Bank of Marin Bancorp Announces Higher Third Quarter Earnings and Stable Credit Quality.

NOVATO, Calif. -- Bank of Marin Bancorp (Nasdaq: BMRC) President and CEO Russell A. Colombo announced third-quarter earnings for Bank of Marin Bancorp (Bancorp) of $3.2 million, up $84 thousand, or 2.7%, from the same period in 2006. Diluted earnings per share were $0.60 in the third quarter of 2007, compared to $0.55 in the third quarter of 2006, up 5 cents, or 9.1%.

"Given the competitive environment, we are very pleased with these strong results," said Colombo.

Earnings for the nine-month period ended September 30, 2007 were $9.1 million, an increase of $410 thousand, or 4.7%, over the same period a year ago. Diluted earnings per share for the nine-month period were $1.70, an increase of 15 cents per share, or 9.7%, over the same period in 2006.

Net income for the third quarter and first nine months of 2007 includes pre-tax non-recurring gains of $387 thousand from the sale of the Bank's $1.5 million VISA portfolio. The sale allows the Bank to offer a third-party product that will better meet customers' needs. Net income for the nine months ended September 30, 2007 also includes pre-tax non-recurring net gains of $710 thousand related to the second-quarter sale of the $76 million indirect auto loan portfolio. The proceeds from the sale provide a source of funding for higher-yielding relationship loans, which drive core deposit growth.

Loans totaled $686.0 million at September 30, 2007. Excluding the indirect auto portfolio, which was sold in the second quarter of 2007, loans increased 9.3% from a year ago. Credit quality remains strong with $150 thousand in non-performing loans at September 30, 2007. Bank of Marin Bancorp holds no subprime loans in its portfolio nor does it hold investment securities backed by subprime loans.

"At a time when credit and liquidity issues are facing other banks, Bank of Marin Bancorp's strengths include exceptional credit quality and a high level of liquidity," said Colombo.

Deposits grew 9.1% to $809.4 million since September 30, 2006. "We are pleased that our deposits continue their solid growth in a very competitive marketplace," said Colombo. "It confirms that we are providing excellent service and products through highly qualified employees."

Net interest income of $10.8 million in the third quarter increased $370 thousand, or 3.6% from the same period a year ago, reflecting growth in interest-earning assets, partially offset by a compressed net interest margin. Net interest income of $31.3 million in the nine-month period ending September 30, 2007 remained essentially unchanged from $31.2 million in the same period a year ago.

The net interest margin totaled 4.94% in the third quarter of 2007 compared to 5.04% in the third quarter of 2006. The net interest margin totaled 5.00% during the first nine months of 2007 compared to 5.17% in the first nine months of 2006. The margin compression reflects both economic and competitive pressures.

Non interest income, excluding non-recurring gains, totaled $1.2 million in the third quarter of 2007, an increase of $203 thousand, or 20.4% over the third quarter of 2006. For the nine months ended September 30, 2007 non-interest income, excluding non-recurring gains, totaled $3.4 million, an increase of $455 thousand, or 15.5% over the same period a year ago. Increases in service charge income, Wealth Management Services income and other income, including Bank-owned life insurance income, contributed to the growth. Approximately $23 thousand and $75 thousand of recoveries on indirect auto loans were recorded in other income during the third quarter of 2007 and the first nine months of 2007, respectively, subsequent to recording these loans at their fair value.

"Our efforts to grow stable sources of non-interest income are having success," said Colombo. "We continue to expand our product base to serve our customers' needs."

In the third quarter of 2007 non-interest expense increased by $341 thousand to $6.9 million, an increase of 5.2% from the third quarter of 2006. In the first nine months of 2007 non-interest expense increased by $1.2 million to $20.6 million, an increase of 6.3% from the same period a year ago. The increases reflect the hiring of new key personnel, one-time costs associated with the formation of the holding company and higher FDIC insurance premiums. The increase in the first nine months of 2007 over the same period in 2006 also includes costs associated with the relocation of administrative functions to a new facility in Novato in July of 2006.

Stockholders' equity declined 4.0% to $86.6 million at September 30, 2007 from $90.1 million a year ago. The decline reflected the Bank's effort to proactively manage its capital and included the impact of a share repurchase program ($15 million repurchased from October 2006 through February 2007) and cash dividends to stockholders, substantially offset by earnings and stock option exercises. "The Bank's capitalization remains well above regulatory guidelines," said Colombo.

The formation of a bank holding company, Bank of Marin Bancorp, with Bank of Marin as its wholly-owned subsidiary was completed on July 2, 2007. In the transaction, shareholders of the Bank became shareholders of the holding company on a "one-share for one-share" basis. For trading purposes, Bank of Marin Bancorp assumed the Bank of Marin's ticker symbol "BMRC."

The financial information for the current period presented relates to Bank of Marin Bancorp, while prior periods relate to the Bank of Marin, as these periods are prior to the formation of the bank holding company. This information is comparable between periods as the only subsidiary of Bank of Marin Bancorp is the Bank of Marin.

Bank of Marin has eleven branch 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 has a commercial loan production office in San Francisco. The Bank's administrative offices are located in Novato, and its Wealth Management Services are located in Corte Madera, Novato and Petaluma.

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 Bancorp'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 Bancorp's operations, pricing, products and services. These and other important factors are detailed in various securities law filings made periodically by Bancorp or the Bank, copies of which are available from Bancorp without charge. Bancorp 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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