Bank of Marin Bancorp

Good morning, and thank you for joining Bank of Marin Bancorp's earnings call for the third quarter ended September 30th, 2025. I'm Christy Meyer, Corporate Secretary for Bank of Marin Bancorp. During the presentation, all participants will be in a listen-only mode. After the call, we will conduct a question and answer session. Joining us on the call today are Bank of Marin President and CEO Tim Myers and Chief Financial Officer Dave Bonacorso. Our earnings news release and supplementary presentation, which were issued this morning, can be found in the investor relations section of our website at bankofmarine.com, where this call is also being webcast. Closed captioning is available during the live webcast as well as on the webcast replay. Before we get started, I want to note that we will be discussing some non-GAAP financial measures. please refer to the reconciliation table in our earnings news release for both gap and non-gap measures. Additionally, the discussion on the call is based on information we know as of Friday, October 24th, 2025, and may contain forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those set forth in such statements. For a discussion on these risks and uncertainties, please review the forward-looking statements disclosure in our earnings news release, as well as our SEC filings. Following our prepared remarks, Tim, Dave, and our Chief Credit Officer, Misako Stewart, will be available to answer your questions. And now I'd like to turn the call over to Tim Myers.

Thank you, Chrissy. Good morning, everyone, and welcome to our quarterly earnings call. We executed well in the third quarter and generated positive trends in a number of key areas, including loan and deposit growth, continued expansion in our net interest margin, effective expense management, and improvement in our asset quality. As a result, we saw the acceleration in our level of profitability that we expected with our net income increasing 65% compared to the third quarter of 2024, as we continue to benefit from the actions we've taken to put us in a good position to grow our balance sheet. Our improving financial performance and continued benefits from prudent balance sheet management resulted in increases in both book value and tangible book value per share in the third quarter while we continue to invest in the company to support future profitable growth. Our banking team, driven largely by recent additions, continues to develop attractive lending opportunities and bring new relationships to the bank, including in areas like the greater Sacramento region. While we continue to navigate a competitive market environment on both pricing and structure, we've been able to add new clients and maintain our discipline underwriting and pricing criteria. During the quarter, our total loan originations were $101 million, including 69 million in fundings, the largest since Q2 of 2022. Our originations were a nicely diversified and granular mix across commercial banking categories, industries, and property types. And we are seeing a healthy increase in CRE loan demand that meets our standards. This quarter's payoffs included the proactive workout of a $7 million loan that benefits the health of the overall portfolio. Our total deposits increased in the third quarter due to a combination of increased balances from longtime clients, as well as continued activity bringing in new relationships. The rate environment remains competitive and clients remain rate sensitive. However, they continue to bank with us for our service levels, accessibility, and commitment to our communities. And while our quarterly cost of deposits increased one basis point during Q3 due to existing relationship expansion, we've seen improvements in our spot cost of deposits, as Dave will discuss later. Given our solid financial performance and prudent balance sheet management, our capital ratios remain very strong with a total risk-based capital ratio of 16.13% and a TCE ratio of 9.72%. Given our high level of capital during the quarter, we repurchased $1.1 million of shares at prices below tangible book to further build value for our shareholders. With that, I'll turn the call over to Dave Bonicorso to discuss our financial results in greater detail.

Thanks, Tim. Good morning, everyone. We had net income of $7.5 million in the third quarter or 47 cents per share. This was significantly higher than the prior quarter which included the impact of the loss on security sales we had as part of our balance sheet repositioning. Stripping out some of the noise though, our pre-tax pre-provision net income increased by 28% on a sequential quarter basis and confirms the enhancements we've made to our core earning stream. Our net interest income increased from the prior quarter to $28.2 million primarily due to a higher balance of average earning assets as well as the 17 basis point increase in our asset yield. Although our cost of deposits increased just one basis point during the quarter and negatively impacted net interest margin, our spot cost of deposits declined four basis points during the quarter to finish at 1.25%. And we've seen a further decline in our spot cost of deposits to 1.24% as of October 23rd. Though Fed funds rate cuts resume later in the year than many forecasters expected, We have made targeted cuts to deposit rates throughout the year, as well as larger cuts in response to the September Fed Fund's rate cut, which has resulted in a 15 basis point decline in our cost of deposits year over year. We are well positioned to continue to reduce deposit costs going forward in line with the expectation of additional Fed Fund rate cuts over the remainder of the year, which will contribute to margin expansion. Our non-interest expense was down slightly from the prior quarter with small reductions in a number of areas. Moving to non-interest income, setting aside the securities losses, we had a decline of $370,000 during the quarter that is mostly attributable to a bully death benefit paid in Q2. Discipline credit management remains a hallmark of Bank of Moran as well. Due to the improvement we saw in asset quality in our loan portfolio and the substantial level of reserves we have already built, we did not require any provision for credit losses in the third quarter, and our allowance for credit losses remains strong at 1.43% of total loans. Overall trends in our level of problem assets reflect our proactive and conservative approach to credit management, where we are aggressive to downgrade and cautious to upgrade. Due to the improvement we saw in the performance of some borrowers, we had a number of upgrades during the third quarter that resulted in a reduction in non-accrual and classified loans. Subsequent to quarter end, an additional $3.6 million in non-accrual loans paid off in full, including interest and fees. Given the continued strength of our capital ratios, our board of directors declared a cash dividend of $0.25 per share on October 23rd, the 82nd consecutive quarterly dividend paid by the company. With that, I'll turn it back over to you, Tim, to share some final comments.