Bank of Marin Bancorp(BMRC) - 2022 Q3 - Quarterly Report

Financial Performance - Record earnings of $12.2 million for Q3 2022, up from $11.1 million in Q2 2022, with diluted earnings per share increasing from $0.69 to $0.76[166] - Net income for the three months ended September 30, 2022, was $12,174,000, compared to $11,066,000 for the previous quarter, representing a 10% increase[179] - Net interest income increased to $33,027,000 for the three months ended September 30, 2022, from $31,197,000 in the previous quarter, reflecting a 5.9% growth[182] - Non-interest income for Q3 2022 was $2.7 million, nearly unchanged from the previous quarter, with a $63 thousand loss on the sale of investment securities[213] - Total non-interest income for the first nine months of 2022 was $8.3 million, an increase of $905 thousand from the same period in 2021[214] Ratios and Margins - Return on average assets (ROA) improved to 1.11% and return on average equity (ROE) to 11.65% for Q3 2022, compared to 1.03% and 10.74% in Q2 2022[167] - Efficiency ratio decreased to 52.24% in Q3 2022 from 55.73% in Q2 2022, reflecting improved operating leverage post-merger[168] - Tax-equivalent net interest margin increased by 11 basis points to 3.16% in Q3 2022, while year-to-date margin decreased by 17 basis points to 3.06%[169] - The tax-equivalent net interest margin increased to 3.16% in Q3 2022 from 3.05% in Q2 2022, driven by higher yields on loans and investment securities[194] - The tax-equivalent net interest margin for the first nine months of 2022 was 3.06%, down from 3.23% in the same period of the prior year, due to a higher proportion of investment securities[196] Assets and Liabilities - Total assets as of September 30, 2022, were $4,348,653,000, up from $4,314,209,000 at the end of the previous year[182] - Total liabilities increased by $88.2 million to $3.952 billion during the first nine months of 2022, with total deposits rising by $94.2 million to $3.903 billion[236] - Total deposits rose by $94.2 million to $3.903 billion as of September 30, 2022, with non-interest bearing deposits comprising 53% of total deposits[170] - Total interest-earning assets for the nine months ended September 30, 2022, were $4,107,169 thousand, generating interest income of $96,990 thousand[190] - Total interest-bearing liabilities for the nine months ended September 30, 2022, were $1,858,715 thousand, with an interest expense of $1,718 thousand[190] Loans and Credit Quality - Loan balances decreased to $2.158 billion at September 30, 2022, but year-to-date originations doubled to $204.1 million compared to the same period in 2021[171] - Non-accrual loans represented 0.49% of total loans at September 30, 2022, an increase from 0.37% at December 31, 2021[174] - The allowance for credit losses on loans to total loans was 1.06% as of September 30, 2022, compared to 1.02% at the end of the previous year[182] - A provision for credit losses on loans of $422 thousand was recorded in Q3 2022, primarily due to ongoing economic outlook deterioration[203] - Loans designated as special mention decreased by $9.1 million year-to-date to $64.2 million as of September 30, 2022[206] Capital and Dividends - A cash dividend of $0.25 per share was declared on October 21, 2022, marking the 70th consecutive quarterly dividend[177] - Total risk-based capital ratio for Bancorp was 15.1% at September 30, 2022, up from 14.6% at December 31, 2021[176] - Tangible common equity to tangible assets was 7.5% at September 30, 2022, down from 8.8% at December 31, 2021, primarily due to a $78.0 million increase in after-tax unrealized losses on available-for-sale securities[239] - The Bank's capital ratios exceed the regulatory definition of "well capitalized" as of September 30, 2022, with no conditions affecting this status reported[238] - Total Capital to risk-weighted assets as of September 30, 2022, was $422.1 million, representing a ratio of 15.06%[242] Economic Outlook and Management Commentary - Management's forward-looking statements indicate potential impacts from economic conditions, including inflation and interest rate changes, on future earnings[162] - The Federal Open Market Committee (FOMC) raised the federal funds rate by 75 basis points four times in 2022, bringing the target range to 3.75% - 4.00%[200] - The effective tax rate increased by 160 basis points in the first nine months of 2022 compared to the same period in 2021, primarily due to lower BOLI income[224] - Significant liquidity uses included $537.2 million in investment securities purchased and $11.7 million in cash dividends paid[247] - Undrawn credit commitments totaled $561.7 million at September 30, 2022[249]