Bank of Marin Bancorp(US:BMRC)2023-08-07 16:00PART I FINANCIAL INFORMATION Financial Statements (Unaudited) This section presents the unaudited consolidated financial statements for the period ended June 30, 2023 Consolidated Statements of Condition Total assets slightly decreased to $4.09 billion, driven by a decline in deposits offset by increased borrowings Consolidated Statements of Condition (in thousands) | Account | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Assets | $4,092,133 | $4,147,464 | | Total investment securities | $1,717,750 | $1,774,303 | | Loans, net | $2,078,964 | $2,069,563 | | Total Liabilities | $3,668,192 | $3,735,372 | | Total deposits | $3,325,212 | $3,573,348 | | Short-term borrowings and other obligations | $292,572 | $112,439 | | Total Stockholders' Equity | $423,941 | $412,092 | Consolidated Statements of Comprehensive (Loss) Income Net income for the first half of 2023 declined to $14.0 million due to significantly higher interest expense Comprehensive Income Highlights (in thousands, except per share data) | Metric | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net Interest Income | $54,029 | $61,095 | | Provision for credit losses on loans | $850 | $(485) | | Non-interest Income | $5,674 | $5,595 | | Non-interest Expense | $40,445 | $38,281 | | Net Income | $13,991 | $21,531 | | Diluted EPS | $0.87 | $1.35 | | Total Comprehensive (Loss) Income | $18,357 | $(34,473) | Consolidated Statements of Changes in Stockholders' Equity Stockholders' equity grew to $423.9 million, driven by net income and positive other comprehensive income - For the six months ended June 30, 2023, total stockholders' equity increased by $11.8 million, primarily due to net income and positive other comprehensive income200 - Cash dividends of $0.50 per share, totaling $8.0 million, were paid during the first six months of 2023200 Consolidated Statements of Cash Flows A net cash decrease of $5.8 million resulted from financing outflows offsetting operating and investing inflows Cash Flow Summary (in thousands) | Cash Flow Category | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $21,498 | $19,608 | | Net cash provided by (used in) investing activities | $48,605 | $(265,299) | | Net cash (used in) provided by financing activities | $(75,870) | $13,955 | | Net decrease in cash | $(5,767) | $(231,736) | Notes to Consolidated Financial Statements Details accounting policies, new standards adoption, fair value measures, and specifics on key financial items - The company adopted ASU No. 2022-02, which eliminated Troubled Debt Restructuring (TDR) accounting and enhanced disclosure for loan modifications, effective January 1, 202340204 - The company's interest rate swap contracts indexed to LIBOR transitioned to the Secured Overnight Financing Rate (SOFR) on July 1, 2023, with no material impact227 Management's Discussion and Analysis of Financial Condition and Results of Operations Analyzes financial performance, highlighting net interest margin pressure, deposit shifts, and strong capital ratios - Net income for Q2 2023 was $4.6 million ($0.28/share), a significant decrease from $9.4 million ($0.59/share) in Q1 2023, primarily due to increased interest expense274 - Deposits decreased by $248.1 million in the first half of 2023, but showed recovery in Q2; non-interest bearing deposits fell from 51.5% to 47.8% of total deposits159306 - The tax-equivalent net interest margin decreased to 2.45% in Q2 2023 from 3.04% in Q1 2023, driven by higher deposit and borrowing costs73145 - In July 2023, the bank sold $82.7 million of AFS securities for a $2.8 million loss, which was offset by a $2.8 million gain from the sale of Visa Inc. Class B stock108 - Contingent liquidity sources totaled $1.992 billion, covering 209% of estimated uninsured/uncollateralized deposits as of June 30, 2023131275 Quantitative and Qualitative Disclosure about Market Risk Details the management of interest rate risk using simulation models within established policy guidelines Estimated Change in Net Interest Income from Immediate Parallel Rate Shifts | Rate Shift (basis points) | Estimated Change in NII (Year 1) | Estimated Change in NII (Year 2) | | :--- | :--- | :--- | | up 400 | (18.0)% | (4.9)% | | up 200 | (9.1)% | (2.8)% | | up 100 | (4.5)% | (1.2)% | | down 100 | 4.9% | 2.9% | | down 200 | 9.1% | 4.8% | - The company uses interest rate swaps to mitigate changes in the fair value of long-term fixed-rate loans362 Controls and Procedures Management confirms the effectiveness of disclosure controls and procedures as of June 30, 2023 - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period169 - No significant changes were made to internal controls over financial reporting during the quarter ended June 30, 2023138 PART II OTHER INFORMATION Legal Proceedings The company reports no pending legal proceedings expected to have a material adverse financial effect - Management is not aware of any pending legal proceedings that would materially and adversely affect the company299 Risk Factors Highlights new risks from the banking environment, including eroded confidence and potential regulatory changes - Recent bank failures have eroded customer confidence, potentially impacting the company's liquidity, loan funding, and results of operations170 - Rising interest rates have decreased the value of the company's securities portfolio, and selling these securities could result in losses that impair capital140366 - The company anticipates increased regulatory scrutiny and new regulations for banks of its size, which could increase costs178338 Unregistered Sales of Equity Securities and Use of Proceeds Discloses a new $25.0 million share repurchase program and confirms no unregistered sales occurred - On July 21, 2023, the Board approved a new share repurchase program for up to $25.0 million, expiring July 31, 202575172 - There were no share repurchases in 2023 under the previous program, which had $34.7 million outstanding as of June 30, 2023185 Defaults Upon Senior Securities Reports no defaults upon senior securities during the reporting period - None367 Mine Safety Disclosures This section is not applicable to the company's operations - Not applicable142 Other Information This section is not applicable for the reporting period - Not applicable180 Exhibits Lists all exhibits filed with the quarterly report, including officer certifications and XBRL documents - The report includes exhibits such as officer certifications (31.01, 31.02, 32.01) and Inline XBRL documents143