Bank of Marin Bancorp

Previous wording

Management's discussion of the financial condition and results of operations, which is unaudited, should be read in conjunction with the related unaudited consolidated financial statements in this Form 10-Q and with the audited consolidated financial statements and accompanying notes included in our 2023 Annual Report on Form 10-K. Average balances, including balances used in calculating certain financial ratios, are generally comprised of average daily balances.

Current wording

Management's discussion of the financial condition and results of operations, which is unaudited, should be read in conjunction with the related unaudited consolidated interim financial statements in this Form 10-Q and with the audited consolidated financial statements and accompanying notes included in our 2024 Annual Report on Form 10-K. Average balances, including balances used in calculating certain financial ratios, are generally comprised of average daily balances.

Previous wording

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. Factors that could cause future results to vary materially from current management expectations include, but are not limited to, general economic conditions and the economic uncertainty in the United States and abroad, including economic or other disruptions to financial markets caused by acts of terrorism, war or other conflicts, impacts from inflation, supply chain disruptions, changes in interest rates (including the actions taken by the Federal Reserve to control inflation), California's unemployment rate, deposit flows, real estate values, and expected future cash flows on loans and securities; the impact of adverse developments at other banks, including bank failures, that impact general sentiment regarding the stability and liquidity of banks; costs or effects of acquisitions; competition; changes in accounting principles, policies or guidelines; changes in legislation or regulation; natural disasters (such as wildfires and earthquakes in our area); adverse weather conditions; interruptions of utility service in our markets for sustained periods; and other economic, competitive, governmental, regulatory and technological factors (including external fraud and cybersecurity threats) affecting our operations, pricing, products and services; and successful integration of acquisitions.

Current wording

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. Factors that could cause future results to vary materially from current management expectations include, but are not limited to, general economic conditions and the economic uncertainty in the United States and abroad, including economic or other disruptions to financial markets caused by the Trump administration's approach to tariffs and trade, acts of terrorism, war or other conflicts, impacts from inflation, supply chain disruptions, changes in interest rates (including the actions taken by the Federal Reserve to control inflation), California's unemployment rate, deposit flows, real estate values, and expected future cash flows on loans and securities; the impact of adverse developments at other banks, including bank failures, that impact general sentiment regarding the stability and liquidity of banks; costs or effects of acquisitions; competition; changes in accounting principles, policies or guidelines; changes in legislation or regulation; natural disasters (such as wildfires and earthquakes in our area); adverse weather conditions; interruptions of utility service in our markets for sustained periods; and other economic, competitive, governmental, regulatory and technological factors (including external fraud and cybersecurity threats) affecting our operations, pricing, products and services; and successful integration of acquisitions.

Previous wording

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. Our critical estimates include: Allowance for Credit Losses on Loans and Unfunded Commitments, Fair Value Measurements, and Goodwill.

Current wording

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. Our critical estimates include: Allowance for Credit Losses on Loans and Unfunded Commitments, Fair Value Measurements, and Goodwill. Refer to Critical Accounting Estimates in Item 7 of our 2024 Form 10-K for more information.

Previous wording

•Total deposits increased by $19.2 million to $3.309 billion as of September 30, 2024, compared to $3.290 billion as of December 31, 2023. Non-interest bearing deposits made up 44.5% of total deposits as of September 30, 2024, compared to 43.8% as of December 31, 2023.

Current wording

•Total deposits increased by $82.0 million to $3.302 billion as of March 31, 2025, compared to $3.220 billion as of December 31, 2024 however, some seasonal outflow is expected in early second quarter. Non-interest bearing deposits made up 43.2% of total deposits as of March 31, 2025, compared to 43.5% as of December 31, 2024.

Previous wording

•Total borrowings were reduced to zero in the second quarter and remained there for the third quarter representing a $26.0 million decrease from December 31, 2023, although there were intermittent borrowings averaging $5.9 million in the first nine months of 2024. Net available contingent funding sources, including unrestricted cash, unencumbered available-for-sale securities and total available borrowing capacity was $1.934 billion, or 58% of total deposits and 208% of estimated uninsured and/or uncollateralized deposits as of September 30, 2024.

Current wording

•Net available contingent funding sources, including unrestricted cash, unencumbered available-for-sale securities and total available borrowing capacity was $1.917 billion, or 58% of total deposits and 203% of estimated uninsured and/or uncollateralized deposits as of March 31, 2025.

Previous wording

•Return on average assets ("ROA") was 0.48% for the third quarter of 2024, compared to (2.35)% for the second quarter of 2024, and return on average equity ("ROE") was 4.17%, compared to (20.36)% for the prior quarter. ROA was (0.51)% for the nine months ended September 30, 2024, compared to 0.63% in the same period of the prior year. ROE was (4.43)% for the nine months ended September 30, 2024, compared to 6.07% in the same period of the prior year.

Current wording

•Return on average assets ("ROA") was 0.53% for the first quarter of 2025, compared to 0.63% for the fourth quarter of 2024, and return on average equity ("ROE") was 4.52% for the first quarter of 2025, compared to 5.48% for the prior quarter.

Previous wording

•Capital was above well-capitalized regulatory thresholds with Bancorp's and the Bank's total risk-based capital ratios of 16.40% and 15.82%, respectively, as of September 30, 2024. The capital plan and point-in-time capital stress tests indicate that Bank of Marin and Bancorp capital ratios will remain above regulatory well-capitalized and internal policy minimums throughout a five-year forecast horizon and across stress scenarios such as additional unrealized losses on the investment portfolio, additional deposit growth or decline, loan credit quality deterioration, and potential share repurchases.

Current wording

•Capital was above well-capitalized regulatory thresholds with Bancorp's and the Bank's total risk-based capital ratios of 16.69% and 16.45%, respectively, as of March 31, 2025. The capital plan and point-in-time capital stress tests indicate that Bank of Marin and Bancorp capital ratios will remain above regulatory well-capitalized and internal policy minimums throughout a five-year forecast horizon and across stress scenarios such as additional unrealized losses on the investment portfolio, additional deposit growth or decline, loan credit quality deterioration, and potential share repurchases.

Previous wording

•Bancorp's tangible common equity to tangible assets ("TCE ratio") was 9.72% as of September 30, 2024, and the Bank's TCE ratio was 9.32%. While we do not intend to sell our held-to-maturity securities, the Bancorp's TCE ratio, net of after-tax unrealized losses on held-to-maturity securities as if the losses were realized 1, was 8.16% as of September 30, 2024, compared to 7.80% as of December 31, 2023.

Current wording

•Bancorp's tangible common equity to tangible assets ("TCE ratio") was 9.82% as of March 31, 2025, and the Bank's TCE ratio was 9.66%. While we do not intend to sell our held-to-maturity securities, the Bancorp's TCE ratio, net of after-tax unrealized losses on held-to-maturity securities as if the losses were realized 1, was 8.08% as of March 31, 2025, compared to 7.85% as of December 31, 2024.

Previous wording

•The Board of Directors approved a cash dividend of $0.25 per share on October 24, 2024, which represents the 78 th consecutive quarterly dividend paid by Bancorp. The dividend is payable on November 14, 2024, to shareholders of record at the close of business on November 7, 2024.

Current wording

•The Board of Directors approved a cash dividend of $0.25 per share on April 24, 2025, which represents the 80 th consecutive quarterly dividend paid by Bancorp. The dividend is payable on May 15, 2025, to shareholders of record at the close of business on May 8, 2025.

Previous wording

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 periods 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 three and nine months ended September 30, 2024, compared to the three months ended June 30, 2024, and nine months ended September 30, 2023.

Current wording

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 periods 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 two days less in the three months ended March 31, 2025, compared to the three months ended December 31, 2024, and one day less in the first three months of 2025, compared to the first three months of 2024.

Previous wording

Net interest income totaled $69.4 million for the nine months ended September 30, 2024, compared to $78.5 million for the same period in the prior year. The $9.1 million decrease from the prior year was primarily due to a smaller balance sheet and higher costing deposits, partially offset by lower borrowing costs and higher average earning asset yields.

Current wording

Net interest income totaled $24.9 million for the three months ended March 31, 2025, compared to $22.7 million for the same period in the prior year. The $2.3 million increase from the prior year was primarily due to higher average earning asset yields and lower cost of deposits.

Previous wording

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, ended the year of 2023 at a federal funds target rate range between 5.25% and

Current wording

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, 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.

Previous wording

Primarily due to declining inflation and rising unemployment, the Federal Reserve lowered the target for the federal funds rate by 50 basis points, to a range of 4.75% to 5.00% at its September 2024 meeting and indicated that more rate cuts are likely in the coming months. 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 3. Quantitative and Qualitative Disclosure about Market Risk for further information.

Current wording

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. In the first quarter of 2025, the FOMC left rates unchanged in the January 29th and March 19th meetings due to projected slower economic growth and higher inflation by year-end. 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 3. Quantitative and Qualitative Disclosure about Market Risk for further information.

Previous wording

The provision totaling $1.3 million for the nine months ended September 30, 2023 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.

Current wording

We recorded no provision for credit losses on loans in the fourth quarter of 2024. We recorded a provision totaling $350 thousand for the three months ended March 31, 2024. This was primarily due 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.

Previous wording

The income tax provision for the third quarter of 2024 totaled $2.4 million at an effective tax rate of 34.5%, compared to a benefit of $12.5 million at an effective tax rate of 36.3% in the prior quarter. The increase in the provision for income taxes in the third quarter of 2024 reflected a higher pre-tax income as compared to the prior quarter. The decrease in the effective tax rate in the third quarter of 2024 was primarily due to the recording of an income tax benefit resulting from a $32.5 million pre-tax loss on the sale of available-for-sale investment securities in the prior quarter.

Current wording

The income tax provision for the first quarter of 2025 totaled $1.6 million at an effective tax rate of 24.8%, compared to a provision of $3.6 million at an effective tax rate of 37.8% in the prior quarter. The decrease in the provision for income taxes in the first quarter of 2025 reflected lower pre-tax income as compared to the prior quarter. The decrease in the effective tax rate in the first quarter of 2025 was primarily due to the treatment of certain permanent tax differences while in a loss position for the 2024 tax year.

Previous wording

Total cash, cash equivalents and restricted cash were $229.2 million at September 30, 2024, an increase of $198.7 million compared to $30.5 million at December 31, 2023, largely due to proceeds of $292.6 million from the sale of available-for-sale securities in the second quarter and deposit growth, partially offset by purchases of investment securities and the residential real estate loan pool discussed below.

Current wording

Total cash, cash equivalents and restricted cash were $259.9 million at March 31, 2025, an increase of $122.6 million compared to $137.3 million at December 31, 2024, driven by growth in deposits totaling $82.0 million and proceeds from paydowns and maturities of investment securities of $63.0 million offset by purchases of investment securities of $33.6 million.

Previous wording

Both the available-for-sale and held-to-maturity portfolios are eligible for pledging to FHLB or the Federal Reserve as collateral for borrowings. The portfolios are comprised of high credit quality investments with average effective durations of 3.58 on available-for-sale securities and 5.35 on held-to-maturity securities. Both portfolios generate cash flows monthly from interest, principal amortization and payoffs, which supports the Bank's liquidity. Those cash flows totaled $91.9 million in the first nine months of 2024. See Note 4, Investment Securities, for additional information.

Current wording

Both the available-for-sale and held-to-maturity portfolios are eligible for pledging to FHLB or the Federal Reserve as collateral for borrowings. The portfolios are comprised of high credit quality investments with average effective durations of 3.27 on available-for-sale securities and 5.61 on held-to-maturity securities. Both portfolios generate cash flows monthly from interest, principal amortization and payoffs, which supports the Bank's liquidity. Those cash flows totaled $72.8 million in the first three months of 2025. See Note 4, Investment Securities, for additional information.

Previous wording

Of the total investment in obligations of state and political subdivisions, the largest concentrations outside of California are in Texas (38.4%), Washington (15.7%) and Wisconsin (9.4%). Our investment in obligations issued by municipal issuers in Texas are either guaranteed by the AAA rated Texas Permanent School Fund ("PSF") or backed by revenue sources from essential services (such as utilities and transportation).

Current wording

Of the total investment in obligations of state and political subdivisions, the largest concentrations outside of California are in Texas (38.4%), Washington (15.6%) and Wisconsin (9.4%). Our investment in obligations issued by municipal issuers in Texas are either guaranteed by the AAA rated Texas Permanent School Fund ("PSF") or backed by revenue sources from essential services (such as utilities and transportation).

Previous wording

In the first nine months of 2024, pay-offs and paydowns of non-accrual loans totaled $4.7 million. Of the total non-accrual loans as of September 30, 2024, approximately 50% were paying as agreed, 80% were real estate secured, and all are being closely monitored for payments or payoff.

Current wording

Of the total non-accrual loans as of March 31, 2025, approximately 57% were paying as agreed, 90% were real estate secured, and all are being closely monitored for payments or payoff.

Previous wording

Bank of Marin has continued its conservative underwriting practices, and in light of current market conditions, our portfolio management and credit teams are exercising heightened vigilance for potential credit quality weakening. Classified loans increased to $52.4 million as of September 30, 2024, compared to $32.3 million as of December 31, 2023. The $20.1 million increase was largely due to $26.8 million in downgrades, partially offset by $5.9 million in payoffs and paydowns and $827 thousand upgraded to pass.

Current wording

Bank of Marin has continued its conservative underwriting practices, and in light of current market conditions, our portfolio management and credit teams are exercising heightened vigilance for potential credit quality weakening. Classified loans increased to $57.4 million as of March 31, 2025, compared to $45.1 million as of December 31, 2024. The $12.3 million increase was largely due to downgrades of one $7.1 million commercial relationship and two non-owner occupied real estate relationships totaling $7.2 million, partially offset by the sale of a $2.1 million non-owner occupied real estate loan.

Previous wording

Loans designated special mention, which are not considered adversely classified, decreased by $45.7 million to $89.5 million as of September 30, 2024, from $135.2 million as of December 31, 2023. The decrease was largely due to net migrations out of special mention to both pass and classified risk ratings including downgrades which we are closely monitoring and actively managing. Of the loans designated special mention, 90% were real estate secured.

Current wording

Loans designated special mention, which are not considered adversely classified, decreased by $20.0 million to $88.9 million as of March 31, 2025, from $108.9 million as of December 31, 2024. The decrease was largely due to $14.2 million in downgrades to substandard risk rating and contractual paydowns and payoffs totaling $6.0 million. Of the loans designated special mention, 100% were real estate secured.

Previous wording

Non-interest bearing deposits made up 44.5% of total deposits at September 30, 2024, compared to 43.8% at December 31, 2023. Additionally, the Bank's competitive and balanced approach to relationship management and focused outreach supported the addition of approximately 3,700 new accounts during the first nine months of 2024.

Current wording

Non-interest bearing deposits made up 43.2% of total deposits at March 31, 2025, compared to 43.5% at December 31, 2024. Additionally, the Bank's competitive and balanced approach to relationship management and focused outreach supported the addition of approximately 1,000 new accounts during the three months ended March 31, 2025.

Previous wording

During the first nine months of 2024, outstanding borrowings decreased by $26.0 million to zero at September 30, 2024, primarily due to the strategic balance sheet repositioning in the second quarter and the resulting proceeds from the sale of AFS securities mentioned above. There were intermittent borrowings averaging $5.9 million in 2024, compared to $260.6 million in the first nine months of 2023. Although available as a liquidity source, we have not utilized brokered deposits. Net available funding sources, including unrestricted cash, unencumbered available-for-sale securities, and remaining borrowing capacity was $1.934 billion, or 58% of total deposits and 208% of estimated uninsured and/or uncollateralized deposits as of September 30, 2024. Balances in the reciprocal deposit network program increased $17.7 million during the nine months ended September 30, 2024 to $441.2 million from $423.5 million as of December 31, 2023.

Current wording

We had no outstanding borrowings at March 31, 2025 and December 31, 2024. Although available as a liquidity source, we have not utilized brokered deposits. Net available funding sources, including unrestricted cash, unencumbered available-for-sale securities, and total available borrowing capacity was $1.917 billion, or 58% of total deposits and 203% of estimated uninsured and/or uncollateralized deposits as of March 31, 2025. Balances in

Previous wording

The total risk-based capital ratio for Bancorp was 16.40% at September 30, 2024, compared to 16.89% at December 31, 2023. The total risk-based capital ratio for the Bank was 15.82% at September 30, 2024, compared to 16.62% at December 31, 2023. Reductions in risk-based capital ratios were related to losses realized on securities sales.

Current wording

The total risk-based capital ratio for Bancorp was 16.69% at March 31, 2025, compared to 16.54% at December 31, 2024. The total risk-based capital ratio for the Bank was 16.45% at March 31, 2025, compared to 16.13% at December 31, 2024.

Previous wording

Bancorp's tangible common equity to tangible assets ("TCE ratio") was 9.72% at September 30, 2024, compared to 9.73% at December 31, 2023. Bancorp's TCE ratio, net of after tax unrealized losses on held-to-maturity securities 1, was 8.16%, compared to 7.80% at December 31, 2023. Management believes this non-GAAP measure is important because it reflects the level of capital available to withstand drastic changes in market conditions.

Current wording

Bancorp's tangible common equity to tangible assets ("TCE ratio") was 9.82% at March 31, 2025, compared to 9.93% at December 31, 2024. Bancorp's TCE ratio, net of after tax unrealized losses on held-to-maturity securities 1, was 8.08%, compared to 7.85% at December 31, 2024. Management believes this non-GAAP measure is important because it reflects the level of capital available to withstand drastic changes in market conditions.

Previous wording

Net available contingent funding sources, including unrestricted cash, unencumbered available-for-sale securities and total available borrowing capacity totaled $1.934 billion, or 58% of total deposits and 208% of estimated uninsured and/or uncollateralized deposits as of September 30, 2024.

Current wording

Net available contingent funding sources, including unrestricted cash, unencumbered available-for-sale securities and total available borrowing capacity totaled $1.917 billion or 58% of total deposits and 203% of estimated uninsured and/or uncollateralized deposits as of March 31, 2025.

Previous wording

We obtain funds from the repayment and maturity of loans, deposit inflows, investment securities sales, maturities and paydowns, federal funds purchases, FRB 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, maturity of certificates of deposit, repayment of borrowings, dividends to common stockholders, share repurchases and operating expenses.

Current wording

We obtain funds from the repayment and maturity of loans, deposit inflows, investment securities sales, maturities and paydowns, federal funds purchases, FRB 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.

Previous wording

Customer deposits are a significant component of our daily liquidity position. The attraction and retention of new deposits depends 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.

Current wording

Page-42 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.

Previous wording

Our cash and cash equivalents increased $198.7 million in the first nine months of 2024. The most significant sources of liquidity during the first nine months of 2024 were proceeds of $355.9 million from principal paydowns, maturities, calls and sales of investment securities, $19.2 million from net increase of deposits and $17.7 million in net cash provided by operating activities.

Current wording

Our cash and cash equivalents increased $122.6 million in the first three months of 2025. The most significant sources of liquidity during the first three months of 2025 were proceeds of $82.0 million from net increase of deposits, $63.0 million from principal paydowns, calls and maturities of investment securities, loan payoffs of $25.5 million, $20.5 million in amortization of principal and a net $9.5 million decrease in utilization of credit lines, in addition to $4.9 million in net cash provided by operating activities.

Previous wording

Significant uses of liquidity during the first nine months of 2024 were $133.5 million in investment securities purchased, $26.0 million in repayments of short-term borrowings, and $16.4 million in purchased loan pool, loan originations, and unfunded loan commitment advances, net of principal collected. Additionally, other uses included $12.2 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-Q 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 outlined in the table above are adequate to support our operational needs.

Current wording

Significant uses of liquidity during the first three months of 2025 were $47.4 million in loan fundings, $33.6 million in investment securities purchased, and $4.0 million in cash dividends paid on common stock to our shareholders. Refer to the Consolidated Statement of Cash Flows in this Form 10-Q 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 outlined in the table above are adequate to support our operational needs.

Previous wording

Unfunded loan commitments, as discussed in Note 8 to the Consolidated Financial Statements in this Form 10-Q, totaled $454.2 million at September 30, 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.

Current wording

Unfunded credit commitments, as discussed in Note 8 to the Consolidated Financial Statements in this Form 10-Q, totaled $451.2 million at March 31, 2025. 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.

Previous wording

Over the next twelve months, $262.6 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.

Current wording

Over the next twelve months, $206.0 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.

Previous wording

We had no borrowings under our credit facilities at September 30, 2024, and $26.0 million at December 31, 2023, as discussed in Note 6 to the Consolidated Financial Statements in ITEM 1 of this report.

Current wording

We had no outstanding borrowings under our credit facilities at March 31, 2025, nor at December 31, 2024, as discussed in Note 6 to the Consolidated Financial Statements in ITEM 1 of this report.

Previous wording

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

Current wording

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. Dividends in excess of that amount may be paid with prior approval of the Department of Financial Protection and Innovation ("DFPI"). The Bank received approval from the State of California - DFPI 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 $5.8 million in cash at March 31, 2025. Management has requested approval from the DFPI for a dividend to be paid in the second quarter of 2025.