Bank of Marin Bancorp Q4 Earnings Call Highlights
Bank of Marin Bancorp NASDAQ: BMRC executives highlighted stronger loan production, improving credit metrics, and early benefits from a fourth-quarter balance sheet restructuring during the company’s earnings call covering the quarter ended Dec. 31, 2025.
Management said fourth-quarter execution drove “continued positive trends” across core profitability measures, balance sheet growth, expense management, and credit quality. The company reported a GAAP net loss in the quarter due to a securities portfolio repositioning, but emphasized that core earnings and net interest margin improved and that capital levels remained strong following a targeted approach to security sales and a subordinated debt offering.
Loan growth and origination activity
President and CEO Tim Myers said loan production was one of the company’s strongest quarters in the past decade. Total loan originations were $141 million in the fourth quarter, including $106 million funded, with “over 90%” of that activity in commercial loans. Myers said production reflected a “more diversified and granular mix” across categories, geographies, industries, and property types, and that the bank is seeing a “healthy increase” in commercial real estate demand that meets its underwriting standards.
While overall loan growth was described as robust, it was partially offset by $50 million in payoffs during the quarter, primarily in non-owner occupied commercial real estate and residential real estate. For the full year, the company originated $374 million in new loans, including $274 million funded, which management said was 79% higher than the prior year.
In response to analyst questions, Myers attributed a “significant part” of production to teams that include newer hires, while noting the broader lending organization has also improved as those hires “set a new standard.” He added the pipeline is “a little more diverse,” and that the bank is seeing better activity “in virtually every market.” The company cited key growth markets including the Greater Sacramento area and said it will continue to look for talent in Sacramento, the East Bay, and San Francisco, while emphasizing it is “less geographically sensitive” to where hires are located given where deals originate.
On 2026 loan growth expectations, Myers said the company is targeting “a much more consistent mid-single digit production,” with potential to do better depending on payoffs. He described payoffs as driven largely by factors outside the bank’s control, including asset sales and borrowers deleveraging with cash. He also said the company has intentionally exited certain credits with “structural imbalances” dating to the pandemic, contributing roughly $10 million of fourth-quarter payoffs. Myers added the loan pipeline was about 30% higher than the same time last year despite significant fourth-quarter closings.
Deposit growth and deposit pricing
Management said total deposits increased during the fourth quarter due to higher balances from longtime clients and continued inflows from new relationships. Myers acknowledged a competitive rate environment and rate-sensitive customers, but said service levels and community commitment helped the company lower its cost of deposits by 10 basis points while growing the deposit base.
On the call, the company provided additional color on deposit costs and client behavior. CFO Dave Bonaccorso said the Dec. 31 “spot rate” for interest-bearing deposits was 2.08% and the total deposit cost was 1.17%, and management said rates were “roughly in the same place” as of the prior week. Myers noted the bank put through “a lot of the rate reductions late in December,” suggesting much of the impact was already reflected in spot rates.
Myers also discussed deposit growth drivers and mix. The bank opened nearly 1,000 accounts during the period, and about 45% were new to the bank, a trend he said has been relatively consistent over the past four to six quarters. He noted that new-to-bank accounts tend to carry a higher percentage of interest-bearing balances. Quarterly deposit fluctuations, he said, are often driven by “movements within our large deposit” customers—sometimes deposit-only accounts—including public, fiduciary, and contractor funds tied to government contracts, which can be volatile. He also noted the bank anticipated some temporary inflows from a real estate transaction and had already moved that money off balance sheet.
Regarding receptivity to lower deposit rates, Myers said the bank has taken a “very targeted” and segmented approach, seeking moderate decreases. He said some attrition can occur from “rate shoppers” pursuing higher CD rates elsewhere, but added the company is not looking to grow deposits through aggressively priced CDs and expects any related outflows to be manageable.
Balance sheet restructuring and earnings impact
Bonaccorso said the company completed a balance sheet repositioning in mid-fourth quarter and that it is “performing as expected,” with benefits already flowing through results. On a 12-month basis from execution, management expects approximately $0.40 of earnings-per-share accretion and about 25 basis points of net interest margin lift.
As part of the repositioning, the company transferred the entire held-to-maturity portfolio to available-for-sale, but sold 74% of the legacy held-to-maturity portfolio. Bonaccorso said the bank sought to optimize incremental reinvestment income relative to the realized loss and the capital ratio impact. He said the company replenished capital using subordinated debt, avoiding earnings dilution associated with issuing common stock.
The securities sale drove a $69 million loss recorded in the quarter. As a result, Bank of Marin reported a GAAP net loss of $39.5 million, or $2.49 per share. Excluding the securities portfolio repositioning loss, non-GAAP net income was $9.4 million, or $0.59 per share. Bonaccorso said non-GAAP pre-tax, pre-provision net income increased 31% quarter-over-quarter and 51% year-over-year.
Net interest margin, expenses, and outlook items
Net interest income increased to $31.2 million from the prior quarter, driven by balance sheet growth, higher investment security yields, and reduced deposit costs, according to Bonaccorso. Loan yields also benefited from $667,000 of recovered interest tied to the payoff of a non-accrual relationship. Management said that based on market expectations for 25 to 50 basis points of Fed funds easing during 2026, the bank remains prepared to make targeted deposit cost reductions that it believes can contribute to further margin expansion.
Bonaccorso pointed to monthly margin progression during the quarter, stating that after adjusting for a non-accrual interest recovery in October, the adjusted net interest margin for that month was 3.12%, while the actual net interest margin in December was 3.42%, reflecting 30 basis points of expansion. He also noted that a meaningful portion of fourth-quarter loan growth occurred late in December, which he said provided momentum heading into 2026. Management discussed continued “back book” repricing opportunity in loans and remaining reinvestment upside from certain bond cash flows that were not repositioned.
Non-interest income, excluding securities losses, was described as relatively consistent with the prior quarter. Non-interest expense increased about $100,000 from the prior quarter. Bonaccorso said salaries and benefits were lower in the fourth quarter due to incentive and profit-sharing accrual adjustments, but that the first quarter typically sees higher personnel-related expenses due to seasonal resets such as payroll taxes, incentive accruals, and 401(k) matching. He also said the company expects to complete most annual charitable giving in the first quarter. Separately, management said it anticipates additional investments in people, initiatives, and systems during 2026 to support growth, including opportunities to improve fee income.
Credit quality and capital actions
Myers said proactive credit management contributed to improved trends. Classified loans declined 35% quarter-over-quarter to 1.5% of total loans from 2.4% in the prior quarter. Non-accrual loans fell 14% to 1.3% of total loans from 1.5% in the prior quarter. Past due loans declined to the lowest level since the fourth quarter of 2023.
During Q&A, management addressed an increase in special mention loans, attributing the biggest contributor to a downgrade of a wine industry credit. Myers also said the bank upgraded a couple of loans from substandard to special mention as a conservative step, including a commercial property in the Palo Alto area that moved from 100% vacant to fully leased but had not yet had tenants take occupancy.
Bonaccorso said the company recorded a minor provision for credit losses in the fourth quarter, citing improved asset quality and the level of reserves already built. The allowance for credit losses stood at 1.42% of total loans.
The board declared a cash dividend of $0.25 per share on Jan. 22, marking the company’s 83rd consecutive quarterly dividend. On capital, Myers said ratios are lower than historical levels but “more than adequate” for the balance sheet’s risk profile. He noted the company has an existing share repurchase authorization and said management wants to keep options open, including potential M&A as the stock valuation improves, but indicated there were no current plans.
About Bank of Marin Bancorp NASDAQ: BMRC
Bank of Marin Bancorp is the bank holding company for Bank of Marin, a community-oriented financial institution headquartered in Novato, California. Through its subsidiary, the company provides a broad range of banking services to individuals, small and medium-sized businesses, and nonprofit organizations. Its operating philosophy emphasizes personalized service and strong local relationships across the San Francisco North Bay region.
The company's core product offerings include deposit accounts such as checking, savings, money market and time certificates of deposit.
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