Bank of Marin Bancorp (NASDAQ:BMRC) Q3 2019 Earnings Conference Call - Final Transcript

Oct 21, 2019 • 11:30 am ET

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Bank of Marin Bancorp (NASDAQ:BMRC) Q3 2019 Earnings Conference Call - Final Transcript

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Presentation
Executive
Russell A. Colombo

September 30th, which was down 1 basis point from the prior quarter. We recorded a $400,000 provision for loan losses in the quarter, which is in line with our loan growth. Recognizing the bank's continued solid performance, our Board of Directors declared a cash dividend of $0.21 per share payable on November 8th, 2019. This represents a 30% payout ratio and a 2% dividend yield based on our September 30th, 2019 share price.

Now let me turn it over to Tani for additional insight on our financial results.

Executive
Tani Girton

Thank you, Russ. Good morning. As Russ mentioned, Bank of Marin delivered another quarter of strong performance with earnings of $9.4 million. Earnings increased $1.2 million or 15% over the second quarter of 2019 and $768,000 over the third quarter of last year. Year-to-date earnings of $25.2 million translate into a return on assets of 1.33% and return on equity of 10.4%. In addition to solid loan and deposit growth, there were two items that benefited net income in the third quarter. One, a $562,000 bank-owned-life insurance or BOLI benefit; and two, a $327,000 tax adjustment related to the true-up of our deferred tax liability. Taken together, these items accounted for $0.06 per share of net income and without them return on assets and return on equity for the quarter would have been 1.35% and 10.28% respectively.

Net interest income of $24.2 million was up $362,000 from last quarter and up $612,000 from the third quarter 2018. The increase from last quarter was largely due to interest recovery on a land development loan. This recovery combined with higher average loan balances and higher yields across interest earning categories accounted for the year-over-year increase in net interest income and was only partially offset by higher rates on deposits. The tax equivalent net interest margin of 4.04% was unchanged from the second quarter and up 7 basis points from the year ago quarter. The 7 basis point increase over third quarter of last year, as well as the 12 basis point year-to-date increase over 2018 were both due to higher interest rates and loan growth.

Non-interest income was $2.7 million, an increase of more than $400,000 from both the second quarter 2019 and the third quarter 2018. The increase was due to the BOLI benefit, I mentioned earlier. Year-to-date non-interest income was up by a smaller amount due to the underwriting costs on new BOLI policies purchased earlier this year and lower deposit network income in 2019. Non-interest expense in the third quarter decreased by $716,000 to $14.2 million from the second quarter, primarily due to severance paid in the second quarter and increased deferred costs associated with higher loan originations in the third quarter.

Importantly, we completed our transition to an enhanced digital platform in the third quarter. As a result, we are no longer absorbing the added cost that come from running two digital banking platforms in parallel. In addition, last quarter's FDIC assessment was reversed in the third quarter since the