Bank of Marin Announces Third Quarter Earnings.

CORTE MADERA, Calif. -- Bank of Marin (Nasdaq:BMRC) President and CEO Russell A. Colombo announced third quarter earnings of $3.1 million, unchanged from $3.1 million in the same period in 2005. For comparability purposes, excluding the effect of Statement of Financial Accounting Standard No. 123R (SFAS 123R) implemented on January 1, 2006, which requires the Bank to record stock options as compensation expense, third quarter 2006 earnings would have been $3.2 million, an increase of 4.3%.

Diluted earnings per share were $0.55 in the third quarter of 2006, compared to $0.56 in the third quarter of 2005. The 2005 figures have been restated for the 5% stock dividend declared in April 2006. Excluding the effect of SFAS 123R, diluted earnings per share would have been $0.57 in the third quarter of 2006.

Earnings for the nine-month period ended September 30, 2006 were $8.7 million, an increase of 3.0% over the same period last year. Excluding the effects of SFAS 123R, earnings through September 30, 2006 would have been $9.0 million, a 7.4% increase over the prior year. Diluted earnings per share for the nine-month period were $1.55, an increase of $.03 per share over the same period in 2005. Excluding the effects of SFAS 123R, diluted earnings per share in the nine months ended September 30, 2006 would have been $1.60.

In the third quarter of 2006, the Bank recorded net tax benefits of $251 thousand, or $0.04 per diluted share, related to interest on enterprise zone loans for tax years 2002 through 2005, based on a study completed in September.

Net interest income of $10.4 million in the third quarter and $31.2 million in the nine-month period ended September 30, 2006 represented increases of 1.7% and 8.5%, respectively, over the same periods last year. The net interest margin totaled 5.04% in the third quarter of 2006 compared to 5.21% in the third quarter of 2005. In the nine-month period ended September 30, 2006 the net interest margin totaled 5.17% compared to 5.23% in the same period in 2005.

Total assets of $873.2 million at September 30, 2006 represented a 2.7% increase over the $850.1 million reported at September 30, 2005. Loans totaled $712.9 million at period end, a 4.6% increase over $681.8 million a year ago. Deposits declined 1.9% to $742.2 million at September 30, 2006 from $756.3 million a year ago, reflecting competitive pressures. However, the overall mix of deposits has improved as non-interest bearing demand deposits now account for 29.0% of total deposits, compared to 27.3% at September 30, 2005.

"The market is extremely competitive," said Colombo. "We continue to focus on building relationships and maintaining our margins. We have always been successful by offering solid financial products coupled with personal relationships that we have established with our clients. We are confident that this formula will continue to enhance our future growth."

At September 30, 2006 non accrual loans totaled $4.4 million, and were comprised primarily of two loans, including one commercial loan for which the Bank holds collateral and is well reserved, and one commercial real estate loan with a loan-to-value of fifty percent. The commercial real estate borrower is currently in contract to sell the underlying property.

Non-interest income of $2.9 million for the nine months ended September 30, 2006 improved by 6.6% from $2.8 million in the same period in 2005, and included solid performance by the Wealth Management Department. Non-interest expense increased 16.8% to $19.4 million from $16.6 million a year ago reflecting the relocation of the Bank's administrative facilities, branch expansion, personnel additions and improvements in infrastructure to better position the Bank for the future.

"In July 2006 we consolidated our administrative functions into the Pell Plaza building in Novato which has brought increased efficiency to the Bank," said Colombo. "I look forward to continued positive effects of the move."

Again this year the Bank hosted the annual "Spirit of Marin" awards luncheon in September at the St. Vincent School for Boys in San Rafael. This is the Bank's 13th year holding this event that honors businesses and individuals chosen by each of the twelve Marin County Chambers of Commerce, in recognition of their dedication and support of their respective communities.

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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