Bank of Marin Bancorp (NASDAQ:BMRC) reported higher third-quarter earnings as net interest margin expanded, loan production improved and non-interest-bearing deposits increased.
Net income for the quarter ended September 30, 2026, was $9.9 million, or $0.62 per share, compared with $9.2 million, or $0.58 per share, in the prior quarter, Chief Financial Officer Dave Bonaccorso said during the company’s earnings call. Earnings per share rose 7% sequentially and were 32% above the third quarter of 2025.
The company reported a 1.05% return on average assets, a 12.26% return on average tangible common equity and an efficiency ratio of 58.65%. President and CEO Tim Myers said quarterly return on tangible common equity exceeded 12%, while the efficiency ratio moved below 60% amid expense discipline and higher revenue.
Margin Expansion Driven by Loan Yields and Deposit Costs
Net interest income rose to $31.4 million from the prior quarter, aided by higher loan yields and lower deposit costs. The average loan yield increased to 5.23% in the third quarter from 5.12% in the second quarter, while average total deposit costs declined to 1.24% from 1.28%.
Bank of Marin’s net interest margin expanded 10 basis points during the quarter. Bonaccorso said September net interest margin was 3.52% as reported, or 3.54% on a tax-equivalent basis. Excluding the effect of approximately $145 million of one-way deposit sales, he said the margin would have been about 3.46%.
The bank generated $489,000 of income from one-way deposit sales during the quarter, compared with $386,000 in the prior quarter. Bonaccorso said balances in the program could move modestly higher or lower, but indicated that $300 million would be outside the expected range.
New loan fundings carried a weighted average yield of 6.65%, up 12 basis points from the previous quarter. Bonaccorso said the 142-basis-point difference between new-loan yields and the overall portfolio yield provides an opportunity for additional margin improvement through repricing and loan mix changes.
Management also pointed to the company’s deposit franchise as a potential advantage in a rising-rate environment. Non-interest-bearing deposits represented 37.8% of total deposits at quarter-end. Bonaccorso said the company’s total deposit beta was 29% in the prior rate cycle, compared with 43% for peers, and said he did not see a reason for that relationship to differ with additional rate increases.
Loan Growth, Production and Residential Loan Purchase
The bank originated $102 million in new loan commitments during the third quarter, compared with $98 million in the prior quarter. Year-to-date originations reached $281 million, up 21% from a year earlier.
Funded loans totaled $63.6 million, compared with $62.8 million in the second quarter, while payoffs declined to $31.6 million from $71 million. Myers said historical payoff pressure included approximately $28 million associated with a pandemic-era commercial real estate credit and a large wine-industry loan, along with completed construction projects.
The company also purchased a $31 million pool of California residential loans using a portion of its excess liquidity. Myers said the purchase was an opportunistic move rather than a primary growth strategy. Bonaccorso said the pool had an approximate 6.20% coupon, was purchased at a small premium and was expected to yield around 6% under conservative prepayment assumptions.
The pool was modeled using a 25% conditional prepayment rate, resulting in an expected average life of about 3.3 years, according to Bonaccorso.
Myers said $25 million of new construction-loan commitments were included in the quarter’s unfunded commitments. He said those projects are expected to fund over subsequent quarters at relatively high rates. The company expects cash flow from its shorter-duration securities portfolio and its 63% loan-to-deposit ratio to support additional lending without wholesale funding.
Deposits and Fee Income Improve
Total deposits increased $25.3 million in the quarter, including a $45 million increase in non-interest-bearing balances. The increase was partly offset by lower money market and time-deposit balances.
The company added $23.2 million in new client relationships during the quarter, including $13 million in new non-interest-bearing deposits. Myers said the growth reflected relationship-building efforts and focused outreach by the bank’s teams.
Non-interest income increased $501,000 from the prior quarter. The increase included a $251,000 rise in service charges on business deposit accounts following a pricing update that took effect July 1, as well as $199,000 in special dividend income from Federal Home Loan Bank stock.
Management said the revised business-service pricing strategy is intended to create a more durable recurring source of fee income. Myers said the updated fee schedule for commercial treasury-management customers has been implemented, while the company continues to pursue other fee-income opportunities not related to deposit service charges.
Credit, Expenses and Capital
Special mention loans declined by $36 million during the quarter, while classified loans rose $15 million. Myers said the changes primarily reflected the downgrade of a $14 million owner-occupied commercial real estate relationship due to a borrower-specific issue. The borrower is paying as agreed, and the company does not expect a loss because of what Myers described as strong collateralization.
Special mention balances also benefited from $18 million in upgrades and payoffs. Net charge-offs were minimal.
Bank of Marin recorded a $500,000 provision for credit losses on loans and a $325,000 provision for unfunded commitments, driven by loan growth and higher commitments. The allowance for credit losses was 1.07% of total loans, unchanged from the preceding quarter.
Non-interest expense declined by about $1 million sequentially, reflecting an incentive bonus accrual adjustment, the absence of an annual prior-quarter expense, lower professional services costs and more normalized FDIC insurance expense. Bonaccorso said fourth-quarter expenses are expected to be broadly similar to third-quarter levels, though expense patterns are typically seasonal.
Capital ratios improved during the quarter, with the common equity tier 1 ratio reaching 12.96%, the total capital ratio reaching 15.59% and the tier 1 leverage ratio reaching 9.04%. However, rising market rates negatively affected accumulated other comprehensive income by $24.8 million, reducing the tangible common equity ratio to 8.05% and tangible book value per share to $18.81.
The board declared a quarterly cash dividend of $0.25 per share on Oct. 22, marking the company’s 86th consecutive quarterly dividend.
About Bank of Marin Bancorp (NASDAQ:BMRC)
Bank of Marin Bancorp is the holding company for Bank of Marin, a community bank headquartered in Novato, California. The bank provides financial services to individuals, families, professionals, nonprofit organizations and businesses, with a focus on relationship-based commercial banking.
Its products and services include business and personal checking and savings accounts, commercial and residential real estate loans, construction and commercial lending, small-business loans, consumer credit, cash-management services, online and mobile banking, and wealth management and trust services.
