Bank of Marin Bancorp

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 GAAP and non-GAAP measures. Additionally, the discussion on the call is based on information we knew as of Friday, January 23, 2026, 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, Christy. Good morning, everyone, and welcome to our quarterly earnings call. We are very excited that our execution in the fourth quarter across a number of key areas resulted in continued positive trends for core profitability metrics, loan and deposit growth, effective expense management, and improved credit quality. We completed a balance sheet restructuring during the quarter that did result in a net loss, but meaningfully improved net interest margin and net interest income while we maintained strong capital levels due to a targeted approach to security sales and a successful subordinated debt offering. Before Dave goes into more detail about the restructuring and its benefits, I'd like to discuss our fourth quarter highlights related to loan and deposit growth and asset quality improvements. During the quarter, our total loan originations were $141 million, including $106 million funded, with over 90% of that activity in commercial loans. This was one of our strongest quarters in the past decade. Our originations were a more diversified and granular mix across commercial banking categories, geographies, industries, and property types, and we are seeing a healthy increase in commercial real estate loan demand that meets our discipline underwriting standards. Our overall loan growth, although quite robust, was offset moderately by $50 million in payoffs during the quarter, predominantly within non-owner-occupied commercial real estate and residential real estate. For the full year, we originated $374 million in new loans, including $274 million funded, which was 79% higher than the prior year. Our banking team continues to develop attractive lending opportunities and bringing new, deeply rooted relationships to the bank, including in key growth markets such as the greater Sacramento area. While we continue to navigate a competitive market environment on pricing and structure, we have attracted a significant amount of new client relationships while maintaining our discipline underwriting and pricing criteria. Our total deposits increased during the fourth quarter due to a combination of increased balances from long-time clients, as well as continued activity bringing in new relationships. The rate environment remains competitive and clients do remain rate sensitive, however, they continue to bank with us for our service levels, accessibility, and commitment to our communities, allowing us to continue reducing our cost of deposits by 10 basis points while growing our deposit base. Proactive credit management led to improved credit quality trends this quarter, driven by borrower upgrades, reflecting strong financial performance and successful targeted loan workout efforts. Classified loans declined 35% quarter over quarter, decreasing to 1.5% of total loans from 2.4% in the prior quarter. Non-accrual loans also improved, declining 14% to 1.3% of total loans compared with 1.5% in the prior quarter. Past few loans decreased significantly as well in the quarter, reaching the lowest level since the fourth quarter of 2023. With that, I'll turn the call over to Dave Bonacorso to discuss our financial results in greater detail. Thanks, Tim.

Good morning, everyone. As Tim mentioned, the balance sheet repositioning we completed in the middle of the fourth quarter is performing as expected, with contributions to profitability metrics already flowing through during the quarter. On a 12-month basis from the time of execution, we expect approximately 40 cents of earnings per share accretion and 25 basis points of net interest margin left. Regarding the structure of the repositioning, While we transferred the entire held to maturity portfolio to available for sale, we only sold 74% of the legacy held to maturity portfolio as we sought to optimize the level of incremental income on reinvestment relative to the realized loss on the securities sale, which impacted our capital ratio. Through this optimization, we were able to replenish capital using only subordinated debt, which avoided the dilution to earnings per share that a common stock issuance would have created. As a result of the losses on security sales, we had a net loss of $39.5 million in the fourth quarter, or $2.49 per share, which was attributable to the $69 million loss that we recorded related to the securities portfolio repositioning in the fourth quarter. On a non-GAAP basis, excluding the loss in the securities portfolio repositioning, our net income was $9.4 million, or $0.59 per share. Non-GAAP pre-tax pre-provision net income increased 31% over the quarter and 51% over the year. Our net interest income increased from the prior quarter to $31.2 million due to balance sheet growth as well as higher investment security yields and reduced deposit costs. Loan yields also benefited from $667,000 of recovered interest from the payoff of a non-accrual relationship. Based on current market expectations for 25 to 50 basis points of easing the Fed funds rate during 2026, we will remain prepared to make targeted deposit cost reductions, which we believe will continue to contribute to margin expansion. Moving to non-interest income, setting aside the securities losses, most areas of fee income were relatively consistent with the prior quarter. Our non-interest expense increased by $100,000 from the prior quarter. While salaries and employee benefits declined in the fourth quarter due to incentive bonus and profit-sharing accrual adjustments, in the first quarter, we expect this category to be elevated due to seasonal salary and benefit accrual resets, including payroll taxes, incentive compensation accruals, and 401k matching. Similar to last year, in the first quarter, we also expect to complete the majority of our annual charitable giving. Due to the improvement in asset quality in our loan portfolio and the substantial level of reserves we have already built, we had just a minor provision for credit losses in the fourth quarter, and our allowance for credit losses remained strong at 1.42% of total loans. Given the continued strength of our capital ratios, our board of directors declared a cash dividend of $0.25 per share on January 22nd, the 83rd consecutive quarterly dividend paid by the company. With that, I'll turn it back over to you, Tim, to share some final comments.