form10k.htm
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
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S
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ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For
the fiscal year ended: December 31, 2007
or
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£
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For the transition period from __________________ to
__________________
Commission
File number: 001-33572
Bank
of Marin Bancorp
(Exact
name of Registrant as specified in its charter)
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California
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20-8859754
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(State or
other jurisdiction of incorporation)
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(IRS Employer
Identification No.)
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504
Redwood Blvd., Suite 100,
Novato,
CA
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94947
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(Address of
principal executive office)
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(Zip
Code)
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(415)
763-4520
(Registrant’s
telephone number, including area code)
Securities
registered pursuant to Section 12 (b) of the Act:
None
Securities
registered pursuant to section 12(g) of the Act:
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Common
Stock, No Par Value,
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and attached Share
Purchase Rights
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NASDAQ Capital
Market
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(Title of
each class)
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(Name of each
exchange on which registered)
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Indicate by check
mark if the registrant is a well-known seasoned issuer, as defined in Rule 405
of the Securities Act.
Indicate by check
mark if the registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act.
Note – checking the
box above will not relieve any registrant required to file reports pursuant to
section 13 or 15(d) of the Exchange Act from their obligations under these
sections.
Indicate by check
mark whether the registrant (1) has filed all reports to be filed by Section 13
or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months,
and (2) has been subject to such filing requirements for the past 90
days. Yes S No £ (See
Explanatory Note.)
Indicate by check
mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K
is not contained herein, and will not be contained, to the best of the
registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this form 10-K or any amendment to this
Form 10-K. £
Indicate by check
mark whether the registrant is a large accelerated filer, an accelerated filer,
or a non-accelerated filer. See definition of “accelerated filer and
large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
One):
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Large
accelerated filer £
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Accelerated
filer S
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Non-accelerated
filer £
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Smaller
reporting company £
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Indicate by check
mark if the registrant is a shell company, as defined in Rule 12b(2) of the
Exchange Act.
Yes £ No S
As of June 30,
2007, the last business day of the registrant’s most recently completed second
fiscal quarter, the aggregate market value of the voting and non-voting common
equity held by non-affiliates, based upon the closing price per share of the
registrant’s common stock as reported by the NASDAQ, was approximately $169
million.
As
of February 20, 2008 there were 5,142,150 shares of common stock
outstanding.
DOCUMENTS
INCORPORATED BY REFERENCE
Portions of the
registrant’s 2007 Annual Report are incorporated by reference into Part II and
Part IV. Portions of the registrant’s Proxy Statement for the 2008
Annual Meeting of Shareholders are incorporated by reference into Part
III.
Explanatory
Note
Bank of Marin
Bancorp is the successor registrant to Bank of Marin pursuant to an 8-K filed
with the SEC on June 29, 2007.
On July 1, 2007
(the “Effective Date”), a bank holding company reorganization was completed
whereby Bank of Marin Bancorp became the parent holding company for Bank of
Marin. On the Effective Date, each outstanding share of Bank of Marin
common stock was converted into one share of Bank of Marin Bancorp common stock
and Bank of Marin became a wholly-owned subsidiary of the holding
company. Bancorp assumed the ticker symbol BMRC, which was formerly
used by Bank of Marin. Prior to the Effective Date, Bank of Marin filed reports
and proxy statements with the Federal Deposit Insurance Corporation (“FDIC”)
pursuant to Sections 12 of the Securities Exchange Act of 1934 (the “1934
Act”).
The financial
statements and discussion thereof contained in this report for periods
subsequent to the reorganization relate to consolidated Bank of Marin
Bancorp. Periods prior to the reorganization relate to Bank of Marin
only. The information is comparable as the sole subsidiary of Bank of
Marin Bancorp is the Bank of Marin.
This report refers
to previous filings made by Bank of Marin with the FDIC pursuant to the 1934
Act. Copies of these filings are available by requesting them
in writing or by phone from:
Corporate
Secretary
Bank of
Marin
504 Redwood Blvd.,
Suite 100
Novato,
CA 94947
415-763-4523
Copies of such
filings are also available on Bancorp’s website at www.bankofmarin.com. This
website address is for information only and is not intended to be an active
link, or to incorporate any website information into this document.
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PAGE
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PART
I
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ITEM
1
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5
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ITEM
1A
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9
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ITEM
1B
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13
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ITEM
2
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13
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ITEM
3
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13
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ITEM
4
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13
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PART
II
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ITEM
5
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14
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ITEM 6
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16
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ITEM 7
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16
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ITEM 7A
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16
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ITEM 8
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16
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ITEM 9
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16
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ITEM
9A
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16
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ITEM
9B
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17
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PART
III
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ITEM
10
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17
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ITEM
11
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17
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ITEM
12
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17
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ITEM
13
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18
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ITEM
14
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18
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PART
IV
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ITEM
15
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18
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20
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22
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Forward-Looking
Statements
This discussion of
financial results includes forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, (the "1933 Act") and
Section 21E of the Securities Exchange Act of 1934, as amended, (the "1934
Act"). Those sections of the 1933 Act and 1934 Act provide a "safe
harbor" for forward-looking statements to encourage companies to provide
prospective information about their financial performance so long as they
provide meaningful, cautionary statements identifying important factors that
could cause actual results to differ significantly from projected
results.
As used in this
document, the term “Bancorp” refers to the Bank holding company and its
subsidiary, Bank of Marin. Bancorp’s forward-looking statements include
descriptions of plans or objectives of management for future operations,
products or services, and forecasts of its revenues, earnings or other measures
of economic performance. Forward-looking statements can be identified by the
fact that they do not relate strictly to historical or current facts. They often
include the words "believe," "expect," "intend," "estimate" or words of similar
meaning, or future or conditional verbs such as "will," "would," "should,"
"could" or "may."
Forward-looking
statements are based on management's current expectations regarding economic,
legislative, and regulatory issues that may impact Bancorp’s earnings in future
periods. A number of factors - many of which are beyond management’s control -
could cause future results to vary materially from current management
expectations. Such factors include, but are not limited to, general economic
conditions, changes in interest rates, deposit flows, real estate values and
competition; changes in accounting principles, policies or guidelines; changes
in legislation or regulation; and other economic, competitive, governmental,
regulatory and technological factors affecting Bancorp’s operations, pricing,
products and services. These and other important factors are detailed in Item 1A
– Risk Factors. Forward-looking statements speak only as of the date they are
made. Bancorp does not undertake to update forward-looking statements to reflect
circumstances or events that occur after the date the forward-looking statements
are made or to reflect the occurrence of unanticipated events.
On July 1, 2007
(the “Effective Date”), a bank holding company reorganization was completed
whereby Bank of Marin Bancorp became the parent holding company for Bank of
Marin (the “Bank”), its sole subsidiary. Upon formation of the holding company,
Bancorp became subject to regulation under the Bank Holding Company Act of 1956,
as amended, which subjects Bancorp to Federal Reserve Board reporting and
examination requirements. Bank of Marin was incorporated in August 1989,
received its charter from the California Superintendent of Banks (now the
California Department of Financial Institutions) and commenced operations in
January 1990. The Bank is an insured bank under the Federal Deposit Insurance
Act.
Virtually all of
Bancorp’s business is conducted through its sole subsidiary, the Bank of
Marin. The Bank operates through eleven branch offices in Marin and
southern Sonoma counties, north of San Francisco, California. The
Bank also has a loan production office in San Francisco. The Bank's customer
base is made up of business and personal banking relationships from the
communities near the branch office locations. The Bank's business
banking focus is on small to medium sized businesses, professionals and
not-for-profit organizations.
The Bank offers a
broad range of commercial and retail lending programs designed to meet the needs
of its target markets. These include commercial loans and lines of
credit, construction financing, consumer loans, and home equity lines of
credit. Through a third party vendor, the Bank offers a proprietary
Visa credit card combined with a rewards program to its customers, as well as a
Business Visa program for business and professional customers. The Bank also
offers reverse mortgages, leases, and 401K plan management to business clients,
through third parties.
The Bank offers a
variety of checking and savings accounts, and a number of time deposit
alternatives, including interest bearing and non-interest bearing personal and
business checking accounts and time certificates of deposit. The Bank
also offers remote deposit capture and direct deposit of payroll, social
security and pension checks. A valet deposit pick-up service is
available to the Bank's professional and business clients. Automatic
teller machines (ATM's) are available at each branch location and at the Marin
Airporter terminal in Larkspur.
The Bank's ATM
network is linked to the STAR, PLUS and NYCE networks. The Bank offers its
depositors 24-hour access to their accounts by telephone and to both consumer
and business accounts through its internet banking products.
The Bank attracts
deposit relationships from individuals, merchants, small-to-medium sized
businesses, not-for-profit organizations and professionals who live and/or work
in the communities comprising its market areas. Approximately 88% of
the Bank’s deposits are from Marin and southern Sonoma counties, and
approximately 62% of the Bank's deposits are from businesses and 38% are from
individuals. The Bank has only a nominal amount of public
deposits.
The Bank offers
Wealth Management Services which include customized investment portfolio
management, financial planning, trust administration, estate settlement and
custody services. The Bank also offers 401(k) plan services to small
and medium businesses through a third party vendor.
In February 2007,
the Bank introduced branch-based Private Banking as a natural extension of the
Bank’s services. The Bank’s Private Banking includes deposit services, loans,
investment management, trust administration, financial planning and advice on
charitable giving.
The Bank does not
directly offer international banking services, but does make such services
available to its customers through other financial institutions with whom the
Bank has correspondent banking relationships.
The Bank holds no
patents, registered trademarks, licenses (other than licenses required by the
appropriate banking regulatory agencies), franchises or
concessions. However, the Bank has registered the service mark "The
Spirit of Marin" with the United States Patent & Trademark
Office.
Market
Area
The Bank’s primary
market area reaches from southern Sonoma County south to San Francisco and
lies between the Pacific Ocean on the west and San Pablo Bay to the east.
The Bank’s customer base is made up of business and personal banking
relationships from the communities near the branch office
locations.
Competition
The banking
business in California generally, and in the Bank's market area specifically, is
highly competitive with respect to attracting both loan and deposit
relationships. The increasingly competitive environment is impacted
by changes in regulation, technology and product delivery systems, as well
as the accelerating pace of consolidation among financial service providers. The
Marin County market area is dominated by three major California banks, each
of which have more branch offices than Bank of Marin in its defined service
area. Additionally, there are several thrifts, including the major
thrift institutions operating in the California market, credit unions and other
independent banks.
Approximately 67
banking offices with $5.35 billion in total deposits as of June 30, 2007 served
the Marin County market. As of that same date, there were
approximately 19 thrift offices in Marin with $2.41 billion in total deposits.
Compared with the Bank of Marin's share of 9.5%, the four financial institutions
with the greatest market share, Bank of America, Wells Fargo Bank, Washington
Mutual and Westamerica Bank had deposit market shares of 17.7%, 16.9%, 10.6% and
10.4%, respectively, as of June 30, 2007, the most recent date for which data is
available.
In the southern
Sonoma County area of Petaluma, there are approximately 26 banking and
thrift offices with $1.5 billion in total deposits as of June 30,
2007. Compared with the Bank of Marin's share of 2.6%, the four
banking institutions with the greatest market share, Wachovia (formerly World
Savings), Bank of America, Wells Fargo Bank and Bank of Petaluma, had deposit
market shares in Petaluma of 23.4%, 13.8%, 12.3%, and 8.7%, respectively, as of
June 30, 2007.
The Bank also
competes for depositors' funds with money market mutual funds and with non-bank
financial institutions such as brokerage firms and insurance
companies. Among the competitive advantages held by some of these
non-bank financial institutions is the ability to finance extensive advertising
campaigns, and to allocate investment assets to regions of California or other
states with areas of highest demand and often, therefore, highest
yield.
Large commercial
banks also have substantially greater lending limits than the Bank and the
ability to offer certain services which are not offered directly by the
Bank.
In order to compete
with the numerous, and often larger, financial institutions in its primary
market area, the Bank uses, to the fullest extent possible, the flexibility and
rapid response capabilities which are accorded by its independent
status. This includes an emphasis on specialized services, community
involvement, local promotional activities and personal contacts. The
commitment and dedication of the Bank's organizers, directors, officers and
staff have also contributed greatly to the Bank's success in competing for
business.
Employees
At December 31,
2007, Bancorp employed 190 full-time equivalent (FTE) staff. The
actual number of employees at year-end 2007 included 6 executive officers, 69
other corporate officers and 136 staff. None of Bancorp’s employees are
presently represented by a union or covered by a collective bargaining
agreement. Bancorp believes that its employee relations are
good.
SUPERVISION
AND REGULATION
Bank holding
companies and banks are extensively regulated under both federal and state
law. The following discussion summarizes certain significant laws,
rules and regulations affecting Bancorp and the Bank.
Transactions
between Bancorp and the Bank are quantitatively and qualitatively restricted
under the Federal Reserve Act. Sections 23A and 23B of the Act and Federal
Reserve Regulation W. Section 23A places restrictions on the Bank’s “covered
transactions” with Bancorp, including loans and other extensions of credit,
investments in the securities of, and purchases of assets from Bancorp. Section
23B requires that certain transactions, including all covered transactions, be
on market terms and conditions. Federal Reserve Regulation W combines statutory
restrictions on transactions between the Bank and Bancorp with Board
interpretations in an effort to simplify compliance with Sections 23A and
23B.
Capital
Requirements
The Federal Reserve
and the FDIC have adopted risk-based capital guidelines for bank holding
companies and banks. Banks are classified as either well-capitalized, adequately
capitalized or undercapitalized. Holding companies are classified as either
adequately capitalized or under capitalized. Bancorp meets the definition of
adequately capitalized and the Bank meets the definition for
well-capitalized. Undercapitalized depository institutions may be
subject to significant restrictions. Payment of interest and principal on
subordinated debt of the Bank could be restricted or prohibited, with some
exceptions, if the Bank were categorized as "critically undercapitalized" under
applicable FDIC regulations. For further information on risk-based capital, see
Note 16 of the Notes to Financial Statements included in the 2007 Annual
Report.
Sarbanes-Oxley
Act of 2002
Bancorp is subject
to the requirements of the Sarbanes-Oxley Act of 2002 which implemented
legislative reforms intended to address corporate and accounting
improprieties. Since Bancorp files periodic reports under the
Securities and Exchange Commission regulations, it is subject to the provisions
of the Sarbanes-Oxley Act of 2002 and related rules and
regulations.
Bank
Holding Company Regulation
Upon formation of
the bank holding company on July 1, 2007, Bank of Marin Bancorp became subject
to regulation under the Bank Holding Company Act of 1956, as amended (“BHCA”)
which subjects Bancorp to Federal Reserve Board reporting and examination
requirements. Under the Federal Reserve Board’s regulations, a bank
holding company is required to serve as a source of financial and managerial
strength to its subsidiary banks.
The BHCA regulates
the activities of holding companies including acquisitions, mergers, and
consolidations and, together with the Gramm-Leach Bliley Act of 1999, the scope
of allowable banking activities.
Bank
Regulation
Banking regulations
are primarily intended to protect depositors’ funds, federal deposit insurance
funds and the banking system as a whole. These regulations affect the
Bank’s lending practices, consumer protections, capital structure, investment
practices and dividend policy.
As a state
chartered bank, the Bank is subject to regulation and examination by the
California Department of Financial Institutions (DFI). The Bank is also subject
to regulation, supervision and periodic examination by the Federal Deposit
Insurance Corporation (FDIC). If, as a result of an examination of the Bank, the
FDIC or the California Department of Financial Institutions should determine
that the financial condition, capital resources, asset quality, earnings
prospects, management, liquidity, or other aspects of the Bank’s operations are
unsatisfactory or that the Bank or its management has violated any law or
regulation, various remedies are available to those regulators including
restricting the Bank’s growth or removing officers and directors.
Dividends
The payment of cash
dividends by the Bank to Bancorp is subject to restrictions set forth in the
California Financial Code. Prior to any distribution from the Bank to
Bancorp, a calculation is made to ensure compliance with the provisions of this
Code and to ensure that the Bank remains within capital guidelines set forth by
the DFI and the FDIC. Bank management does not believe that these regulations
will limit dividends from the Bank to meet the operating requirements of Bancorp
in the foreseeable future.
FDIC
Insurance Assessments
The Bank’s deposits
are insured by the FDIC to the maximum amount permitted by law which is
currently $100,000 per depositor except for certain retirement accounts which
are insured up to $250,000. The FDIC enacted a new rule, effective January 1,
2007, under which the FDIC uses a risk-based assessment system to assign one of
four risk categories to insured financial institutions. The new
premium rate structure imposes a minimum assessment of five to seven cents for
every $100 of domestic deposits on institutions that are assigned to the lowest
risk category. This category encompasses substantially all insured institutions,
including the Bank.
Community
Reinvestment Act
The Bank is subject
to the provisions of the Community Reinvestment Act (CRA), under which all banks
and thrifts have a continuing and affirmative obligation, consistent with safe
and sound operations, to help meet the credit needs of their entire communities,
including low and moderate income neighborhoods. The act requires a
depository institution’s primary federal regulator, in connection with its
examination of the institution, to assess the institution’s record in meeting
the requirements in CRA. The regulatory agency’s assessment of the institution’s
record is made available to the public. The record is taken into
consideration when the institution establishes a new branch that accepts
deposits, relocates an office or applies to merge or consolidate, or expand into
other activities. CRA performance is evaluated by the FDIC under the
intermediate small bank requirements. The last performance evaluation
was issued by the FDIC on April 17, 2006 with a rating of
“Outstanding.”
Anti-Money
Laundering Regulations
A series of banking
laws and regulations beginning with the Bank Secrecy Act in 1970 require banks
to prevent, detect, and report illicit or illegal financial activities to the
federal government to prevent money laundering, international drug trafficking,
and terrorism. Under the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act
of 2001, financial institutions are subject to prohibitions against specified
financial transactions and account relationships as well as enhanced due
diligence and “know your customer” standards in their dealings with high risk
customers, foreign financial institutions, and foreign individuals and
entities. The Bank has extensive controls to comply with these
requirements.
Privacy
and Data Security
The Gramm-Leach
Bliley Act (GLBA) of 1999 imposed requirements on financial institutions with
respect to consumer privacy. The GLBA generally prohibits disclosure
of consumer information to non-affiliated third parties unless the consumer has
been given the opportunity to object and has not objected to such
disclosure. Financial institutions are further required to disclose
their privacy policies to consumers annually. The GLBA also directs
federal regulators, including the FDIC, to prescribe standards for the security
of consumer information. The Bank is subject to such standards, as
well as standards for notifying consumers in the event of a security
breach. The Bank must disclose its privacy policy to consumers,
permit consumers to “opt out” of having non-public customer information
disclosed to third parties. The Bank is required to have an
information security program to safeguard the confidentiality and security of
customer information and to ensure proper disposal. Customers must be
notified when unauthorized disclosure involves sensitive customer information
that may be misused.
Consumer
Protection Regulations
Lending activities
of the Bank are subject to a variety of statutes and regulations designed to
protect consumers, including the Fair Credit Reporting Act, Equal Credit
Opportunity Act, the Fair Housing Act, and the Truth-in-Lending Act. Deposit
operations of the Bank are also subject to laws and regulations that protect
consumer rights including Funds Availability, Truth in Savings, and Electronic
Funds Transfers. Additional rules govern check writing ability on certain
interest earning accounts and prescribe procedures for complying with
administrative subpoenas of financial records.
Available
Information
On Bancorp’s
internet web site, www.bankofmarin.com,
Bancorp posts the following filings as soon as reasonably practicable after they
are filed with or furnished to the SEC: Bancorp’s Annual Report on Form 10-K,
Bancorp’s Proxy Statement for the Annual Meeting of Shareholders, Bancorp’s
quarterly reports on Form 10-Q, Bancorp’s current reports on Form 8-K, and any
amendments to those reports filed or furnished pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934. The text of the Code of
Ethical Conduct for Bancorp and the Bank is also included on the website. All
such filings on Bancorp’s site are available free of charge.
An investment in
Bancorp’s common stock is subject to risks inherent to its business. The
material risks and uncertainties that management believes may affect Bancorp’s
business, primarily through its sole subsidiary, the Bank of Marin, are
described below. Before making an investment decision, you should carefully
consider the risks and uncertainties described below together with all of the
other information included or incorporated by reference in this report. The
risks and uncertainties described below are not the only ones facing Bancorp’s
and the Bank’s business. Additional risks and uncertainties that management is
not aware of or focused on or that management currently deems immaterial may
also impair business operations. This report is qualified in its entirety by
these risk factors.
If any of the
following risks actually occur, Bancorp and the Bank’s financial condition and
results of operations could be materially and adversely affected.
The
Earnings of Bancorp and the Bank are Significantly Affected by General Business
and Economic Conditions
Bancorp is
operating in a challenging and uncertain economic environment, including
generally uncertain national and local conditions. Financial
institutions continue to be affected by the softening of the real estate market
and constrained financial markets. While the Bank does not offer
first mortgages and has no sub-prime residential loans or securities backed by
such loans in the portfolio, Bancorp nevertheless may be affected by these
events. Continued declines in real estate values, home sales volumes and
financial stress on borrowers as a result of the uncertain economic environment,
including job losses, and customers’ inability to pay debt could adversely
affect our financial condition and results of operations. This
current deterioration in economic conditions coupled with a possible national
economic recession, could result in the following consequences:
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Demand for
our products and services may
decline
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Low cost or
non-interest bearing deposits may
decrease
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Collateral
for our loans, especially real estate, may decline in
value
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Loan
delinquencies, problem assets and foreclosures may
increase
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Bancorp’s serving
area has not experienced the same degree of challenges as other areas due to the
high per capita income in Marin and Sonoma counties. However, Bancorp cannot
predict with certainty what effect a continuing economic decline in the United
States will have on Bancorp’s business.
Negative
Conditions Affecting Real Estate May Harm the Bank’s Business
Concentration of
the Bank's lending activities in the California real estate sector could have
the effect of intensifying the impact of any adverse changes in the real estate
market in the Bank's lending area. Although the Bank does not offer
traditional first mortgages, approximately 84% of the Bank's loans were secured
by real estate at December 31, 2007. Therefore, the value of the
Bank's real estate collateral could be affected by adverse changes in the real
estate market in which the Bank conducts business. Most of the
properties that secure the Bank's loans are located within Marin and
Sonoma Counties. These counties have been somewhat insulated from the
current general depression of the real estate market in other areas of the
country, due in part to the greater wealth in the Bank’s market
area. However, there is no assurance that the Bank’s real estate
portfolio will be unaffected by market declines in the future.
At December 31,
2007, 54% of the Bank's loans were secured by commercial real estate, including
small office buildings, owner-user office/warehouses, mixed-use
residential/commercial properties and retail properties. There can be no
assurance that the companies or properties securing the Bank's loans will
generate sufficient funds to allow the borrowers to make full and timely loan
payments to the Bank.
In late 2006,
Federal banking regulators issued final guidance regarding commercial real
estate lending to address a concern that rising commercial real estate lending
concentrations may expose institutions to unanticipated earnings and capital
volatility in the event of adverse changes in the investor commercial real
estate market. This guidance suggests that institutions that are potentially
exposed to significant commercial real estate concentration risk will be subject
to increased regulatory scrutiny. Institutions that have experienced
rapid growth in commercial real estate lending, have notable exposure to a
specific type of commercial real estate lending, or are approaching or exceed
certain supervisory criteria that measure an institution’s commercial real
estate portfolio against its capital levels, may be subject to such increased
regulatory scrutiny. Although regulators have not notified the Bank
of any concern, there is no assurance that the Bank will not be subject to
additional scrutiny in the future.
The
Bank Operates in a Highly Competitive Industry and Market Area
The Bank’s market
area is primarily, but not limited, to Marin County, southern
Sonoma County and San Francisco. The distance covered in the
service area is approximately 60 miles. The Bank faces competition from a
variety of different competitors, many of which are larger and may have more
financial resources. Competitors include national, regional and community banks
within the markets served by Bank of Marin as well as other types of financial
institutions, including savings and loans, credit unions, brokerage firms, and
other financial intermediaries. If the Bank is unable to compete effectively it
could lose market share, and income from loans and other products may be
reduced. If the Bank is unable to retain its deposit base, it risks
being challenged to fund its loans at competitive rates.
The
Bank is Subject to Interest Rate Risk
The Bank’s earnings
and cash flows are largely dependent upon its net interest
income. Net interest income is the difference between interest income
earned on interest-earning assets such as loans and securities and interest
expense paid on interest-bearing liabilities such as deposits and borrowed
funds. Interest rates are sensitive to many factors outside the Bank’s control,
including general economic conditions and policies of various governmental and
regulatory agencies and, in particular, the Board of Governors of the Federal
Reserve System, which regulates the supply of money and credit in the United
States. Changes in monetary policy, including changes in interest rates, could
influence not only the interest the Bank receives on loans and securities and
the amount of interest it pays on deposits and borrowings, but such changes
could also affect (i) the Bank’s ability to originate loans and obtain deposits,
(ii) the fair value of the Bank’s financial assets and liabilities, and (iii)
the average duration of the Bank’s mortgage-backed securities portfolio. The
Bank’s portfolio of securities are subject to interest rate risk and will
generally decline in value if market interest rates increase, and generally
increase in value if market interest rates decline.
Between June 30,
2004 and December 31, 2006, the Federal Open Market Committee of the Federal
Reserve Bank (“FMOC”) adopted a policy of monetary tightening through 17
consecutive Federal funds rate increases in 25 basis point increments from 1.00%
to 5.25%. In September, 2007, in response to the state of the
national economy, the housing market and the volatility of financial markets,
the Federal Reserve decreased the Federal funds target rate by 50 basis points
and followed that with two subsequent decreases of 25 basis points each,
bringing the target rate to 4.25% in December. The Federal Reserve
continued by dropping rates by another 125 basis points during January of 2008,
thereby reducing the target rate to 3.00%.
Although management
believes it has implemented effective asset and liability management strategies,
any substantial, prolonged change in market interest rates could have a material
adverse effect on the Bank’s financial condition and results of
operations. See the sections captioned “Net Interest Income” and
“Market Rate Risk” in Management’s Discussion and Analysis of Financial
Condition and Results of Operations located in Bancorp’s 2007 Annual Report for
further discussion related to management of interest rate risk.
Loan
Losses May Exceed the Bank’s Allowance for Loan Losses in the
Future
The Bank maintains
an allowance for loan losses, which is a reserve established through a provision
for loan losses charged to expense, that represents management’s best estimate
of probable losses that may be incurred within the existing portfolio of loans.
The level of the allowance reflects management’s continuing evaluation of
industry concentrations, specific credit risks, loan loss experience, current
loan portfolio quality and present economic, political and regulatory
conditions. The determination of the appropriate level of the allowance for loan
losses inherently involves a high degree of subjectivity and requires the Bank
to make significant estimates of current credit risks and future trends, all of
which may undergo material changes.
Changes in economic
conditions affecting borrowers, new information regarding existing loans,
identification of additional problem loans and other factors, may require an
increase in the allowance for loan losses. In addition, bank
regulatory agencies periodically review the Bank’s allowance for loan losses and
may require an increase in the provision for loan losses or the recognition of
further loan charge-offs. In addition, if charge-offs in future
periods exceed the allowance for loan losses, the Bank will need to record
additional loan loss provisions. Any increases in the allowance for
loan losses will result in a decrease in net income, and possibly,
capital.
The
Bank May Lose Deposits to Other Financial Instruments
Checking and
savings account balances and other forms of deposits can decrease when the
Bank’s deposit customers perceive alternative investments as providing superior
expected returns. Technology and other changes have made it more
convenient for bank customers to transfer funds into alternative investments or
other deposit accounts, including products offered by other financial
institutions or non-bank service providers. The current low interest
rate environment could increase such transfers of deposits to higher yielding
deposits or other investments. Efforts and initiatives the Bank
undertakes to retain and increase deposits, including deposit pricing, can
increase the Bank’s costs. When Bank customers move money into
higher yielding deposits or in favor of alternative investments, the Bank can
lose a relatively inexpensive source of funds, increasing its funding
costs.
Bancorp
and the Bank are Subject to Extensive Government Regulation and
Supervision
Bancorp and the
Bank are subject to extensive federal and state governmental supervision,
regulation and control. Holding company regulations affect the range of
activities in which Bancorp is engaged. Banking regulations affect the Bank’s
lending practices, capital structure, investment practices and dividend policy
among other controls. Future legislative changes or interpretations may also
alter the structure and competitive relationship among financial
institutions.
Compliance risk is
the current and prospective risk to earnings or capital arising from violations
of, or nonconformance with, laws, rules, regulations, prescribed practices,
internal policies, and procedures, or ethical standards set forth by
regulators. Compliance risk also arises in situations where the laws
or rules governing certain bank products or activities of the Bank's clients may
be ambiguous or untested. This risk exposes Bancorp and the Bank to
potential fines, civil money penalties, payment of damages and the voiding of
contracts. Compliance risk can lead to diminished reputation, reduced
franchise value, limited business opportunities, reduced expansion potential and
an inability to enforce contracts.
For
further information on supervision and regulation, see the section captioned
“Supervision and Regulation” in Item 1 above.
The
Bank May Not Be Able to Attract and Retain Qualified Employees
The Bank’s success
depends, in large part, on its ability to attract and retain key employees and
highly qualified employees at every level. Competition for the best
people can be great. Management believes that the Bank has built the
management team and personnel, and established an infrastructure to support the
Bank’s current size. Future success will depend on the ability of
executives and employees to continue to implement and improve operational,
financial and management controls and processes, reporting systems and
procedures, and to manage a growing number of customer relationships. Without
additional key personnel the Bank may not be able to meet its growth
strategy.
The
Bank May Experience a Breach in Security
The Bank's business
requires the secure handling of sensitive client information. A
breach of security or well publicized breaches of other financial institutions
could significantly harm the Bank’s reputation, result in a loss of customer
business, subject the Bank to additional regulatory scrutiny, or expose the Bank
to civil litigation and possible financial liability. While the Bank
has systems and procedures designed to prevent security breaches, management
cannot be certain that advances in criminal capabilities, physical system or
network break-ins or inappropriate access will not compromise or breach the
technology protecting its networks or proprietary client
information.
The
Bank Relies on Third-Party Vendors
The Bank depends on
the accuracy and completeness of information provided by certain of its vendors,
including but not limited to, the Bank's data processing vendor. The
Bank's ability to operate, as well as the Bank's financial condition and results
of operations, could be negatively affected in the event of interruptions of
information systems, an undetected error, or in the event of a natural disaster
whereby certain vendors are unable to maintain business continuity.
Bancorp
Relies on Dividends from the Bank to pay Cash Dividends to
Shareholders
Bancorp is a
separate legal entity from its subsidiary, the Bank. It receives all
of its revenue from dividends received from the Bank. This revenue is
the principal source of funds to pay cash dividends to Bancorp’s common
shareholders. Various federal and state laws and regulations limit the amount of
dividends that the Bank may pay to Bancorp. In the event that the Bank is unable
to pay dividends to Bancorp, Bancorp may not be able to pay dividends to its
shareholders which could have an adverse effect on Bancorp’s stock price and
investment value.
Under federal law,
capital distributions from the Bank would become prohibited, with limited
exceptions, if the Bank were categorized as "undercapitalized" under applicable
Federal Reserve or FDIC regulations. In addition, as a California
bank, the Bank is subject to state law restrictions on the payment of
dividends.
Accounting
for Stock Options may Result in Volatility of Net Income and Equity
Bancorp has certain
employee stock options that are subject to new accounting treatment beginning
January 1, 2006. Bancorp is required to treat stock options as a
non-cash expense based on the grant date fair market value of the options. As
its common stock price fluctuates, the grant date fair value of new awards is
affected, which in turn will affect Bancorp’s net income and equity. See Note 10
to Bancorp’s audited financial statements included in Bancorp’s 2007 Annual
Report for the impact of employee stock options on net income. The
impact of employee stock options on Bancorp’s equity is not expected to be
significant.
The
Trading Volume of Bancorp’s Common Stock is Less than that of Other Larger
Financial Services Companies
Bancorp’s common
stock is listed for trading on the NASDAQ’s Capital Market. Its
trading volume is less than that of other larger financial
institutions. A public trading market having the desired
characteristics of depth, liquidity and orderliness depends on the presence of
willing buyers and sellers of common stock at any given time. This
presence depends on the individual decisions of investors and general economic
and market conditions over which Bancorp has no control. Given the
lower trading volume of Bancorp’s common stock, significant sales of the stock,
or the expectations of these sales, could cause the stock price to
fall.
Severe
Weather or Natural Disasters Could Significantly Impact the Bank’s
Business
Severe weather or
disasters, such as severe rainstorms, an earthquake or flood, could affect the
Bank's loan portfolio by damaging properties pledged as collateral and by
impairing the ability of certain borrowers to repay their loans. The
ultimate impact of a natural disaster on the Bank's future financial results and
condition is difficult to predict and will be affected by a number of factors,
including the extent of damage to the collateral, the extent to which damaged
collateral is not covered by insurance, the extent to which unemployment and
other economic conditions caused by the natural disaster adversely affect the
ability of borrowers to repay their loans, and the cost to the Bank of
collection and foreclosure.
|
ITEM
1B.
|
UNRESOLVED STAFF
COMMENTS
|
None.
Bank of Marin
leases its corporate headquarters building, which houses the Bank’s loan
production, operations, and primary administrative offices, in Novato,
California. The Bank also leases other branch office facilities
within its primary market areas in the cities of Petaluma, Novato, San Rafael,
Corte Madera, Mill Valley, Sausalito, and San Francisco,
California. The Bank considers its properties to be suitable and
adequate for its present needs.
ADDITIONAL
INFORMATION
For additional
information on properties, see Notes 5 and 13 of the Notes to Financial
Statements included in the 2007 Annual Report.
There are no
pending, or to management's knowledge any threatened, material legal proceedings
to which Bancorp is a party, or to which any of Bancorp’s properties are
subject. There are no material legal proceedings to which any
director, any nominee for election as a director, any executive officer of
Bancorp, or any associate of any such director, nominee or officer is a party
adverse to Bancorp.
Bancorp is
responsible for its proportionate share of certain litigation indemnifications
provided to Visa U.S.A. by its member banks in connection with lawsuits related
to anti-trust charges and interchange fees. Bancorp recorded a liability of $242
thousand in the fourth quarter of 2007 to cover its potential
liability. Bancorp expects to fully reverse this liability in 2008
upon the initial public offering of Visa Inc., which became the parent company
of Visa U.S.A. during a restructuring in 2007. A portion of the
proceeds from the initial public offering is expected to be set aside by Visa
Inc. to cover this litigation on behalf of its member banks.
No matters were
submitted to a vote of security holders during the fourth quarter of
2007.
|
ITEM
5.
|
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES
|
Bancorp common
stock trades on the NASDAQ Capital Market under the symbol BMRC.
At February 20,
2008, 5,142,150 shares of Bancorp’s common stock, no par value, were outstanding
and held by approximately 700 holders of record. The following table
sets forth, for the periods indicated, the range of high and low sales prices of
the Bank's common stock through the second quarter of 2007 and Bancorp’s common
stock thereafter. The prices have been adjusted to reflect the effect of all
stock dividends and stock splits.
|
Quarter/Year
|
|
High
|
|
|
Low
|
|
|
4th Quarter
2007
|
|
$ |
32.63 |
|
|
$ |
27.00 |
|
|
3rd Quarter
2007
|
|
$ |
33.60 |
|
|
$ |
29.88 |
|
|
2nd Quarter
2007
|
|
$ |
36.58 |
|
|
$ |
32.57 |
|
|
1st Quarter
2007
|
|
$ |
39.49 |
|
|
$ |
35.42 |
|
|
|
|
|
|
|
|
|
|
|
|
4th Quarter
2006
|
|
$ |
36.75 |
|
|
$ |
31.50 |
|
|
3rd Quarter
2006
|
|
$ |
33.25 |
|
|
$ |
30.00 |
|
|
2nd Quarter
2006
|
|
$ |
35.25 |
|
|
$ |
32.25 |
|
|
1st Quarter
2006
|
|
$ |
37.00 |
|
|
$ |
33.60 |
|
The table below shows dividends paid in
the last two fiscal years.
| |
|
|
2007
|
|
|
2006
|
|
| |
|
|
Per
|
|
|
|
|
|
Per
|
|
|
|
|
| |
|
|
Share
|
|
|
Dollars
|
|
|
Share
|
|
|
Dollars
|
|
|
1Q
|
|
|
$ |
0.12 |
|
|
$ |
625,000 |
|
|
$ |
0.10 |
|
|
$ |
500,000 |
|
|
2Q
|
|
|
$ |
0.13 |
|
|
$ |
680,000 |
|
|
$ |
0.12 |
|
|
$ |
641,000 |
|
|
3Q
|
|
|
$ |
0.13 |
|
|
$ |
672,000 |
|
|
$ |
0.12 |
|
|
$ |
655,000 |
|
|
4Q
|
|
|
$ |
0.13 |
|
|
$ |
673,000 |
|
|
$ |
0.12 |
|
|
$ |
652,000 |
|
Included in cash
dividends during the second quarter of 2007 is $5 thousand paid to shareholders
in connection with the redemption of all the preferred share purchase rights
issued pursuant to the Bank’s Rights Agreement of August 11, 2003. Each right
entitled the registered holder to purchase from Bank one one-hundredth of a
share of Series A Junior Participating Preferred stock, no par value of Bank at
a price of $125 per one one-hundredth of a preferred share, subject to
adjustments. The redemption, in anticipation of the formation of a bank holding
company, was effective June 14, 2007 at a redemption price of $0.001 per right.
On that same day, Bank of Marin Bancorp’s Board of Directors executed a Rights
Agreement substantially similar to the Bank’s agreement and has issued
replacement rights to purchase shares of Bancorp under the new Rights Agreement
to shareholders of record as of July 23, 2007. The Bank of Marin Bancorp Rights
Agreement is designed to discourage takeovers that involve abusive tactics or do
not provide fair value to shareholders.
In October 2006,
Bank of Marin received approval from the California Department of Financial
Institutions (DFI) and the Federal Deposit Insurance Corporation (FDIC) to buy
back up to 10%, or approximately 545,884 of the Bank’s 5,458,838
then-outstanding shares, not to exceed $15 million. The repurchase
program allowed the Bank to purchase common shares for a period of approximately
twelve months from the approval date in the open market or in privately
negotiated transactions. The Bank executed these transactions pursuant to the
Securities and Exchange Commission’s Rule 10b-18. All shares
repurchased were made in open market transactions and were part of the publicly
announced repurchase program. From October 1, 2006 to December 31,
2006, the Bank repurchased 115,625 shares at an average price of $34.26 per
share for a total cost of $4.0 million. In 2007 through February 28, the Bank
purchased an additional 289,692 shares at an average price of $38.10 per share,
for a total cost of $11.0 million, thereby concluding this share repurchase
program.
In November 2007,
Bancorp’s Board of Directors approved a second plan to repurchase common shares
of Bancorp up to $5 million. No regulatory approval was required for this
repurchase plan as Bancorp was exempted under the provisions of Regulation Y of
the Federal Reserve Board. In November and December of 2007, Bancorp repurchased
a total of 51,732 shares at an average price of $29.96 per share for a total
cost of $1.5 million.
A schedule of
purchases during 2006 and 2007 follows. This schedule reflects the
repurchase, upon formation of the bank holding company on July 1, 2007, of
24,399 common shares of the Bank for $876 thousand from six shareholders who
dissented to the exchange of those shares for Bancorp common
shares.
|
(Dollars in
thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period
|
|
Total Number
of Shares Purchased
|
|
|
Average
Price
|
|
|
Total Number
of Shares Purchased as Part of Publicly Announced Plans or
Programs
|
|
|
Approximate
Dollar Value that May Yet be Purchased Under the Program
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan
#1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October
24-31, 2006
|
|
|
25,004 |
|
|
$ |
32.53 |
|
|
|
25,004 |
|
|
$ |
14,187 |
|
|
November
1-30, 2006
|
|
|
29,514 |
|
|
$ |
33.56 |
|
|
|
29,514 |
|
|
$ |
13,196 |
|
|
December
1-31, 2006
|
|
|
61,107 |
|
|
$ |
35.30 |
|
|
|
61,107 |
|
|
$ |
11,039 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
2006 Purchases Under Regulatory Approved Plans
|
|
|
115,625 |
|
|
$ |
34.26 |
|
|
|
115,625 |
|
|
$ |
11,039 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1-31,
2007
|
|
|
74,980 |
|
|
$ |
37.10 |
|
|
|
74,980 |
|
|
$ |
8,257 |
|
|
February
1-28, 2007
|
|
|
214,712 |
|
|
$ |
38.45 |
|
|
|
214,712 |
|
|
Plan
Concluded
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
2007 Plan #1
|
|
|
289,692 |
|
|
$ |
38.10 |
|
|
|
289,692 |
|
|
|
--- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan
#2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November
1-30, 2007
|
|
|
750 |
|
|
$ |
27.75 |
|
|
|
750 |
|
|
$ |
4,979 |
|
|
December
1-31, 2007
|
|
|
50,982 |
|
|
$ |
29.99 |
|
|
|
50982 |
|
|
$ |
3,450 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
2007 Plan #2
|
|
|
51,732 |
|
|
$ |
29.96 |
|
|
|
51,732 |
|
|
$ |
3,450 |
|
|
Total
2007 Purchases Under Regulatory Approved Plans
|
|
|
341,424 |
|
|
$ |
36.87 |
|
|
|
341,424 |
|
|
$ |
3,450 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 1-31
2007
|
|
|
24,399 |
|
|
$ |
35.92 |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Repurchased
from Dissenting
Shareholders
|
|
|
24,399 |
|
|
$ |
35.92 |
|
|
|
N/A |
|
|
|
N/A |
|
Securities
Authorized for Issuance Under Equity Compensation Plans
The following table
summarizes information as of December 31, 2007, with respect to equity
compensation plans. All plans have been approved by the
shareholders.
|
|
|
(A)
|
|
|
(B)
|
|
|
(C)
|
|
|
|
|
Shares to be
issued upon exercise of outstanding options
|
|
|
Weighted
average exercise price of outstanding options
|
|
|
Shares
available for future issuance (Excluding shares in column
A)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
compensation plans approved by shareholders
|
|
|
481,975 |
(1) |
|
$ |
23.64 |
|
|
|
485,910 |
|
|
|
(1)
|
Represents
shares of common stock issuable upon exercise of outstanding options under
the Bank of Marin 1990 Stock Option Plan, the Bank of Marin 1999 Stock
Option Plan and the Bank of Marin Bancorp 2007 Equity
Plan.
|
Bancorp’s stock
price performance graph is incorporated by reference from page 58 of
Bancorp’s Annual Report.
The information
required to be furnished pursuant to this item is set forth under the caption
"Selected Financial Data" on page 3 of Bancorp’s 2007 Annual Report and is
incorporated herein by reference.
For management's
discussion and analysis of financial condition and results of operations, see
"Management's Discussion and Analysis" on pages 5 through 27 of Bancorp’s 2007 Annual
Report, which is incorporated herein by reference. Management's
Discussion and Analysis and other statistical disclosures should be read in
conjunction with the financial statements and notes thereto, included on pages
28 through 58 of Bancorp’s 2007 Annual Report, which is incorporated herein by
reference.
|
ITEM
7A.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
The information
required to be furnished pursuant to this item is set forth under the captions
"Liquidity" and "Market Risk Management" on pages 23 through 24 of Bancorp’s
2007 Annual Report and is incorporated herein by reference.
|
ITEM
8.
|
FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA
|
The information
required to be furnished pursuant to this item is set forth on pages 28 through
57 of Bancorp’s
2007 Annual Report and is incorporated herein by reference.
|
ITEM
9.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
|
None.
|
(A)
|
Evaluation of
disclosure controls and
procedures
|
Bancorp’s Chief
Executive Officer, Chief Financial Officer, and several other members of
Bancorp’s senior management have evaluated the effectiveness of its disclosure
controls and procedures as of December 31, 2007.
Based on this
evaluation, the Bank’s Chief Executive Officer and Chief Financial Officer have
concluded, as of December 31, 2007, that the disclosure controls and procedures
were effective in recording, processing, summarizing and reporting the
information Bancorp is required to disclose in the reports it files under the
Securities Exchange Act of 1934, within the time periods specified in the
Securities and Exchange Commission's rules and forms.
|
(B)
|
Management's Annual
Report on Internal Control over Financial
Reporting
|
The management of
Bancorp is responsible for establishing and maintaining adequate internal
control over financial reporting. Bancorp’s internal control system
was designed to provide reasonable assurance to Bancorp’s management and Board
of Directors regarding the preparation and fair presentation of published
financial statements.
All internal
control systems, no matter how well designed, have inherent
limitations. Therefore, even those systems determined to be effective
can provide only reasonable assurance with respect to financial statement
preparation and presentation.
Bancorp’s
management assessed the effectiveness of Bancorp’s internal control over
financial reporting as of December 31, 2007. Management’s Report
Regarding Internal Control and Compliance with Designated Laws and Regulations
is incorporated by reference from page 29 of Bancorp’s 2007 Annual Report. In
making this assessment, it used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission in Internal Control -
Integrated Framework. Based on its assessment management believes
that, as of December 31, 2007, Bancorp’s internal control over financial
reporting is effective based on those criteria.
Bancorp’s
independent auditors have issued an audit report on Bancorp’s internal control
over financial reporting. See (D) below.
|
(C)
|
Changes in internal
controls
|
During the quarter
ended December 31, 2007, Bancorp did not make any significant changes in, nor
take any corrective actions regarding, its internal controls or other factors
that have materially affected, or are reasonably likely to materially affect
these controls.
|
(D)
|
Attestation Report of
the Registered Public Accounting
Firm
|
The Attestation
Report of the Registered Public Accounting firm required to be furnished
pursuant to this item is set forth on page 28 of Bancorp’s 2007 Annual Report
and is incorporated herein by reference.
None.
|
ITEM
10.
|
DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE
|
The information
required by this Item is incorporated by reference from Bancorp’s Proxy
Statement for the 2008 Annual Meeting of Shareholders. Bancorp and the Bank
have adopted a Code of Ethical Conduct that applies to all staff including the
Chief Executive Officer, Chief Financial Officer and Controller. A copy of the
Code of Ethical Conduct will be provided to any person, without charge, upon
written request to Corporate Secretary, Bank of Marin Bancorp, 504 Redwood
Boulevard, Suite 100, Novato CA 94947.
The information
required by this Item is incorporated by reference from Bancorp’s Proxy
Statement for the 2008 Annual Meeting of Shareholders.
|
ITEM
12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
|
The information
required by this Item is incorporated by reference from Item 5 above, Note 9 to
Bancorp’s audited financial statements included in Bancorp’s 2007 Annual Report
and Bancorp’s Proxy Statement for the 2008 Annual Meeting of
Shareholders.
|
ITEM 13.
|
CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
|
The information
required by this Item is incorporated by reference from Bancorp’s Proxy
Statement for the 2008 Annual Meeting of Shareholders.
|
ITEM
14.
|
PRINCIPAL ACCOUNTANT FEES AND
SERVICES
|
The information
required by this Item is incorporated by reference from Bancorp’s Proxy
Statement for the 2008 Annual Meeting of Shareholders.
|
(A)
|
Documents
Filed as Part of this Report
|
The financial
statements of Bank of Marin Bancorp listed below and appearing at the indicated
page number in Bank of Marin Bancorp’s 2007 Annual Report are incorporated by
reference into this report.
|
Bank of Marin Bancorp
2007 Annual Report
|
Page Number
|
|
|
|
|
Report of
Independent Registered Public Accounting Firm for the years ended December
31, 2007, 2006 and 2005
|
28
|
|
Statement of
Condition as of December 31, 2007 and 2006
|
30
|
|
Statement of
Operations for the years ended December 31, 2007, 2006 and
2005
|
31
|
|
Statement of
Changes in Stockholders' Equity for the years ended December 31, 2007,
2006 and 2005
|
32
|
|
Statement of
Cash Flows for the years ended December 31, 2007, 2006 and
2005
|
33
|
|
Notes to
Financial Statements
|
34 –
60
|
|
|
2.
|
Financial
Statement Schedules
|
All financial
statement schedules have been omitted, as they are inapplicable or the required
information is included in the financial statements or notes
thereto.
|
Number
|
|
Description of
Exhibit
|
|
|
|
|
|
|
|
|
|
3.01
|
|
Articles of
Incorporation, as amended, incorporated by reference to Exhibit 3.01 to
Bancorp’s Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 2007.
|
|
3.02
|
|
Bylaws, as
amended, incorporated by reference to Exhibit 3.02 to Bancorp’s Quarterly
Report on Form 10-Q for the quarterly period ended September 30,
2007.
|
|
4.01
|
|
Rights
Agreement dated as of July 2, 2007 is incorporated by reference to Exhibit
4.1 to Registration Statement on Form 8-A12B filed with the Securities and
Exchange Commission on July 2, 2007.
|
|
10.01
|
|
2007 Employee
Stock Purchase Plan is incorporated by reference to Exhibit 4.1 to
Registration Statement on Form S-8 filed with the Securities and Exchange
Commission on July 24, 2007.
|
|
10.02
|
|
1989 Stock
Option Plan is incorporated by reference to Exhibit 4.1 to Registration
Statement on Form S-8 filed with the Securities and Exchange Commission on
July 24, 2007.
|
|
10.03
|
|
1999 Stock
Option Plan is incorporated by reference to Exhibit 4.1 to Registration
Statement on Form S-8 filed with the Securities and Exchange Commission on
July 24, 2007.
|
|
10.04
|
|
2007 Equity
Plan is incorporated by reference to Exhibit 4.1 to Registration Statement
on Form S-8 filed with the Securities and Exchange Commission on July 24,
2007.
|
|
10.05
|
|
Form of
Change in Control Agreement is incorporated by reference to Exhibit 10.01
to Current Report Form 8-K filed with the Securities and Exchange
Commission on October 30, 2007.
|
|
10.06
|
|
Form of
Indemnification Agreement for Directors and Executive Officers dated
August 9, 2007 is incorporated by reference to Exhibit 10.06 to Bancorp’s
Quarterly Report on Form 10-Q for the quarterly period ended September 30,
2007.
|
|
10.07
|
|
Retirement
Agreement and Release between the Bank and W. Robert Griswold, Jr. dated
March 11, 2006.
|
|
10.08
|
|
Consulting
Agreement between the Bank and W. Robert Griswold, Jr. dated March 11,
2006.
|
|
13.01
|
|
2007 Annual
Report.
|
|
14.01
|
|
Code of
Ethical Conduct.
|
|
23.01
|
|
Consent of
Moss Adams LLP.
|
|
31.01
|
|
Certification
of Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
31.02
|
|
Certification
of Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
32.01
|
|
Certification
pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
|
Pursuant to the
requirements of Section 13 of the Securities Exchange Act of 1934, Bancorp has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
|
Bank of Marin
Bancorp
|
|
|
|
|
Dated: March 10,
2008
|
/s/ Russell A.
Colombo
|
|
|
Russell A.
Colombo
|
|
|
President
&
|
|
|
Chief
Executive Officer
|
|
|
|
|
Dated: March 10,
2008
|
/s/ Christina J.
Cook
|
|
|
Christina J.
Cook
|
|
|
Executive
Vice President &
|
|
|
Chief
Financial Officer
|
|
|
|
|
Dated: March 10,
2008
|
/s/ Larry R.
Olafson
|
|
|
Larry R.
Olafson
|
|
|
Controller
|
Pursuant to the
requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the registrant and in the capacities
and on the dates indicated.
|
|
Members of
Bank of Marin Bancorp’s
|
|
|
Board of
Directors
|
|
|
|
|
Dated: March 10,
2008
|
/s/ Joel
Sklar
|
|
|
Joel Sklar,
M.D.
|
|
|
Chairman of
the Board
|
|
|
|
|
|
|
|
Dated: March 10,
2008
|
/s/ Russell A.
Colombo
|
|
|
Russell A.
Colombo
|
|
|
President
&
|
|
|
Chief
Executive Officer
|
|
|
|
|
|
|
|
Dated: March 10,
2008
|
/s/ Judith O’Connell
Allen
|
|
|
Judith
O’Connell Allen
|
|
|
|
|
|
|
|
Dated: March 10,
2008
|
/s/ James E.
Deitz
|
|
|
James E.
Deitz
|
|
|
|
|
|
|
|
Dated: March 11,
2008
|
/s/ Robert
Heller
|
|
|
H. Robert
Heller
|
|
|
|
|
|
|
|
Dated: _____________
|
____________ |
|
|
Norma J.
Howard
|
|
Dated: March 10,
2008
|
/s/ J. Patrick
Hunt
|
|
|
J. Patrick
Hunt
|
|
|
|
|
|
|
|
Dated: March 10,
2008
|
/s/ James D.
Kirsner
|
|
|
James D.
Kirsner
|
|
|
|
|
|
|
|
Dated: March 10,
2008
|
/s/ Stuart D.
Lum
|
|
|
Stuart D.
Lum
|
|
|
|
|
|
|
|
Dated: March 10,
2008
|
/s/ Joseph D.
Martino
|
|
|
Joseph D.
Martino
|
|
|
|
|
|
|
|
Dated:
_____________
|
______________ |
|
|
William
McDevitt, Jr.
|
|
|
|
|
|
|
|
Dated: March 11,
2008
|
/s/ Brian M.
Sobel
|
|
|
Brian M.
Sobel
|
|
|
|
|
|
|
|
Dated: March 10,
2008
|
/s/ J. Dietrich
Stroeh
|
|
|
J. Dietrich
Stroeh
|
|
|
|
|
|
|
|
Dated:
_____________
|
___________ |
|
|
Jan I.
Yanehiro
|
|
Exhibit
Number
|
|
Description
|
|
Location
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement
Agreement and Release between the Bank and W. Robert Griswold, Jr. dated
March 11, 2006.
|
|
Filed
herewith.
|
|
|
|
|
|
|
|
|
|
Consulting
Agreement between the Bank and W. Robert Griswold, Jr. dated March 11,
2006.
|
|
Filed
herewith.
|
|
|
|
|
|
|
|
|
|
2007 Annual
Report.
|
|
Filed
herewith.
|
|
|
|
|
|
|
|
|
|
Code of
Ethical Conduct
|
|
Filed
herewith.
|
|
|
|
|
|
|
|
|
|
Consent of
Moss Adams LLP.
|
|
Filed
herewith.
|
|
|
|
|
|
|
|
|
|
Certification
of Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) as
adopted pursuant to §302 of the Sarbanes-Oxley Act of
2002.
|
|
Filed
herewith.
|
|
|
|
|
|
|
|
|
|
Certification
of Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) as
adopted pursuant to §302 of the Sarbanes-Oxley Act of
2002.
|
|
Filed
herewith.
|
|
|
|
|
|
|
|
|
|
Certification
pursuant to 18 U.S.C. §1350 as adopted pursuant to §906 of the
Sarbanes-Oxley Act of 2002.
|
|
Furnished
herewith.
|