BMRC - Earnings call transcript Q2 2020

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Operator

Good morning and thank you for joining the Bank of Marin Bancorp’s Earnings Call for the Second Quarter Ended June 30, 2020. I am Andrea Henderson, Director of Marketing for Bank of Marin.

During the presentation all participants will be in a listen-only mode. [Operator Instructions] This conference call is being recorded on July 20, 2020.

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

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

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

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

Following to our be Chief available Tim Colombo. Russ turn now, Tani will Credit your answer along to question. And prepared with remarks, Russ, to I’d Reizman over Officer, call Beth like and the

Russ Colombo

to and I and Andrea. everyone hope morning healthy Thank you, safe. Good the call. welcome remains

loans needs, health program local the small bank responded public loans, including aid XXXX economic over Marin life, well the recovery. over As and of all PPP PPP. uncertainty, situation. the our our commitments, will phase helping gap have we swiftly many in of the bridging very $XXX us fundamentals At which our and banking, the businesses of find customers community actively discipline assist XX,XXX funded interception to ourselves of to COVID-XX impacting the much fluid persists the in the to a we guiding customer participating our the pandemic. principles. weathering These In employees. continues through outset positions in so in crisis, Relationship to Since of customers million execute on daily nearly responding in Bank

requests. a for modification program borrowers implemented with hardship also loan XXX-day We

XXX bank million. As had exceeding loan July $XXX of the modifications XX, approved

be continue As that will – our loan detail customers August, problem about moves towards have modification we moves and to next forward quarter. able provide discussions in active to with more maturity [ph]

are customers. helping open our and to banking continue our to protocols. And from our across enhanced our of teams our many safety work dedicated Although with branches home, employees are markets

Now, I’ll quarter the results. to second turn

sound performance Our through reflects community changing a stable proven and to a bank manage market financially quality conditions. with

very are disciplined capitalized guarantees. as portfolio ratios well standards loan-to-value conservative by is underwriting personal as supported and well and loan We our

we our portfolio affected is which to breakdown As to the bigger less exposure bank. reported call. us the quarter, more later We’ll vulnerability a last loan with give most the wealth, leaves in relative detailed

quarter. up of Here and share diluted are million, We loans. about the were with driven some per key of by with $X.X highlights earnings billion solid XX%, loans PPP income Total $X.XX. from $X.X growth commercial net generated of industrial

we We growth from that see because loans of at continued quarter. second will the conceded program PPP close not lending the

Our They opportunities also are our Commercial new and working meet markets. needs. identifying credit bankers are evolving their to customers understand across

the help efforts proceeds in rates. million deposits. higher to banking banking points rate in relationship the as a these our environment driven The a grow quarter to loan bearing our deposits over average increased second Non-interest of the deposits nine quarter, represented PPP to by expect second of decreased savings cost basis total time. in system billion, combination We of portfolio Total a throughout will increased liquidity and $XXX $X.X of deposits reflecting XX% result low model.

reported Our requirements at regulatory XX.X% risk the XX. well was and total capital above based XX, June at ratio March we XX.X%

and this as COVID-XX XXXX. share program crisis in by from to increased suspended continue board very still the the program precautionary but $X.X repurchase to $XX,XXX when down to of While first total million appropriate. take loans. will and of loans loans indefinitely to pandemic. full monitor a by X.XX% or the the we're situation will relative remains impact of $XX.X time quarter to million, $X.X to materialize. our Non-accrual the quarter quarter of prior first reinstate capitalized, Classified we decreased well million, The are directors response the Management

philosophy is asset in Our history immune lending confident bank of long But the not and quality. to we significant economic strong conservative our pressures. are

Board XX, our payable to per July of quarterly record Directors declared the at represents due XXXX. of $X.XX continued shareholders on XX, of Bancorp. Finally, profitability, close a dividend August XXXX The Marin XXst Bank the business of the by XXXX. XX, on dividend cash consecutive paid dividend to July This share is of on

experience Tim Tim our these challenging ever. I and role up more to overall am recognize and years most region. XX. pleased prepared Now, on Executive leadership modification COO. of change and to team. Officer Tim nearly Chief on portfolio important planning, will finance Vice of are XX In people. market and an South management expansion recently now Operating deep on model and years, business an to Commercial to and our Marin, stability, our important Tim loan XX our After strong well update was our segments. of a more corporate of our and in PPP times, banking, efforts named has a I'd provide Meyers, President, loan was as Bay customers, Bank middle consistency as in standing has to understanding and the June like business, and Banking, connection small to detail that Peninsula with than Tim programs, step the

Tim Myers

and $X to million assist, approximately Only organizations, from balance. XXXX we After forgiveness team an in that are health Among were payroll efforts received businesses over we execution their loans meeting XXX applications of PPP downturn to services that The over total representing of committed on focusing PPP matter and recovery. taking experts helping during that for processed great the to you, greater, cross a become protect customer’s the of is were customers to to of Notably, than deal on successfully or and teams loans, say needed receiving small time A PPP of SBA for employees. the June devoted our smaller Thank local a or loans almost the $XXX less, on million, that Marin non-profit more launching markets XXXX of hundreds approval to less. customers helping the were stopped funded XX% loans totaling to weather proud testament to our businesses human We ranging time, to XX% bank's functional the million. help were grow Bank to we $XXX,XXX the funding our for formed and XX able lender, helped or which $XXX,XXX all of were and dedication loan program subject and their energy get education focus XX, through needs. Russ. process. loans. $XX XX% our of

and program portfolio. to greatest transportation and excited the the loans, and businesses loans this The within estate. of provider retail have million, X% We We both it were through million on pleased estate. XXXX, could applications to June a hotels first million role our real to the a to $XXX by estate, with play technology the totaling and commercial related identified and key portfolio SBA of million and onset These or of total to was exposure real or contracted the exposure help bankers related are pandemic, by portfolio, on streamline see of were retail which these that at XX% industries private our educate wine industry. segments is to $XXX guidelines, these forgiveness of necessary entertainment, dental, medical including completion. XX, real the Not to the the the play In secured CPA of totaled $XXX submission borrowers motels, $XXX energy, schools firm and process we be secured loan to calculations. retail, included and impacted. and with commercial quarter PPP of most

is was on The portfolio, real $XX also by and loan-to-value average of properties portfolio, was hospitality is Our or XX% million, or the which by by is estate, $XX the by medical the estate. is of sector largest of million, of million, was majority at $XX of real mostly and XX, retail $XX at $XX of secured real is education $XX We secured wine which X% loans X% million guarantees. which million. $XX industry and these million segments dental million which million, million June were at in the Education personal $XXX commercial $XX backed which real $XX as million estate. hospitality million, are exposure PPP of secured to industry and these estate in $XX made the at

loans $XXX allowed million payment assistance; We for work were at July $XXX with we process exceeded one interest and $XXX XX. for relief need customers for temporary payment that continue deferral which million payments. also million a only to requests

impacted the Of retail timeframe, modification and million, requested fell this expected almost relief are XX%. at average of into motels $XX the largely $XX related the and loan-to-value customers loan relief. relief, loans commercial Over estate secured days real payment agreements our at million $XX real XXX-day only largest number real industries, on being a our pandemic While a XX% at total XX of of by of payment commercial span and estate loans XX% million. have estate, hotels related education

and for Within XX% properties, for retail XX% was for loan-to-value related categories, motels, the average properties. hotels education XX% largest and

we respond for to for the expansion. we impact strategic look as daily to opportunities pandemic, Even the of continue

David Francisco. that the commercial [ph] serve Marin, counties. well on and excited these it banking the San Mateo, to the Jake San soon Tani over South Peninsula establish in leader Mateo that, prospects San commercial This quarter, Bank During eight for regions of markets. our insight joining of With a additional of location to is office banking experienced I we our results. occupy hired and Area on as Bay nine an are and seasoned about banker very Bay financial South Subsequent secured Jake turn we Area. hired a will Jake highly And second an the in will positions Bay we Nguyen to office focusing in regarded Myers of to

Tani Girton

And Tim. morning, you, good Thank everyone.

Diluted Russ $X.XX of compared to million share year $X.XX the $X.X quarter of the and we compared income As in $XX.X $XX.X quarter, the second interest per in quarter to the $X.XX prior ago. noted, second year. totaled million million Net quarter quarter, net second in XXXX. a earnings and the million generated $XX.X in last prior in of income

year equivalent and XXXX. in fees net in compares basis to XXXX. the loans. impacted interest Second negatively X.XX% net tax net quarter, included year-to-date was same in the to X.XX%, second interest X.XX% margin XXXX. compared interest XXXX, from months the quarter in tax second X.XX% points quarter, last in and of margin. fees second year-to-date margin income quarter the net loans mostly PPP on PPP in income of three the The first net Declines which full low The margin by interest quarter, from yields impact and X.X% put interest was and quarter for to quarter, margins Interest interest the of prior quarter XXXX were in the first that on same six of $X.X equivalent interest the the period a in on million of asset and rates downward versus weighed attributed the our pressure

postponed the CARES Act. you the expected loss As with adoption in CECL credit release or accordance current of previously know, we in the standard accounting the accounting provision

the CECL $XXX,XXX million provision portfolio incurred a We be bank's loan commitments We for deferred first and charges and the at adopt significant the qualitative losses, origination ratio security quarter to of $X.X in XX% and to of December on on service model, PPP recorded prior the loans off-balance reflects to made $X.X increase loan represented unemployment primarily due quarter provision quarter. ends and for Under first. prior efficiency in losses addition impacts when that fees sales COVID-XX. COVID-XX lower to second the the primarily significant decreased in in rate. existing the from million income we in or quarter in will loss with in versus adjustments costs comes whichever factors associated quarter, loan of the million the continued second XX. to of sheet Non-interest $X.X pandemic, national only related XX emergency of loans. the The million for X.XX% Non-accrual the XXXX, second account control, June the $XXX,XXX to respectively in $XXX,XXX quarter $X prepared expense the gains

our conversion. year prior first our prior to data processing down non-interest delivered expenses, expenses platform a believe from into would expenses Marin’s XXXX. some of second COVID-XX of And of you. The But of and underwriting to from strong quarter industries assets are on the meaningful. Bank share move due pandemic, is reduce associated us the the the now impacted The X.XX% quarter as quarter and quarter in position seasonal we on with due of the second closing bank second impact performance well to most with return quarter equity and of we like to half exposure comments on digital XXXX. limited X.XX% Second by Russ return

Russ Colombo

Tani. you, Thank

the address high cost with We both by the enter created position, half low deposit to of quality base. impact and will the unique portfolio, and continue pandemic. the second capital a strong loan XXXX We challenges

questions. And supporting a have We in from our strong for will growth. morning. you by now we economic downturn, emerge we your will and times. it both for history this XX-year your am together, up Thank poised continuing open confident and difficult all of customers I prosperous communities to this to work that time and

Operator

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

Your line is open.

Jeff Rulis

Good Thanks. morning.

Russ Colombo

Jeff. morning, Good

Jeff Rulis

on response fronts couple in had. that Interested the you've a

also some ebb first you you’d of mentioned, just do forward? anticipate forward, case-by-case going margin? fees. that margin stop -- might affect I one, floors that maybe that going lowering the interest to You some sort And lowering take how on rate impact guess But you largely, is waiving the on of the some a basis. still then floors, or that

Russ Colombo

and on ask both go talk Jeff, going is the directly clients, dealing to why don’t Tim, his Girton I'm answer Tani financial. to Tim about Tani you day-to-day ahead. Meyers Tim impact with the to talk But can and that.

Tim Myers

thank Russ. Yes, Jeff. you Hi,

are by we by you case case. Thank are case We those Yes, outside. reviewing

these of credit annual an lines are mostly renewals of our with forward, lot on a and Going basis.

going they were one to done, those naturally times are they when two years for from get us So adjusted where were or ago.

not of Tani? that, So impact we'll I quantified but some have continue to see that.

Tani Girton

we is said basis, it on forward haven't Yes, a as quantified on case-by-case Tim basis. because a go

it decrease margin, occurred And the the community. don't obviously, the March, the that have now. sort in I but on terms that can out provide of after embedded current point segment call of that to XXX I in In it's basis and number a analyst right

Jeff Rulis

I a front lines? fees those growth on or to in the is upfront and the front of I of And going service maybe assume and you forward, on some in this fee a charges, it lot Okay, income might guess the was on then of the, some safe related thanks. waving the end the, see and that resumption at

Russ Colombo

that our nobody we're now. But new time to try our that's, we some going Yes, a, clients to resume this waiting -- Hey make get is. knows the to to be kind see normal that. normal we’ll in once live when at of activities, what when we needs closer challenge Jeff, the time But that difficult time. that to a this going is help businesses Russ. as doing the then customer’s changes point, we're to to and lives, we're for through can trying we of it we're And is have on can to course sensitive mean really doesn't it being, and in forever. going normal back But get they're everybody's or right their Obviously, go now. to and

Jeff Rulis

just And one the that to on, could Sure. interested you of seeing reduced sentiment that activity for maybe borrowers, commentary or that some I light behavior have one, line some Tim, on utilization, what those of kind led in you're -- you're on that last just path some that I'm saying? have any the shed the

Russ Colombo

PPP last down PPP cases were credit. we that during quarter, proceeds sweeps think, on where lines for it's loans credit we of I paid a some things. Yes, -- of In had combination Jeff this people

credit speaking, But cash at [Indiscernible] overall, loans cases financing. of usage. to sell down not those reducing use key they just credit. and proceeds out some is a growing we're lines loans that typically we're of are generally of people other not last generally [ph] the of would, which We to seeing their the quarter They're increase cash and over on normally application borrowers They outstanding. seeing trend, a pay least people usage in driver great rate at

Tim Myers

When then one kind their add as what down, settled of it will actually thing to was were not lines, knowing drew who back. paid things I they crisis began, just And some borrowers there Jeff, that. this ahead.

went, initially went utilization went down. up So then and

Jeff Rulis

Right.

well, Okay, you. thank

Tim Myers

Sure.

Operator

you. Thank

of Our KBW. next with question open. is Please is from the Bohlen go Jackie line your ahead, line

Jackie Bohlen

Hi, good morning, everyone.

Russ Colombo

Good morning, Jackie.

Jackie Bohlen

things I, you're number question. Obviously, Number you play deposit and size. realized couple I'm of of and a on And that? to things. two, this on funding to different balance the lot expect expectations PPP how a challenging But so of curious related around modeling one, loans? wondering, I'm sheet is just here. your the thoughts at how pay-off flow there's a

Russ Colombo

will, be big give I modeling the answer question Tani. it mostly of Take of I'll Maybe we over, we, on to. I'll forgiven, to a ask which expect of the that. Tani, portion frankly the Tani all it PPP, to but it

Tani Girton

that’s right of forgiveness on put goal we're the our effort end to forgiven. toward what that's XXXX, loans making now, that the that's by and modeling all gets those XXX% Well because of and our wrestler PPP is exactly, on right going our sure expectation,

that there missed? there So was another question I

Jackie Bohlen

your deposit And how were flows?

Tani Girton

Yes.

starting out going significant have the with PPP had expected deposit we inflows a we but flows we the, than associated deposit to So, borrowers, loan did pick slower it are is up when sort those order forgiveness. bit with to funds consistent little flows go forgiveness expect the get again, be as to to of the utilized and timing, those in out now we be we originally expect

Jackie Bohlen

tied not to schedule? might in the terms around what are you excess that different to would a the Or liquidity? flows there PPP quarter? excess there on you Is liquidity of stick saw Okay. And be in consider that

Tani Girton

that'll I'm Obviously, excess we the saw day separate -- fair from liquidity PPP. we some stick outflows long saw sure tax how not around. I'm a with associated is not Yes, recently. sure. there

but and, to So that as banking was overall associated be seems up with well. in increased there adding some and cash is our build the there position that, system liquidity to

Jackie Bohlen

Okay.

Okay. back. Thank and step you. And more just for I’ll then me one

on you on, term terms to your of that? is that, office be So then for? San And kind you'll that opening we longer will be in of the what some expenses on if could place Mateo expectations with take background hiring the lookout the with be going what in know, any associated provide should growth that you just, just

Russ Colombo

Jackie, Sure, that office. responsible for Tim is that Myers the person was

ask you. that I'm So answer question to to for Tim going

Tim Myers

Jackie. Hi,

mentioned I points, we manager a one As will in environment, having we're hire commercial little my signed lease talking thus that far say here. in did I the regional a going banking play and this bit by officer. to just

I while initially what we think we this of forecasting, that expectation way were review by environment. to growth in we're have

not commercial regions objections, but standpoint that. management cash team saying I'm least will But able would I that's time management term over long other a banking or we growth our a So from cash with to objectives. strong from very that support probably a one two officers do comfortable have expect other

I way by deal of Tani's has more already expenses thus beyond what And don't far. so a great expect for, accounted

Jackie Bohlen

Okay.

Russ Colombo

And one just Jackie, add I thing.

really, You position San maybe Area, a the puts with in us know, have Jose Clara offices Santa we almost exception commercial market possible every San of and/or banking the in in Valley. opening Mateo really where Bay

of banking offices Peninsula, in whole be entire is addition intention but to on is Bay the establish Area. For rest be and the established serve Mateo focusing the our step. the to to time that San will the This get, being, will

Jackie Bohlen

this for in while and and renewed it it, I is a you so area regional Is board this is able the the that geographically were renewed a is Or say, you, been in it? new it to were did this a clicked for just, to able in know is focus of And on bring focus the you the them Okay. manager had see reflection works finally person plans through? all area?

Russ Colombo

plans on is really -- to works the open office right Peninsula. people. those And, Well, opening offices, we an key the finding office had to the an to key the in

for were And office, so Jake find a other in that we and location person San and, Mateo. identify one able to

went ahead open we it, given. obviously, and is most this the we, be so time with to And offices opportune

opportunities Given the a was this and the opportunity the we pandemic, had about great very thought it was was we we thought available the excited for hire, for us we're however, and it one. and and person

Jackie Bohlen

Okay, great. Thanks color. for you. the added Thank

Russ Colombo

you. Thank

Operator

Please is Sandler. from line question with Piper ahead. the Matthew next of Our Clark go

Your is open. line

Matthew Clark

morning. Good Hi.

Russ Colombo

Good morning.

Tani Girton

Good morning.

Matthew Clark

first on Maybe deferrals. the

of go through As customers and with them. talking with the you kind process your

of that normal sense, have your come to guesstimate order of payments? might Do what's much Just any next you or month? return magnitude? How

Russ Colombo

also they get and a Tim. banking stab upon officers to I'll depending It's of -- have board, where kick a try initially, then over Well, the customers And it I'll and reaching its of to our out over sense to commercial the take industry. other been kind all are.

industries doing expected. better Some are than

still struggling. Some are

would So, judge -- to It's I could end would payment we expect the some add would -- that Tim, have that point. have back this schedules. don't that go hard or But that. would normal to from continue some have We interest-only the we to deferrals at deferrals. go probably end -- to

Tim Myers

No.

I back a little going right. restrictions bit. I This unknown to big the of that's that is exactly a think, of cloud terms think openings, Russ, in rolling new or is

for needs and I to adapt. will are our of with finding ask we what some their speaking these continue out certainly need constantly to how customers, are We that deferrals. expect

the be to borrowers of for that referrals on away. early that impacted almost some very resumed not were However, right asked expected payments and

a And them. that. way of determinations. going quantification in those into still the customers going figure loans to or murky to But little making We out kind forward. play significant these bit of do lot of continue And in sponsorship as have come and so, that's we to been have, will best to it's think behind make outlook our I on the any talk terms forecasts mentioned,

Matthew Clark

was all a forgiven of that accruals the $X.X over of on net the to by they your been so knowing year? far the gets guess, Or income, forgiveness going you're were that from just revenue what's PPP, actually you I assuming on process interest SBA? -- SBA? with time, Okay. million I the And end PPP that then that of mean, experience got the period actually you're -- short that that the

Russ Colombo

I Tani question. accounting that, its answer to because think kind of may ask I an

go Tani ahead. Let's

Tani Girton

Yes.

the SBA contractual now, already from the months received amortizing the of on the hasn't loans. right PPP over are fee loans, XX income been So life we that the actually

As loans into then the forgiven, interest those are income. accelerate we will fees

you if are come in into that So assume those those this we of will forgiven end by successful XXX% fees of all getting year, the loans income.

Matthew Clark

Okay. And then, when I estimate higher of updated know all over done? XX% which of weighted them origination with said What's are comes your the rate. average less it's than a $XXX,XXX, origination fee and

Russ Colombo

Tani?

Tani Girton

Yes.

I think X.X% it's somewhere between X%. and

Matthew Clark

Okay. half feel line? of move hit the assuming the like some lot second in bottom might of into reserves? share mean, I flexibility you what's -- one you able And that the fees of PPP the that lot to get your a the year. a lion your hit that then being of of Or do might

Russ Colombo

thing to opportunities be evaluating we're for. communities, to that's some potentially what within that with help there's -- going coming our one without still Certainly income. Actually to use are reserves of people

but We the put the total how we best we're use. exactly those with possible internally haven't board and the use, them in to funds on utilize determined conversations

Matthew Clark

thoughts run you expenses on for in by on looks the It upcoming FAS your the And about overall we PPP that expense should non-interest Okay. going normalize then, quarter. XX assume But what forward? guys like benefited $X.XX. are rate side

Russ Colombo

Tani?

Tani Girton

was deferred. quarter. going this costs think origination see $XXX,XXX included Those were yes, forward, I So you that

repeat. won't that So

of I'd that, than the that expenses pretty though in other future. we're say going the where indicative are So

Matthew Clark

it then, being in cultural been just And find around. of the great see pandemic? midst the you're was much How was that the able sticking fit? to talent great. Okay, to or that Russ, related not right the to Or solely of related

Russ Colombo

very horses of keep consistency stability, general I only and We and just this we for throughout middle am The -- want we I'm sure I make We know the And to in middle to customers, the midst -- that through how to important of consistency, I question to don't for rapids But its the going this time. continuity now. are of not right and the bank, long last. a And and changing -- be will We pandemic. for in challenging to when? retire. is its stream, time the I don't guess it the for our population. the liking think we seem in maintain

time to good do a be probably that. it's So

Matthew Clark

Okay. Thank you.

Russ Colombo

Okay.

You're welcome.

Operator

you. Thank

next of Coffey the with is go Tim from Janney. line Please ahead. Our question

Your open. line is

Tim Coffey

morning Good everybody. you. Thank

Russ Colombo

Tim. morning, Good

Tim Coffey

Russ, if we industries at-risk loans look Has those in the the quarter? or at the balances COVID. impacted loans last to the of by changed

Russ Colombo

No.

for have Reizman Beth, Credit to Beth I really color you We on ask going have changes our believe of way I'm who to line as those Officer. is that. a don't Chief Beth of in the there's But more answer been Tim? much do categories.

Beth Reizman

at those categories. Yes. This all meaningful Beth have is it of there Reizman. No. not any been changes aware that I'm in

Tim Coffey

there? bucket, what are was that types what of And in hospitality industries -- Okay. in

Beth Reizman

We have some hotels, that nature. of things some restaurants,

Tim Coffey

Okay.

Russ Colombo

we estate would restaurants, guaranteed. have commercial we if I I liquidity. Tim, in they're may we only Not But have that say, they mean, any real have Typically restaurants, with guarantors restaurants finance.

That's our loans to just of lot not a have restaurants. We'd its to. So, the exposure doing not we industry directly lot of an practice.

Beth Reizman

health believe And Correct. I our clubs.

well. We as that have a those couple of industry in

Tim Coffey

Okay. deposits then, Tani, have And tax you that the since do of amount were quarter payments end?

Tani Girton

No, up specific outflows, have day, to build just I some then don't specifically. but We numbers. tax saw and typical not leading

Tim Coffey

of answered. The questions you. Thank my Okay. rest have been

Russ Colombo

Tim. Thank you,

Operator

And our with Raymond James. ahead. line Feaster go you. is David next from Please Thank of the question

open. is line Your

David Feaster

everybody. morning Good

Russ Colombo

morning, Good David.

David Feaster

And strategy is mean, identified to more the reduction. maybe keep behavior? work opportunities in I conversely, with the expense term of maybe more customer that that's wanted up like And mean, for up customer rationalization or office a anything that invest or given need further longer questions. maybe evolving changed open back I maybe additional you've I maybe space employees you remotely. to and there behaviors evolving anything ask to that just strategy? How does

Russ Colombo

a excellent that's David, question.

a We strategy to whether to And lot. strategy a meet a talked where who together have a process, about have benefits many are we we planning thought about we employees that our there's and remote. determine implement we and And that. putting initiative can strategic in recently

and had our employees historically because have we to frankly, have culture, come together, we've of never Now, our staff its working our like site. And employees together. on part monthly remote all where our employees we meeting

building. really we part together. that work of it's relationship So And

However, there's advantage this. what of from think learned take I we've opportunities, to

XXX We employees, normal think, I percentage somewhere at the slightly a know I our XXX either home from or or don't have remotely big of working their location. over in range,

I office. rather the in use -- at the care. one frankly, where to we home. this. risk the could Nevada for don't And want way, could If when necessarily our So be extend to don't branches. of technology in all they It's bank. in, lot is as culture be we they strategy that But one have you an It from Reno, this They're risk us their a that flexibility be organization. our the The employed. at by gives f if have future of home. doing of be the work companies certainly I'm don't actually. employees working headquarters past in to care we're to can if or I'd maybe that it attract from you you particularly for

at But these really control, And much something we advantage about the with careful big be into our something. employees you and forced we have about that the the I give expense can strong as you're And you of don't how culture the balance in to organization. your that. they like it's what's us both work - that's are employees, the standpoint a taking of you of question. situation, have things about to hopefully they look a attracting we from organization. this, we've And right, But So work. think and space. that When need because When learn hopefully which different hopefully, office are future, competitors. in advantage this they're do maybe some taking great the will way over we about our learned things, an

David Feaster

for organic actually new demand thoughts PPP Yes. And in the the going weighing seeing new you just paydowns we declines box growth. exciting sure. times, for then has just on get Obviously, you about credit? stronger growth talked are where on and guess, originations, net do your And, I want quarters. But forward? maybe and It's of credit organic payoffs first to the originations? think the I we're seeing grow? where second exclusive utilization loan your tightened goes and the for that loan quarter

Russ Colombo

comment to that. consistent we we underwrite pretty over we about a as about mentioned industries we new pre-COVID. I'll We've we haven't about consistent But different Tim relationships. then underwrite, tighter. me make way and necessarily we loan kind Tim of industries different, been one as and obviously, Meyers. And at and credit - been address some how far let what manage way ask we've we our it did -- to We've kick But to look the getting metrics the going I'm thing the you than volume, the do. credit

Tim Myers

Of course. you. Thank

But attribute There there that And you think new opportunities. fairly changed. I we time To some our some volume, our at year off today, all while bankers, our of activity has about are what's our of I to-date they're As talking were as in all has to level heightened construction criteria, in far approach beyond continue think mentioned, But the COVID. same look not new the year. this if acquisition loan with it very or the environment, you're It's because we customer using changing well quarter that apply to large -- rapidly and Russ's conversations growth ever have point, today. there. by this to situation to might having to-date. pipeline a I our the that is in we But to be don't longer I criteria lenders. related where keep to last year taking borrowers. and I have the future If that opportunities encouraged good the as consumer was from going we been pipeline commercial been credit

it's our large, a to points year. at and have by think we couple going But out come portfolio. of I pleasantly this existing surprised been

substantial going on. light everyone out encourage the this penetrate Francisco. it's at in large and what point south do to to help predict will continue of to of But we to San what's almost a traction you're office Opening get market best can. reach going So, and impossible down we us

David Feaster

it. Got

Russ Colombo

underwriting and that see too. businesses, you're and the new one In the important and working thing I'd It's when David, things add see go one with part underwriting that's the difficult of understanding out your clients huge process, to with to be of process. do the manage me To how pretty they operation. and business and that. a underwriting their today actually to

we time meet that. out we back I have originally. would still somewhat going less our muted Until some volume, it's be go can to because it's a to we're actually and with clients, get can when less we visit and while hoped getting So, think than of speak

David Feaster

good Yes. point. from a really That's one Last me.

us deferral Just on follow just I the discussion. give want up -- to

deferrals, XX thus that's can you payments? to a Just initial just going thoughts if to rating on that risk -- interest-only How then re-deferral result you a any downgrade? full any versus any do provide? rates. re-deferral in XXX-day if And And far? then, are whether And much versus whether color risk downgrades go seen rating maybe you've

Russ Colombo

ask I'll over would kick to probably I jump - Reizman too. Tim then with so Beth answer will I I'll that And on color like that. -- it to some that suspect in to

capable So, too. he's with that

over kick Beth. So to it

Beth Reizman

Okay.

relief put plan and payment our to for was process. borrowers provide deferral So extensive immediate an these through the not underwriting

point was days between at of full downgrade about or program did deferral. time. in split standard our So And It two. interest-only we XXX not that XX/XX either the

they But payments for -- because majority have resume of them in deferral. just asked watching are will August. again, We most large a

Others each having And analyze do will underwrite discussions need already appropriate they estimate we and some grade one are relief. previously, the individually, some to already to. determine if were what's talking original and their fully we So further indicated payments. have reverted

Russ Colombo

did Tim, you…

Beth Reizman

anything? you want to Tim, do add

Tim Myers

Well, I answer. a think was that great

were would and these vast having as remember Beth deferral XXX percentage on to longer terms of their credit continue I structure. for meaningful what We're the said, going be XX, has in the individualized on But nature a our As impact on what's Beth the related reason and was any risk more be payment the don't of deferrals rating based business exactly. conversations. our of request. it the going And mentioned, whether, majority days adjustments, versus it's because that the program.

what would echo Beth Again, said. with that So backdrop, I sorry. I'm

Russ Colombo

ahead. Go ahead. Go

Tim Myers

to of the with initial I Would the elevated, referral would backdrop, in guess first are so. year? any next than, or that with quarter being least the there? quarter? Or and larger of you I maybe re-deferral month than expect timing to that period largest on larger thoughts the kind expect be the relatively third reserve build mean, maybe, Or the or you second expiration at of if rates quarter the re-deferral

Russ Colombo

Yes. any comments Beth, do you on that.

Beth Reizman

well we Well, in our call portfolio, -- secured. to loan loan you to color what we given are industries. depend. -- generally it's values the going very the gave in to on average low sensitive the Tim Because

We also have guarantors. very strong

anticipate workout, the some prolonged losses. losses. that for will to necessarily we we have but So not And reserve is significant account

it So, would just case. sponsorship, not my unsecured of the that's significant be had we it depends. yes, but kind -- without If loans answer

Russ Colombo

and conservative know, estate, the as the unsecured. Okay. for real rates and also we're, look advance David, numbers terms we we don't of on advance And to We're rates listening of you sponsorship. pretty on just lending a things. lot do in

as this, seem there time back, because bounce I'm the while, know, way And a suppose. be be bounce back you to everybody's there are not any anticipated we we'd negative will better, with some now. doing as but thought, that, this I summer, So, we'd bank, are -- we there at -- having by be workouts industries have

not And my so, that's and Okay, them money a to benefit of on remind working for lot could working through us It's because clients work and make, of and make their that problems this going guarantors credits. and that to in affect step the to these got solve cause it's very that these what we done more real we matter people the clients, our a is really that work obligations. going the just with best strong losing say, crisis, a have a is and on And will good that's with back them, of foreclose we so how's property job you And a and and business? collateralized it a do, with we we matter did is didn't our I were which during actually problem on financial certainly the results we problem. not of

I we we're that some go of forward. for So as think headed

and our possible about it's with the building working know, it's to You effective with find about relationships clients them have best we results.

David Feaster

Thank you. color. Correct. That's, that's helpful extremely

Russ Colombo

Sure.

Operator

further line. And the no questions there on are Thank you. phone

Russ Colombo

hope your look thank want for healthy everyone Okay, we to if And to there's questions, forward morning no out attention I and with planning to this speaking for I is listen. again. everyone other there. you

everyone. we'll better in this hopefully, hopefully, standpoint the quarter, position calling of be in Thank in. we'll the Next you for of meantime, best health the be all nation, but from the to

Bank of Marin Bancorp (BMRC) 20 Jul 202020 Q2 Earnings call transcript