BMRC - Earnings call transcript Q1 2018

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Operator

Good morning and thank you for joining Bank of Marin Bancorp's Earnings Call for the First Quarter ended March 31st, 2018. I am Nancy Boatright, Senior Vice President and Corporate Secretary.

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

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

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

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

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

And now, like the prepared Russ over turn remarks, Colombo. I'd to and call our be Russ questions. available will to Following your Tani to answer

Russell Colombo

welcome Nancy. our review XXXX for pleased you, morning Thank Good our with call. We're quarter to to the of you. first results and

Francisco, highlights. with our net contributed $X.XX and Bank million quarter originations start or million basis results the and share increase strong income of increase We and Napa, was well from XX% a Activity of Loan East XXXX. Napa with quarter last San over Marin full over a our quarter. were in diluted margin per of and Bay, the in income start up $X.X million point net Let's earnings had year million, interest XX first $XX.X the pretax including $XX.X the among distributed to $X.X markets.

originations. increase to is grew non-interest-bearing relationship rolled into which to $XX in loans The were our deposits. quarter's expected quarter in XX% call, deposits, million, close the several quarter's last total first our reflected fourth XX% an banking success of on from of that mentioned As model the originally

us -- only basis ago. total rates and expansion -- retain cost The continues cost cost a of net for advantage significant a point competitive was attract to the eight and rise. to margin one as up from deposits cost interest points, be total well deposits low positions our ability Our interest of basis year

quality program X.X% Our or loan our end, our be per be we quarterly am portfolio share. underwriting. only I required $X.XX off-balance Non-accrual that represented of with increase to X% consecutive capital dividend provision represents quarter announce pleased highly $XX for to credit disciplined price. $X.XX no quarter declared stock during our the outstanding to has This Board continues dividend commencing in strategy. XXnd the our sheet loans will reflecting The the management This at of closing approach shares of end quarterly losses to as to part on share quarter. repurchase represents a paid million shareholders. cash commitments a excellent the based of Directors

Bancorp of As to of Marin the stock this common part plan, permit Bank a insider into is be during blackout periods. entering XXbX-X trading would trading program, which repurchased

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

Tani Girton

you, Thank good and Russ morning.

in headed million income Bank is of is $X.X of a indicator of future. the First where quarter strong Marin net

are reflected As liability Russ financial fully of in and Bank mentioned, assets Napa from required our results. now

income increase Our and has to The law reflects asset first taken tax growth organic in earning effect. assets earlier sensitivity from in million margin net $XX.X and higher quarter the acquisition. quarter both in compared income net and net fourth quarters interest first the last quarter million year. in the growth the from manifested $XX.X is interest the interest XXXX $XX.X new was million

from lower than December loan There Payoffs QX was balances were decline a slightly million $XX loans, than outstanding XXXX. of XXst. than addition, and prior The yields In payoffs the and on million lines up XXXX for X.XX% million largest in $X portion credit Amortization the was in March securities were fourth and of the QX in customer XXst and five X.XX%. both quarter between lower higher changes points from interest and the of quarter projects cash, of in equivalent margins first XX assets. accounted XXXX basis to $X.X and in of of completion periods. the margin utilization was construction basis remainder. X.XX% of sales points successful came Reported net tax up

to of of federal $XXX,XXX was $X.XX. savings. tax $XX.X and is year contracts cost expenses quarters. Primary quarter million, future million Our expect XX.X% core fourth from for reflect XXXX tax $XX related quarters for to in related the increase requirements, $X.X processing the remainder were XX% positively to and to addition the which incurred ago. XXXX. from meeting certain share anticipate those higher non-interest expenses in rate XX.X% corporate for XXXX accounting acquisition-related expenses a earnings The our We result we increased income salaries of quarter year. was from $XX.X XX.X% stock-based first expenses earlier We quarter up related an and down Bank Bank in of factors to XX.X% employees, rate a per efficiency this of non-interest retirement to employees $XXX,XXX Those and in of compared and million, benefits of Napa impacted effective last renegotiating the first in for ratios acquisition-related quarter both by expense additional expense respective ratio of compensation the eligibility of of million Napa reduction in $XXX,XXX

deferred there a tax million XXXX. of was for quarter assets provision included $X reminder, As the fourth the write-down in a tax

We are very pleased quarter with first results.

XX.X% common our on return XX.X%. capital on loan growth was ratio equity end, quarter sheet deposit and The XX.X%, assets return and at total Our continued X.XX% tangible ratio assets tangible to X.X% risk-based balance was strength. was equity to reflect and

to growth And We for now closing the have some over coming back plenty call to liquidity years. will comments. and capital in I support turn the Russ

Russell Colombo

Thank you, Tani.

shareholders has value been always top our the Let priority. me for little plan detail. a repurchase more stock discuss in our Creating

Bank Bay delivering grown continues common investment, returns Also, banking showing given that a already strategy. strong attractive and principal key would we the role Napa to Marin, plays made of as making our to that cash team our office for has results. our out growth an to strong stock continues Organic acquisition investments it of impact in The in Directors stock potential are commercial its Bank The is has Our prefer our targets East expectations. most market, receive the of Board with deal. growth any of returns be in the over a XXXX to belief for and of outlook long-term in -- of of part of higher due positive determined positive is that exceed M&A long our part repurchase our the of franchise.

County, blueprint; we us excited have for With credit commercial new offerings, we number organic greater combined and growth banking identified of our As The there our to focus we another Napa presence in pace strategic provide can an capacity The region. enhanced of already of borrowers new customers has to we a our lending growth. access Sonoma our business increase platform need Bank turn capabilities. gives expanded team acquisition who are that product Napa expertise. our and in with County, a increased of limits, opportunities

now rate is this as footprint, the new of integration, the interest to continue our also complete. pleased relationship we conversion market this can serve across been of net with distinguishes report customers. banks. systems fully to successful many share. environment, to Bank of morning, banking a able Thanks gain we With Napa Along providing in to of that expand of interest growth have other successful base, am our we I Marin low Finally, Bank our Bank to deposit And especially strong Marin stable, margin. our model. base, cost rising of deposit a from That

for long-term ahead open delivers it to As through our I for our time relationship And will we we we XXXX, always to to will this up your further you look it and we as growth customers and attractive now thank shareholders. answer for achieve that morning. in questions. returns disciplined want banking success your have, success

Operator

with line phone go Davidson. of Our Jeff from Rulis first [Operator the question Instructions] Please on the D.A. is ahead.

Jeff Rulis

Thank morning. Good you.

Russell Colombo

Good morning Jeff.

Jeff Rulis

question core you had and guess the a costs. on I the million you expenses. the acquisition $X.X if on Tani and Maybe -- for processing combine just about

anticipate come but still, I read I said processing core the you acquisition you close goes to the get million $X the away, and -- how we to cost? $XXX,XXX guess If that's is

Tani Girton

So, probably still on one. processing, we're -- to the there's core there's some go, that still on on more negotiations

processing the core about associated different So, the is got on $XXX,XXX, Napa to for And -- one-time cost the the contract than $XXX,XXX the go. $XXX,XXX negotiation. that's with left acquisition, acquisition that's we've

Jeff Rulis

ahead. Okay. And the -- process go core as

Russell Colombo

to going do new savings. we is In be, this charge of addition for life the Russ, thing? the can Jeff, but just contract, add renegotiation there's mean I have this over substantial the one I

cost, that this So, is in terms next had is savings a to -- was getting over we're which going the five contract which of be up years. percentage -- over fact, the the front, of we the

And core come but some next that of -- charges negotiation. down years, over our charge count we substantially will took processing completed that's There to first that so are not more on -- we level, going and -- yet, the that can the that's five but costs and be that. because you not could

Jeff Rulis

you're and that would just maybe some quarterly expense. some these Is expense. run with rate looking away correct? for seem million operating that on than a million sub-$XX at a That's or a $XX It I'm bigger Okay. savings non-interest going of picture like quarter

Tani Girton

have ballpark and that's our employees roughly expenses also salaries because our if some included and I think Yes, about think the some of that's-- related I of conversion in yes, think you

Russell Colombo

be close. the pretty that Yes, that's first that take -- is in may we I right we you're achieved our from there those to contract, quarter, in fact will around And that kick of you core savings which the million. think $XX may going be had Once sign we costs very close. because contract. processing out drop When

Jeff Rulis

that Just weekend? was conversion to this clarify

Russell Colombo

two That sign contract negotiations Napa completely we then we'll to actually core in our completed last Bank weekend. and costs was over start of and processing -- The once was the lower this able different, Saturday, on processing this that, be The that now over that's costs. conversion is right days. incurring week

Jeff Rulis

do sort you. lower expect hold you assumed? year had that What was this than to you what near balance it tax in better of yet, little Thank a then this is QX -- maybe it. the rate? Got And the of rate;

Tani Girton

Yes. -- of rate the is provision Usually what our tax we tax forward. the is reflective for expectation do going what

So, yes.

Jeff Rulis

follow-up one last view to maybe not in on of other one. view -- negative out not having a was it move that a as an by Board discussions M&A This just you're that should the with? in option and options versus tool will chest the necessarily And more interest you the if just Okay. less is this M&A. buyback, Russ, a capital of we there

Russell Colombo

is this That's This a time excessive it's to got that our down, important and bring returns for really separate capital discussion. bring at management. capital shareholders. proper to to We've us

one thing. three stock all and or of as stock. done So, had discussions Napa -- we've lots are all the was we we've said, we've discussions had But XXX% either that's other banks mostly stock, with deals.

So, from the will standpoint, an it the and this, and cash -- do frankly, need do a we there when should our or we EPS isn't as acquisition impact really for have grow as this capital buyback. we positive

Jeff Rulis

you. it. Thank Got

Russell Colombo

Welcome.

Operator

of Our O'Neill. is line the ahead. Please Tim next question Sandler O'Brien go from with

Unidentified Analyst

on Thomas Hello. for This Tim is today.

Tani Girton

Tom. Hey

Russell Colombo

morning. Good

Unidentified Analyst

to further little going planned be into for the The acquisition year? related that out So, a XQ through $XXX,XXX expenses. down to just bit is spread XXXX is or expenses, drilling that the

Tani Girton

Most the of end -- second pretty of in We much that quarter. second be by quarter. the will should happen the

Unidentified Analyst

And XXXX? merit-based XQ in compensation to to going be increase related in then there is increases Okay. any

Tani Girton

embedded are in Those QX cost already partially.

that second of yes. get You'll quarter in full quarter, a

increases. were merit first the in Just Bonuses already quarter. the

Unidentified Analyst

all great. Those my Thanks. back. I'll Okay, step were questions.

Russell Colombo

you. Thank

Operator

have [Operator question Please with a go Jaffray. line the Matthew ahead. of Instructions] We Piper Clark from

Matthew Clark

Hey good morning.

Russell Colombo

morning. Good

Tani Girton

Good morning.

Matthew Clark

a I linked here. missed if of year-over-year the straddling quarter? guess, calls quarter, apologize just in does how I guess on I But I loan couple the the this; pipeline, second coming into compare I'm that

Russell Colombo

That off. on we construction volume better than paid We're -- activity it the activity the quarter have -- The loan good year. substantially of said, side. this second last always construction and there's being getting is is really pipeline and of news the on actually good gets second quarter's completed

this versus So, year at pipeline with of lot We've we this some -- higher for asset time have but we're year. XX% that. had do probably our last a -- this sales,

Matthew Clark

of four there the about feeling Okay, $XXX,XXX loan upward out your And new some then not mitigate And pricing, basis up Wondered loan calculating like you're are looked pressures what look that might core great. pricing correctly. were like if to points on repricing? competitive whether yields we or production?

Russell Colombo

competitive, Yes, fixed up, or really is rates that. is, this the yield thing looking and higher get really our competitive -- we're able you higher margins. but The or are still to you're transactions flattening so short-term, curve interesting at seven-year maintain than obviously when in you're five, some it's

it's So, movement of so in you mostly looking kind short. competitive. situation, we very volume and an And for already seen it's It's -- much longer odd rates. we're haven't

Matthew Clark

management, you a switched it the repurchase. Okay. And talking capital I little think then share when just I on over, bit about new caught I with

Just updated your and the here step-up of and dividend outlook thoughts on earnings potential thoughts M&A? growth given on kind organic buyback and in the increases,

Tani Girton

with for in as our have as to Jeff the our capital we got would an we've mentioned some that we announced dry for capital organic program. the way not and management will repurchase all $X.XX per maintain take mentioned, quiver capital also along part it M&A but And going increased position, earlier, share Russ of we're quarter, always to. arrow So, desired, is as share powder on dividend needed, stock, this people of the it's using one growth not overall as rather management capital down

Russell Colombo

given $XX The XX% paying so. long taking repurchase. our back about do earning certainly million It's -- our we of of to reiterate XX% earn to We're is, other our thing currently. -- out run a earnings rate share that

Matthew Clark

Got Great. it. you. Thank

Operator

the KBH go Bohlen next line Please of [ph]. is Our question Jackie from ahead. with

Jackie Bohlen

guys. Hi, morning good

Russell Colombo

morning Good Jackie.

Tani Girton

Hey Jackie.

Jackie Bohlen

way do what cost touched think to you have speaking? on even just know technology might expected, that a everything I be quantify bit and any you very generally you on little the savings

Tani Girton

liberty we think just much. it can't of talk we're middle really we to in very quantify the I because at about now right we're negotiations are and our not --

Jackie Bohlen

loan Okay, some apologize moving had the and if between between I that's understandable. I queue. then into And on where over getting The missed just and generation at of are expect you this, kind where the -- and -- problems just seeing pricing then generation new portfolio was increase? you rate update do March you're the that where -- Is now. what after differential

Russell Colombo

pricing don't of I Well term or intense on the on haven't competition was short-term pretty frankly, XX-year that financings continues to pretty much lift lift -- I to and financings. I we is aggressive, five on as saying see seen financings, longer seven pretty even be I the -- the said but longer -- like aggressive.

we're seeing in seeing yield is those lift You're curve not good. seeing -- we're are the because seeing lift margin But is the the as -- as in we some and so much that flat here, expansion obviously short-term. some which not in are we and

Tani Girton

And lift the terms as some on any our rates, rates as moving equity, responding I'll curve it's and the of of are more categories, in is not although said, that did declines as long we're only the categories of Russ of home loan But end in see on residential pressure categories, in much. just the seeing fast really consumer not or those. course, most -- add as said the of our the because we loan

Jackie Bohlen

do And nuances behavior? you are shaking how can driving there that is just specific -- out? it there of Tani, you are in things think of that Or kind -- customer are are terms any

Tani Girton

loan -- Yes, time we to can there can about new And in balances I I we little the in another we how general know understand we I to equity about law. theories rates think more But a that some that. got responding quarter. out -- think more are bit might we've need tax think and

Jackie Bohlen

do in see same just to consumer differentiation there's happen been that between on about essentially could behavioral deposit log two? increase, think you the between your you obviously When and any pattern rates as movement And costs. Okay. businesses, continue what no

Russell Colombo

your tell things I'm will nature. of movement as I accounts I'll this. money there deposits sure sure, will, And demand Well, completely there that with I'm rise, not you understand CDs and question, be maybe banks, out of market but on rates into and some all

need base, are chase very money We Those might those and just better accounts had a and deposit our slightly huge accounts, think bank may at on strong we little reflection demand will operating used. might a don't the are in lower And rise, is demand deposits. deposits, to market the part of have. frankly, we a looked most some and the some side, a be should forward. are stay we our -- and as a is cost deposits. movement in have in to of were in relationship-based up so and our relative of so for our we demand though; going any again, see high of to the -- thing to this move, higher is market costs we market such so see those we cost rates but as base and rates the stay cost funded going model that continue got going a be big over money -- deposits you deposit the not to than rise primarily of you'll percentage rates demand little certainly I about but but It and of some movement money bit But we've We the prices. going bank, about are positioned funds because some probably don't deposit recently then money of percentage that demand accounts. there deposit We're well I've going forward market in CD see bit ever a demand

Tani Girton

-- account they're movements large given experienced have any numbers those customer asset-sensitive. -- they higher point base, are said, even in construction utilize large our we add see large the we because whether than interest something why other have higher as they We going have rate experiencing balances inflows in -- total are betas we much different our they Russ quarter-to-quarter -- and still And our at about with in companies right on thing that's betas, cash model those elections. outflows time, actually Jackie. that, operating deposit scenarios cash to when big And income related can And now. deposit our they forward I'll we're sometimes -- net obviously and or higher to

accounts And in they so in those of cover and that, level out. of to going in to Russ' point, maintain because those order a back certain to have cash flows liquidity

So, from over ultimately money to limits move demand market. how can that deposits much

Jackie Bohlen

Okay.

So, in in essence, addition sticky liquidity deposits have customers keep you with and strong their to the needs your that basically, help obviously, relationships your everything? to

Russell Colombo

Yes.

Tani Girton

Yes.

Jackie Bohlen

Okay, great. Thank you much. very

Russell Colombo

Thank you, Jackie.

Tani Girton

Thank you.

Operator

further There no phone questions on time. the at this are

Russell Colombo

I'd for this forward morning talking like thank you Thank us Okay. after to Well, the quarter. joining we'll you. everyone with again look and to second

Tani Girton

you. Thank

Operator

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

Bank of Marin Bancorp (BMRC) 23 Apr 182018 Q1 Earnings call transcript