Earnings call transcript Q2 2023

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

Andrea Henderson

Thank you for joining Bank of Marin Bancorp's Earnings Call for the Second Quarter Ended June 30, 2023. I am Andrea Henderson, Director of Marketing for Bank of Marin.

During the presentation, all participants will be in a listen-only mode. After the call, we will conduct a question-and-answer session. [Operator Instructions] This conference call is being recorded on July 24, 2023.

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

issued being found webcast on press morning, at portion the bankofmarin.com earnings release live call supplementary as captioning website which Our the is is this also during and of our as can Closed webcast the in we be where Investor webcast. replay. Relations well presentation, this available

will want table I and some to press started, be get we refer reconciliation discussing financial that the release we in Please measures. Before non-GAAP measures. GAAP non-GAAP note earnings for to both our

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

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

and our be remarks, Following prepared your Chief Tim, to Credit answer available Stewart questions. will Misako Officer, Tani

Myers. like I'd Tim over to the call now, to turn And

Tim Myers

Thank you, everyone, Andrea. our welcome call. earnings Good second quarter to morning, and

make compression an higher slower by lending resulting progress borrowings Our be the QX largely performance failures, nature of of interest indicator activity. balance continued significant paired not We full our believe will with future in to that we deposits and cost the this in due impact is focusing and temporary margin sheet. meaningful as the on have second bank to of funds net FHLB late impact reflected quarter on

bank improving deposits, by sheet and attracting stronger liquidity profitability. the raising fact, In strengthened growth we to the position efficient substantially and for balance customers,

first deposit sensitivity, note. key significant quarter. few bank and the stabilized highlights our price a outflows regional late triggered After in quickly are Here of failures deposits industry

rates. second quarter, $XXX below raised at the capital balances in we million new market During

X,XXX customers. over both new we Additionally, accounts opened for and existing

drove accounts, outflow some of quarter. markets to million in the $XX customer second largely activity money deposit net normal growth and balances, continued of New

reduce DDA Importantly, and million borrowings those quarter. deposits at the new investment or to quarter-end by seasonal now July we Deposit end the growth pre-bank (ph) post $XX flows million failure FHLB XX% million to XX, which during second $XXX enabled our short-term us added continued has From anticipated. and deposits cash to we [$XXX.X] quarter total included within March early levels had growth are of XXXX. in

pre-pandemic in deposits of have end percentage the same has also to has higher of Our $XXX of At increased time, million. posits the and percentage cost a slowed FHLB the increase of demand rate level XXXX. another the borrowings at than the fallen

Our was relationship-based proactive to deposit strategy and pricing by outreach be growth discussions. customer driven continues and

markets. not CD We or offered CD have tapped specials brokered into

In deposits yields customers reciprocal offerings. deposit we excess as as the higher shift FDIC well increased saw from cash bearing saw interest network quarter, as to non-interest a coverage bearing natural insurance on through our

Second costs delivery points quarter sequentially made. that adjustments due deposit increased pricing basis we XX to

interest XXXX bearing hikes cost funding Fed reallocation of and between operating and level-off increases the funds customer that accounts as of expect half second We rate accounts in will slow.

down at bearing mix deposit from non-interest Our consisted June quarter. XX% of last deposits, XX XX%

However, the deposits was non-interest to XX% July by back percentage of up bearing XX.

and with our covers we we XXX%. deposits to and will stringent continue maintain our a our basis our carefully contact with all uninsured level a liquidity liquidity In in deposit of that high have pricing remain customer-specific manage close to risks. continue will standards, over customers we forward, of on as history, by opportunities alignment Going throughout to understand

Notably, quarter-end. total our to deposits at uninsured our XX% from deposits declined XX% of

prior to of quarter only from largest total account the slightly deposit $X,XXX $X,XXX declined In X.X% deposits. deposit addition, our average our balance with per by representing

the from of contingent cash, $X borrowing approximately FHLB and was Bank. liquidity consisted and billion securities Reserve available Federal Our availability unencumbered and

net we AFS retaining selling Class additional securities at quarter and Visa Post a proceeds bolster end, B in by shares steps to liquidity sheet and breakeven taken on-balance have cash.

our securities available-for-sale value. changes market In swaps addition, from we pay rate into entered interest in to other fixed protect

to borrowers and with our engage year. we lending identifying this and half the about also continue second are in We support of actively compelling optimistic opportunities

income our on forward, the lending is protect than our credits pipeline. believe books higher that NIM While off. should we This high being fund our help to activity on we slowed, are has yields providing we boost new are to quality those bringing loans to paid our and notably interest moving us as continue coming a at

will rates, we portfolio lift our months. portfolio. provide occurred points loan it an will XX If next XX% basis of those approximately XX reprices Additionally, loan roughly estimate reprice in for the today's of the at incremental

has continue achieving our demand on risk returns attractive quality. while teams adjusted solid loan to While maintaining eased, focus credit

have We we that the risk are sticking lending our to had, and loan prudent adjusting always standards rating. portfolio monitoring and proactively policies carefully

rate no some been special were quarter. risk mention surprises the has there loans, meaningful in largely in there migration, While

During X.XX% loans quarter comprised of basis previously increase total the Classified during downgraded a centered around loan, primarily at loans the at the XX increased and usage on only of total loans non-accrual Classified loan second quarter-end. held steady loans. credit. the line C&I of term quarter, non-office just did CRE points loans

this representing loans owner-occupied, second balances our moment largest commercial the in as loans, it is our real CRE provide profile concentration of are XX% different our added the of we the quarter. carry believe at a book, loan Of our to total total end I'll estate XX% non-owner which risk take environment. to a color in portfolio occupied loan than

loans of most with XXX the million. recent was and million, loan based largest million The average LTV an service $X.X debt on times was occupied process. XX% the of consists coverage size being annual our of average portfolio loan $XX Our average X.XX with $XXX review non-owner office

as Lastly, of we has disruption actively number bankers. recent a proven made recruiting are considerable industry available talent seasoned

lending to we announce meaningful a activity value to deposit news greater shareholders. and advantage soon customers our and deliver that changes growth and boost expect We will have of market and our taken help the recruiting recent believe

detail. results I'll to Tani Now, our greater over pass it discuss to in financial

Tani Girton

everyone. morning Good Tim. Thanks,

Tim how that a I million share quarter. our through Marin provided earnings. second per of walk Bank has sheet is in or of $X.X the of will $X.XX picture income evolving, diluted generated net balance Now

the As first from decline a largely higher rising Tim quarter cost and average deposits was both said, the the expense, on due interest borrowing balances. to of higher

prior interest far pricing X.XX% quarter second borrowing rapid tax basis outweigh down equivalent loan deposit was of Our the adjustments as yields. from and net balances points higher increasing XX quarter gradually margin

NIM of XXXX. more second rate in quarter and compression, concentrated deposit the lagging it XXXX to increases contributed resulted earnings, in delayed While change also

market changes interest pressure half the and somewhat expect as yields net to are have in continue improving. up margin rate abate but our to We to continue caught rates second on of with expected loan XXXX deposit

classified real impacted made swaps. multifamily related by $XXX,XXX the Additionally, of we $XX rate impact to further borrowings, $XXX have trends criticized for increases and office second in portfolios qualitative value. another mitigate occupied down a in non-owner on million We provision our taken $XXX and steps loans quarter pay commercial entering estate million proceeds in credit selling hikes the interest fixed and in in into cash by based in million factors retain paying securities early third quarter collateral rate the and to losses in to

interchange million a the card second offset primarily quarter gain. slight only of down owned property the in by we Non-interest higher quarter-end, insurance life somewhat $X.X modestly our at real first on the in to income debit policy sold estate other was and the of trust recognition fees to payments related wealth income management Subsequent from quarter. quarter, services bank-owned and first

were assessment deposit and well giving $XXX,XXX the from benefits, salaries in and closures. Non-interest merit in $XXX,XXX $XXX,XXX program quarter. charitable partially quarter $XXX,XXX depreciation FDIC contributions, a adjustment. at quarter, in remain expenses rate and related expenses offset expense in million reductions in expense $XXX,XXX related annual $XX.X first amortization $XXX,XXX base of controlled included for branch the occupancy and to $XX.X first in increases included increase which by network The annual up increases, million equipment and These

$XXX,XXX to services the of In performed. decreased by work professional addition, timing related audit

Our higher XX. The quarter June interest the and equity requirements from All return expenses. to XX.X% a ratios total the both quarter efficiency increased and in ratio into and of down on X.XX% and non-interest in The ratios due X.XX%, to XX.XX% X.XX% assets capitalized Bancorp risk-based prior at translated regulatory quarter. second capital and XX% from return capital for increased earnings prior XX.XX% X.XX% were well to above on respectively. of Bank the

be X.X% our tangible common adjusting compared respectively. unrealized as to Bancorp. losses for for for our equity quarter, HTM and the Quarter-end Bancorp portfolio, Bank X.X% in After after-tax of in and would previous X.X% ratio Marin TCE securities X.X% million was $XX for X.X%

August Board share XX, Bank dividend of Board $XX a Bancorp. of a the new Directors of also declared effective by for The $X.XX on paid million XXXX. program XXXX. represents cash This through consecutive approved XXrd per Our Marin repurchase quarterly share quarterly dividend July payable

liquidity and and of Our ongoing investments ample strength operations future capital the portfolio Marin. Bank for the investment provides and position high-quality in of

cycles of navigate and interest price test liquidity We the evaluate scenarios of to capital banking the profitably. on economic we credit, Bank's and We believe Marin our rate, assumptions. will market underlying stress management fundamental Bank that risk emphasis liquidity, unwavering relationship continue under various position and to challenging regularly and value

final some turn Now comments. back to share Tim it I'll to

Tim Myers

to Tani. conclusion, impact the interest the second caused on while In of net our the while in to have earnings improvement the normal failures And EPS on a model. Due we the intense effects nothing continue balance for you, quarter-end. Thank bank business effects significant our outside improvement our and enhance and environment recent temporary. to be NIM forward, rate current quarter, going sheet, those believe considerably material prospects seen focus post and we we doing our margin

for support. want and thank call your on With today's that, interest I to everyone

We call will questions. now open to your the

Operator

Instructions] line Feaster from ahead. go Thank [Operator David of Our Please with is James. first the Raymond question you.

David Feaster

Hey, good everybody. morning,

Tim Myers

Good morning, David. How are you?

David Feaster

great efforts to continued outpace been forward I'm the that is hopefully some is year? you have flows, kind the Curious you just there, it's third the out your just And a how the Maybe in to of the how lot growth do the to growth? deposit deposit characterize deposit your pay curious, could commentary about to if you to much growth going and very flows, borrowings this -- active then the strategy drive end what plan And account of sounds loans you starting it's already. had about and and side seasonality. like the of continue the far of hear continue just growth? down continued the think then by it But quarter on look, NIB guys

Tim Myers

question. good So,

in were the reflective accounts movement demand our the seasonality. deposit in end So quarter after of and normal quarter

on there checking have up. soliciting deposit some the out Maybe raising mentioned side outflow call in taxes was effort that go on in the interest or to of they bearing accounts. so and You and quarter and can that had $XX we're we payroll of last because was million that in Most imagine you seasonal funds. where increases going we as start

the was X.XX% pool. for was money deposit So we the raised our nice was bearing, rate what is through the bulk interest whole we of that weighted mentioned average but initiative the on

So of still well our below borrowing. cost

the continue raise is goal So deposits. to to

is not is goal loans. loans, to our goal to Our shrink grow

have seeing estate, pushed kind quarter. us talk office We we in or pipeline. We're portfolio. the did to in to you that pipeline closings continue more happen some get are with tenancy a vacancy. of When expected real issues than we issues We affect about next into build

valuation steady. has is a in where lot do of maintained portfolio weed out risk, What lease Our cetera, we risk. to there's et turnover had activity have very pipeline our

the We're in we So build looking help growth. drive hires future near pipeline. make to the that continue some to to

result So pipeline to to and pay a loan continue the borrowings down to will growth. deposits, build in goal the drive is continue that

we because the long trying fundamentals answer, rates but raising customers on could we retain and did as to and effort close deposits that do when level very we're non-interest winded in interest today will those rates subside we bearing we So lowest have the at concerted as as the a goes to both of mix away this maintain quarter bearing can. as and will trying to that all we are are those eventually of

David Feaster

relates in in Tani, before kind hoping was get you like And hearing, between about of second, parts to of seen growth moving as growth the a margin. about given there's look Okay. that And us kind it like lot side to deposit there, That's parts the just forward? the just things getting back quarter, help sounds and we've trough. in if touch NIM all bit trough of helpful. for I but the want a commentary, more the in it could the we to pay but the of a talked as year, pressure sounds it your you've half on close the expect we're think just all I borrowing your we timing the there a downs, trajectory the moving just

Tani Girton

Yes, I help you with can that.

So hit on trough, a million. gave but Federal securities, Home soon pay in of believe in going the Bank short if which not balance sheet Loan as of just down a -- rate that $XX more about I and proceeds borrowings, like think coming on of or piece we at interest dependent -- to you we we But to XXX more deposits, answer, keep and lot to that continue go try the about out to to at. those bring some we'll NIM points. pickup basis do on that that have those in about we've it, we about pickup We're of what end would is sold rate of million $XX us about get up if

Fed points pick also point up rate on Then swaps, in that -- rate XX no million funds there week, when case, basis a in basis base increase $XXX probably change scenario. we a also assuming assumes next XX did the week. the -- basis the in And this just securities, in probably one we the XXX Fed increase I we'll you gave and points that this the

So let's see.

XX, in The other July points you on got we deposits, XX look basis thing at were is we if another where cost.

So basis where deposits up wild to points. that's that going. card cost was of XX That's -- one's the

have you've down And we're the But balance points. federal by borrowings. during coming the go you quarter. and in remaining home sheet. then $XX portion That bank $XXX offsetting borrowings that, that's basis But those up XX million about $XXX million on X.XX% retaining yielded the loan would got million because had

So looking you taking and points July beyond XX, again, to at growth assuming pickup we'd balance no going I'd as where they into put are went think say sheet, basis it roughly all of deposits I together, be the to account where in go margin. of not XX

David Feaster

Okay.

June second And you when the margin is or maybe say figure? has think so you to quarter the full troughed, that the relative

Tani Girton

thinking -- quarter. I I about that second -- would was the

David Feaster

Okay.

third starts margin think you So the expanding here in quarter?

Tani Girton

Yep, thinking. what I'm that's

David Feaster

Okay.

Tani Girton

gave all you. assumptions those With caveats I and

David Feaster

are some course, of things back of the Tim, point from curious, could What's course. truly still your demand know is growth opportunities, color it side, your this you infill? any big that, if new talk to Is And versus you're expansion? on curious hires for good what encouraging just appetite are it How these to just much pretty back, from? coming curious your Where you're like hear Yeah, kind the seeing sounds of growth. about market market? all clients? what broad then getting just growth. a just returns? still I'm slowdown but Just category, you on have understand It I it’s I you risk-adjusted about And mean, of hearing maybe then a for where pushed like I'm appetite pulse seeing. Is it's delays. the

Tim Myers

Sure.

is to question that certainly lending. to -- is and continue But a the that of rates actively there's grow estate business from So that a calling base there's get no client C&I benefit diversification pushing are, demand no that and are where demand more variable lot benefit investors, our of being try We muted. portion and muted. with the real or they rate that question program is on

right going two roll where going our to to as we refi, is list more not five some through risk, or that's loan, and rollover are want just For meaning tenant to if stretch we're now. parsing that that over standards, opportunities are a of conversations a year a those credit a of the year protracted we're where or the sacrificing coming there's they third seven because are next little

of it's And And A so is being cautious. form our pretty about real we're I we of commercial opportunities in within seeing. lot are -- the think that, footprint that we're estate. throughout even some

credit to side, that infill hiring our had we've to fit there from opportunistic the administration are hires On people model. opportunities and ranging

dramatically different answer on Does that your meaning that changing the think bring not you things people in growth when bring failed, to new our So within but already looking lending about how David? for banks have model, the around our but strategic that our we do can things, benefit appetite that. question, us we're also edges, push understand that

David Feaster

all the Thanks Yeah, color. for terrific. no, that's

Tani Girton

left back roughly on at of assuming with description. increase the go -- That XX XX includes an Dave, and also points I embedded the the can basis increase Hey, portfolio I an last to basis loan on basis loans my of points also think repricing I out X Fed. assumption a point

David Feaster

helpful. That's Okay. you. Thank

Operator

is question Please Andrew next Stephens. from Terrell ahead. go with Our

Andrew Terrell

Good Tani. Good morning, Tim. morning,

Tim Myers

morning, Good Andrew.

Andrew Terrell

back basis talk point in assumptions to on deposit commentary XX be point you terms go the just incremental the to margin, last pick-up in that can of that on cost underlying pressure? that might Tani, the about

Tani Girton

and where It's earnings So much we basis a tough is -- the right of points going points, XX the that's on that that is higher having the hasn't as be quarter, than lift catch my basis we while then we've as to during like we've but else July levels pricing to XX to up take includes I of been next we're XX really funds and because But because as strong, catch portfolio to been those what it's today, Fed assess get down might slow It initial up. come thought conversations so that because anything still it not doesn't that And they're that. of the pressure we deposit still to XX. now to up disclosed do basis at to presentation you repricing the hard another think lot is gauge. still up since won't pricing, the include in where the in big in had as wildcard. of the release all really said, caught it we're kind there impactful are points really,

Andrew Terrell

total disclosure that. can front No, understood. appreciate the drill where the on third I the not the how quarter what June sense for trying is quarter. Just to points guess quarter deposit was the leveling-off sense basis ended specifically, not? I that to deposit get a average? or appreciate Yep, pressure a I down you the that give us costs on XX deposit whether I quarter-to-date If of third could in really compares throughout the costs cost or or the

Tani Girton

Yeah.

quarter was deposits cost at So total just the at the if was basis XX that second July X through was XX points. of month If points XX of look points. June, XX, basis July we look And basis we that

Andrew Terrell

Understood.

Okay.

So of June? of versus month lift so X end spot the only far July month point the throughout the basis at a of

Tim Myers

started our in events the to to happened. was catch-up quarter. early go, transparency ratio, pace request fourth our We’d into a peers talked We a not has there you lot think the It being adjust where not do we rates process, that of but to of quarter last going rates, moderated. Yeah. Andrew, up a on the full do catch where slower noted We but your of given deposit we're to about then were already lot hasn't the loan do. the to of call, of number and had -- stopped, full as March

terms that has So of in, request. catch-up. There's lot in the rapid the people's quarter coming more a that of impact moderated certainly had but process request of

Andrew Terrell

to moving expectations I from -- up, could modeling color risk the firmly you'd Really where of Yeah. presentation of lot a there. And of ask a the a assumption the think recall what XX% XX% are seen the Paul, pieces interest of But XX%? interest on mentions there I using discussed appreciate question get of Is interest I I Totally shake a the a if but where think last a going that now. understood. catch I beta if to on just kind the lot beta, the from in of is now drove of bearing I bearing rate prior quarter, presentation modeling guess rate the for out to correctly right this kind risk we've assumption, kind you're discussion outperform XX% you previous think that moderation beta kind we've perspective? that. that from

Tani Girton

bit on beta little The and money only XX% deposits. the a deposits all XX% market interest-bearing apples and that's was So of is oranges. on

Andrew Terrell

see. I

Okay.

Tani Girton

not So we have betas. We're not down. our changing the not -- taking we're definitely betas

we're lag doing is what our in fact, the modeling. we're eliminating In

Andrew Terrell

share like non-interest can maybe understood, hires, or sense should I'm help know hires but And that potential how get run it we expenses moving the then rate sounds rate, any about a individual hoping thinking some much expect expense of team close understood. or the Okay, just I and about give maybe expense forward? forward? on on to influences back on there? kind don’t going getting levers you be hires you how just team might run the Any

Tim Myers

those impact to just the of I leave but reasons. that I for or to jinx cost ways the -- Well, that. just want want disclosure to hires, moderate because on timing looking I'll and don't one we are of costs the overpromise don't at there it

Andrew Terrell

Yep, understood.

Okay. Thank for you questions. the

Tim Myers

loan there David yields. think to Yes, fail I -- did around Feaster’s your answer, the growth was I the part in question of

you But X.XX%. at originations the as sense had Unfortunately, gives compared yield of on will that pickup paid were of considerably yield paying overall high at weighted the So than average as the we about ones portfolio off a look hope -- that quarter, the you yield, our to loans around still improve. X.X% of that a a came off. those if higher which was the or average

Operator

Please next with Woody KBW. go from Our question Lay ahead. is

Woody Lay

Hey, good morning guys.

Tani Girton

Hey.

Tim Myers

Good morning, Wood.

Woody Lay

But going there I know the expense a bit was noise little any it hiring Just with XQ seem of can mean, rate had forward? a sort does hires, Excluding… on charitable the XQ reasonable excluding know in like expenses I some adjust move follow-up contributions. additional around, question. run if but that that, you I for -- of a

Tani Girton

think on -- was there? last thing oh sorry, I said No, the depreciation what you

Woody Lay

hires. Sorry, potential I said just excluding any

Tani Girton

Okay.

does occupancy of the and levels. indicative those equipment, now two So reflect depreciation the go-forward amortization, branch are and lines closures and

in the of quarter. was first acceleration the most So

see you'll The rate FDIC from X basis that So continue. X base up points. basis to went points

a So XX% versus it that's where was. about lift

what in second quarter a first for the So should I an than at and accrued say it deposits also quarter change the that that look it -- have included is first the quarter. higher the then in should forward. adjustment included And we would raise for the we because and And FDIC a have. incorporated adjust then for we later the by XX% go quarter for accrual because first look

to going QX. it's be higher than lower that's So to QX going -- than but

is You we are higher out other them of reciprocal absolutely because expense right seem more on have charitable deposits. indicative contributions, in those pretty do mostly The go of rest QX.

So that's also indicative.

Woody Lay

sticky client the clients I clients? was full to that's business that mean, it on front. with successful can you sort time a quarter optimistic helpful. over view Yep, of How suite get shifting you are Maybe that it new how like these and of really the do you over disclosure. looks these

Tim Myers

lot of think had That's that it's tend was a to sticky. back good money and do getting A I left. going that question.

new half was customers. over So accounts you were number just for look existing accounts at opened, the of that

that XXX interest-bearing DDA the some those account. account were account an in architecture structure, of their into putting or money a reallocating But clients. new was So over of reciprocal

some we them. And can so already for things what the are them. other we There's some pushes around municipalities to been talking and of do then

we we relationship totality. but can here, look starting we're in So their that see how always yes, grow to

Woody Lay

Got it. buyback then the I saw last announcement. renewed And for me.

volatility how seeming the settle about with updated little Just bit, buyback? in to there are you on the any the thoughts thinking a are market down

Tim Myers

temporary on a it have we've We capital that remains and stock. of the take result ability being are past. impact that of They're to cautious that a what want said, QX to as have in and about we very tremendous earnings the is advantage depression stock to had similar how think very in we described We our happened value of think we purchase the being All value. preservation.

So we ability out not the to want retain rushing do that. do to But to so. we're

Woody Lay

Got it. Thanks guys.

Tani Girton

just I the top company initiatives full think got is in us. on both to the those if important strategic that the Wood, add, are and and is the to priority maintain our our really we've reinvest in dividend fronts, maintaining plates management of I'll dividend capital but

Woody Lay

All right. Thanks guys.

Tim Myers

you. Thank

Operator

Our with ahead. is next from Rulis question D.A. Davidson. Please Jeff go

Jeff Rulis

Good morning. Thanks.

Tim Myers

morning, Good Jeff.

Jeff Rulis

the a of on deposit average? cost. trends Did Tani, the interest in appreciate all net and have color month you June margin

Tani Girton

Yes, let pull time. me second. just have because already it, pull that. every me that asks at fingertips a my [indiscernible] I should that I'll

Jeff Rulis

line of in have But wanted loan I segments, CRE, the that, additions loans credit. C&I, during hop the outlined you've maybe do and on classifieds? of you And to your to Okay. classified geography increase within the those -- think industries loan that I

Tim Myers

Yeah, Officer, going our the I'm Credit to Stewart, classifieds. to Chief Misako talk ask about

Misako Stewart

it's classified Tim different all concentration saw it not from the C&I. collateral that if covers in the CRE term that's and was the secured to C&I had sub-standard term there's geography, criticized existing And really again migration of we the a where and it of to criticized a in terms board kind Yeah, one the then other that of categories, noted, question. small across both was increased watch an loan multi-family, loans classified already one loan and an mention. But that as well. classified, on downgraded downgraded, to watch two loan loan retail, office special kind We the as only as the from of on usage

Jeff Rulis

Got it.

where they concentration, much just of kind So geographic not yeah, so were.

Misako Stewart

Yeah.

Jeff Rulis

spread So it sounds footprint. the was like throughout it

Tim Myers

class Yes, diversified. both asset geographically and

the nothing There retail none the look which you it's the side, asset all estate multifamily there. within alike space, mention a migration a was same in was the and class. wine the at criticized, industry geography, on we motel, none in the over There's in C&I real same If place. special a largest had, commercial space

one about multiple outstanding any Misako the we've collateral class. on have And for. negotiating So on we again, particular real C&I in the The been ones was full we're same have remain revolving meaningful noted talking a in not usage credit substandard quarters. the side that as for estate deterioration problems we seen increase that

been properties. focus those So able to we've on

Misako Stewart

line wanted down. watch transitory. special we meaningful too, of seen And a watch to any I mention the to Right. just And indicative the that haven't from since isn't kind We category paid also of necessarily migration improvement as deterioration. has and treat note

So it if matter, case, In not move we improvement. it seeing to of do any this don't or deterioration that see a any special meaningful we for mention. was improvement, matter

Jeff Rulis

go Okay. back to and And maybe, the capital buyback, to prudent appreciate a cautious the approach. I Tim,

philosophy you a kind I X.X% think on baked the think with in? I Just guess, think an I of TCE, AOCI X.X% got and I current question,

Tim Myers

Yeah.

Jeff Rulis

look -- that metric the mean What could robust. value you guess at? capital to I do that at that at more? X.X%? mean, with AOCI, -- that you I'm we look if regulatory -- cautiousness know you you we the I I that look value capital should get you to target of you do is kind most that. the do trying I of very or do thought, don't what's value is guiding Is of part

Tim Myers

regulatory capital. the we at book. important. ratio in have community. It's the we that losses important we have do right impact Meaning us. amongst Board. have time a and question, And and And all unrealized look I are sure the ourselves a But those Jeff. answer, to to with important meaning, we HTM at It's have not to all I'm yes, AOCI or investment adjusted conversations good those the for TEC the of high factors is It's the look solid now,

And our asset and so our we'll deposit of look within and certainly and earnings context at generation. trends the -- that growth our

-- okay, look we that thing and buy and look those it's all to we'd So all right what time. we at of We at do to say, more advantage and this the stock take value of just to love yes, shares. factors want at back the

to that path balance continue our we'll and marginal the impacts be that. any not there going saying a look and meaningful lot is capital, on, -- I'm clear clean-up don't start But you to one we closer have we're for answer So that other if to we like no take improve at evasive. sorry I'm earnings certainly along feel then to sheet we're

Jeff Rulis

you. Thank it. Appreciate

Tani Girton

sheet, that to of interest And of million. or purchased your little to at April, if in over month the over funds Hey, a a the bit out was the balance level funds just million. margin million you close excess down $XXX June because holding a sold borrowing month little net Jeff, are come of that of now borrow is million. color Fed that question, keeping had balance proceeds $XX we June, little And million sorry, the net our the to cash on -- $XX the to back $XXX And we're give end X.X%. for the peaked $XXX from borrowed our to or now that,

that's significant to the impact a have So going on improvement. margin

Jeff Rulis

fully the the Tani, relative equivalent X.XX%? X.XX% tax that's And, is -- to

Tani Girton

correct. is That

Jeff Rulis

you. Thank it. appreciate I Okay,

Operator

is Please question go next Sandler. Our ahead. Instructions] from Matthew Piper Clark [Operator with

Matthew Clark

Tani. morning, good Hey, Tim,

on portfolio, Just looks Visa taking the it within of here. gain restructuring the the like securities advantage you're

in more portfolio for appetite Just what's restructuring that back half here? the of your

Tani Girton

rate So that's mean we a $XXX the impacted interest of position. question. our include terms tough I swaps in you if risk million

to of in take a and you we'd rates I achieve down the It's be what's think and losses, earn-back earn-back we at it. period, frankly of go hard selling really and if a we So opportunity, securities, remain now. have that opportunistic. we short to that's right -- But will terms taking period, once want looking very do matter as then start

Matthew Clark

And you're to tied index and terms the terms paying? the specific what what receiving, there swap, what Great. in of in you're then of are terms what Okay.

Tani Girton

Okay.

three $XX and floating year, in did and are and the million we at the million we on $XX in did And -- X.X in is underlying on year. the rates are Those X.X%, AFS fixed security X.X% that… portfolio. So range average the those SOFR

Matthew Clark

Okay. Great.

Tani Girton

Yeah.

Matthew Clark

That's for XX% but turn. your basis Okay. of quarter assuming rate Didn't then your not in by I'm anything, increase into week assumption the deposit speak light beginning missing on of didn't in interest-bearing points mean cycle I'm to to of on and deposit another assuming the would and meaningfully the and cut XQ. you rate assumption? XX just XX this And imply July of the terms of cost Fed of a spot off. And out want meaningfully slow fourth fair -- the beta

Tani Girton

‘XX Matthew, of quarter and about fourth ‘XX? you're quarter talking first

Matthew Clark

No, fourth saying But of end XX% back get step-up -- you another you into year? after and that, in of quarter that costs of nice just of upcoming the spot rate slows year. you the given beta, change then fourth would here -- the I'm quarter. to it year beginning -- deposit No, this your the the it looks in to like quarter you that this next have meaningfully a deposit provided, suggest rate have

Tani Girton

modeling, zero Yes. in numbers rate. assumption the changes. of the with caveats, lot it’s But apply up that I scenarios, Fed in the -- in in And but That In XX is modeling, our we only betas funds -- it's is different. case, assuming of the earlier, rate assumed interest gave course, I our the a no increase a base up you're point with in in -- lag. embedded then basis the

we be will there. so next April that results previous of on in or the all will occurred XX-Q, take published quarter in those running will risk -- were actions assumed in the actions XX. run account attempts. -- was -- XQ funds will July And interest as sorry, earnings Fed peak our have at into model I what up actually second July. said, quarter We're we And April from as faster the second be of rate our What sheet -- that be the the than XX -- in go XX as would of and will modeling balance

showing So XX-Q. when will we bit was it liability there. what little like much will probably XX, the But a we of first more in more sensitivity be quarter looking start run as July

Matthew Clark

just have of -- you end of Got the And even have what you Okay. whether in gears not year, -- not terms repricing portfolio, this maturing shifting and to the be CRE then do to next what office you And or whether you… or through it. year? in maybe or that through going is

Tim Myers

have of year. bit rest and into a this the about little year We loans next more than XX maturing that

investor office space. tremendous a not So That's number. within just the

Matthew Clark

Okay. item, know on the housekeeping going Thank it's I forward, Got a Tani, you. little it. And tax then rate low quarter. this

Tani Girton

Yeah.

the it's with the particularly So year. does is full because quarter that what this earnings the reduces the low it rate for for quarter,

going there. adjusting some there's So on

a big driver. biggest had That was the that impact. So

Matthew Clark

forward, -- going you rate still? the And XX.X% would

Tani Girton

Yeah.

we because I take to what -- quick because rate, one that adjust it expectation me future reflect full the that's future So -- we look. is think provision, that for the year -- just let

was that's the that I that XX.X% think was going think to I to it to -- -- be to forward. think -- it’s I high down XX.XX% going quarter, Because shifts. XX% don't it's those be don't all quarter it going this due -- it's last

somewhere think I it those. So balance between will out

Matthew Clark

Okay. Thank you.

Operator

speakers, Please are questions at presentation further no continue And there closing remarks. time. your this or with

Tani Girton

they XX of annual the the where pickup one the assume net to the in and say. net increase I Should Fed. margin? margin for immediately So on swaps? margin accretive to duration about the year priced the in the I they the It's are should to the somewhere they $XXX,XXX right are now participants a as basis, from on including interest you talk net are $XXX,XXX accretive So question gave point detail between basis we interest roughly an on had Yes, more swaps. online. we Can immediately

Tim Myers

thank I and for quarter. and With forward questions, talking to that, want everybody you your look to your support, I all interest to next

Tani Girton

Thank you.

Bank of Marin Bancorp (BMRC) 24 Jul 232023 Q2 Earnings call transcript