Good morning. And thank you for joining us for the Bank of Marin Bancorp Earnings Call for the Quarter Ended September 30, 2015. My name is Jarrod Gerhardt, I am a Senior Vice President with Bank of Marin. During the presentation, all participants will be on a listen-only mode. After the call, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded on October 16, 2015. Presenting this morning will be Russ Colombo, President and CEO; and Tani Girton, Chief Financial Officer. You may access the information discussed on this call from the press release that went over the wire at 5 AM Pacific Time this morning or on our website at bankofmarin.com, where this call is also being webcast. Before we get started, I want to emphasize that the discussion you hear on this call is based on information we know as of today, October 16, 2015, and may contain forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those set-forth in such statements. For a discussion of these risks and uncertainties, please review the forward-looking statements disclosure in the earnings press release we issued earlier this morning, as well as Bank of Marin Bancorp's SEC filings. Following the prepared remarks, our team will be available for questions. And now, I'd like to turn the call over to Russ Colombo.

Thank you, Jarrod. Good morning, and welcome to the call. We are pleased to share our results for the third quarter which reflects our strategic focus on relationship banking in our core market. A great deal of hard work by our team has continued to generate momentum and position us well as we head into the fourth quarter. Let’s start with some key highlights from the quarter. New loan originations in the third quarter were strong at $57 million, making this the best quarter of the year so far and the third straight quarterly increase. The strength of origination led to a $24 million net increase in total loans since June 30, 2015. New loans in the quarter were well distributed both across our geographic market and product. We continue to see growth in the Marin and Petaluma market where our presence is the strongest. Loan payoffs which have been a factor so far this year were down for the quarter to approximately 37 million with only a small percentage attributable to refinancing with competitors. Deposits totaled 1.6 billion at quarter end growing $5 million from last quarter and 5.4% since December 31, 2014. Non-interest bearing deposits continued to grow in the third quarter. They increased to 752.3 million and $11 million increase from June 30, 2015. Non-interest bearing deposits are now 46% of total deposits compared to 45.5% at June 30, 2015. Overall, our loan and deposit pipelines are healthy and we look forward to the future with confidence. As for detailed results from the quarter, earnings were $4.8 million compared to 4.3 million last quarter, an 11% increase. Our 1% return on assets and 9% return on equity are supported by strong capital and liquidity as well as disciplined expense management. Our already excellent credit quality continues to improve. Non-accrual loans represent only 0.19% of total loans at quarter-end, down significantly from 0.53% at June 30 and 0.73% a year ago. The decrease in non-accrual loans primarily relates to a $2.7 million loan that was returned to accrual status and the payoff of a $1.4 million loan. At quarter end, the Texas ratio stood at 1.41%, an improvement from 3.5% last quarter and 5.14% a year ago. Now let me turn it over to Tani for additional insights about our financial results.

Thank you, Russ, and Good morning everyone. I'll start by saying that it is so rewarding to see our hard work reflected in many positive production and loan quality trends. We continue to perform at a high level and we believe that we are well positioned to finish the year strong. While we continue to experience deposit fluctuations related to seasonal activity and the new business ventures as some of our larger customers, balances are on an upward trend. Our loan to deposit ratio is sensitive to this deposit volatility and rose to 83.4% on September 30th, compared to 82.1% on June 30th, as loan balances increased more quarter-over-quarter than did deposit balances. That said our capital and liquidity positions are solid and will support substantial growth, as well as the effects of potential changes in interest rates. Turning to the income statement, diluted earnings per share for the quarter were $0.79 as compared to $0.71 per share in the second quarter. Net interest income grew to 16.9 million in the third quarter of 2015 compared to $16.5 million in the second quarter primarily due to balance sheet growth and an additional day in the quarter. The decrease in net interest income relative to 17.5 million in the third quarter last year is due mostly to a lower level of income recognition on acquired loans as well as rates on new loans and securities that are somewhat below rates on paid off loans. The third quarter tax-equivalent net interest margin of 3.79% declined 7 and 24 basis points respectively from last quarter and from the third quarter of 2014. This is primarily due to a higher percentage of securities on the balance sheet as average deposit levels outpaced loan growth. Additionally, income recognition on acquired loans continues to fall and…

Thank you, Tani. As Tani mentioned the trends we're experiencing across the business are positive. Loan origination, deposit growth, credit quality and earnings continue to improve. Given the healthy economies of the markets where we operate, there is no predicting loan payoffs; however, the bank was able to take advantage of a slight ease in pay offs in the third quarter. We remain disciplined on the credit side because as you know bad loans are very often made during good times. A solid performing loan portfolio is hard earned and priceless in any market condition. Maintaining a high ratio of non-interest bearing deposits continues to be an emphasis for us. As with our focus on loan origination, this is an important trend which reinforces our relationship based approach. Overall we are pleased with our performance this quarter which makes us optimistic about the future. Thank you for your time this morning and now we'll open it up to your questions.

Thank you. [Operator Instructions] And our first question comes from Jeff Rulis with D.A. Davidson. Please proceed with your question.

Russ, you mentioned payoff activity obviously tough to predict but is there any sort of planned payoff that you can see into ‘16 versus ‘15, was there inherently just more planned payoffs that you can see at this point say that well it should be a lighter year in 2016 from a payoff perspective or is that not the case?

Well, Jeff, as you know it's really hard to predict and, but ones you don't want to see are bank - are customers refinancing with other banks which was relatively a small piece of what we had in terms of payoffs. We have -- there are planned payoffs which are primarily related to our construction portfolio. We want those to pay off because the project is completed and you can look at our construction portfolio and anticipate that there's about an 18 month life to those projects and then they get paid off. So we do have that. For the most part the rest is very difficult to anticipate and we're just working hard to make sure that none of the payoffs are related to refinances outside the bank and we're maintaining our existing relationship and then growing the portfolio. And the other thing, we had a couple, especially in the second quarter, we had two businesses that sold and they were big loans on our portfolio so you never know when that's going to happen and that's the ones you really have to work hard to make up for because what can you do about that.

Got it, okay and then just maybe on strategy of the securities purchases, deploying that cash balance was that a tipping point on just waiting for rate hikes and putting some to play or was, I guess, thoughts on additional securities purchases or are you comfortable with that cash balance where it sits.

So we, we're definitely comfortable with the cash balance, we're sitting, we continue to get increases in deposit balances. We look forward at what our cash flows coming off of the portfolio are going to look like, so we're very comfortable that as we have loan growth that we'll be able to fund that with other cash coming in or existing deposits. So what we've done now to the extent that the cash to invest has exceeded any expectations is that we make sure we put them in highly liquid shorter duration securities so that if loan growth picks up faster than expected that we will also be able to convert securities to loans.

Okay, then maybe one quick last one. Just on the reserving, on the provision line, in '16 I guess if you see a positive loan growth in next year could we expect maybe a pickup in that provision line?

Yes, I mean, as we have loan growth we will be provisioning. So you can certainly expect that and…

And do you have an absolute level on the reserve to loans or is it just kind of -- I mean as you approach 1%...

Well no, we're actually implementing a new [ALLL] [ph] model which is more robust than what we've used historically and that drives that provisioning, and we don't really have a target. You don't see many banks that are below 1% so I think that's fair to say that we're going to keep it above that number, but you know, you - it’s driven by the types of loans we're making, you know the loss experienced in all those in certain areas. You can look at our bank and you can see that we have a big percentage of commercial real estate, yet historically if you look at our history we've had only about $2.2 - 2.3 million of losses of net losses in commercial real estate in 25 years. That's total. So provisioning in commercial real estate is a reflection of your experience. That's the way the model works.

Our next question comes from Timothy Coffey from FIG Partners, please proceed with your question.

Russ, your deposit growth seem to be a little light this quarter, is that just kind of a one off event or is it, is the economy, your margins starting to experience a little slowing?

No, it's interesting asset because during the quarter we have a fair amount of volatility in that number and we had some big depositors that utilized their deposit balances and sometimes, you have to go $20 million [swing]][ph] on a daily basis it's really kind of interesting. During the quarter and it's kind of a standard if you look at the quarterly results, if you look at it month by month you would see that there's almost a bell curve and it seems to be at the end of every quarter there seems to be kind of a decline. In the middle of the quarter we're substantially up, and that will happen almost every quarter. But I don't read anything negative, actually if you look across relationships and you look across the pipeline of the branches that are working on all these deposit relationships it's healthy and we're optimistic about where our deposits will continue to go and but the most important number for us is that non-interest bearing account, the demand deposits which continues to grow. And that's an indication that we're building relationships.

And to your point I see your average interest bearing deposits were actually up 2% in the quarter, so. And then the other question I had had to do with the expenses and the salary and benefit line items. That was also lower than we've seen in previous quarters. Is that a sustainable run rate?

We actually had slightly lower FTE in the third quarter and so as we fill positions we just had a slight dip I think that that number's probably a little bit below what we're going to have going forward, just because our FTEs were down for the quarter.

The other thing is that every second quarter we have a true-up on the vesting of our stock options and so that true-up was a positive number last quarter. So, without that true-up expenses on the salary and benefits line went down somewhat.

We do have another question from Tim O'Brien from Sandler O'Neill Partners. Please proceed with your question.

Hi Russ and Tani, first question, do you happen – Tani, do you have an unfunded commitment this quarter end for the third quarter and then for the second quarter also just by off-hand right there?

So, the number I have is that the unfunded commitments went up by roughly 28 million but you have to remember that there're new -- with new loans coming in and out of the portfolio and so the utilization rate which might be the other factor that you're looking at to tighten up your numbers was 42% at the end of the quarter.

And that's a little lower than kind of normal and you have borrowings online to credit that affect that obviously. Historically it’s around 45%. So, when you have that drop than you have more unfunded commitments and then we had -- we did reserve for unfunded commitments in the quarter on 300 plus thousand dollars. So, that number just -- its volatile based on our borrowing needs of our clients.

So, is the utilization rate, the 42% utilization rate a blended rate that includes construction or is that specific to commercial?

No, that's everything that includes construction.

And Tani do you happen to have the unfunded commitment number at the end of -- what are the totals unfunded commitments at the end of the third quarter and the second quarter?

I don't have those numbers in front of me Tim. I think we'll have to get back to you with that.

And then another question for you is, Russ you mentioned implementation of a [LLL] model. Is that implementation going to be completed this quarter or is that something that's going to carry in, in the next year? I mean I know the model will be implemented but is it going to be up and running this quarter or next year?

Next year. First quarter next year.

First quarter next year. At that time like at the end of the first quarter, will there kind of a true-up in reserves kind to reflect the model reality….

The model is different than what we're using but we don't expect there to be a significant difference in where we are. It's just much more detailed to it and much more robust in terms of the types of things that it's measuring and applying numbers to the buy. I don't expect there’s going to be a huge true-up, if there's any it will relative to modest.

And then last question for you all is that Russ did you see an uptick in aggressive pricing around real-estate this quarter from any of the big banks that -- that you guys have to navigate around?

It’s been all year Tim, we've been surprised from time-to-time by a big bank with whom I priced something relative, I mean pretty aggressively with a long-term particularly in commercial real-estate, but it's what's been happening for a while, I don't see there is a huge difference from most recently but there's lot of bank going very long with very aggressive pricing on commercial real-estate loans.

Tim, I can give you the numbers on unfunded commitments now. The unfunded commitments as of September 30, was 375 million and as of June 30 it was 348 million rounded up.

I have one other question for Russ and that is as far as the economy in your market is concerned, what do you think is most noteworthy at this point in time, end of third quarter coming in towards year-end, what do you think is the most compelling or concerning kind of thing out there that's caught your eye that you keep in track that we might not know about? As far as kind of the overall [indiscernible] economy?

Yes, you probably know about it, but it's both compelling and concerning and its technology which is driving commercial real-estate prices through the roof primarily -- it starts in San Francisco in the Peninsula, but there's definitely a spillover to [East Bay] and there is a spillover in the Marin County now. And so you're seeing that and so the concerning thing is that if you're driving these prices are getting driven up, you are lending against higher valued commercial property and so we're very cognizant of that and being very careful about advanced rate against properties today because re-prices have gone through the roof. And so that’s me is the concern and we're watching this very-very carefully and it definitely had an impact in Marin here, certainly not to that extent that it had an impact in San Francisco and down in peninsula and Silicon Valley. And in the East Bay definitely we're seeing the impact in Oakland and you're seeing technology companies who are signing big leases for lots of space in the East Bay and there is talk of technology companies coming up our way too. The Marin has become somewhat the affordable alternative which is almost laughable, but it is because commercial properties are so valuable now in San Francisco and peninsula.

[Operator Instructions] And our next question comes from Don Worthington from Raymond James. Please proceed with your question.

This maybe kind of the same issue that Tim was asking about a minute ago, but in terms of competition where your commentary suggests you in loose as many relationships to other lenders, is that due to an pullback by the competition in terms of pricing or is Bank of Marin being more competitive in what you're offering to kind of match what competitors are offering on loans?

Don, I'd really like to think that we’re really spending a lot of time focused on building and maintaining our relationship. The best defense against moving relationship isn't pricing, it's being proactive with our accounts, making sure we're seeing them, making sure we have a term of institutionalizing our credit to the bank. And if we do that, we'll be way more successful maintaining relationship than trying to match pricing against a large bank. That being said, we're certainly trying to be competitive where we can, but sometimes you have to make the decision you walk away from a relationship if the pricing is too aggressive. But I think we've done a good job and we're doing a better job of working the relationship than maybe we might have been in the past.

Okay great thank you and then you mentioned in the press release the 89 day delinquencies subsequently paying off after quarter end, is there anything common in terms of type of loan, it sounds like there were five of them that were resolved after quarter end?

We had one, there are just five loans related and they all paid off after the -- [and we've missed out] that they were refinanced. And so we have -- with resolve those that showed up end of the quarter but not they have been resolved.

So these were all loans with one relationship or?

One relationship, we refinanced them here. It wasn't a problem of them not paying, we did a refinance and they're still here. And it’s one relationship, five loans.

We have no further phone questions at this time.

Okay, well thank you all for your time this morning. We appreciate for taking the time to listening to the call and we look forward to talking to you again next quarter. Thank you.