As of December 31, 2024, approximately 90% of our loans had real estate as a primary or secondary component of collateral, which were comprised of 72% commercial real estate and 28% residential real estate. Real estate valuations are influenced by demand, and demand is driven by economic factors such as employment rates and interest rates.
Excluding zero balance accounts, 59% of deposit balances were held in business accounts with average balances of $120 thousand per account, with the remaining 41% in consumer accounts with average balances of $41 thousand per account as of December 31, 2023.
Excluding zero balance accounts, 59% of deposit balances were held in business accounts with average balances of $127 thousand per account, with the remaining 41% in consumer accounts with average balances of $40 thousand per account as of December 31, 2024.
We maintain a well-diversified deposit base, with an estimated 28% of uninsured and/or uncollateralized deposits as of December 31, 2023.
We maintain a well-diversified deposit base, with an estimated 29% of uninsured and/or uncollateralized deposits as of December 31, 2024.
Such uninsured deposits were fully covered by the Bank's available funding sources, including unrestricted cash, unencumbered available-for-sale securities, and a total available borrowing capacity of $1.967 billion, or 60% of total deposits, and 213% of estimated uninsured and/or uncollateralized deposits as of December 31, 2023.
Such uninsured deposits were fully covered by the Bank's available funding sources, including unrestricted cash, unencumbered available-for-sale securities, and a total available borrowing capacity of $1.849 billion, or 57% of total deposits, and 197% of estimated uninsured and/or uncollateralized deposits as of December 31, 2024.
While it is neither our intention to sell securities at a net loss in the normal course of business, nor were we required to, we did so for strategic purposes in the third and fourth quarters of 2023 as a source of liquidity and to reposition the balance sheet to bolster net interest margin.
While it is neither our intention to sell securities at a net loss in the normal course of business, nor were we required to, we strategically sold securities in the third and fourth quarters of 2023 and the second quarter of 2024, to reposition the balance sheet to bolster net interest margin.
As of December 31, 2023 and 2022, using regulatory definitions in the CRE Concentration Guidance, our CRE loans represented 300% and 307%, respectively, of our total risk-based capital.
As of December 31, 2024 and 2023, using regulatory definitions in the CRE Concentration Guidance, our CRE loans represente d 389% and 371%, respectively, of our total risk-based capital.
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As a result of seven rate adjustments during 2022, the federal funds target rate increased to a range of 4.25% to 4.50% at year-end 2022 and our net interest margin increased gradually over the course of the year.
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These market developments have negatively impacted customer confidence in the safety and soundness of regional and community banks and may impact our financial results in future periods.
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In 2023, on each of February 1 st , March 22 nd , May 3 rd , and July 26 th the FOMC increased the target rate by 25 basis points to a range of 5.25% to 5.50%.
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The FOMC began increasing rates in March 2022, totaling seven rate increases in 2022 and four additional rate increases in 2023, and ended the year of 2023 at a federal funds target rate range between 5.25% and 5.50%.
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Additional rate increases are not widely anticipated in 2024, as Federal Reserve policymakers continue to monitor inflation and economic developments .
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Primarily due to declining inflation, the Federal Reserve lowered the target for the federal funds rate by 100 basis points, to a range of 4.25% to 4.50% in the later months of 2024.
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Significant changes or developments in U.S. laws or policies, and the reactions of the national and global economy to such changes, may have a material adverse effect on our business.
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There are uncertainties around the legal and regulatory approach that will be taken under the Trump administration, and we cannot predict the likelihood, nature or extent of changes in law or government regulations that may arise from future legislation or administrative or executive action, either in the United States or abroad.
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The current administration’s rapidly evolving policy pronouncements and executive orders create an unpredictable regulatory landscape. This unpredictability can result in sudden changes to the legal and regulatory framework governing our operations, making it challenging to plan and execute our business strategies effectively.
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Additionally, the potential for abrupt policy shifts may cause fluctuations in market conditions, impacting our investment portfolio, lending activities, and overall financial performance.
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The general uncertainty associated with the administration’s policy approach may also lead to increased market volatility and disruptions that could affect the availability and cost of capital, the valuation of our assets, the stability of our funding sources, and the financial health and operations of our borrowers.
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In turn, this may impact our ability to meet regulatory capital requirements, manage liquidity, and maintain profitability. The administration’s efforts to roll back financial regulations, which may include those established under the Bank Secrecy Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, and others could lead to changes in the regulatory environment in which we operate.
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While deregulation may reduce compliance costs and regulatory burdens, it may also increase competition and risk-taking in the financial services sector, potentially leading to greater market volatility and financial instability.
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We cannot, however, accurately predict the full effects of recent or future legislation or the various other governmental, regulatory, monetary, and fiscal initiatives which have been and may be enacted on the financial markets, the Company, and the Bank. We continue to monitor regulatory developments and adjust our strategies accordingly.
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However, the inherent unpredictability of the current regulatory environment poses a risk to our business that could have material adverse effects on our financial condition and results of operations.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe Company's cybersecurity risk management program and strategy are regularly reviewed and updated to ensure that they are aligned with the Bank's business objectives and are designed to address evolving cybersecurity threats and satisfy regulatory requirements and industry standards. 22 The Company’s Board of Directors is charged with overseeing the establishment and execution of the Company’s risk management framework and monitoring adherence to related policies required by applicable statutes, regulations and principles of safety and soundness.
Biggest changeThe Company's cybersecurity risk management program and strategy are regularly reviewed and updated to ensure that they are aligned with the Bank's business objectives and are designed to address evolving cybersecurity threats and satisfy regulatory requirements and industry standards. 23 The Company’s Board of Directors is charged with overseeing the establishment and execution of the Company’s risk management framework and monitoring adherence to related policies required by applicable statutes, regulations and principles of safety and soundness.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe lease branch and office facilities within our primary market areas in the cities of Corte Madera, San Rafael, Novato, Sausalito, Mill Valley, Greenbrae, Petaluma, Santa Rosa, Healdsburg, Sonoma, Napa, San Francisco, Alameda, Oakland, Walnut Creek, San Mateo, Gold River, Jackson, Roseville, and Sacramento.
Biggest changeWe lease branch and office facilities within our primary market areas in the cities of Corte Madera, San Rafael, Novato, Sausalito, Mill Valley, Greenbrae, Petaluma, Santa Rosa, Healdsburg, Sonoma, Napa, San Francisco, Alameda, Oakland, Walnut Creek, Gold River, Jackson, Roseville, and Sacramento.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeA total of $34.7 million remained available to repurchase under the program that expired on July 31, 2023. On July 21, 2023, the Board of Directors approved the adoption of Bancorp's new share repurchase program, which replaced the one expiring on July 31, 2023, for up to $25.0 million and expiring on July 31, 2025.
Biggest changeFor the year ended December 31, 2024, the excise tax, net of issuances, was approximately $19 thousand. 3 On July 21, 2023, the Board of Directors approved the adoption of Bancorp's share repurchase program for up to $25.0 million and expiring on July 31, 2025.
Five-Year Stock Price Performance Graph The following graph, compiled by S&P Global Market Intelligence of New York, New York, shows a comparison of cumulative total shareholder return on our common stock during the five fiscal years ended December 31, 2023 compared to the Russell 2000 Stock index and the S&P Regional Banks Select Industry Index.
Five-Year Stock Price Performance Graph The following graph, compiled by S&P Global Market Intelligence of New York, New York, shows a comparison of cumulative total shareholder return on our common stock during the five fiscal years ended December 31, 2024 compared to the Russell 2000 Stock index and the S&P Regional Banks Select Industry Index.
The comparison assumes the investment of $100 in our common stock on December 31, 2018 and the reinvestment of all dividends. The graph represents past performance and does not indicate future performance.
The comparison assumes the investment of $100 in our common stock on December 31, 2019 and the reinvestment of all dividends. The graph represents past performance and does not indicate future performance.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information and Holders Bancorp's common stock trades on the Nasdaq Capital Market under the symbol BMRC. At February 29, 2024, 16,193,342 shares of Bancorp's common stock, no par value, were outstanding and held by approximately 7,860 holders of record and beneficial owners.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information and Holders Bancorp's common stock trades on the Nasdaq Capital Market under the symbol BMRC. At February 28, 2025, 16,116,627 shares of Bancorp's common stock, no par value, were outstanding and held by approximately 7,500 holders of record and beneficial owners.
Shares to be issued upon exercise of outstanding options 1 Weighted average exercise price of outstanding options Shares remaining available for future issuance 2 Equity compensation plans approved by shareholders 283,578 $ 33.46 999,843 1 Represents shares of common stock issuable upon exercise of outstanding options under the Bank of Marin Bancorp 2017 Equity Plan and 2007 Equity Plan. 2 Represents remaining shares of common stock available for future grants under the 2017 Equity Plan and the 2020 Director Stock Plan, excluding 283,578 shares to be issued upon exercise of outstanding options and 372,923 shares available to be issued under the Employee Stock Purchase Plan.
Shares to be issued upon exercise of outstanding options 1 Weighted average exercise price of outstanding options Shares remaining available for future issuance 2 Equity compensation plans approved by shareholders 273,242 $ 33.92 925,140 1 Represents shares of common stock issuable upon exercise of outstanding options under the Bank of Marin Bancorp 2017 Equity Plan and 2007 Equity Plan. 2 Represents remaining shares of common stock available for future grants under the 2017 Equity Plan and the 2020 Director Stock Plan, excluding 273,242 shares to be issued upon exercise of outstanding options and 370,739 shares available to be issued under the Employee Stock Purchase Plan.
In addition, total return performance results vary depending on the length of the performance period. 2018 2019 2020 2021 2022 2023 Bank of Marin Bancorp (BMRC) 100.00 111.31 87.16 96.97 88.13 62.13 Russell 2000 Index 100.00 125.53 150.58 172.90 137.56 160.85 S&P Regional Banks Select Industry Index 1 100.00 127.64 118.58 165.90 141.42 130.91 Source: S&P Global Market Intelligence 1 The index comprises stocks in the S&P Total Market Index that are classified in the Global Industry Classification Standard regional banks sub-industry. 24 Securities Authorized for Issuance under Equity Compensation Plans The following table summarizes information as of December 31, 2023, with respect to equity compensation plans.
In addition, total return performance results vary depending on the length of the performance period. 2019 2020 2021 2022 2023 2024 Bank of Marin Bancorp (BMRC) 100.00 78.30 87.11 79.18 55.82 63.57 Russell 2000 Index 100.00 119.96 137.74 109.59 128.14 142.93 S&P Regional Banks Select Industry Index 1 100.00 92.90 129.98 110.80 102.56 122.17 Source: S&P Global Market Intelligence 1 The index comprises stocks in the S&P Total Market Index that are classified in the Global Industry Classification Standard regional banks sub-industry. 25 Securities Authorized for Issuance under Equity Compensation Plans The following table summarizes information as of December 31, 2024, with respect to equity compensation plans.
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Purchases of Equity Securities by the Issuer and Affiliated Purchasers In January 2022, the last activity under the share repurchase program approved in 2021, Bancorp repurchased 23,275 shares at an average price of $37.64 per share for a total cost of $877 thousand. Cumulative repurchases totaled 618,991 shares at an average price of $36.04 per share.
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Purchases of Equity Securities by the Issuer and Affiliated Purchasers On July 21, 2023, the Board of Directors approved the adoption of Bancorp's share repurchase program for up to $25.0 million and expiring on July 31, 2025. Bancorp repurchased 220,000 shares totaling $4.3 million at an average price of $19.21 per share in the year ended December 31, 2024.
Removed
There were no repurchases under this program in 2023. ITEM 6. [RESERVED]
Added
Shares repurchased pursuant to our common stock share repurchase programs during 2024, 2023 and 2022, were as follows. 2024 2023 2022 Cumulative Totals Total number of common shares repurchased 220,000 0 23,275 243,275 Total purchase price of common shares repurchased (in millions) $ 4.3 $ — $ 1.0 $ 5.3 The following table reports information regarding repurchases of our common stock during the year ended December 31, 2024: (in thousands, except per share data) Total Number of Shares Purchased Average Price Paid per Share 1, 2 Total Number of Shares Purchased as Part of Publicly Announced Programs Approximate Dollar Value That May yet Be Purchased Under the Program 3 Period January 1, 2024 to January 31, 2024 — $ — — $ 25,000 February 1, 2024 to February 29, 2024 — — — 25,000 March 1, 2024 to March 31, 2024 — — — 25,000 April 1, 2024 to April 30, 2024 — — — 25,000 May 1, 2024 to May 31, 2024 — — — 25,000 June 1, 2024 to June 30, 2024 — — — 25,000 July 1, 2024 to July 31, 2024 — — — 25,000 August 1, 2024 to August 31, 2024 220 19.21 220 24,780 September 1, 2024 to September 30, 2024 — — — 24,780 October 1, 2024 to October 31, 2024 — — — 24,780 November 1, 2024 to November 30, 2024 — — — 24,780 December 1, 2024 to December 31, 2024 — — — 24,780 Year ended December 31, 2024 220 $ 19.21 220 $ 24,780 1 Average price paid per share excludes commission. 2 The aggregate purchase price and weighted average price per share does not include the effect of excise tax expense incurred on net stock repurchases.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

109 edited+47 added−63 removed56 unchanged
Biggest changeTreasury securities — — 11,923 1.00 — — — — 11,923 10,623 1.00 Obligations of state and political subdivisions - tax-exempt 3 — — 5,142 1.59 14,602 2.04 69,382 2.68 89,126 80,720 2.51 Obligations of state and political subdivisions - taxable 100 3.14 3,005 1.31 8,956 1.74 1,015 1.98 13,076 11,162 1.67 Corporate bonds — — 11,992 1.19 — — — — 11,992 10,718 1.19 Asset-backed securities — — — — — — — — — — — Total available-for-sale 777 2.08 379,692 1.86 148,893 2.13 84,117 2.73 613,479 552,028 2.04 Total $ 777 2.08 % $ 584,027 2.46 % $ 709,113 2.16 % $ 244,760 2.37 % $ 1,538,677 $ 1,366,858 2.31 % 37 December 31, 2022 Within 1 Year 1-5 Years 5-10 Years After 10 Years Total (dollars in thousands; unaudited) AmortizedCost 1 Average Yield 2 AmortizedCost 1 Average Yield 2 AmortizedCost 1 Average Yield 2 AmortizedCost 1 Average Yield 2 Amortized Cost 1 Fair Value Average Yield 2 Held-to-maturity: MBS/CMOs issued by U.S. government agencies $ 463 0.63 % $ 152,817 3.36 % $ 419,822 2.20 % $ 158,410 2.28 % $ 731,512 $ 643,437 2.46 % SBA-backed securities — — 2,372 3.17 — — — — 2,372 2,239 3.17 Debentures of government-sponsored agencies — — 24,993 4.26 47,017 2.06 73,813 1.91 145,823 119,356 2.36 Obligations of state and political subdivisions - tax-exempt 3 — — — — 5,515 3.72 26,600 2.74 32,115 28,846 2.90 Obligations of state and political subdivisions - taxable — — — — 4,708 1.84 25,677 2.28 30,385 22,913 2.21 Corporate bonds — — 30,000 3.63 — — — — 30,000 28,448 3.63 Total held-to-maturity 463 0.63 210,182 3.50 477,062 2.20 284,500 2.22 972,207 845,239 2.49 Available-for-sale: MBS/CMOs issued by U.S. government agencies 2,305 2.02 317,528 2.13 198,809 2.43 9,823 2.55 528,465 475,505 2.25 SBA-backed securities 65 1.01 47,166 2.66 — — 493 5.03 47,724 44,355 2.68 Debentures of government sponsored agencies — — 140,145 1.29 6,977 1.35 1,992 1.39 149,114 135,106 1.29 U.S.
Biggest changeTreasury securities — — 11,923 1.00 — — — — 11,923 10,623 1.00 Obligations of state and political subdivisions - tax-exempt 3 — — 5,142 1.59 14,602 2.04 69,382 2.68 89,126 80,720 2.51 Obligations of state and political subdivisions - taxable 100 3.14 3,005 1.31 8,956 1.74 1,015 1.98 13,076 11,162 1.67 Corporate bonds — — 11,992 1.19 — — — — 11,992 10,718 1.19 Asset-backed securities — — — — — — — — — — — Total available-for-sale 777 2.08 379,692 1.86 148,893 2.13 84,117 2.73 613,479 552,028 2.04 Total $ 777 2.08 % $ 584,027 2.46 % $ 709,113 2.16 % $ 244,760 2.37 % $ 1,538,677 $ 1,366,858 2.31 % 1 Book value reflects cost, adjusted for accumulated amortization and accretion. 2 Weighted average calculation is based on amortized cost of securities. 3 Yields on tax-exempt municipal bonds are presented on a taxable equivalent basis, using a federal tax rate of 21%.
Significant fluctuations were as follows: • Deposit network fees increased by $2.5 million as customers sought additional FDIC insurance protection through reciprocal deposit networks. • Salaries and employee benefits increased by $1.4 million primarily due to the filling of open positions and the hiring of several key employees and officers, an increase in SERP-related expenses largely due to new and retired participant adjustments lowering costs for 2022, an increase in deferred officer compensation expense from increased participation and interest rates, higher insurance costs, and lower deferred loan origination costs.
Significant fluctuations were as follows: • Deposit network fees increased by $2.5 million as customers sought additional FDIC insurance protection through reciprocal deposit networks. 37 • Salaries and employee benefits increased by $1.4 million primarily due to the filling of open positions and the hiring of several key employees and officers, an increase in SERP-related expenses largely due to new and retired participant adjustments lowering costs for 2022, an increase in deferred officer compensation expense from increased participation and interest rates, higher insurance costs, and lower deferred loan origination costs.
This impact does not consider changes to other assumptions for either the quantitative factors, such as probability of default, loss given default, loan mix or cash flows, prepayment/curtailment rates, and individually analyzed loans, or qualitative factors as discussed in Note 1 - Summary of Significant Accounting Policies.
This impact does not consider changes to other assumptions for either the quantitative factors, such as probability of default, loss given default, loan mix or cash flows, prepayment/curtailment rates, and individually analyzed loans, or qualitative factors as discussed in Note 1 - Summary of Significant Accounting 27 Policies.
Management estimates these allowances quarterly using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. 25 Credit loss experience among the Bank and peer groups provides the basis for the estimation of expected credit losses.
Management estimates these allowances quarterly using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Credit loss experience among the Bank and peer groups provides the basis for the estimation of expected credit losses.
Loans classified as substandard increased by $4.2 million in 2023, primarily due to downgrades from special mention totaling $6.0 million and from pass totaling $3.7 million, partially offset by $4.5 million in paydowns and 44 payoffs and $939 thousand in upgrades to pass.
Loans classified as substandard increased by $4.2 million in 2023, primarily due to downgrades from special mention totaling $6.0 million and from pass totaling $3.7 million, partially offset by $4.5 million in paydowns and payoffs and $939 thousand in upgrades to pass.
Fair value is discussed further in Note 1 - Summary of Significant Accounting Policies, and Note 9 - Fair Value of Assets and Liabilities in ITEM 8 - Financial Statements and Supplementary Data of this Form 10-K. 26 Goodwill Goodwill arises from the acquisition method of accounting for business combinations and represents the excess of the fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date.
Fair value is discussed further in Note 1 - Summary of Significant Accounting Policies, and Note 9 - Fair Value of Assets and Liabilities in ITEM 8 - Financial Statements and Supplementary Data of this Form 10-K. 28 Goodwill Goodwill arises from the acquisition method of accounting for business combinations and represents the excess of the fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date.
Our Asset Liability Management Committee ("ALCO"), which is comprised of independent Bank directors and the Bank's Chief Executive Officer, is responsible for approving and monitoring our liquidity targets and strategies.
Our Asset Liability Management Committee ("ALCO"), which is comprised of Bank directors and the Bank's Chief Executive Officer, is responsible for approving and monitoring our liquidity targets and strategies.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion of financial condition as of December 31, 2023 and 2022 and results of operations for each of the years in the three-year period ended December 31, 2023 should be read in conjunction with our consolidated financial statements and related notes thereto, included in Part II ITEM 8 of this report.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion of financial condition as of December 31, 2024 and 2023 and results of operations for each of the years in the three-year period ended December 31, 2024 should be read in conjunction with our consolidated financial statements and related notes thereto, included in Part II ITEM 8 of this report.
Management determines the maturities and types of securities to be purchased based on liquidity and interest rate risk position, and the desire to attain a reasonable investment yield balanced with risk exposure. The tables below show the composition of the debt securities portfolio by weighted average life at December 31, 2023 and 2022.
Management determines the maturities and types of securities to be purchased based on liquidity and interest rate risk position, and the desire to attain a reasonable investment yield balanced with risk exposure. The tables below show the composition of the debt securities portfolio by weighted average life at December 31, 2024 and 2023.
Demand Deposit Marketplace SM ("DDM") and ICS balances are discussed in Note 6 to the Consolidated Financial Statements in ITEM 8 of this report. Maturities of Uninsured Time Deposits The following table shows time deposits by account that are in excess of $250,000 by time remaining to maturity at December 31, 2023.
Demand Deposit Marketplace SM ("DDM") and ICS balances are discussed in Note 6 to the Consolidated Financial Statements in ITEM 8 of this report. Maturities of Uninsured Time Deposits The following table shows time deposits by account that are in excess of $250,000 by time remaining to maturity at December 31, 2024.
We also have relationships with third-party deposit networks and can adjust the placement of our deposits via reciprocal or one-way sales as part of our cash management strategy, as discussed in Note 6 to the Consolidated Financial Statement in ITEM 8 of this report.
We also have relationships with third-party deposit networks and can adjust the placement of our deposits via reciprocal or one-way sales as part of our cash management strategy, as discussed in Note 6 to the Consolidated Financial Statements in ITEM 8 of this report.
See ITEM 1A, Risk Factors, for a discussion of potential risks associated with concentrations and volatility due to the activity of our large deposit customers. Distribution of Average Deposits The table below shows the relative composition of our average deposits for 2023 and 2022.
See ITEM 1A, Risk Factors, for a discussion of potential risks associated with concentrations and volatility due to the activity of our large deposit customers. Distribution of Average Deposits The table below shows the relative composition of our average deposits for 2024 and 2023.
The following table presents the amortized costs and maturity distribution of our loans by portfolio class as of December 31, 2023 based on their contractual maturity dates. Maturities do not include scheduled payments or potential prepayments.
The following table presents the amortized costs and maturity distribution of our loans by portfolio class as of December 31, 2024 based on their contractual maturity dates. Maturities do not include scheduled payments or potential prepayments.
Increases to salaries and employee benefits were partially offset by a decrease in profit sharing expense mainly from accrual adjustments and because some contributions in 2023 were made from forfeitures rather than paid in cash, a decrease in accrued incentive bonuses, and a decrease in stock-based compensation from changes in award structure and estimated performance award payout estimates. • FDIC insurance costs increased by $699 thousand due to an increase in the FDIC statutory assessment rate to s trengthen the Deposit Insurance Fund. • Occupancy and equipment and depreciation and amortization expenses rose by $483 thousand and $258 thousand , respectively, mainly from the acceleration of lease-related costs for branch closures in the first quarter of 2 0 23 and higher maintenance costs. • Professional services expenses increased by $299 thousand, mainly from consulting fees associated with core systems contract negotiations, systems transformation projects, and internal and external audit costs. • Information technology and data processing expenses decreased by $628 thousand and $592 thousand , respectively, due to our core system contract renegotiation for the current period and because the prior year included data processing expenses largely eliminated after the systems conversion associated with the American River Bankshares merger. 35 • Other real estate owned expenses decreased by $311 thousand due to the write-down in 2022 of the property that was then sold in the third quarter of 2023. 2022 Compared to 2021 Non-interest expenses increased $2.6 million to $75.3 million in 2022 from $72.6 million in 2021.
Increases to salaries and employee benefits were partially offset by a decrease in profit sharing expense mainly from accrual adjustments and because some contributions in 2023 were made from forfeitures rather than paid in cash, a decrease in accrued incentive bonuses, and a decrease in stock-based compensation from changes in award structure and estimated performance award payout estimates. • FDIC insurance costs increased by $699 thousand due to an increase in the FDIC statutory assessment rate to s trengthen the Deposit Insurance Fund. • Occupancy and equipment and depreciation and amortization expenses rose by $483 thousand and $258 thousand , respectively, mainly from the acceleration of lease-related costs for branch closures in the first quarter of 2 0 23 and higher maintenance costs. • Professional services expenses increased by $299 thousand, mainly from consulting fees associated with core systems contract negotiations, systems transformation projects, and internal and external audit costs. • Information technology and data processing expenses decreased by $628 thousand and $592 thousand , respectively, due to our core system contract renegotiation for the current period and because the prior year included data processing expenses largely eliminated after the systems conversion associated with the American River Bankshares merger. • Other real estate owned expenses decreased by $311 thousand due to the write-down in 2022 of the property that was then sold in the third quarter of 2023.
We performed a sensitivity analysis as of December 31, 2023, and estimated that a 100 basis point change (e.g., 4.5% to 5.5%) in the forecasted unemployment rates over the next four quarters would result in about a 5% change to our allowance for credit losses on loans.
We performed a sensitivity analysis as of December 31, 2024, and estimated that a 100 basis point change (e.g., 4.5% to 5.5%) in the forecasted unemployment rates over the next four quarters would result in about a 6% change to our allowance for credit losses on loans.
The following table summarizes our commercial real estate loan concentrations by the county in which the property was located as of December 31, 2023 and 2022.
The following table summarizes our commercial real estate loan concentrations by the county in which the property was located as of December 31, 2024 and 2023.
As of December 31, 2023 and 2022, neither the Bank nor Bancorp had accruals for interest or penalties related to unrecognized tax benefits. 36 FINANCIAL CONDITION Investment Securities We maintain an investment securities portfolio to provide liquidity and generate earnings on funds that have not been loaned to customers.
As of December 31, 2024 and 2023, neither the Bank nor Bancorp had accruals for interest or penalties related to unrecognized tax benefits. 38 FINANCIAL CONDITION Investment Securities We maintain an investment securities portfolio to provide liquidity and generate earnings on funds that have not been loaned to customers.
On December 31, 2023 and 2022, our liabilities under the SERPs totaled $4.5 million and $4.7 million, respectively, and were recorded in interest payable and other liabilities in the consolidated statements of condition. The SERPs are unfunded and non-qualified for tax purposes and subject to Title I of the Employee Retirement Income Security Act of 1974.
On December 31, 2024 and 2023, our liabilities under the SERPs totaled $4.6 million and $4.5 million, respectively, and were recorded in interest payable and other liabilities in the consolidated statements of condition. The SERPs are unfunded and non-qualified for tax purposes and subject to Title I of the Employee Retirement Income Security Act of 1974.
Bancorp's TCE ratio, net of after-tax unrealized losses on held-to-maturity securities as if the losses were realized, was 7.80% as of December 31, 2023, compared to 6.15% (refer to the discussion and reconciliation of this non-GAAP financial measure in the section below entitled Statement Regarding Use of Non-GAAP Financial Measures ).
Bancorp's TCE ratio, net of after-tax unrealized losses on held-to-maturity securities as if the losses were realized, was 7.85% as of December 31, 2024, compared to 7.80% at December 31, 2023 (refer to the discussion and reconciliation of this non-GAAP financial measure in the section below entitled Statement Regarding Use of Non-GAAP Financial Measures ).
For additional information on our allowance for credit losses methodology, refer to Notes 1 and 3 to the Consolidated Financial Statements in ITEM 8 of this report. The ratio of the allowance for credit losses to total loans was 1.21% at December 31, 2023 and 1.10% at December 31, 2022.
For additional information on our allowance for credit losses methodology, refer to Notes 1 and 3 to the Consolidated Financial Statements in ITEM 8 of this report. The ratio of the allowance for credit losses to total loans was 1.47% at December 31, 2024 and 1.21% at December 31, 2023.
Our primary uses of funds are the origination of loans, the purchase of investment securities, withdrawals of deposits, maturity of certificates of deposit, repayment of borrowings, dividends to common stockholders, and operating expenses. Customer deposits are a significant component of our daily liquidity position.
Our primary uses of funds are the origination of loans, the purchase of investment securities and loans, withdrawals of deposits, maturities of certificates of deposit, repayment of borrowings, dividends to common stockholders, share repurchases and operating expenses. Customer deposits are a significant component of our daily liquidity position.
We accomplish this goal by maintaining an appropriate level of liquid assets and formal lines of credit with the FHLB, FRBSF and correspondent banks that enable us to borrow funds, as discussed in Note 7 to the Consolidated Financial Statement in ITEM 8 of this report.
We accomplish this goal by maintaining an appropriate level of liquid assets and formal lines of credit with the FHLB, FRBSF and correspondent banks that enable us to borrow funds as seen in the table below and discussed in Note 7 to the Consolidated Financial Statements in ITEM 8 of this report.
Weighted average life takes into account the issuer's right to call or prepay obligations, with or without call or prepayment penalties. The weighted average life of the investment portfolio at December 31, 2023 and 2022 was approximately 6.6 and 6.8 years, respectively. The effective duration of the investment portfolio was 5.2 and 5.0 at December 31, 2023 and 2022, respectively.
Weighted average life takes into account the issuer's right to call or prepay obligations, with or without call or prepayment penalties. The weighted average life of the investment portfolio at December 31, 2024 and 2023 was approximately 5.9 and 6.6 years, respectively. The effective duration of the investment portfolio was 4.8 and 5.2 at December 31, 2024 and 2023, respectively.
We had outstanding borrowings under our credit facilities of $26.0 million and $112.0 million as of December 31, 2023 and 2022, respectively, as discussed in Note 7 to the Consolidated Financial Statements in ITEM 8 of this report.
We had no outstanding borrowings under our credit facilities as of December 31, 2024, and $26.0 million as of December 31, 2023, as discussed in Note 7 to the Consolidated Financial Statements in ITEM 8 of this report.
While we do not intend to sell our held-to-maturity securities, the TCE ratio, net of after-tax unrealized losses on held-to-maturity securities as if the losses were realized, was 7.80% as of December 31, 2023, compared to 6.15% as of December 31, 2022 (refer to the discussion and reconciliation of this non-GAAP financial measure in the section below entitled Statement Regarding Use of Non-GAAP Financial Measures ). • The Board of Directors declared a cash dividend of $0.25 per share on January 25, 2024, which was the 75 th consecutive quarterly dividend paid by Bancorp.
While we do not intend to sell our held-to-maturity securities, the TCE ratio, net of after-tax unrealized losses on held-to-maturity securities as if the losses were realized, was 7.85% as of December 31, 2024 (refer to the discussion and reconciliation of this non-GAAP financial measure in the section below entitled Statement Regarding Use of Non-GAAP Financial Measures ). • The Board of Directors declared a cash dividend of $0.25 per share on January 23, 2025, which was the 79 th consecutive quarterly dividend paid by Bancorp.
Management anticipates that our current strong liquidity position, as detailed in this report, and contingent funding sources are adequate to support our operational needs. 48 Unfunded credit commitments, as discussed in Note 16 to the Consolidated Financial Statements in ITEM 8 of this report, totaled $505.2 million at December 31, 2023.
Management anticipates that our current strong liquidity position, as detailed in this report, and contingent funding sources are adequate to support our operational needs. Unfunded credit commitments, as discussed in Note 16 to the Consolidated Financial Statements in ITEM 8 of this report, totaled $460.7 million at December 31, 2024.
Management believes that, given recent industry turmoil, the presentation of Bancorp's non-GAAP TCE ratio reflecting the after-tax impact of unrealized losses on held-to-maturity securities provides useful supplemental information to investors because it reflects the level of capital remaining after a hypothetical liquidation of the entire securities portfolio.
Management believes that, given industry turmoil that largely began in the first quarter of 2023, the presentation of Bancorp's non-GAAP TCE ratio reflecting the after tax impact of unrealized losses on held-to-maturity securities provides useful supplemental information to investors because it reflects the level of capital remaining after a hypothetical liquidation of the entire securities portfolio.
Based on the current conditions of the loan portfolio and reasonable and supportable forecasts, management believes that the $25.2 million allowance for credit losses at December 31, 2023 was adequate to absorb expected credit losses in our loan portfolio.
Based on the current conditions of the loan portfolio and reasonable and supportable forecasts, management believes that the $30.7 million allowance for credit losses at December 31, 2024 was adequate to absorb expected credit losses in our loan portfolio.
Of the total investment in obligations of state and political subdivisions, the largest concentrations outside California are in Texas (37.1%), Washington (15.4%), and Wisconsin (9.0%).
Of the total investment in obligations of state and political subdivisions, the largest concentrations outside California are in Texas (38.4%), Washington (15.7%), and Wisconsin (9.4%).
The results of this assessment indicated the value of goodwill was not impaired as of our annual impairment testing date of November 30, 2023, and there were no changes to our assessment through December 31, 2023. 27 RESULTS OF OPERATIONS Financial Highlights The following are highlights of our financial condition and results of operations.
The results of these assessments indicated the value of goodwill was not impaired as of our annual impairment testing dates of November 30, 2024 and 2023, and there were no changes to our assessment through December 31, 2024. 29 RESULTS OF OPERATIONS Financial Highlights The following are highlights of our financial condition and results of operations.
Years ended December 31, (dollars in thousands) 2023 2022 2021 Provision for (reversal of) credit losses on loans $ 2,575 $ (63) $ (1,449) The provision in 2023 was due primarily to adjustments to qualitative risk factors from continued uncertainty about inflation and recession risks, the potential impact of rapidly increasing interest rates and other external factors on both our non-owner-occupied commercial real estate and construction portfolios, loan and collateral concentration risks in our construction and commercial real estate portfolios, heightened portfolio management in light of current economic conditions, and continued negative trends in adversely graded loans and/or collateral values for our non-owner occupied commercial real estate office and multi-family real estate portfolios.
The provision in 2023 was due primarily to adjustments to qualitative risk factors from continued uncertainty about inflation and recession risks, the potential impact of rapidly increasing interest rates and other external factors on both our non-owner-occupied commercial real estate and construction portfolios, loan and collateral concentration risks in our construction and commercial real estate portfolios, heightened portfolio management in light of current economic conditions, and continued negative trends in adversely graded loans and/or collateral values for our non-owner occupied commercial real estate office and multi-family real estate portfolios.
As of December 31, 2023, the Bank had $26.0 million outstanding in short-term borrowings under the BTFP facility at an average rate of 4.83%, compared to $112.0 million in FHLB overnight borrowings as of December 31, 2022 at a rate of 4.65%. Other correspondent bank lines of credit were not utilized as of December 31, 2023 or 2022.
As of December 31, 2024, the Bank had no outstanding borrowings, compared to $26.0 million outstanding in short-term borrowings under the BTFP facility at an average rate of 4.83% as of December 31, 2023. Other bank lines of credit were not utilized as of December 31, 2024 or 2023.
The dividend was paid on February 15, 2024 to shareholders of record at the close of business on February 8, 2024. 30 Net Interest Income Net interest income is the interest earned on loans, investments and other interest-earning assets minus interest expense incurred on deposits and other interest-bearing liabilities.
The dividend was paid on February 13, 2025 to shareholders of record at the close of business on February 6, 2025. 32 Net Interest Income Net interest income is the interest earned on loans, investments and other interest-earning assets minus interest expense incurred on deposits and other interest-bearing liabilities.
In addition, as of December 31, 2023 and 2022 46 we had $135.0 million and $150.0 million, respectively, in unsecured lines of credit with correspondent banks to cover short-term borrowing needs.
I n addition, as of December 31, 2024 and 2023 we had $125.0 million and $135.0 million, respectively, in unsecured lines of credit with correspondent banks to cover short-term borrowing needs.
Tangible common equity to tangible assets ("TCE ratio") increased to 9.73% as of December 31, 2023, from 8.21% as of December 31, 2022.
Tangible common equity to tangible assets ("TCE ratio") increased to 9.93% as of December 31, 2024, from 9.73% as of December 31, 2023.
Note: Brokered deposits available through third-party networks are not included above. We obtain funds from the repayment and maturity of loans, deposit inflows, investment security maturities, sales and paydowns, federal funds purchases, FHLB advances, other borrowings, and cash flow from operations.
Note: Brokered deposits available through third-party networks are not included above. We obtain funds from the repayment and maturity of loans, deposit inflows, investment securities sales, maturities and paydowns, federal funds purchases, FRBSF and FHLB advances, other borrowings, and cash flow from operations. Although available as a liquidity source, we have not chosen to utilize brokered deposits.
Because there are limits to the usefulness of this measure to investors, Bancorp encourages readers to consider its annual and quarterly consolidated financial statements and notes related thereto in their entirety, as filed with the SEC, and not to rely on any single financial measure. A reconciliation of the non-GAAP TCE ratio is presented below.
Because there are limits to the usefulness of this or any other non-GAAP measure to investors, Bancorp encourages readers to consider its annual and quarterly consolidated financial statements and notes related thereto in their entirety, as filed with the Securities and Exchange Commission, and not to rely on any single financial measure.
Allowance for Credit Losses on Loans Rollforward (dollars in thousands; unaudited) 2023 2022 2021 Beginning balance $ 22,983 $ 23,023 $ 22,874 Provision for (reversal of) credit losses 2,575 (63) (1,449) Initial allowance for PCD loans — — 1,505 Loans charged-off: Commercial and industrial (11) (9) — Real estate: Commercial real estate, owner-occupied (406) — — Installment and other consumer (24) (23) (5) Total loans charged-off (441) (32) (5) Loans recovered: Commercial and industrial 29 22 14 Real estate: Construction 25 33 34 Home equity — — 50 Installment and other consumer 1 — — Total loans recovered 55 55 98 Net loans (charged-off) recovered (386) 23 93 Ending balance $ 25,172 $ 22,983 $ 23,023 Total loans, at amortized cost $ 2,073,720 $ 2,092,546 $ 2,255,645 Average total loans outstanding during year $ 2,099,719 $ 2,175,259 $ 2,155,982 Ratio of allowance for credit losses to total loans at end of year 1.21 % 1.10 % 1.02 % Net charge-offs (recoveries) to average loans 0.02 % NM NM NM - Not meaningful. 43 The following table shows non-performing assets as of December 31, 2023 and 2022.
Allowance for Credit Losses on Loans Rollforward (dollars in thousands; unaudited) 2024 2023 2022 Beginning balance $ 25,172 $ 22,983 $ 23,023 Provision for (reversal of) credit losses 5,550 2,575 (63) Loans charged-off: Commercial and industrial (41) (11) (9) Real estate: Commercial real estate, owner-occupied — (406) — Installment and other consumer (58) (24) (23) Total loans charged-off (99) (441) (32) Loans recovered: Commercial and industrial 21 29 22 Real estate: Commercial, non-owner occupied 8 — — Construction — 25 33 Installment and other consumer 4 1 — Total loans recovered 33 55 55 Net loans (charged-off) recovered (66) (386) 23 Ending balance $ 30,656 $ 25,172 $ 22,983 Total loans, at amortized cost $ 2,083,256 $ 2,073,720 $ 2,092,546 Average total loans outstanding during year $ 2,074,971 $ 2,099,719 $ 2,175,259 Ratio of allowance for credit losses to total loans at end of year 1.47 % 1.21 % 1.10 % Net charge-offs (recoveries) to average loans NM 0.02 % NM NM - Not meaningful. 46 The following table shows non-performing assets as of December 31, 2024 and 2023.
December 31, 2023 Within 1 Year 1-5 Years 5-10 Years After 10 Years Total (dollars in thousands; unaudited) AmortizedCost 1 Average Yield 2 AmortizedCost 1 Average Yield 2 AmortizedCost 1 Average Yield 2 AmortizedCost 1 Average Yield 2 Amortized Cost 1 Fair Value Average Yield 2 Held-to-maturity: MBS/CMOs issued by U.S. government agencies $ — — % $ 139,418 3.41 % $ 462,010 2.23 % $ 83,757 2.1 % $ 685,185 $ 605,934 2.45 % SBA-backed securities — — 1,853 3.17 — — — — 1,853 1,763 3.17 Debentures of government-sponsored agencies — — 29,994 4.38 83,345 1.83 32,787 1.85 146,126 124,132 2.36 Obligations of state and political subdivisions - tax-exempt 3 — — 3,070 3.77 2,392 3.65 26,220 2.74 31,682 29,820 2.91 Obligations of state and political subdivisions - taxable — — — — 12,473 1.99 17,879 2.36 30,352 24,377 2.21 Corporate bonds — — 30,000 3.63 — — — — 30,000 28,804 3.63 Total held-to-maturity — — 204,335 3.59 560,220 2.17 160,643 2.19 925,198 814,830 2.48 Available-for-sale: MBS/CMOs issued by U.S. government agencies 677 1.93 261,575 2.05 116,365 2.24 13,720 3.05 392,337 352,472 2.14 SBA-backed securities — — 21,126 2.45 — — — — 21,126 19,471 2.45 Debentures of government sponsored agencies — — 64,929 1.22 8,970 1.36 — — 73,899 66,862 1.23 U.S.
Treasury securities — — 12,020 0.78 — — — — 12,020 10,815 0.78 Obligations of state and political subdivisions - tax-exempt 3 — — 3,831 0.68 43,581 2.04 40,043 2.73 87,455 76,199 2.30 Obligations of state and political subdivisions - taxable — — 2,992 1.09 5,731 1.86 — — 8,723 7,515 1.60 Corporate bonds — — 6,000 1.15 — — — — 6,000 5,649 1.15 Total available-for-sale 100,397 4.09 156,994 2.91 113,140 2.40 48,761 2.66 419,292 387,534 3.02 Total $ 149,333 3.93 % $ 375,302 3.17 % $ 583,617 2.15 % $ 190,239 2.21 % $ 1,298,491 $ 1,151,069 2.66 % 39 December 31, 2023 Within 1 Year 1-5 Years 5-10 Years After 10 Years Total (dollars in thousands; unaudited) AmortizedCost 1 Average Yield 2 AmortizedCost 1 Average Yield 2 AmortizedCost 1 Average Yield 2 AmortizedCost 1 Average Yield 2 Amortized Cost 1 Fair Value Average Yield 2 Held-to-maturity: CMBS/MBS/CMOs issued by U.S. government agencies $ — — % $ 139,418 3.41 % $ 462,010 2.23 % $ 83,757 2.1 % $ 685,185 $ 605,934 2.45 % SBA-backed securities — — 1,853 3.17 — — — — 1,853 1,763 3.17 Debentures of government-sponsored agencies — — 29,994 4.38 83,345 1.83 32,787 1.85 146,126 124,132 2.36 Obligations of state and political subdivisions - tax-exempt 3 — — 3,070 3.77 2,392 3.65 26,220 2.74 31,682 29,820 2.91 Obligations of state and political subdivisions - taxable — — — — 12,473 1.99 17,879 2.36 30,352 24,377 2.21 Corporate bonds — — 30,000 3.63 — — — — 30,000 28,804 3.63 Total held-to-maturity — — 204,335 3.59 560,220 2.17 160,643 2.19 925,198 814,830 2.48 Available-for-sale: CMBS/MBS/CMOs issued by U.S. government agencies 677 1.93 261,575 2.05 116,365 2.24 13,720 3.05 392,337 352,472 2.14 SBA-backed securities — — 21,126 2.45 — — — — 21,126 19,471 2.45 Debentures of government sponsored agencies — — 64,929 1.22 8,970 1.36 — — 73,899 66,862 1.23 U.S.
Key considerations include: • The soundness of a municipality’s budgetary position and the stability of its tax revenues • Debt profile and level of unfunded liabilities, diversity of revenue sources, taxing authority of the issuer • Local demographics and economics including unemployment data, the largest local taxpayers and employers, income indices, and home values • For revenue bonds, the source and strength of revenue for municipal authorities, including obligors' financial condition and reserve levels, annual debt service and debt coverage ratio, and credit enhancement (such as insurers' strength) • Credit ratings by major credit rating agencies Loans Loans Outstanding by Class and Percent of Total December 31, 2023 December 31, 2022 (in thousands; unaudited) Amortized Cost Percent of Total Amortized Cost Percent of Total Commercial and industrial $ 153,750 7.4 % $ 173,547 8.3 % Real estate Commercial owner-occupied 333,181 16.1 354,877 17.0 Commercial non-owner occupied 1,219,385 58.8 1,191,889 56.9 Construction 99,164 4.8 114,373 5.5 Home equity 82,087 4.0 88,748 4.2 Other residential 118,508 5.7 112,123 5.4 Installment and other consumer 67,645 3.2 56,989 2.7 Total loans, at amortized cost 2,073,720 100.0 % 2,092,546 100.0 % Allowance for credit losses on loans (25,172) (22,983) Total loans, net of allowance for credit losses $ 2,048,548 $ 2,069,563 39 Loans decreased by $18.8 million in 2023, or 1%, to $2.074 billion as of December 31, 2023, from $2.093 billion as of December 31, 2022.
Key considerations include: • The soundness of a municipality’s budgetary position and the stability of its tax revenues • Debt profile and level of unfunded liabilities, diversity of revenue sources, taxing authority of the issuer • Local demographics and economics including unemployment data, the largest local taxpayers and employers, income indices, and home values • For revenue bonds, the source and strength of revenue for municipal authorities, including obligors' financial condition and reserve levels, annual debt service and debt coverage ratio, and credit enhancement (such as insurers' strength) • Credit ratings by major credit rating agencies Loans Loans Outstanding by Class and Percent of Total December 31, 2024 December 31, 2023 (in thousands; unaudited) Amortized Cost Percent of Total Amortized Cost Percent of Total Commercial and industrial $ 152,263 7.3 % $ 153,750 7.4 % Real estate Commercial owner-occupied 321,962 15.5 333,181 16.1 Commercial non-owner occupied 1,273,596 61.1 1,219,385 58.8 Construction 36,970 1.8 99,164 4.8 Home equity 88,325 4.2 82,087 4.0 Other residential 143,207 6.9 118,508 5.7 Installment and other consumer 66,933 3.2 67,645 3.2 Total loans, at amortized cost 2,083,256 100.0 % 2,073,720 100.0 % Allowance for credit losses on loans (30,656) (25,172) Total loans, net of allowance for credit losses $ 2,052,600 $ 2,048,548 41 Loans increased by $9.5 million in 2024, or 0.5%, to $2.083 billion as of December 31, 2024, from $2.074 billion as of December 31, 2023.
For further discussion of bank capital requirements, refer to the SUPERVISION AND REGULATION section in ITEM 1 of this report. Bancorp's total risk-based capital ratio increased to 16.89% at December 31, 2023, from 15.90% at December 31, 2022.
For further discussion of bank capital requirements, refer to the SUPERVISION AND REGULATION section in ITEM 1 of this report. The total risk-based capital ratio for Bancorp was 16.54% at December 31, 2024, compared to 16.89% at December 31, 2023.
At December 31, (dollars in thousands, except per share data) 2023 2022 Selected financial condition data: Total assets $ 3,803,903 $ 4,147,464 Investment securities $ 1,477,226 $ 1,774,303 Loans, net of allowance for credit losses on loans $ 2,048,548 $ 2,069,563 Deposits $ 3,290,075 $ 3,573,348 Borrowings and other obligations $ 26,298 $ 112,439 Stockholders' equity $ 439,062 $ 412,092 Book value per share $ 27.17 $ 25.71 Asset quality ratios: Allowance for credit losses to total loans 1.21 % 1.10 % Allowance for credit losses to non-accrual loans 3.15x 9.45x Non-accrual loans to total loans 0.39 % 0.12 % Classified loans (graded substandard and doubtful) as a percentage of total loans 1.56 % 1.34 % Capital ratios: Equity to total assets 11.54 % 9.94 % Tangible common equity to tangible assets 9.73 % 8.21 % Total capital (to risk-weighted assets) 16.89 % 15.90 % Tier 1 capital (to risk-weighted assets) 15.91 % 15.02 % Tier 1 capital (to average assets) 10.46 % 9.60 % Common equity Tier 1 capital (to risk-weighted assets) 15.91 % 15.02 % Other data: Loan-to-deposit ratio 63.03 % 58.56 % Number of branches 27 31 Full-time equivalent employees 329 313 For the Years Ended December 31, (dollars in thousands, except per share data) 2023 2022 2021 Selected operating data: Net interest income $ 102,761 $ 127,492 $ 104,951 Provision for (reversal of) credit losses on loans 2,575 (63) (1,449) Reversal of credit losses on unfunded loan commitments (342) (318) (992) Non-interest income 4,989 10,905 10,132 Non-interest expense 79,481 75,269 72,638 Net income 19,895 46,586 33,228 Net income per common share: Basic $ 1.24 $ 2.93 $ 2.32 Diluted $ 1.24 $ 2.92 $ 2.30 Performance and other financial ratios: Return on average assets 0.49 % 1.08 % 0.94 % Return on average equity 4.69 % 11.16 % 8.43 % Tax-equivalent net interest margin 2.63 % 3.11 % 3.17 % Cost of deposits 0.74 % 0.06 % 0.07 % Efficiency ratio 73.76 % 54.39 % 63.12 % Net charge-offs (recoveries) $ 386 $ (23) $ (93) Net charge-offs (recoveries) to average loans 0.02 % NM NM Cash dividend payout ratio on common stock 1 80.65 % 33.45 % 40.52 % Cash dividends per common share $ 1.00 $ 0.98 $ 0.94 1 Calculated as cash dividends per common share divided by basic net income per common share.
At December 31, (dollars in thousands, except per share data) 2024 2023 Selected financial condition data: Total assets $ 3,701,335 $ 3,803,903 Investment securities $ 1,266,733 $ 1,477,226 Loans, net of allowance for credit losses on loans $ 2,052,600 $ 2,048,548 Deposits $ 3,220,015 $ 3,290,075 Borrowings and other obligations $ 154 $ 26,298 Stockholders' equity $ 435,407 $ 439,062 Book value per share $ 27.06 $ 27.17 Tangible book value per share $ 22.37 $ 22.44 Asset quality ratios: Allowance for credit losses to total loans 1.47 % 1.21 % Allowance for credit losses to non-accrual loans 0.90x 3.15x Non-accrual loans to total loans 1.63 % 0.39 % Classified loans (graded substandard and doubtful) as a percentage of total loans 2.17 % 1.56 % Capital ratios: Equity to total assets 11.76 % 11.54 % Tangible common equity to tangible assets 9.93 % 9.73 % Total capital (to risk-weighted assets) 16.54 % 16.89 % Tier 1 capital (to risk-weighted assets) 15.32 % 15.91 % Tier 1 capital (to average assets) 10.46 % 10.46 % Common equity Tier 1 capital (to risk-weighted assets) 15.32 % 15.91 % Other data: Loan-to-deposit ratio 64.70 % 63.03 % Number of branches 27 27 Full-time equivalent employees 285 329 For the Years Ended December 31, (dollars in thousands, except per share data) 2024 2023 2022 Selected operating data: Net interest income $ 94,660 $ 102,761 $ 127,492 Provision for (reversal of) credit losses on loans 5,550 2,575 (63) Reversal of credit losses on unfunded loan commitments (233) (342) (318) Non-interest income (21,360) 4,989 10,905 Non-interest expense 81,818 79,481 75,269 Net (loss) income (8,409) 19,895 46,586 Net (loss) income per common share: Basic $ (0.52) $ 1.24 $ 2.93 Diluted $ (0.52) $ 1.24 $ 2.92 Performance and other financial ratios: Return on average assets (0.22) % 0.49 % 1.08 % Return on average equity (1.93) % 4.69 % 11.16 % Tax-equivalent net interest margin 2.63 % 2.63 % 3.11 % Cost of deposits 1.41 % 0.74 % 0.06 % Cost of funds 1.42 % 1.02 % 0.07 % Efficiency ratio 111.62 % 73.76 % 54.39 % Net charge-offs (recoveries) $ 66 $ 386 $ (23) Net charge-offs (recoveries) to average loans NM 0.02 % NM Cash dividend payout ratio on common stock 1 NM 80.65 % 33.45 % Cash dividends per common share $ 1.00 $ 1.00 $ 0.98 1 Calculated as cash dividends per common share divided by basic net income per common share.
Average Statements of Condition and Analysis of Net Interest Income Year ended Year ended Year ended December 31, 2023 December 31, 2022 December 31, 2021 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 $ 42,864 $ 2,329 5.36 % $ 120,395 $ 1,407 1.15 % $ 287,626 $ 399 0.14 % Investment securities 2, 3 1,753,708 39,100 2.23 % 1,796,628 35,534 1.98 % 866,790 16,999 1.96 % Loans 1, 3, 4, 7 2,099,719 99,018 4.65 % 2,175,259 94,614 4.29 % 2,155,982 92,376 4.23 % Total interest-earning assets 1 3,896,291 140,447 3.56 % 4,092,282 131,555 3.17 % 3,310,398 109,774 3.27 % Cash and non-interest-bearing due from banks 37,868 53,534 61,299 Bank premises and equipment, net 8,348 7,400 5,964 Interest receivable and other assets, net 135,200 151,295 159,502 Total assets $ 4,077,707 $ 4,304,511 $ 3,537,163 Liabilities and Stockholders' Equity Interest-bearing transaction accounts $ 240,524 $ 1,036 0.43 % $ 294,682 $ 421 0.14 % $ 217,924 $ 172 0.08 % Savings accounts 281,611 867 0.31 % 341,710 125 0.04 % 268,397 94 0.04 % Money market accounts 1,013,620 18,553 1.83 % 1,065,104 1,589 0.15 % 864,625 1,520 0.18 % Time accounts, including CDARS 191,056 4,715 2.47 % 140,547 323 0.23 % 115,393 246 0.21 % Borrowings and other obligations 1, 6 221,623 11,562 5.15 % 2,295 91 3.90 % 892 9 1.08 % Subordinated debenture 1, 5 — — — % — — — % 534 1,361 251.54 % Total interest-bearing liabilities 1,948,434 36,733 1.89 % 1,844,338 2,549 0.14 % 1,467,765 3,402 0.23 % Demand accounts 1,656,047 1,993,373 1,628,289 Interest payable and other liabilities 49,442 49,456 46,746 Stockholders' equity 423,784 417,344 394,363 Total liabilities & stockholders' equity $ 4,077,707 $ 4,304,511 $ 3,537,163 Tax-equivalent net interest income/margin 1 $ 103,714 2.63 % $ 129,006 3.11 % $ 106,372 3.17 % Reported net interest income/margin 1 $ 102,761 2.60 % $ 127,492 3.07 % $ 104,951 3.13 % Tax-equivalent net interest rate spread 1.67 % 3.03 % 3.04 % 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.
Average Statements of Condition and Analysis of Net Interest Income Year ended Year ended Year ended December 31, 2024 December 31, 2023 December 31, 2022 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 $ 128,752 $ 6,714 5.13 % $ 42,864 $ 2,329 5.36 % $ 120,395 $ 1,407 1.15 % Investment securities 2, 3 1,361,859 33,349 2.45 % 1,753,708 39,100 2.23 % 1,796,628 35,534 1.98 % Loans 1, 3, 4, 5 2,074,971 101,912 4.83 % 2,099,719 99,018 4.65 % 2,175,259 94,614 4.29 % Total interest-earning assets 1 3,565,582 141,975 3.92 % 3,896,291 140,447 3.56 % 4,092,282 131,555 3.17 % Cash and non-interest-bearing due from banks 36,692 37,868 53,534 Bank premises and equipment, net 7,310 8,348 7,400 Interest receivable and other assets, net 164,298 135,200 151,295 Total assets $ 3,773,882 $ 4,077,707 $ 4,304,511 Liabilities and Stockholders' Equity Interest-bearing transaction accounts $ 193,456 $ 1,201 0.62 % $ 240,524 $ 1,036 0.43 % $ 294,682 $ 421 0.14 % Savings accounts 227,061 2,003 0.88 % 281,611 867 0.31 % 341,710 125 0.04 % Money market accounts 1,155,016 33,914 2.94 % 1,013,620 18,553 1.83 % 1,065,104 1,589 0.15 % Time accounts, including CDARS 262,482 9,254 3.53 % 191,056 4,715 2.47 % 140,547 323 0.23 % Borrowings and other obligations 1 4,628 241 5.13 % 221,623 11,562 5.15 % 2,295 91 3.90 % Total interest-bearing liabilities 1,842,643 46,613 2.53 % 1,948,434 36,733 1.89 % 1,844,338 2,549 0.14 % Demand accounts 1,448,346 1,656,047 1,993,373 Interest payable and other liabilities 47,823 49,442 49,456 Stockholders' equity 435,070 423,784 417,344 Total liabilities & stockholders' equity $ 3,773,882 $ 4,077,707 $ 4,304,511 Tax-equivalent net interest income/margin 1,3 $ 95,362 2.63 % $ 103,714 2.63 % $ 129,006 3.11 % Reported net interest income/margin 1 $ 94,660 2.61 % $ 102,761 2.60 % $ 127,492 3.07 % Tax-equivalent net interest rate spread 1.39 % 1.67 % 3.03 % 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.
We group our assets and liabilities that are measured at fair value into three levels within the fair value hierarchy, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.
These nonrecurring fair value adjustments typically involve write-downs of, or specific reserves against, individual assets. We group our assets and liabilities that are measured at fair value into three levels within the fair value hierarchy, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.
In 2023, the Company assessed goodwill for impairment by performing a quantitative assessment, which encompassed an income approach and a market approach.
In both 2024 and 2023, the Company assessed goodwill for impairment by performing a quantitative assessment, which encompassed an income approach and two market approaches (peer metrics and recent transactions).
In 2023, we sold $214.5 million in available-for-sale securities with an average yield of 2.35%, as part of a balance sheet restructuring, including $75.2 million in debentures of government sponsored agencies, $69.6 million in agency collateralized mortgage obligations ("CMOs"), $25.0 million in corporate bonds, $15.4 million in SBA-backed securities, $14.6 million in agency mortgage-backed securities ("MBSs"), $13.2 million in obligations of state and political subdivisions, and $1.4 million in asset-backed securities.
In 2024, we sold $325.2 million in available-for-sale securities with an average yield of 1.94%, as part of a balance sheet restructuring, including $190.5 million in agency collateralized mortgage obligations ("CMOs"), $65.0 million in debentures of government sponsored agencies, $39.8 million in agency mortgage-backed securities ("MBSs"), $18.4 million in SBA-backed securities, $6.0 million in corporate bonds and $5.5 million in obligations of state and political subdivisions.
We believe our emphasis on local deposits, combined with our immediately available funding sources, provides a very stable base for our liquidity needs.
Any outflows can be absorbed by the Bank's excess liquidity. We believe our emphasis on local deposits, combined with our immediately available funding sources, provides a very stable base for our liquidity needs.
The $8.8 million decrease in 2023 was primarily due to an $8.5 million decrease in deferred tax assets related to changes in unrealized losses on available-for-sale investment securities and an $803 thousand decrease in deferred tax assets related to state franchise tax.
The $3.7 million decrease in 2024 was primarily due to an $8.4 million decrease in deferred tax assets related to changes in unrealized losses on available-for-sale investment securities.
The following table presents the allowance for credit losses on loans by loan portfolio class in accordance with the methodology described in Note 1 to the Consolidated Financial Statements in ITEM 8 of this report, as well as the per centage of total loans in each of the same loan portfolio classes as of December 31, 2023 and 2022. 42 Allocation of the Allowance for Credit Losses (dollars in thousands; unaudited) Commercial and industrial Commercial real estate, owner-occupied Commercial real estate, non-owner occupied Construction Home equity Other residential Installment and other consumer Unallocated Total December 31, 2023 Modeled expected credit losses $ 897 $ 1,270 $ 7,380 $ 185 $ 482 $ 619 $ 634 $ — $ 11,467 Qualitative adjustments 622 1,205 6,327 1,647 70 33 342 2,038 12,284 Specific allocations 193 1 1,226 — — 1 — — 1,421 Total $ 1,712 $ 2,476 $ 14,933 $ 1,832 $ 552 $ 653 $ 976 $ 2,038 $ 25,172 Loans as a percent of total loans 7.4 % 16.1 % 58.8 % 4.8 % 4.0 % 5.7 % 3.2 % N/A 100.0 % December 31, 2022 Modeled expected credit losses $ 1,079 $ 1,497 $ 7,937 $ 453 $ 504 $ 571 $ 610 $ — $ 12,651 Qualitative adjustments 706 990 4,739 1,484 54 24 258 2,068 10,323 Specific allocations 9 — — — — — — — 9 Total $ 1,794 $ 2,487 $ 12,676 $ 1,937 $ 558 $ 595 $ 868 $ 2,068 $ 22,983 Loans as a percent of total loans 8.3 % 17.0 % 56.9 % 5.5 % 4.2 % 5.4 % 2.7 % N/A 100.0 % The table below shows the activity in the allowance for credit losses for each of the three years presented below.
The following table presents the allowance for credit losses on loans by loan portfolio class in accordance with the methodology described in Note 1 to the Consolidated Financial Statements in ITEM 8 of this report, as well as the per centage of total loans in each of the same loan portfolio classes as of December 31, 2024 and 2023. 45 Allocation of the Allowance for Credit Losses (dollars in thousands; unaudited) Commercial and industrial Commercial real estate, owner-occupied Commercial real estate, non-owner occupied Construction Home equity Other residential Installment and other consumer Unallocated Total December 31, 2024 Modeled expected credit losses $ 759 $ 1,241 $ 7,632 $ 41 $ 620 $ 1,133 $ 625 $ — $ 12,051 Qualitative adjustments 672 1,120 6,528 597 64 8 268 1,255 10,512 Specific allocations 145 — 7,933 — — — 15 — 8,093 Total $ 1,576 $ 2,361 $ 22,093 $ 638 $ 684 $ 1,141 $ 908 $ 1,255 $ 30,656 Loans as a percent of total loans 7.3 % 15.5 % 61.1 % 1.8 % 4.2 % 6.9 % 3.2 % N/A 100.0 % December 31, 2023 Modeled expected credit losses $ 897 $ 1,270 $ 7,380 $ 185 $ 482 $ 619 $ 634 $ — $ 11,467 Qualitative adjustments 622 1,205 6,327 1,647 70 33 342 2,038 12,284 Specific allocations 193 1 1,226 — — 1 — — 1,421 Total $ 1,712 $ 2,476 $ 14,933 $ 1,832 $ 552 $ 653 $ 976 $ 2,038 $ 25,172 Loans as a percent of total loans 7.4 % 16.1 % 58.8 % 4.8 % 4.0 % 5.7 % 3.2 % N/A 100.0 % The table below shows the activity in the allowance for credit losses for each of the three years presented below.
See the discussion in the section captioned “Securities May Lose Value Due to Credit Quality of the Issuers” in ITEM 1A Risk Factors above. 38 At December 31, 2023 and 2022, distribution of our investment in obligations of state and political subdivisions was as follows: December 31, 2023 December 31, 2022 (dollars in thousands; unaudited) Amortized Cost Fair Value Percent of State and Municipal Securities Amortized Cost Fair Value Percent of State and Municipal Securities Within California: General obligation bonds $ 24,191 $ 20,009 14.7 % $ 25,806 $ 20,768 14.4 % Revenue bonds 3,507 2,917 2.1 3,719 2,987 2.1 Tax allocation bonds — — — Total within California 27,698 22,926 16.8 29,525 23,755 16.5 Outside California: General obligation bonds 108,846 98,139 66.3 121,908 106,375 68.0 Revenue bonds 27,692 25,014 16.9 27,922 23,752 15.5 Total outside California 136,538 123,153 83.2 149,830 130,127 83.5 Total obligations of state and political subdivisions $ 164,236 $ 146,079 100.0 % $ 179,355 $ 153,882 100.0 % Percent of investment portfolio 10.7% 10.7% 9.6% 9.3% The portion of the portfolio outside the state of California is distributed among twelve states.
See the discussion in the section captioned “Securities May Lose Value Due to Credit Quality of the Issuers” in ITEM 1A Risk Factors above. 40 At December 31, 2024 and 2023, distribution of our investment in obligations of state and political subdivisions was as follows: December 31, 2024 December 31, 2023 (dollars in thousands; unaudited) Amortized Cost Fair Value Percent of State and Municipal Securities Amortized Cost Fair Value Percent of State and Municipal Securities Within California: General obligation bonds $ 22,913 $ 18,749 14.5 % $ 24,191 $ 20,009 14.7 % Revenue bonds 2,060 1,658 1.3 3,507 2,917 2.1 Tax allocation bonds — — — — — — Total within California 24,973 20,407 15.8 27,698 22,926 16.8 Outside California: General obligation bonds 108,037 94,748 68.5 108,846 98,139 66.3 Revenue bonds 24,728 21,778 15.7 27,692 25,014 16.9 Total outside California 132,765 116,526 84.2 136,538 123,153 83.2 Total obligations of state and political subdivisions $ 157,738 $ 136,933 100.0 % $ 164,236 $ 146,079 100.0 % Percent of investment portfolio 12.2% 11.9% 10.7% 10.7% The portion of the portfolio outside the state of California is distributed among twelve states.
T he decrease in 2023 was primarily du e to $22.2 million in payoffs and $16.9 million in conversions to commercial real estate financing. These decreases were partially offset by $24.5 million in advances on existing construction loans. The decrease in 2022 was primarily due to $46.6 million in payoffs and $3.6 million in conversions to commercial real estate financing.
The decrease in 2023 was primarily due to $22.2 million in payoffs and $16.9 million in conversions to commercial real estate financing. These decreases were partially offset by $24.5 million in advances on existing construction loans. Undisbursed construction loan commitments at December 31, 2024 and 2023 were $8.3 million and $13.9 million, respectively.
For the year ended December 31, 2023 2022 (in thousands; unaudited) Average Amount Percent of Total Average Amount Percent of Total Non-interest bearing $ 1,656,047 49.0 % $ 1,993,373 52.0 % Interest-bearing transaction 240,524 7.1 294,682 7.7 Savings 281,611 8.3 341,710 8.9 Money market 1 1,013,620 30.0 1,065,104 27.8 Time deposits, including CDARS 191,056 5.6 140,547 3.6 Total average deposits $ 3,382,858 100.0 % $ 3,835,416 100.0 % 1 Money market balances include Insured Cash Sweep ® ("ICS") in both 2023 and 2022.
For the year ended December 31, 2024 2023 (in thousands; unaudited) Average Amount Percent of Total Average Amount Percent of Total Non-interest bearing $ 1,448,346 44.1 % $ 1,656,047 49.0 % Interest-bearing transaction 193,456 5.9 240,524 7.1 Savings 227,061 6.9 281,611 8.3 Money market 1 1,155,016 35.1 1,013,620 30.0 Time deposits, including CDARS 262,482 8.0 191,056 5.6 Total average deposits $ 3,286,361 100.0 % $ 3,382,858 100.0 % 1 Money market balances include Insured Cash Sweep ® ("ICS") in both 2024 and 2023.
Available-for-sale securities and interest rate swap agreements are financial instruments recorded at fair value on a recurring basis. Additionally, we record at fair value other financial assets on a nonrecurring basis, such as collateral dependent loans and other real estate owned. These nonrecurring fair value adjustments typically involve write-downs of, or specific reserves against, individual assets.
Fair Value Measurements We use fair value measurements to record certain financial instruments and to determine fair value disclosures. Available-for-sale securities and interest rate swap agreements are financial instruments recorded at fair value on a recurring basis. Additionally, we record at fair value other financial assets on a nonrecurring basis, such as collateral dependent loans and other real estate owned.
Estimated uninsured and/or uncollateralized deposits comprised 28% of total deposits as of December 31, 2023. 29 • Total borrowings decreased by $86.0 million to $26.0 million, compared to $112.0 million at December 31, 2022, as part of the strategic balance sheet restructuring in 2023.
Estimated uninsured and/or uncollateralized deposits comprised 29% of total deposits as of December 31, 2024. • At December 31, 2024, the Bank had no outstanding borrowings compared to $26.0 million at December 31, 2023, as a result of our strategic balance sheet restructuring in 2023 and 2024.
Therefore, no valuation allowance was established as of December 31, 2023 or 2022. For additional information, refer to Note 11 to the Consolidated Financial Statements in ITEM 8 of this report. We held $16.7 million of FHLB stock recorded at cost in other assets at both December 31, 2023 and 2022.
We held $16.7 million of FHLB stock recorded at cost in other assets at both December 31, 2024 and 2023. We received $1.5 million, $1.3 million and $1.0 million in cash dividends in 2024, 2023 and 2022, respectively. For additional information, refer to Note 2 to the Consolidated Financial Statements in ITEM 8 of this report.
Construction Loans Outstanding by Type and County (dollars in thousands; unaudited) December 31, 2023 December 31, 2022 Loan Type Amount Percent of Construction Loans Amount Percent of Construction Loans Apartments and multifamily $ 45,390 45.8 % $ 60,347 52.7 % Commercial real estate 26,042 26.3 33,746 29.5 1-4 Single family residential 26,666 26.9 19,171 16.8 Land - unimproved 1,066 1.0 1,109 1.0 Total $ 99,164 100.0 % $ 114,373 100.0 % (dollars in thousands; unaudited) December 31, 2023 December 31, 2022 County Amount Percent of Construction Loans Amount Percent of Construction Loans San Francisco $ 43,341 43.7 % $ 45,271 39.6 % Alameda 32,808 33.1 20,163 17.6 Solano 11,372 11.5 18,873 16.5 San Mateo 4,851 4.9 4,409 3.9 Marin 4,542 4.6 7,784 6.8 Other 2,250 2.2 17,873 15.6 Total $ 99,164 100.0 % $ 114,373 100.0 % Cons truction loans decreased by $15.2 million in 2023, compared to a decrease of $5.5 million in 2022.
Construction Loans Outstanding by Type and County (dollars in thousands; unaudited) December 31, 2024 December 31, 2023 Loan Type Amount Percent of Construction Loans Amount Percent of Construction Loans Apartments and multifamily $ 19,057 51.5 % $ 45,390 45.8 % Commercial real estate 2,261 6.1 26,042 26.3 1-4 Single family residential 15,652 42.4 26,666 26.9 Land - unimproved — — 1,066 1.0 Total $ 36,970 100.0 % $ 99,164 100.0 % 43 (dollars in thousands; unaudited) December 31, 2024 December 31, 2023 County Amount Percent of Construction Loans Amount Percent of Construction Loans San Francisco $ 24,706 66.8 % $ 43,341 43.7 % Contra Costa 4,682 12.7 1,184 1.2 Marin 2,995 8.1 4,542 4.6 Napa 2,326 6.3 — — Placer 2,261 6.1 — — Alameda — — 32,808 33.1 Solano — — 11,372 11.5 San Mateo — — 4,851 4.9 Other — 1,066 1.0 Total $ 36,970 100.0 % $ 99,164 100.0 % Cons truction loans decreased by $62.2 million in 2024, compared to a decrease of $15.2 million in 2023.
The 300 basis point decrease in the effective tax rate in 2023, as compared to 2022, was primarily due to a larger proportional effect of permanent tax differences on lower pretax income and higher tax-exempt BOLI income.
The 300 basis point decrease from 2022 to 2023 was primarily due to a larger proportional effect of permanent tax differences on lower pretax income and higher tax-exempt BOLI income. This decrease was partially offset by a reduction in the tax-exempt interest exclusion (due to a larger IRC Section 291(e) interest expense disallowance), compared to 2022.
We expect to fund these commitments to the extent utilized primarily through the repayment of existing loans, principal paydowns of investment securities, and liquid assets. Over the next twelve months, $233.7 million of time deposits will mature. We expect to replace these funds with new deposits or excess liquidity.
We expect to fund these commitments to the extent utilized primarily through the repayment of existing loans, principal paydowns of investment securities, and liquid assets. Over the next twelve months, $230.2 million of time deposits will mature. We expect that a high percentage of these funds will remain with the Bank either through renewals or shifts to other deposit products.
Refer to the Consolidated Statement of Cash Flows in this Form 10-K for additional information on our sources and uses of liquidity.
Additionally other uses included $16.2 million in cash dividends paid on common stock to our shareholders, and $4.2 million in common stock repurchases. Refer to the Consolidated Statement of Cash Flows in this Form 10-K for additional information on our sources and uses of liquidity.
The most significant sources of liquidity during 2023 were proceeds from principal paydowns, maturities and sales of investment securities totaling $315.1 million, and proceeds from loans collected net of originations totaling $16.9 million. In addition, $35.7 million in net cash was provided by operating activities.
The most significant sources of liquidity during 2024 were proceeds from sales, principal paydowns, calls and maturities of investment securities totaling $370.4 million, and $28.4 million in net cash was provided by operating activities.
The provision for income taxes totaled $6.1 million at an effective tax rate of 23.6% in 2023, compared to $16.9 million at an effective tax rate of 26.6% in 2022 and $11.7 million at an effective tax rate of 26.0% in 2021. The decrease in the provision for income taxes in 2023, as compared to 2022, reflected lower pre-tax income.
The benefit for income taxes totaled $5.4 million at an effective tax rate of 39.2% in 2024, compared to the provision of $6.1 million at an effective tax rate of 23.6% in 2023 and $16.9 million at an effective tax rate of 26.6% in 2022.
Costs associated with network deposits are recorded as non-interest expense and totaled $2.8 million, $258 thousand, and $26 thousand for the years ended December 31, 2023, 2022 and 2021, respectively.
Balances in the reciprocal deposit network program decreased by $19.3 million during 2024 to $404.7 million as of December 31, 2024. Costs associated with network deposits are recorded as non-interest expense and totaled $3.5 million, $2.8 million, and $258 thousand for the years ended December 31, 2023, 2022 and 2021, respectively.
At December 31, 2023 and 2022, our aggregate payment obligations under both plans totaled $6.6 million and $7.1 million, respectively, and was recorded in interest payable and other liabilities in the consolidated statements of condition.
At December 31, 2024 and 2023, our aggregate payment obligations under both plans totaled $6.0 million and $6.6 million, respectively, and was recorded in interest payable and other liabilities in the consolidated statements of condition. Decreases in the deferred compensation plans in 2024 mainly resulted from increases in benefit payments to terminated employees.
For information regarding critical estimates related to our allowance for credit losses methodology, the provision for credit losses, and risks to asset quality and lending activity, see ITEM 1A - Risk Factors, the Allowance for Credit Losses section in ITEM 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations, Fair Value Measurements We use fair value measurements to record certain financial instruments and to determine fair value disclosures.
For information regarding critical estimates related to our allowance for credit losses methodology, the provision for credit losses, and risks to asset quality and lending activity, see ITEM 1A - Risk Factors, the Allowance for Credit Losses section in ITEM 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations, and Note 3 - Loans and Allowance for Credit Losses on Loans in ITEM 8 - Financial Statements and Supplementary Data of this Form 10-K.
Our allowance model is particularly sensitive to forecasted and seasonally-adjusted actual California unemployment rates, which increased to 5.1% at December 31, 2023, from 4.1% at December 31, 2022. The ACL model incorporates a one-year forecast. For periods beyond the forecast horizon, the economic factors revert to historical averages on a straight-line basis over a one-year period.
Our allowance model is particularly sensitive to forecasted and seasonally-adjusted actual California unemployment rates, which increased to 5.5% at December 31, 2024, from 5.1% a t December 31, 2023. The ACL model incorporates a one-year forecast.
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 the 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 AMRB that were redeemed on August 25, 2021. 7 Net loan origination (costs) fees included in interest income totaled $(1.3) million, $1.1 million, and $7.0 million in 2023, 2022, and 2021, respectively. 31 Analysis of Changes in Net Interest Income The following table presents the effects of changes in average balances (volume) or changes in average rates on tax-equivalent net interest income for the years indicated.
The amortized portion of net loan origination fees is included in interest income on loans, representing an adjustment to the yield. 5 Net loan origination (costs) fees included in interest income totaled $(1.6) million, $(1.3) million, and $1.1 million in 2024, 2023, and 2022, respectively. 33 Analysis of Changes in Net Interest Income The following table presents the effects of changes in average balances (volume) or changes in average rates on tax-equivalent net interest income for the years indicated.
Mix variances are attributable to the change in yields or rates multiplied by the change in average balances. 2023 compared to 2022 2022 compared to 2021 (in thousands, unaudited) Volume Yield/Rate Mix Total Volume Yield/Rate Mix Total Interest-earning deposits with banks $ (906) $ 5,135 $ (3,307) $ 922 $ (233) $ 2,961 $ (1,720) $ 1,008 Investment securities 1 (849) 4,523 (108) 3,566 18,233 146 156 18,535 Loans 1 (3,286) 7,966 (276) 4,404 826 1,401 11 2,238 Total interest-earning assets (5,041) 17,624 (3,691) 8,892 18,826 4,508 (1,553) 21,781 Interest-bearing transaction accounts (77) 848 (156) 615 61 139 49 249 Savings accounts (22) 926 (162) 742 26 5 — 31 Money market accounts (77) 17,906 (865) 16,964 352 (229) (54) 69 Time accounts, including CDARS 116 3,146 1,130 4,392 54 19 4 77 Borrowings and other obligations 8,697 29 2,745 11,471 16 25 41 82 Subordinated debenture — — — — (1,361) — (1,361) Total interest-bearing liabilities 8,637 22,855 2,692 34,184 509 (1,402) 40 (853) Tax-equivalent net interest income $ (13,678) $ (5,231) $ (6,383) $ (25,292) $ 18,317 $ 5,910 $ (1,593) $ 22,634 1 Yields and interest income on tax-exempt securities and loans are presented on a taxable-equivalent basis using the federal statutory rate of 21%. 2023 Compared to 2022 Net interest income totaled $102.8 million in 2023, compared to $127.5 million in 2022.
Mix variances are attributable to the change in yields or rates multiplied by the change in average balances including one day more in the year ended 2024. 2024 compared to 2023 2023 compared to 2022 (in thousands, unaudited) Volume Yield/Rate Mix Total Volume Yield/Rate Mix Total Interest-earning deposits with banks $ 4,667 $ (100) $ (182) $ 4,385 $ (906) $ 5,135 $ (3,307) $ 922 Investment securities 1 (8,737) 3,845 (859) (5,751) (849) 4,523 (108) 3,566 Loans 1 (1,167) 3,828 233 2,894 (3,286) 7,966 (276) 4,404 Total interest-earning assets (5,237) 7,573 (808) 1,528 (5,041) 17,624 (3,691) 8,892 Interest-bearing transaction accounts (203) 453 (85) 165 (77) 848 (156) 615 Savings accounts (168) 1,610 (306) 1,136 (22) 926 (162) 742 Money market accounts 2,588 11,128 1,645 15,361 (77) 17,906 (865) 16,964 Time accounts, including CDARS 1,763 2,002 774 4,539 116 3,146 1,130 4,392 Borrowings and other obligations (11,321) (50) 50 (11,321) 8,697 29 2,745 11,471 Total interest-bearing liabilities (7,341) 15,143 2,078 9,880 8,637 22,855 2,692 34,184 Tax-equivalent net interest income $ 2,104 $ (7,570) $ (2,886) $ (8,352) $ (13,678) $ (5,231) $ (6,383) $ (25,292) 1 Yields and interest income on tax-exempt securities and loans are presented on a taxable-equivalent basis using the federal statutory rate of 21%. 2024 Compared to 2023 Net interest income totaled $94.7 million in 2024, compared to $102.8 million in 2023.
Non-Performing Assets (dollars in thousands; unaudited) December 31, 2023 December 31, 2022 Non-accrual loans: Commercial and industrial $ 4,008 $ — Real estate: Commercial, owner-occupied 434 1,563 Commercial, non-owner occupied 3,081 — Home equity 469 778 Installment and other consumer — 91 Total non-accrual loans $ 7,992 $ 2,432 Other real estate owned $ — $ 455 Total non-performing assets $ 7,992 $ 2,887 Criticized and classified loans: Special mention $ 135,171 $ 60,207 Substandard $ 32,324 $ 28,010 Doubtful $ — $ 99 Allowance for credit losses to non-accrual loans 3.15x 9.45x Non-accrual loans to total loans 0.39 % 0.12 % Non-performing assets to total assets 0.21 % 0.07 % Non-Accrual Loans Non-accrual loans increased by $5.6 million in 2023, primarily due to $7.6 million in loans designated as non-accrual in 2023 comprised mostly of commercial and industrial and non-owner occupied commercial real estate loans.
Non-Performing Assets (dollars in thousands; unaudited) December 31, 2024 December 31, 2023 Non-accrual loans: Commercial and industrial $ 2,845 $ 4,008 Real estate: Commercial, owner-occupied 1,537 434 Commercial, non-owner occupied 28,525 3,081 Home equity 752 469 Installment and other consumer 222 — Total non-accrual loans $ 33,881 $ 7,992 Other real estate owned $ — $ — Repossessed personal properties 1 — Total non-performing assets $ 33,882 $ 7,992 Criticized and classified loans: Special mention $ 108,916 $ 135,171 Substandard $ 45,104 $ 32,324 Doubtful $ — $ — Allowance for credit losses to non-accrual loans 0.90x 3.15x Non-accrual loans to total loans 1.63 % 0.39 % Non-performing assets to total assets 0.92 % 0.21 % Non-Accrual Loans Non-accrual loans increased by $25.9 million in 2024, primarily due to three relationships designated as non-accrual in the second and third quarters.
Over 96% of the non-accrual loans as of December 31, 2022 were well-secured by either commercial or residential real estate. Criticized and Classified Loans Loans designated as special mention, which are not considered adversely classified, increased by $75.0 million in 2023, primarily due to downgrades from the watch category to special mention.
Loans designated as special mention, which are not considered adversely classified, increased by $75.0 million in 2023, primarily due to downgrades from the watch category to special mention.
Estimated uninsured and/or uncollateralized deposits decreased to 28% of total deposits as of December 31, 2023, compared to 39% as of December 31, 2022, due primarily to our customers' increased usage of the reciprocal deposit network program, as noted above. Our liquidity policies require that compensating cash balances be held against concentrations over a certain level.
Estimated uninsured and/or uncollateralized deposits totaled 29% of total deposits as of December 31, 2024, compared to 28% as of December 31, 202 3. 48 Our liquidity policies require that compensating cash balances be held against concentrations over a certain level.
These reversals were partially offset by an increase in the allowance for credit losses related to qualitative risk factor adjustments for recent changes in executive leadership and senior lending positions, and integration of loans from the merger with AMRB. 33 Non-interest Income The table below details the components of non-interest income. 2023 compared to 2022 2022 compared to 2021 Years ended December 31, Amount Increase (Decrease) Percent Increase (Decrease) Amount Increase (Decrease) Percent Increase (Decrease) (dollars in thousands; unaudited) 2023 2022 2021 Wealth management and trust services $ 2,145 $ 2,227 $ 2,222 $ (82) (3.7) % $ 5 0.2 % Service charges on deposit accounts 2,083 2,007 1,593 76 3.8 % 414 26.0 % Debit card interchange fees, net 1,831 2,051 1,812 (220) (10.7) % 239 13.2 % Earnings on bank-owned life insurance, net 1,802 1,229 2,194 573 46.6 % (965) (44.0) % Dividends on Federal Home Loan Bank stock 1,265 1,056 760 209 19.8 % 296 38.9 % Merchant interchange fees, net 496 549 422 (53) (9.7) % 127 30.1 % Losses on sale of investment securities, net (5,893) (63) (16) (5,830) 9,254.0 % (47) 293.8 % Other income 1,260 1,849 1,145 (589) (31.9) % 704 61.5 % Total non-interest income $ 4,989 $ 10,905 $ 10,132 $ (5,916) (54.3) % $ 773 7.6 % 2023 Compared to 2022 Non-interest income totaled $5.0 million in 2023, a $5.9 million decrease from $10.9 million in 2022.
These decreas es were partially offset by adjustments to qualitative risk factors to account for the ongoing deterioration in the economic outlook that management believed was not captured in the quantitative portion of the allowance calculation. 35 Non-interest Income The table below details the components of non-interest income. 2024 compared to 2023 2023 compared to 2022 Years ended December 31, Amount Increase (Decrease) Percent Increase (Decrease) Amount Increase (Decrease) Percent Increase (Decrease) (dollars in thousands; unaudited) 2024 2023 2022 Wealth management and trust services $ 2,420 $ 2,145 $ 2,227 $ 275 12.8 % $ (82) (3.7) % Service charges on deposit accounts 2,164 2,083 2,007 81 3.9 % 76 3.8 % Earnings on bank-owned life insurance, net 1,714 1,802 1,229 (88) (4.9) % 573 46.6 % Debit card interchange fees, net 1,701 1,831 2,051 (130) (7.1) % (220) (10.7) % Dividends on Federal Home Loan Bank stock 1,478 1,265 1,056 213 16.8 % 209 19.8 % Merchant interchange fees, net 324 496 549 (172) (34.7) % (53) (9.7) % Losses on sale of investment securities, net (32,541) (5,893) (63) (26,648) 452.2 % (5,830) 9,254.0 % Other income 1,380 1,260 1,849 120 9.5 % (589) (31.9) % Total non-interest income $ (21,360) $ 4,989 $ 10,905 $ (26,349) (528.1) % $ (5,916) (54.3) % 2024 Compared to 2023 Non-interest income showed a loss of $21.4 million for 2024, a $26.3 million decrease from income of $5.0 million for 2023.
Non-interest bearing deposits declined to 43.8% of total deposits at December 31, 2023, compared to 51.5% at December 31, 2022.
Deposits Deposits decreased by $70.1 million, to $3.220 billion at December 31, 2024, compared to $3.290 billion at December 31, 2023. Non-interest bearing deposits declined to 43.5% of total deposits at December 31, 2024, compared to 43.8% at December 31, 2023.
Our anticipated sources of capital in 2024 include future earnings and shares issued under the stock-based compensation program. 47 Liquidity and Capital Resources The goal of liquidity management is to provide adequate funds to meet loan demand and fund operating activities and deposit withdrawals.
Liquidity and Capital Resources The goal of liquidity management is to provide adequate funds to meet loan demand and to fund operating activities and deposit withdrawals.
The amortized cost of our investment securities portfolio decreased by $326.1 million, or 17.5%, in 2023.
The amortized cost of our investment securities portfolio decreased by $240.2 million, or 15.6%, in 2024.
Commercial Real Estate Loans Outstanding by County (dollars in thousands; unaudited) December 31, 2023 December 31, 2022 County Amount Percent of Commercial Real Estate Loans Amount Percent of Commercial Real Estate Loans Marin $ 317,862 20.5 % $ 339,805 22.0 % Sonoma 256,516 16.5 245,883 15.9 San Francisco 186,803 12.0 173,511 11.2 Napa 178,685 11.5 186,477 12.1 Alameda 156,934 10.1 163,381 10.6 Sacramento 125,483 8.1 120,146 7.8 Contra Costa 72,580 4.7 67,356 4.4 Placer 40,733 2.6 28,928 1.9 Solano 39,247 2.5 32,235 2.1 San Mateo 35,420 2.3 37,681 2.4 Santa Clara 24,086 1.6 21,091 1.4 San Joaquin 15,261 1.0 15,585 1.0 El Dorado 11,257 0.7 12,822 0.8 Other 91,699 5.9 101,865 6.4 Total $ 1,552,566 100.0 % $ 1,546,766 100.0 % Commercial real estate loans increased by $5.8 million in 2023, compared to a $34.6 million decrease in 2022.
Commercial Real Estate Loans Outstanding by County (dollars in thousands; unaudited) December 31, 2024 December 31, 2023 County Amount Percent of Commercial Real Estate Loans Amount Percent of Commercial Real Estate Loans Marin $ 303,255 19 % $ 317,862 20 % Sonoma 245,510 15 256,516 16 San Francisco 211,254 13 186,803 12 Alameda 187,526 12 156,934 10 Napa 170,492 11 178,685 12 Sacramento 131,857 8 125,483 8 Contra Costa 75,522 5 72,580 5 Solano 52,294 3 39,247 2 Placer 41,951 2 40,733 3 San Mateo 41,275 2 35,420 2 Santa Clara 23,610 2 24,086 2 San Joaquin 14,933 1 15,261 1 El Dorado 8,460 1 11,257 1 Other 87,619 6 91,699 6 Total $ 1,595,558 100 % $ 1,552,566 100 % Commercial real estate loans increased by $43.0 million in 2024, compared to a $5.8 million increase in 2023.
Additionally, 2022 incorporated a full year of non-interest income from the AMRB acquisition, compared to five months in 2021. 34 Non-interest Expense The table below details the components of non-interest expense. 2023 compared to 2022 2022 compared to 2021 Years ended December 31, Amount Increase (Decrease) Percent Increase (Decrease) Amount Increase (Decrease) Percent Increase (Decrease) (dollars in thousands; unaudited) 2023 2022 2021 Salaries and employee benefits $ 43,448 $ 42,046 $ 41,939 $ 1,402 3.3 % $ 107 0.3 % Occupancy and equipment 8,306 7,823 7,297 483 6.2 % 526 7.2 % Data processing 4,057 4,649 5,139 (592) (12.7) % (490) (9.5) % Professional services 3,598 3,299 4,974 299 9.1 % (1,675) (33.7) % Deposit network fees 2,783 258 26 2,525 978.7 % 232 892.3 % Depreciation and amortization 2,098 1,840 1,740 258 14.0 % 100 5.7 % Federal Deposit Insurance Corporation insurance 1,878 1,179 889 699 59.3 % 290 32.6 % Information technology 1,569 2,197 1,550 (628) (28.6) % 647 41.7 % Amortization of core deposit intangible 1,350 1,489 1,135 (139) (9.3) % 354 31.2 % Directors' expense 1,212 1,107 957 105 9.5 % 150 15.7 % Charitable contributions 717 709 587 8 1.1 % 122 20.8 % Other real estate owned 48 359 5 (311) (86.6) % 354 NM Other non-interest expense: Advertising 1,244 1,070 908 174 16.3 % 162 17.8 % Other expense 7,173 7,244 5,492 (71) (1.0) % 1,752 31.9 % Total other non-interest expense 8,417 8,314 6,400 103 1.2 % 1,914 29.9 % Total non-interest expense $ 79,481 $ 75,269 $ 72,638 $ 4,212 5.6 % $ 2,631 3.6 % NM - not meaningful 2023 Compared to 2022 Non-interest expenses increased $4.2 million to $79.5 million in 2023 from $75.3 million in 2022.
Decreases were partially offset by $573 thousand higher benefit payments from and earnings on bank-owned life insurance, and $209 thousand from increases in dividends on Federal Home Loan Bank stock. 36 Non-interest Expense The table below details the components of non-interest expense. 2024 compared to 2023 2023 compared to 2022 Years ended December 31, Amount Increase (Decrease) Percent Increase (Decrease) Amount Increase (Decrease) Percent Increase (Decrease) (dollars in thousands; unaudited) 2024 2023 2022 Salaries and employee benefits $ 44,683 $ 43,448 $ 42,046 $ 1,235 2.8 % $ 1,402 3.3 % Occupancy and equipment 8,242 8,306 7,823 (64) (0.8) % 483 6.2 % Professional services 5,129 3,598 3,299 1,531 42.6 % 299 9.1 % Data processing 4,222 4,057 4,649 165 4.1 % (592) (12.7) % Deposit network fees 3,526 2,783 258 743 26.7 % 2,525 978.7 % Federal Deposit Insurance Corporation insurance 1,863 1,878 1,179 (15) (0.8) % 699 59.3 % Information technology 1,686 1,569 2,197 117 7.5 % (628) (28.6) % Depreciation and amortization 1,466 2,098 1,840 (632) (30.1) % 258 14.0 % Directors' expense 1,213 1,212 1,107 1 0.1 % 105 9.5 % Amortization of core deposit intangible 975 1,350 1,489 (375) (27.8) % (139) (9.3) % Charitable contributions 677 717 709 (40) (5.6) % 8 1.1 % Other real estate owned — 48 359 (48) (100.0) % (311) (86.6) % Other non-interest expense: Advertising 1,090 1,244 1,070 (154) (12.4) % 174 16.3 % Other expense 7,046 7,173 7,244 (127) (1.8) % (71) (1.0) % Total other non-interest expense 8,136 8,417 8,314 (281) (3.3) % 103 1.2 % Total non-interest expense $ 81,818 $ 79,481 $ 75,269 $ 2,337 2.9 % $ 4,212 5.6 % 2024 Compared to 2023 Non-interest expenses increased $2.3 million to $81.8 million in 2024 from $79.5 million in 2023.
The large majority of variable-rate loans are tied to independent indices, such as the Prime Rate or a Treasury Constant Maturity Rate. Most loans with original terms of more than five years have provisions for the fixed rates to reset, or convert to variable rates, after three, five or seven years. These loans are included in the variable-rate balances below.
Most loans with original terms of more than five years have provisions for the fixed rates to reset, or convert to variable rates, after three, five or seven years.
(in thousands) Total Available Amount Used Net Availability Internal Sources Unrestricted cash 1 $ 13,536 N/A $ 13,536 Unencumbered securities at market value 501,672 N/A 501,672 External Sources FHLB line of credit 1,009,044 $ — 1,009,044 FRB line of credit and BTFP facility 334,192 (26,000) 308,192 Lines of credit at correspondent banks 135,000 — 135,000 Total Liquidity $ 1,993,444 $ (26,000) $ 1,967,444 1 Excludes cash items in transit as of December 31, 2023.
(in thousands) Total Available Amount Used Net Availability Internal Sources Unrestricted cash 1 $ 111,128 N/A $ 111.128 Unencumbered securities at market value 306,773 N/A 306.773 External Sources FHLB line of credit 948,127 $ — 948.127 FRB line of credit 357,970 — 357.97 Lines of credit at correspondent banks 125,000 — 125 Total Liquidity $ 1,848.998 $ — $ 1,848.998 1 Excludes cash items in transit as of December 31, 2024.
NM - Not meaningful. 28 Executive Summary Annual earnings were $19.9 million in 2023, compared to $46.6 million in 2022. Diluted earnings were $1.24 per share in 2023, compared to $2.92 per share in 2022.
NM - Not meaningful. 30 Executive Summary Our annual loss was $8.4 million in 2024, compared to earnings of $19.9 million in 2023. Diluted loss was $(0.52) per share in 2024, compared to earnings of $1.24 per share in 2023.
Bancorp's tangible common equity to tangible assets ("TCE ratio") increased to 9.73% at December 31, 2023, from 8.21% at December 31, 2022, primarily due to a decrease in unrealized losses on available-for-sale securities and a decrease in tangible assets.
The reduction is primarily related to losses realized on securities sales in 2024. 50 Bancorp's tangible common equity to tangible assets ("TCE ratio") increased to 9.93% at December 31, 2024, from 9.73% at December 31, 2023, primarily due to due to the reduction in total assets .

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe above tables reflect deposit betas of up to 68%, averaging 40%, to rates paid on non-maturity interest-bearing deposits in rising rate scenarios and deposit betas of up to 60%, averaging 34%, to rates paid on non-maturity interest-bearing deposits in falling rate scenarios.
Biggest changeDeposit betas of up to 60%, averaging 35%, are applied to rates paid on non- 54 maturity interest-bearing deposits in falling rate scenarios with a two month lag assumed. However, deposit pricing is actively managed at the relationship level and closely monitored real-time to avoid unintended consequences.
Immediate Changes in Interest Rates (in basis points) Estimated Change in Net Interest Income in Year 1, as Percent of Net Interest Income Estimated Change in Net Interest Income in Year 2, as Percent of Net Interest Income up 400 (10.8) % 0.7 % up 300 (7.9) % 0.7 % up 200 (5.1) % 0.7 % up 100 (2.3) % 0.6 % down 100 0.6 % (0.9) % down 200 2.5 % 0.9 % down 300 4.4 % 2.6 % down 400 7.0 % 4.6 % Interest rate sensitivity is a function of the repricing characteristics of our assets and liabilities.
Immediate Changes in Interest Rates (in basis points) Estimated Change in Net Interest Income in Year 1, as Percent of Net Interest Income Estimated Change in Net Interest Income in Year 2, as Percent of Net Interest Income up 400 (7.3) % 6.3 % up 300 (5.3) % 4.8 % up 200 (3.3) % 3.4 % up 100 (1.7) % 1.5 % down 100 1.0 % 0.9 % down 200 2.3 % 2.6 % down 300 2.2 % 0.9 % down 400 1.8 % 2.6 % Interest rate sensitivity is a function of the repricing characteristics of our assets and liabilities.
The actual rates 50 and timing of prepayments on loans and investment securities could vary significantly from the assumptions applied in the various scenarios. Lastly, uneven changes in different tenors of U.S. Treasury rates that result in changes to the shape of the yield curve could produce different results from those presented in the table.
The actual rates and timing of prepayments on loans and investment securities could vary significantly from the assumptions applied in the various scenarios. Lastly, uneven changes in different tenors of U.S. Treasury rates that result in changes to the shape of the yield curve could produce different results from those presented in the table.
The Bank runs a combination of scenarios and sensitivities in its attempt to capture the range of interest rate risk including the simulations mentioned above. As with any simulation model or other method of measuring interest rate risk, limitations are inherent in the process and dependent on assumptions.
The Bank runs a combination of scenarios and sensitivities in its attempt to capture the range of interest rate risk including the simulations mentioned above. As with any simulation model or other method of measuring interest rate risk, limitations are inherent in the process and results are dependent on assumptions.
Accordingly, the results presented should not be relied upon as indicative of actual results in the event of changing market interest rates.
Accordingly, the results presented should not be relied upon as indicative of actual results in the event of changing market interest rates. 55
Governing policies are subject to review by regulators and are updated to incorporate their observations and adapt to changes in idiosyncratic and systemic risks. As of December 31, 2023, interest rate risk was within the policy guidelines established by ALCO and the Board.
Governing policies are subject to review by regulators and are updated to incorporate their observations and adapt to changes in idiosyncratic and systemic risks. As of December 31, 2024, interest rate risk was within the policy guidelines established by ALCO and the Board.
Important deposit modeling assumptions include the speed of deposit run-off and the amount by which interest-bearing deposit rates increase or decrease when market interest rates change, otherwise known as the deposit beta.
Important deposit modeling assumptions include the speed of deposit run-off and the amount by which interest-bearing deposit rates increase or decrease when market interest rates change, otherwise known as the deposit beta. The above tables reflect deposit betas of up to 70%, averaging 43%, to rates paid on non-maturity interest-bearing deposits in rising rate scenarios.

Other BMRC 10-K year-over-year comparisons