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

PART I FINANCIAL INFORMATION This section covers the unaudited financial statements, management's analysis, market risk, and internal controls of Bank of Marin Bancorp Financial Statements (Unaudited) This section presents the unaudited consolidated financial statements, including statements of condition, income, equity, and cash flows, with detailed notes Consolidated Statements of Condition 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 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 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] - 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] Consolidated Statements of Cash Flows 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 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] - 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] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the financial performance, highlighting a strategic securities repositioning, its impact on net interest margin, credit quality, and capital adequacy Executive Summary 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] 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] - 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] Results of Operations 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] - 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] - No provision for credit losses was recorded in Q2 2025, compared to a $75 thousand provision in Q1 2025[164] - Non-interest expense was stable at $21.5 million in Q2 2025, a slight increase of $226 thousand from the prior quarter[174] Financial Condition Summary 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] - 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] - Non-accrual loans decreased by $1.4 million to $32.5 million (1.57% of total loans) at June 30, 2025[190] - 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][196] Capital Adequacy 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] Liquidity and Capital Resources 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] - 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] Quantitative and Qualitative Disclosure about Market Risk 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] Controls and Procedures 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] - 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] PART II OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, defaults, and exhibits Legal Proceedings 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][117] Risk Factors 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] Unregistered Sales of Equity Securities and Use of Proceeds 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][235] - A new share repurchase program authorizing up to $25.0 million was approved, effective from July 24, 2025, to July 31, 2027[234] Defaults Upon Senior Securities There were no defaults upon senior securities during the reporting period - None[236] Mine Safety Disclosures This item is not applicable to the company - Not applicable[237] Other Information This item is not applicable to the company - Not applicable[238] Exhibits 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]