Bank of Marin Announces First Quarter Earnings.

CORTE MADERA, Calif. -- Bank of Marin (NASDAQ:BMRC) President and CEO Russell A. Colombo announced first quarter earnings of $3.0 million, up $64 thousand, or 2.2%, from the same period in 2006.

Diluted earnings per share were $0.55 in the first quarter of 2007, compared to $0.52 in the first quarter of 2006. The 2006 figures have been restated for the 5% stock dividend declared in April 2006.

Effective January 1, 2007 the Bank marked its $83 million auto loan portfolio to fair value in accordance with SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities." The final calculated fair value measurement of these loans on January 1, 2007 resulted in a $1.5 million cumulative-effect net reduction of retained earnings. The Bank also recorded a $520 thousand pre-tax unrealized gain in its first quarter earnings, representing the change from January 1, 2007 to March 31, 2007 in the fair value of such loans. The market adjustment was performed in anticipation of the sale of the auto loan portfolio, which will provide a source of funding for higher-yielding relationship loans.

"This represents a pro-active move to maximize returns for our shareholders," said Colombo. For further information on the intended sale of the auto portfolio, see the Bank's Form 8-K dated April 16, 2007.

Net interest income of $10.0 million in the first quarter of 2007 represents a decrease of 3.6% over the same period last year. The net interest margin was 5.00% in the first quarter of 2007 compared to 5.31% in the first quarter of 2006.

"The net interest margin was affected by a combination of upward pressure on deposit rates in our marketplace, competition on loan rates and increased levels of borrowings to support loan growth," said Colombo. "These issues are affecting the banking industry as a whole, and have called for special effort and dedication on the part of our experienced staff. Management of the Bank expects the sale of the auto portfolio and subsequent reinvestment of the proceeds to have a positive impact on the net interest margin."

Loans totaled $736.1 million at March 31, 2007, an 8.8% increase over a year ago. Deposits grew 4.5% to $774 million in the same period. "Our loan growth reflects solid performance in the marketplace, while our credit quality remained strong, with nominal non- performing loans," said Colombo.

Non-interest income in the first quarter of 2007 totaled $988 thousand, exclusive of the $520 thousand unrealized mark-to-market adjustment on the auto portfolio. This represents an improvement of 4.9% from $942 thousand in the same period in 2006, and included increases in Wealth Management Services fees due to increased business.

"We continue to focus our effort in improving less volatile sources of income," said Colombo. "In the first quarter of 2007 we introduced Remote Deposit Capture, new technology whereby clients can deposit checks without ever leaving their place of business. We also plan to introduce Positive Pay, which will allow clients to better detect fraud in check processing. These two products will enhance our product base while growing deposits and adding to our sources of fee income."

Non-interest expense in the first quarter of 2007 increased by $447 thousand, or 7.2%, to $6.7 million from $6.2 million a year ago, in part reflecting costs associated with the move of administrative functions to Pell Plaza in Novato. "This move has provided improved communication and ultimately will provide greater efficiencies for our administrative staff, now that we are all under one roof," said Colombo.

In March of 2007 the Board of Directors approved the formation of a holding company, subject to shareholder and regulatory approval. If approved, the Bank will become a wholly-owned subsidiary of the holding company. The formation of a holding company will, among other things, allow the Bank the flexibility to more actively manage its capital through alternative forms of funding.

In the first quarter of 2007, the Bank completed its stock repurchase program, which began in the third quarter of 2006. A total of $15 million, representing 405,315 shares, were repurchased under the plan, enhancing shareholder value while maintaining capital well within regulatory guidelines.

"We are positioning the Bank for the future by evaluating our sources of income, establishing a holding company and appropriately monitoring the Bank's capital base. At the same time, we continue to focus on building relationships and expanding our product offerings. We are confident we have the ability and resources to maintain and enhance our financial strength and market position," said Colombo.

Bank of Marin has eleven offices with locations in Strawberry, Corte Madera, downtown San Rafael, Andersen Drive and Northgate in San Rafael, Ignacio, downtown Novato, Sausalito and three offices in Petaluma. The Bank's administrative offices are located in Novato, and its Wealth Management Services are located at the Corte Madera location.

This release may contain certain forward-looking statements that are based on management's current expectations regarding economic, legislative, and regulatory issues that may impact the Bank's earnings in future periods. 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." Factors that could cause future results to vary materially from current management expectations 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 the Bank's operations, pricing, products and services. These and other important factors are detailed in various Federal Deposit Insurance Corporation filings made periodically by the Bank, copies of which are available from the Bank without charge. The Bank undertakes no obligation to release publicly the result of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date of this press release or to reflect the occurrence of unanticipated events.

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