Financial Data and Key Metrics Changes - The company reported a net income of $7,500,000 for Q3 2025, representing a 65% increase compared to 2024 [4][8] - Net interest income rose to $28,200,000, driven by a higher balance of average earning assets and a 17 basis point increase in asset yield [10] - The total risk-based capital ratio stood at 16.13%, with a tangible common equity (TCE) ratio of 9.72% [6] Business Line Data and Key Metrics Changes - Total loan originations reached $101,000,000, with $69,000,000 in fundings, marking the largest amount since 2022 [5] - The company experienced a healthy increase in commercial real estate (CRE) loan demand, indicating a diversified mix across various banking categories [5][11] Market Data and Key Metrics Changes - Total deposits increased due to higher balances from long-term clients and new relationships, despite a competitive rate environment [6] - The cost of deposits increased by one basis point during the quarter, but the spot cost of deposits declined to 1.25% [10] Company Strategy and Development Direction - The company aims to continue improving core financial performance through balance sheet growth, net interest margin expansion, and disciplined expense management [13][14] - There is a focus on adding banking talent and enhancing efficiency through technology to support future profitable growth [13] Management's Comments on Operating Environment and Future Outlook - Management noted that while there is economic uncertainty, credit quality continues to improve, and loan demand remains healthy [13] - The loan pipeline is strong, with expectations for solid loan production in Q4 2025 [13] Other Important Information - The company repurchased $1,100,000 of shares at prices below tangible book value to enhance shareholder value [6] - A cash dividend of $0.25 per share was declared, marking the 82nd consecutive quarterly dividend [12] Q&A Session Summary Question: Thoughts on HTM securities loss trade - Management is evaluating various factors but has not made a final decision [19] Question: Updated thoughts on expense run rate and seasonality - Q4 is expected to resemble Q3, with potential adjustments to payroll-related items [20][21] Question: Progress on deposit costs and margin expectations - The company is positioned for near-term benefits from rate declines, with expectations for margin expansion [31] Question: Credit upgrades and market conditions - Upgrades were due to improved leasing activity and specific project recoveries, with overall positive trends in credit quality [34][35] Question: Loan competition and pricing - There is aggressive pricing competition for high-quality deals, with a return of nonrecourse lending [46] Question: Pipeline growth and hiring plans - The company is actively hiring and expects increased activity in the Sacramento region, with a focus on new customer relationships [74][75] Question: Deposit growth and seasonality - Predicting deposit balance growth is challenging, but management does not foresee any abnormal outflows [88][90]

Financial Performance - Net income for Q3 2025 was $7.5 million, with diluted EPS at $0.47[8] - Pre-tax pre-provision net income improved by 28% sequentially[8] - The tax-equivalent net interest margin increased to 3.08% from 2.93%, a 15 basis point increase[8, 15] Loan and Deposit Portfolio - Total deposits increased by $137.5 million, driven by existing and new relationships[8] - Non-interest bearing deposits represent 43.1% of total deposits[8, 27] - $100.7 million in new loans were originated, with $69.0 million funded, including $85.3 million in commercial loans originated ($65.4 million funded)[8] - Non-accrual loans decreased to 1.51% of total loans from 1.57% in the prior quarter[8] Capital and Liquidity - The bank repurchased $1.1 million in shares in Q3 2025[8, 18] - Total risk-based capital remained strong at 16.13%[8, 17] - Immediately available net funding of $2.0 billion, representing 202% coverage of estimated uninsured deposits[8, 20]

Core Insights - Bank of Marin reported a revenue of $31.1 million for the quarter ended September 2025, reflecting a year-over-year increase of 14.5% [1] - The earnings per share (EPS) for the quarter was $0.47, up from $0.28 in the same quarter last year, resulting in an EPS surprise of +11.9% against the consensus estimate of $0.42 [1] Financial Performance Metrics - The net interest margin (FTE) was reported at 3.1%, matching the average estimate from three analysts [4] - The efficiency ratio stood at 68.9%, slightly above the average estimate of 68% based on three analysts [4] - The average balance of total interest-earning assets was $3.6 billion, exceeding the average estimate of $3.54 billion from two analysts [4] - Total non-accrual loans were reported at $31.49 million, lower than the estimated $32.86 million by two analysts [4] - Net interest income was $28.19 million, surpassing the average estimate of $27.95 million from three analysts [4] - Total non-interest income was $2.75 million, below the average estimate of $3.08 million from three analysts [4] - Net interest income (FTE) was reported at $28.35 million, slightly above the average estimate of $28.14 million from two analysts [4] Stock Performance - Over the past month, shares of Bank of Marin have returned -1.5%, contrasting with the Zacks S&P 500 composite's +2.5% change [3] - The stock currently holds a Zacks Rank 2 (Buy), indicating potential for outperformance in the near term [3]

Financial Performance - Bank of Marin Bancorp reported a net income of $7.5 million for Q3 2025, a significant recovery from a net loss of $8.5 million in Q2 2025, marking a 61.4% increase on a non-GAAP basis [2]. - Diluted earnings per share for Q3 2025 were $0.47, compared to a diluted loss per share of $(0.53) in the previous quarter [3]. - Net income for Q3 2025 was $7,526,000, a significant improvement from a loss of $8,536,000 in Q2 2025 and an income of $4,570,000 in Q3 2024 [32]. - Pre-tax, pre-provision net income for Q3 2025 was $9,610,000, compared to a loss of $11,199,000 in Q2 2025 and an income of $6,973,000 in Q3 2024 [32]. - The return on average assets (GAAP) for Q3 2025 was 0.78%, compared to (0.92)% in Q2 2025 and 0.48% in Q3 2024 [32]. - The return on average equity (GAAP) for Q3 2025 was 6.79%, improving from (7.80)% in Q2 2025 and 4.17% in Q3 2024 [32]. - Comprehensive income for the three months ended September 30, 2025, was $9,549 thousand, compared to $4,576 thousand in the previous quarter [43]. Asset and Deposit Growth - Total assets reached $3.9 billion, with a strong ranking of 1 on the West Coast and 4 nationwide for best deposit franchise among banks with assets between $3 billion and $10 billion [35]. - Total deposits increased by 4.2% to $3.383 billion as of September 30, 2025, up from $3.245 billion as of June 30, 2025 [8]. - Total deposits rose to $3,382,576,000, compared to $3,245,048,000 in the previous quarter [38]. - Total assets increased to $3,869,021 thousand as of September 30, 2025, up from $3,726,193 thousand in June 30, 2025, representing a growth of 3.84% [41]. - Total liabilities increased to $3,425,203 thousand as of September 30, 2025, up from $3,287,655 thousand in June 30, 2025, marking a growth of 4.19% [41]. Loan Performance - Loan originations for Q3 2025 totaled $100.7 million, a significant increase from $68.8 million in the previous quarter [9]. - Total loans increased to $2,090,354,000 from $2,073,638,000 in the prior quarter [38]. - Classified loans decreased to 2.36% of total loans, down from 2.95% in the previous quarter, due to upgrades in commercial real estate relationships [8]. - Non-accrual loans declined to 1.51% of total loans, down from 1.57% in the prior quarter, with $1.1 million in payoffs during Q3 2025 [12]. - The loan-to-deposit ratio improved to 61.80% from 63.90% in the previous quarter [38]. Income and Expense Management - Net interest income for the third quarter of 2025 was $28.2 million, an increase of $2.3 million from the prior quarter, driven by a rise in average earning assets [26]. - Non-interest income was $2.7 million for the third quarter of 2025, a significant recovery from a net non-interest loss of $15.6 million in the prior quarter [28]. - Non-interest expense decreased to $21.3 million for the third quarter of 2025, down from $21.5 million in the prior quarter [29]. - The efficiency ratio improved to 68.94% in Q3 2025, reflecting increased net interest income [6]. - The efficiency ratio (GAAP) improved to 68.94% in Q3 2025 from 208.81% in Q2 2025, indicating enhanced operational efficiency [32]. Capital and Equity - The total risk-based capital ratio for Bancorp was 16.13% at September 30, 2025, a slight decrease from 16.25% at June 30, 2025, due to increased risk-weighted assets [24]. - Bancorp's tangible common equity to tangible assets (TCE ratio) was 9.72% at September 30, 2025, down from 9.95% at June 30, 2025 [25]. - Stockholders' equity increased to $443,818,000 from $438,538,000 in the previous quarter [38]. Market and Economic Outlook - Forward-looking statements indicate potential impacts from economic conditions, regulatory changes, and competition on future earnings [36].

Core Viewpoint - Bank of Marin (BMRC) has experienced a bearish trend with a 5% loss over the past four weeks, but the formation of a hammer chart pattern suggests a potential trend reversal as buying interest may be increasing [1][2]. Technical Analysis - The hammer chart pattern indicates a potential bottom in the stock price, suggesting that selling pressure may be exhausting and that bulls could be gaining control [2][5]. - A hammer pattern forms when there is a small candle body with a long lower wick, typically occurring during a downtrend, signaling a possible reversal if it appears at the bottom of the trend [4][5]. - The effectiveness of the hammer pattern is enhanced when used alongside other bullish indicators, as its strength is dependent on its placement on the chart [6]. Fundamental Analysis - There has been a positive trend in earnings estimate revisions for BMRC, with a 1.2% increase in the consensus EPS estimate over the last 30 days, indicating that analysts expect better earnings than previously predicted [7][8]. - BMRC holds a Zacks Rank of 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks, which typically outperform the market [9][10]. - The Zacks Rank serves as a timing indicator, suggesting that the company's prospects are beginning to improve, further supporting the potential for a trend reversal [10].

Core Viewpoint - Bank of Marin Bancorp will host a webcast for its Q3 earnings on October 27, 2025, at 8:30 a.m. PT, providing insights into its financial performance for the fiscal third quarter ending September 30, 2025 [1][2]. Company Overview - Bank of Marin Bancorp, founded in 1990 and headquartered in Novato, California, operates as a leading business and community bank with total assets of $3.7 billion [4]. - The bank offers a range of services including commercial and personal banking, specialty lending, and wealth management through its network of 27 branches and eight commercial banking offices in Northern California [4]. - The company has been recognized for its community contributions, consistently ranking as one of the "Top Corporate Philanthropists" by San Francisco Business Times since 2003 and being inducted into North Bay Biz's "Best of" Hall of Fame in 2024 [4].

[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)

Core Insights - Bank of Marin Bancorp reported a sequential and year-to-date growth in pretax pre-provision net income, despite a GAAP net loss due to a one-time securities repositioning [10][21] - The repositioning is expected to increase net interest margin by 13 basis points, with the majority of benefits beginning in Q3 2025 [10][16] - The bank's total risk-based capital ratio was 16.25% and TCE ratio at 9.95%, indicating strong capital levels [8][19] Financial Performance - Pretax pre-provision net income increased by 15% sequentially in Q2 2025 and 85% compared to the prior year [4][15] - Net loss for Q2 2025 was $6.5 million, or $0.53 per share, primarily due to a one-time securities repositioning loss [5][21] - Net interest income was $25.9 million for Q2 2025, up sequentially due to higher average earning assets and a seven basis point improvement in net interest margin [5][22] Loan and Deposit Trends - Total loan originations were $68.8 million in commitments and $50.2 million in fundings, consistent with the prior quarter [6][17] - Total deposits declined due to client cash usage and seasonal tax outflows, but over 70% of outflows were recouped in July [7][18] - The average yield on loans increased by seven basis points from the prior quarter, with newly originated loans yielding more than runoff loans [6][22] Expense Management - Non-interest expense rose slightly due to technology and branch upgrades, but is expected to remain stable for the remainder of the year [7][23] - The bank executed $2.2 million in share repurchases under renewed authorization, while maintaining a cash dividend of $0.25 per share [9][25] Market Position and Outlook - The company is focused on expanding its market share and enhancing client relationships, particularly in Sacramento and San Francisco [12][56] - Management projects mid-single-digit loan growth for the year, with expectations for an acceleration in fundings in the second half of 2025 [12][46] - The bank's pipeline remains strong, with loan production expected to continue positively into the second half of the year [27][46]

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]