Q3 2025 Bank of Marin Bancorp Earnings Call
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 of day upon of course, though.
Our earnings news release, and supplementary presentation, which were issued this morning can be found in the Investor Relations section of our website at bank of Marin Dot 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 GAAP and non-GAAP 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, Masako, Stuart will be available to answer your questions and now I'd like to turn the call over to Tim Myers.
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 than 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.
<unk> 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 disciplined 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 quarters payoffs included the proactive work out of the $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 very 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 remained very strong with a total risk based capital ratio of 16, one 3% and a TCE ratio of 972%.
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 <unk> to discuss our financial results in greater detail.
Thanks, Tim.
Everyone.
We had net income of $7 $5 million in the third quarter or <unk> 47 per share.
This was significantly higher than the prior quarter, which include 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 earnings stream.
Our net interest income to increase from the prior quarter to $28 $2 million, primarily due to a higher balance of average earning assets as well as a 17 basis point increase in our asset yields.
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 two 4% as of October 23.
So fed funds rate cuts resume later in the year than many forecasters expected, we've made targeted cuts to deposit rates throughout the year as well as larger cuts in response to the September fed funds rate cuts, 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 noninterest expense was down slightly from the prior quarter with small reductions in a number of areas.
Moving to noninterest income setting aside the securities losses, we had a decline of $370000. During the quarter that is mostly attributable to a bully death benefit paid in Q2.
Disciplined credit management remains a hallmark of bank of marine as well.
Due to the improvement we saw in asset quality in our loan portfolio and a 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 143% of total loans.
Overall trends in our level of problem assets reflect our proactive and conservative approach to credit management, but 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 nonaccrual and classified loans.
Subsequent to quarter end, an additional $3 $6 million in nonaccrual 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 25 per share on October 23, 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.
Okay.
In closing we believe we are very well positioned for continued improvements in our core financial performance in areas, including balance sheet growth net interest margin expense management and asset quality.
While broadly there is economic uncertainty our credit quality continues to improve and our loan demand remains healthy.
Our loan pipeline remains strong and we expect to generate solid loan production in the fourth quarter.
Speaker #1: 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 nonaccrual and classified loans.
While we always tightly manage expenses. We will also continue to take advantage of opportunities to add banking talent and enhance efficiency a few technology now.
Speaker #1: 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 .
We believe will help support the continued profitable growth of our franchise into the future.
With the strength of our balance sheet. We believe we are very well positioned to increase our market share at attractive new client relationships and further enhance the value of our franchise in 2025 and beyond.
Speaker #1: The 82nd consecutive quarterly dividend was paid by the company. With that, I'll turn it back over to you, Tim, to share some final comments.
With that I want to thank everyone on today's call for your interest and your support.
Speaker #1: Thank you, Dave. In closing, we believe we are very well positioned for continued improvements in our core financial performance in areas including balance sheet growth.
Okay.
If you would like to ask a question. Please click on the raise hand button at the bottom of your screen. Once prompted please Amit your line and ask your question, we will now pause a moment to assemble the queue.
Speaker #1: Net interest margin, expense management, and asset quality. While broadly there is economic uncertainty, our credit quality continues to improve and our loan demand remains healthy.
Our first question will come from Matthew Clark with Piper Sandler Please on mute and ask your question.
Speaker #1: Our loan pipeline remains strong, and we expect to generate solid loan production in the fourth quarter. While we always tightly manage expenses, we will also continue to take advantage of opportunities to add banking talent and enhance efficiency through technology that we believe will help support the continued profitable growth of our franchise into the future.
Hey, good morning.
Good morning, Matt.
Yeah.
I'm sure you're getting tired of being asked this question, but what are your latest thoughts on HTM securities loss trade.
Given all your capital.
Well Theres a lot of moving parts to consider we continue to evaluate all those moving parts, but no final decision has been met.
Speaker #1: With the strength of our balance sheet, we believe we are very well positioned to increase our market share through attractive new client relationships and further enhance the value of our franchise.
Okay.
And then just on.
Expenses going forward any updated thoughts on the run rate there and how should we think about.
Speaker #1: In 2025 and beyond. With that, I want to thank everyone on today's call for your interest and your support.
Seasonality and just.
The pace of growth Youre looking to manage to next year.
So I think Q4, probably looks quite a bit like Q3, what's historically been the wildcard for Q4, you mentioned seasonality.
Speaker #2: If you would like to ask a question, please click on the Raise Hand button at the bottom of your screen. Once prompted, please unmute your line and ask your question.
Q4 in recent years, we've had adjustments to.
Speaker #2: We will now pause for a moment to assemble the queue. Our first question will come from Matthew Clark with Piper Sandler. Please unmute and ask your question.
Payroll related items and yes.
So that's probably the wildcard this this year as well probably to a smaller degree in my estimation, but there are kind of puts and takes.
Speaker #3: Hey , good morning . Good morning Matt . I'm sure you're getting tired of being asked this question , but what are your latest thoughts on a TTM securities loss trade ?
On both sides and.
Overall, you can probably come in pretty close to where you where we were in Q3.
Okay, great. Thank you.
Speaker #3: Given all your capital ?
Speaker #1: Well, there are a lot of moving parts to consider. We continue to evaluate all those moving parts, but no final decisions have been made.
Hi.
Our next question will come from Jeff <unk> with D. A Davidson.
Thanks, Good morning, good morning.
Speaker #3: Okay . And then just on expenses going forward , any updated thoughts on the run rate there and how should we think about , you know , seasonality and just , you know , the pace of growth you're looking to manage to next year .
Data view.
You commented on.
The progress on the deposit costs and just kind of looking at the slide five you've got your rate sensitivity kind of signaling asset sensitive, but the reality is sounds like kind of pointing to.
Speaker #1: So I think Q4 probably looks quite a bit like Q3. What's historically been the wild card for Q4? You mentioned seasonality in Q4.
Further margin.
Expansion.
Could you and I guess absent maybe some interest and fees you might collect on.
Speaker #1: In recent years , we've had adjustments to payroll related items and so that's that's probably the wild card . This this year as well , probably to a smaller degree .
The subsequent non accrual payoff just the core margin and expectations ahead.
Speaker #1: In my estimation . But there are , you know , kind of puts and takes on both sides and overall , you probably come in pretty close to where where we were in Q3 .
Sure. So let me give you let me give you a three part answer the first one relates to what you're talking about on page five.
The traditional ALLL sensitivity. So historically, we've been pretty neutral, we typically talk about change of slightly asset sensitive or slightly liability sensitive this corner equally well every quarter, we do our <unk> mid quarter and at that point in time, probably had more cash than we that we finished the quarter.
Speaker #3: Okay, great. Thank you.
Speaker #2: Our next question will come from Jeffrey Lewis with D.A. Davidson.
Speaker #4: Thanks . Good morning . Dave , you you commented on the progress on the deposit costs and just kind of looking at the slide five , you've got your rate sensitivities , kind of signaling asset sensitive , but the reality is sounds like kind of pointing to further margin expansion .
And then as normal and so I think thats, adding to the asset sensitivity you see in that illustration.
Some of that has that has gone away.
In my estimation. So that's dimension one is the pure a L M sensitivity demur.
As I mentioned too is just pure napkin math and when you look at our floating rate liabilities, which is to say interest bearing non maturity deposits those are roughly $1 7 billion.
Speaker #4: Could you and I guess absent maybe some interest in fees, you might collect on the subsequent non-accrual payoff. Just the core margin, and expectations ahead.
And then look at our floating rate assets those are about $525 million between loans securities and interest, earning cash so the assets have a 100% beta and if you try to solve for what the beta needs to be on the liability side, you get to around 31% beta needed to breakeven and our cycle to date.
Speaker #1: Sure . So let me give you let me give you a three part answer . The first one relates to what you're talking about on page five .
Speaker #1: The traditional arm sensitivity . So historically , we've been pretty neutral . We typically talk about shades of slightly acid sensitive or slightly liability sensitive .
Non maturity interest bearing <unk>.
35%.
And we model, a 34% and Ral him run so I think that speaks to near term benefits from.
Speaker #1: This quarter . Well , every quarter we do our arm run mid-quarter . And at that point in time , we probably had more cash than we than we finished the quarter .
From rate declines does some of that.
Does drift or.
Speaker #1: And then as normal . And so I think that's adding to the asset sensitivity . You see in that illustration . But I think some of that has has gone away in my estimation .
Fade away over time, just because.
The way assets reprice overtime.
Then I guess the third dimension is just go instrument by instrument in the balance sheet, just working your way down cash of course, if you believe fed funds rate expectations, that'd probably be a drag down the road, but that's by far the smallest of the components Securities. We Havent Iaff's portfolio, It's Ben.
Speaker #1: So that's that's dimension one is the pure arm sensitivity . Dimension two is just pure napkin math . And when you look at our floating rate liabilities , which is to say interest bearing non maturity deposits , those are roughly 1.7 billion .
Fully repositioned or almost fully repositioned with a book yield of 444. So there's not much you can do there the HTM portfolio as a book yield of 240, and so we can reinvest cash flows off that portfolio at much higher rates, we expect about 76 or so million payoffs from that HTM portfolio in the next 12 months. So that gives you a sense of what could.
Speaker #1: And then, looking at our floating rate assets, those are about $525 million between loan securities and interest-earning cash. So the assets have a 100% beta.
Speaker #1: And if you try to solve for what the beta needs to be on the liability side, you get to around a 31% beta needed to break even.
Reprice there.
Speaker #1: And our cycle to date non maturity interest bearing beta been 35% . And we model 34% in realm run . So I think that speaks to near-term benefits from from rate declines .
And then on the loan side.
Year over year, we expect our loan yield on a monthly basis to be about 20 basis points higher September 26, compared to September 25.
So that's what the flat balance sheet and payoffs.
Payoffs at market rates, we had a three basis point increase this quarter, so that tracks with that and obviously, if we have loan growth on top of that that would give you some upside to the loan side.
Speaker #1: Though some of that does drift or fade away over time just because of the way assets reprice over time. And then, I guess the third dimension is just go instrument by instrument on the balance sheet.
And then on the deposit side.
Speaker #1: And it just working your way down . Cash . Of course , if you believe fed funds rate expectations , that will probably be a drag down the road .
We had the the.
Small increase this quarter, but.
Of course, the fed funds cut came in the last 10 or 15% a quarter or so.
Speaker #1: But that's by far the smallest of the component securities. We have an AFS portfolio that's been fully repositioned, or almost fully repositioned, with a yield of 4.44.
The benefit we got from that wasn't as large as it was translated over a full quarter our spot rate of deposits came down from 632 to 930, so that I think speaks to.
Speaker #1: So, there's not much you can do there. The ATM portfolio has a yield of 240, and we can reinvest cash flows off that portfolio at much higher rates.
Two the benefits, we're going to get from further cuts.
Speaker #1: We expect about $76 million of payoffs from that ATM portfolio in the next 12 months. So, that gives you a sense of what could reprice there.
Moving ahead, if they play out so that quick look at instruments.
Suggest that.
There's quite a bit of a benefit to NIM expansion.
Speaker #1: And then on the loan side, year over year, we expect our loan yield on a monthly basis to be about 20 basis points higher.
In a falling rate environment.
Speaker #1: September 26th compared to September 25th. So that's what the flat balance sheet and payoffs at market rates. We had a 3 basis point increase this quarter.
That sounds good I appreciate it sounds fairly positive, but maybe the linked quarter.
Still some flow through from the securities restructure, but kind of core it seems like it's got some positive so I appreciate the detail.
Speaker #1: So that tracks with that. And obviously, if we have loan growth on top of that, that would give you some upside to the loan side.
Maybe if I just hopped to credit that also sounds.
Speaker #1: And then on the deposit side, we had a small increase this quarter. But of course, the Fed funds cut came in the last 10 or 15% of the quarter.
Barely positive.
Movie timber masako just.
The upgrades is that a function of.
Some rate relief early on as a better occupancy maybe just overall CRE improvement if you could speak to the or maybe it's project specific.
Speaker #1: So, the benefit we got from that wasn't as large as it was translated over a full quarter. Our spot rate of deposits came down from $630 million to $930 million.
Love to check in on that.
Speaker #1: So that I think speaks to to the benefits we're going to get from further cuts moving ahead . If they play out so that that quick look at instruments suggests that there's quite a bit of of benefit to Nim expansion in a in a falling rate environment .
Yeah, I think you'd be talking about the classified upgrades. It was a mix of what you just said, Jeff there was improved leasing activity on multifamily and San Francisco that got us above.
Our requisite debt coverage ratio.
And then there was another property that had been burned down and one of the fires that finally got construction.
Speaker #4: That sounds good . I appreciate it . Sounds fairly positive , but you know , maybe the link quarter , you know , a lot of still some flow through from the securities restructure .
<unk> started so theirs and insight or a light at the end of the tunnel for a repayment source.
But it's all been idiosyncratic I mean overall, we are seeing improved leasing activity in San Francisco again, the other markets have held up fine.
Speaker #4: But kind of core seems like it's got some positives. So I appreciate the detail. Maybe if I just hop to credit, that also sounds fairly positive.
But the the upgrades were idiosyncratic.
And Jamie.
So I guess, if you roll forward. These appraisals to I know that on the larger credit you had a recent one maybe last quarter and that was year over year positive is that is that a trend that youre continuing to see into the third quarter.
Speaker #4: Maybe Tim or Misako , just the the upgrades . Is is that a function of of of some rate relief early on ? Is a better occupancy maybe just overall CRE improvement ?
Speaker #4: If you could speak to the... Or maybe it's project-specific; we'd love to check in on that.
Yes, I mean, we haven't done those same kind of appraisals on those same properties, but I do use we are seeing valuations improve.
Speaker #1: Yeah. I think if you talked about the classified upgrades, it was a mix of what you just said, Jeff. There was improved leasing activity on multifamily in San Francisco that got us above the requisite debt coverage ratio.
In San Francisco, the magnitude of that over time, it's really hard to say, but we are seeing valuations come off yes.
Okay and last is just the 30 to 89 day bucket increases debt largely procedural or is it just.
Speaker #1: And then there was another property that had been burned down in one of the fires that finally got, you know, construction started.
Against specific credits anything that touch on with that move.
Speaker #1: So there's an end in sight, or light at the end of the tunnel for repayment. Source. But it's all been idiosyncratic.
You already know that as procedural things that needed to be extended or in the process of that negotiating and so these are not recent people not paying us it's getting lines mature or extended.
Speaker #1: I mean , overall , we are seeing improved leasing activity in San Francisco . Again , the other markets have held up fine , but the upgrades were idiosyncratic .
Fair enough. Thanks, good luck.
Speaker #4: And Tim , you've you know , as I guess if you roll forward these appraisals to I know on the larger credit you had a recent one maybe last quarter and that was year over year positive .
Your next question will come from what do you like with K B W.
Hey, good morning, guys.
Speaker #4: Is that a trend that you continue to see into the third quarter?
Wanted to follow along on the line of thinking there.
Speaker #1: Yeah, I mean, we haven't done those same kind of appraisals on those same properties. But I do think we are seeing valuations improve in San Francisco.
It feels like we're seeing much more positive headlines come out of the Bay area and it feels like there Matt.
Macro momentum.
Speaker #1: You know , the magnitude of that over time . It's really hard to say . But we are seeing valuations come up . Yes okay .
Play with you now.
Tailwind in political impacts.
Are you seeing that optimism carryover tier one demand.
Speaker #4: And last is just the 30 to 89-day bucket increases that are largely procedural. Or is it just, again, specific credits? Anything to touch on with that move?
I think we are we at a higher proportion of investors CRE. This quarter, because I do think people are coming back into the market. Although that the property types are really diverse there are markets, where a diverse set.
Speaker #1: No. You already nailed it. It's procedural things that needed to be extended or are in the process of negotiating. And so these are not increases in people not paying us.
Incremental continues to continues to be a big area of our growth and so.
Speaker #1: It's getting lines mature or extended.
$20 million north of $20 million of our deals this quarter were CRA related with some affordable housing. So I don't really attribute that to that same kind of trend in San Francisco.
Speaker #4: Fair enough . Thanks .
Speaker #2: Your next question will come from Woody Lei with KBW.
Speaker #4: Hey good morning guys .
We are seeing increased activity if you look at our construction team finding.
Speaker #5: Wanted to follow along on the line of thinking there . And you know , it feels like we're seeing much more positive headlines come out of the Bay area and it feels like there's macro momentum at play with , you know , AI tailwinds and political impacts .
Financing developers a lot of those projects are in San Francisco over immediately around and we're seeing a higher degree of interest and activity on their part that takes some time to translate into.
Outstandings, but I would say that's a fair statement as well.
Speaker #5: Are you seeing that optimism carry over to your loan demand?
Got it and then anything to note on the loan competition side I feel like we've been hearing a lot about.
Speaker #1: I think we are. We had a higher proportion of investors in commercial real estate (CRE) this quarter because I do think people are coming back into the market, although the property types are really diverse.
Intense pricing competition or are you seeing that as well and anything to note on the structural side.
For high quality deals, yes pricing competition is aggressive.
Speaker #1: There . Markets were diverse . Sacramento continues , continues to be a big area of our growth . And so probably 20 million north of 20 million of our deals this quarter were CRA related , with some affordable housing .
We are also seeing a return of the nonrecourse.
Through our best not to participate in that and only do and we have enough. Other things we could do to mitigate those risks. So it's rare for us, but we are seeing a return of that degree of competition yes.
Speaker #1: So I don't really attribute that to that same kind of trend in San Francisco . But we are seeing increased activity . If you look at our construction team , you know , financing developers , a lot of those projects are in San Francisco or immediately around .
Got it and then last for me.
It feels like we're seeing tailwind the NIM.
We're seeing loan growth move a little bit higher continued expense management, we saw a really nice profitability inflection in the third quarter, just how do you think about.
Speaker #1: And we're seeing a higher degree of interest and activity on their part. That takes some time to translate into outstandings. But I would say that's a fair statement as well.
Continued positive operating leverage from here.
Speaker #5: Got it. And then anything to note on the loan competition side? I feel like we've been hearing a lot about intense pricing competition.
So I'll start on the growth aspect of it and they can jump in on any margin comments, but you know you heard his comments on the NIM expansion built into the balance sheet today, I think that can really help us.
Speaker #5: Are you seeing that as well? And is there anything to note on the structural side?
We are seeing a continue continuation of the loan growth.
Speaker #1: For high quality deals , yes . Price and competition is aggressive . We are also seeing a return of the non-recourse . You know , we do our best not to participate in that .
The pipeline was bigger at the start of this quarter than last quarter and that was a great quarter and so you know there's really not a lot controllable in the payoffs area, but if we can continue to out run that and accelerate that further.
Speaker #1: And only do when we have enough other things we could do to mitigate those risks. So it's rare for us, but we are seeing a return of that degree of competition.
New hire we have a new hire in Sacramento.
Speaker #1: Yes .
That we expect to add be additive to this effort and so there's a lot of traction internally obviously externally.
Speaker #5: Got it . And then last for me , it feels like we're seeing tailwinds to the Nim . We're seeing loan growth move a little bit higher , continued expense management .
<unk> generated two to keep the growth rate going.
Positive fluctuate and as Dave mentioned, that's really hard to predict all the seasonality of the inflows and outflows, but I do think the key trends there.
Speaker #5: You know, we saw a really nice profitability inflection in the third quarter. Just how do you think about continued positive operating leverage from here?
We expect them to continue.
And that's obviously first and foremost comment on margins at all or.
Speaker #1: So I'll start on the growth aspect of it, and Dave can jump in on any margin comments. But, you know, you heard his comments on the expansion built into the balance sheet today.
Nothing else to add on the margin, but just you know one other thing to mention on expenses year to date 2025 versus 2024, our expenses are only up.
Speaker #1: I think that can really help us . We are seeing a continued continuation of the loan growth . The pipeline was bigger at the start of this quarter than last quarter , and that was a great quarter .
90 basis points. So I think it speaks to the ability to scale without adding a lot to the expense base.
Alright, well I appreciate you all taking my questions.
Speaker #1: And so , you know , there's really not a lot controllable in the payoff area . But if we can continue to outrun that and accelerate that further , we've got new hires .
Thank you Mike.
As a reminder, if you would like to ask a question. Please click on the raise hand button at the bottom of your screen.
Speaker #1: We have a new hire in Sacramento that we expect to add, you know, be additive to this effort. And so there's a lot of traction internally.
And our next question will come from Andrew <unk> with Stephens.
Yeah.
Hey, good morning.
Sure.
Speaker #1: Obviously externally being generated to to keep the growth rate going . You know , deposits fluctuate . And as Dave mentioned that's really hard to predict .
Alright, Hey, maybe just start with Dave.
Thanks for the color on the spot deposit cost I think you mentioned October 1.24% total October 23rd do you have the equivalent interest bearing costs on that day.
Speaker #1: All the seasonality of the inflows and outflows. But I do think the key trends there are we expect them to continue. And that's obviously, first and foremost, a comment on the margins.
Give me a moment.
Actually give me very quick comment.
Speaker #1: They're nothing else on margin , but just one other thing to mention on expenses . Year to date , 2025 versus 2024 . Our expenses are all up 90 basis points .
It's a 2018.
Speaker #1: So I think it speaks to the ability to scale without adding a lot of the expenses.
That's okay.
Okay.
Non maturity interest bearing to 11.
Speaker #4: Yeah .
Got you, Okay, Yeah, and I guess, where I was going to go with that is it looks like you know.
Speaker #5: All right. Well, you taking my questions.
Speaker #1: Thank you .
Speaker #2: As a reminder, if you would like to ask a question, please click on the right-hand button at the bottom of your screen.
I understand that you know.
Growth.
It seems like later in the quarter.
Speaker #2: And our next question will come from Andrew Turel with Stephens.
At a higher cost somewhat impeded what all else equal is kind of a good repricing story later in the quarter and early into October and I guess I just wanted to get a sense for incremental new money as it's coming on the balance sheet.
Speaker #6: Hey , good morning .
Speaker #1: Andrew .
Speaker #6: Maybe just start with Dave. Thanks for the color on the spot deposit cost. I think you mentioned October 1, 1.24% total. October 23rd.
Is it coming on similarly price overall to your overall deposit franchise right now just given you're starting at a low base.
Speaker #6: Do you have the equivalent interest-bearing costs on that day?
I'm trying to get a better sense of what it is.
Speaker #1: Give me a moment. I'll actually give me a very quick moment. It's 2:18. That's... that's.
35%.
Interest bearing beta is kind of a good frame of reference to use.
Given us on a static balance sheet or once we factor in you know new money being brought in a potentially higher rates.
Speaker #6: Totally okay .
Somewhat empty at the beta there we're kind of looking for.
Speaker #1: Maturity, interest bearing, $211 million. Yep.
Well I think part of the story this quarter was that we had growth from existing accounts that made up a pretty big chunk of it and so.
Speaker #6: Gotcha . Okay . Yeah . And I guess so where I was going to go with that is it looks like , you know , I understand that , you know , growth seems like later in the quarter at a higher cost , somewhat impeded what all else equal was kind of a good repricing story later in the quarter and early into October .
So it is it's new money technically, but its not new relationships I'd say and and of course, we encourage our existing customers to to bring more to the bank, but but in terms of what were what would be new flows I'd say, it's not dissimilar from from our overall cost I mean, we're not.
Speaker #6: And I guess I just wanted to get a sense for incremental new money as it's coming on the balance sheet. Is it coming on?
Speaker #6: Similarly priced overall to your overall deposit franchise right now , just given you're starting at a low base ? I'm , I'm trying to get a better sense of whether this , you know .
We're not chasing high cost money, that's never really been part of what we do so.
For that reason I think I think the estimate is.
Debate estimate you've talked about is still still makes sense to me theres nothing that would make me think otherwise yes. If you look at the growth in deposits by customer the largest chunk of growth came from those customers with the longest tenured relationships. So you have to be careful in how you incur.
Speaker #6: 35% interest bearing beta is is kind of a good frame of reference to use given it's on a static balance sheet . Or once we factor in , you know , new money being brought in and potentially higher rates , if that could , you know , somewhat impede the beta that we're we're kind of looking for .
Encouraging them to bring over more funds are fairly compensate them, yes, new money came on at a slightly higher rate, but overall.
Speaker #1: Well, I think part of the story of this quarter was that we had growth from existing accounts that made up a pretty big chunk of it.
Speaker #1: And so , so it's new money technically , but it's not new relationships . I'd say . And and of course , you know , we encourage our existing customers to , to bring more to , to the bank .
Continue to get a nice inflow of noninterest bearing to help offset that.
Yeah, Yeah got you yeah, good problem to have him.
I wanted to ask about the buyback it looks like you were somewhat active this quarter.
Speaker #1: But but in terms of what we're what would be new flows , I'd say it's not dissimilar from , from our overall costs .
Stock's up a bit but you've also got really strong capital as well just.
Speaker #1: I mean , we're not we're not chasing high cost money . That's never really been part of what we do . So , you know , for that reason , I think , I think the estimate is the beta estimate you talked about is still still makes sense to me .
Thank you there are puts and takes on the buyback should we assume youre still going to be active going forward.
Well I'm always comes with a big caveat of the potential uses of capital right. So we certainly did that when we're trading below tangible book, we think that always makes sense for our shareholders, but we do continue to as Matthew asked.
Speaker #1: There's nothing that would make me think otherwise. Yeah. If you look at the growth in deposits by customer, the largest chunk of growth came from those customers with the longest tenured relationship.
Explore the potentiality of further balance sheet restructurings, and that's obviously, a big use of capital and so we wanted to make sure we're being sensitive to those various options in.
Speaker #1: So, you know, you have to be careful in how you, you know, encourage them to bring over more funds and fairly compensate them.
Speaker #1: Yes, new money came on at a slightly higher rate, but overall we continue to get a nice inflow of noninterest-bearing deposits to help offset that.
The next few quarters, obviously, we will see how the market plays out.
Our intent is to.
To make the right decision for the broadest slot to shareholders bond sport.
Speaker #6: Yeah , yep . Gotcha . Yeah . Good problem to have too . I want to ask about the the buyback because like you were , you know , somewhat active this quarter .
Yes, Okay, and then last for me I know you mentioned the pipeline coming into the fourth quarter was <unk>.
Speaker #6: The stock's up a bit. But you've also still got, you know, really strong capital as well. Just, you know, thinking through the puts and takes on the buyback.
Greater than that going into the third quarter are you able to quantify the change in the pipeline.
No.
And I appreciate the question, but as you know we don't give guidance, but we are expecting at this point in time a quarter similar to what we just experienced.
Speaker #6: Should we assume you're still going to be active going forward?
Speaker #1: Well, that always comes with a big caveat of the potential uses of capital. Right? So, we certainly did that when we were trading below tangible book.
Yeah.
Okay.
Fair enough okay. Thank you.
Speaker #1: We think that it always makes sense for our shareholders. But we do continue to, as Matthew asked, explore the potentiality of further balance sheet restructurings.
Yeah.
Your next question will come from David Feaster with Raymond James.
Speaker #1: And that's, you know, obviously a big use of capital. And so we want to make sure we're being sensitive to those various options.
David you Ma'am your line and ask your question.
Hey, good morning.
Speaker #1: And , you know , the next few quarters , obviously we'll see how the market plays out . But we our intent is to , you know , make the right decision for the broadest swath of shareholders possible .
David.
I just kind of wanted to follow up on on that kind of the I guess the pipeline to some degree you know just just you know looking at your originations originations are up really nicely quarter over quarter. It seems like an increasing contribution from from C&I has the complexion of your pipeline chain.
Speaker #6: Yep. Okay. And then, last for me, I know you mentioned the pipeline coming into the fourth quarter was greater than that going into the third quarter.
Changed at all.
Speaker #6: Are you able to quantify the change in the pipeline?
Kind of curious where you're seeing the most opportunities for growth near term.
Speaker #1: No , I appreciate the question . But as you know , we don't give guidance . But we are expecting at this point in time , a quarter similar to what we just experienced .
It is really dispersed David so I would say the prior quarter had a higher component of C&I.
This quarter had a lot of.
Commercial real estate.
With some unfunded component so the unused commitments made it look like that that was C&I, but honestly.
Speaker #6: Fair enough. Okay. Thank you.
Speaker #2: Your next question will come from David Feaster with Raymond James. David, you may unmute your line and ask your question.
It was pretty CRE oriented at this time.
It's coming across the footprint. If you look at the lending groups that are doing the best are primarily centered in the North Bay Moran Napa.
Speaker #4: Hey , good morning .
Speaker #1: Good morning David .
Speaker #4: I just kind of wanted.
Speaker #7: To follow up on on that kind of the I guess , the pipeline to some degree , you know , just just , you know , looking at your originations , originations are up really nicely quarter over quarter .
But a lot of the growth, meaning where those deals are at a lot of that sounds Sacramento and so you know people falling relationship. So we're seeing a really nice again disbursement of effort of opportunity.
Speaker #7: It seems like an increasing contribution from CNI. Has the complexion of your pipeline changed at all? And I’m just kind of curious where you're seeing the most opportunities for growth in the near term.
<unk> had a really nice component of CRA and affordable housing this time, and so which which is somewhat unique compared to prior quarters. So it really has been very.
Speaker #1: It is really dispersed, David. So, I would say the prior quarter had a higher component of CNI; this quarter had a lot of commercial real estate with some unfunded components.
<unk> diverse.
Okay. That's great and you know you talk about some new you talked about the the hire that you made in Sacramento.
Speaker #1: So the unused commitments made it look like that . That was CNI , but honestly , it was pretty CRA oriented this time .
As well as some some tweaks to maybe comp programs and calling programs that you referenced in the deck did you I guess could you a first off touch on on your hiring appetite.
Speaker #1: It really is coming across the footprint. You know, if you look at the lending groups that are doing the best, they're primarily centered in the North Bay.
Is there an appetite for additional hires and what kind of lenders or are you looking for and then could you just maybe give some detail on as to the extent that you can on the change in the comp program and the calling programs that you guys have made.
Speaker #1: Marin, Napa. But a lot of the growth, meaning where those deals are at, a lot of that’s out in Sacramento.
Yeah. So we are.
Speaker #1: And so people fall in relationships. So we're seeing a really nice, again, disbursement of effort and opportunity. Had a really nice component of CRA.
As you noted made another higher in Sacramento following hiring a new regional leader the prior quarter. So we expect activity to pick up considerably in that region.
Speaker #1: And affordable housing this time. And so, which is somewhat unique compared to prior quarters. So, it really has been very diverse.
We'll look to make opportunistic hires throughout the footprint, we think that makes sense and the people. We're hiring has done a really good job for us and so that has a contagious effect of activity activity begets more activity. So if you ask about.
Speaker #7: Okay . That's great . And you know , you talk about some new you talk about the higher that you made in Sacramento as well as some some tweaks to maybe comp programs and calling programs that you referenced in the deck .
I'll kind of reverse the order of your the last part of your question much more active calling.
If you look at.
Speaker #7: Could you , I guess , could you a first off touch on on your hiring appetite , is there an appetite for additional hires and what kind of lenders are you looking for ?
Years ago, when we had really you know a few years ago compared to a higher production year.
Most of that came out of the existing portfolio.
Speaker #7: And then could you just maybe give some detail on the extent that you can on the change in the comp program and the calling programs that you guys have made?
Or a handful of people one or two people now.
Is almost entirely new customers in some cases existing but from a much more active calling the activity base and so David Bloom head of commercial banking has been very active in managing our sales process weekly.
Speaker #1: Yeah. So, as you noted, we made another hire in Sacramento following the hiring of a new regional leader in the prior quarter.
Speaker #1: So, we expect activity to pick up considerably in that region. We will look to make opportunistic hires throughout the footprint. We think that makes sense.
Weak with sales calls with everybody you know blocking and tackling.
And the people, we're hiring are used to and capable of operating within that so no I'm.
Speaker #1: And the people we're hiring have done a really good job for us. And so, you know, that has a contagious effect of activity.
I'm not totally sure of the comp plan is that dramatically different it's aimed at and sending the right behavior.
Certainly doesn't go to the length of some of our former competitors on how they pay people, but it is it is designed to incent.
Speaker #1: Activity begets more activity. So if you ask about, I'll kind of reverse the order of the last part of your question: much more active calling.
The right behavior, and so we're seeing all of that sort of come together, it's been a little while in the making but we're starting to get a lot of traction.
Speaker #1: If you look at a couple of years ago when we had really , you know , a few years ago compare it to a higher production year , most of that came out of the existing portfolio or a handful of people , 1 or 2 people now it is almost entirely new customers .
Okay. That's helpful.
And then I know I mean, payoffs and paydowns have been a headwind across the industry.
And I know, it's just kind of curious what you guys are seeing on that front how much of that is we just we touched on the comp the competitive landscape.
Speaker #1: In some cases, existing, but from a much more active calling activity base. And so, David Bloom had a commercial banking that has been very active in managing a sales process.
Then you've got natural asset sales and some of those kinds of things, but just looking at the payoffs and pay downs that you've seen just kind of curious how much of it is is maybe again, losing deals to do another bank.
Speaker #1: Weekly sales calls with everybody, you know, blocking and tackling. And the people we're hiring are used to and capable of operating within that.
Versus natural asset just payoffs and paydowns in asset sales and those kinds of things versus strategic deleveraging.
Speaker #1: So, you know, I'm not totally sure the comp plan is that dramatically different. It's aimed at incenting the right behavior.
Speaker #1: Certainly doesn't go to the lengths of some of our former competitors , you know , and how they paid people . But it is it is designed to incent , you know , the right behavior .
I think part and parcel to getting a more active.
Lender program activity is managing relationships as well so.
Speaker #1: And so we're seeing all that sort of come together. It's been a little while in the making, but we're starting to get a lot of traction.
$24 million in commercial loan payoffs last quarter only two of that came from third party refinance and David So four was related assets.
Speaker #8: Okay . That's helpful .
Speaker #7: And then I know , I mean payoffs and paydowns have been a headwind across the industry . And I know it's , you know , just kind of curious what you guys are seeing on that front .
<unk> 10 was just cash deleveraging.
People are just paying off debt with cash.
We had about a $7 million of workout that we pushed out which was a good thing.
Speaker #7: You know , how much of that is , you know , we just we touched on the comp , the competitive landscape . You know , then you've got natural asset sales and some of those kinds of things .
And we mentioned that in the release, but again only $2 million in the quarter came from losing money to another bank.
Speaker #7: But just looking at the payoffs and paydowns that you've seen , just kind of curious how much of it is , is maybe , again , losing deals to to another bank versus , you know , natural asset , you know , just payoffs and paydowns and asset sales and those kinds of things or versus strategic deleveraging .
Okay.
And just one quick one I may have missed it but for that $3 6 million dollar non accrual that was paid off after the quarter end do you have the amount of interest recovered from that that we should expect in the fourth quarter.
I do not.
Speaker #1: Well , I think part and parcel to getting a more active lender program activity is , is managing relationships . Well . So of the 24 million in commercial loan payoffs last quarter , only two of that came from third party refinancing .
Okay.
It's a little less than 700000, I think $6 70 ish is the number.
Yes.
Thank you.
Youre welcome.
Your next question will come from Tim Coffey with Janney.
Speaker #1: David . So four was related assets . Almost ten was just cash deleveraging . People just paying off debt with cash . We had about a $7 million workout that we we pushed out , which was a good thing .
Janney Montgomery Scott.
Okay.
Timmy Ma'am your line and ask your question.
Yeah.
Morning, everybody.
Yes.
Speaker #1: And we mentioned that in the release. But again, only $2 million in the quarter came from losing money to another bank.
Yeah, just looking at the deposit growth this quarter and the number of new accounts are referenced in the opening Macquarie referenced in the press release I'm wondering do you have a line of sight deposit balance growth.
Speaker #8: Okay .
Speaker #7: And just one quick one . I may have missed it , but you know , for that $3.6 million non-accrual that was paid off after quarter end , do you have the amount of interest recovered from that that we should expect in the fourth quarter ?
That might offset any kind of seasonality.
Okay.
No that's a it's really hard to forecast for us.
That probably 40000, new accounts a quarter has been pretty consistent all year.
Speaker #1: I do not it's .
Speaker #8: Okay .
Speaker #1: It's a little less than 700,000; I think 670-ish is the number.
So really the large fluctuations are in the end what will drive what.
Speaker #8: Okay. That's helpful. Thank you. You're welcome.
The balances are in.
We've already moved some off balance sheet that we thought were maybe more volatile.
Speaker #2: Your next question will come from Tim Coffey with Janney Montgomery Scott. Timmy may unmute your line and ask your question.
But it is really hard to predict how how some of the customers you know.
Inflows and outflows in some of our larger depositors you know they are the people that are affecting the balances of sort of the usual suspects and nothing strange or unexpected there but.
Speaker #3: Morning , everybody . Yeah , just looking at the deposit growth this quarter and . the number of new accounts referenced in the opening , the quarter reference in the press release , I'm wondering , do you have a line of sight to deposit balance growth in the fourth quarter that might offset any kind of seasonality ?
It's really hard to predict so that was a long winded way of saying I don't know Tim.
Sure.
Appreciate that.
The flip side of that question. Then is I mean, you know typically we see kind of seasonal deposit outflows for tax payments and the like coming up do you see Guinea says that the payment this year with many larger than they've been in previous years.
Speaker #1: You no , that's a it's really hard to forecast for us that roughly 1000 new accounts , a quarter has been pretty consistent all year .
And we have not gotten any indication of that and we do a pretty active job of talking to our clients in an effort to forecast and we don't see any big outflows around normally.
Speaker #1: But the really the large fluctuations are , in the end , what will drive what the balances are . And , you know , we've already moved some off balance sheet that we thought were maybe more volatile .
Clothes for any particular reason happening, but again it is hard to predict and we inevitably will you now not talk to the one client that will have a big change in deposit balances. So it's.
Speaker #1: But it is really hard to predict how how some of the customers , you know , you know , inflows and outflows and some of our larger depositors , you know , the the people that are affecting the balances are sort of the usual suspects .
It is a wait and see game, but we are actively managing talking to our customers and trying to again forecasting any big changes and right now we don't see anything dramatic on the horizon.
Speaker #1: So drains or unexpected . There . But it's really hard to predict . So that was a long winded way of saying , I don't know , Tim .
Speaker #1: So, nothing or abnormally large outflows for any particular reason happening. But again, it is hard to predict. And we inevitably have outflows, not talk to the one client that will have a big change in deposit balances.
Great. Thanks, those are my questions.
Speaker #3: Sure . I can appreciate that . Just the flip side of that question then is , I mean , you know , typically we see kind of seasonal deposit outflows .
We have no further questions at this time I will hand, it back to Tim Myers for closing remarks.
Thank you everybody. We appreciate it we're proud of the quarter and we are happy to share that with you and answer all your questions. Thanks again.
Speaker #3: Due to tax payments and the like coming up, do you see any sense that the payments this year will be any larger than they've been in previous years?
Speaker #1: We have not gotten any indication of that . And , you know , we do a pretty active job of of talking to our clients in an effort to forecast .
Speaker #1: So it's it is a wait and see game . But we are actively managing talking to our customers and trying to again forecast any big changes .
Speaker #1: And right now, we don't see anything dramatic on the horizon.
Speaker #3: Great. Thanks. Those are my questions.
Speaker #8: Thank you .
Speaker #2: We have no further questions at this time. I will hand it back to Tim Myers for closing remarks.
Speaker #1: Thank you everybody . We appreciate it . We're proud of the quarter . And we we are happy to share that with you and answer all your questions .