[PART I FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) This section covers the unaudited financial statements, management's analysis, market risk, and internal controls of Bank of Marin Bancorp [Financial Statements (Unaudited)](index=3&type=section&id=ITEM%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements, including statements of condition, income, equity, and cash flows, with detailed notes [Consolidated Statements of Condition](index=3&type=section&id=Consolidated%20Statements%20of%20Condition) Total assets slightly increased to **$3.73 billion** at June 30, 2025, driven by higher cash and lower investments, with deposits and equity also rising Consolidated Balance Sheet Highlights (in thousands USD) | Account | June 30, 2025 (USD) | December 31, 2024 (USD) | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $228,863 | $137,304 | | Total investment securities | $1,215,299 | $1,266,733 | | Loans, net | $2,043,784 | $2,052,600 | | **Total assets** | **$3,726,193** | **$3,701,335** | | **Liabilities & Equity** | | | | Total deposits | $3,245,048 | $3,220,015 | | Total liabilities | $3,287,655 | $3,265,928 | | Total stockholders' equity | $438,538 | $435,407 | | **Total liabilities and stockholders' equity** | **$3,726,193** | **$3,701,335** | [Consolidated Statements of Comprehensive Income](index=4&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) The company reported a **net loss of $8.5 million** in Q2 2025, primarily due to an **$18.7 million loss** on securities sales, resulting in **($0.53) diluted EPS** Key Income Statement Data (in thousands USD) | Metric | Q2 2025 (USD) | Q1 2025 (USD) | Six Months 2025 (USD) | Six Months 2024 (USD) | | :--- | :--- | :--- | :--- | :--- | | Net interest income | $25,912 | $24,946 | $50,858 | $45,161 | | Provision for credit losses | $0 | $75 | $75 | $5,550 | | Non-interest income (loss) | ($15,621) | $2,874 | ($12,747) | ($27,001) | | Losses on sale of investment securities | ($18,736) | $0 | ($18,736) | ($32,542) | | **Net (loss) income** | **($8,536)** | **$4,876** | **($3,660)** | **($18,980)** | | **Diluted EPS** | **($0.53)** | **$0.30** | **($0.23)** | **($1.18)** | [Consolidated Statements of Changes in Stockholders' Equity](index=5&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) Stockholders' equity increased to **$438.5 million** by June 30, 2025, driven by **$15.7 million** in other comprehensive income, offsetting net loss and dividends - For the six months ended June 30, 2025, total stockholders' equity increased from **$435.4 million** to **$438.5 million**[13](index=13&type=chunk) - Key activities impacting equity in the first six months of 2025 included a **net loss of $3.7 million**, **other comprehensive income of $15.7 million**, **cash dividends of $8.1 million** (**$0.50 per share**), and **stock repurchases of $2.2 million**[13](index=13&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Cash and cash equivalents increased by **$91.6 million** for the six months ended June 30, 2025, with positive contributions from operating, investing, and financing activities Cash Flow Summary (Six Months Ended June 30, in thousands USD) | Cash Flow Activity | 2025 (USD) | 2024 (USD) | | :--- | :--- | :--- | | Net cash provided by operating activities | $12,976 | $7,775 | | Net cash provided by investing activities | $63,968 | $303,703 | | Net cash provided by (used in) financing activities | $14,615 | ($110,523) | | **Net increase in cash and cash equivalents** | **$91,559** | **$200,955** | [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed disclosures on accounting policies, fair value measurements, investment and loan portfolios, borrowings, equity, and commitments - The company operates in a single reportable segment: community banking. Wealth management services do not meet the quantitative threshold for separate reporting[19](index=19&type=chunk) - Due to the net loss position for the three and six months ended June 30, 2025 and 2024, diluted loss per share is the same as basic loss per share as potential common shares would be anti-dilutive[21](index=21&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=33&type=section&id=ITEM%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the financial performance, highlighting a strategic securities repositioning, its impact on net interest margin, credit quality, and capital adequacy [Executive Summary](index=34&type=section&id=Executive%20Summary) Q2 2025 saw a **net loss of $8.5 million** due to a strategic **$18.7 million** securities sale, expected to improve future net interest margin and EPS - The bank sold **$185.8 million** of available-for-sale (AFS) securities, resulting in a **pre-tax loss of $18.7 million**. This repositioning is expected to have an approximate four-year earn back period[142](index=142&type=chunk) GAAP vs. Non-GAAP Performance (Q2 2025) | Metric | GAAP (USD) | Non-GAAP (Comparable) (USD) | | :--- | :--- | :--- | | Net (Loss) Income | ($8.5M) | $4.7M | | Diluted EPS | ($0.53) | $0.29 | | Return on Average Assets | (0.92)% | 0.50% | | Return on Average Equity | (7.80)% | 4.26% | - Net available contingent funding sources stood at **$1.863 billion**, representing **57% of total deposits** and **200% of estimated uninsured/uncollateralized deposits** as of June 30, 2025[144](index=144&type=chunk) - The company repurchased **100,000 shares** for **$2.2 million** in Q2 2025, contributing to an increase in tangible book value per share to **$22.55**[145](index=145&type=chunk) [Results of Operations](index=37&type=section&id=Results%20of%20Operations) Net interest income increased to **$25.9 million** in Q2 2025, with tax-equivalent net interest margin expanding to **2.93%**, while non-interest income was negative due to securities sales - Net interest income increased by **$966 thousand** in Q2 2025 compared to Q1 2025, driven by higher loan interest income from portfolio replenishment at higher rates[154](index=154&type=chunk) - The tax-equivalent net interest margin rose to **2.93%** in Q2 2025 from **2.86%** in Q1 2025, with higher-rate loan originations being a key contributor[155](index=155&type=chunk) - No provision for credit losses was recorded in Q2 2025, compared to a **$75 thousand** provision in Q1 2025[164](index=164&type=chunk) - Non-interest expense was stable at **$21.5 million** in Q2 2025, a slight increase of **$226 thousand** from the prior quarter[174](index=174&type=chunk) [Financial Condition Summary](index=45&type=section&id=Financial%20Condition%20Summary) The company's financial condition remained stable, with cash increasing, investment portfolio decreasing, and deposits rising to **$3.245 billion** - Cash and equivalents increased by **$91.6 million** in the first half of 2025 to **$228.9 million**, largely due to proceeds from securities sales[183](index=183&type=chunk) - The loan portfolio decreased by **$9.6 million** in the first six months of 2025 to **$2.074 billion**. Loan originations were **$132.8 million**, while payoffs were **$62.0 million**[189](index=189&type=chunk) - Non-accrual loans decreased by **$1.4 million** to **$32.5 million** (**1.57% of total loans**) at June 30, 2025[190](index=190&type=chunk) - Total deposits increased by **$25.0 million** in the first half of 2025 to **$3.245 billion**. Non-interest bearing deposits constituted **42.5% of total deposits**[195](index=195&type=chunk)[196](index=196&type=chunk) [Capital Adequacy](index=47&type=section&id=Capital%20Adequacy) Both the company and the Bank remained well-capitalized as of June 30, 2025, with Bancorp's total risk-based capital ratio at **16.25%** Bancorp Capital Ratios (June 30, 2025) | Ratio | Actual | Well Capitalized Threshold | | :--- | :--- | :--- | | Total Capital (to risk-weighted assets) | 16.25% | 10.00% | | Tier 1 Capital (to risk-weighted assets) | 15.03% | 8.00% | | Common Equity Tier 1 | 15.03% | 6.50% | | Tier 1 Leverage Capital | 10.22% | 5.00% | - Bancorp's tangible common equity to tangible assets (TCE) ratio was **9.95%** at June 30, 2025. The non-GAAP TCE ratio, net of after-tax unrealized losses on held-to-maturity securities, was **8.26%**[202](index=202&type=chunk) [Liquidity and Capital Resources](index=48&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains a strong liquidity position with **$1.863 billion** in net available contingent funding sources, representing **57% of total deposits** Contingent Liquidity Sources (June 30, 2025, in thousands USD) | Source | Net Availability (thousands USD) | | :--- | :--- | | Unrestricted cash | $201,162 | | Unencumbered securities | $270,966 | | FHLB line of credit | $945,977 | | FRB line of credit | $319,843 | | Correspondent bank lines | $125,000 | | **Total Liquidity** | **$1,862,948** | - Total available liquidity of **$1.863 billion** represents **200% of estimated uninsured and/or uncollateralized deposits**[206](index=206&type=chunk) - The holding company (Bancorp) held **$31.1 million** in cash at June 30, 2025, with its primary source of liquidity being dividends from the Bank[217](index=217&type=chunk) [Quantitative and Qualitative Disclosure about Market Risk](index=51&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosure%20about%20Market%20Risk) The company manages interest rate risk, with simulation models indicating that a **+100 basis point** rate shock would decrease year one net interest income by **0.5%** Estimated Change in Net Interest Income (NII) from a Static Balance Sheet | Immediate Rate Change (bps) | Estimated Change in NII (Year 1) | Estimated Change in NII (Year 2) | | :--- | :--- | :--- | | +200 | (1.5)% | 4.8% | | +100 | (0.5)% | 2.8% | | -100 | 0.3% | (0.6)% | | -200 | 0.8% | (1.0)% | - The interest rate sensitivity models use deposit betas of up to **70%** (averaging **45%**) in rising rate scenarios and up to **60%** (averaging **38%**) in falling rate scenarios[227](index=227&type=chunk) [Controls and Procedures](index=52&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, with no significant changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[229](index=229&type=chunk) - No significant changes were made during the quarter ended June 30, 2025, that materially affected, or are reasonably likely to affect, the company's internal control over financial reporting[230](index=230&type=chunk) [PART II OTHER INFORMATION](index=53&type=section&id=PART%20II%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity sales, defaults, and exhibits [Legal Proceedings](index=53&type=section&id=ITEM%201.%20Legal%20Proceedings) This section refers to disclosures in the 2024 Form 10-K and Note 8 for details on ongoing legal proceedings and potential liabilities - The company refers to Note 8 for details on legal proceedings, which discusses potential liabilities from Visa anti-trust litigation and a recent settlement of a wage and hour lawsuit[231](index=231&type=chunk)[117](index=117&type=chunk) [Risk Factors](index=53&type=section&id=ITEM%201A.%20Risk%20Factors) No material changes have occurred to the risk factors previously disclosed in the company's 2024 Form 10-K - No material changes have occurred to the risk factors disclosed in the 2024 Form 10-K[232](index=232&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=53&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered equity sales but repurchased **100,000 shares** for **$2.2 million** and authorized a new **$25.0 million** repurchase program - During the second quarter of 2025, Bancorp repurchased **100,000 shares** at an average price of **$21.72 per share**, for a total of **$2.2 million**[234](index=234&type=chunk)[235](index=235&type=chunk) - A new share repurchase program authorizing up to **$25.0 million** was approved, effective from July 24, 2025, to July 31, 2027[234](index=234&type=chunk) [Defaults Upon Senior Securities](index=55&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities during the reporting period - None[236](index=236&type=chunk) [Mine Safety Disclosures](index=55&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[237](index=237&type=chunk) [Other Information](index=55&type=section&id=ITEM%205.%20Other%20Information) This item is not applicable to the company - Not applicable[238](index=238&type=chunk) [Exhibits](index=56&type=section&id=ITEM%206.%20Exhibits) This section lists the exhibits filed with the report, including certifications by the Principal Executive Officer and Principal Financial Officer, and XBRL data - Exhibits filed include CEO and CFO certifications pursuant to Sarbanes-Oxley Act Sections 302 and 906, as well as Inline XBRL documents[241](index=241&type=chunk)

Financial Data and Key Metrics Changes - The pretax, pre-provision net income increased by 15% compared to the prior quarter and 85% compared to the prior year to date [4] - The net interest income rose to $25.9 million, primarily due to a higher balance of average earning assets and a seven basis point increase in the net interest margin [10] - The total risk-based capital ratio stood at 16.25% and the tangible common equity (TCE) ratio was 9.95% [9] Business Line Data and Key Metrics Changes - Total loan originations were $68.8 million, with $50.2 million in fundings, consistent with the prior quarter [5] - The average yield on loans increased by seven basis points from the prior quarter, while the average yield on interest-earning assets increased by six basis points [10] - Noninterest income was negative due to a loss incurred on the securities portfolio repositioning, but most other areas remained consistent with the prior quarter [11] Market Data and Key Metrics Changes - Total deposits declined in the second quarter due to normal client activity, but year-to-date deposits have grown, with over 70% of outflows recouped in July [6][7] - The rate environment remains competitive, but limited attrition of deposits was noted due to service levels and community commitment [8] Company Strategy and Development Direction - The company is focused on maintaining disciplined underwriting and pricing criteria while expanding its banking teams to drive future growth [5] - The management plans to continue enhancing efficiency through technology and adding banking talent to support profitable growth [15] - The company expects to generate improved financial performance over the remainder of the year, targeting loan growth and further expansion of the net interest margin [15] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about loan demand remaining healthy despite broader economic uncertainty [14] - The loan pipeline is strong, and management anticipates loan growth in the second half of the year [15] - The company is cautious about the impact of potential securities repositioning on capital and shareholder dilution [21] Other Important Information - The company declared a cash dividend of $0.25 per share, marking the 81st consecutive quarterly dividend [12] - The securities repositioning is expected to add 13 basis points to the net interest margin and $0.20 to annual earnings per share, with benefits starting in the third quarter [5] Q&A Session Summary Question: Details on the two CRE loans that migrated this quarter - The loans are generally retail or mixed-use, located outside San Francisco, experiencing tenancy or cash flow issues, but management is optimistic about their resolution [19][20] Question: Appetite for restructuring the HTM securities portfolio - Management is cautiously considering this, balancing potential capital impacts and shareholder dilution [21] Question: Update on share buyback plans - The company has renewed its buyback allocation and is looking to execute below tangible book value, but timing constraints have limited recent actions [25] Question: Performance of the AFS book in the second quarter - The final yield on purchases was slightly above 5%, aligning with expectations [32] Question: Recent deposit rate cuts - Targeted cuts were made, with a recent reduction impacting approximately $185 million in deposits, contributing to a slight benefit in net interest margin [38] Question: Outlook for loan growth in the second half of the year - Management is targeting net growth, supported by a strong pipeline and new market leaders joining the bank [44][51]

Financial Data and Key Metrics Changes - The pretax, pre-provision net income increased by 15% compared to the prior quarter and 85% compared to the prior year to date [4] - Net interest income rose to $25,900,000, primarily due to a higher balance of average earning assets and a seven basis point increase in net interest margin [10] - The total risk-based capital ratio stood at 16.25% and the tangible common equity (TCE) ratio was 9.95% [8] Business Line Data and Key Metrics Changes - Total loan originations were $68,800,000, with $50,200,000 in fundings, consistent with the prior quarter [5] - The average yield on loans increased by seven basis points from the prior quarter, reflecting higher rates on new loan production compared to paid-off loans [10] - Noninterest income was negative due to losses from securities portfolio repositioning, but most other areas remained consistent with the prior quarter [11] Market Data and Key Metrics Changes - Total deposits declined in the second quarter due to normal client activity, but year-to-date growth in deposits was noted, with over 70% of outflows recouped in July [6][7] - The competitive rate environment remains, but limited attrition of deposits was observed as clients value service levels and community commitment [7] Company Strategy and Development Direction - The company is focused on maintaining disciplined underwriting and pricing criteria while expanding its banking teams to drive future growth [5] - Plans for further securities portfolio repositioning are in place to enhance earnings and net interest margin [14] - The company aims to increase market share and generate profitable growth through strategic hiring and technology enhancements [15][16] Management's Comments on Operating Environment and Future Outlook - Despite economic uncertainty, loan demand remains healthy, and the loan pipeline is strong, indicating expectations for loan growth in the second half of the year [14] - Management expressed optimism about continued positive trends in net interest margin and revenue, with expectations for improved financial performance [15] Other Important Information - The company declared a cash dividend of $0.25 per share, marking the 81st consecutive quarterly dividend [12] - The company repurchased $2,200,000 of shares during the quarter [8] Q&A Session Summary Question: Details on the two CRE loans that migrated this quarter - The loans are generally retail or mixed-use, located outside San Francisco, and are experiencing tenancy or cash flow issues, but management is not particularly concerned due to good sponsorship [20][21] Question: Appetite for restructuring the HTM securities portfolio - The company is cautiously considering this, weighing the impact on capital and potential shareholder dilution [22] Question: Update on share buyback plans - The company has renewed its buyback allocation and is looking to buy back shares below tangible book value, balancing this with other capital uses [25][26] Question: Performance of the AFS book and reinvestment rates - The final yield on purchases was slightly above 5%, aligning with expectations [33][34] Question: Recent deposit rate cuts - Targeted deposit rate cuts were implemented, with a recent cut of about 15 basis points, contributing to a small benefit to net interest margin [38][40] Question: Expectations for loan growth in the second half of the year - Management is optimistic about net growth, supported by a strong pipeline and new market leaders joining the bank [42][49] Question: Credit upgrades anticipated in the third quarter - Upgrades are expected across various segments, with some meaningful amounts involved [58][62]

Financial Performance - The company reported a net loss of $8.5 million, or ($0.53) diluted EPS, for Q2 2025, but excluding the loss on the sale of securities, net income would have been $4.7 million, or $0.29 EPS, using a blended statutory tax rate of 29.56%[8] - Tax-equivalent net interest margin increased to 2.93% from 2.86%, primarily due to new loan production at higher rates[8] - The company sold $185.8 million in AFS securities, resulting in a pre-tax loss of $18.7 million, but expects a 13bp increase in annualized NIM and $0.20 EPS accretion over 4 quarters with a 4-year earnback[8] Capital & Liquidity - The company's total risk-based capital remained strong at 16.25%[8] - The company repurchased $2.2 million in shares during Q2 2025[8, 18] - The company has $1.9 billion in immediately available net funding, representing 200% coverage of estimated uninsured deposits[8, 20] Deposits & Loans - Total deposits decreased by $56.9 million, with non-interest bearing deposits remaining a strong 42.5% of total deposits[8] - The company originated $68.8 million in new loans, including $49.1 million in commercial loans[8] - Non-accrual loans decreased to 1.57% of total loans from 1.59% in the prior quarter, while classified loans increased to 2.95% of total loans[8] Loan Portfolio - The company's loan portfolio is well-diversified, with non-owner occupied commercial real estate (NOO-CRE) representing 62% of the $2.1 billion total loan portfolio[38] - Within the NOO-CRE portfolio, office properties account for 28% of the $1.3 billion, while retail, warehouse & industrial, and multi-family properties represent 19%, 12%, and 15% respectively[38] - The company's non-owner occupied (NOO) CRE office exposure in the City of San Francisco is $61.1 million, representing 3% of the total loan portfolio and 5% of total NOO CRE loans[52, 53]

Group 1 - Bank of Marin (BMRC) reported quarterly earnings of $0.29 per share, missing the Zacks Consensus Estimate of $0.36 per share, and showing an increase from $0.06 per share a year ago, resulting in an earnings surprise of -19.44% [1] - The company posted revenues of $29.2 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 0.35%, compared to year-ago revenues of $25.25 million [2] - Over the last four quarters, Bank of Marin has surpassed consensus EPS estimates two times and topped consensus revenue estimates just once [2] Group 2 - The stock's immediate price movement will depend on management's commentary on the earnings call and the sustainability of earnings expectations [3][4] - Bank of Marin shares have added about 0% since the beginning of the year, underperforming the S&P 500's gain of 8.6% [3] - The current consensus EPS estimate for the coming quarter is $0.45 on $31.5 million in revenues, and for the current fiscal year, it is $1.49 on $120.2 million in revenues [7] Group 3 - The Zacks Industry Rank indicates that the Banks - West industry is currently in the top 36% of over 250 Zacks industries, suggesting a favorable outlook for the sector [8] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5][6]

[Second Quarter 2025 Financial Performance](index=1&type=section&id=Second%20Quarter%202025%20Financial%20Performance) Bank of Marin Bancorp reported a net loss primarily due to a strategic securities sale, while non-GAAP comparable net income showed a slight decrease [Overview of Results](index=1&type=section&id=Overview%20of%20Results) Bank of Marin Bancorp reported a net loss of $8.5 million due to a strategic securities sale, while non-GAAP comparable net income was $4.7 million Q2 2025 Key Financial Results (GAAP vs. Non-GAAP) | Metric | Q2 2025 (GAAP) | Q1 2025 (GAAP) | Q2 2025 (Non-GAAP) | | :--- | :--- | :--- | :--- | | Net (Loss) Income (Millions USD) | ($8.5) | $4.9 | $4.7 | | Diluted (Loss) EPS (USD) | ($0.53) | $0.30 | $0.29 | - The reported loss was directly attributable to a previously announced securities repositioning strategy, which resulted in a **significant one-time loss** on the sale of securities[1](index=1&type=chunk) - CEO Tim Myers highlighted that comparable pre-tax pre-provision net income grew by **15%** compared to the prior quarter and **85%** year-to-date, indicating improvement in core financial performance[2](index=2&type=chunk) [Securities Repositioning Strategy](index=2&type=section&id=Securities%20Repositioning%20Strategy) The bank sold $185.8 million in AFS securities, incurring an $18.7 million pre-tax loss, to enhance future earnings and net interest margin - Sold **$185.8 million** in AFS securities, resulting in a pre-tax loss of **$18.7 million**[6](index=6&type=chunk) - The redeployment of proceeds is projected to increase the annualized net interest margin by **13 basis points** and add an estimated **$0.20** to EPS over the next year[6](index=6&type=chunk) - The strategy has an estimated **four-year earn-back period** and is aimed at improving future earnings and return on equity[6](index=6&type=chunk) [Key Performance Ratios](index=2&type=section&id=Key%20Performance%20Ratios) Key performance ratios were significantly impacted by the securities sale, with GAAP ROA at (0.92)% and ROE at (7.80)% Q2 2025 Performance Ratios (GAAP vs. Non-GAAP) | Ratio | Q2 2025 (GAAP) | Q1 2025 (GAAP) | Q2 2025 (Non-GAAP) | | :--- | :--- | :--- | :--- | | Return on Average Assets (ROA) | (0.92)% | 0.53% | 0.50% | | Return on Average Equity (ROE) | (7.80)% | 4.52% | 4.26% | | Efficiency Ratio | 208.81% | 76.44% | 74.03% | [Balance Sheet and Credit Quality](index=3&type=section&id=Balance%20Sheet%20and%20Credit%20Quality) The bank maintained stable loan portfolios and strong liquidity while managing deposit fluctuations and strategic investments [Loans and Credit Quality](index=3&type=section&id=Loans%20and%20Credit%20Quality) The total loan portfolio remained stable at $2.074 billion, with mixed but generally stable credit quality metrics and no Q2 provision for credit losses Loan Portfolio and Credit Quality Metrics | Metric | June 30, 2025 | March 31, 2025 | | :--- | :--- | :--- | | Total Loans (Billions USD) | $2.074 | $2.074 | | Non-accrual Loans to Total Loans | 1.57% | 1.59% | | Classified Loans to Total Loans | 2.95% | 2.77% | | Allowance for Credit Losses to Total Loans | 1.44% | 1.44% | - Loan originations in Q2 2025 totaled **$68.8 million** (**$50.2 million** funded), compared to **$63.6 million** in Q1 2025[9](index=9&type=chunk) - There was **no provision for credit losses** on loans in Q2 2025, compared to a **$75 thousand** provision in Q1 2025[7](index=7&type=chunk)[17](index=17&type=chunk) [Deposits](index=4&type=section&id=Deposits) Total deposits decreased by $56.9 million to $3.245 billion, with non-interest bearing deposits remaining a strong 42.5% of the total Deposit Balances | Metric | June 30, 2025 | March 31, 2025 | | :--- | :--- | :--- | | Total Deposits (Billions USD) | $3.245 | $3.302 | | Non-Interest Bearing Deposits % of Total | 42.5% | 43.2% | - The average cost of total deposits decreased by **1 basis point** to **1.28%** in Q2 2025[7](index=7&type=chunk) - The bank generated over **1,000 new accounts** during the second quarter, with **40%** representing new relationships[20](index=20&type=chunk) [Investments](index=4&type=section&id=Investments) The investment securities portfolio decreased to $1.215 billion due to strategic AFS sales and new purchases, maintaining high credit quality - The total investment portfolio stood at **$1.215 billion** as of June 30, 2025[19](index=19&type=chunk) - Key portfolio activities included the sale of **$185.8 million** in AFS securities and the purchase of **$219.2 million** in new AFS securities[19](index=19&type=chunk) [Liquidity and Borrowings](index=4&type=section&id=Liquidity%20and%20Borrowings) The bank maintained a strong liquidity position with no outstanding borrowings, boasting $1.863 billion in total available funding Contingent Liquidity Sources (June 30, 2025) | Source | Net Availability (Millions USD) | | :--- | :--- | | Unrestricted cash | $201.1 | | Unencumbered securities | $271.0 | | FHLB line of credit | $946.0 | | FRB line of credit | $319.8 | | Lines of credit at correspondent banks | $125.0 | | **Total Liquidity** | **$1,862.9** | - The bank had **no outstanding borrowings** as of June 30, 2025, and has not utilized brokered deposits[21](index=21&type=chunk) [Earnings Analysis](index=5&type=section&id=Earnings%20Analysis) Net interest income and margin improved, while non-interest income was significantly impacted by a one-time securities loss [Net Interest Income and Margin](index=5&type=section&id=Net%20Interest%20Income%20and%20Margin) Net interest income increased to $25.9 million, and the tax-equivalent net interest margin expanded by 7 basis points to 2.93% Net Interest Income and Margin | Metric | Q2 2025 | Q1 2025 | | :--- | :--- | :--- | | Net Interest Income (Millions USD) | $25.9 | $24.9 | | Tax-Equivalent Net Interest Margin | 2.93% | 2.86% | - The **7 basis point increase** in NIM was attributed to higher rate loan originations (**+4 bps**), higher average deposit balances (**+2 bps**), and the securities repositioning (**+1 bp**)[27](index=27&type=chunk) [Non-Interest Income (Loss)](index=5&type=section&id=Non-Interest%20Income%20%28Loss%29) Non-interest income reported a $15.6 million loss for Q2 2025, primarily due to an $18.7 million pre-tax loss on AFS securities - A loss of **$18.7 million** on the sale of AFS securities drove the total non-interest income to a loss of **$15.6 million**[28](index=28&type=chunk) - Excluding the securities loss, non-interest income was **$3.1 million**, an increase of **$241 thousand** from the prior quarter[28](index=28&type=chunk) [Non-Interest Expense](index=5&type=section&id=Non-Interest%20Expense) Non-interest expense increased slightly to $21.5 million in Q2 2025, driven by higher information technology costs - Total non-interest expense was **$21.5 million**, a modest increase from **$21.3 million** in Q1 2025[29](index=29&type=chunk) - CFO Dave Bonaccorso noted that expense growth of **1.1% QoQ** is in line with the recent annual growth rate of approximately **4%**[8](index=8&type=chunk) [Capital Management and Shareholder Returns](index=3&type=section&id=Capital%20Management%20and%20Shareholder%20Returns) The company maintained strong capital ratios and continued to return capital to shareholders through dividends and share repurchases [Capital Ratios](index=3&type=section&id=Capital%20Ratios) The company's capital ratios remain well above regulatory thresholds, with a total risk-based capital ratio of 16.25% Key Capital Ratios | Ratio | June 30, 2025 | March 31, 2025 | | :--- | :--- | :--- | | Total Risk-Based Capital Ratio (Bancorp) | 16.25% | 16.69% | | TCE to Tangible Assets Ratio (Bancorp) | 9.95% | 9.82% | - Capital stress tests indicate that capital ratios will remain above regulatory and internal minimums across various stress scenarios over a **five-year horizon**[25](index=25&type=chunk) [Shareholder Returns](index=3&type=section&id=Shareholder%20Returns) Bancorp continued to return capital to shareholders through share repurchases and dividends, authorizing a new $25.0 million buyback program - The Board declared a quarterly cash dividend of **$0.25 per share**[15](index=15&type=chunk) - Repurchased **100,000 shares** for **$2.2 million** in Q2 2025[15](index=15&type=chunk)[33](index=33&type=chunk) - A new share repurchase program authorizing up to **$25.0 million** in buybacks was approved, effective through **July 31, 2027**[33](index=33&type=chunk) [Corporate and Investor Information](index=7&type=section&id=Corporate%20and%20Investor%20Information) The company updated its insider trading policy and scheduled an investor webcast to discuss Q2 2025 financial results [Corporate Governance](index=7&type=section&id=Corporate%20Governance) The Board revised the Insider Trading Policy, shortening the blackout period and adding pre-approval for 10b5-1 trading plans - The quarterly blackout period for insider trading was shortened from **three weeks to two weeks** prior to quarter-end[34](index=34&type=chunk) - New provisions require pre-approval for any **10b5-1 trading plans** by employees and directors to ensure compliance with SEC rules[34](index=34&type=chunk)[35](index=35&type=chunk) [Investor Relations](index=8&type=section&id=Investor%20Relations) The company will host a webcast on July 28, 2025, to discuss its second quarter financial results - An earnings call and webcast is scheduled for **July 28, 2025**, at **8:30 a.m. PT / 11:30 a.m. ET**[36](index=36&type=chunk) [Appendix: Financial Statements and Reconciliations](index=6&type=section&id=Appendix%3A%20Financial%20Statements%20and%20Reconciliations) This appendix provides detailed reconciliations of non-GAAP financial measures and comprehensive financial statements for investor analysis [Non-GAAP Financial Measures Reconciliation](index=6&type=section&id=Non-GAAP%20Financial%20Measures%20Reconciliation) This section provides detailed reconciliation of GAAP to non-GAAP financial measures, excluding the securities portfolio repositioning impact - The report includes reconciliations for key metrics such as pre-tax pre-provision net income, net income, EPS, ROA, ROE, and the efficiency ratio, adjusting for the loss on sale of investment securities[32](index=32&type=chunk) - A reconciliation of tangible common equity (TCE) is also provided, showing adjustments for goodwill, intangible assets, and unrealized losses on held-to-maturity (HTM) securities[31](index=31&type=chunk) [Financial Highlights](index=9&type=section&id=Financial%20Highlights) This section presents a comprehensive table of selected operating data, performance ratios, and financial condition data [Consolidated Statements of Condition (Balance Sheet)](index=11&type=section&id=Consolidated%20Statements%20of%20Condition%20%28Balance%20Sheet%29) The Consolidated Statements of Condition details the company's assets, liabilities, and stockholders' equity for current and prior periods [Consolidated Statements of Comprehensive Income (Income Statement)](index=12&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Income%20Statement%29) This statement provides a detailed breakdown of revenues and expenses for the three and six months ended June 30, 2025 [Average Statements of Condition and Net Interest Income Analysis](index=14&type=section&id=Average%20Statements%20of%20Condition%20and%20Net%20Interest%20Income%20Analysis) This section analyzes net interest income based on average asset and liability balances, detailing yields and rates

Core Viewpoint - Wall Street anticipates a year-over-year increase in earnings for Bank of Marin (BMRC) due to higher revenues, with a focus on how actual results compare to estimates impacting stock price [1][2]. Earnings Expectations - Bank of Marin is expected to report quarterly earnings of $0.36 per share, reflecting a significant year-over-year increase of +500% [3]. - Revenues are projected to reach $29.1 million, which is a 15.3% increase from the same quarter last year [3]. Estimate Revisions - The consensus EPS estimate has been revised 14.53% higher in the last 30 days, indicating a reassessment by analysts [4]. - The Most Accurate Estimate for Bank of Marin is lower than the Zacks Consensus Estimate, resulting in an Earnings ESP of -4.67%, suggesting a bearish outlook from analysts [12]. Earnings Surprise Prediction - The Zacks Earnings ESP model indicates that a positive or negative reading can predict deviations from consensus estimates, with positive readings being more reliable [9][10]. - Bank of Marin's current Zacks Rank is 3 (Hold), complicating predictions for an earnings beat [12]. Historical Performance - In the last reported quarter, Bank of Marin was expected to post earnings of $0.32 per share but delivered only $0.30, resulting in a surprise of -6.25% [13]. - Over the past four quarters, the company has beaten consensus EPS estimates two times [14]. Industry Comparison - In the Zacks Banks - West industry, Glacier Bancorp (GBCI) is expected to report earnings of $0.47 per share, indicating a year-over-year change of +20.5% [18]. - Glacier Bancorp's revenue is projected at $243.5 million, up 22.6% from the previous year, with a higher Most Accurate Estimate leading to an Earnings ESP of +7.45% [19].

Group 1 - BRC Inc. (BRCC) has been added to the Zacks Rank 5 (Strong Sell) List due to a 33.3% downward revision in the consensus estimate for its current year earnings over the last 60 days [1] - Foot Locker, Inc. (FL) is also on the Zacks Rank 5 (Strong Sell) List, with a 19% downward revision in the consensus estimate for its current year earnings over the last 60 days [1] - Bank of Marin Bancorp (BMRC) has seen a 5.9% downward revision in the consensus estimate for its current year earnings over the last 60 days [2]

Financial Performance - Net income for Q1 2025 was $4.9 million, down from $6.0 million in Q4 2024, with diluted earnings per share at $0.30 compared to $0.38 in the previous quarter[133]. - Return on average assets (ROA) was 0.53% for Q1 2025, down from 0.63% in Q4 2024, while return on average equity (ROE) was 4.52% compared to 5.48% in the prior quarter[133]. - Net interest income for Q1 2025 totaled $24.9 million, a decrease of $284 thousand from Q4 2024, primarily due to a $36.3 million reduction in average earning assets[142]. - Non-interest income for Q1 2025 was $2.9 million, an increase of $120 thousand or 4.4% year-over-year, primarily driven by bank-owned life insurance dividend income[158]. - Total non-interest expense for Q1 2025 was $21.3 million, reflecting a $95 thousand increase or 0.4% compared to the same period in 2024, mainly due to higher charitable contributions[163]. Interest Margin and Income - The tax-equivalent net interest margin increased to 2.86% in Q1 2025 from 2.80% in Q4 2024, and was 2.50% in the same period last year, reflecting a 36 basis point year-over-year increase[133]. - Compared to Q1 2024, net interest income rose by $2.3 million, reaching $24.9 million, attributed to higher average earning asset yields and lower deposit costs[144]. - The tax-equivalent net interest margin improved by 36 basis points from 2.50% in Q1 2024, influenced by higher yields on investment securities and lower deposit costs[145]. Loans and Credit Quality - Loan balances decreased by $9.7 million to $2.074 billion, with loan fundings of $47.4 million and payoffs of $25.5 million during Q1 2025[133]. - The provision for credit losses on loans was $75 thousand in Q1 2025, with the allowance for credit losses at 1.44% of total loans[133]. - Non-accrual loans decreased to $32.9 million, or 1.59% of total loans, with approximately 57% of non-accrual loans paying as agreed[133]. - Classified loans increased to $57.4 million as of March 31, 2025, compared to $45.1 million at December 31, 2024, primarily due to downgrades in commercial relationships[178]. - Net charge-offs for Q1 2025 totaled $825 thousand, significantly higher than $19 thousand in Q4 2024, primarily due to a charge-off of an acquired commercial real estate loan[180]. Deposits and Liquidity - Total deposits rose by $82.0 million to $3.302 billion as of March 31, 2025, with non-interest bearing deposits comprising 43.2% of total deposits[133]. - Total cash, cash equivalents, and restricted cash rose to $259.9 million as of March 31, 2025, up $122.6 million from $137.3 million at December 31, 2024, driven by an $82 million increase in deposits[168]. - Cash and cash equivalents increased by $122.6 million in Q1 2025, driven by an $82.0 million net increase in deposits and $63.0 million from investment securities[199]. - The Bank had no outstanding borrowings at March 31, 2025, maintaining a strong liquidity position[203]. - Unfunded credit commitments totaled $451.2 million as of March 31, 2025, with expectations to fund these through existing loan repayments and liquid assets[201]. Capital Ratios - Bancorp's total risk-based capital ratio was 16.69% as of March 31, 2025, indicating strong capital levels above regulatory thresholds[134]. - The total risk-based capital ratio for Bancorp was 16.69% as of March 31, 2025, up from 16.54% at the end of 2024, indicating strong capital adequacy[188]. - Bancorp's tangible common equity to tangible assets (TCE ratio) was 9.82% at March 31, 2025, down from 9.93% at December 31, 2024[189]. - The Bank's capital ratios exceed the regulatory definition of "well capitalized" as of March 31, 2025[187]. Expenses and Contributions - Salaries and related benefits increased by $2.6 million in Q1 2025, attributed to various factors including new talent acquisition and increased 401(k) contributions[162]. - Charitable contributions expense in Q1 2025 was $403 thousand, significantly higher than $30 thousand in Q4 2024 and $12 thousand in Q1 2024[162]. - Total non-interest expense rose to $21.3 million in Q1 2025, compared to $21.2 million in Q1 2024, with a significant increase in charitable contributions of $391 thousand[163]. Economic Environment - The Federal Reserve's target federal funds rate was left unchanged in early 2025, reflecting projected slower economic growth and higher inflation[148]. - The effective tax rate for Q1 2025 was 24.8%, down from 37.8% in the prior quarter, reflecting lower pre-tax income and the treatment of certain permanent tax differences[165].

First Quarter 2025 Earnings Presentation Forward-Looking Statements This discussion of financial results includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, (the "1933 Act") and Section 21E of the Securities Exchange Act of 1934, as amended, (the "1934 Act"). Those sections of the 1933 Act and 1934 Act provide a "safe harbor" for forward-looking statements to encourage companies to provide prospective information about their financial performance ...