BMRC - Earnings call transcript Q3 2017

Due to licensing restrictions, you must log in to view earnings call transcripts.

Jarrod Gerhardt

Good morning. And thank you for joining us for Bank of Marin Bancorp's Earnings Call for the Third Quarter ended September 30, 2017. I'm Jarrod Gerhardt, Senior Vice President, Director of Marketing for Bank of Marin.

During the presentation, all participants will be in listen-only mode. After the call, we will conduct a question-and-answer session. reminder, is a October recorded As XXXX. XX, Instruction] this being conference on [Operator

the are call and on us Joining today Tani Chief CEO, Russ Girton, Financial Officer. and President Colombo,

morning release was website press bankofmarin.com, call webcast. this also where found earnings Our at issued this on can which our being is be

statements on and to XXXX, as know of Actual October XX, Before want the differ those on we emphasize we materially start, risks this such set information discussion may that contain results may forth forward-looking and that uncertainties. statements. I call involve is based from today, in

For a earnings the press risks SEC uncertainties, the forward-looking well as please as our discussion review of these release filing. in statements disclosure and

now, Russ Following call turn the prepared our Colombo. will remarks, And like over I'd the team to be questions. to for available

Russ Colombo

Jarrod. you, Thank the to morning welcome Good call. and

and and of accounted chief and week the community hearts safety as We're Marin not extremely employees the fortunate. was and Napa Before Napa, than situation has grateful disaster I fluid more go our quarter, a want we to our terrible that one was the to recent for hit of Bank and everyone in results those North in of are all well-being concern the safe our a out the County. affected. that for The our to in community, Bank Sonoma fires review acknowledge for very moment who take Lake Bay Sonoma, were

the to in recover to assessed, businesses Napa doing losses to rebuild. is our We committed and are The are base of customers damage Bank and our be surveying and the homes. the continues customer communities are determine while their our we helping to same. impact enormous

third our discuss Now results the let's for quarter.

well continue and significant initiatives. in execute to very furthering our growth we progress We made

we year. fourth on acquisition highlights, of announced this to on of acquire to Bank few our Napa quarter a this in we XX, the plan are July and track are Here close

about addition Marin. excited this very to of We are Bank

share the and bank following a business in approximately complimentary, to be acquisition with in banking deposit on counties. the by focused strong base model culture. a assets combined accretive community This County XX Napa built core and be be Our billion credit earnings close a X solid $X.X banking The will largest Bank will total Bay deposit branches we Community in Area share. will

where executive has Bank also than our Jim team and Wells In Chief XX during Office as many Specialty named banking quarter. Region of Officer. assignments Bank James joins the We Regional Kimball Coast as Group. September, Vice some additions Industry Senior Wine newly he from the Marin more among Fargo created Head years Banking commercial made the to served was position to Operating and Commercial and experience of for North President

Bank former the markets. These Mcadams, This deposits Mechanics the teams. their help our strategy very platform third We great for strong portfolio. growth Scott execute hires welcomed executives experience of and will also Head We Commercial level to senior successfully to had our future. in grew look in quarter. our and we established leverage have of We us who the relationships core loan performance depth our as this and be attracting commitment our Sonoma banking delighted in of Head and to Napa commercial and to confidence caliber We're plan. growth our Banking Banking Commercial underscore

of down a for Our our third year. deposits was from the the strength the source $XX $XX million. $X.XXX quarter in $XX $XX by deposits solid in were billion for originations last X earnings. billion; credit total again $X.X loan loan of making deposits. up bearing million was deposits continue grew Net growth we to $XX Total remains delivered XX% pay-offs second be for the the million excellent quarter. to in Non-interest once The quarter for portfolio million bank, quality and points. $XX quarter million of million, quarter Loan the basis and bringing total quarter the to were cost

quality our that. and metric continues support to be credit Our excellent

maintained the to our in dividend underwriting. quarter was paid per cash our had Diluted dividend expenses approach per by XXXX. $X.XX a This have Directors pleased disciplined earnings We $X.XX share of has We're to a highly of on quarterly impact of the third XXth announce per consecutive $X.XX negative share. share declared is Acquisition-related bank. the that EPS. Board

me Tani over additional to let results. financial it turn Now our for insights on

Tani Girton

great on morning Financially was everyone. fronts. it quarter Thank Good all you, a Russ.

income quarter. from third was of net quarter million down last $X.X Our $X.X million

included earnings loan per earnings principally of net were which quarter after-tax $X.XX. been related the without higher to and quarter a Bank share than large recovery expense year-to-date Napa income XXX,XXX in year third of a loans XXXX. due Third have of significantly early XXXX acquired this pay-offs to would acquisition and

decreased second margin carries interest basis both quarter And tax to the assets. over allocation which higher and XXX,XXX earning increased cash equivalent income of yields assets. than interest other due net and quarter X total growth the lower points, Third net

Third up on in virtually quarter of months year. to acquisition-related unchanged quarter Non-interest income million XXXX higher to from first and non-interest million sales due non-interest the income prior $XX.X due of $XXX,XXX lower was of second security of costs. quarter year-to-date was nine expense mostly gains $XX from $X.X the than million was last

loans and While end. quarter, was from $XXX,XXX totaled remained total loan portfolio expense down. of to due to our from the past X.X% up in quality fell loans at is prior last our slightly efficiency quarter Credit million $XXX,XXX Non-interest quarter. loans were from only the accruing relative up prior the $XX.X Classified in assets XX.X% ratio X.X% strong non-accrual of quarter. XX.X%

legacy is loss reserve total loans loan Our loans. Marin X% and X.XX% of of Bank of

the on was equity and return X.XX% assets our Finally on quarter return average for X.X%. was average

ratio to based and XX tangible September total assets common at was risk XX%. Our XX.X% tangible was capital equity

to acquisition very organic to us over our to I and back closing base cost Russ now shareholders. deposit comments. it position will pursue turn value Our level well growth capital for some strong deliver that and low opportunities

Russ Colombo

our you, by our we Napa. third of deposits Bank acquisition growth Thank deliver as the our pending of and successfully balance in strategy on continued to loans and growth In demonstrated Tani. quarter, continued

We about this acquisition. are excited

had attracted to staff. the chance clear the a at those large. Our existing that and positively our Napa both by better of meet company. customers clients with and lending us of limits what community Napa new part combined the resources received been it will to we were Since Bank serve The enhance allow has to announced we us a add we In meetings, made of they ability higher ones. acquisition, to announcement Bank and key

In helped presence further Bank relationship community. of client's deepen Napa's addition, our Napa us in the

year accretive this to it up to of answer expect to We be you this earnings transaction to growth Thank your deliver XXXX. in questions. morning and now time a your position strong for us we open and will

Operator

question coming [Operator you. first Jeff with Our Instructions] of the from Rulis Please your Davidson. Thank D.A. line with proceed question.

Jeff Rulis

morning. Good Thanks.

Tani Girton

morning. Good

Russ Colombo

Jeff. morning, Good

Jeff Rulis

maybe the activity, looks kind thing where if Just a it's get don't versus a and in in or in a half almost these pay-off we quarter trying quarter read into a question down on linked to that on that like activity, slowing things in been of if, we one a pay-off I sense just get steady past can temperature know quarters?

Russ Colombo

pay-offs. loans, things When was about elsewhere. XX% sales. bit. down budget obviously activity quarter small is little of we this refinancing Hopefully, of every amortization That anticipate we And good. year of combination it's Jeff, a of very [Indiscernible] particularly a

last $XX For year. I down were are down, about total the think million, year we versus of pay-offs

a read really I I sure not too And that we XX% of the I we lower we read budget a that. But that's I'm than think show in those to growth. thing. good volume terms much so, slightly the of budgeted obviously we to down we too have all sure X% I'm show because keep still and We way like which XX% work pay-off, quarter And much we when into into numbers growth. said can not is

Jeff Rulis

an point, good shape are it. your standpoint. actually quarter-over-quarter Got in to But certainly pipelines origination the from have

Russ Colombo

a more the -- building good officers the Well, know of I pipelines that very through say think the kind bigger all as of funnel. to job and that pipeline, the commercial banking are we have that comes the doing I

really grow it's to to so, continue And that. important

actually pipeline had And last what exceeds so, have we year. at we this time which total

Jeff Rulis

then, And for one it. Got Tani. maybe

impact, kind of core build X the basis on of or On the timing where margin compression the bouncing about I ex-accretion points, around? then, cash is to due maybe guess -- outlook and you was on core that kind that think for comments any

Tani Girton

of was to And take networks was securities, the there. net in amortization of extent during the cash scheduled bulk the of increase margin. you The about change have position. -- million those bit $XX deposits the growth and over deposits margins an a to of we deposits that quarter of deployed A and increase above off some opportunity of that. the and do maturities due interest the definitely into thereby that, in in the drag little net Yes. our investment To the the saw deploy some that to we

Jeff Rulis

just you Okay. Napa? the Sonoma pro the Bank in loan one on basis guess maybe could I counties forma -- a And what's comment then, last exposure bank's the if one of and total and Napa with

Russ Colombo

million. Napa excess But, County, kind million. I real will of a $XX that's Sonoma few terms a course over in million. estate a little Sonoma, exposure just down wine industry of little $XXX In itself about just have little over In a outstanding, things. of break In in $XX we of of were about

-- so And

Jeff Rulis

And that’s both the counties…

Russ Colombo

some -- So, in home both lines really pardon equity have me…

Jeff Rulis

Sonoma. both counties, over was Napa, XX That

Russ Colombo

both That's counties.

good million we what is was In about just already and addition we – we far have just insurance we does been in The to so that in been $XX on Bank assess had that we home to proceeds. $X mobile Napa. financed that than include clients. million that have was news to of -- that's working all County we that's lines we’ve and Napa that burned And potential we not through Marin of in that, home -- damage done one that Sonoma Bank have less paid of equity only have had

was rental which that was damage we only a that. there a fourplex about concerned our property wineries, really fine. the [Ph], was some were to slight and vineyard, all one which not wineries had one And but have a large other [borrower] are burned all We of

going to looking at looking through doing damage. have try we codes the against and what the is North at and so, those areas zip throughout clients, our and affected been matching assess And Bay

we have little. far, so And just very

said, to the minimum this rebuild just Napa It's that's assess a to being can't a road both point. the impact at regions we I rebuild. that suspect and for to going get something years homes back Now, community all of long that the long-term and be couple to Sonoma the

it how goes, we are it see it's going closely. very but we’ll all to a So, be be monitoring challenge and going to obviously

Jeff Rulis

Appreciate the Thanks. It sounds Okay. comments. challenging. like

Russ Colombo

Sure. Thanks Jeff.

Operator

Thank you.

Our next Tim your line with Please the Sandler question O'Brien coming with of from O'Neill. proceed question.

Unidentified Analyst

is Tim. Andrew everyone. on This Hi, for

you the a owners beneficiaries? referenced may any the how on the timing in Just some be coming to distributed of this deposits sense these out question of that or these when of and quarter,

Tani Girton

So, that's [ph], some come of increase I that how we are businesses the of out express is XXX% account and may it sales to deposits of bulk necessarily some due of for it, there that think in the not in may but to in that state] or deposits. trying settlement in fluctuations sometimes some the we of go what of [a

to going up long-term is you of transaction though, a and at strong have if trend component the look think the I continue in it we account. deposits

moving our those And grow as grow. accounts also flows tend the to through cash so, customers

Unidentified Analyst

Okay.

Russ Colombo

a [ph] contractors of [actual] large a work. a we There have lot do the in our do deposits, of also -- is number portfolio of

a they And so, obtain are contract, for when they that. funded

as we dollars and so to in accounts. And way project, of work deposit have consistent it's continue ongoing they come dollars of account they in have But, one, those the that down. projects growth seen if types it's have the the in those the -- could we and their number work just not grow that

and tomorrow, out hard in that when will contract to in its not pretty today out, it's out. of then it today life it's the and it's So, go the over it's way then predict works but

Unidentified Analyst

that's Okay, and right the to going what outlook progressing are like very your the thoughts seems now helpful. deals on TCE forward? M&A And of then talk, at smoothly discuss XX% ratio just and your for what just environment more Bank Napa

Russ Colombo

fact We're that are, There we we've interested all in Bay -- the area. talked you as very interested in are more. in the about doing know we banks

bought, As sold, are time said banks I board before, sold. get decides a are they and banks it's not its when

well certainly positioned. interested, we're very we're so, And

a up bit it's Our stayed prices actually recently. stock -- have been

so, And there to at nothing, but certainly acquire banks point. talking report at we're different to a is good and we're this nothing actively to and, position many

Unidentified Analyst

questions, Thank back. Those are you. my right. All step I'll

Russ Colombo

Thanks.

Operator

you. Thank

proceed next coming question. Our your question Worthington Raymond of Don the Please with line with James. from

Don Worthington

morning. Good

Russ Colombo

morning Good Don.

Tani Girton

Good morning.

Don Worthington

mentioned are you on Just just might a some during of curious question on the kind there tenant-in-common loan what general the, terms you loans the purchases those more? were do of and whether quarter,

Russ Colombo

-- purchase were, Umpqua There tell and was number Yes. that is by that TICs there you Bank a of can that I -- was back. years was from made Umpqua result Circle Bank which that acquired that were made of

of And they so were in buying we portfolio the reminded the not kind business. that ended up active

our have credit terms were credit warrants, we ministry he those San getting. we for was working quite a involved million and loans the primarily been we're Pat who was And and [UCG] have so, exactly at have -- so, but what we And we San bank, couple And, of Francisco things of those the and demands TIC well. officer $X we in them McCarty for a acquired Bank. reviewed part have [ph] he in portfolio we of And about knew Circle made most them, there that actually a Francisco.

why we them. bought that's So,

Don Worthington

have All given far have that in you those happened Thanks. fairly right. so the have terms kind increases what betas of And Okay. then deposit of to-date? been tracked

Tani Girton

Board market use that rate So who for and what across increases. increase seeing same. the much modeling the in we we're calls we're lot the has and a of to experiencing. We'll now been our people the actually In we're raising rates rates. that deposit the market, that doing But not higher lot get betas than then in know want of general, the around see not Feds there whether a industry deposit pressure for are movement in to

Don Worthington

Okay, you. great. Thank

Operator

you. Thank

Piper the Please coming line with Our with question. next your of question proceed from Jaffray. Clark Matthew

Nath Race

Good actually morning. for Nath It's Race Matthew.

Tani Girton

Hi, Nath.

Russ Colombo

Good morning.

Nath Race

of built quarter, the the going of deployment the excess get that assuming Just of fourth the cash some in growth to back you in the loan quarter.

what what into the speak early to into If should just of XXXX? of this optionality you securities thinking across terms portfolio be kind XQ and in and deployment we

Tani Girton

its way the want And, liquidity short-term our make pretty we into X can securities. the sure then years. Yes, of said, duration a in fairly what we exactly short-term we as growth on securities to you get our at in so represents we portfolio, government support now right we a our the deploy one component when quarter and keep that to because maintain you Fed. cash loan plenty can portfolio, short, part to in under securities of allocation guaranteed the That's get generous compared that

portfolio liquidity So, is very conservative it we for primarily. the keep purposes

Nath Race

we the related sound then into guys Got loan had well? this guys as just that the consistent term correctly, Russ with if into fires similar heard in you and a build any to saw expecting are like early And it. that here. But I growth XXXX doesn't events XQ it near credit expect third or quarter it Tani. you tied quarter fair Thanks to just reserve is you provisions

Russ Colombo

- missed can your I the of repeat question, that? maybe you part last can you

Nath Race

Yes.

early that Just credit terms potential the have fires sound the into XXXX, guys fourth of quarter though the losses doesn't in so whole of even a build thing in expecting and obviously process. is the lot are it with into it like reserve you early transpired that

reserve trying near-term? just So the puts out takes and figure to from basis

Russ Colombo

okay. Okay,

reserving the to with we there the a have we will loan at start So point the fourth only reserve, kind loan kind we -- growth. do reserve haven't in to wasn't If model but that quarter same amount. we we of had require issues, [ph] for and as We, reserve this need credit the [AAA] only to expectation we had growth greater is of didn't that. for

So, portfolio ourselves. for that to is we now clean we issues such reserve right credit got have that a not there certainly

for beyond growth then loan As reserving we would the see drive that AAA. --

Nath Race

your on I Congrats appreciate a quarter. it. color. great Got

Russ Colombo

Thanks.

Tani Girton

Thank you.

Operator

Thank you.

coming proceed the Our question. Please line with with Tim Coffey from your Partners. next of question FIG

Justin Eun

Tim. Justin calling for is morning. in Good This

Russ Colombo

Good morning.

Tani Girton

Good morning.

Justin Eun

question a Bay of there changes the first My with result of fires? pending are Yes. North to merger Bank as Napa the is, any

Russ Colombo

No.

Justin Eun

North the Great. modest fires in? change Bay recoveries Does current manager anticipate rate will net the of

Russ Colombo

recovery? Of what

Justin Eun

run modest Change of current recoveries? of the rate net

Russ Colombo

And predict of think that we small pretty ones were I that the No. to of part affected. customers affected; will be was so. tried for that impact I that except don't Like customer we hard on what -- it's ones mentioned. saw analyze, the the number most said, that long-term short-term collateral that's fires, but we for the the to

-- minimal, modest impact had to we've say our and don't relatively customer pretty, of to We our had have amount loan I portfolio but base.

there long-term that we properties have affected fires, didn't with be those had customers to have We but necessarily harshly. that the don't expect issues we that up finance too

Justin Eun

to hear. good quarter rate BMRC? for good a That's expenses case legacy you run million say would And in is that at per $XX

Russ Colombo

guidance Yes give don't on expenses. we

predict So, yourself. you can

Tani Girton

of quarter, there Sorry later next think is take you that bit FTE we X quarter. we do be in can of there see the you as the And couple growth little factors a had some quarter a those to came the close account acquisition. expenses did more you can in see going you are into is

those So, be main associated there that are expenses the will change. with drive some But can think factors those. I some

Justin Eun

last you. Great. XXXX? The quarter was the $XXX,XXX last for quarter was third it OREO what Thank question, the

Russ Colombo

back going when we from has that's bank of that just, nothing XXXX. end one of that's Alameda to Alameda Bank that's from in There been acquired OREO the it. Bank had back legacy Going we else, of

Justin Eun

much. Okay, great. Thank you very

Russ Colombo

right. All

welcome. You're

Operator

with from with coming question your proceed question. the line KBW. next Our Jackie Instructions] Please [Operator Bohlen you. Thank of

Jackie Bohlen

Hi, good morning, everyone.

Russ Colombo

Jackie. morning, Good

Jackie Bohlen

scope everything. weeks people little Marin stuff the and all obviously in last impact Have starting any of it's kind of that of fires customers back that to given know for the and you normal demand to such some the and Bank of lot business on just little of it's how color thank bit? to answer hear has of very are you also two and loan preliminary great to operations change I to the of a there been or noticed kind Russ, over shift get the a

Russ Colombo

Sonoma pretty in It's impact to demand the going -- what hard and still county it's Napa. is to pretty particularly loan judge be and hard the what --

operations, our in of rest not the -- impacted East Francisco On it's in really at that it's Bay really County or or San Marin whether in much all.

going the difficult, think to so, it's less. And I to be is relative Sonoma in impact Napa much

County, are don't that but I properties. Sonoma more over number remember, think changing, lost of maybe it's I the there and homes XXXX these commercial

it's to area. the so, the the be going operations, businesses difficult in And that's really how judge business going to to impact

So, you of quickly. think it's homes to are going daunting that rebuild how very to many

one husband is, her Park pull so, there together work able hope I mentioned. back and these And that the and two her fortunate are and their home were the Coffee their We possible to they done quickly is as lost area homes. I and lost and have safe, home to who very get as got their unfortunate in We people certainly they did as to employee her communities get together home. kids but in are to

things task And of those to people so, those to all of get planning be lost to from get home. hard for all it's that going back that now to so rebuilding, kind

Sonoma Bay to operation we very environment quickly the will But, great then this and Sonoma impact sure North County. confidence businesses So, they in its in our I together right in all County get the -- get will going is I'm to how business judge get does that back it normal and hard in region, to have now.

Jackie Bohlen

the and is helpful. it's have that on. preliminary you a given That's I merger there is you. scheduled Bank month. next understand a really all obviously lot conversion going of there? the tentative Napa close Do And to day then, Thank for very that

Russ Colombo

in Yes, April.

converging April The is conversion. XX, week date -- them from which is day close which anticipated our the in [ph] date to more XX, are converting the with FIS. is there [FYS] And [ph] five, seven is believe November We XX. into is [July] I conversion

have we preliminary for that's up were which of faster, So, like FIS reason their but -- date, the with We we moved it were would some it is -- probably it to schedule. respect unlikely. kind

Jackie Bohlen

Okay.

start-off expenses conversion So, assuming that is the date, rate a it to with on clean XQ April XX is we run then? fair say

Russ Colombo

but, still the there quarter, pretty some quarter the quarter, in third second for fourth sure. third think the I possibly will certainly costs and quarter, be quarter lingering in certainly clean third

Jackie Bohlen

that great. helpful. That's Thanks everyone safe. very glad And is I'm Okay, that guys. again,

Russ Colombo

Thank you, Thank Jackie. you.

Tani Girton

Thanks.

Operator

are will no I you. closing questions or further this back There you. presentation with to turn the Thank remarks. your continue time. at Please call

Russ Colombo

this will much forward I quarter talking that thank you and and joining for into Napa everyone forward at again Bank are we want us to of looking have morning. Bank next look point merged to Marin very And we to to of we that.

So, thank you attending this again morning. for

Operator

Have you and Ladies your that that ask thank for We your conclude gentlemen, call today. the lines. day. you participation great disconnect please conference does for a and

Bank of Marin Bancorp (BMRC) 23 Oct 172017 Q3 Earnings call transcript