BMRC - Earnings call transcript Q1 2019

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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 31, 2019. I'm Andrea Henderson, Director of Marketing for Bank of Marin. [Operator Instructions] As a reminder, this conference is being recorded on April 22, 2019.

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

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

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

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

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

Russ Colombo

Good call. positioned Andrea. for for a you, XXXX morning off start year. Thank and welcome the solid well the We're to and exceptionally are to

historic strength steady we waver environment. balance and intense will demonstrate We've markets In breeds the cycles and model relationship proven lows. through competition, loans. multiple quarter, to banking again our focus but Our our and near strongly both business competitive That with in deposits highly XXXX. continue expansion, in a business customers growing strength unemployment once economic on growth resonates generated hovered rate not and first sheet that solid

growth Looking healthy fundamentals our and remains loan outlook positive. for strong forward, and XXXX underlying demand see we

the some through previous quarter, for but the income of you quarter $X.X the in the from year. same walk in million last the We $X.X first up me reported let $X.X financial highlights for million of quarter. Now, first net quarter, million down from

$X.XX $X.XX $X.XX and X% XXXX, of at at the we're same the in billion and December billion the XXXX remains quarter of $XX.X level. March in matching consistent Non-interest first were stock-based million deposits to Diluted of payroll total XX, represented in cornerstones quarter XXXX. share XXXX taxes first $X.XX March ago. XXXX year performance. compared quarter December the X.XX% year the Strong $X.XX for expenses Loans annual of Non-accrual increased represented of billion including to XXX costs, we per This contribution XXXX on XX, XX% billion. seasonal our an reflects Total quarter-over-quarter typically $X.XX last increased the see in at $X.X at first decline from due and earnings no as deposits early XX, credit compensation Bank each of quarter to loan from increases that deposits the as quality XX, from loan quarter non-interest with there in a to million reset and grants. $X.XX one well and in increased provision loans personnel by of par losses our March XX quarter. were portfolio the bearing up

talent Walnut are Bay Diablo in Valley. a the investing in opening building our expanded presence initiatives will and businesses by organic We We East markets. that Creek in growth key office production loan serve in adding across

made hires in Santa also San the Commercial strategic Banking President, Manager named market. Francisco in key Robert Rosa Holden, We Vice and Senior Regional Napa and

represents the Bancorp. of of of cash dividend consecutive XX, payable Bank This XXth share May dividend Board per Our Marin on a XXXX. quarterly declared by paid $X.XX Directors

In addition, of repurchase Bancorp our is considering program. $XX million an share extension

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

Tani Girton

the to X.XX% exceeded asset yields prior interest Russ. to the quarter The in $X the higher funding to compared of income, $XX.X quarter the interest on interest special prior margin quarter I'll redemption. in million equivalent million interest same compared and asset due - October XXXX quarter Non-interest year income is to Thank with XX $X.X a primarily from $X.X ago. quarter million and $XX.X year dividend accelerated improvement tax both prior to the a fewer previous to interest a $X.X on due $XXX,XXX and Despite early was in X.XX% the is two the expense Good of the and begin million you, in earning quarter, higher the of quarter The in from quarter. first income ago first the Inc. increased of base, appreciation pre-tax the fourth fourth the net QX discount to common accretion net to due on a increase stock cost. morning. quarter of Visa Class in lower quarter net almost $XXX,XXX in Home the Loan quarter. in to quarter million, XXXX redemption B which related the sale XXXX of basis the subordinated million income Bank net declined debt. $XX.X The X,XXX million was related interest point days sub-debt totaled in sensitivity quarterly over Year-over-year, shares Bank's thanks gain the restricted the rate. up XXXX Federal first controlled

underwrite network $XXX,XXX. attributable QX $XXX,XXX deposit the income to policies bank-owned income. Bank new the new and decline deposits incurred non-interest fell in and sale policy deposit the cost in to the network XXXX the expense to insurance quarter BOLI excess Additionally, a is of lower Likewise, first from life from income

Year this XXXK $XX.X year some As typically quarter typical the taxes million, reset Russ Non-interest was included exception. expense of mentioned, matching. and New is the no seasonal and first payroll year includes the of expenses

Additionally, bonuses XXXK the matching spikes are first paid. in when quarter

vesting, contract data $XXX,XXX and processing in was stock-based between attributable primarily $XXX,XXX renegotiations core to $XXX,XXX retirement retirement in First The all primarily net in share primarily the increases XXXX. retirement in grants additional and full-time a adjustment employees, of in the quarter, professional between decline XXXX five payout. expense compensation XXXX the quarter provision Other eligible net quarters quarter in for were $XXX,XXX accounting in in a and and and The employees included compensation one-time expenses on related to XXXX of share XXXK due sheet off annual sheet increase In merit balance and million XXXX. the for return more expenses balance employees, differences expenses included $X.X commitments pay a increases, acquisition. for $XXX,XXX eight to equity first the also in quarter $XX,XXX increase QX The one-time services and XXXX mostly commitment significant the match, provisions. just expense, Napa QX of the cycle to between new cycle XXXX first of processor additional these Bank delivered in XXXX eligible employees, and performance pay X.XX% first adjustment more performance the $XXX,XXX of first more assets six stock-based eligible accelerated off on a $XX,XXX, return X.XX%. attributable was

that parts we comparative from and with the relationships are several Bank's and and results expense While moving our affected profitability credit long-term this prospects continuing the strong customer derive consistent management. quarter, pleased

Now, Russ would like to share closing comments. some

Russ Colombo

Thank with quarter results. you, Tani. first our pleased I'm

our - growth, in XXth are declare pleased executing organic We dividend. quarterly were is long-term plan able performance. for on our consecutive to also I'm strategic which successfully our annual reflected that we

our our funds maintain Our in are service. low and us customers' close to We strong sound and deposit a testament ties of underwriting banking our and cost value This deposit loans and deliver this that of demand accounts. on stable on level both with to deposits. consistently ability build a needs, those focus growing to consistently allows with base virtualized while XX% lasting to to We relationship shareholders customers model. based our is

While market East for across San activity strong, the banking competition is high-quality Francisco Napa, grow the lending continues Marin, our our Bay. borrowers to Sonoma, commercial in and

to is biggest of access all talent. that challenges face the companies One

to continue people. We attract retain and great

loan for Walnut Francisco. Our including of in solid commercial banking long Along Creek, San teams office our made Rosa and Santa in opportunities production growth. have a are number Rob Napa with we personnel moves, Holden creating key in

in to future build foundation stronger is people investment helping Our even an growth. for

our and you we'll Our primary to we all the Thank results shareholders. Together, for drive to local for this and leverage deliver of growth. now, confident talent up questions. organic your answer the beyond your time I morning. it and teams to value am second to open And is will great our expertise focus of quarter

Operator

the of Please first ahead. comes Jeff Our D.A. Instructions] Rulis, from question [Operator go line Davidson.

Jeff Rulis

Wanted of the you know of seasonality the could the what question Clearly, non-recurring, LPO into we of if bit just Maybe to detail. I you also the a kind some almost quarter, coming kind if little but occurred in Tani. the get items don't about on expenses those got talk consider on. some for occurring. - is

sort maybe fall where Just and would in expenses of but off? see you would specifics, not to exactly expect what what settle recur that,

Tani Girton

Yes.

is in of terms the real until second not estate additional employees. on coming quarter the space expense actually LPO the and in the So

in the manager of that we and had hired course, QX. that's Of already embedded office

to we that most So and related not QX expenses of benefit salary is non-recurring. talked the about

any that the expenses plus so new any that million between expenses newly first XXX(k) not you'll quarter, - the retirement the is for the expensed Non-recurring end item plus stock-based payroll first last the when big the the period, around due all the that - have on estimated you when their of and expensed matching, - we of that as the And $X think - every said, new eligible happened And typically become pay on to adjustment. month one-time expensed employees. processing of employees retirement get million, in I gone that, quarter. And quarter our the were - up month. eligible, previously few have of be employees cycle been bulk - year several years, hours. had that grants I as $X.X about what over - grants, in are compensation we goes would is those our and when grants paid. at So result for are options, last for not prior days somewhere bonuses of whatever, employees $XXX,XXX to we the non-exempt XXth eligible our employees, immediately. the up pay had time get $XXX,XXX a there When existing our see first and that granted on pay time which, depending and And retirement that

that. allowed Now, we're to not by law do

- pay on So employees logged few processing we we a been of pay that payroll card, period. hours shorted the have actual days it on time would if if because

up that $XXX,XXX and Bank the what chose cost for the non-exempt difference employees make that was to So was. that

for look the successful, infrastructure are also first continue ready in bonuses to people that's to are never folks say year because to more first their as that, we up. and when revenue going As getting those would be long stopped expenses that. we as the producing - that tend and of we're successful half I go a lot of we recruiting to doing in our we're quarter long move. employees as or in see invest the doing and And we

to add want you does So do something? that Russ, cover?

Russ Colombo

that minimum something to and going retirement XX we benefits, - last year. years retirement become instituted if was add service And Just of that exceed one with you thing a was on was of age service. eligible of - years XX the it

they're a certain of have So invested, decide it's anybody retire, criteria. not going then just you a sudden who to all have to

was it the mind. the applies some a not always didn't want we to thing ran get which then So in do decide be employees, made and to to would we have situation, unvested where decision. time, they'd forced to of make make that we that retirement, Board is have to it, my criteria important will that all to into we make equity it appropriate a which decided the subject the people And we

unfortunately have So those those year couple for that retire have why options as eligible the and to have it standpoint restricted retirement that have that you year, stock up earnings, popped years. stock. each who new last of for you a of you are and from but employees don't extend will each year, the you employees or one-time That's

Jeff Rulis

there's too early and bigger you current see touch in the And on bringing update just the Any deal picture. you the lot on on see talking seen Russ, guys if and didn't your Rabo-Mechanics credit you're folks any or like - thoughts Obviously, customers to could and of personnel. you ability another potential one maybe to market. seem attract maybe additional of a platform. their opportunity the to of just with the the we've Russ to just about landscape a maybe if Competitive what Maybe talent? landscape

Russ Colombo

people for case and that you which time mergers, it community when we've much bank, creates acquire being because Marin still we compete. our people competing or otherwise. of are of community people in reason for people for acquired it very are by San often to banks, And opportunity competitive talent. larger for every about people because bank bankers, that we're working only banks the competing think some is opportunity tough. much said, for work a acquired. we're very, not that or market, but certainly for market Bay, by us creates competitive with employees it's a We're the banks just And that's a and larger Sonoma East talking of was the typically I for That a very when have in for and it's all technologies Francisco,

don't So acquiring it's but There opportunities you community think that certain banks I to present see themselves it banks. are going do change, does. much when larger

on So when people focus and certainly that that those we're on happens.

Operator

of Please from line KBW. Jackie Bohlen, ahead. Our comes next question the go

Jackie Bohlen

mentioned, first you yet consider you would anticipate about expect you potential other roughly a the normal background, year. expenses I in each those for taxes that But XXX(k) addition and just XQ all eligibility eligible quarter was that and wind XQ helpful what what you the down? during in had with very decrease occur the seasonality one to on And wanted and you in everything. again. as to we think touching payroll that, How of to [indiscernible] knowing Tani in retirement that touch do on might thank expenses

Tani Girton

the terms that is good taxes hit XXX(k). about payroll of matching, tapers course $XXX,XXX. then of down the as of the differential QX as difference The So year kind that their But not of was significant of the nearly and is QX I is, in over what cap and people sort as because the a company think between off. tapers that XXX(k) indicator

Jackie Bohlen

Is second So then just expenses go and we of compensation rest Outside as see there'll down and you new hires the taper the potential quarter, the new some in of the with maybe from even be could of fair? the line some that understanding year. XQ that through LPO trend added any hires? the slightly in

Tani Girton

Yes.

over I the the that $XXX,XXX, that be year. would when I said think course of

So December probably by got to that. of down something XXXX, time would the you be to it similar

Russ Colombo

expense on line off XXX(k) the at of if the portion maxes look is you is many big on a quarter employees. taken But XXX(k) because first bonuses, out

show rest employees, there, some so it have do retirement once go the of year after up and which decline is you it's give to equity a when these So year to going a but we - because compensation, is the that's from continues stock-based benefits quarter, for get. not we first

probably you'll So see both I big because the those numbers are pretty of on those think impacts first quarter.

Jackie Bohlen

provide know just in to quarter, And an stand, then provide the when you that last were that update if - dual I on just down you on so think later be might I a was and were plan spoke you running you'd update down year. that there we Can an that? where systems single

Tani Girton

Yes.

So parallel right in and QX now, we are FIS. with

parallel parallel, from are a However, the expenses we yet. processing as expenses in the jump expected not the QX in that

to digital more that's that, to the after time the that the processing that likely come will the see quarter cut expect system but then the platform, second off of it's will a reduction - to quarters turn will systems. and running not we and on period in right when both on we're in And in over we we there next now, couple So the cost. jump new parallel a reflect FIS expense

Jackie Bohlen

estimations run preliminary cost of any what to And have systems do in those parallel? you would it

Tani Girton

was expense $XX,XXX in on the have that time. figured it to we same think at I we roughly both when incremental $XX,XXX

Jackie Bohlen

that is monthly? or And quarterly

Tani Girton

Jackie. back to let - quarterly, think on I that that, me you but was get

Operator

ahead. O'Brien, Please Our the and comes go Tim from next question Partners. O'Neill of Sandler line

Tim O'Brien

that When to us monthly? could we it send it, versus just have all, so quarterly you send that the info, Jackie you

Tani Girton

Yes.

Tim O'Brien

another is we assets follow income that perhaps this that, the this the does line it generated higher accounting could And just adjustments, quarter run accounting? mark that see through increased negative then of $XX,XXX BOLI line out income that you and that BOLI on And went signify forward? item, behind - that color quarter net the going is that could into in

Tani Girton

Yes.

than So put a These policies. life on put usually we time policies, universal normally the where put this are structure policies on. that different on we of were we whole

with between time, administrative So policies we across the expenses differences the this is one on of upfront life that rather taken those the that just spread policy. key the of kinds put than ones the of and two are -

So what out expenses actually income, should that big these means then income expenses that because - upfront the life policies, income additional over more produce over of but we're over only not is new that time. expense we'll not time, have chunk netting they policies, the of we also a have of because and

of amount $X.X - about underwriting was million the then and total the that $XXX,XXX. was So with added were and associated policies the so expense

you up without we have been that that of So take can out the over see what new income because would those BOLI expenses you'll expect and policies. $XXX,XXX, go to time

Tim O'Brien

And assets somewhere, in know you just of base have I it's handy, at related happen number K the that but...? to the year-end, probably BOLI do

Tani Girton

me come to this minute. number question just a that Let pull and back I'll in

Tim O'Brien

I'm to resulted you, basis, what quarter. sequential a that What color On in last actually do income, other on was quarter, down two at any on a that from? $XXX,XXX have $XXX,XXX difference the you throw - going this one quarter quarter just another though. bit

Tani Girton

Yes.

deposit And those we of lower networks have So selling when just and quarter-over-quarter. we them for excess we fee of level a deposits, had income we kinds sell to earn sales those.

Tim O'Brien

did what the on be April second kicks coming the have they're or that's it add? you rent monthly LPO, do also, at something that? to to the here what on that sounds in staff - you from going quarter. in And regarding - quarterly the then the of how know or Xst, like start rent And happen many here And then

Russ Colombo

for to to is able - nothing it's on other you market need third. one think Frankly, person that one get trying Creek space remember far, two back working but tried another The get, that A we've don't I will yet. Walnut to hired Hout what is that. still Wim-Kees Class one, X,XXX about we've we we're van square we feet. on reported We're to rental foot people but We've the space and a in I Tim. got per been but though, thus

three fourth we'll we'll have a a too. adding and people maybe So be potentially

Tim O'Brien

you is these can question last Rob is with lead Francisco it we but for And love the San about team. it's joined have at his chance - And join? payroll a not additional all. to for...? he you do then Holden be just Russ, Marin so that's chat a stuff to briefly, Bank is of time associated April to offline minute X, the when I'd to later, space an And going When the did sensitive

Russ Colombo

in In calling are addition forgot BDO have we Right. the about, there, working that in Walnut Creek, commission and be basis is to a hired a we market. there business development officer two a actually have I that who's we'll that on

we'll engagement So because four call RM, have manager. we portfolio manager an the have and we then ultimately, have what we'll

ultimately, with foot So whole location that X,XXX Creek. commission Walnut be in one based staff square it people, - will four in and

Tim O'Brien

helpful. all It's on a you the color the quarter this guys really lot, provided Thanks appreciate P&L.

Operator

Jaffray. Next question Clark, comes Piper line Please Matthew go ahead. from the of

Matthew Clark

from just done. the pricing, one has on First given me curve loan what

have new what are I what rates get to I'm to I'm kind speak guess run the to for like you And spreads sense incremental to it and some business. get trying new If is, on on production. a you the just room in still can margin looks at trying of

RussColombo

a for we cost, know We same over are little spread pretty numbers targets kind spread but are the bit. similar, of the that look up the

about our portfolio. versus basis at I think versus it's - and quarter-over-quarter - were is were yields was XX looking actual which points loan new production old, I that the the

same, that's we've and yield. to big to head very, continues pretty don't starting said, we're to same see I That I the the think had the much it we're even in improvement a of going little think necessarily bit So where out, a farther it's fully committed trend, to very historically. - that that in be competitive target being

Matthew Clark

I'm consistent suggest is some Fed With do And going Can pricing. - upward then sorry the on just pace increase to for see does quarter. hold, start we're of deposit that pressure to pricing the on that pressure maybe or The from there? just stabilize things last continue to some you might you here period. to fairly think speak

Russ Colombo

to is mean, deposit over but that's base, our out I can don't been we right less they’re are but stabilized I little Fed Our being These pricing stabilize. some on in think we're the it there, where cost But of probably to sure of deposit of and that to go extent. we make I from going has than very have the why treated and to side proactive big pretty opinion. money over bit that selective proactive, this to think going activity depositors year lack we're sure where or - market are properly out like think through certainly proper the we make and pressure, moving and I consistent our to with that's because don't pricing to about obviously know my And risk year. We've appropriately, certain a a the I think - so change, depositors I up now action action elsewhere. returns. we're Fed now. getting we that the being big been of that going I - a seems but the don't bit the end keep we're

Matthew Clark

then and of the how can is pipeline that to speak tenant common late there you in trending pressure portfolio And and too? competitive business,

Russ Colombo

team there's this before think more historically. paid said think only I of interesting had calls, drop rates to out competitors the real is know more We in and exceptionally good market performed and it's we way. residential but gotten we've XX for San the portfolio TICs we I continues the think so done - don't that that we've we strong in get agreed. we've volume so want well. got experience, rewritten as market and of had It we've Francisco over well. other I had is quarter feel like I which and one that has the and The of years a very we tight some and I've exact The exceptionally if good been the number and done it's volume, year, of fall couple a volume

So solid that's line us. very for a business

Matthew Clark

And rate that on and rate. XX, of to hovering right then just the Tani, the tax going kind forward? use around is

Tani Girton

I smaller an Yes, is the think and up. probably differences. rate come so will of so. then go headed increase fluctuates that tax reflects the rate of income does But We Obviously general, up, where the had does changes a because back. permanent of the become little in in bit significantly go indicative tax BOLI expense, lower it and as differences the the the permanent percentage effective we're

RussColombo

over million Matthew, in little of we add year there's Last that over number TICs. $X - one is thing on over the first $X first volume had quarter quarter was I'll in space the that million.

So get to out - quality perfect. pretty said, we again - and market I it's been credit as good darn volume of has had been that continue

Operator

appear the line. phone no [Operator have on questions Instructions] further We to

Tani Girton

was one life the Tim, to million. I on will I the bank-owned said XXXX, more, render That insurance. could to If I $XX at get you just add back in cash

year. last the that'll that's but up So new of purchases, was where end the go sitting for it at

Russ Colombo

morning talking next want forward no again to us look all we other you you to and for thank I quarter. question, Thank joining If to you. there's this

Tani Girton

Thank you.

Bank of Marin Bancorp (BMRC) 22 Apr 192019 Q1 Earnings call transcript