Bank of Marin Bancorp Q1 Earnings Call Highlights
by Doug Wharley · The Cerbat GemBank of Marin Bancorp (NASDAQ:BMRC) reported first-quarter 2026 results that management said reflected improvement across profitability, net interest margin, loan production, and credit quality following prior balance sheet repositioning efforts.
Quarterly results show higher earnings and margin expansion
President and CEO Tim Myers said the company’s “execution in the first quarter across a number of key areas resulted in continued improvement in year-over-year profitability metrics, loan production, net interest margin expansion, and improved credit quality.” Compared with the first quarter of 2025, Myers said net income and earnings per share increased 75% and 77%, respectively.
Chief Financial Officer Dave Bonaccorso reported net income of $8.5 million, or $0.53 per share. He said net interest income rose to $30.3 million from the prior quarter, driven by “average balance sheet growth and higher investment security yields and reduced deposit costs,” along with what he described as positive churn in the loan portfolio.
The company’s net interest margin increased 6 basis points sequentially and 47 basis points year over year, according to Myers. Bonaccorso added that the sequential change included the impact of a fourth-quarter recovery of interest and fees on a paid-off non-accrual loan relationship that did not repeat in the first quarter. In response to an analyst question, Bonaccorso said the fourth-quarter interest recovery was about $667,000 and confirmed there was no similar item in the first quarter.
Bonaccorso also cited a headwind during the quarter tied to the expansion of a “deposit relationship with a relatively high cost.” He said the bank moved a portion of those funds off balance sheet at quarter-end to take advantage of “a relatively high One-Way Sell rate,” which he said boosted overall net income and contributed to non-interest income, and noted the opportunity persisted into the second quarter.
Loan production improves; portfolio mix shows slight tilt toward C&I
Myers said the bank originated $81 million in new loans during the quarter, with $61 million funded, representing “an almost 30% increase over the prior year’s period.” He described the first quarter as seasonally slower but said additional hires, “generally favorable economic conditions” in the bank’s markets, and higher commercial real estate demand contributed to what he called the strongest first-quarter production in a number of years.
He said new loan production was “roughly in line with our existing portfolio with a slight skewing towards C&I.” In a later exchange, Myers reiterated his desire to increase the proportion of C&I over time, while noting that new loan mix largely mirrored the overall portfolio, with a higher C&I share within that breakdown.
Bonaccorso provided additional details on loan repricing and turnover. He said new loan yields in the first quarter averaged 5.91%, compared with 5.51% on paid-off loans. He also said about 17% of the portfolio reprices over the next year and 34% over the next three years, and that the portfolio remains “a relatively low level of floating rate” loans at about 8%.
Management acknowledged ongoing payoff dynamics. Myers said payoffs in consumer-related loans remain elevated, primarily within acquired auto and mortgage portfolios, and noted that those loans had been among the higher-yielding categories. Still, he said the net interest margin benefited because new loans came onto the books at rates about 40 basis points higher than payoffs.
Credit quality improves after sale of non-accrual loans
Management highlighted credit quality improvements tied to purposeful exits. Myers said the bank sold “our longest tenure classified and non-accrual loans totaling $16.3 million,” which he said had been downgraded to substandard in 2021 and moved to non-accrual in 2024. Myers said the bank had taken $7.3 million in specific reserves based on property valuations, and that sale proceeds “validated our reserve assumptions with the charge-offs equaling the specific amounts reserved.”
Following the sales, Myers said non-accrual loans declined from 1.27% of assets to 0.41%, and the ratio of classified to total loans decreased from 1.51% to 0.85%. He added that, after the note sales, “virtually all of the remaining non-accrual balances are comprised of one non-owner occupied commercial real estate loan” and said the bank has “no loss expectations based on underlying valuation and cash flow.”
Bonaccorso said the company recorded no provision for credit losses in the first quarter due to the improved asset quality and the level of reserves already built. He reported the allowance for credit losses remained at 1.08% of total loans, which he said management believes is appropriate following the sale of the non-performing loans.
Asked about another non-accrual credit referenced on prior calls, Myers described it as “completely different” from the loans sold. He said the remaining issue relates to a dispute over extension terms and is in a legal process, while reiterating that loan-to-value and debt service coverage metrics are adequate and that the bank does not have loss expectations for that credit.
Deposits rise; competitive pricing and repricing trends continue
Myers said total deposits increased in the first quarter due to higher balances from long-term clients and continued new relationship activity. He acknowledged that the deposit market remains competitive and that clients remain rate sensitive, but said service levels and accessibility have helped the bank “continue reducing our cost of deposits while growing our deposit base.”
In the question-and-answer session, Bonaccorso said management expects to continue targeted pricing adjustments “away from Fed cuts” and pointed to time deposit repricing as a contributor to lower costs, citing a 24 basis point sequential decline. Myers added that pressure on total deposit costs continues to be driven in part by large existing clients whose relationship rates have risen, and noted the bank has used One-Way Sells as part of its management approach.
Expenses rise seasonally; dividend declared; outlook emphasizes loan growth and fee initiatives
Bonaccorso said non-interest expense increased $2.5 million from the prior quarter, primarily reflecting higher salaries and employee benefits tied to seasonal resets and accruals, including payroll taxes, incentive compensation accruals, profit sharing, insurance, and 401(k) matching. He also said the first quarter included a higher level of annual charitable giving, which the company expects will represent almost 70% of total giving for 2026.
Bonaccorso said overall first-quarter non-interest expense was broadly in line with expectations. While charitable giving is expected to normalize later in the year, he said the company otherwise expects non-interest expense to remain near current levels as it continues investing in people and technology. He also highlighted FDIC insurance expense as an outlier in the quarter due to the balance sheet repositioning’s impact on leverage ratio, assessment factors, and tangible equity, which he said should normalize as repositioning benefits flow through.
On capital returns, Bonaccorso said the board declared a cash dividend of $0.25 per share on April 23, marking the company’s 84th consecutive quarterly dividend. Management also addressed share repurchases, with Myers saying the improved credit picture “brings us closer to having a comfort level” to revisit buybacks, though he said the company still wants to “earn our way back into a bit of a higher ratio” before potentially resuming repurchases.
Looking ahead, Myers said the bank continues to see stable economic conditions in its markets and described the loan pipeline as strong amid healthy demand. He said the company expects to generate solid loan growth in 2026 while continuing to grow deposits through new and expanded client relationships. He also pointed to priorities aimed at improving profitability through loan growth and increased fee income, including initiatives in treasury management, wealth management, and trust income, while emphasizing that the company is not focused on cutting costs to improve earnings.
On commercial real estate conditions, Myers said trends remain “very positive,” while differentiating between San Francisco office and other Bay Area markets. He said the bank did not experience the same level of value degradation in outer markets and described increased opportunism and purchasing activity, including development-related purchases, as a constructive sign for the market.
About Bank of Marin Bancorp (NASDAQ:BMRC)
Bank of Marin Bancorp is the bank holding company for Bank of Marin, a community-oriented financial institution headquartered in Novato, California. Through its subsidiary, the company provides a broad range of banking services to individuals, small and medium-sized businesses, and nonprofit organizations. Its operating philosophy emphasizes personalized service and strong local relationships across the San Francisco North Bay region.
The company’s core product offerings include deposit accounts such as checking, savings, money market and time certificates of deposit.