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Bank of Marin Bancorp (BMRC)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered a clean beat on EPS and an in-line revenue print: diluted EPS of $0.47 vs S&P Global consensus $0.41; total revenue of $30.94M vs $30.92M consensus. Margin expansion and deposit cost reductions were key drivers, aided by the Q2 securities repositioning (13 bps NIM uplift) and lower spot deposit costs . Values retrieved from S&P Global.*
  • Net income rose 65% year over year; tax-equivalent NIM expanded to 3.08% (from 2.70% in Q3’24 and 2.93% in Q2’25), supported by higher average earning assets and asset yields, with cost of deposits up just 1 bp Q/Q .
  • Deposits increased 4.2% Q/Q to $3.383B, with non-interest-bearing deposits at 43.1% of the total, and spot deposit cost declined to 1.25% at quarter-end (and 1.24% by 10/23) .
  • Capital remained strong (Bancorp total RBC 16.13%; TCE ratio 9.72%), supporting buybacks ($1.1M repurchased below TBV) and the 82nd consecutive quarterly dividend of $0.25/share; management expects continued NIM tailwinds in a falling rate environment .

What Went Well and What Went Wrong

What Went Well

  • Net interest margin expanded 15 bps Q/Q to 3.08% on higher asset yields and Q2 AFS repositioning (+13 bps to annualized NIM) .
  • Loan production accelerated: $100.7M originations ($69.0M funded), the largest since Q2 2022, with diversified CRE/C&I mix; classified loans fell to 2.36% and non-accruals to 1.51% of loans .
  • Management quote: “We executed well... net income increasing 65% compared to the third quarter of 2024... we are very well positioned for continued improvements... net interest margin, expense management, and asset quality” .
  • Deposit franchise remained resilient: deposits +$137.5M Q/Q, non-interest-bearing at 43.1%; spot cost declined to 1.25% by 9/30 (1.24% by 10/23) .

What Went Wrong

  • Cost of deposits increased 1 bp Q/Q (to 1.29%), reflecting late-quarter growth from existing interest-bearing accounts; management noted competitive pricing pressure and some non-recourse competition reappearing in high-quality deals .
  • Non-interest income, ex the Q2 securities loss, declined by $370K Q/Q due to a prior quarter BOLI death benefit not repeating .
  • Accruing loans 30–89 days past due rose to $11.0M (from $2.7M in Q2), mainly procedural extensions of CRE loans; management characterized increases as idiosyncratic and procedural, not payment issues .

Financial Results

MetricQ3 2024Q2 2025Q3 2025
Revenue ($USD Millions)$27.16 $10.29 $30.94
Net Income ($USD Millions)$4.57 ($8.54) $7.53
Diluted EPS ($USD)$0.28 ($0.53) $0.47
Tax-Equivalent NIM (%)2.70% 2.93% 3.08%
Cost of Deposits (%)1.46% 1.28% 1.29%

Notes: Revenue defined as net interest income + non-interest income; Q2 2025 “Revenue” reflects the securities loss recorded in non-interest income .

Segment breakdown:

ComponentQ3 2024Q2 2025Q3 2025
Net Interest Income ($USD Millions)$24.27 $25.91 $28.19
Non-Interest Income ($USD Millions)$2.89 ($15.62) $2.75

Key KPIs:

KPIQ3 2024Q2 2025Q3 2025
Loan Originations ($MM)$79.4 $68.8 $100.7
Funded Loans ($MM)$63.9 $50.2 $69.0
Total Deposits ($B)N/A$3.245 $3.383
Non-Interest-Bearing Deposits (% of total)N/A42.5% 43.1%
Non-Accrual Loans / Total Loans (%)1.63% 1.57% 1.51%
Allowance for Credit Losses / Loans (%)1.47% 1.44% 1.43%
Classified Loans / Total Loans (%)N/A2.95% 2.36%
Spot Cost of Deposits (%)N/A1.29% (6/30) 1.25% (9/30)
Bancorp TCE Ratio (%)9.93% (12/31/24) 9.95% 9.72%
Bancorp Total Risk-Based Capital (%)16.54% (12/31/24) 16.25% 16.13%
Share Repurchases ($MM)N/A$2.2 $1.1
Dividend per Share ($)$0.25 (prior) $0.25 $0.25

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Interest MarginNear-term (H2’25)N/AExpect continued NIM expansion in a falling rate environment given deposit beta and asset repricing dynamics Raised (qualitative)
Deposit CostsNear-term (H2’25)Ongoing rate cuts since Aug’24 Well-positioned to continue reducing deposit costs; spot down to 1.25% by 9/30 and 1.24% by 10/23 Lowered (qualitative)
Operating ExpensesQ4 2025N/AQ4 to look “quite a bit like Q3”; wildcard = payroll-related items; overall close to Q3 run-rate Maintained
Credit ProvisionQ4 2025N/ANo provision in Q3; allowance 1.43% of loans; improvements in non-accrual/classified loans Maintained (no formal guide)
DividendQ4 2025$0.25/share$0.25/share declared Oct 23; 82nd consecutive quarterly dividend Maintained
Share Repurchases2025–2027$25M authorization effective 7/24/25 Repurchased $1.1M in Q3 below TBV; future activity balanced vs potential balance sheet restructurings Maintained (opportunistic)
HTM Loss TradeNear-termUnder evaluationStill evaluating; no decision yet Maintained (under review)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2 2025)Current Period (Q3 2025)Trend
NIM trajectoryQ1: NIM +6 bps on deposit cost cuts ; Q2: NIM +7 bps with initial benefits from AFS repositioning NIM 3.08% (+15 bps Q/Q); repositioning contributed 13 bps; asset yields +17 bps Improving
Deposit beta/costsQ1: IB deposit cost -17 bps; spot 1.26% (3/31) ; Q2: avg cost 1.28%; spot 1.29% (6/30) Avg cost 1.29%; spot cost 1.25% (9/30) and 1.24% (10/23); further reductions expected Improving
Securities repositioningQ2: Sold $185.8M AFS; EPS accretion est. $0.20 over 4 quarters; ~4-year earn-back Repositioning driving NIM; future restructurings under consideration Supportive
Loan demand/pipelineQ1: Originations ramping (funded C&I ~5x y/y) ; Q2: pipeline diversification, higher yields Strong pipeline; originations $101M; adding bankers in Sacramento; diversified CRE/CNI mix Improving
Asset qualityQ1: non-accrual down to 1.59%; classified up to 2.77% ; Q2: non-accrual 1.57%; classified 2.95% Non-accrual 1.51%; classified 2.36%; $3.6M non-accruals paid off post-Q3; allowance 1.43% Improving
Bay Area CRE dynamicsOngoing monitoring; deep dives on maturities/re-pricings Improved leasing in SF multifamily; idiosyncratic upgrades; valuations improving Improving
Competition/pricingRelationship-focused; limited rate outflows Pricing competition aggressive; some non-recourse returning; BMRC remains disciplined Mixed

Management Commentary

  • “We executed well in the third quarter... net income increasing 65% compared to the third quarter of 2024... continued expansion in our net interest margin, effective expense management, and improvement in our asset quality” — Tim Myers, CEO .
  • “Our net interest income increased... primarily due to a higher balance of average earning assets as well as a 17 bp increase in asset yield... spot cost of deposits declined 4 bps to 1.25%... we are well positioned to continue to reduce deposit costs going forward” — Dave Bonaccorso, CFO .
  • “We repurchased $1.1 million of shares at prices below tangible book to further build value for our shareholders” — Tim Myers, CEO .
  • “A quick look at instruments suggests that there’s quite a bit of benefit to NIM expansion in a falling rate environment” — Dave Bonaccorso, CFO .

Q&A Highlights

  • HTM loss trade: Management continues to evaluate a potential HTM securities loss trade given capital strength; no decision yet .
  • Expense outlook: Q4 expected to look “quite a bit like Q3,” with typical payroll-related seasonality; overall run-rate stable .
  • Deposit beta mechanics: Floating liabilities ($1.7B) vs floating assets ($525M); break-even liability beta ~31% vs cycle-to-date 35%—supports margin tailwinds as rates decline .
  • Credit specifics: SF multifamily leasing improved; property-specific idiosyncrasies drove upgrades; procedural items explain the 30–89 day bucket increase .
  • Buyback stance: Opportunistic when below TBV, but balanced against potential balance sheet restructuring alternatives .
  • Non-accrual payoff: ~$3.6M non-accrual paid off post-Q3; interest/fees recovery ~ $670K expected in Q4 .

Estimates Context

Metric (Q3 2025)Consensus*ActualSurprise*
EPS ($USD)$0.41*$0.47 +$0.06*
Revenue ($USD Millions)$30.92*$30.94 +$0.02*
EPS — # of Estimates6*——
Revenue — # of Estimates5*——
Target Price (12M)$29.00*——
Target Price — # of Estimates5*——
Consensus RecommendationN/A*——

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • The quarter marks an inflection in core profitability: NIM at 3.08% with clear runway for further expansion as deposit costs grind lower and assets reprice; expect estimate revisions upward on NIM/EPS momentum .
  • Asset quality trend is favorable: non-accruals and classified loans down, allowance steady at 1.43%; $3.6M non-accrual payoffs post-Q3 bolster Q4 fee/interest income (~$670K), supporting near-term EPS .
  • Deposit franchise strength is intact: deposits +4.2% Q/Q, NIBD 43.1%, spot cost down; liquidity coverage (202% of estimated uninsured deposits) reduces funding risk and supports growth .
  • Securities repositioning is paying off: 13 bps to annualized NIM; management evaluating additional balance sheet actions—potential catalysts if executed prudently .
  • Competitive loan market requires discipline: aggressive pricing and some non-recourse returning; BMRC’s underwriting stance should protect long-term credit outcomes despite near-term growth push .
  • Capital deployment remains balanced: buybacks below TBV continue when accretive; dividend sustained; strong ratios (Total RBC 16.13%) provide optionality .
  • Near-term trading: Positive bias into Q4 on NIM tailwinds and non-accrual recoveries; monitor any 8-Ks on further securities actions and deposit cost trends for incremental catalysts .