Bank of Marin Bancorp (BMRC) 2013年年度報告「NASDAQ」.pdf

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1、504 redwood boulevard,suite 100novato,california 94947415.763.4520s a n f r a n c i s c o|m a r i n|s o n o m a|n a p a|a l a m e d aw w w.b a n k o f m a r i n.c o mstrength through growth2013 Annual Reportpersonal bankingDeveloping personal relationships and providing legendary service to our cust

2、omers is our way of doing business.Personal Checking&Savings Teen Checking&Savings Online Banking,eStatements&Telephone Banking Credit Cards Mobile Banking&Mobile Check Depositsbusiness bankingOur experienced team provides ongoing business guidance and creative financing solutions for any size busin

3、ess.Business Account Management Remote Deposit&Image Lockbox Fraud Protection Products Merchant Services&Credit Cards Mobile Banking&Mobile Check Deposits International ServiceslendingOur expert local lenders provide flexible,customized financing tailored to our customers personal or business needs.

4、Home Equity Loans&Lines of Credit Commercial Loans&Lines of Credit Construction&Commercial Real Estate Loans Wine Industry Loans Asset Based Loanswealth management&trustDelivering extraordinary service,backed by integrity and accountability,we provide professional guidance,customized financing,and f

5、inancial solutions to manage the most complex banking needs.Investment Management Trust Services Retirement Benefits PlanAt Bank of Marin,we develop trusting,personal relationships with our customers,taking time to understand their needs and how they operate their businesses.An integral part of Bank

6、 of Marin is our dedication and support of our local communities.Committed to Your Business and Our Community(dollars in thousands,except per share data)20132012201120102009At December 31,Total assets$1,805,194$1,434,749$1,393,263$1,208,150$1,121,672 Total loans 1,269,322 1,073,952 1,031,154 941,400

7、 917,748Total deposits 1,587,102 1,253,289 1,202,972 1,015,739 944,061Total stockholders equity180,887151,792135,551121,920 109,051 Equity-to-asset ratio10.0%10.6%9.7%10.1%9.7%For the Year Ended December 31,Net income$14,270$17,817$15,564$13,552$12,765 Net income per share(diluted)2.57 3.28 2.89 2.5

8、5 2.19 Cash dividend payout ratio on common stock127.9%21.0%22.1%23.6%25.8%As of December 31,Total Capital(to risk-weighted assets)13.21%13.71%13.13%13.34%12.33%1 Calculated as dividends on common share divided by basic net income per common share.Financial Performancetransfer agent and registrarReg

9、istrar and Transfer Company10 Commerce DriveCranford,NJ 07016-3506(800)368-independent auditorsMoss Adams LLPStockton,CAlegal counselStuart|MooreSan Luis Obispo,CAnasdaq symbolBMRCannual meeting6:00 p.m.,May 13,201410 Avenue of the FlagsSan Rafael,CA 94903periodic reportsThe Companys annual report f

10、or 2013 on Form 10-K,which is required to be filed with the SEC,is available to any shareholder without charge.The report may be obtained by written request to Corporate Secretary,Bank of Marin Bancorp,P.O.Box 2039,Novato,CA 94948.It is available in the Investor Relations section of the Companys web

11、site at .forward-looking statementsThis discussion of financial results includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933,as amended,(the“1933 Act”)and Section 21E of the Securities Exchange Act of 1934,as amended,(the“1934 Act”).Those sections of th

12、e 1933 Act and 1934 Act provide a“safe harbor”for forward-looking statements to encourage companies to provide prospective information about their financial performance so long as they provide meaningful,cautionary statements identifying important factors that could cause actual results to differ si

13、gnificantly from projected results.Our forward-looking statements include descriptions of plans or objectives of Management for future operations,products or services,and forecasts of revenues,earnings or other measures of economic performance.Forward-looking statements can be identified by the fact

14、 that they do not relate strictly to historical or current facts.They often include the words“believe,”“expect,”“intend,”“estimate”or words of similar meaning,or future or conditional verbs such as“will,”“would,”“should,”“could”or“may.”Forward-looking statements are based on Managements current expe

15、ctations regarding economic,legislative,and regulatory issues that may impact our earnings in future periods.A number of factorsmany of which are beyond Managements controlcould cause future results to vary materially from current Management expectations.Such factors include,but are not limited to,g

16、eneral economic conditions,the economic uncertainty in the United States and abroad,changes in interest rates,deposit flows,real estate values,expected future cash flows on acquired loans and securities,integration of acquisitions and competition;changes in accounting principles,policies or guidelin

17、es;changes in legislation or regulation;adverse weather conditions;and other economic,competitive,governmental,regulatory and technological factors affecting our operations,pricing,products and services.The events or factors that could cause results or performance to materially differ from those exp

18、ressed in our prior forward-looking statements concerning the NorCal acquisition include:lower than expected consolidated revenues;higher than expected acquisition related costs;losses of deposit and loan customers resulting from the acquisition;greater than expected operating costs and/or loan loss

19、es;significant increases in competition;the inability to achieve expected cost savings from the acquisition,or the inability to achieve those savings as soon as expected;and unexpected costs and difficulties in adapting to technological changes and integrating systems.These and other important facto

20、rs are detailed in the Risk Factors section of the 2013 Annual Report and Form 10-K.Forward-looking statements speak only as of the date they are made.We do not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements

21、are made or to reflect the occurrence of unanticipated events.Corporate InformationPhotography by Steven Peixotto/ 2013 was another excellent year for Bank of Marin and a pivotal year in our 24-year history.With the completion of the acquisition of the Bank of Alameda,Bank of Marin grew to$1.8 billi

22、on in assets,with 21 offices in 5 counties.This acquisition was the Banks first open bank acquisition(in 2011 we acquired Charter Oak in an FDIC-assisted transaction)and reaffirmed our ability to be a strong survivor in the consolidating banking industry.Because of our disciplined approach to bankin

23、g,we weathered the financial downturn quite well and will enter 2014 with very strong capital,excellent credit quality,a growing deposit base and a diversified loan portfolio of$1.27 billion.Both loans and deposits grew organically in 2013 and,combined with the acquired portfolio,provided us with si

24、gnificant growth over 2012.We believe that these factors position Bank of Marin perfectly for continued growth,profitability and success.2013 was also a year of change and growth for our senior management team through a combination of promotions and outside additions.Beth Reizman was promoted to Chi

25、ef Credit Officer following the retirement of Kevin Coonan.Beth is a perfect replacement in this critical role after 18 years in credit administration and commercial banking with Bank of Marin.Tim Myers was named head of Commercial Banking to replace Beth,having led the successful growth of the bank

26、s San Francisco commercial and industrial portfolio since 2007.His extensive commercial banking background will be a key to our continued success in developing commercial lending relationships throughout our markets.Jim Burke joined us as Chief Information Officer in early 2013 from a national bank.

27、He and his staff have been instrumental in the successful integration of Bank of Alameda and have strengthened our operations and technology infrastructure.In August we added Tani Girton to Bank of Marin as our Chief Financial Officer.Tanis extensive experience in the financial services industry,mos

28、t recently as Treasurer of a major California bank,gives us added strength and expertise in accounting,finance and treasury.Our Board has also experienced changes and additions.Stuart Lum was elected Chairman of the Board,taking over from Joel Sklar,who will remain on the Board and continue his 24 y

29、ears(and counting)as a founding member of the bank.Stuart has served on the Board for 14 years and brings substantial business experience and knowledge of the bank through his past leadership roles as Audit Chair,ALCO Chair and member of the Executive Committee.In addition,financial advisor and Alam

30、eda leader Kevin Kennedy joined the Board as a result of the acquisition.Most recently,we welcomed James Hale to the Board.Jim is a recognized leader,investor,and pioneer in the financial services industry and an advisor to many public and private companies.This past year Bank of Marin also recogniz

31、ed the passing of three individualsWilliam P.(“Bill”)Murray,Jr.,founder and chairman emeritus of the banks board;J.D.Sullivan,Bank of Marins first CEO;and Board member Tom Fostereach of whom instilled and nurtured the three values that have made us who we are todayrelationship banking,disciplined ba

32、nking fundamentals,and a strong commitment to the communities that we serve.Their contributions,along with the hard work and dedication of all of our employees and directors on behalf of our clients and shareholders,drive Bank of Marins success every day.Thank you for your ongoing support.Sincerely,

33、Russell A.Colombo President&Chief Executive OfficerStuart D.Lum Chairman of the BoardA Message from the President&CEO and Chairman of the Board1Bank of Marin Bancorp Marin Organicpoint reyes station,californiaJeffrey Westman,Executive DirectorOrganic,sustainable,fresh produce and support for our loc

34、al farmers.Its taken root,right here,thanks in part to Marin Organic.And that means we have more choices at the market and at our table.Nicely enough we share the same principles of community:leftover crops are donated to those in need.By increasing access to fresh produce,offering nutrition and env

35、ironmental education and supporting family farmers,were cultivating a vibrant,local economy.2International Wine Accessoriescotati,californiaBen Argov,Co-Owner&PresidentFor those who savor a sophisticated wine lifestyle,International Wine Accessories is the perfect complement.Theyre known for their c

36、ustom wine cellars,distinctive furniture and cabinets,wine coolers,and an extensive array of barware for homes,hotels,and restaurants.A commercial loan from Bank of Marin helped fund their latest wine related acquisition,proving again that wine businesses and our local team truly make the perfect pa

37、iring.2013 Annual ReportSilverman&Lightemeryville,californiaChuck Silverman,Founder&PrincipalWhen Chuck needs a commercial loan for his growing electrical engineering firm,or a real estate loan for his other business entities,he goes to Bank of Marin,where he likes working with flexible,creative and

38、 smart lenders.Bankers who arent just number crunchers,but can think out of the box.Chuck is known for designing the most innovative lighting and electrical systems in the Bay Areaand for demanding the most from his bank.Lixit Corporationnapa,californiaLinda Parks,President&Chief Executive OfficerEm

39、ployee owned,100%made in the USA,with a loyal labor force that includes people with disabilities,Lixit is the largest manufacturer of small animal watering devices in the world.With over 30 different labels,their bottles,bowls,and small animal accessories are uniquely designed,durable items made for

40、 pets best interests.Were happy to join Lixit in their commitment to the Napa community and to support their current and future successes.Bank of Marin Bancorp 3Peter PelhamExecutive Vice President and Director of Retail BankingElizabeth ReizmanExecutive Vice President and Chief Credit Officer4Exper

41、ienced Leadershipboard of directorsexecutive officerssenior management teamRussell A.ColomboPresident and Chief Executive Officer,Bank of Marin and Bank of Marin BancorpTani GirtonExecutive Vice President and Chief Financial OfficerTim MyersSenior Vice President and Commercial Banking Manager Nancy

42、Rinaldi BoatrightSenior Vice President and Corporate SecretaryJim BurkeSenior Vice President and Chief Information Officer Bob GotelliSenior Vice President and Director of Human ResourcesStuart D.LumPresident and Chief Executive Officer,Edgewood Pacific Inc.;Chairman,Bank of Marin and Bank of Marin

43、Bancorp Russell A.ColomboPresident and Chief Executive Officer,Bank of Marin and Bank of Marin BancorpJames C.HaleGeneral Partner,FTV CapitalRobert HellerFormer Governor,U.S.Federal Reserve Board and former President and CEO,Visa USANorma J.HowardBusiness ConsultantKevin KennedyKevin Kennedy,LLCWill

44、iam H.McDevitt,Jr.President,McDevitt Construction Partners,Inc.Michaela K.RodenoFormer Wine Industry CEOJoel Sklar,MDCardiologist and Chief Medical Officer,Marin General Hospital Brian M.SobelPrincipal Consultant,Sobel Communications of PetalumaJ.Dietrich StroehPartner,CSW/Stuber-Stroeh Civil Engine

45、ering FirmJan I.YanehiroPresident,Jan Yanehiro Inc.;Director,School of Multimedia Communications,Academy of Art University,San Francisco2013 Annual Report2 0 1 3 A N N U A L R E P O R TThis page intentionally left blank.UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549 FORM 10-K(Ma

46、rk One)ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31,2013 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from _ to _ Commission File Number 001-33572Bank o

47、f Marin Bancorp(Exact name of Registrant as specified in its charter)California 20-8859754(State or other jurisdiction of incorporation)(IRS Employer Identification No.)504 Redwood Boulevard,Suite 100,Novato,CA 94947(Address of principal executive office)(Zip Code)Registrants telephone number,includ

48、ing area code:(415)763-4520Securities registered pursuant to Section 12(b)of the Act:NoneSecurities registered pursuant to section 12(g)of the Act:Common Stock,No Par Value,and attached Share Purchase RightsNASDAQ Capital Market(Title of each class)(Name of each exchange on which registered)Indicate

49、 by check mark if the registrant is a well-known seasoned issuer,as defined in Rule 405 of the Securities Act.Yes No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d)of the Act.Yes No Note-checking the box above will not relieve any regi

50、strant required to file reports pursuant to Section 13 or 15(d)of the Exchange Act from their obligations under these sections.Indicate by check mark whether the registrant(1)has filed all reports to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during the preceding 12 months

51、(or for such shorter period that the registrant was required to file such reports),and(2)has been subject to such filing requirements for the past 90 days.Yes No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site,if any,every Interactive D

52、ata File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months(or for such shorter period that the registrant was required to submit and post such files).Yes No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regul

53、ation S-K is not contained herein,and will not be contained,to the best of the registrants knowledge,in definitive proxy or information statements incorporated by reference in Part III of this form 10-K or any amendment to this Form 10-K.Indicate by check mark whether the registrant is a large accel

54、erated filer,an accelerated filer,a non-accelerated filer or a smaller reporting company.See the definitions of“large accelerated filer,”“accelerated filer”and“smaller reporting company”in Rule 12b(2)of the Exchange Act.Large accelerated filer Accelerated filer Non-accelerated filer Smaller reportin

55、g company Indicate by check mark if the registrant is a shell company,as defined in Rule 12b(2)of the Exchange Act.Yes No As of June 30,2013,the last business day of the registrants most recently completed second fiscal quarter,the aggregate market value of the voting common equity held by non-affil

56、iates,based upon the closing price per share of the registrants common stock as reported by the NASDAQ,was approximately$210 million.For the purpose of this response,directors and officers of the Registrant are considered the affiliates at that date.As of February 28,2014,there were 5,900,891 shares

57、 of common stock outstanding.DOCUMENTS INCORPORATED BY REFERENCEPortions of the registrants Proxy Statement for the Annual Meeting of Shareholders to be held on May 13,2014 are incorporated by reference into Part III.Page-2TABLE OF CONTENTS PART IForward-Looking StatementsITEM 1.BUSINESSITEM 1A.RISK

58、 FACTORSITEM 1B.UNRESOLVED STAFF COMMENTSITEM 2.PROPERTIESITEM 3.LEGAL PROCEEDINGSITEM 4.MINE SAFETY DISCLOSURESPART IIITEM 5.MARKET FOR REGISTRANTS COMMON EQUITY,RELATED STOCKHOLDERMATTERS AND ISSUER PURCHASES OF EQUITY SECURITIESITEM 6.SELECTED FINANCIAL DATAITEM 7.MANAGEMENTS DISCUSSION AND ANALY

59、SIS OF FINANCIAL CONDITIONAND RESULTS OF OPERATIONSForward-Looking StatementsExecutive SummaryCritical Accounting PoliciesRESULTS OF OPERATIONSNet Interest IncomeProvision for Loan LossesNon-Interest IncomeNon-Interest ExpenseProvision for Income TaxesFINANCIAL CONDITIONInvestment SecuritiesLoansAll

60、owance for Loan LossesOther AssetsDepositsBorrowingsDeferred Compensation ObligationsOff Balance Sheet Arrangements and CommitmentsCapital AdequacyLiquidityITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAPage-4Page-4Page-4Page-12Pag

61、e-20Page-20Page-20Page-20Page-22Page-22Page-24Page-25Page-25Page-25Page-26Page-30Page-32Page-35Page-36Page-37Page-39Page-39Page-39Page-42Page-45Page-49Page-49Page-50Page-50Page-50Page-51Page-52Page-53Page-55Page-3 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1:Summary of Significant Accounting Po

62、liciesNote 2:AcquisitionNote 3:Investment SecuritiesNote 4:Loans and Allowance for Loan LossesNote 5:Bank Premises and EquipmentNote 6:Bank Owned Life InsuranceNote 7:DepositsNote 8:BorrowingsNote 9:Stockholders Equity and Stock PlansNote 10:Fair Value of Assets and LiabilitiesNote 11:Benefit PlansN

63、ote 12:Income TaxesNote 13:Commitments and ContingenciesNote 14:Concentrations of Credit RiskNote 15:Derivative Financial Instruments and Hedging ActivitiesNote 16:Regulatory MattersNote 17:Financial Instruments with Off-Balance Sheet RiskNote 18:Condensed Bank of Marin Bancorp Parent Only Financial

64、 StatementsITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTINGAND FINANCIAL DISCLOSUREITEM 9A.CONTROLS AND PROCEDURESITEM 9B.OTHER INFORMATIONPART IIIITEM 10.DIRECTORS,EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEITEM 11.EXECUTIVE COMPENSATIONITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFI

65、CIAL OWNERS ANDMANAGEMENT AND RELATED STOCKHOLDER MATTERSITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,AND DIRECTORINDEPENDENCEITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICESPART IVITEM 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES SIGNATURESEXHIBIT INDEXPage-61Page-61Page-69Page-73Page-78Pa

66、ge-90Page-90Page-91Page-91Page-93Page-97Page-102Page-103Page-105Page-106Page-106Page-109Page-110Page-111Page-113Page-113Page-114Page-114Page-114Page-114Page-114Page-114Page-114Page-115Page-115Page-117Page-119Page-4PART I Forward-Looking Statements This discussion of financial results includes forwar

67、d-looking statements within the meaning of Section 27A of the Securities Act of 1933,as amended,(the 1933 Act)and Section 21E of the Securities Exchange Act of 1934,as amended,(the 1934 Act).Those sections of the 1933 Act and 1934 Act provide a safe harbor for forward-looking statements to encourage

68、 companies to provide prospective information about their financial performance so long as they provide meaningful,cautionary statements identifying important factors that could cause actual results to differ significantly from projected results.Our forward-looking statements include descriptions of

69、 plans or objectives of Management for future operations,products or services,and forecasts of revenues,earnings or other measures of economic performance.Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts.They often include the w

70、ords believe,expect,intend,estimate or words of similar meaning,or future or conditional verbs such as will,would,should,could or may.Forward-looking statements are based on Managements current expectations regarding economic,legislative,and regulatory issues that may impact our earnings in future p

71、eriods.A number of factorsmany of which are beyond Managements controlcould cause future results to vary materially from current Management expectations.Such factors include,but are not limited to,general economic conditions,the economic uncertainty in the United States and abroad,changes in interes

72、t rates,deposit flows,real estate values,expected future cash flows on acquired loans and securities,integration of acquisitions and competition;changes in accounting principles,policies or guidelines;changes in legislation or regulation;adverse weather conditions;and other economic,competitive,gove

73、rnmental,regulatory and technological factors affecting our operations,pricing,products and services.The events or factors that could cause results or performance to materially differ from those expressed in our prior forward-looking statements concerning the NorCal acquisition include:lower than ex

74、pected consolidated revenues;higher than expected acquisition related costs;losses of deposit and loan customers resulting from the acquisition;greater than expected operating costs and/or loan losses;significant increases in competition;the inability to achieve expected cost savings from the acquis

75、ition,or the inability to achieve those savings as soon as expected;and unexpected costs and difficulties in adapting to technological changes and integrating systems.These and other important factors are detailed in Item 1A Risk Factors section of this report.Forward-looking statements speak only a

76、s of the date they are made.We do not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made or to reflect the occurrence of unanticipated events.ITEM 1 BUSINESSBank of Marin(the“Bank”)was incorporated in Au

77、gust 1989,received its charter from the California Superintendent of Banks(now the California Department of Business Oversight or DBO)and commenced operations in January 1990.The Bank is an insured bank under the Federal Deposit Insurance Corporation(“FDIC”).On July 1,2007(the“Effective Date”),a ban

78、k holding company reorganization was completed whereby Bank of Marin Bancorp(“Bancorp”)became the parent holding company for the Bank,the sole and wholly-owned subsidiary of Bancorp.On the Effective Date,each outstanding share of Bank of Marin common stock was converted into one share of Bank of Mar

79、in Bancorp common stock.Bancorp is listed at NASDAQ and assumed the ticker symbol BMRC,which was formerly used by the Bank.Prior to the Effective Date,the Bank filed reports and proxy statements with the FDIC pursuant to Sections 12 of the Securities Exchange Act of 1934(the“1934 Act”).Upon formatio

80、n of the holding company,Bancorp became subject to regulation under the Bank Holding Company Act of 1956,as amended,which subjects Bancorp to Federal Page-5Reserve Board reporting and examination requirements,and Bancorp now files 1934 Act reports with the Securities and Exchange Commission.Referenc

81、es in this report to“Bancorp”mean Bank of Marin Bancorp,parent holding company for the Bank.References to“we,”“our,”“us”mean the holding company and the Bank that are consolidated for financial reporting purposes.Most of our business is conducted through Bancorps subsidiary,the Bank,which is headqua

82、rtered in Novato,California.As of December 31,2013,we operated through twenty-one offices in Marin,Sonoma,San Francisco,Napa and Alameda counties with a strong emphasis on supporting the local community.Our customer base is made up of business and personal banking relationships from the communities

83、near the branch office locations.Our business banking focus is on small to medium-sized businesses,professionals and not-for-profit organizations.We offer a broad range of commercial and retail deposit and lending programs designed to meet the needs of our target markets.Our loan products include co

84、mmercial real estate loans,commercial and industrial loans and lines of credit,construction financing,consumer loans,and home equity lines of credit.Merchant card services are available for our customers in retail businesses.Through a third party vendor,we offer a proprietary Visa credit card produc

85、t combined with a rewards program to our customers,as well as a Business Visa program for business and professional customers.We also offer cash management sweep to business clients through a third party vendor.We offer a variety of personal and business checking and savings accounts,and a number of

86、 time deposit alternatives,including time certificates of deposit,Individual Retirement Accounts(“IRAs”),Health Savings Accounts,and Certificate of Deposit Account Registry Service(“CDARS”).CDARS is a network through which we offer full FDIC insurance coverage in excess of the regulatory maximum by

87、placing deposits in multiple banks participating in the network.We also offer remote deposit capture,Automated Clearing House services(“ACH”),social security and pension checks,fraud prevention services including Positive Pay for Checks and ACH and image lockbox services.A valet deposit pick-up serv

88、ice is available to our professional and business clients.Automatic teller machines(“ATMs”)are available at each branch location.Our ATM network is linked to the PLUS,CIRRUS and NYCE networks,as well as to a network of nation-wide surcharge-free ATMs called MoneyPass.We also offer our depositors 24-

89、hour access to their accounts by telephone and through our internet banking products available to personal and business account holders.We offer Wealth Management and Trust Services(“WMTS”)which include customized investment portfolio management,financial planning,trust administration,estate settlem

90、ent and custody services,and advice of charitable giving.We also offer 401(k)plan services to small and medium-sized businesses through a third party vendor.We do not directly offer international banking services,but do make such services available to our customers through other financial institutio

91、ns with whom we have correspondent banking relationships.We hold no patents,licenses(other than licenses required by the appropriate banking regulatory agencies),franchises or concessions.The Bank has registered the service marks The Spirit of Marin,the words“Bank of Marin”,the Bank of Marin logo,an

92、d the Bank of Marin tagline“Committed to your business and our community”with the United States Patent&Trademark Office.In addition,Bancorp has registered the service marks for the words“Bank of Marin Bancorp”and for the Bank of Marin Bancorp logo with the United States Patent&Trademark Office.All s

93、ervice marks registered by Bancorp or the Bank are registered on the United States Patent&Trademark Office Principal Register,with the exception of the words Bank of Marin Bancorp which is registered on the United States Patent&Trademark Office Supplemental Register.Market AreaOur primary market are

94、a consists of Marin,San Francisco,Napa,Sonoma and Alameda counties.Our customer base is primarily made up of business and personal banking relationships within these market areas.As discussed in Note 2 to the Consolidated Financial Statements in Item 8 of this report,in November 2013,we expanded our

95、 community banking footprint to Alameda County through the acquisition of$280.9 million of assets,the Page-6assumption of$246.4 million of liabilities,and the addition of four branch offices serving Alameda,Emeryville,and Oakland of the former NorCal Community Bancorp(NorCal),parent company of Bank

96、of Alameda(the“Acquisition”).On February 18,2011,we entered into a modified whole-bank purchase and assumption agreement without loss share(the“P&A Agreement”)with the Federal Deposit Insurance Corporation(the“FDIC”),the receiver of Charter Oak Bank of Napa,California.We purchased$107.8 million in a

97、ssets and assumed$107.7 million in liabilities of the former Charter Oak Bank to enhance our market presence in Napa.We attract deposit relationships from individuals,merchants,small to medium-sized businesses,not-for-profit organizations and professionals who live and/or work in the communities com

98、prising our market areas.As of December 31,2013,approximately 62%of our deposits are in Marin and southern Sonoma Counties,and approximately 56%of our deposits are from businesses and 44%are from individuals.CompetitionThe banking business in California generally,and in our market area specifically,

99、is highly competitive with respect to attracting both loan and deposit relationships.The increasingly competitive environment is impacted by changes in regulation,interest rate environment,technology and product delivery systems,and the consolidation among financial service providers.The banking ind

100、ustry is seeing extreme competition for quality loans,which has resulted in limited loan growth in the past year.Larger banks are seeking to expand lending to businesses,which are traditionally community bank customers.In all of our five counties,we have significant competition with nationwide banks

101、,which have much larger branch networks nationwide,as well as several thrifts,credit unions and other independent banks.We have the largest business core deposit market share,representing 23.3%of business core deposits in Marin County according to the Deposit&Market Share Report from the California

102、Banksite Corporation based upon the FDIC deposit market share data as of June 30,2013.A significant driver of our franchise value is the growth and stability of our checking and savings deposits,a low cost funding source for our loan portfolio.Bank of Marin maintains the highest market share in Mari

103、n County as a community bank,and has the third highest market share behind two national banks.We have a presence in Sonoma County with 6%market share,and are building shares in the San Francisco,Napa and Alameda markets.We also compete for depositors funds with money market mutual funds and with non

104、-bank financial institutions such as brokerage firms and insurance companies.Among the competitive advantages held by some of these non-bank financial institutions is their ability to finance extensive advertising and funding campaigns and allocate investments to our markets.Nationwide banks have th

105、e competitive advantages of national advertising campaigns and technology infrastructure to achieve economies of scale.Large commercial banks also have substantially greater lending limits and have the ability to offer certain services which are not offered directly by us.In order to compete with th

106、e numerous,and often larger,financial institutions in our primary market area,we use,to the fullest extent possible,the flexibility and rapid response capabilities which are accorded by our independent status,local leadership and local decision making.Our competitive advantages also include an empha

107、sis on personalized service,community involvement,philanthropic giving,local promotional activities and strong relationships with our customers.The commitment and dedication of our directors,officers and staff have also contributed greatly to our success in competing for business.EmployeesAt Decembe

108、r 31,2013,we employed 281 full-time equivalent(“FTE”)staff.The actual number of employees,including part-time employees,at year-end 2013 included five executive officers,103 other corporate officers and 189 staff.None of our employees are presently represented by a union or covered by a collective b

109、argaining agreement.We 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 and as a Top Corporate Philanthropist”by the San Francisco Business Times for many years.Page-7SUPERVISION AND REGULATIONBank holding compan

110、ies and banks are extensively regulated under both federal and state law.The following discussion summarizes certain significant laws,rules and regulations affecting Bancorp and the Bank.Bank Holding Company RegulationUpon formation of the bank holding company on July 1,2007,we became subject to reg

111、ulation under the Bank Holding Company Act of 1956,as amended(“BHCA”)which subjects Bancorp to FRB reporting and examination requirements.Under the FRBs regulations,a bank holding company is required to serve as a source of financial and managerial strength to its subsidiary banks.The BHCA regulates

112、 the activities of holding companies including acquisitions,mergers and consolidations and,together with the Gramm-Leach Bliley Act of 1999,the scope of allowable banking activities.Bancorp is also a bank holding company within the meaning of the California Financial Code.As such,Bancorp and its sub

113、sidiaries are subject to examination by,and may be required to file reports with,the DBO.Bank RegulationBanking regulations are primarily intended to protect consumers,depositors funds,federal deposit insurance funds and the banking system as a whole.These regulations affect our lending practices,co

114、nsumer protections,capital structure,investment practices and dividend policy.As a state chartered bank,we are subject to regulation and examination by the DBO.We are also subject to regulation,supervision and periodic examination by the FDIC.If,as a result of an examination of the Bank,the FDIC or

115、the DBO should determine that the financial condition,capital resources,asset quality,earnings prospects,management,liquidity,or other aspects of our operations are unsatisfactory,or that we have violated any law or regulation,various remedies are available to those regulators including issuing a“ce

116、ase and desist”order,monetary penalties,restitution,restricting our growth or removing officers and directors.The following discussion summarizes certain significant laws,rules and regulations affecting both Bancorp and the Bank.The Bank addresses the many state and federal regulations it is subject

117、 to through a comprehensive compliance program that addresses the various risks associated with these issues.DividendsThe payment of cash dividends by the Bank to Bancorp is subject to restrictions set forth in the California Financial Code(the“Code”).Prior to any distribution from the Bank to Banco

118、rp,a calculation is made to ensure compliance with the provisions of the Code and to ensure that the Bank remains within capital guidelines set forth by the DBO and the FDIC.Management anticipates that there will be sufficient earnings at the Bank level to provide dividends to Bancorp to meet its ca

119、sh requirements for 2014.See also Note 9 to the Consolidated Financial Statements,under the heading“Dividends”in Item 8 of this report.FDIC Insurance AssessmentsOur deposits are insured by the FDIC to the maximum amount permitted by law,which is currently$250,000 per depositor.The 2010 enacted Dodd-

120、Frank Wall Street Reform and Consumer Protection Act(the“Dodd-Frank Act”)made the deposit insurance coverage permanent at the$250,000 level retroactive to January 1,2008.On February 7,2011,as required by the Dodd-Frank Act,the FDIC approved a rule that changed the FDIC insurance assessment base from

121、 adjusted domestic deposits to average consolidated total assets minus average tangible equity,defined as Tier 1 capital.The new rule lowered assessment rates to between 2.5 and 9 basis points on the broader base for banks in the lowest risk category,and 30 to 45 basis points for banks in the highes

122、t risk category.The change was effective beginning with the second quarter of 2011.Since we have a solid core deposit base,do not rely heavily on borrowings and brokered deposits and maintain high asset quality,the benefit of the lower assessment rate(which dropped by approximately half for us in 20

123、11)significantly outweighed the effect of a wider assessment base.Page-8Community Reinvestment ActWe are subject to the provisions of the Community Reinvestment Act(“CRA”),under which all banks and thrifts have a continuing and affirmative obligation,consistent with safe and sound operations,to help

124、 meet the credit needs of their entire communities,including low and moderate income neighborhoods.The act requires a depository institutions primary federal regulator,in connection with its examination of the institution,to assess the institutions record in meeting the requirements of CRA.The regul

125、atory agencys assessment of the institutions record is made available to the public.The 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.Our CRA performance will

126、 be evaluated by the FDIC under the large bank requirements in the future.The FDICs last CRA performance examination was performed under the intermediate small bank requirements and completed on June 18,2012 with a rating of“Satisfactory”.Anti Money-Laundering RegulationsA series of banking laws and

127、 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.Under the Uniting and Strengthening America by Providing App

128、ropriate 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 cus

129、tomer”standards in their dealings with high risk customers,foreign financial institutions,and foreign individuals and entities.We have extensive controls in place to comply with these requirements.Privacy and Data SecurityThe Gramm-Leach Bliley Act(“GLBA”)of 1999 imposes requirements on financial in

130、stitutions with respect to consumer privacy.The GLBA generally prohibits disclosure of consumer information to non-affiliated third parties unless the consumer has been given the opportunity to object and has not objected to such disclosure.Financial institutions are further required to disclose the

131、ir privacy policies to consumers annually.The GLBA also directs federal regulators,including the FDIC,to prescribe standards for the security of consumer information.We are subject to such standards,as well as standards for notifying consumers in the event of a security breach.We must disclose our p

132、rivacy policy to consumers and permit consumers to“opt out”of having non-public customer information disclosed to third parties.We are required to have an information security program to safeguard the confidentiality and security of customer information and to ensure proper disposal of information t

133、hat is no longer needed.Customers must be notified when unauthorized disclosure involves sensitive customer information that may be misused.Consumer Protection RegulationsOur lending activities are subject to a variety of statutes and regulations designed to protect consumers,including the Fair Cred

134、it Reporting Act,Equal Credit Opportunity Act,the Fair Housing Act,Truth-in-Lending Act,the Unfair,Deceptive or Abusive Acts and Practices,and the Dodd-Frank Act.Our deposit operations are also subject to laws and regulations that protect consumer rights including Funds Availability,Truth in Savings

135、,and Electronic Funds Transfers.Additional rules govern check writing ability on certain interest earning accounts and prescribe procedures for complying with administrative subpoenas of financial records.Additionally,effective October 28,2013,there is a new provision of Regulation E to accommodate

136、the new Remittance Transfers Rule requirements of the Dodd-Frank Wall Street Reform Act concerning consumer international wires.The new rule focuses primarily on consumer protection including mandatory disclosures of wire transfer fees,error resolution procedures,and cancellation rights.Restriction

137、on Transactions between Banks AffiliatesTransactions between Bancorp and the Bank are quantitatively and qualitatively restricted under Sections 23A and 23B of the Federal Reserve Act and Federal Reserve Regulation W.Section 23A places restrictions on the Banks“covered transactions”with Bancorp,incl

138、uding loans and other extensions of credit,investments in the securities of,and purchases of assets from Bancorp.Section 23B requires that certain transactions,including all covered transactions,be on market terms and conditions.Federal Reserve Regulation W combines statutory restrictions on Page-9t

139、ransactions between the Bank and Bancorp with FRB interpretations in an effort to simplify compliance with Sections 23A and 23B.Capital RequirementsThe FRB and the FDIC have adopted risk-based capital guidelines for bank holding companies and banks.Bancorps ratios exceed the required minimum ratios

140、for capital adequacy purposes and the Bank meets the definition for well capitalized.Undercapitalized depository institutions may be subject to significant restrictions.Payment of dividends could be restricted or prohibited,with some exceptions,if the Bank were categorized as critically undercapital

141、ized under applicable FDIC regulations.For further information on risk-based capital,see Note 16 to the Consolidated Financial Statements in Item 8 of this Form 10-K.In December 2010,the Basel Committee on Bank Supervision finalized a set of international guidelines for determining regulatory capita

142、l known as“Basel III.”These guidelines were developed to address many of the weaknesses in the banking industry that contributed to the past financial crisis,including excessive leverage,inadequate and low-quality capital and insufficient liquidity buffers.In July 2013,the FRB,the FDIC and the Offic

143、e of the Comptroller of the Currency,finalized a rule to implement Basel III.The rule is subject to a phase-in period beginning January 2015,and all the changes should be implemented by January 2019.The guidelines,among other things,increase minimum capital requirements of bank holding companies,inc

144、luding increasing the Tier 1 capital to risk-weighted assets ratio to 6%,introducing a new requirement to maintain a minimum ratio of common equity Tier 1 capital to risk-weighted assets of 4.5%,and in 2019,when fully phased in,a capital conservation buffer of an additional 2.5%of risk-weighted asse

145、ts.In addition,there have been several updates to the way risk-weighted assets are assessed.The three changes that will affect the Bank most significantly are:the movement of past due exposures from 100%to 150%risk weight;the movement of off-balance sheet items with an original maturity of one year

146、or less from 0%to 20%risk weight;and the risk weighting of mortgage-backed securities using the gross-up approach instead of the ratings-based approach.We have modeled our ratios under the finalized rules and we do not expect that we will be required to raise additional capital as a result of their

147、implementation.Sarbanes-Oxley Act of 2002We are subject to the requirements of the Sarbanes-Oxley Act of 2002 which implemented legislative reforms intended to address corporate and accounting improprieties and,among other things:required executive certification of financial presentations;increased

148、requirements for board audit committees and their members;enhanced disclosure of controls and procedures and internal control over financial reporting;enhanced controls over,and reporting of,insider trading;and increased penalties for financial crimes and forfeiture of executive bonuses in certain c

149、ircumstances.Emergency Economic Stabilization Act of 2009(the“EESA”)In response to the financial crisis affecting the banking system and financial markets and going concern threats of investment banks and other financial institutions,on October 3,2008,the EESA was signed into law,which gave the U.S.

150、Treasury the authority to purchase senior preferred shares from the largest nine financial institutions in the nation and other financial institutions in a program known as the Treasury Capital Purchase Program(“TCPP”)that was carved out of the Troubled Asset Relief Program(“TARP”).As a result of ou

151、r participation in the TCPP,we issued a warrant to the U.S.Treasury to acquire 156,134 shares of our common stock(as adjusted with newly declared dividends).The warrant was auctioned by the U.S.Treasury and purchased by two institutional investors during November 2011 and remains outstanding.See Not

152、e 9 to the Consolidated Financial Statements in Item 8 of this report for discussion regarding the warrant.The American Recovery and Reinvestment Act of 2009(the“Recovery Act”)The Recovery Act was signed into law on February 17,2009 in an effort,among other things,to jumpstart the U.S.economy,preven

153、t job losses,expand educational opportunities,and provide affordable health care and tax relief.Among the various measures in the Recovery Act are restrictions on executive compensation and corporate expenditure limits for recipients of TCPP funds and a provision for repurchase of preferred stock at

154、 liquidation amount without Page-10regard to the original TCPP transaction terms.See Note 9 to the Consolidated Financial Statements in Item 8 of this report for discussion regarding our repurchase of preferred stock issued under the TCPP.The Dodd-Frank Wall Street Reform and Consumer Protection Act

155、 On July 21,2010,President Obama signed into law the Dodd-Frank Act,a landmark financial reform bill comprised of voluminous new rules and restrictions that will impact banks going forward.It includes key provisions aimed at preventing a repeat of the 2008 financial crisis and a new process for wind

156、ing down failing,systemically important institutions in a manner as close to a controlled bankruptcy as possible.The Dodd-Frank Act includes other key provisions as follows:(1)Establishes a new Financial Stability Oversight Council to monitor systemic financial risks.The FRB is given extensive new a

157、uthorities to impose strict controls on large bank holding companies with total consolidated assets equal to or in excess of$50 billion and systemically significant non-bank financial companies to limit the risk they might pose to the economy and other large interconnected companies.The FRB can also

158、 take direct control of troubled financial companies that are considered systemically significant.The Dodd-Frank Act restricts the amount of trust preferred securities(“TruPS”)that may be considered as Tier 1 Capital.For bank holding companies below$15 billion in total assets,TruPS issued before May

159、 19,2010 are grandfathered,so their status as Tier 1 capital does not change.On November 29,2013,we acquired NorCal and assumed ownership of NorCal Community Bancorp Trusts I and II,respectively(the Trusts),which were formed by NorCal for the sole purpose of issuing TruPS.Since the TruPS assumed fro

160、m the NorCal acquisition were issued prior to May 2010 and they do not exceed 25%of the sum of all our other core capital elements,they are included in our Tier I capital.Beginning January 1,2013,bank holding companies above$15 billion in assets will have a three-year phase-in period to fill the cap

161、ital gap caused by the disallowance of the TruPS issued before May 19,2010.However,going forward,TruPS will be disallowed as Tier 1 capital.(2)Creates a new process to liquidate failed financial firms in an orderly manner,including giving the FDIC broader authority to operate or liquidate a failing

162、financial company.(3)Establishes a new independent Federal regulatory body for consumer protection within the Federal Reserve System known as the Consumer Financial Protection Bureau(CFPB),which assumes responsibility for most consumer protection laws(except the Community Reinvestment Act).It is als

163、o in charge of setting appropriate consumer banking fees and caps.The Office of Comptroller of the Currency continues to have authority to preempt state banking and consumer protection laws if these laws prevent or significantly interfere with the business of banking.(4)Affects changes in the FDIC a

164、ssessment as discussed in section“FDIC Insurance Assessments”above.(5)Places certain limitations on investment and other activities by depository institutions,holding companies and their affiliates,including comprehensive regulation of all over-the-counter derivatives.(6)Authorizes the FRB to regula

165、te interchange fees on debit card and certain general-use prepaid card transactions paid to issuing banks with assets in excess of$10 billion to ensure that they are“reasonable and proportional”to the cost of processing individual transactions and to prohibit networks and issuers from requiring tran

166、sactions to be processed on a single payment network.The FRB issued its final rule on June 29,2011.Available InformationOn our Internet web site,we post the following filings as soon as reasonably practical after they are filed with or furnished to the Securities and Exchange Commission:Annual Repor

167、t 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.The text of the Code of Eth

168、ical Conduct for Bancorp and the Bank is also included on the website.All such filings on our website are available free of charge.This website address is for information only and Page-11is not intended to be an active link,or to incorporate any website information into this document.In addition,cop

169、ies of our filings are available by requesting them in writing or by phone from:Corporate SecretaryBank of Marin Bancorp 504 Redwood Boulevard,Suite 100Novato,CA 94947415-763-4523Page-12ITEM 1A RISK FACTORSAn investment in our common stock is subject to risks inherent in our business.The material ri

170、sks and uncertainties that Management believes may affect our business are described below.Before making an investment decision,investors should carefully consider the risks and uncertainties described below,together with all of the other information included or incorporated by reference in this rep

171、ort.The risks and uncertainties described below are not the only ones facing our business.Additional risks and uncertainties that Management is not aware of,focused on,or currently deems immaterial may also impair business operations.This report is qualified in its entirety by these risk factors.If

172、any of the following risks actually occur,our financial condition and results of operations could be materially and adversely affected.Earnings are Significantly Influenced by General Business and Economic ConditionsWe are operating in an uncertain economic environment.While there are signs of econo

173、mic conditions improving,the recovery in the labor market is not complete and the unemployment and underemployment rates are still well above levels typically associated with economic strength.Weak business and consumer spending,the U.S.budget deficit and uncertainty in the economies of Europe and e

174、merging markets have the potential to hamper economic recovery.The economic environment is impacted by political uncertainty and changes in fiscal and monetary policy,and the long-term effects of expiring tax cuts and mandatory reductions in federal spending,could adversely affect our business.Econo

175、mic conditions have led to prolonged low interest rates,particularly medium and longer-term rates,which may have a long-term impact on the composition of our earning assets and our net interest margin.Among other things,a period of prolonged lower rates may cause prepayments to increase as our custo

176、mers seek to refinance existing loans,resulting in a decrease in the weighted average yield of our earning assets and variability in our net interest income.Furthermore,financial institutions continue to be affected by the tepid recovery of the real estate market and a stricter regulatory environmen

177、t.While our market areas have not experienced the same degree of challenge in unemployment as other areas 1,the effects of these issues have trickled down to households and businesses in our markets.There can be no assurance that the recent economic improvement is sustainable or that the credit wort

178、hiness of our borrowers will not deteriorate.Continued weakness in real estate values and home sale volumes,financial stress on borrowers,including job losses,and customers inability to pay debt could adversely affect our financial condition and results of operations in the following ways:Demand for

179、 our products and services may decline Low cost or non-interest bearing deposits may decrease Collateral for our loans,especially real estate,may decline further in value Loan delinquencies,problem assets and foreclosures may increase.As the economy is still vulnerable,businesses are wary about capi

180、tal expenditures or expansion of working capital and consumers are de-leveraging by reducing their debt levels.Hence,we have noticed a low level of loan demand due to an unfavorable economic climate and intensified competition for credit-worthy borrowers,all of which could impact our ability to gene

181、rate profitable loans._1 Based on the latest available labor market information from the California Employment Development Department.Preliminary December 2013 results show that the unemployment rate in Marin County was the lowest in California at 4.2%.The unemployment rates in San Francisco,Sonoma,

182、Napa and Alameda County are 4.8%,5.7%,5.9%and 6.3%,compared to the state of California at 8.3%.Page-13Banks and Bank Holding Companies are Subject to Extensive Government Regulation and SupervisionBancorp and the Bank are subject to extensive federal and state governmental supervision,regulation and

183、 control.Holding company regulations affect the range of activities in which Bancorp is engaged.Banking regulations affect the Banks lending practices,capital structure,investment practices and dividend policy among other controls.Future legislative changes or interpretations may also alter the stru

184、cture and competitive relationship among financial institutions.Legislation is regularly introduced in the U.S.Congress and the California Legislature which would impact our operating environment in perhaps substantial and unpredictable ways.The nature and extent of future legislative and regulatory

185、 changes affecting us is unpredictable at this time.The historic disruptions in the financial marketplace over the past several years have prompted the Obama administration to reform financial market regulation.This reform includes additional regulations over consumer financial products,bond rating

186、agencies and the creation of a regime for regulating systemic risk across all types of financial service firms.In light of recent economic conditions,as well as regulatory and congressional criticism,further restrictions on financial service companies may adversely impact our results of operations a

187、nd financial condition,as well as increase our compliance risk.Compliance risk is the current and prospective risk to earnings or capital arising from violations of,or non-conformance with,laws,rules,regulations,prescribed practices,internal policies and procedures,or ethical standards set forth by

188、regulators.Compliance risk also arises in situations where the laws or rules governing certain bank products or activities of our clients may be ambiguous or untested.This risk exposes Bancorp and the Bank to potential fines,civil money penalties,payment of damages and the voiding of contracts.Compl

189、iance risk can lead to diminished reputation,reduced franchise value,limited business opportunities,reduced expansion potential and an inability to enforce contracts.For further information on supervision and regulation,see the section captioned“Supervision and Regulation”in Item 1 above.Recently En

190、acted Legislation and Other Measures Undertaken by the Government May not Help Stabilize the U.S.Financial System and The Impact of New Financial Reform Legislation is Yet to be DeterminedAs discussed in Item 1,Section captioned“Supervision and Regulation”above,in 2010,President Obama signed into la

191、w a landmark financial reform bill-the Dodd-Frank Act.The rules under the Dodd-Frank Act change banking statutes and the operating environment of Bancorp and the Bank in substantial and unpredictable ways,and could continue to increase the cost of doing business,decrease our revenues,limit or expand

192、 permissible activities or affect the competitive balance depending upon whether or how regulations are implemented.We may continue to invest significant Management attention and resources to make any necessary changes related to the Dodd-Frank Act and any regulations promulgated thereunder.The ulti

193、mate effect that the changes will have on the financial condition or results of operations of Bancorp or the Bank is uncertain at this time.The broader impact of recently enacted legislation and related measures undertaken to alleviate the aftermaths of the credit crisis is also unknown.The capital

194、and credit markets experienced volatility and disruption at unprecedented levels in the last credit crisis.In some cases,the markets have produced downward pressure on credit availability for certain issuers without regard to those issuers underlying financial strength.If similar disruptions and vol

195、atility return,there can be no assurance that we will not experience an adverse effect on our ability to access credit or capital.In addition to the Basel III capital framework discussed on page 9 under Capital Requirements,there is a Basel III liquidity framework that requires banks and bank holdin

196、g companies to measure their liquidity against specific liquidity tests,such as the liquidity coverage ratio(“LCR”).The LCR is designed to ensure that the banking entity maintains an adequate level of unencumbered high-quality liquid assets equal to the entitys expected net cash outflow for a 30-day

197、 time horizon under an acute liquidity stress scenario.The LCR at 60%is required to be satisfied on January 1,2015,with a phase-in period ending January 1,2019.The other test,referred to as the net stable funding ratio(“NSFR”),is designed to promote more medium and long-term funding of the assets an

198、d activities of banking entities over a one-year time horizon.The Basel III liquidity framework contemplates that the NSFR will be subject to an observation period through mid-2016 and,subject to any revisions resulting from the analysis conducted and data collected during the observation period,imp

199、lemented as a minimum standard by January 1,2018.These new standards are subject to further rulemaking and their terms may well change before implementation.The federal banking agencies are Page-14expected to propose rules implementing the Basel III liquidity framework and have not determined to wha

200、t extent they will apply to U.S.banks that are not large,internationally active banks.Intense Competition with Other Financial Institutions to Attract and Retain Banking CustomersWe are facing significant competition for customers from other banks and financial institutions located in the markets we

201、 serve.We compete with commercial banks,saving banks,credit unions,non-bank financial services companies and other financial institutions operating within or near our service areas.Some of our non-bank competitors may not be subject to the same extensive regulations as we are,giving them greater fle

202、xibility in competing for business.We anticipate intense competition will be continued for the coming year due to the recent consolidation of many financial institutions and more changes in legislature,regulation and technology.Further,loan demand may continue to be challenging due to the uncertain

203、economic climate and the intensifying competition for creditworthy borrowers,both of which could lead to loan rate concession pressure or impact our ability to generate profitable loans.Going forward,we may see tighter competition in the industry as banks seek to take market share in the most profit

204、able customer segments,particularly the business segment and the mass-affluent segment,which offer a rich source of deposits as well as more profitable and less risky customer relationships.Further,with the rebound of the equity markets,our deposit customers may perceive alternative investment oppor

205、tunities as providing superior expected returns.Technology and other changes have made it more convenient for bank customers to transfer funds into alternative investments or other deposit accounts such as online virtual banks and non-bank service providers.The current low interest rate environment

206、could increase such transfers of deposits to higher yielding deposits or other investments.Efforts and initiatives we undertake to retain and increase deposits,including deposit pricing,can increase our costs.When our customers move money into higher yielding deposits or alternative investments,we c

207、an lose a relatively inexpensive source of funds,thus increasing our funding costs.We also compete with nation-wide and regional banks much larger than our size,which may be able to benefit from economies of scale through their wider branch networks,national advertising campaigns and sophisticated t

208、echnology infrastructures.In 2012,a local community bank in Marin County was acquired by a reputable regional bank seeking to expand their footprint in our primary market.We intend to seek additional deposits by continuing to establish and strengthen our personal relationships with our existing cust

209、omers and by offering deposit products that are competitive with those offered by other financial institutions in our markets.If these efforts are unsuccessful,we may need to fund our asset growth through borrowings,other non-core funding or public offerings of our common stock which could be levera

210、ged.Increasing debt without capital would further increase our leverage,reduce our borrowing capacity and increase our reliance on non-core funds and counterparties credit availability,while a public offering may have a dilutive effect on earnings per share and share ownership.We May Not Be Able To

211、Attract and Retain Key EmployeesOur success depends,in large part,on our ability to attract and retain key people.Competition for the best people in most activities engaged by us can be intense and we may not be able to hire skilled people or retain them.We do not have non-compete agreements with an

212、y of our senior officers.The unexpected loss of services of key personnel could have a material adverse impact on our business because of the skills,knowledge of our market,years of industry experience and difficulty of promptly finding qualified replacement personnel.Negative Conditions Affecting R

213、eal Estate May Harm Our BusinessConcentration of our lending activities in the California real estate sector could negatively impact our results of operations if adverse changes in our lending area occur or intensify.Although we do not offer traditional first mortgages,nor have sub-prime or Alt-A re

214、sidential loans or significant amount of securities backed by such loans in the portfolio,we are not immune to volatility in those markets.Approximately 86%of our loans were secured by real estate at December 31,2013,of which 64%were secured by commercial real estate and the remaining 22%by resident

215、ial real estate.Real estate valuations are impacted by demand,and demand is driven by factors such as employment;when unemployment rates rise,demand drops.The unemployment rate has been elevated since 2009.Most of the properties that secure our loans are located within Marin,San Francisco,Sonoma,Nap

216、a and Alameda Counties,and we have seen some improvement in real estate sales volume and home prices in 2013.Page-15Loans secured by commercial real estate include those secured by small office buildings,owner-user office/warehouses,mixed-use residential/commercial properties and retail properties.I

217、n general,2013 office,industrial and retail vacancy rates have fallen in Marin,Sonoma and Napa Counties based on the latest available real estate information from Keegan&Coppin Company,Inc.In addition,commercial vacancy rates have fallen in the Bay Area,especially in the east bay and San Francisco.T

218、here can be no assurance that the companies or properties securing our loans will generate sufficient cash flows to allow borrowers to make full and timely loan payments to us.In late 2006,Federal banking regulators issued final guidance regarding commercial real estate lending to address a concern

219、that rising commercial real estate lending concentrations may expose institutions to unanticipated earnings and capital volatility in the event of adverse changes in the investor commercial real estate market.This guidance suggests that institutions that are potentially exposed to significant commer

220、cial real estate concentration risk will be subject to increased regulatory scrutiny.Institutions that have experienced rapid growth in commercial real estate lending such as us,have notable exposure to a specific type of commercial real estate lending,or are approaching or exceed certain supervisor

221、y criteria that measure an institutions commercial real estate portfolio against its capital levels,may be subject to such increased regulatory scrutiny.We have regular conversations with regulators to avoid unexpected regulatory risk.Severe Weather,Natural Disasters or Other Climate Change Related

222、Matters Could Significantly Impact Our BusinessOur primary market is located in an earthquake-prone zone in northern California,which is also subject to other weather or disasters,such as severe rainstorms,wildfire or flood.These events could interrupt our business operations unexpectedly.Climate-re

223、lated physical changes and hazards could also pose credit risks for us.For example,our borrowers may have collateral properties located in coastal areas at risk to rise in sea level.The properties pledged as collateral on our loan portfolio could also be damaged by tsunamis,floods,earthquakes or wil

224、dfires and thereby the recoverability of loans could be impaired.A number of factors can affect credit losses,including the extent of damage to the collateral,the extent of damage not covered by insurance,the extent to which unemployment and other economic conditions caused by the natural disaster a

225、dversely affect the ability of borrowers to repay their loans,and the cost of collection and foreclosure to us.Lastly,there could be increased insurance premiums and deductibles,or a decrease in the availability of coverage,due to severe weather-related losses.The ultimate impact on our business of

226、a natural disaster,whether or not caused by climate change,is difficult to predict.Growth May Produce Unfavorable OutcomesWe seek to expand our franchise safely and consistently.A successful growth strategy requires us to manage multiple aspects of the business simultaneously,such as following adequ

227、ate loan underwriting standards,balancing loan and deposit growth without increasing interest rate risk or compressing our net interest margin,maintaining sufficient capital,and recruiting,training and retaining qualified professionals.Our growth strategy also includes merger and acquisition possibi

228、lities that either enhance our market presence or have potential for improved profitability through financial management,economies of scale or expanded services.We may be exposed to difficulties in combining the operations of acquired institutions into our own operations,which may prevent us from ac

229、hieving the expected benefits from our acquisition activities.As discussed in Note 2 to the Consolidated Financial Statements in Item 8 of this report,on November 29,2013,we completed the merger of NorCal Community Bancorp(NorCal),parent company of Bank of Alameda,(the Acquisition).Our earnings,fina

230、ncial condition and prospects after the merger will depend in part on our ability to integrate the operations and management of NorCal while continuing to implement other aspects of our business plan.Inherent uncertainties exist in integrating the operations of an acquired institution and there is n

231、o assurance that we will be able to do so successfully.Among the issues that we could face are:unexpected problems with operations,personnel,technology or credit;loss of customers and employees of the acquiree;difficulty in working with the acquirees employees and customers;the assimilation of the a

232、cquirees operations,culture and personnel;instituting and maintaining uniform standards,controls,procedures and policies;and litigation risk not discovered during the due diligence period.Page-16Undiscovered factors as a result of an acquisition could bring liabilities against us,our management and

233、the management of the institutions we acquire.These factors could contribute to our not achieving the expected benefits from our acquisitions within desired time frames,if at all.Further,although we anticipate cost savings as a result of the merger,we may not be able to fully realize those savings.A

234、ny cost savings that are realized may be offset by losses in revenues or other charges to earnings.We are Subject to Significant Credit Risk and Loan Losses May Exceed Our Allowance for Loan Losses in the FutureWe maintain an allowance for loan losses,which is a reserve established through a provisi

235、on for loan losses charged to expense,that represents Managements best estimate of probable losses that may be incurred within the existing portfolio of loans(the incurred loss model).The level of the allowance reflects Managements continuing evaluation of industry concentrations,specific credit ris

236、ks,loan loss experience,current loan portfolio quality and present economic,political and regulatory conditions.The determination of the appropriate level of the allowance for loan losses inherently involves a high degree of subjectivity and requires us to make significant estimates of current credi

237、t risks and future trends,all of which may undergo material changes.Further,we generally rely on appraisals of the collateral or comparable sales data to determine the level of specific reserve and/or the charge-off amount on certain collateral dependent loans.Inaccurate assumptions in the appraisal

238、s or an inappropriate choice of the valuation techniques may lead to an inadequate level of specific reserve or charge-offs.Changes in economic conditions affecting borrowers,new information regarding existing loans and their collateral,identification of additional problem loans and other factors,ma

239、y require an increase in our allowance for loan losses.In addition,bank regulatory agencies periodically review our allowance for loan losses and may require an increase in the provision for loan losses or the recognition of further loan charge-offs.In addition,if charge-offs in future periods excee

240、d the allowance for loan losses or cash flows from acquired loans do not perform as expected,we will need to record additional provision for loan losses.In December 2012,the Financial Accounting Standards Board(“FASB”)issued a proposed Accounting Standards Update,Financial Instruments:Credit Losses,

241、which establishes a new impairment framework also known as the current expected credit loss model.In contrast to the incurred loss model currently used by financial entities like us,the current expected credit loss model requires an allowance be recognized based on the expected credit losses(i.e.all

242、 contractual cash flows that the entity does not expect to collect from financial assets or commitments to extend credit).It requires the consideration of more forward-looking information than is permitted under current U.S.generally accepted accounting principles.In addition to relevant information

243、 about past events and current conditions,such as borrowers current creditworthiness,quantitative and qualitative factors specific to borrowers,and the economic environment in which the entity operates,the new model requires consideration of reasonable and supportable forecasts that affect the expec

244、ted collectability of the financial assets remaining contractual cash flows,and evaluation of the forecasted direction of the economic cycle,as well as time value of money.This proposed impairment framework is expected to have wide reaching implications to financial institutions such as us.The allow

245、ance for loan losses is likely to increase due to a larger volume of financial assets that fall within the scope of the proposed model,resulting in an adverse impact on net income,volatility in earnings and higher capital requirements.The full effect of the implementation of this new model is unknow

246、n until the proposed guidance is finalized.Interest Rate Risk is Inherent in Our BusinessOur earnings and cash flows are largely dependent upon our net interest income.Net interest income is the difference between interest income earned on interest-earning assets,such as loans and securities,and int

247、erest expense paid on interest-bearing liabilities,such as deposits and borrowed funds.Interest rates are sensitive to many factors outside our control,including general economic conditions and policies of various governmental and regulatory agencies and,in particular,the Federal Reserve Bank(FRB),w

248、hich regulates the supply of money and credit in the United States.Changes in monetary policy,including changes in interest rates,can influence not only the interest we receive on loans and securities and interest we pay on deposits and borrowings,but can also affect(i)our ability to originate loans

249、 and obtain deposits,(ii)the fair value of our financial assets and liabilities,and(iii)the average duration of our securities and loan portfolios.Our portfolio of securities will generally decline in value if market interest rates increase,and increase in value if market interest rates decline.Our

250、mortgage-backed security(MBS)portfolio is also subject to prepayment risk when interest rates are low and extension risk when rates rise.Page-17In response to the recessionary state of the national economy,the gloomy housing market and the volatility of financial markets,the Federal Open Market Comm

251、ittee of the FRB(“FOMC”)started a series of decreases in Federal funds target rate with seven decreases in 2008,bringing the target rate to a historically low range of 0%to 0.25%.Based on statements after the December 2013 FOMC meeting,they expect to keep interest rates near zero for at least as lon

252、g as the unemployment rate remains above 6.5%.The FRB continues purchasing MBS,although at a reduced pace beginning in February 2014.The FRBs sizable and still-increasing holdings of longer-term securities will continue to place downward pressure on longer-term interest rates,and hence our net inter

253、est margin.Interest rate changes can create fluctuations in the net interest margin due to an imbalance in the timing of repricing or maturity of assets and liabilities.We manage interest rate risk exposure with the goal of minimizing the impact of interest rate volatility on the net interest margin

254、.Although we believe we have implemented effective asset and liability management strategies,the prolonged low interest rate environment could have an adverse effect on our financial condition and results of operations.Our 2014 net interest margin may compress due to continued repricing on loans and

255、 securities.See the sections captioned“Net Interest Income”in Managements Discussion and Analysis of Financial Condition and Results of Operations in Item 7 and Quantitative and Qualitative Disclosures about Market Risk in Item 7A of this report for further discussion related to management of intere

256、st rate risk.In the current environment of historically low interest rates,the net interest margin compression has become a major concern.If interest rates rise by more than 100 basis points,we anticipate that net interest margin will rise assuming no additional deposit rate sensitivity.However,it m

257、ay still take several upward market rate movements for variable rate loans at floors to move above their floor rates.Further,a rise in index rates leads to lower debt service coverage of variable rate loans if the borrowers operating cash flow does not also rise.This creates a leveraged paradox of a

258、n improving economy(leading to higher interest rates),but lowers credit quality as short-term rates move up faster than the cash flow or income of the borrowers.Higher interest rates may also depress loan demand,making it more difficult for us to grow loans.Accounting Estimates and Risk Management P

259、rocesses Rely On Analytical and Forecasting ModelsThe processes we use to estimate probable loan losses and to measure the fair value of financial instruments,as well as the processes used to estimate the effects of changing interest rates and other market measures on our financial condition and res

260、ults of operations,depends upon the use of analytical and forecasting models.These models reflect assumptions that may not be accurate,particularly in times of market stress or other unforeseen circumstances.Even if these assumptions are adequate,the models may prove to be inadequate or inaccurate b

261、ecause of other flaws in their design or their implementation.If the models we use for interest rate risk and asset-liability management are inadequate,we may incur increased or unexpected losses upon changes in market interest rates or other market measures.If the models we use for determining our

262、probable loan losses are inadequate,the allowance for loan losses may not be sufficient to support future charge-offs.If the models we use to measure the fair value of financial instruments are inadequate,the fair value of such financial instruments may fluctuate unexpectedly or may not accurately r

263、eflect what we could realize upon sale or settlement of such financial instruments.Any such failure in our analytical or forecasting models could have a material adverse effect on our business,financial condition and results of operations.Financial Institutions Rely on Technology and Continually Enc

264、ounter Technological ChangeThe financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services.The effective use of technology will enable efficiency and meet customers changing needs.Our future success depen

265、ds,in part,upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands,as well as to create additional efficiencies in our operations.Many of our competitors have substantially greater resources to invest in technolog

266、ical improvements.We may not be able to effectively implement new technology-driven products and services as efficiently as national banks or be successful in marketing these products and services to retain and compete for customers.Failure to keep pace with technological change affecting the financ

267、ial services industry could have a material adverse impact on the long-term success of our business and,in turn,our financial condition and results of operations.The Bank outsources core processing to Fidelity Information Services,a leading financial services solution provider,which allows us access

268、 to competitive technology offerings without having to directly invest in development.Page-18Cyber Security is a Growing Risk for Financial InstitutionsOur business requires the secure handling of sensitive client information.We also rely heavily on communications and information systems to conduct

269、our business.Cyber incidents include intentional attacks and unintentional events that may present unauthorized access to digital systems that disrupt operations,corrupt data,release sensitive information or cause denial-of-service on our websites.We store,process and transmit account information in

270、 connection with lending and deposit relationships,including funds transfer and online banking.A breach of cyber-security systems of the Bank,our vendors or customers,or widely publicized breaches of other financial institutions could significantly harm our reputation,result in a loss of customer bu

271、siness,subject us to additional regulatory scrutiny,or expose us to civil litigation and financial liability.While we have systems and procedures designed to prevent security breaches,we cannot be certain that advances in criminal capabilities,physical system or network break-ins or inappropriate ac

272、cess will not compromise or breach the technology protecting our networks or proprietary client information.We process debit card transactions initiated by our customers at merchant locations around the world.When a merchant is impacted by a cyber breach,we are exposed to the risk of financial losse

273、s due to fraudulent card activity,as well as increases in associated operational expense.We Rely on Third-Party Vendors for Important Aspects of Our OperationWe depend on the accuracy and completeness of information and systems provided by certain key vendors,including but not limited to data proces

274、sing,payroll processing,technology support,investment safekeeping and accounting.Our ability to operate,as well as our financial condition and results of operations,could be negatively affected in the event of an interruption of an information system,an undetected error,a cyber breach,or in the even

275、t of a natural disaster whereby certain vendors are unable to maintain business continuity.Failure of Correspondent Banks and Counterparties May Affect LiquidityIn the past few years,the financial services industry in general was materially and adversely affected by the credit crisis.We have witness

276、ed failure of banks in the industry in recent years.We rely on our correspondent banks for lines of credit.We also have two correspondent banks as counterparties in our derivative transactions(see Note 15 to the Consolidated Financial Statements in item 8 in this Form 10-K).While we continually moni

277、tor the financial health of our correspondent banks and we have diverse sources of liquidity,should any one of our correspondent banks become financially impaired,our available credit may decline and/or they may be unable to honor their commitments.Deterioration of Credit Quality or Insolvency of In

278、surance Companies May Impede our Ability to Recover LossesThe financial crisis led certain major insurance companies to be downgraded by rating agencies.We have property,casualty and financial institution risk coverage underwritten by several insurance companies,who may not avoid insolvency risk inh

279、erent in the insurance industry.In addition,some of our investments in obligations of state and political subdivisions are insured by insurance companies.While we closely monitor credit ratings of our insurers and insurers of our municipality securities,and we are poised to make quick changes if nee

280、ded,we cannot predict an unexpected inability to honor commitments.We also invest in bank-owned life insurance policies on certain members of senior Management,which may lose value in the event of the carriers insolvency.In the event that our bank-owned life insurance policy carriers credit ratings

281、fall below investment grade,we may exchange policies underwritten by them to another carrier at a cost charged by the original carrier,or we may terminate the policies which may result in adverse tax consequences.Our loan portfolio is also primarily secured by properties located in earthquake or fir

282、e-prone zones.In the event of a disaster that causes pervasive damage to the region in which we operate,not only the Bank,but also the loan collateral may suffer losses not recovered by insurance.Securities May Lose Value due to Credit Quality of the IssuersWe hold securities issued and/or guarantee

283、d by Federal National Mortgage Association(“FNMA”)and Federal Home Loan Mortgage Corporation(“FHLMC”).Since 2008,both FNMA and FHLMC have been under a U.S.Government Page-19conservatorship which purchases MBS issued by them.As a result,the MBS issued by FNMA and FHLMC have experienced an increase in

284、 fair value and our MBS portfolio has benefited from this government support.However,on August 17,2012,the U.S.Department of the Treasury announced plans to accelerate the wind down of FNMA and FHLMC and incrementally shrink the governments housing-finance footprint by,among other things,reducing FN

285、MA and FHLMCs investment portfolios at an annual rate of 15 percent and sweeping every dollar of profit that each firm earns to the U.S.Treasury quarterly.Beginning in February 2014,the FRBs monthly MBS purchase was reduced to$30 billion from$35 billion.When the U.S.Government starts selling FNMA an

286、d FHLMC MBS,when the government support is phased-out or completely withdrawn,or if either FNMA or FHLMC comes under further financial stress or deteriorates in their credit worthiness,the fair value of our securities issued or guaranteed by these entities may decline.We also invest in obligations o

287、f state and political subdivisions,some of which are experiencing financial difficulties in part due to loss of property tax from falling home values and declines in sales tax revenues from a reduction in retail activities.State and political subdivisions are expected to undergo further financial st

288、ress due to the reduced federal funding.While we generally seek to minimize our exposure by diversifying geographic location of our portfolio and investing in investment grade securities,there is no guarantee that the issuers will remain financially sound or continue their payments on these debentur

289、es.The Value Of Goodwill and Other Intangible Assets May Decline In The FutureAs of December 31,2013,we had goodwill totaling$6.4 million and a core deposit intangible asset totaling$4.5 million from the NorCal acquisition.A significant decline in expected future cash flows,a significant adverse cha

290、nge in the business climate,slower growth rates or a significant and sustained decline in the price of our common stock could necessitate taking charges in the future related to the impairment of goodwill or other intangible assets.If we were to conclude that a future write-down of goodwill or other

291、 intangible assets is necessary,we would record the appropriate charge,which could have a material adverse effect on our business,financial condition and results of operations.Non-performing Assets Take Significant Time To Resolve And Adversely Affect Results Of Operations And Financial Condition.Th

292、e Banks non-performing assets have historically been maintained at a manageable level.While we have significantly reduced non-performing assets,non-performing assets may adversely affect our net income in various ways in the future.Until economic improvement continues in a sustainable fashion,we mig

293、ht incur losses relating to non-performing assets if their collateral values deteriorate.We do not record interest income on non-accrual loans,which adversely affects our income and increases our loan administration costs.When we take collateral in foreclosures and similar proceedings,we are require

294、d to mark the related loan to the fair value of the collateral,which may result in a loss.While we have managed our problem assets through workouts,restructurings and other proactive credit management,decreases in the value of the assets,underlying collateral,or borrowers performance or financial co

295、nditions,whether or not due to economic and market conditions beyond our control,could adversely affect our business,results of operations and financial condition.In addition,the resolution of non-performing assets requires significant commitments of time from Management,which can detract from other

296、 responsibilities.There can be no assurance that we will not experience further increases in non-performing assets in the future.Unexpected Early Termination of Interest Rate Swap Agreements May Impact EarningsWe have entered into interest-rate swap agreements,primarily as an asset/liability managem

297、ent strategy,in order to mitigate the changes in the fair value of specified long-term fixed-rate loans and firm commitments to enter into long-term fixed-rate loans caused by changes in interest rates.These hedges allow us to offer long-term fixed-rate loans to customers without assuming the intere

298、st rate risk of a long-term asset by swapping our fixed-rate interest stream for a floating-rate interest stream.In the event of default by the borrowers on our hedged loans,we may have to terminate these designated interest-rate swap agreements early,resulting in severe prepayment penalties charged

299、 by our counterparties.On the other hand,when these interest-rate swap agreements are in an asset position,we are subject to the credit risk of our counterparties,who may default on the interest-rate swap agreements,leaving us vulnerable to interest rate movements.Page-20We May Take Filing Positions

300、 or Follow Tax Strategies That May Be Subject to ChallengeWe provide for current and deferred taxes in our consolidated financial statements based on our results of operations,business activities and business combinations,legal structure and federal and state legislation and regulations.We may take

301、filing positions or follow tax strategies that are subject to interpretation of tax statutes.Our net income may be reduced if a federal,state or local authority assessed charges for taxes that have not been provided for in our consolidated financial statements.Taxing authorities could change applica

302、ble tax laws,challenge filing positions or assess taxes and interest charges.If taxing authorities take any of these actions,our business,results of operations or financial condition could be adversely and significantly affected.Bancorp Relies on Dividends from the Bank to Pay Cash Dividends to Shar

303、eholdersBancorp is a separate legal entity from its subsidiary,the Bank.Bancorp receives substantially all of its revenue from the Bank in the form of dividends,which is Bancorps principal source of funds to pay cash dividends to Bancorps common shareholders,service subordinated debt,and cover opera

304、tional expenses of the holding company.Various federal and state laws and regulations limit the amount of dividends that the Bank may pay to Bancorp.In the event that the Bank is unable to pay dividends to Bancorp,Bancorp may not be able to pay dividends to its shareholders and pay interest on the s

305、ubordinated debentures.As a result,it could have an adverse effect on Bancorps stock price and investment value.Under federal law,capital distributions from the Bank would become prohibited,with limited exceptions,if the Bank were categorized as undercapitalized under applicable FRB or FDIC regulati

306、ons.In addition,as a California bank,the Bank is subject to state law restrictions on the payment of dividends.For further information on the distribution limit from the Bank to Bancorp,see the section captioned“Bank Regulation”in Item 1 above and“Dividends”in Note 9 to the Consolidated Financial St

307、atements in Item 8 of this report.The Trading Volume of Bancorps Common Stock is Less than That of Other,Larger Financial Services CompaniesOur common stock is listed on the NASDAQ Capital Market.Our trading volume is less than that of nationwide or regional financial institutions.A public trading m

308、arket having the desired characteristics of depth,liquidity and orderliness depends on the presence of willing buyers and sellers of common stock at any given time.This presence depends on the individual decisions of investors and general economic and market conditions over which we have no control.

309、Given the lower trading volume of our common stock,significant trades of our stock in a given time,or the expectations of these trades,could cause the stock price to be more volatile.ITEM 1B UNRESOLVED STAFF COMMENTSNone ITEM 2 PROPERTIESWe lease our corporate headquarters building,which houses subs

310、tantial loan production,operations and administration in Novato,California.We also lease other branch or office facilities within our primary market areas in the cities of Corte Madera,San Rafael,Novato,Sausalito,Mill Valley,Tiburon,Greenbrae,Petaluma,Santa Rosa,Sonoma,Napa,San Francisco,Alameda,Eme

311、ryville,and Oakland.We consider our properties to be suitable and adequate for our needs.For additional information on properties,see Notes 5 and 13 to the Consolidated Financial Statements included in Item 8 of this report.ITEM 3 LEGAL PROCEEDINGS We may be party to legal actions which arise from t

312、ime to time as part of the normal course of our business.We believe,after consultation with legal counsel,that we have meritorious defenses in these actions,and that litigation contingent liability,if any,will not have a material adverse effect on our financial position,results of operations,or cash

313、 flows.Page-21We are responsible for our proportionate share of certain litigation indemnifications provided to Visa U.S.A.by its member banks in connection with lawsuits related to anti-trust charges and interchange fees.For further details,see Note 13 to the Consolidated Financial Statements in It

314、em 8 of this report.ITEM 4 MINE SAFETY DISCLOSURES Not applicable.Page-22PART II ITEM 5 MARKET FOR REGISTRANTS COMMON EQUITY,RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIESBancorp common stock trades on the NASDAQ Capital Market under the symbol BMRC.At February 28,2014,5,900,8

315、91 shares of Bancorps common stock,no par value,were outstanding and held by approximately 2,400 holders of record and beneficial owners.The following table sets forth,for the periods indicated,the range of high and low intra-day sales prices of Bancorps common stock.Calendar20132012 QuarterHighLowH

316、ighLow1st Quarter$41.45$36.89$40.44$34.562nd Quarter$40.75$37.75$39.38$35.233rd Quarter$45.96$38.45$44.02$35.724th Quarter$46.21$40.00$44.09$34.50The table below shows cash dividends paid to common shareholders on a quarterly basis in the last two fiscal years.Calendar20132012 QuarterPer ShareDollar

317、sPer ShareDollars1st Quarter$0.18$971,000$0.17$908,0002nd Quarter$0.18$979,000$0.17$911,0003rd Quarter$0.18$982,000$0.18$965,0004th Quarter$0.19$1,038,000$0.18$967,000For additional information regarding our ability to pay dividends,see discussion in Note 9 to the Consolidated Financial Statement,un

318、der the heading“Dividends,”in Item 8 of this report.There were no purchases made by or on behalf of Bancorp or any“affiliated purchaser”(as defined in Rule 10b-18(a)(3)under the Securities Exchange Act of 1934),of the Bancorps common stock during the fourth quarter of 2013.On July 2,2007,Bancorp exe

319、cuted a shareholder rights agreement(“Rights Agreement”)designed to discourage takeovers that involve abusive tactics or do not provide fair value to shareholders.Refer to Exhibit 4.1 to Registration Statement on Form 8-A12B filed with the Securities and Exchange Commission on July 2,2007.For furthe

320、r information,see Note 9 to the Consolidated Financial Statements,under the heading“Shareholder Rights Plan”in Item 8 of this report.Securities Authorized for Issuance under Equity Compensation PlansThe following table summarizes information as of December 31,2013,with respect to equity compensation

321、 plans.All plans have been approved by the shareholders.(A)(B)(C)Shares to be issuedupon exercise ofoutstanding optionsWeighted averageexercise price ofoutstanding optionsShares available for futureissuance(Excluding sharesin column A)Equity compensation plansapproved by shareholders220,456 1$32.744

322、08,643 21 Represents shares of common stock issuable upon exercise of outstanding options under the Bank of Marin 1999 Stock Option Plan and the Bank of Marin Bancorp 2007 Equity Plan.2 Represents shares of common stock available for future grants under the 2007 Equity Plan and the 2010 Director Sto

323、ck Plan.Page-23Stock Price Performance GraphThe following graph,provided by Keefe,Bruyette,&Woods,Inc.,shows a comparison of cumulative total shareholder return on our common stock during the five fiscal years ended December 31,2013 compared to Russell 2000 Stock index and peer group index of other

324、financial institutions.We have been part of the Russell 2000 index since July 2009.The comparison assumes$100 was invested on December 31,2008 in our common stock and all of the dividends were reinvested.The performance graph represents past performance and should not be considered to be an indicati

325、on of future performance.200820092010201120122013BMRC100139152166169199Peer Group110083857190129Russell 20001001271611551802501BMRC Peer Group represents public California banks with assets between$1 billion to$5 billion as of December 31,2013:WABC,WIBC,MCHB,CYHT,HAFC,TCBK,FMCB,EXSR,PFBC,PPBI,BBNK,H

326、TBK,BSRR,CUNB,AMBZ,RCBC,HEOP,CVCY.The peer group composite index is weighted by market capitalization and reinvests dividends on the ex-date and adjusts for stock splits,if applicable.Source:Company Reports,FactSet,and SNLBank of MarinIndexed Five Year Total ReturnIndexed Prices(%)Peer Group1Russell

327、 2000200820092010201120122013050100150200250300Page-24ITEM 6 SELECTED FINANCIAL DATA201320122011201020092012/2013(dollars in thousands,except per share data)%changeAt December 31,Total assets$1,805,194$1,434,749$1,393,263$1,208,150$1,121,67225.8%Total loans1,269,3221,073,9521,031,154941,400917,74818

328、.2%Total deposits1,587,1021,253,2891,202,9721,015,739944,06126.6%Total stockholders equity180,887151,792135,551121,920109,05119.2%Equity-to-asset ratio10.0%10.6%9.7%10.1%9.7%(5.7)%For year ended December 31,Net interest income$58,775$63,190$63,819$54,909$52,567(7.0)%Provision for loan losses5402,900

329、7,0505,3505,510(81.4)%Non-interest income8,0667,1126,2695,5215,18213.4%Non-interest expense144,09238,69438,28333,35731,69614.0%Net income114,27017,81715,56413,55212,765(19.9)%Net income per share(diluted)2.573.282.892.552.19(21.6)%Tax-equivalent net interestmargin4.20%4.74%5.13%4.95%5.17%(11.4)%Cash

330、 dividend payout ratio on common stock 227.9%21.0%22.1%23.6%25.8%32.9%1 2013 amount included$3.7 million in one-time expenses related to the NorCal acquisition and 2011 amount included$1.0 million one-time expenses related to the Charter Oak Bank acquisition.2 Calculated as dividends on common share

331、 divided by basic net income per common share.Page-25ITEM 7 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion of financial condition as of December 31,2013 and 2012 and results of operations for each of the years in the three-year period en

332、ded December 31,2013 should be read in conjunction with our consolidated financial statements and related notes thereto,included in Part II Item 8 of this report.Average balances,including balances used in calculating certain financial ratios,are generally comprised of average daily balances.Forward

333、-Looking Statements The disclosures set forth in this item are qualified by important factors detailed in Part I captioned Forward-Looking Statements and Item 1A captioned Risk Factors of this report and other cautionary statements set forth elsewhere in the report.Executive Summary On November 29,2013,we closed the acquisition of NorCal Community Bancorp(“NorCal”),parent company of Bank of Alame