Bank of Marin Bancorp(BMRC) - 2025 Q2 - Quarterly Results

Second Quarter 2025 Financial Performance 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 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] - 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] Securities Repositioning Strategy 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] - 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] - The strategy has an estimated four-year earn-back period and is aimed at improving future earnings and return on equity[6] Key Performance Ratios 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 The bank maintained stable loan portfolios and strong liquidity while managing deposit fluctuations and strategic investments Loans and Credit Quality 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] - There was no provision for credit losses on loans in Q2 2025, compared to a $75 thousand provision in Q1 2025[7][17] 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] - The bank generated over 1,000 new accounts during the second quarter, with 40% representing new relationships[20] 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] - 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] Liquidity and Borrowings 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] Earnings Analysis Net interest income and margin improved, while non-interest income was significantly impacted by a one-time securities loss Net Interest Income and Margin 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] Non-Interest Income (Loss) 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] - Excluding the securities loss, non-interest income was $3.1 million, an increase of $241 thousand from the prior quarter[28] Non-Interest Expense 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] - CFO Dave Bonaccorso noted that expense growth of 1.1% QoQ is in line with the recent annual growth rate of approximately 4%[8] Capital Management and Shareholder Returns The company maintained strong capital ratios and continued to return capital to shareholders through dividends and share repurchases Capital Ratios 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] Shareholder Returns 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] - Repurchased 100,000 shares for $2.2 million in Q2 2025[15][33] - A new share repurchase program authorizing up to $25.0 million in buybacks was approved, effective through July 31, 2027[33] Corporate and Investor Information The company updated its insider trading policy and scheduled an investor webcast to discuss Q2 2025 financial results Corporate Governance 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] - New provisions require pre-approval for any 10b5-1 trading plans by employees and directors to ensure compliance with SEC rules[34][35] Investor Relations 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] Appendix: Financial Statements and Reconciliations This appendix provides detailed reconciliations of non-GAAP financial measures and comprehensive financial statements for investor analysis Non-GAAP Financial Measures Reconciliation 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] - 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] Financial Highlights This section presents a comprehensive table of selected operating data, performance ratios, and financial condition data Consolidated Statements of Condition (Balance Sheet) 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) 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 This section analyzes net interest income based on average asset and liability balances, detailing yields and rates