BMRC - Earnings call transcript Q1 2021

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Andrea Henderson

Good morning, and thank you for joining Bank of Marin Bancorp’s Earnings Call for the First Quarter and Year Ended March 31, 2021. I am Andrea Henderson, Director of Marketing for Bank of Marin [Operator Instructions]. This conference call is being recorded on April 19, 2021.

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

Our earnings press release, along with the merger announcement press release and investor presentation, which we issued this morning can be found on our investor relations page at bankofmarin.com, where this call is also being webcast.

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

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

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

Russ Colombo

Thanks, with income generating earnings opened strong credit first quarter million quality on income regional will [Technical per Tim, exceeded I Marin After Bank. fit franchise ways. announced Andrea. Bank that tests. which the included I'd the discuss in This combination begin same disciplined share delivering results, $X.XX and is that diluted scale. and quarter quarter as Net to we together release by us press from $X.X It Marin the complementary first morning was deal and net of prior through will that this our great be fundamentals, call legendary first the institutions Good morning. of on the results Tani walk for many the and expand footing, brings quarter Bank like news share River XXXX. [addressing] to details a solid results American exciting in of exceptional Difficulty]. of two values I like service of the allowed acquiring us a ‘XX

over-reserved. model we were forecast, indicated Given the economic our improved that

to and loan $X.X losses made in losses the credit for So the allowance for reversed unfunded loans and allowance for XXX,XXX commitments. reverse the on credit during losses million unfunded loan commitments. of We credit we provisions quarter, loans on on decision

loans to previous Non-accrual X.XX% remains portfolio our loans the I the loan million. noted, classified quality totaled and quarter of or $XX.X $X.X from As strong. credit million slightly increased

to XX% SBA’s year we of prior of the a origination, quarter to of our focus to on $X.X accommodate portion XX. reflected continued and the totaling million modestly loan as ongoing [XX] We loan XXst. continue total requiring requests, at has paycheck from This a program. March portfolio While as of ago grew portfolio protection our payment declined in relationship well $XX our the loan participation new comprised as April billion growth XX assistance relief loans the from

$XX During Marine loans, in the we markets. PPP quarter, funded million new primarily and the in Napa

million deposits million and of $XXX $XXX we been request $XXX $XXX those XX% addition, million applications X,XXX totaling loan XX. and million basis the million The of program In funded deposits forgiveness is accepted bearing at average PPP the the SBA XX% by to denied. to of accelerating. submitted totaling million the $XX loans $X.X with Of just have comprising new for deposits our original deposits grew no noninterest X points. as total PPP April $XXX of with applications over billion applications cost portion forgiveness borrowers, have Total in with of forgiven

well above total XX capital XX.X% based March regulatory Our of risk at requirements. ratio was capitalized well

any sheet to rates. increases is in from benefit and stands balance Our interest strong

high market of During opportunities reduce invest debt. excess to cash cost and the quarter, we took advantage

was our the accretion earnings redemption driver would $X.X been million. in of XX.XX%. we accelerated points debenture otherwise which on the our also redeemed basis increased equivalent by tax XX discount primary This which quarter. ratio, have million March advised call, last net subordinated of XXXX, $X.X XX, As on reduced for interest resulted It efficiency a margin

dividend of dividend share paid Marin cash profitability, continued our This on the declared consecutive XX, XXXX. April our of of $X.XX Finally, Bancorp. Bank represents quarterly to per due by Board a XXth Directors

our in and customer strength resiliency more press improves economic bank serve. banking performance find for our summary, base will business on You our success the of first our detail the our quarter relationship position of the outlook markets credit strong model earnings as release. the for quality, the In we

be exceptional generates X.XXX organizations book one to XXXX increase allows XX.X% efficiency, Now two culture projected interest brought manage Northern let's commitment bank, well communities of and Bank Tangible basis largest to bank of River X% of phased and rate becomes is that on to River X.X deal. Bank common risk on by Bank In to shares These American will credit two share exchanged highly California be capital XX% attractive California. both of the based a at community will low company The running customer return. rate as With region Marin The and will one of and All similar back American directors Bank $X fully management Sacramento bank scale. the model. and two well The a and ratios, Bank across business share capitalized Area equity service Bay market loan talk as by capitalization. earnings board. accretion the which us for will period Marin Greater allow in merger, the dedication holding of on costs Marin markets. very amplified Bancorp about combined of dilution billion invite Bank across a challenges and bank regulatory and earn preeminent help scale over in on risk strategy, Marin business offset serving as a emerge positioned closing have of merger, seamless the XX% disciplined and the company integration of regional deal American of this a deposit well from well Bancorp. be is River environment above total be join years. Growing a size can the internal to be XX.X%. each to capital local including levels. our to of value share will tangible based

it over snapshot a in Now River to the let me to Greater give Bank Tim you of Sacramento American market. turn

Tim Myers

Slide overview an in you, California, in Rancho Bank. focused have on strong full maintaining Amador, gives Sonoma credit in headquartered of Placer discipline. Sacramento, business relationships X Like and Cordova, River River service American they Thank building services American XX and Founded XXXX County. Marin, Russ. providing banking is and Bank of branches

deep In in an is Their they our commercial also estate, businesses, professionals loan property complement to to own. and portfolio small real managers. addition lend manufacturers, wholesalers and to expertise excellent

year, River's X home Their activity $X like capital ratios in the and Marin, disciplined and as invested Projected is affordable strong. relocate, region. you in been the focus regional expectation the growth the management, development more workers to last population appealing In on household projects was XXXX. of the part banking California been are are billion people Bank since like new commitment credit Greater top to and region also Midtown in Northern to American throughout the term Center, some by of There as looking ranked well exceeding while offer. than Slide of gives more community driven XXXX benefits region quality to space Sacramento Sacramento Golden remote has to everything new area. in Kings Downtown the highlights. us. existing opening very providing minded Importantly, relationship for has migration a Sacramento lifestyle national and has income estimates, office economic the long ample There One by seeking accessible still newly a destination

financial Pacific of markets I greater bank such and most X detail. of with an to operations network, the Finally, financial companies is of aspects as share the now market young in combined the universities for and UC Sacramento recent University attractive educated [nearby], professionals. Tani Slide to transaction Davis, call increasingly turn over seeking the branch highlights. will region State profiles the

Tani Girton

Tim, under of will summarize of I and valued the million $X.X be Thanks, and tax phased the XX% about or American for roughly CECL deposit earnings, remainder analysts core X in indicator XXXX at that Marin Slide Savings River's transaction points. thereafter. In month a which million the $X.X market the losses Bank allowance saying of use River of Bank’s are rate period. credit allowances apply deal basis components loans consensus over X.X% on XX expected the to assessments losses expenses adjustments, believe and after a provides both six effective we the Estimated aggregate we framework. expenses amount details morning. X% of American or is and market credit for to American XXXX by good valuation for of intangible and good future value value, and we River growth of modeling on fair credit

$X.X addition, positive accumulated the rate million These loans, through amortized, in In forward. on accreted million owned we to marks on $X.X Healdsburg. a of up a other income applied depreciated and going are comprehensive mark reduction property million interest earnings and $X.X write a

Turning to X. Slide

You for pro each shares ownership for AMRB results common ratio BMRC which issued can exchange forma share see XX% the shareholders. of stock approximately fixed of X.XXX in outstanding, American of River

signing Amador multiples excellent prepared And accretion a We quarter River's at premium aligned. forward and date transaction third our stock per us including translates Greater will the established close We and of options returns earnings are to to at Russ. agreement, diligence, anticipate River are BMRC merger Assuming XXth, American April pricing in franchise $XX.XX the American also value be companies, because back of This cashed to XXXX institutions of in so to compliance. to with portfolio out X.XX closing this on loan we our XX% much due $XX.X. review wrap an core the Sacramento remarks, to Key as share only two at AMRB our combination $XXX.X call and Prior that closing, attractive internal I'll over up when year. times but tangible of over That XX% such the a book presents and the XXX% well rate consensus partnership not because value, merging now markets. X.X%. to consideration look XX build times the of represents of vested a has return very shares of million earnings this stock. deposit completed turn allow extensive

Russ Colombo

with River up are team to reiterate great and and Bank plan. bank over will scale Greater Strategic build increase has now to assets, of our have The has welcome American infrastructure today, American you, Thank our costs strategic been footprint always want for a I'd River our again It's employees and discussed diversified reasons acquire to talent, Tani. fit efficiencies part that we acquisition the clients an geography. larger us grow Bank. and for Marin. excited we Bank expand how we base. opportunity to all like a growth of of across a spread at

know, As you an Bank of experienced has acquisition. Marin

to that successfully have multiple will expertise integration draw the and integrated with banks, experience on execute American River process seamless team. a We we and

Now have in remain that new has to the established dedicated to propelled industry's we am banking a Bank I approach the our shareholder customer culture continued built one of and consistency. proud creating delivering Marin value. disciplined opportunities. We and growth exceptional XXst and franchises of service year, best of of

looking are We to ahead. now success time And questions. it Thank open year future to bright. in certainly your is up The more we this you will your forward morning. for the

Operator

[Operator Jeff Davidson. D.A. from Instructions] comes question Rulis first with Our

Jeff Rulis

couple the of questions legacy. a is margin. just on had I One the

the have impact debt, the you you exclusive a number the PPP, on do linked margin, of core do core quarter? have I appreciate also but sequential I Tani, on guess a So sub margin

Tani Girton

affected amount the significant only we was turns as So X the it because had of by margin point first out PPP quarter. some from forgiveness basis in QX

by earning the interest the the outstanding what in from assets. So PPP we with brought accelerating PPP were the some fees that line contribution getting on of other

Jeff Rulis

And I guess was but that net in material? the what check, QX. back impact I know I was go and could don't

Tani Girton

we QX we have quarter. that from was didn't PPP impacted by XX had points and the because this forgiveness that's basis

Jeff Rulis

-- slightly to it River higher margin American I and as margin. the just And guess carrying I relates deal, wanted a to

just is Just as of positive two sub impact margin, in? of with of there thought assume any of sort a bank that you do your may -- the you funding -- to that you with would contribution on on should ballpark side the And what forward, how kind kind the going as think think core of or you put where you the about debt any sells net, we together?

Tani Girton

from but but think the some to yields two is I we the Yes. hit the head you to portfolio. have tailwinds do that on debt improve AMRB hesitate redemption give drivers a I sub the the on because number, of going margin the

Russ Colombo

higher in the yields quite significantly. quite say, are enough, mirrors many actually We look portfolio ours. portfolio our a I'd at little and Interestingly cases, extensively their it than

that's as so impact going positive a And go to we have forward.

funding loan bit side, think the deposit to I the ours. than on a ratio is lower

So deposit than side And opportunity an a bit liquidity. us. of total because the a terms excess reduction maybe us, of little little their higher but than costs not higher that's tremendously, in lot bit for in a they're

So I well, it's I'd going all we improve down margins as their little positive. bit, our look to funding costs a forward, and say, bit so can a bring

Jeff Rulis

XX% the And you on speaks similarities the or number cost was my have to question saves considerable is said, -- and companies. other culturally a maybe as the you the, similar

is from hear expenses I I coming bulk out And or of? do branch guess, majority So saves. comfort expectation, of of the didn't that -- there's senior cost expect cost a come Where to the consolidation you those the management? Is that guys you a there.

Russ Colombo

Jeff, we a overlaps. do a we we in two as branch Healdsburg, Santa as have branch Well, have do we. have They do and in Rosa

savings we look those work at So of numbers and to all pretty that those about took there's very from be number. going we're because a we and about the employees two that really responsibilities and And and hard offices. people, job XX% hard confident cost

way, Let's just that confident. it very put

Jeff Rulis

be back the this will it savings So but and office again. branch then cleanup,

right, step I’ll Okay. All back.

Russ Colombo

the administrative cost going You savings. is know be to side

Operator

comes David Raymond Our with next from James. question Feaster

David Feaster

front. need as start heading the about whether of are in just growth American you're into as clients drawdowns Could start some be growth maybe year how your second off I the on we're and in talk we how getting expecting you're the any any that front? River trending just or back a there's C&I wanted going anything helpful. is whether kind of that growth run pipeline the on with conversations expecting color to quarter and to then you hopefully And commentary just would the just you in resurgence the just still half there on

Russ Colombo

to portfolio. XX% I what at runoff said, at of over look don't this saying look turn on we will that anything Like to Tim, like it saw. going we by I for I'm but we just start really their and

So we're trying not It's good any the all anticipating business perspective. out bank. drive of to our from

growth we expectations Tim go about let pipelines So with that, and talk I'll about forward. as

Tim Myers

outlook that's still seeing I optimism definitely all improvement is pipeline The an but we're the year, by reality, the weak. improving but and muted is still demand say I or think, in very would attitude for relatively the meaning we loan sense

deleveraging cash, still our amount due a attitude going to get non out And contributing good and on down quarter-over-quarter $X requests. utilization, virtually so declines the like to see just was extent we we're a factor we're people can And the fair But million calling about loan still seeing we a we're in more where on. commitments of necessary PPP that quarter. payoffs flying we to still and

conversations, So that still takes getting protractive. pipeline The is bigger. it the to while we're is do getting time more that pretty optimistic

we are together. you I when tell the optimistic. within the of to that's more can't all year So time come going But

David Feaster

could And market. then maybe accelerates there. you talk deal the growth The on just really your Sonoma

You guys expanding there yourselves. were

Just overall curious, thoughts and for market on your just you're Sonoma. plans seeing change that there

Tim Myers

that up had on getting. group side emphasis we We about they're there. into I a manager excited transitioned a we're know heavy the last new lending industry. think And They're with year wine traction well team respected. their our the on

on been a in Northern benefit can particularly with excited again, And can and Those Santa their overall, we're their at with industry we this time. wine long Sonoma in market. Sonoma Healdsburg, combination combine pretty contacts. grow folks the with very ours. market expertise optimistic support County from Rosa, there there overlap the now we're So in have to County group focus. to being then branch but with And our that how Healdsburg, We

and results lead that growth all the come we for to get road. us I -- think expect together down that to

Russ Colombo

really about County. just Sonoma seeing I in mean Dave with add, the in much CEO, really opportunities I he they're talked American seeing did a He they're River’s growth would as that And pipeline. excited he Sacramento. Ritchie, as discussions that about strong was

perspective. So good our all from that's

Sacramento not too. deal, So seen growth this only but of Sonoma out

David Feaster

agree. I Yes,

as a exciting. higher just that I income then become digits, pretty a high think larger that's bank, And level. bit of maybe in you your X%. fee I are guess, both to mid around contributions single

some sell opportunities about income fee talked income of bit on waives a thoughts lines I curious opportunities. additional cross get Just or but you fee the larger institution? fees, a bringing that contribution fee to higher any you your as are on other maybe there become income know

Russ Colombo

First or in in XXXX, April we basically all, month that we we of fee and just waived have waivers last off of -- so. started the them took back

see And during year, which overdraft penalties. withdrawal early that, so seen fees, resurgence you're CD fees, to of things a going you hadn't ATMs the like fees, last

So fees the last year. we of during one waived every those

of So in negative that our fee income, that a pretty terms improve. had impact will

that regional I and income, become of scale opportunities a other be whether it’d think just as opportunities you brings too the what maybe surge the over standpoint has there we last into wealth has and is offerings I'm Sacramento, the And management been in affordable. from from will in a the the more market market. Bay potentially has growth much being come fee expanding year bank, accelerated, have about the of that that in It's pandemic there's market, Area. excited been which our

the kind you halfway Tahoe. of For familiar between Area Lake who the it's geography, of and with those aren't necessarily Bay as

and business housing, so lower recreation growth and and is are for opportunities abundant the a up. picking for cost And at

from kinds but that you just which adults of great a be bank gives all to it's future -- moving different your opportunities. not grow income opportunities lots in of younger you're because market, think the fee the and look standpoint I it only the we place to at So of in to

about excited that. we're So

Operator

question comes [Bob from Shone] next Our Sandler. from Piper

Unidentified Analyst

Sacramento potential Maybe the the consider or kind markets but willingness you of would to if start here, -- knowing penetration could as strategy, so, there for the right is to further is M&A part kind that obviously, of integration on And to where integration company's forefront off, we that you the be of what's consider? bank's is of other the want start complete? is once M&A strategic if growth market

Russ Colombo

certainly opportunities, to be are us. or Sacramento, them, valley Once Sacramento to the going open opens it's or other to certainly, to you north grow grow the if into the bank. of to and find get you want we're slightly It there that. up whether in opportunities south market,

And additional we're to open certainly so opportunities.

Valley We be Bay quite one certainly And focused since Sacramento San exciting we've in to integrated Joaquin we're it's will there this Area. because on lots there open Valley, strictly the haven't been up us to opportunities there. in that yet. the past, themselves It's -- of are

Unidentified Analyst

And the then turning maybe to legacy bank.

we of the lower you improvement estimation the In metrics on pre towards an of pandemic forecast, percentage much reserve, given in kind go stable? levels. remain reserve get how of have credit if kind considering excluding PPP Do terms the if economic can

Russ Colombo

me Chief Officer, for that answer let Beth sitting to question So here, Credit who's Reizman, ask our you.

Beth Reizman

California on by based [CECL], We primarily the is unemployment we're rate. adopted which affected forecast,

economy we'd diminish. as that So also to the reserves assume continues would improve, our

at be I estimate, this really an appropriate would in time. think However, don't that I can't point give

Unidentified Analyst

And one from then maybe last me.

anything commitments, of of funding Looking just quarter? forward. going more good trying onetime in nature kind run get in rate to number outside reversal a there this the sense was that of a at expenses I'm for

Tani Girton

get quarter not a the people normal thing, of their vestings then a matching of Yes, significant. stock XXXX not stuff then acceleration delayed XXX(k) and of up first bonuses to the that have the bumped retirement when pandemic, first mean and of were audits associated items in but from I of few that that we payment eligibility. gets quarter also the because sort closer with And too much. the the in sort few of the seasonal because

Operator

Our Bohlen question Jackie from KBW. comes next with

Jackie Bohlen

the Russ. This the expansion, with wanted with strategy in perfect especially what's Just deal off on start sense a with going question, makes terms Area. Bay to of

of movement some found know newspapers. I there the in from Just local to people Sacramento, model written been or that's highly

half one, the all, if lot everything else? if wondering, call something growth number when it, number would operations and it strategy And pandemic? about year is you at Marin and deal just this a have of Just considered, overall think ago Bank how, before a of with had hits two, in you trends we that the and change

Russ Colombo

more to on us the we half mind, Bay that Sacramento it's a to just up started were Area from half mean, a those migration offices was became market in way, And and of on we're stated ago, we to not because the talking focus. year said, and that opportunities that It a First something what interested literally, in there certainly, consider had always front place a Sacramento. that's of most our so exactly hour a center. our as our kind I opportunities you opportunities, drive Sacramento diminish, should was And clear that and Sacramento. always is from in but the Area we was to growth Bay the probably long

read meet we was expertise, did were we've good bank come of and looking I one tell I been the down, really a that up not people very, is And opens as We meet. world good as -- with But a So sat an sense Valley really because we strategic diligence previous will I've the a it's now due strong, us write because that the who valley only ups, without to makes and buying standpoint, people very was, very those people and really the it a in there. through the important open to gives we're from and up Sacramento you the know office And this job. that they one people but the the -- that really all market. in really question as very us impressed people. thing that's has we've open at the acquire go people

with the of with impressed So huge we're the a difference. impressed market, and that makes knowledge the underwriting,

opportunity So why that's it was and so an exciting we're here.

Jackie Bohlen

conversations it now one I -- just on there's of your call a know moving good And on sounds growth then based the once this a environment. just on fair? else is it improved like that given weaker demand the XXXX. probably bit when the equal, looking a But can that outlook side lot still comments, we're little and like has sounds right this all and growth too, move of parts from in be Is transaction the

Russ Colombo

I acquisition, Clearly, then once make been. just when think ours, This bank to Sacramento dramatically. but to the lend a new not when you this bank, fair. add want that's to capacity also we that it. bank we're in an acquire we we grow which only market, -- grows we it, want haven't and we And to into integrate

certainly, what And them I that transaction think and we We're the size as of even to with bit to grow things the of different. there be existing capital size so and we're will about of opportunities smaller a do because they're to willing relationships. and customer And talk are requirements nature. willing base to those that do

this new one. relationships So not but us be great build to a for grow only existing to will opportunity

Jackie Bohlen

deal light the in that quarters? terms buyback, of just you over some in the of How announcement next in you couple quarter. then about And of the are activity had thinking the

Tani Girton

is acquisition have an Well, it. after see of abundance we capital still plenty we as have capital. -- still And of the you the

program our this haven't repurchase or point. at made about changing And any decisions pronouncements share so we

Jackie Bohlen

And just one one me. last for

a just yields last contributor to that notes in In impact? the that if pretty that big terms quarter, and from of quarter's a some was benefited the muted have the wondering if or a in prepayment quarter was I compression penalties. bit you not last quarter securities And I'm my

Tani Girton

actually No, that did the contribute yes. compression, to

Jackie Bohlen

how you for Do about have ballpark much? a

Tani Girton

do, fingertip. not at but my I

you that I'll So on one. to back come

Operator

next Tim Montgomery Our with Janney Coffey Scott. from comes question

Tim Coffey

percentage those for I during that quarter to have your Do of clients? had existing the PPP at originated a you the loans quarter. looking results that the a came you question start and with, on loans from

Russ Colombo

a I of that clients of done don't care -- didn't rounds pretty of volume There’s We've we first it's in mean, our would front both almost have entirety always me, important the in bring that some rounds. of customer. in I non did we really that low we but it's first, that. the of decision

non existing probably done really I after something of the were similar. think bank, clients there but to it only [XXX], what thought open up don't of care we important Speakers], because was then of that but but we And do the customers were to know we percentages like the were [Multiple I took that that, they first others.

Tim Myers

cost. It's actually higher towards our

Tim Coffey

of then questions deal. And a couple on the

Russ, So Is or improving going take loan the combined to that's quick fix to a that to be time? think going deposit ratio. you do

Russ Colombo

because time certainly running take think XX%, will than It I to we're the XXs. lower close they're much that in

as have pick that things like which pandemic, up they think certainly start can participate out we the the talking we had demand they transaction I expand this that was we out did, of to existing go previously, We fact I only think come I there did size. that to the We and think relationships, loan it will -- would ourselves. frankly, American to now take their which done are to you and because also, that of River is, will deal. clients of And whole time And I so as to that help. will the

And to organization us them be so important size existing and able really relationships. in as to this be grow a combined respect for will

And to the the part be banking be will part just speak. other drive our will fix, So so that continuing [offer]. commercial to of

Tim Coffey

And then what tax own? rate are you using your on Is the merger it accounting?

Tani Girton

XX%.

Tim Coffey

company, need the this see you why get why to it. on are reasons feel see reasons leads thoughts? your wouldn't, to but And to consider What also like you're -- going do then, question, I can I to Russ, might but because not can rebrand you you the

Russ Colombo

Sonoma a but then wouldn’t play as discussion part I and about fine would a not in was of period tremendous a think Marin, have push American at in America with people reasons it a Certainly, early why still the geography, County from River would be that Bank, River on And the Marin just I’m are there while a American division Bank reasons [Technical a back of interesting on. great felt but in we they there Difficulty]. And American division runs there are enough, River name. a branches And I not and -- the branded that getting where they're through why afield we will far time we're don't of but Sonoma there wasn't Sacramento. County. bit

But be now, it term. seen you as I to River keep during as remains don't to thought and efficiencies the long thoughts of build of So been you're are the as probably it unless our working ultimately, hard Bank Marin. franchise of is one will right Bank American we to But think part the integration Marin organization. keep of get name We've -- brand, name the a as name. Bank the that really

Operator

more Instructions] questions [Operator at this have appears no It phone we time.

Russ Colombo

and time Well, success. forward look opportunities Thank to for talking Bank. acquisition excited again We want quarter. the ourselves We're up organization to you merger think for I joining thank River many and very going this for I call just growth next between open thank and on we American today. your us you. the to for to you about it's new everyone

Bank of Marin Bancorp (BMRC) 19 Apr 212021 Q1 Earnings call transcript