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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of financial condition as of December 31, 2024 and 2023 and results of operations for each of the years in the three-year period ended December 31, 2024 should be read in conjunction with our consolidated financial statements and related notes thereto, included in Part II ITEM 8 of this report.

Forward-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.

Critical Accounting Estimates

Critical accounting estimates are those estimates made in accordance with generally accepted accounting principles that involve a significant level of estimation and uncertainty and have had or are reasonably likely to have a material impact on our financial condition and results of operations. We consider accounting estimates to be critical to our financial results if (i) the accounting estimate requires management to make assumptions about matters that are highly uncertain, (ii) management could have applied different assumptions during the reported period, and (iii) changes in the accounting estimate are reasonably likely to occur in the future and could have a material impact on our financial statements. Management has determined the following accounting estimates and related policies to be critical.

Allowance for Credit Losses on Loans and Unfunded Commitments

The allowance for credit losses on loans is a valuation account that is deducted from the amortized cost basis at the balance sheet date to present the net amount of loans expected to be collected. The allowance for losses on unfunded loan commitments is based on estimates of the probability that these commitments will be drawn upon according to historical utilization experience, expected loss severity, and loss rates as determined for pooled funded loans. The allowance for credit losses on unfunded commitments is a liability account included in interest payable and other liabilities. Management estimates these allowances quarterly using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Credit loss experience among the Bank and peer groups provides the basis for the estimation of expected credit losses.

The allowance for credit losses ("ACL") model utilizes a discounted cash flow ("DCF") method to measure the expected credit losses on loans collectively evaluated that are sub-segmented by loan pools with similar credit risk characteristics, which generally correspond to federal regulatory reporting codes. In addition, the DCF method incorporates assumptions for probability of default ("PD"), loss given default ("LGD"), and prepayments and curtailments over the contractual terms of the loans. Under the DCF method, the ACL reflects the difference between the amortized cost basis and the present value of the expected cash flows using the loan's effective rate.

Management considers whether adjustments to the quantitative portion of the ACL are needed for differences in segment-specific risk characteristics or to reflect the extent to which it expects current conditions and reasonable and supportable forecasts of economic conditions to differ from the conditions that existed during the historical period included in the development of PD and LGD.

Our allowance model is particularly sensitive to forecasted and seasonally-adjusted actual California unemployment rates, which increased to 5.5% at December 31, 2024, from 5.1% at December 31, 2023. The ACL model incorporates a one-year forecast. For periods beyond the forecast horizon, the economic factors revert to historical averages on a straight-line basis over a one-year period through the remaining lives of the loans. We performed a sensitivity analysis as of December 31, 2024, and estimated that a 100 basis point change (e.g., 4.5% to 5.5%) in the forecasted unemployment rates over the next four quarters would result in about a 6% change to our allowance for credit losses on loans. This impact does not consider changes to other assumptions for either the quantitative factors, such as probability of default, loss given default, loan mix or cash flows, prepayment/curtailment rates, and individually analyzed loans, or qualitative factors as discussed in Note 1 - Summary of Significant Accounting

Policies. Additionally, because current economic conditions and forecasts can change, as future events are inherently difficult to predict, the estimated credit losses on loans and unfunded commitments could change significantly.

While we believe we use the best information available to determine the allowance for credit losses, our results of operations could be significantly affected if circumstances differ substantially from the assumptions used in determining the allowance. For information regarding critical estimates related to our allowance for credit losses methodology, the provision for credit losses, and risks to asset quality and lending activity, see ITEM 1A - Risk Factors, the Allowance for Credit Losses section in ITEM 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations, and Note 3 - Loans and Allowance for Credit Losses on Loans in ITEM 8 - Financial Statements and Supplementary Data of this Form 10-K.

Fair Value Measurements

We use fair value measurements to record certain financial instruments and to determine fair value disclosures. Available-for-sale securities and interest rate swap agreements are financial instruments recorded at fair value on a recurring basis. Additionally, we record at fair value other financial assets on a nonrecurring basis, such as collateral dependent loans and other real estate owned. These nonrecurring fair value adjustments typically involve write-downs of, or specific reserves against, individual assets. We group our assets and liabilities that are measured at fair value into three levels within the fair value hierarchy, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. The classification of assets and liabilities within the hierarchy is based on whether the inputs to the valuation methodology used in the measurement are observable or unobservable. Observable inputs reflect market-driven or market-based information obtained from independent sources, while unobservable inputs reflect our estimates about market data. The degree of management judgment involved in determining the fair value of a financial instrument is dependent upon the availability of quoted market prices or observable market data. For financial instruments that trade actively and have quoted market prices or observable market data, there is minimal subjectivity involved in measuring fair value. When observable market prices and data are not fully available, management judgment is necessary to estimate fair value. In addition, changes in market conditions may reduce the availability of quoted prices or observable data. Therefore, when market data is not available, we use valuation techniques that require more management judgment to estimate the appropriate fair value measurement. Fair value is discussed further in Note 1 - Summary of Significant Accounting Policies, and Note 9 - Fair Value of Assets and Liabilities in ITEM 8 - Financial Statements and Supplementary Data of this Form 10-K.

Goodwill

Goodwill arises from the acquisition method of accounting for business combinations and represents the excess of the fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. Goodwill is tested annually for impairment, or more often if conditions change and indicate a possible impairment. Significant judgment is used in the assessment of goodwill, both in a qualitative assessment and a quantitative assessment. Assessments of goodwill often require the use of fair value estimates, which are dependent upon various factors, including estimates concerning the Company’s long-term growth prospects and comparability to industry data. Uncertainty and imprecision in estimates can affect the estimated fair value of the reporting unit in a goodwill assessment. Additionally, various events or circumstances could have a negative effect on the estimated fair value of a reporting unit, such as declines in business performance, increases in credit losses, and deterioration in economic or market conditions, which may result in a material impairment charge to earnings in future periods.

In both 2024 and 2023, the Company assessed goodwill for impairment by performing a quantitative assessment, which encompassed an income approach and two market approaches (peer metrics and recent transactions). The income approach considered such factors as the estimated future cash flows of our reporting unit based on internal long-term forecasts, assumptions concerning potential synergies and other economic benefits, and a discount rate used to present value such cash flows to determine the fair value. The market approach utilized observable market data from comparable public companies, including price-to-tangible book value ratios, to estimate the Company’s fair value. The market approach also incorporated a control premium to represent the Company’s expectation of a hypothetical acquisition. Management used judgment in the selection of comparable companies and included those with similar business activities, and related operating environments. In addition, the selection and weighting of the various fair value techniques may result in higher or lower estimates of fair value. Judgment is applied in determining the weightings between the income approach and the market approach in determining fair value. The results of these assessments indicated the value of goodwill was not impaired as of our annual impairment testing dates of November 30, 2024 and 2023, and there were no changes to our assessment through December 31, 2024.

RESULTS OF OPERATIONS

Financial Highlights

The following are highlights of our financial condition and results of operations. The data was derived from the audited consolidated financial statements of Bank of Marin Bancorp.

At December 31,

(dollars in thousands, except per share data) 2024 2023

Selected financial condition data:

Loans, net of allowance for credit losses on loans $ 2,052,600 $ 2,048,548

Borrowings and other obligations $ 154 $ 26,298

Tangible book value per share $ 22.37 $ 22.44

Asset quality ratios:

Allowance for credit losses to total loans 1.47 % 1.21 %

Allowance for credit losses to non-accrual loans 0.90x 3.15x

Non-accrual loans to total loans 1.63 % 0.39 %

Capital ratios:

Tangible common equity to tangible assets 9.93 % 9.73 %

Total capital (to risk-weighted assets) 16.54 % 16.89 %

Tier 1 capital (to risk-weighted assets) 15.32 % 15.91 %

Tier 1 capital (to average assets) 10.46 % 10.46 %

Common equity Tier 1 capital (to risk-weighted assets) 15.32 % 15.91 %

Other data:

Number of branches 27 27

Full-time equivalent employees 285 329

For the Years Ended December 31,

Selected operating data:

Provision for (reversal of) credit losses on loans 5,550 2,575 (63)

Reversal of credit losses on unfunded loan commitments (233) (342) (318)

Net (loss) income per common share:

Performance and other financial ratios:

Return on average assets (0.22) % 0.49 % 1.08 %

Tax-equivalent net interest margin 2.63 % 2.63 % 3.11 %

Net charge-offs (recoveries) $ 66 $ 386 $ (23)

Net charge-offs (recoveries) to average loans NM 0.02 % NM

Cash dividend payout ratio on common stock 1 NM 80.65 % 33.45 %

Cash dividends per common share $ 1.00 $ 1.00 $ 0.98

NM - Not meaningful.

Executive Summary

Our annual loss was $8.4 million in 2024, compared to earnings of $19.9 million in 2023. Diluted loss was $(0.52) per share in 2024, compared to earnings of $1.24 per share in 2023.

Results for 2024 were significantly impacted by our strategic balance sheet repositioning which included the sale of $325.2 million in low yielding investment securities at a $32.5 million pre-tax loss, the payoff of high cost borrowings and the purchase and origination of higher yielding loans and securities. In addition, we took actions to reduce operating expenses in 2024 which positively impacted our results later in the year. Though the percentage of non-accrual loans increased from the prior year, we continue to proactively identify and manage credit risk within the loan portfolio and there were some improvements in credit quality trends during the fourth quarter. We believe the strength of our balance sheet, higher level of productivity that we are seeing from our banking teams, and positive trends in our net interest margin and operating leverage are key factors that should help mitigate any unforeseen credit quality deterioration that may arise and drive further improvement in our financial performance in the year ahead.

The following are highlights of operating and financial performance for the year ended December 31, 2024:

•Loans increased $9.5 million during the year ended December 31, 2024, to $2.083 billion, compared to $2.074 billion at December 31, 2023. Excluding a $35.7 million loan pool purchase of residential real estate loans, loan originations totaled $152.6 million for the year ended December 31, 2024, compared to $144.1 million for the prior year.

•Classified loans made up 2.17% of total loans as of December 31, 2024, compared to 1.56% as of December 31, 2023. The Bank continues to proactively identify and manage credit risk within the loan portfolio.

•Non-accrual loans totaled $33.9 million, or 1.63% of the loan portfolio, compared to $8.0 million, or 0.39%, as of December 31, 2024 and 2023, respectively primarily due to three relationships designated as non-accrual in the second and third quarters of 2024. Of the total non-accrual loans as of December 31, 2024, approximately 56% were paying as agreed, 91% were real estate secured, and all are being closely managed and monitored.

•A $5.6 million provision for credit losses on loans in 2024 including a $5.2 million specific reserve taken on a commercial real estate loan as a result of declining collateral values brought the allowance for credit losses to 1.47% of total loans, compared to 1.21% as of December 31, 2023.

•Total deposits decreased by $70.1 million to $3.220 billion as of December 31, 2024, from $3.290 billion as of December 31, 2023. Non-interest bearing deposits continue to remain strong compared to our peers and made up 43.5% of total deposits as of December 31, 2024, compared to 43.8% as of December 31, 2023. We believe we are appropriately competitive in regard to deposit pricing, given our relationship banking model, which differentiates Bank of Marin through exceptional service. Estimated uninsured and/or uncollateralized deposits comprised 29% of total deposits as of December 31, 2024.

•At December 31, 2024, the Bank had no outstanding borrowings compared to $26.0 million at December 31, 2023, as a result of our strategic balance sheet restructuring in 2023 and 2024. Total available funding sources, including unrestricted cash, unencumbered available-for-sale securities, and total available borrowing capacity, were $1.849 billion, or 57% of total deposits and 197% of estimated uninsured and/or uncollateralized deposits as of December 31, 2024.

•The tax-equivalent net interest margin was 2.63% for 2024, consistent with 2023. Higher yields on loans increased the margin by 31 basis points, while higher deposit costs resulted in a 64 basis points reduction in the margin. In addition, the year's balance sheet restructuring activities affected the borrowings, interest-bearing cash and investments factors with impacts of 27, 13 and (7) basis points, respectively.

•All capital ratios were above well-capitalized regulatory requirements. Bancorp's total risk-based capital ratio was 16.54% as of December 31, 2024, compared to 16.89% as of December 31, 2023. Tangible common equity to tangible assets ("TCE ratio") increased to 9.93% as of December 31, 2024, from 9.73% as of December 31, 2023. While we do not intend to sell our held-to-maturity securities, the TCE ratio, net of after-tax unrealized losses on held-to-maturity securities as if the losses were realized, was 7.85% as of December 31, 2024 (refer to the discussion and reconciliation of this non-GAAP financial measure in the section below entitled Statement Regarding Use of Non-GAAP Financial Measures).

•The Board of Directors declared a cash dividend of $0.25 per share on January 23, 2025, which was the 79th consecutive quarterly dividend paid by Bancorp. The dividend was paid on February 13, 2025 to shareholders of record at the close of business on February 6, 2025.

Net Interest Income

Net interest income is the interest earned on loans, investments and other interest-earning assets minus interest expense incurred on deposits and other interest-bearing liabilities. Net interest income is impacted by changes in general market interest rates and by changes in the composition of interest-earning assets and interest-bearing liabilities. Interest rate changes can create fluctuations in net interest income and/or 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 net interest income.

Net interest margin is expressed as net interest income divided by average interest-earning assets. Net interest rate spread is the difference between the average rate earned on total interest-earning assets and the average rate incurred on total interest-bearing liabilities. Both of these measures are reported on a taxable-equivalent basis. Net interest margin is the higher of the two because it reflects interest income earned on assets funded with non-interest-bearing sources of funds, which include demand deposits and stockholders’ equity.

The following table compares interest income, average interest-earning assets, interest expense, and average interest-bearing liabilities for the periods presented. The table also presents net interest income, net interest margin and net interest rate spread for the years indicated.

Average Statements of Condition and Analysis of Net Interest Income

Year ended Year ended Year ended

Interest Interest Interest

Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/

Assets

Liabilities and Stockholders' Equity

Tax-equivalent net interest rate spread 1.39 % 1.67 % 3.03 %

Analysis of Changes in Net Interest Income

The following table presents the effects of changes in average balances (volume) or changes in average rates on tax-equivalent net interest income for the years indicated. Volume variances are equal to the increase or decrease in average balances multiplied by prior period rates. Rate variances are equal to the increase or decrease in rates multiplied by prior period average balances. Mix variances are attributable to the change in yields or rates multiplied by the change in average balances including one day more in the year ended 2024.

2024 Compared to 2023

Net interest income totaled $94.7 million in 2024, compared to $102.8 million in 2023. The $8.1 million decrease from the prior year was primarily due to higher deposit costs of $21.2 million, partially offset by the reduction of $11.3 million in borrowing costs.

The tax-equivalent net interest margin was 2.63% for 2024, consistent with 2023. Higher yields on loans increased the margin by 31 basis points, while higher deposit costs resulted in a 64 basis points reduction in the margin. In addition, the year's balance sheet restructuring activities affected the borrowings, interest-bearing cash and investments factors with impacts of 27, 13 and (7) basis points, respectively.

2023 Compared to 2022

Net interest income totaled $102.8 million in 2023, compared to $127.5 million in 2022. The $24.7 million decrease from the prior year was primarily due to higher funding costs of $34.2 million, partially offset by higher average yields on earning assets.

The tax-equivalent net interest margin was 2.63% for 2023, compared to 3.11% for 2022. The decrease was primarily attributed to higher deposit and borrowing costs, partially offset by higher yields on loans and investment securities. Average interest-bearing deposit balances decreased by $115.2 million, while the average rate increased by 133 basis points, decreasing the margin by 58 basis points. Average borrowings and other obligations increased by $219.3 million, while the average cost increased by 125 basis points, decreasing the net interest margin by 29 basis points. Average loan balances decreased by $75.5 million, while the average yield increased by 36 basis points, increasing the margin by 23 basis points. Average investment securities decreased $42.9 million, while their average yield increased 25 basis points, improving the margin by 14 basis points.

Market Interest Rates

Market interest rates are, in part, based on the target federal funds interest rate (the interest rate banks charge each other for short-term borrowings) implemented by the Federal Reserve Open Market Committee ("FOMC").

In response to the evolving risks to economic activity caused by the COVID-19 pandemic, the FOMC made two emergency federal funds rate cuts totaling 150 basis points in March 2020. The federal funds rate range remained between 0.0% and 0.25% through the beginning of 2022, putting downward pressure on our asset yields and net interest margin. The FOMC began increasing rates in March 2022, totaling seven rate increases in 2022 and four

additional rate increases in 2023, and ended the year of 2023 at a federal funds target rate range between 5.25% and 5.50%. Rising interest rates resulted in rapid increases in the cost of funds through rising deposit costs and increased average borrowings, putting pressure on our net interest margin. Because market interest rates remained high for longer than many market participants anticipated, during the second quarter of 2024, we sold securities with relatively low yields and redeployed the proceeds to pay off borrowings, invest in higher yielding loans and securities, and position the balance sheet for future acquisitions of similar assets.

Primarily due to declining inflation, the Federal Reserve lowered the target for the federal funds rate by 100 basis points, to a range of 4.25% to 4.50% in the later months of 2024. At the January 2025 meeting, the FOMC left rates unchanged and signaled slower than originally anticipated rate cuts are likely in 2025. Management and the Board are continuously monitoring and analyzing the impact of market rates on the Company's financial condition and results of operations to enhance performance, safety and soundness and returns to shareholders. See ITEM 7A. Quantitative and Qualitative Disclosure about Market Risk for further information.

Provision for Credit Losses on Loans

Management assesses the adequacy of the allowance for credit losses on loans quarterly based on several factors, including growth or contraction of the loan portfolio, past events, current conditions, and reasonable and supportable forecasts to estimate expected losses over the contractual terms of our loans. The allowance for credit losses on loans is increased by provisions charged to expense and loss recoveries and decreased by loans charged off.

The following table shows the activity for the periods presented.

Years ended December 31,

Provision for (reversal of) credit losses on loans $ 5,550 $ 2,575 $ (63)

The provision in 2024 was due primarily to increases in qualitative risk factors to account for continued uncertainty about inflation and recession risks, and from continued negative trends in adversely graded loans and/or collateral values on our non-owner occupied commercial real estate office and multi-family real estate portfolios including $5.2 million taken in the second quarter due to an increased individual reserve for one non-owner occupied commercial real estate loan totaling $16.7 million that, although current, had experienced a deterioration in the collateral value and, therefore, a material increase in the loan-to-value.

The provision in 2023 was due primarily to adjustments to qualitative risk factors from continued uncertainty about inflation and recession risks, the potential impact of rapidly increasing interest rates and other external factors on both our non-owner-occupied commercial real estate and construction portfolios, loan and collateral concentration risks in our construction and commercial real estate portfolios, heightened portfolio management in light of current economic conditions, and continued negative trends in adversely graded loans and/or collateral values for our non-owner occupied commercial real estate office and multi-family real estate portfolios.

The provision reversal in 2022 was largely due to a $55.4 million decrease in applicable loan balances (excludes the $107.7 million decrease in PPP loans for which there was no allowance) and improvements in Moody's Analytics' Baseline Forecast of California unemployment rates since December 31, 2021, which decreased the quantitative "modeled" allowance for credit losses. These decreases were partially offset by adjustments to qualitative risk factors to account for the ongoing deterioration in the economic outlook that management believed was not captured in the quantitative portion of the allowance calculation.

Non-interest Income

The table below details the components of non-interest income.

2024 Compared to 2023

Non-interest income showed a loss of $21.4 million for 2024, a $26.3 million decrease from income of $5.0 million for 2023. The decrease in 2024 was primarily due to the $32.5 million net loss on the sale of available-for-sale investment securities in the second quarter related to our balance sheet restructuring. Excluding losses on sale of securities in both years, non-interest income increased by $299 thousand, which included a $275 thousand year-over-year increase in wealth management and trust services income due to increased assets.

2023 Compared to 2022

Non-interest income totaled $5.0 million in 2023, a $5.9 million decrease from $10.9 million in 2022. The decrease in 2023 was primarily due to the $5.9 million net loss on the sale of investment securities mentioned above. Excluding this loss, non-interest income decreased by $86 thousand, which included a $504 thousand decline in deposit network fees earned when deposit balances were brought back on the balance sheet, and a $220 thousand decrease in debit card interchange income. Decreases were partially offset by $573 thousand higher benefit payments from and earnings on bank-owned life insurance, and $209 thousand from increases in dividends on Federal Home Loan Bank stock.

Non-interest Expense

The table below details the components of non-interest expense.

Other non-interest expense:

2024 Compared to 2023

Non-interest expenses increased $2.3 million to $81.8 million in 2024 from $79.5 million in 2023. Significant fluctuations were as follows:

•Professional services expenses increased by $1.5 million, mainly from the legal resolution of a Private Attorneys General Act / putative class action lawsuit of $615 thousand and $354 thousand in the new loan operating system platform and implementation costs.

•Salaries and employee benefits increased by $1.2 million primarily due to severance and salaries paid in relation to the reduction in force in the second quarter, the filling of open positions and the hiring of several key employees and officers, higher insurance costs, and lower deferred loan origination costs. Increases to salaries and employee benefits were partially offset by a decrease in profit sharing expense mainly from accrual adjustments, a decrease in accrued incentive bonuses, and a decrease in stock-based compensation from changes in award structure and estimated performance award payouts.

•Deposit network fees increased by $743 thousand due both to rate and volume.

•Depreciation and amortization expenses decreased by $632 thousand, mainly from the acceleration of lease-related costs for four branch closures in 2023.

•Amortization of the core deposit intangible decreased by $375 thousand as the Bank of Alameda amortization completed in 2023.

2023 Compared to 2022

Non-interest expenses increased $4.2 million to $79.5 million in 2023 from $75.3 million in 2022. Significant fluctuations were as follows:

•Deposit network fees increased by $2.5 million as customers sought additional FDIC insurance protection through reciprocal deposit networks.

•Salaries and employee benefits increased by $1.4 million primarily due to the filling of open positions and the hiring of several key employees and officers, an increase in SERP-related expenses largely due to new and retired participant adjustments lowering costs for 2022, an increase in deferred officer compensation expense from increased participation and interest rates, higher insurance costs, and lower deferred loan origination costs. Increases to salaries and employee benefits were partially offset by a decrease in profit sharing expense mainly from accrual adjustments and because some contributions in 2023 were made from forfeitures rather than paid in cash, a decrease in accrued incentive bonuses, and a decrease in stock-based compensation from changes in award structure and estimated performance award payout estimates.

•FDIC insurance costs increased by $699 thousand due to an increase in the FDIC statutory assessment rate to strengthen the Deposit Insurance Fund.

•Occupancy and equipment and depreciation and amortization expenses rose by $483 thousand and $258 thousand, respectively, mainly from the acceleration of lease-related costs for branch closures in the first quarter of 2023 and higher maintenance costs.

•Professional services expenses increased by $299 thousand, mainly from consulting fees associated with core systems contract negotiations, systems transformation projects, and internal and external audit costs.

•Information technology and data processing expenses decreased by $628 thousand and $592 thousand, respectively, due to our core system contract renegotiation for the current period and because the prior year included data processing expenses largely eliminated after the systems conversion associated with the American River Bankshares merger.

•Other real estate owned expenses decreased by $311 thousand due to the write-down in 2022 of the property that was then sold in the third quarter of 2023.

Provision for Income Taxes

Income tax provisions reflect accruals for taxes at the applicable rates for federal income tax and California franchise tax based upon reported pre-tax income. Provisions also reflect permanent differences between income for tax and financial reporting purposes (such as earnings on tax exempt loans and municipal securities, bank-owned life insurance ("BOLI"), low-income housing tax credits, and stock-based compensation from the exercise of stock options, disqualifying dispositions of incentive stock options and vesting of restricted stock awards).

The benefit for income taxes totaled $5.4 million at an effective tax rate of 39.2% in 2024, compared to the provision of $6.1 million at an effective tax rate of 23.6% in 2023 and $16.9 million at an effective tax rate of 26.6% in 2022. The reversal in the provision for income taxes in 2024, reflected the impact of the net loss before taxes in the year of $13.8 million compared to net income before taxes of $26.0 million in 2023. The 15.6% increase in the effective tax rate in 2024, as compared to 2023, was due to the treatment of certain permanent differences while in a loss position, such as in 2024. The 300 basis point decrease from 2022 to 2023 was primarily due to a larger proportional effect of permanent tax differences on lower pretax income and higher tax-exempt BOLI income. This decrease was partially offset by a reduction in the tax-exempt interest exclusion (due to a larger IRC Section 291(e) interest expense disallowance), compared to 2022.

We file a consolidated return in the U.S. federal tax jurisdiction and a combined return in the state of California tax jurisdiction. There were no ongoing federal or state income tax examinations at the time of the issuance of this report. As of December 31, 2024 and 2023, neither the Bank nor Bancorp had accruals for interest or penalties related to unrecognized tax benefits.

FINANCIAL CONDITION

Investment Securities

We maintain an investment securities portfolio to provide liquidity and generate earnings on funds that have not been loaned to customers. Management determines the maturities and types of securities to be purchased based on liquidity and interest rate risk position, and the desire to attain a reasonable investment yield balanced with risk exposure. The tables below show the composition of the debt securities portfolio by weighted average life at December 31, 2024 and 2023. Weighted average life takes into account the issuer's right to call or prepay obligations, with or without call or prepayment penalties. The weighted average life of the investment portfolio at December 31, 2024 and 2023 was approximately 5.9 and 6.6 years, respectively. The effective duration of the investment portfolio was 4.8 and 5.2 at December 31, 2024 and 2023, respectively.

December 31, 2024 Within 1 Year 1-5 Years 5-10 Years After 10 Years Total

Held-to-maturity:

Available-for-sale:

December 31, 2023 Within 1 Year 1-5 Years 5-10 Years After 10 Years Total

Held-to-maturity:

Available-for-sale:

Asset-backed securities — — — — — — — — — — —

1 Book value reflects cost, adjusted for accumulated amortization and accretion.

2 Weighted average calculation is based on amortized cost of securities.

3 Yields on tax-exempt municipal bonds are presented on a taxable equivalent basis, using a federal tax rate of 21%.

The amortized cost of our investment securities portfolio decreased by $240.2 million, or 15.6%, in 2024. In 2024, we sold $325.2 million in available-for-sale securities with an average yield of 1.94%, as part of a balance sheet restructuring, including $190.5 million in agency collateralized mortgage obligations ("CMOs"), $65.0 million in debentures of government sponsored agencies, $39.8 million in agency mortgage-backed securities ("MBSs"), $18.4 million in SBA-backed securities, $6.0 million in corporate bonds and $5.5 million in obligations of state and political subdivisions. The sales of available-for-sale securities generated a net pre-tax loss of $32.5 million.

We consider agency debentures and CMOs issued by U.S. government sponsored entities to have low credit risk as they carry the credit support of the U.S. federal government. The debentures, CMBSs, CMOs and MBS issued by U.S. government sponsored agencies, SBA-backed securities and U.S. Treasury securities made up 85.1% of the portfolio as of December 31, 2024, compared to 86.6% at December 31, 2023. See the discussion in the section captioned “Securities May Lose Value Due to Credit Quality of the Issuers” in ITEM 1A Risk Factors above.

At December 31, 2024 and 2023, distribution of our investment in obligations of state and political subdivisions was as follows:

Within California:

Tax allocation bonds — — — — — —

Outside California:

The portion of the portfolio outside the state of California is distributed among twelve states. Of the total investment in obligations of state and political subdivisions, the largest concentrations outside California are in Texas (38.4%), Washington (15.7%), and Wisconsin (9.4%). Our investments in obligations issued by municipal issuers in Texas are either guaranteed by the AAA-rated Texas Permanent School Fund ("PSF"), rated AAA without enhancement, or backed by revenue sources from essential services (such as utilities and transportation).

Investments in states, municipalities and political subdivisions are subject to an initial pre-purchase credit assessment and ongoing monitoring. Key considerations include:

•The soundness of a municipality’s budgetary position and the stability of its tax revenues

•Debt profile and level of unfunded liabilities, diversity of revenue sources, taxing authority of the issuer

•Local demographics and economics including unemployment data, the largest local taxpayers and employers, income indices, and home values

•For revenue bonds, the source and strength of revenue for municipal authorities, including obligors' financial condition and reserve levels, annual debt service and debt coverage ratio, and credit enhancement (such as insurers' strength)

•Credit ratings by major credit rating agencies

Loans

Loans Outstanding by Class and Percent of Total

Real estate

Allowance for credit losses on loans (30,656) (25,172)

Total loans, net of allowance for credit losses $ 2,052,600 $ 2,048,548

Loans increased by $9.5 million in 2024, or 0.5%, to $2.083 billion as of December 31, 2024, from $2.074 billion as of December 31, 2023. Organic loan originations were $152.6 million in 2024, compared to $144.1 million in 2023. Loan purchases totaled $35.7 million in 2024, compared to none in the prior year. Non-PPP payoffs were $120.2 million in 2024, compared to $107.1 million in 2023. PPP loan payoffs during 2024 and 2023 were $443 thousand and $2.7 million, respectively. The majority of the payoffs were a result of cash payoffs and asset sales. In addition, $57.4 million of loan amortization from scheduled repayments, net of credit line utilization, contributed to the change in loan balances for 2024. The originations and payoffs noted above, combined with utilization on lines of credit and amortization on existing loans, resulted in a net increase for this period.

Approximately 89% and 90% of total loans were secured by real estate as of December 31, 2024 and 2023, respectively. For additional information on loan concentration risk, see ITEM 1A, Risk Factors.

The following table summarizes our commercial real estate loan concentrations by the county in which the property was located as of December 31, 2024 and 2023.

Commercial Real Estate Loans Outstanding by County

(dollars in thousands; unaudited) December 31, 2024 December 31, 2023

Commercial real estate loans increased by $43.0 million in 2024, compared to a $5.8 million increase in 2023. The increase in 2024 was comprised of the $54.2 million increase within the non-owner occupied loan portfolio, partially offset by the $11.2 million decrease within the owner-occupied loan portfolio. Of the commercial real estate loans as of December 31, 2024, 80% were non-owner occupied and 20% were owner-occupied. Almost the entire commercial real estate loan portfolio is comprised of term loans for which the primary source of repayment is either the cash flow from leasing activities of the real estate collateral or the operating cash flow of the owner occupant.

Non-owner and Owner Occupied Real Estate Loans by Type

Multi-family 16 12 — —

Church — — 6 6

Gas/auto — — 8 4

Health club — — 4 2

Commercial Real Estate Loans by Type and County

Non-owner occupied Owner-occupied

(unaudited) Retail Warehouse & industrial Multi-family Office Office

With the heightened market concern about non-owner-occupied commercial real estate, and in particular the office sector, we are providing the following additional information: We continue to maintain diversity among property types and within our geographic footprint. In particular, our office commercial real estate portfolio in the City of San Francisco represents just 3% of our total loan portfolio and 5% of our total non-owner-occupied commercial real estate portfolio.

The following table shows an analysis of construction loans by type and county as of December 31, 2024 and 2023.

Construction Loans Outstanding by Type and County

(dollars in thousands; unaudited) December 31, 2024 December 31, 2023

Land - unimproved — — 1,066 1.0

(dollars in thousands; unaudited) December 31, 2024 December 31, 2023

County Amount Percent of Construction Loans Amount Percent of Construction Loans

Construction loans decreased by $62.2 million in 2024, compared to a decrease of $15.2 million in 2023. The decrease in 2024 was primarily due to $44.5 million in conversions to commercial real estate financing following completion of construction and $15.4 million in payoffs. These decreases were partially offset by $11.5 million in new loans and $4.9 million in advances on existing construction loans. The decrease in 2023 was primarily due to $22.2 million in payoffs and $16.9 million in conversions to commercial real estate financing. These decreases were partially offset by $24.5 million in advances on existing construction loans. Undisbursed construction loan commitments at December 31, 2024 and 2023 were $8.3 million and $13.9 million, respectively.

The following table presents the amortized costs and maturity distribution of our loans by portfolio class as of December 31, 2024 based on their contractual maturity dates. Maturities do not include scheduled payments or potential prepayments.

Loan Maturity Distribution

(in thousands; unaudited)

Real estate

1 Construction loans that mature after 5 years are structured to convert to permanent financing after the initial construction period.

The following table shows the mix of variable-rate loans and fixed-rate loans due after one year by portfolio class as of December 31, 2024. The large majority of variable-rate loans are tied to independent indices, such as the Prime Rate or a Treasury Constant Maturity Rate. Most loans with original terms of more than five years have provisions for the fixed rates to reset, or convert to variable rates, after three, five or seven years. These loans are included in the variable-rate balances below.

Loan Interest Rate Sensitivity - Due After One Year

(in thousands; unaudited) Fixed Variable Total

Real estate

Allowance for Credit Losses on Loans

The allowance for credit losses on loans is calculated in accordance with ASC 326 based on management's best estimate of current expected credit losses over the loans' contractual terms, adjusted for estimated prepayments where applicable. The contractual terms exclude anticipated extensions, renewals and modifications. Relevant available information includes historical credit loss experience, current conditions and reasonable and supportable forecasts. While historical credit loss experience provides the basis for the estimation of expected credit losses, adjustments to historical loss information may be made for differences in current portfolio-specific risk characteristics, environmental conditions or other relevant factors. All specifically identifiable and quantifiable losses are charged off against the allowance. The ultimate adequacy of the allowance depends on a variety of complex factors, some of which may be beyond management's control, such as volatility in the real estate market, changes in interest rates and economic and political environments. Based on the current conditions of the loan portfolio and reasonable and supportable forecasts, management believes that the $30.7 million allowance for credit losses at December 31, 2024 was adequate to absorb expected credit losses in our loan portfolio. For additional information on our allowance for credit losses methodology, refer to Notes 1 and 3 to the Consolidated Financial Statements in ITEM 8 of this report.

The ratio of the allowance for credit losses to total loans was 1.47% at December 31, 2024 and 1.21% at December 31, 2023.

The $5.5 million increase in the allowance for credit losses on loans in 2024 was largely due to the specific allowance increase of $6.7 million. This was mainly due to the increased reserve of $5.2 million for one non-owner occupied commercial real estate loan totaling $16.7 million that, although current, had experienced a deterioration in the collateral value and, therefore, a material increase in the loan-to-value. For further information, refer to the Provision for Credit Losses section above, and Notes 1 and 3 to the Consolidated Financial Statements in ITEM 8 of this report.

The following table presents the allowance for credit losses on loans by loan portfolio class in accordance with the methodology described in Note 1 to the Consolidated Financial Statements in ITEM 8 of this report, as well as the percentage of total loans in each of the same loan portfolio classes as of December 31, 2024 and 2023.

Allocation of the Allowance for Credit Losses

The table below shows the activity in the allowance for credit losses for each of the three years presented below.

Allowance for Credit Losses on Loans Rollforward

Provision for (reversal of) credit losses 5,550 2,575 (63)

Loans charged-off:

Commercial and industrial (41) (11) (9)

Real estate:

Commercial real estate, owner-occupied — (406) —

Installment and other consumer (58) (24) (23)

Total loans charged-off (99) (441) (32)

Loans recovered:

Commercial and industrial 21 29 22

Real estate:

Commercial, non-owner occupied 8 — —

Installment and other consumer 4 1 —

Net loans (charged-off) recovered (66) (386) 23

Net charge-offs (recoveries) to average loans NM 0.02 % NM

NM - Not meaningful.

The following table shows non-performing assets as of December 31, 2024 and 2023.

Non-Performing Assets

(dollars in thousands; unaudited) December 31, 2024 December 31, 2023

Non-accrual loans:

Commercial and industrial $ 2,845 $ 4,008

Real estate:

Commercial, owner-occupied 1,537 434

Installment and other consumer 222 —

Other real estate owned $ — $ —

Repossessed personal properties 1 —

Criticized and classified loans:

Doubtful $ — $ —

Allowance for credit losses to non-accrual loans 0.90x 3.15x

Non-accrual loans to total loans 1.63 % 0.39 %

Non-performing assets to total assets 0.92 % 0.21 %

Non-Accrual Loans

Non-accrual loans increased by $25.9 million in 2024, primarily due to three relationships designated as non-accrual in the second and third quarters. One non-owner occupied commercial real estate loan was due to material declines in collateral value, as mentioned in earlier sections. Another was a commercial relationship which had a material paydown in the fourth quarter of 2024. The third relationship was another non-owner occupied commercial real estate loan whose renewal negotiations remain ongoing. This property became 100% occupied with a conforming debt service coverage in the fourth quarter. Approximately 91% of the non-accrual loans as of December 31, 2024 were well-secured by either commercial or residential real estate.

Non-accrual loans in 2023 were comprised of mostly of commercial and industrial and non-owner occupied commercial real estate loans. Over 66% of the non-accrual loans as of December 31, 2023 were well-secured by either commercial or residential real estate.

Criticized and Classified Loans

Loans designated as special mention, which are not considered adversely classified, decreased by $26.3 million in 2024, primarily due to net downgrades of $2.6 million from the pass or watch category and downgrades of $25.0 million to substandard. Of the downgrades to special mention, $15.3 million was attributed to one recently completed construction loan that will be marketed for sale or paid down to a conforming debt service level. The remaining balance changes consisted of paydowns, payoffs and upgrades from substandard risk rating.

Loans designated as special mention, which are not considered adversely classified, increased by $75.0 million in 2023, primarily due to downgrades from the watch category to special mention. The majority of the downgrades from watch to special mention were not necessarily due to worsening conditions or deterioration in the borrowers' financial condition but to a lack of meaningful improvement over the most recent quarters. Of the $92.5 million in downgrades to special mention in 2023, $83.2 million (or 90%) were collateralized by real estate. These increases were partially offset by $7.7 million in paydowns and payoffs, $6.0 million in downgrades from special mention to substandard, and $3.8 million in upgrades to a pass risk rating.

Loans classified as substandard increased by $12.8 million in 2024, primarily due to downgrades from special mention totaling $25.0 million and from pass totaling $2.7 million, partially offset by $11.9 million in paydowns and payoffs and $2.8 million in upgrades to pass or special mention. Of the downgraded loans, $17.1 million (or 82%)

was secured by commercial real estate, $3.5 million was to commercial borrowers, and the remaining $222 thousand were personal loans.

Loans classified as substandard increased by $4.2 million in 2023, primarily due to downgrades from special mention totaling $6.0 million and from pass totaling $3.7 million, partially offset by $4.5 million in paydowns and payoffs and $939 thousand in upgrades to pass. Of the downgraded loans, $7.0 million (or 72%) was secured by commercial real estate, and the remaining $2.7 million was to commercial borrowers.

Refer to Note 3 to the Consolidated Financial Statements in ITEM 8 of this report for an allocation of criticized and classified loans by loan portfolio class.

Other Assets

BOLI totaled $71.0 million as of December 31, 2024, compared to $68.1 million at December 31, 2023. The $2.9 million increase was primarily due to the purchase of $1.2 million in new BOLI policies and earnings from the BOLI policies.

Interest receivable and other assets totaled $72.3 million and $74.9 million at December 31, 2024 and 2023, respectively. The $2.7 million decrease was primarily due to a $3.7 million decrease in net deferred tax assets, as discussed below.

Net deferred tax assets totaled $30.6 million and $34.3 million at December 31, 2024 and 2023, respectively. Deferred tax assets consist primarily of tax benefits expected to be realized in future periods related to temporary differences such as allowances for credit losses and unfunded loan commitments, net operating loss carryforwards, and deferred compensation and salary continuation obligations. The $3.7 million decrease in 2024 was primarily due to an $8.4 million decrease in deferred tax assets related to changes in unrealized losses on available-for-sale investment securities. The decreases in net deferred tax assets was partially offset by a $3.2 million increase in deferred tax assets related to net operating loss carryforwards and $1.6 million increase in the allowance for credit losses on loans and unfunded loan commitments. Management believes deferred tax assets will be realizable due to our expectation that earnings will continue to be at a level adequate to realize such tax benefits. Therefore, no valuation allowance was established as of December 31, 2024 or 2023. For additional information, refer to Note 11 to the Consolidated Financial Statements in ITEM 8 of this report.

We held $16.7 million of FHLB stock recorded at cost in other assets at both December 31, 2024 and 2023. We received $1.5 million, $1.3 million and $1.0 million in cash dividends in 2024, 2023 and 2022, respectively. For additional information, refer to Note 2 to the Consolidated Financial Statements in ITEM 8 of this report.

Deposits

Deposits decreased by $70.1 million, to $3.220 billion at December 31, 2024, compared to $3.290 billion at December 31, 2023. Non-interest bearing deposits declined to 43.5% of total deposits at December 31, 2024, compared to 43.8% at December 31, 2023. Deposit outflows included transfers to investment accounts in our wealth management services team and other outflows that did not meet our disciplined pricing strategy given our strong liquidity position. We continued our disciplined and focused approach to relationship management and customer outreach, adding approximately 4,700 new accounts in 2024.

As of December 31, 2024, 59% of deposit balances were held in business accounts, with average balances of $127 thousand per account. The remaining 41% were consumer accounts, with average balances of $40 thousand per account. The largest depositor represented 1.3% of total deposits, and the combined four largest depositors represented 4.8% of total deposits.

Balances in the reciprocal deposit network program decreased by $19.3 million during 2024 to $404.7 million as of December 31, 2024. Costs associated with network deposits are recorded as non-interest expense and totaled $3.5 million, $2.8 million, and $258 thousand for the years ended December 31, 2023, 2022 and 2021, respectively.

Estimated uninsured and/or uncollateralized deposits totaled 29% of total deposits as of December 31, 2024, compared to 28% as of December 31, 2023.

Our liquidity policies require that compensating cash balances be held against concentrations over a certain level. See ITEM 1A, Risk Factors, for a discussion of potential risks associated with concentrations and volatility due to the activity of our large deposit customers.

Distribution of Average Deposits

The table below shows the relative composition of our average deposits for 2024 and 2023. For average rates paid on deposits, refer to the Average Statements of Condition and Analysis of Net Interest Income table in ITEM 7- Management's Discussion and Analysis of Financial Condition and Results of Operations.

For the year ended December 31,

1 Money market balances include Insured Cash Sweep® ("ICS") in both 2024 and 2023. Demand Deposit Marketplace SM ("DDM") and ICS balances are discussed in Note 6 to the Consolidated Financial Statements in ITEM 8 of this report.

Maturities of Uninsured Time Deposits

The following table shows time deposits by account that are in excess of $250,000 by time remaining to maturity at December 31, 2024.

(in thousands; unaudited) Total Uninsured Portion

Over six months through twelve months 17,769 8,519

Network Deposits

Our deposit portfolio includes deposits offered through the Promontory Interfinancial Network that are comprised of Certificate of Deposit Account Registry Service® ("CDARS") balances included in time deposits and Insured Cash Sweep® ("ICS") balances included in money market deposits. In addition, we offer deposits through Reich & Tang Deposit Networks, LLC, comprised of Demand Deposit MarketplaceSM ("DDM") balances. Through these two networks we are able to offer our customers access to FDIC-insured deposit products in aggregate amounts exceeding current insurance limits. When we place funds through CDARS,ICS and DDM, on behalf of a customer, we have the option of receiving matching deposits through the network's reciprocal deposit program, or placing deposits "one-way" for which we receive no matching deposits. We consider reciprocal deposits to be in-market deposits, as distinguished from traditional out-of-market brokered deposits. The following table shows the composition of our network deposits at December 31, 2024 and 2023.

Reciprocal 1 One-Way 1 Reciprocal 1 One-Way 1

Borrowings

As of December 31, 2024 and 2023, our borrowing capacity with the Federal Home Loan Bank ("FHLB") under secured lines of credit totaled $948.1 million and $1.009 billion, respectively.

The Bank had a line of credit through the Discount Window at the Federal Reserve Bank of San Francisco ("FRBSF") totaling $358.0 million as of December 31, 2024, secured by investment securities and residential loans. As of December 31, 2023, the Bank had a line of credit through the Discount Window totaling $64.0 million, secured by residential loans, and a $270.2 million line under the Federal Reserve's temporary Bank Term Funding Program ("BTFP") based on the par values of pledged investment securities.

In addition, as of December 31, 2024 and 2023 we had $125.0 million and $135.0 million, respectively, in unsecured lines of credit with correspondent banks to cover short-term borrowing needs.

As of December 31, 2024, the Bank had no outstanding borrowings, compared to $26.0 million outstanding in short-term borrowings under the BTFP facility at an average rate of 4.83% as of December 31, 2023. Other bank lines of credit were not utilized as of December 31, 2024 or 2023.

For additional information, see Note 7, Borrowings and Other Obligations, in ITEM 8 of this report.

Deferred Compensation Obligations

We maintain a non-qualified, unfunded deferred compensation plan for certain key management personnel. Under this plan, participating employees may defer compensation, which will entitle them to receive certain payments for up to, but not exceeding, fifteen years commencing upon retirement, death, disability or termination of employment. A similar Deferred Director Fee Plan entitles participating members of the Board of Directors to receive payments as elected by the participant upon separation from service, death, disability or termination of service. At December 31, 2024 and 2023, our aggregate payment obligations under both plans totaled $6.0 million and $6.6 million, respectively, and was recorded in interest payable and other liabilities in the consolidated statements of condition. Decreases in the deferred compensation plans in 2024 mainly resulted from increases in benefit payments to terminated employees.

We have entered into supplemental executive retirement plans ("SERPs") with a select group of executive officers, providing for certain retirement benefits at age 65 and reduced benefits upon early retirement. The annual amount of benefits in either pre-retirement scenario is based on a vesting schedule unique to each executive. The SERP also provides for lump sum benefits in the event of a change in control followed by the termination of the executive. Payments under the SERPs are expected to be funded by income from bank-owned life insurance policies. On December 31, 2024 and 2023, our liabilities under the SERPs totaled $4.6 million and $4.5 million, respectively, and were recorded in interest payable and other liabilities in the consolidated statements of condition. The SERPs are unfunded and non-qualified for tax purposes and subject to Title I of the Employee Retirement Income Security Act of 1974.

For additional information, see Note 10 to the Consolidated Financial Statements in ITEM 8 of this report.

Capital Adequacy

As discussed in Note 15 to the Consolidated Financial Statements in ITEM 8 of this report, the Bank's capital ratios were above regulatory guidelines to be considered "well capitalized" and Bancorp's ratios exceeded the required minimum ratios for capital adequacy purposes. For further discussion of bank capital requirements, refer to the SUPERVISION AND REGULATION section in ITEM 1 of this report.

The total risk-based capital ratio for Bancorp was16.54% at December 31, 2024, compared to 16.89% at December 31, 2023. The reduction is primarily related to losses realized on securities sales in 2024.

Bancorp's tangible common equity to tangible assets ("TCE ratio") increased to 9.93% at December 31, 2024, from 9.73% at December 31, 2023, primarily due to due to the reduction in total assets. Bancorp's TCE ratio, net of after-tax unrealized losses on held-to-maturity securities as if the losses were realized, was 7.85% as of December 31, 2024, compared to 7.80% at December 31, 2023 (refer to the discussion and reconciliation of this non-GAAP financial measure in the section below entitled Statement Regarding Use of Non-GAAP Financial Measures). The Bank's total risk-based capital ratio decreased to 16.13% at December 31, 2024, from 16.62% at December 31, 2023.

Bancorp's share repurchase program and activity are discussed in detail in ITEM 5 and in Note 8 to the Consolidated Financial Statements in ITEM 8 of this report. We expect to maintain strong capital levels and do not expect that we will be required to raise additional capital in 2025. Our anticipated sources of capital in 2025 include future earnings and shares issued under the stock-based compensation program.

Liquidity and Capital Resources

The goal of liquidity management is to provide adequate funds to meet loan demand and to fund operating activities and deposit withdrawals. We accomplish this goal by maintaining an appropriate level of liquid assets and formal lines of credit with the FHLB, FRBSF and correspondent banks that enable us to borrow funds as seen in the table below and discussed in Note 7 to the Consolidated Financial Statements in ITEM 8 of this report. Our Asset Liability Management Committee ("ALCO"), which is comprised of Bank directors and the Bank's Chief Executive Officer, is responsible for approving and monitoring our liquidity targets and strategies. The Bank has long-established minimum liquidity requirements that are regularly monitored using metrics and tools similar to those used by larger banks, such as the liquidity coverage ratio, and multi-scenario, long-horizon stress tests. Our contingency funding plan provides for early detection of potential liquidity issues in the market or the Bank and institutes prompt responses that may prevent or alleviate a liquidity crisis. Management monitors liquidity daily and regularly adjusts our position based on current and future liquidity needs. We also have relationships with third-party deposit networks and can adjust the placement of our deposits via reciprocal or one-way sales as part of our cash management strategy, as discussed in Note 6 to the Consolidated Financial Statements in ITEM 8 of this report.

Net available funding sources, including unrestricted cash, unencumbered available-for-sale securities, and total available borrowing capacity, totaled $1.849 billion, or 57% of total deposits, and 197% of estimated uninsured and/or uncollateralized deposits as of December 31, 2024.

The following table details the components of our contingent liquidity sources as of December 31, 2024.

(in thousands) Total Available Amount Used Net Availability

Internal Sources

External Sources

Lines of credit at correspondent banks 125,000 — 125

1 Excludes cash items in transit as of December 31, 2024.

Note: Brokered deposits available through third-party networks are not included above.

We obtain funds from the repayment and maturity of loans, deposit inflows, investment securities sales, maturities and paydowns, federal funds purchases, FRBSF and FHLB advances, other borrowings, and cash flow from operations. Although available as a liquidity source, we have not chosen to utilize brokered deposits. Our primary uses of funds are the origination of loans, the purchase of investment securities and loans, withdrawals of deposits, maturities of certificates of deposit, repayment of borrowings, dividends to common stockholders, share repurchases and operating expenses.

Customer deposits are a significant component of our daily liquidity position. The attraction and retention of deposits depend upon the variety and effectiveness of our customer account products, service and convenience, rates paid to customers, and our financial strength. The cash cycles and unique business activities of some of our large commercial depositors may cause short-term fluctuations in their deposit balances held with us.

Our cash and cash equivalents increased by $106.9 million to $137.3 million at December 31, 2024, from $30.5 million at December 31, 2023. The most significant sources of liquidity during 2024 were proceeds from sales, principal paydowns, calls and maturities of investment securities totaling $370.4 million, and $28.4 million in net cash was provided by operating activities.

Significant uses of liquidity during 2024 were $163.8 million in investment securities purchased, $70.1 million in withdrawals of deposits, $26.0 million in repayments of short-term borrowings, and $9.7 million in purchased loan pool, loan originations, and unfunded loan commitment advances, net of principal collected. Additionally other uses included $16.2 million in cash dividends paid on common stock to our shareholders, and $4.2 million in common stock repurchases. Refer to the Consolidated Statement of Cash Flows in this Form 10-K for additional information on our sources and uses of liquidity. Management anticipates that our current strong liquidity position, as detailed in this report, and contingent funding sources are adequate to support our operational needs.

Unfunded credit commitments, as discussed in Note 16 to the Consolidated Financial Statements in ITEM 8 of this report, totaled $460.7 million at December 31, 2024. We expect to fund these commitments to the extent utilized primarily through the repayment of existing loans, principal paydowns of investment securities, and liquid assets.

Over the next twelve months, $230.2 million of time deposits will mature. We expect that a high percentage of these funds will remain with the Bank either through renewals or shifts to other deposit products. Any outflows can be absorbed by the Bank's excess liquidity. We believe our emphasis on local deposits, combined with our immediately available funding sources, provides a very stable base for our liquidity needs.

We had no outstanding borrowings under our credit facilities as of December 31, 2024, and $26.0 million as of December 31, 2023, as discussed in Note 7 to the Consolidated Financial Statements in ITEM 8 of this report.

Because Bancorp is a holding company and does not conduct regular banking operations, its primary sources of liquidity are dividends from the Bank. Under the California Financial Code, payment of a dividend from the Bank to Bancorp without advance regulatory approval is restricted to the lesser of the Bank’s retained earnings or the amount of the Bank’s net profits from the previous three fiscal years less the amount of dividends paid during that period. The Bank received approval from the State of California - Department of Financial Protection and Innovation on May 30, 2024, for a dividend of $19.0 million which was paid to Bancorp on June 24, 2024. The primary uses of funds for Bancorp are shareholder dividends, share repurchases and ordinary operating expenses. Bancorp held $10.3 million in cash as of December 31, 2024, which is expected to cover cash needs into the second quarter of 2025.

Statement Regarding Use of Non-GAAP Financial Measures

Financial results are presented in accordance with GAAP and with reference to certain non-GAAP financial measures. Management believes that, given industry turmoil that largely began in the first quarter of 2023, the presentation of Bancorp's non-GAAP TCE ratio reflecting the after tax impact of unrealized losses on held-to-maturity securities provides useful supplemental information to investors because it reflects the level of capital remaining after a hypothetical liquidation of the entire securities portfolio. In addition, management believes that providing selected financial measures excluding the loss on sale of securities discussed above is useful to investors as the strategic short-term loss taken for long-term profitability makes the operational performance difficult to compare to the prior period. The year 2022 did not have a material loss on sale of securities and was therefore excluded below. Because there are limits to the usefulness of this or any other non-GAAP measure to investors, Bancorp encourages readers to consider its annual and quarterly consolidated financial statements and notes related thereto in their entirety, as filed with the Securities and Exchange Commission, and not to rely on any single financial measure. A reconciliation of the GAAP financial measures to comparable non-GAAP financial measures is presented below.

Reconciliation of GAAP and Non-GAAP Financial Measures

(in thousands, unaudited) December 31, 2024 December 31, 2023

Tangible Common Equity - Bancorp

Goodwill and core deposit intangible (75,546) (76,520)

Unrealized losses on HTM securities, net of tax1 (89,171) (86,500)

Unrealized losses on HTM securities included in AOCI, net of tax2 7,701 8,761

TCE, net of unrealized losses on HTM securities (non-GAAP) b $ 278,391 284,803

Goodwill and core deposit intangible (75,546) (76,520)

Unrealized losses on HTM securities, net of tax1 (89,171) (86,500)

Unrealized losses on HTM securities included in AOCI, net of tax2 7,701 8,761

Bancorp TCE ratio a / c 9.93 % 9.73 %

Tangible Book Value Per Share

Tangible book value per share a / e $ 22.37 $ 22.44

(in thousands, except per share amounts; unaudited) Years ended

Adjustments:

Related income tax benefit (9,619) (1,742)

Diluted (loss) earnings per share

Diluted (loss) earnings per share (GAAP) $ (0.52) $ 1.24

Comparable diluted earnings per share (non-GAAP) $ 0.90 $ 1.50

Return on average assets

Return on average assets (GAAP) (0.22) % 0.49 %

Comparable return on average assets (non-GAAP) 0.38 % 0.59 %

Return on average equity

Return on average equity (GAAP) (1.93) % 4.69 %

Comparable return on average equity (non-GAAP) 3.34 % 5.67 %

Efficiency ratio

Comparable efficiency ratio (non-GAAP) 77.30 % 69.94 %

ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk

Market risk is defined as the risk of loss arising from an adverse change in the market value (or prices) of financial instruments. A significant component of market risk is interest rate risk, which is inherent in our lending, investment, borrowing, and deposit gathering activities. The Bank manages interest rate sensitivity to minimize the exposure of our net interest margin, earnings, and capital to changes in interest rates. Interest rate changes can create fluctuations in the net interest margin due to an imbalance in the timing of repricing, or maturity of assets or liabilities. Interest rate changes can also affect the market value of our financial instruments, such as available-for-sale securities and the related unrealized gains or losses, which affect our equity value.

To mitigate interest rate risk, the structure of our assets and liabilities is managed with the objective of correlating the effects of interest rate changes on loans and investments with those of deposits and borrowings. The Asset/Liability Management Policy sets limits on the acceptable amount of change to net interest income and the economic value of equity in different interest rate environments.

From time to time, we enter into interest rate swap contracts to mitigate the changes in the fair value of selected investment securities and specified long-term fixed-rate loans and firm commitments to enter into long-term fixed-rate loans caused by changes in interest rates. Refer to Note 14 to the Consolidated Financial Statements in ITEM 8 of this report.

ALCO and the Board of Directors review our exposure to interest rate risk at least quarterly. We use simulation models to measure interest rate risk and to evaluate strategies to improve profitability in the context of policy guidelines. A simplified statement of condition is prepared on a quarterly basis as a starting point, using instrument level data of our actual loans, investments, borrowings and deposits as inputs. If potential changes to net equity value and net interest income resulting from hypothetical interest rate changes are not within the limits established by the Board of Directors, management may adjust the asset and liability mix to bring the risk position within approved limits or take other actions. Governing policies are subject to review by regulators and are updated to incorporate their observations and adapt to changes in idiosyncratic and systemic risks. As of December 31, 2024, interest rate risk was within the policy guidelines established by ALCO and the Board. One set of interest rates modeled and evaluated against flat interest rates and a static balance sheet is a series of immediate parallel shifts in the yield curve. Our most recent analysis of our interest rate sensitivity is provided in the following table as an example rather than an expectation of likely interest rate movements.

Interest rate sensitivity is a function of the repricing characteristics of our assets and liabilities. The Bank runs a combination of scenarios and sensitivities in its attempt to capture the range of interest rate risk including the simulations mentioned above. As with any simulation model or other method of measuring interest rate risk, limitations are inherent in the process and results are dependent on assumptions. For example, lower deposit growth than modeled may cause the Bank to increase its borrowing position, thereby increasing its liability sensitivity. Additionally, assets and liabilities may react differently to changes in market interest rates in terms of both timing and responsiveness to market rate movements. Important deposit modeling assumptions include the speed of deposit run-off and the amount by which interest-bearing deposit rates increase or decrease when market interest rates change, otherwise known as the deposit beta.

The above tables reflect deposit betas of up to 70%, averaging 43%, to rates paid on non-maturity interest-bearing deposits in rising rate scenarios. Deposit betas of up to 60%, averaging 35%, are applied to rates paid on non-

maturity interest-bearing deposits in falling rate scenarios with a two month lag assumed. However, deposit pricing is actively managed at the relationship level and closely monitored real-time to avoid unintended consequences. The actual rates and timing of prepayments on loans and investment securities could vary significantly from the assumptions applied in the various scenarios. Lastly, uneven changes in different tenors of U.S. Treasury rates that result in changes to the shape of the yield curve could produce different results from those presented in the table. Accordingly, the results presented should not be relied upon as indicative of actual results in the event of changing market interest rates.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors

Bank of Marin Bancorp

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated statements of condition of Bank of Marin Bancorp and Subsidiary (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of comprehensive income (loss), changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2024 and 2023, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,

accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made

only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance for Credit Losses on Loans

As described in Note 1 and Note 3 to the consolidated financial statements, the allowance for credit losses on loans at December 31, 2024, was $30.7 million on a total loan portfolio of $2.1 billion. The allowance for credit losses provides an estimate of lifetime expected losses in the loan portfolio. The measurement of expected credit losses is based on relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the financial assets.

We identified the forecasted economic conditions and qualitative internal and external risk factors used in the allowance for credit losses on loans as a critical audit matter. The principal considerations for our determination of these components of the allowance for credit losses on loans as a critical audit matter are subjectivity of the estimation and application of forecasted economic conditions and qualitative internal and external risk factors used in the calculation. The economic forecast component of the allowance for credit losses on loans is used to compare the conditions that existed during the historical period to current conditions and future expectations. The qualitative internal and external risk factors are used to adjust for differences in segment-specific risk characteristics or conditions that differ from those that existed during the historical period for which the probability of default and loss given default factors were developed. Auditing management’s judgements regarding the forecasted economic conditions and qualitative internal and external risk factors applied to the allowance for credit losses on loans involved a high degree of subjectivity.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. Our audit procedures related to the allowance for credit losses on loans included the following, among others:

• Testing the design, implementation, and operating effectiveness of controls related to management’s calculation of the allowance for credit losses on loans, including controls over the forecasted economic conditions and qualitative internal and external risk factors utilized.

• Testing the appropriateness of the methodology used in the calculation of the allowance for credit losses on loans, as well as testing completeness and accuracy of the data used in the calculation, application of the forecasted economic conditions and qualitative internal and external risk factors determined by management and used in the calculation, and verifying calculations in the allowance for credit losses on loans.

• Obtaining management’s analysis and supporting documentation related to the forecasted economic conditions and testing whether the forecasts used in the calculation of the allowance for credit losses on loans are reasonable and supportable based on the analysis provided by management.

• Obtaining management’s analysis of qualitative internal and external risk factors and evaluating the reasonableness of the assumptions used in determining the qualitative factor adjustments.

/s/ Moss Adams LLP

Portland, Oregon

March 14, 2025

We have served as the Company’s auditor since 2004.

March 14, 2025

Management's Report on Internal Control over Financial Reporting

Management of Bank of Marin Bancorp and subsidiary, (the "Company") is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles ("GAAP"). The Company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company's assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures are being made only in accordance with authorizations of management and board of directors; and (3) provide reasonable assurance regarding prevention, or timely detection and correction of unauthorized acquisition, use, or disposition of the Company's assets that could have a material effect on the financial statements.

Management conducted an assessment of the effectiveness of internal control over financial reporting as of December 31, 2024, utilizing the framework established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, management has concluded that the Company maintained effective internal control over financial reporting as of December 31, 2024.

The Company's independent registered public accounting firm, Moss Adams LLP, has issued an integrated audit opinion on our internal control over financial reporting, which appears on the previous page.

/s/ Timothy D. Myers

Timothy D. Myers, President and Chief Executive Officer

/s/ Dave Bonaccorso

Dave Bonaccorso, EVP and Chief Financial Officer

BANK OF MARIN BANCORPCONSOLIDATED STATEMENTS OF CONDITION

(in thousands, except share data) 2024 2023

Assets

Cash, cash equivalents and restricted cash $ 137,304 $ 30,453

Investment securities:

Allowance for credit losses on loans (30,656) (25,172)

Bank premises and equipment, net 6,832 7,792

Liabilities and Stockholders' Equity

Liabilities

Deposits:

Interest bearing:

Borrowings and other obligations 154 26,298

Interest payable and other liabilities 24,250 25,562

Commitments and contingent liabilities (Note 12)

Stockholders' Equity

Preferred stock, no par value, Authorized - 5,000,000 shares, none issued — —

Accumulated other comprehensive loss, net of tax (30,068) (53,006)

The accompanying notes are an integral part of these consolidated financial statements.

BANK OF MARIN BANCORPCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Interest income

Interest on federal funds sold and due from banks 6,714 2,329 1,407

Interest expense

Interest on interest-bearing transaction accounts 1,201 1,036 421

Interest on borrowings and other obligations 241 11,562 91

Provision for (reversal of) credit losses on loans 5,550 2,575 (63)

Reversal of credit losses on unfunded loan commitments (233) (342) (318)

Non-interest income

Net losses on sale of investment securities (32,541) (5,893) (63)

Non-interest expense

Federal Deposit Insurance Corporation insurance 1,863 1,878 1,179

Other real estate owned — 48 359

Net (loss) income per common share:

Weighted average common shares:

Comprehensive income (loss):

Other comprehensive income (loss):

The accompanying notes are an integral part of these consolidated financial statements.

BANK OF MARIN BANCORPCONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

Shares Amount

Other comprehensive loss, net of tax — — — (71,722) (71,722)

Stock issued under employee stock purchase plan 2,025 62 — — 62

Stock issued under employee stock ownership plan 38,000 1,233 — — 1,233

Restricted stock granted 46,672 — — — —

Restricted stock forfeited / cancelled (13,692) — — — —

Stock-based compensation - stock options — 251 — — 251

Stock-based compensation - restricted stock — 712 — — 712

Cash dividends paid on common stock ($0.98 per share) — — (15,673) — (15,673)

Stock purchased by directors under director stock plan 515 16 — — 16

Stock issued in payment of director fees 10,145 355 — — 355

Stock repurchased, including commissions (23,275) (877) — — (877)

Other comprehensive income, net of tax — — — 20,740 20,740

Stock issued under employee stock purchase plan 2,527 46 — — 46

Stock issued under employee stock ownership plan 58,400 1,315 — — 1,315

Restricted stock granted 61,978 — — — —

Restricted stock forfeited / cancelled (21,024) — — — —

Stock-based compensation - stock options — 181 — — 181

Stock-based compensation - restricted stock — 341 — — 341

Cash dividends paid on common stock ($1.00 per share) — — (16,106) — (16,106)

Stock issued in payment of director fees 18,362 398 — — 398

Other comprehensive income, net of tax — — — 22,938 22,938

Stock issued under employee stock purchase plan 2,184 38 — — 38

Stock issued under employee stock ownership plan 60,800 1,149 — — 1,149

Restricted stock granted 106,964 — — — —

Restricted stock forfeited / cancelled (42,396) — — — —

Stock-based compensation - stock options — 50 — — 50

Stock-based compensation - restricted stock — 580 — — 580

Cash dividends paid on common stock ($1.00 per share) — — (16,197) — (16,197)

Stock issued in payment of director fees 27,287 513 — — 513

The accompanying notes are an integral part of these consolidated financial statements.

BANK OF MARIN BANCORP CONSOLIDATED STATEMENTS OF CASH FLOWS

Cash Flows from Operating Activities:

Provision for (reversal of) credit losses on loans 5,550 2,575 (63)

Reversal of credit losses on unfunded loan commitments (233) (342) (318)

Noncash contribution expense to employee stock ownership plan 1,149 1,315 1,233

Noncash director compensation expense 513 398 355

Net change in deferred loan origination costs/fees 120 (836) (2,716)

Write-down of other real estate owned — 40 345

Net losses on sale of investment securities 32,541 5,893 63

Earnings on bank-owned life insurance policies (1,714) (1,802) (1,229)

Net changes in:

Net changes in interest receivable and other assets (6,695) (4,149) 2,228

Net changes in interest payable and other liabilities 172 2,378 (4,708)

Cash Flows from Investing Activities:

Proceeds from sale of premises and equipment 21 — —

Purchase of held-to-maturity securities — — (319,937)

Purchase of available-for-sale securities (163,769) — (243,459)

Proceeds from sale of Visa Inc. Class B restricted common stock — 2,807 —

Purchased Loans (35,874) — —

Proceeds from sale of loan — 3,263 —

Purchase of bank-owned life insurance policies (1,211) — (4,714)

Proceeds from bank-owned life insurance policies — 766 350

Purchase of premises and equipment (520) (1,749) (2,266)

Proceeds from sale of other real estate owned — 420 —

Cash paid for low income housing tax credit investment (5) (42) (30)

Cash Flows from Financing Activities:

Repayment of finance lease obligations (152) (148) (131)

Proceeds from stock options exercised — 230 821

Restricted stock surrendered for tax withholdings upon vesting (64) (70) (40)

Stock repurchased, including commissions (4,253) — (1,250)

Supplemental disclosure of cash flow information:

Supplemental disclosure of noncash investing and financing activities:

Purchase of available-for-sale security on account and unsettled $ — $ — $ —

Cumulative effect of change in accounting principle ASU 2016-13 $ — $ — $ —

Transfer of loan to loans held-for-sale $ — $ 3,263 $ —

Restricted cash 1 $ — $ 330 $ —

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1: Summary of Significant Accounting Policies

Nature of Operations: Bank of Marin Bancorp ("Bancorp"), headquartered in Novato, California, conducts business primarily through its wholly-owned subsidiary, Bank of Marin (the "Bank"), a California state-chartered commercial bank that provides a wide range of financial services through 27 retail branches and 8 commercial banking offices across Northern California. Our customer base is made up of business, not-for-profit and personal banking relationships from the communities within our Northern California footprint.

Basis of Presentation:The consolidated financial statements include the accounts of Bancorp, a bank holding company, and its wholly-owned bank subsidiary, Bank of Marin, a California state-chartered commercial bank. References to “we,” “our,” “us” mean Bancorp and the Bank that are consolidated for financial reporting purposes. Our accounting and reporting policies conform to U.S. generally accepted accounting principles ("GAAP"), general practice, and regulatory guidance within the banking industry. A summary of our significant policies follows. All material intercompany transactions have been eliminated. We evaluated subsequent events through the date of filing with the Securities and Exchange Commission (“SEC”) and determined there were no subsequent events that required additional recognition or disclosure.

Segment Reporting: Our Chief Operating Decision Maker ("CODM") is our Chief Executive Officer, who reviews our financial information on a consolidated basis for purposes of evaluating financial performance and allocating resources. We have one operating and reportable segment, community banking, and our other operating segment, wealth management services, does not meet the quantitative threshold for separate reporting. Our CODM reviews consolidated net income before provision for income taxes as our primary measure of profitability alongside significant expense information consistent with the expense captions presented in our Consolidated Statements of Comprehensive Income (Loss). These metrics are used by our CODM to monitor actual results and to benchmark to our peers. Segment assets are equal to consolidated total assets in our Consolidated Statements of Condition and all segment non-cash items are equal to those disclosed in our Consolidated Statements of Cashflows. We derive materially all of our income from activities within the United States, and materially all of our long lived assets are physically located within the United States. No single customer or client relationship accounts for ten percent or more of our income.

(in thousands)

Community banking segment:

Reconciliation of income

Less:2

Provision for (reversal of) credit losses on loans 5,550 2,575 (63)

Reversal of credit losses on unfunded loan commitments (233) (342) (318)

Non-interest expense

Federal Deposit Insurance Corporation insurance 1,863 1,878 1,179

Other real estate owned — 48 359

Reconciliation of segment (loss) income

Accounting Changes and Reclassifications: There have been no items in prior financial statements that have been reclassified to conform to the current presentation.

Use of Estimates:The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant accounting estimates reflected in the consolidated financial statements include the allowance for credit losses, fair value measurements, and goodwill impairment assessment, as discussed in the Notes herein.

Cash, Cash Equivalents and Restricted Cash: This includes cash, due from banks, federal funds sold and other short-term investments with maturities of less than three months at the time of purchase.Restricted cash includes balances not immediately available for business operations such as Federal Reserve Bank of San Francisco reserve requirements and cash pledged for interest rate swap contracts and local agency deposits.

Investment Securities: Investment securities are classified as "held-to-maturity," "trading securities" or "available-for-sale." Investments classified as held-to-maturity are those that we have the ability and intent to hold until maturity and are reported at cost, adjusted for the amortization or accretion of premiums or discounts. Investments held for resale in anticipation of short-term market movements are classified as trading securities and are reported at fair value, with unrealized gains and losses included in earnings. Investments that are neither held-to-maturity

nor trading are classified as available-for-sale and are reported at fair value. Unrealized gains and losses for available-for-sale securities, net of related taxes, are reported as a separate component of comprehensive income (loss) and included in stockholders' equity until realized. For discussion of our methodology in determining fair value, see Note 9, Fair Value of Assets and Liabilities.

Purchase premiums and discounts on investment securities are amortized or accreted over the life of the related security as an adjustment to yield using the effective interest method. For certain callable debt securities purchased at a premium, we amortize the premium to the earliest call date.

Dividend and interest income are recognized when earned. Realized gains and losses on the sale of securities are included in non-interest income. The specific identification method is used to calculate realized gains and losses on sales of securities.

Securities transferred from the available-for-sale category to the held-to-maturity category are recorded at fair value at the date of transfer. Unrealized holding gains or losses on the dates of the transfer of securities from available-for-sale to held-to-maturity are included in the balance of accumulated other comprehensive income (loss), net of tax, in the consolidated balance sheets. These unrealized holding gains or losses on the dates of transfer are amortized over the remaining life of the securities as yield adjustments in a manner consistent with the amortization or accretion of the original purchase premium or discount on the associated security.

Non-marketable equity securities include stock held for membership and regulatory purposes, such as Federal Home Loan Bank ("FHLB") stock and other non-marketable equity securities. These securities are accounted for at cost, evaluated for impairment as of each reporting period, and included in interest receivable and other assets on the consolidated statements of condition. During 2023, the Bank sold its remaining investment in Visa Inc. Class B restricted common stock, as discussed in Note 2 - Investment securities. As of December 31, 2024 and 2023 our investment in FHLB stock was carried at cost, as there was no impairment or changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Both cash and stock dividends from the FHLB are reported as non-interest income.

Allowance for Credit Losses on Investment Securities: The allowance for credit losses on held-to-maturity securities is a contra-asset valuation account determined in accordance with ASC 326, which is deducted from the securities' amortized cost basis at the balance sheet date as a result of management's assessment of the net amount expected to be collected. The allowance is measured on a pooled basis for securities with similar risk characteristics using historical credit loss information, adjusted for current conditions and reasonable and supportable forecasts. Securities that are determined to be uncollectible are written off against the allowance.

For available-for-sale securities in an unrealized loss position ("impaired security"), we assess whether 1) we intend to sell the security, or, 2) it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis. Under either of these conditions, the security's amortized cost is written down to fair value through a charge to previously recognized allowances or earnings, as applicable. For impaired securities that do not meet these conditions, we assess whether the decline in fair value was due to credit loss or other factors. This assessment considers, among other things: 1) the extent to which the fair value is less than amortized cost, 2) the financial condition and near-term prospects of the issuer, 3) any changes to the rating of the security by a rating agency, and 4) our intent and ability to retain the investment for a period of time sufficient to allow for any anticipated recovery in fair value. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss component. Any impairment due to non-credit-related factors that has not been recorded through an allowance for credit losses is recognized in other comprehensive income (loss). The discount rate used in determining the present value of the expected cash flows is based on the effective interest rate implicit in the security at the date of purchase.

Accrued interest receivable is excluded from the amortized costs and fair values of both held-to-maturity and available-for-sale securities and included in interest receivable and other assets on the consolidated statements of condition. Investment securities are placed on non-accrual status when principal or interest is contractually past due more than ninety days, or management does not expect full payment of principal and interest. We do not record an allowance for credit losses for accrued interest on investment securities, as the amounts are written-off

when the investment is placed on non-accrual status. There were no non-accrual investment securities in any of the years presented in the consolidated financial statements.

Originated Loans: Loans are reported at amortized cost, which is the principal amount outstanding net of deferred fees (costs), purchase premiums (discounts) and net charge-offs (recoveries). Amortized cost excludes accrued interest, which is reflected in interest receivable and other assets in the consolidated statements of condition. We do not measure an allowance for credit losses on accrued interest receivable balances because these balances are written off in a timely manner as a reduction to interest income when loans are placed on non-accrual status as discussed below. Interest income is accrued daily using the simple interest method. Fees collected upon loan origination and certain direct costs of originating loans are deferred and recognized over the contractual lives of the related loans as yield adjustments using the interest method or straight-line method, as applicable. Upon prepayment or other disposition of the underlying loans before their contractual maturities, any associated unearned fees or unamortized costs are recognized.

Acquired Loans:ASC 326 modified the accounting for purchased loans and requires that an allowance for credit losses be established at the date of acquisition. However, for purchased financial assets with a more-than-insignificant amount of credit deterioration since origination (“PCD assets”) that are measured at amortized cost, the initial allowance for credit losses is added to the purchase price rather than reported as a provision for credit losses. Subsequent changes in the allowance for credit losses on PCD assets are recognized through the provision for credit losses.

Past-Due and Non-Accrual Loan Policy: A loan is considered past due when a payment has not been received by the contractual due date. Loans are placed on non-accrual status when management believes that there is substantial doubt as to the collection of principal or interest, generally when they become contractually past due by 90 days or more with respect to principal or interest, except for loans that are well-secured and in the process of collection. When loans are placed on non-accrual status, any accrued but uncollected interest is reversed from current-period interest income and the amortization of deferred loan origination fees and costs is suspended. Interest payments received on nonaccrual loans are either applied against principal or reported as interest income, according to management’s judgment as to the ultimate collectability of principal. We may return non-accrual loans to accrual status when one of the following occurs:

•The borrower has resumed paying the full amount of the principal and interest and we are satisfied with the borrower's financial position. In order to meet this test, we must have received repayment of all past due principal and interest, unless the amounts contractually due are reasonably assured of repayment within a reasonable period of time, and there has been a sustained period of repayment performance (generally, six consecutive monthly payments), according to the original or modified contractual terms.

•The loan has become well secured and is in the process of collection.

Loan Charge-Off Policy:For all loan types excluding overdraft accounts, we generally make a charge-off determination at or before 90 days past due. A collateral-dependent loan is partially charged down to the fair value of collateral securing it if: (1) it is deemed uncollectable, or (2) it has been classified as a loss by either our internal loan review process or external examiners. A non-collateral-dependent loan is partially charged down to its net realizable value under the same circumstances. Overdraft accounts are generally charged off when they exceed 60 days past due.

Collateral Dependent Loans: A loan is collateral dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral. For collateral dependent loans, including those for which management determines foreclosure is probable, each loan is individually evaluated and the allowance for credit losses is based on the fair value of the collateral, adjusted for estimated selling costs when repayment is expected from the sale of the collateral, less the loan's amortized cost. In determining the fair value, management considers such information as the appraised value of the collateral, observed and potential future changes in collateral value, and historical loss experience for loans that were secured by similar collateral. Generally, with problem credits that are collateral dependent, we obtain appraisals of the collateral at least annually. We may obtain appraisals more frequently if we believe the collateral value is subject to market volatility, if a specific event has affected the collateral, or if we believe foreclosure is imminent.

Allowance for Credit Losses on Loans ("ACL"):The ACL is a valuation account that is deducted from the amortized cost basis at the balance sheet date to present the net amount of loans expected to be collected. Amortized cost does not include accrued interest, which management elected to exclude from the estimate of expected credit losses (refer to the Past-Due and Non-Accrual Loan Policy section above). Management estimates the allowance quarterly using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Credit loss experience provides the basis for the estimation of expected credit losses.

The ACL model utilizes a discounted cash flow ("DCF") method to measure the expected credit losses on loans collectively evaluated that are sub-segmented by loan pools with similar credit risk characteristics, which are generally comprised of federal regulatory reporting codes (i.e., Call codes). Pooled segments include the following:

•Loans secured by real estate:

- 1-4 family residential construction loans

- Other construction loans and all land development and other land loans

- Secured by farmland (including residential and other improvements)

- Revolving, open-end loans secured by 1-4 family residential properties and extended under lines

of credit

- Closed-end loans secured by 1-4 family residential properties, secured by first liens

- Closed-end loans secured by 1-4 family residential properties, secured by junior liens

- Secured by multifamily (5 or more) residential properties

- Commercial real estate loans secured by owner-occupied non-farm nonresidential properties

- Commercial real estate loans secured by other non-farm nonresidential properties

•Loans to finance agricultural production and other loans to farmers

•Commercial and industrial loans

•Loans to individuals for household, family and other personal expenditures (i.e., consumer loans)

•Municipal entities

•Non-profit organizations

•Other loans (overdraft credit lines)

The DCF method incorporates assumptions for probability of default ("PD"), loss given default ("LGD"), and prepayments and curtailments over the contractual terms of the loans. Under the DCF method, the ACL reflects the difference between the amortized cost basis and the present value of the expected cash flows using the loan's effective rate. We elected to report the change in present values from one reporting period to the next due to the passage of time and changes in the estimate of future expected cash flows through the provision for credit losses, rather than though interest income.

In determining the PD for each pooled segment, the Bank utilized regression analyses to identify certain economic drivers that were considered highly correlated to historical Bank or peer loan default experience. As a result, management chose the California unemployment rate as the primary economic forecast driver for all segments, except for municipal loans. In addition, the annual percentage change in the California gross domestic product was used in the commercial and industrial loan segment. For municipal loans, the ACL model utilized a constant default rate obtained from a nationally recognized default rate study, which is updated annually. A third party provides LGD estimates for each segment based on a banking industry Frye-Jacobs Risk Index approach. The ACL model incorporates a one-year reasonable and supportable forecast of economic factors, updated quarterly, which is based on Moody's Analytics' Baseline Forecast. For periods beyond the forecast horizon, the economic factors revert to historical averages on a straight-line basis over a one-year period.

Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments and curtailments, when appropriate. The pooled loans' contractual loan terms exclude assumptions about extensions, renewals, and modifications.

Loans that do not share the same risk characteristics as pooled loans are evaluated individually for credit loss and generally include all non-accrual loans, collateral dependent loans, and certain modified loans and loans graded substandard or worse, as determined by management.

•Changes in the nature and volume of the loan portfolio

•Changes in the volume and severity of past due loans, the volume of non-accruals loans, and the volume and severity of adversely classified or graded loans

•The existence and effect of individual loan and loan segment concentrations

•Changes in lending policies and procedures, including changes in underwriting standards and collection, charge-off, and recovery practices not considered elsewhere

•Changes in the experience, ability, and depth of lending management and other relevant staff

•Changes in the quality of our systematic loan review processes

•Changes in economic and business conditions, and developments that affect the collectability of the portfolio

•Changes in the value of underlying collateral, where applicable

•The effect of other external factors such as legal and regulatory requirements on the level of estimated credit losses in the portfolio

•The effect of acquisitions of other loan portfolios on our infrastructure, including risk associated with entering new geographic areas as a result of such acquisitions

•The presence of specialized lending segments in the portfolio

There were no material changes to the ACL methodology during 2024. However, assumptions that mainly influenced management's current estimate of the expected credit losses were primarily adjustments to qualitative risk factors from continued uncertainty about inflation and recession risks, the potential impact of rapidly increasing interest rates and other external factors on both our non-owner-occupied commercial real estate and construction portfolios, loan and collateral concentration risks in our construction and commercial real estate portfolios, heightened portfolio management in light of current economic conditions, and continued negative trends in adversely graded loans and/or collateral values for our non-owner occupied commercial real estate office and multi-family real estate portfolios. Other elements of the estimated current expected credit losses included increased allowances for individually analyzed loans exhibiting unique credit risk characteristics and a slight increase in Moody's Analytics' Baseline Forecast of California's unemployment rate, partially offset by the impact of an overall decrease in loans. While we believe we use the best information available to determine the allowance for credit losses, our results of operations could be significantly affected if circumstances differ substantially from the assumptions used in determining the allowance. Our ACL model is sensitive to changes in unemployment rate forecasts and certain other assumptions that could result in material fluctuations in the allowance for credit losses and adversely affect our financial condition and results of operations.

Under ASU No. 2022-02 certain loan modifications made to borrowers experiencing financial difficulty are now subject to the Bank's standard ACL process, as outlined above.

For further information regarding the allowance for loan losses, see Note 3, Loans and Allowance for Loan Losses.

Allowance for Credit Losses on Unfunded Loan Commitments: We make commitments to extend credit to meet the financing needs of our customers in the form of loans or standby letters of credit. We are exposed to credit losses over a loan's contractual period in the event that a decline in credit quality of the borrower leads to nonperformance. We record an allowance for losses on unfunded loan commitments at the balance sheet date based on estimates of probability that these commitments will be drawn upon according to historical utilization experience of different types of commitments and expected loss severity and loss rates determined for pooled funded loans. The allowance for credit losses on unfunded commitments is a liability account included in interest payable and other liabilities on the consolidated statements of condition. Adjustments to the allowance for unfunded commitments are included in non-interest expense as a provision for (or reversal of) the allowance for unfunded commitments.

Transfers of Financial Assets:We have entered into certain loan participation agreements with other organizations. We account for these transfers of financial assets as sales when control over the transferred financial assets has been surrendered. Control over transferred assets is deemed to be surrendered when 1) the

assets and liabilities have been isolated from us, 2) the transferee has the right to pledge or exchange the assets (or beneficial interests) it received, free of conditions that constrain it from taking advantage of that right, beyond a trivial benefit and 3) we do not maintain effective control over the transferred financial assets or third-party beneficial interests related to those transferred assets. Transfers of a portion of a loan must meet the criteria of a participating interest. If it does not meet the criteria of a participating interest, the transfer must be accounted for as a secured borrowing. In order to meet the criteria for a participating interest, all cash flows from the loan must be divided proportionately, the rights of each loan holder must have the same priority, and the loan holders must have no recourse to the transferor other than standard representations and warranties and no loan holder has the right to pledge or exchange the entire loan. We recognized no gains or losses on the sale of these participation interests in 2024, 2023 and 2022.

Premises and Equipment:Land is carried at cost and not depreciated. Bank-owned buildings, leasehold improvements, furniture, fixtures, software and equipment and are stated at cost, less accumulated depreciation, and depreciated/amortized on a straight-line basis. Furniture and fixtures are depreciated over eight years and equipment is generally depreciated over three to twenty years. Bank-owned buildings are depreciated over twenty-five to thirty years. Leasehold improvements are amortized over the lesser of their estimated useful lives or the terms of the leases. When assets are sold or otherwise disposed of, the cost and related accumulated depreciation or amortization are removed from the accounts and any resulting gain or loss is recognized in income for the period. The cost of maintenance and repairs is charged to expense as incurred.

Leases:We lease certain premises under long-term non-cancelable operating leases, most of which include escalation clauses and one or more options to extend the lease term, and some of which contain lease termination clauses. Only those renewal and termination options that management determines are reasonably certain of exercising are included in the calculation of the lease liability. In addition, we lease certain equipment under finance leases. The equipment finance lease terms do not contain renewal options, bargain purchase options or residual value guarantees. We did not have any significant short-term leases during the reported periods.

Lease right-of-use assets represent the right to use the underlying asset while lease liabilities represent the present value of future lease obligations. We elected not to separate non-lease components from lease components and to exclude short-term leases (i.e., lease term of 12 months or less at the commencement date) from right-of-use assets and lease liabilities for all lease classifications. When calculating the lease liability, because most lease contracts do not contain an implicit interest rate, we discount lease payments over a lease's expected term based on the collateralized Federal Home Loan Bank borrowing rate that was commensurate with lease terms and minimum payments at the lease commencement date. Right-of-use assets for operating leases are amortized over the lease term by amounts that represent the difference between periodic straight-line lease expense and periodic interest accretion on the related liability to make lease payments, whereas finance leases are amortized on a straight-line basis over the term of the lease. Expense recognition for operating leases is recorded on a straight-line basis while expense recognition for finance leases represents the sum of periodic amortization of the associated right-of-use asset and the interest accretion on the lease liability. Refer to Note 12, Commitments and Contingencies, for further information.

Business Combinations: Business combinations are accounted for under the acquisition method of accounting in accordance with ASC 805, Business Combinations. A business is defined as a set of activities and assets that is both self-sustaining and managed to provide a return to investors and generally has three elements: inputs, processes and outputs. Under the acquisition method, the acquiring entity in a business combination recognizes the acquired assets and assumed liabilities at their estimated fair values as of the date of acquisition. Any excess of the purchase price over the fair value of net assets and other identifiable intangible assets acquired is recorded as goodwill. To the extent the fair value of net assets acquired, including other identifiable assets, exceed the purchase price, a bargain purchase gain is recognized. Assets acquired and liabilities assumed from a business combination are recognized at fair value. Results of operations of an acquired business are included in the consolidated statements of operations from the date of acquisition. Business acquisition-related costs, including conversion and restructuring charges, are expensed as incurred. If substantially all of an acquisition is made up of one asset or several similar assets, or without a substantive process that together contributes to the ability to create outputs, the acquisition is accounted for as an asset acquisition and acquisition costs will be capitalized as part of the assets acquired, rather than expensed in a business combinations.

Goodwill and Other Intangible Assets: Goodwill arises from the acquisition method of accounting for business combinations and represents the excess of the fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. Goodwill is deemed to have an indefinite life, is not subject to amortization, and as such is tested for impairment at least annually or more frequently if events and circumstances lead management to believe the value of goodwill may be impaired. Goodwill is the only intangible asset with an indefinite life recorded in the Company’s consolidated statements of financial condition. Impairment testing is performed at the reporting unit level, which management considered to be the Community Banking Segment at December 31, 2024. Management considered the Company to be its sole reportable unit for the year ended December 31, 2024.

Management’s assessment of goodwill impairment is performed in accordance with ASC 350-20, Intangibles - Goodwill and Other - Goodwill and encompasses a two-step process to evaluate each reporting unit. First, the Company has the option to perform a qualitative assessment to evaluate relevant events or circumstances to determine whether it is more likely than not the fair value of the Company is less than its carrying amount, including goodwill. The factors considered in the qualitative assessment typically include macroeconomic conditions, industry and market conditions and the overall financial performance of the Company, among other factors. If the Company determines that it is more likely than not the fair value of the Company may be less than its carrying amounts, then it proceeds to the quantitative impairment test, whereby it calculates the fair value of the Company. Under GAAP, in its performance of impairment testing, management has the unconditional option to proceed directly to the quantitative impairment test, bypassing the qualitative assessment. If the carrying amount of the Company exceeds its fair value, the amount by which the carrying amount exceeds fair value, up to the carrying value of goodwill, is recorded through earnings as an impairment charge recorded in non-interest expense. If the results of the qualitative assessment indicate that it is not more likely than not that an impairment has occurred, or if the quantitative impairment test results in a fair value of the Company that is greater than the carrying amount, then no impairment charge is recorded.

The Company performs its annual goodwill impairment test as of November 30th each year. The results indicated that goodwill was not impaired as of December 31, 2024, and there were no changes to our assessment through December 31, 2024. In addition, the Company recorded no goodwill impairment for the year ended December 31, 2023 or 2022.

Core deposit intangibles ("CDI") arising from the acquisition of other financial institutions are considered to have definite useful lives and are amortized on an accelerated method over their estimated useful life of ten years.At December 31, 2024, the future estimated amortization expense for the CDI arising from our past acquisitions was as follows:

BMRC US Equity

BMRC · 10-K · period ended 2024-12-31

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

BMRC US Equity☆

BMRC · 10-K · period ended 2024-12-31

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

BMRC US Equity