Bank of Marin Bancorp Q1 FY2026 earnings call

• Net income and earnings per share grew by 75% and 77% respectively compared to Q1 2025. - Net interest margin increased 6 basis points sequentially and 47 basis points year-over-year due to balance sheet repositioning, loan portfolio churn, etc. - Originated $81 million in new loans, $61 million funded, with slight skew towards CNI. - Credit quality improved with non-accrual loans and classified loans ratios decreasing. - Total deposits increased from longtime clients and new relationships, with cost of deposits reduced. - Non-interest income had some consistency with special dividends and bowling debt benefit. - Non-interest expense increased due to personnel and other factors, but expected to stabilize

Net income was $8.5 million, or $0.53 per share. Net interest income increased due to average balance sheet growth, higher investment security yields, reduced deposit costs, etc. Net interest margin increased 6 basis points sequentially and 47 basis points year-over-year. Originated $81 million in new loans, $61 million funded. Total deposits increased due to longtime clients and new relationships

• Expect to continue solid loan growth in 2026. - Continue to grow deposits through new and existing client relationships. - Net interest margin expected to be positively impacted by loan repricing going forward

• Competitive market environment on pricing and structure. - Rate environment uncertainties. - Credit risks, including different trends in CRE markets (e.g., San Francisco office vs. outer Bay Area)

Q: How much was the interest reversal that negatively impacted the loan yield on a dollar basis?

A: It was $667,000 in Q4.

Q: How are you thinking about deposit costs kind of beyond that spot rate with the Fed on hold?

A: Continue to look at targeted adjustments away from Fed cuts, time deposit repricing, and manage off cycle reductions.

Q: How do you think about the buyback here going forward?

A: Conversation to start having now that credit situation improved but still want to earn way back to higher ratio.

Q: Trying to get a sense for margin level indicative of the balance sheet today?

A: Mid threes still appropriate with loan repricing tailwinds.

Q: Timing of large loan resolution?

A: Notes sold were pandemic special, other loan in legal process with no loss expectations.

Q: View of general market on CRE side?

A: Bifurcate Bay Area, positive trends in outer markets and some opportunism in San Francisco.

Q: Higher expenses in first quarter?

A: Due to personnel, charitable contributions, FDIC insurance expense, but expected to normalize.

Q: Continued tailwinds to the margin?

A: Yes, with loan repricing and potential strategic growth.

Q: Loan repricing dynamics?

A: New origination yields higher than paid off loans, 17% of portfolio repricing next year, 34% over three years.

Q: Capital ratios post restructure?

A: Conversation to have more now with less risk, but no specific target.

Q: ROTC and profitability levers?

A: Focus on loan activity and fee income for improvement.

Q: Growth drivers?

A: New hires, incentive plan, better performance in Sacramento, construction market activity.

Q: Credit broadly and wine industry?

A: Competition in loan terms, wine industry struggling but limited impact on customer base, CRE trends stable.

Q: M&A and efficiency gains?

A: Open to M&A, working on efficiency through staff adjustments, technology, etc.

Q: Loan market spreads and types?

A: Market aggressive on pricing, prefer higher mix of CNI and construction loans, possibly upward bias on allowance ratio.

Q: Tax rate appropriate?

A: Current quarter indicative for full year