Bank of Marin Bancorp
For the period ended Dec 31, 2025. Filed Mar 13, 2026.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2025 · Filed Mar 13, 2026
BMRC$28.44-0.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2024-12-31; filed 2025-03-14.
0001403475-25-000026
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-K
Period ended 2025-12-31; filed 2026-03-13.
0001403475-26-000018
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 180 previous paragraphs and 181 current paragraphs.
93 unchanged; 63 reworded; 22 added; 19 removed; 5 previous and 3 current paragraphs rearranged.
Tables are not compared: 26 previous and 28 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (22)
Current report
The Company restated its Consolidated Statements of Condition and revised its Consolidated Statements of Comprehensive (Loss) Income for the years ended December 31, 2024 and 2023, and the quarters ended September 30, 2025, June 30, 2025, March 31, 2025, September 30, 2024, June 30, 2024, and March 31, 2024, (the “Affected Periods”) for misstatements between the balance sheet and income statement that were determined, in the aggregate, to be material to previously issued financial statements. Generally, the restatements and revisions related to the misclassification of certain deposits and expenses related thereto as non-interest bearing deposits and non-interest expense when they should have been classified as interest bearing deposits and interest expense. See “Note 19, Restatement of Prior Period Financial Statements (Quarterly Information Unaudited)” in Item 8 of this Form 10-K, for additional information related to the restatement and revision, including descriptions of the misstatements and the impacts on our consolidated financial statements. All affected tables and narrative disclosures herein from the Affected Periods have likewise been corrected.
Current report
Overview
Current report
This discussion should be read in conjunction with the consolidated financial statements and the related notes that appear elsewhere in this Form 10-K. As noted above, the Company restated its financial statements for the Affected Periods for misstatements between the balance sheet and income statement that were determined, in the aggregate, to be material to previously issued financial statements. Generally, the restatements related to the misclassification of certain deposits and expenses related thereto as non-interest bearing deposits and non-interest expense when they should have been classified as interest bearing deposits and interest expense. See below and “Note 19, Restatement of Prior Period Financial Statements (Quarterly Information Unaudited)” in Item 8 of this Form 10-K, for additional information related to the restatement, including descriptions of the misstatements and the impacts on our consolidated financial statements. All affected tables and narrative disclosure herein from the Affected Periods has likewise been corrected.
Current report
Restatement and Revision of Prior Period Financial Statements and Financial Highlights
Current report
See below for the restated and revised prior period financial statements and affected financial highlights referred to above and in Form 8-K filed February 17, 2026.
Current report
•During the fourth quarter of 2025, we issued Fixed-to-Floating Subordinated Notes of $45.0 million with a final maturity date of December 1, 2035, to certain investors in a private placement to strengthen capital ratios as part of our fourth quarter 2025 balance sheet repositioning. The interest rate of the Bank’s subordinated notes is 6.75%, payable semi-annually in arrears on June 1 and December 1 of each year, commencing on June 1, 2026. After December 1, 2030, the interest rate will be variable and equal Three-Month Term SOFR plus 335 basis points, resetting quarterly.
Current report
•The tax-equivalent net interest margin was 2.94% for 2025, compared to 2.55% for 2024. The increase of 39 basis points was primarily attributable to the favorable impacts of the investment securities restructuring performed in 2025 and 2024, lower deposit costs and higher average deposit balances year over year, higher loan yields and loan balances, and higher interest-earning deposit balances with the Federal Reserve.
Current report
Net interest income totaled $106.0 million in 2025, compared to $91.6 million in 2024. The $14.4 million increase from the prior year was primarily due to higher average yields on investment securities and loans and higher average earning asset balances on interest-bearing deposits with banks during the year contributing an increase in interest income of $11.2 million. In addition, interest-bearing deposit costs decreased by 27 basis points on an increased average balance contributing a reduction of $3.4 million in interest expense on deposits.
Current report
The tax-equivalent net interest margin was 2.94% for 2025, compared to 2.55% in 2024. The increase of 39 basis points was primarily attributable to the favorable impacts of the investment securities restructuring performed in 2025 and 2024, lower deposit costs, higher average deposit balances year over year, higher loan yields, and higher interest-earning deposit balances with the Federal Reserve.
Current report
The provision in 2025 was due primarily to the $37.6 million net increase in loans during the year including the $92.7 million increase in non-owner occupied commercial real estate loans, partially offset by the $32.6 million decrease in other residential real estate loans. In addition to this pooled loan growth, the peer group used in our loss driver analysis was updated in 2025, and the fourth quarter of 2025 showed a modest deterioration in Moody's economic forecast over the next four quarters. Partially offsetting these increases were qualitative risk factor improvements in areas including staff experience and graded/delinquent/non-accrual loans and specific reserve adjustments.
Current report
Non-interest expenses increased$2.6 millionto $81.3 million in 2025 from $78.7 million in 2024. Salaries and employee benefits increased by $2.8 million primarily due to an increase in annual incentives due to performance and increased employee insurance and profit share expenses. These were partially offset by an increase in deferred loan costs. Partially offsetting increases were the decrease of$828 thousand in professional services expenses, mainly from the legal resolution of a Private Attorneys General Act / putative class action lawsuit of $615 thousand and $354 thousand in the new loan operating system platform and implementation costs in the prior year.
Current report
In the fourth quarter of 2025, the Bank completed a balance sheet repositioning and reclassified its HTM portfolio into AFS resulting in no HTM securities at December 31, 2025.
Current report
Construction loans decreased by $21.9 million in 2025 to $15.1 million from $37.0 million at December 31, 2024. The decrease in 2025 was primarily due to payoffs of $28.7 million offset by $6.7 million in advances on existing construction loans.
Current report
The $567 thousand decrease in the allowance for credit losses on loans in 2025 was largely due to the $942 thousand in net charge-offs, primarily due to a $2.1 million acquired non-owner occupied commercial real estate loan with a partial charge-off in the first quarter of 2025 of $809 thousand that the Bank had previously reserved $449 thousand for as of December 31, 2024. There was an additional decline in the financial condition of the borrower and guarantor and the value of the collateral during the first quarter that led to the Bank proactively selling the note in March rather than pursuing the additional costly steps of liquidating after foreclosure. It had been on non-accrual since late 2023. This decline was partially offset by the $375 thousand provision recorded in 2025.
Current report
Non-accrual loans decreased by $7.0 million in 2025, primarily due to $4.4 million in payoffs including a $3.6 million commercial relationship paid off in full in the fourth quarter and a $2.1 million non-owner occupied real estate loan sale in the first quarter.
Current report
Loans designated as special mention, which are not considered adversely classified, increased by $9.1 million in 2025 with downgrades from the pass or watch category of $49.3 million primarily within commercial real estate and commercial with an average balance of $2.7 million and upgrades from substandard of $6.9 million, partially offset by payoffs and paydowns of $38.7 million and $7.3 million, respectively.
Current report
Loans classified as substandard decreased by $13.0 million in 2025 largely due to upgrades to special mention of $6.9 million mentioned above and payoffs and paydowns of $5.3 million and $1.7 million, respectively. Downgrades from pass or watch of $2.1 million in the year were offset by the $2.1 million loan that was sold.
Current report
BOLI totaled $71.3 million as of December 31, 2025, compared to $71.0 million at December 31, 2024. The $279 thousand increase was primarily due to increased earnings from higher yields on policies in 2025.
Current report
Subordinated Notes
Current report
During the fourth quarter of 2025, we issued Fixed-to-Floating Subordinated Notes of $45.0 million with a final maturity date of December 1, 2035, to certain investors in a private placement, to strengthen capital ratios as part of our balance sheet repositioning. Subordinated notes outstanding was $43.9 million, net of issuance costs, at December 31, 2025. Bancorp made a capital contribution of $30.0 million to the Bank in the fourth quarter. The subordinated notes qualify as Tier 2 capital for the consolidated Company (Bancorp) for regulatory purposes and the portion that Bancorp contributed to the Bank is treated as Tier 1 capital for the Bank. At December 31, 2025, we were in compliance with all covenants under our long-term debt subordinated notes agreement.
Current report
For additional information, see Note 13, Subordinated Notes, in ITEM 8 of this report.
Current report
Bancorp's tangible common equity to tangible assets ("TCE ratio") decreased to 8.35% at December 31, 2025, from 9.93% at December 31, 2024, primarily dueto increases in unrealized losses attributed to the HTM securities reclassification and the subsequent loss from sales of securities during 2025. The Bank's total risk-based capital ratio decreased to 13.90% at December 31, 2025, from 16.13% at December 31, 2024.
Removed paragraphs (19)
Previous report
Goodwill
Previous report
Goodwill arises from the acquisition method of accounting for business combinations and represents the excess of the fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. Goodwill is tested annually for impairment, or more often if conditions change and indicate a possible impairment. Significant judgment is used in the assessment of goodwill, both in a qualitative assessment and a quantitative assessment. Assessments of goodwill often require the use of fair value estimates, which are dependent upon various factors, including estimates concerning the Company’s long-term growth prospects and comparability to industry data. Uncertainty and imprecision in estimates can affect the estimated fair value of the reporting unit in a goodwill assessment. Additionally, various events or circumstances could have a negative effect on the estimated fair value of a reporting unit, such as declines in business performance, increases in credit losses, and deterioration in economic or market conditions, which may result in a material impairment charge to earnings in future periods.
Previous report
In both 2024 and 2023, the Company assessed goodwill for impairment by performing a quantitative assessment, which encompassed an income approach and two market approaches (peer metrics and recent transactions). The income approach considered such factors as the estimated future cash flows of our reporting unit based on internal long-term forecasts, assumptions concerning potential synergies and other economic benefits, and a discount rate used to present value such cash flows to determine the fair value. The market approach utilized observable market data from comparable public companies, including price-to-tangible book value ratios, to estimate the Company’s fair value. The market approach also incorporated a control premium to represent the Company’s expectation of a hypothetical acquisition. Management used judgment in the selection of comparable companies and included those with similar business activities, and related operating environments. In addition, the selection and weighting of the various fair value techniques may result in higher or lower estimates of fair value. Judgment is applied in determining the weightings between the income approach and the market approach in determining fair value. The results of these assessments indicated the value of goodwill was not impaired as of our annual impairment testing dates of November 30, 2024 and 2023, and there were no changes to our assessment through December 31, 2024.
Previous report
Net interest income totaled $102.8 million in 2023, compared to $127.5 million in 2022. The $24.7 million decrease from the prior year was primarily due to higher funding costs of $34.2 million, partially offset by higher average yields on earning assets.
Previous report
The tax-equivalent net interest margin was 2.63% for 2023, compared to 3.11% for 2022. The decrease was primarily attributed to higher deposit and borrowing costs, partially offset by higher yields on loans and investment securities. Average interest-bearing deposit balances decreased by $115.2 million, while the average rate increased by 133 basis points, decreasing the margin by 58 basis points. Average borrowings and other obligations increased by $219.3 million, while the average cost increased by 125 basis points, decreasing the net interest margin by 29 basis points. Average loan balances decreased by $75.5 million, while the average yield increased by 36 basis points, increasing the margin by 23 basis points. Average investment securities decreased $42.9 million, while their average yield increased 25 basis points, improving the margin by 14 basis points.
Previous report
In response to the evolving risks to economic activity caused by the COVID-19 pandemic, the FOMC made two emergency federal funds rate cuts totaling 150 basis points in March 2020. The federal funds rate range remained between 0.0% and 0.25% through the beginning of 2022, putting downward pressure on our asset yields and net interest margin. The FOMC began increasing rates in March 2022, totaling seven rate increases in 2022 and four additional rate increases in 2023, and ended the year of 2023 at a federal funds target rate range between 5.25% and 5.50%. Rising interest rates resulted in rapid increases in the cost of funds through rising deposit costs and increased average borrowings, putting pressure on our net interest margin. Because market interest rates remained high for longer than many market participants anticipated, during the second quarter of 2024, we sold securities with relatively low yields and redeployed the proceeds to pay off borrowings, invest in higher yielding loans and securities, and position the balance sheet for future acquisitions of similar assets.
Previous report
The provision reversal in 2022 was largely due to a $55.4 million decrease in applicable loan balances (excludes the $107.7 million decrease in PPP loans for which there was no allowance)and improvements in Moody's Analytics' Baseline Forecast of California unemployment rates since December 31, 2021, which decreased thequantitative "modeled" allowance for credit losses. These decreases were partially offset by adjustments to qualitative risk factors to account for the ongoing deterioration in the economic outlook that management believed was not captured in the quantitative portion of the allowance calculation.
Previous report
Non-interest income totaled $5.0 million in 2023, a $5.9 million decrease from $10.9 million in 2022. The decrease in 2023 was primarily due to the $5.9 million net loss on the sale of investment securities mentioned above. Excluding this loss, non-interest income decreased by $86 thousand, which included a $504 thousand decline in deposit network fees earned when deposit balances were brought back on the balance sheet, and a $220 thousand decrease in debit card interchange income. Decreases were partially offset by $573 thousand higher benefit payments from and earnings on bank-owned life insurance, and $209 thousand from increases in dividends on Federal Home Loan Bank stock.
Previous report
•Deposit network fees increased by $743 thousand due both to rate and volume.
Previous report
•Deposit network fees increased by $2.5 million as customers sought additional FDIC insurance protection through reciprocal deposit networks.
Previous report
•FDIC insurance costs increased by $699 thousand due to an increase in the FDIC statutory assessment rate to strengthen the Deposit Insurance Fund.
Previous report
•Occupancy and equipment and depreciation and amortization expenses rose by$483 thousand and$258 thousand, respectively, mainly from the acceleration of lease-related costs for branch closures in the first quarter of 2023 and higher maintenance costs.
Previous report
•Professional services expenses increased by$299 thousand, mainly from consulting fees associated with core systems contract negotiations, systems transformation projects, and internal and external audit costs.
Previous report
•Information technology and data processing expenses decreased by$628 thousand and$592 thousand, respectively, due to our core system contract renegotiation for the current period and because the prior year included data processing expenses largely eliminated after the systems conversion associated with the American River Bankshares merger.
Previous report
•Other real estate owned expenses decreased by$311 thousand due to the write-down in 2022 of the property that was then sold in the third quarter of 2023.
Previous report
Loans designated as special mention, which are not considered adversely classified, increased by $75.0 million in 2023, primarily due to downgrades from the watch category to special mention. The majority of the downgrades from watch to special mention were not necessarily due to worsening conditions or deterioration in the borrowers' financial condition but to a lack of meaningful improvement over the most recent quarters. Of the $92.5 million in downgrades to special mention in 2023, $83.2 million (or 90%) were collateralized by real estate. These increases were partially offset by $7.7 million in paydowns and payoffs, $6.0 million in downgrades from special mention to substandard, and $3.8 million in upgrades to a pass risk rating.
Previous report
Loans classified as substandard increased by $4.2 million in 2023, primarily due to downgrades from special mention totaling $6.0 million and from pass totaling $3.7 million, partially offset by $4.5 million in paydowns and payoffs and $939 thousand in upgrades to pass. Of the downgraded loans, $7.0 million (or 72%) was secured by commercial real estate, and the remaining $2.7 million was to commercial borrowers.
Previous report
BOLI totaled $71.0 million as of December 31, 2024, compared to $68.1 million at December 31, 2023. The $2.9 million increase was primarily due to the purchase of $1.2 million in new BOLI policies and earnings from the BOLI policies.
Previous report
Bancorp's tangible common equity to tangible assets ("TCE ratio") increased to 9.93% at December 31, 2024, from 9.73% at December 31, 2023, primarily due todue to the reduction in total assets. Bancorp's TCE ratio, net of after-tax unrealized losses on held-to-maturity securities as if the losses were realized, was 7.85% as of December 31, 2024, compared to 7.80%at December 31, 2023 (refer to the discussion and reconciliation of this non-GAAP financial measure in the section below entitled Statement Regarding Use of Non-GAAP Financial Measures). The Bank's total risk-based capital ratio decreased to 16.13% at December 31, 2024, from 16.62% at December 31, 2023.
Reworded paragraphs (63)
Previous wording
The allowance for credit losses on loans is a valuation account that is deducted from the amortized cost basis at the balance sheet date to present the net amount of loans expected to be collected. The allowance for losses on unfunded loan commitments is based on estimates of the probability that these commitments will be drawn upon according to historical utilization experience, expected loss severity, and loss rates as determined for pooled funded loans. The allowance for credit losses on unfunded commitments is a liability account included in interest payable and other liabilities. Management estimates these allowances quarterly using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Credit loss experience among the Bank and peer groups provides the basis for the estimation of expected credit losses.
Current wording
The allowance for credit losses on loans is a valuation account that is deducted from the amortized cost basis at the balance sheet date to present the net amount of loans expected to be collected. The allowance for credit losses on unfunded loan commitments is based on estimates of the probability that these commitments will be drawn upon according to historical utilization experience, expected loss severity, and loss rates as determined for pooled funded loans. The allowance for credit losses on unfunded commitments is a liability account included in interest payable and other liabilities. Management estimates these allowances quarterly using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Credit loss experience among the Bank and peer groups provides the basis for the estimation of expected credit losses.
Previous wording
Our allowance model is particularly sensitive to forecasted and seasonally-adjusted actual California unemployment rates, which increased to 5.5% at December 31, 2024, from 5.1% at December 31, 2023. The ACL model incorporates a one-year forecast. For periods beyond the forecast horizon, the economic factors revert to historical averages on a straight-line basis over a one-year period through the remaining lives of the loans. We performed a sensitivity analysis as of December 31, 2024, and estimated that a 100 basis point change (e.g., 4.5% to 5.5%) in the forecasted unemployment rates over the next four quarters would result in about a 6% changeto our allowance for credit losses on loans. This impact does not consider changes to other assumptions for either the quantitative factors, such as probability of default, loss given default, loan mix or cash flows, prepayment/curtailment rates, and individually analyzed loans, or qualitative factors as discussed in Note 1 - Summary of Significant Accounting
Current wording
Our allowance model is particularly sensitive to forecasted and seasonally-adjusted actual California unemployment rates, which was 5.5% at December 31, 2025 and December 31, 2024. The ACL model incorporates a one-year forecast. For periods beyond the forecast horizon, the economic factors revert to historical averages on a straight-line basis over a one-year period through the remaining lives of the loans. We performed a sensitivity analysis as of December 31, 2025, and estimated that a 100 basis point change (e.g., 5.5% to 6.5%) in the forecasted unemployment rates over the next four quarters would result in about a 5% change to our allowance for credit losses on loans. This impact does not consider changes to other assumptions for either the quantitative factors, such as probability of default, loss given default, loan mix or cash flows, prepayment/curtailment rates, and individually analyzed loans, or qualitative factors as discussed in Note 1 - Summary of Significant Accounting Policies. Additionally, because current economic conditions and forecasts can change, as future events are inherently difficult to predict, the estimated credit losses on loans and unfunded commitments could change significantly.
Previous wording
Our annual loss was $8.4 million in 2024, compared to earnings of $19.9 million in 2023. Diluted loss was $(0.52) per share in 2024, compared to earnings of $1.24 per share in 2023.
Current wording
Our annual loss was $35.7 million in 2025, compared to an annual loss of $8.4 million in 2024. Diluted loss was $2.24 per share in 2025, compared to a diluted loss of $0.52 per share in 2024.
Previous wording
Results for 2024 were significantly impacted by our strategic balance sheet repositioning which included the sale of $325.2 million in low yielding investment securities at a $32.5 million pre-tax loss, the payoff of high cost borrowings and the purchase and origination of higher yielding loans and securities. In addition, we took actions to reduce operating expenses in 2024 which positively impacted our results later in the year. Though the percentage of non-accrual loans increased from the prior year, we continue to proactively identify and manage credit risk within the loan portfolio and there were some improvements in credit quality trends during the fourth quarter. We believe the strength of our balance sheet, higher level of productivity that we are seeing from our banking teams, and positive trends in our net interest margin and operating leverage are key factors that should help mitigate any unforeseen credit quality deterioration that may arise and drive further improvement in our financial performance in the year ahead.
Current wording
Results for 2025 were significantly impacted by our strategic balance sheet repositioning which included the sale of available-for-sale ("AFS") securities with a book value of $185.8 million, resulting in a pre-tax loss of $18.7 million in the second quarter of 2025, the sale of AFS securities of $593.2 million in low yielding investment securities at a $69.5 million pre-tax loss in the fourth quarter of 2025, the purchase and origination of higher yielding loans and securities and the replenishment of our capital ratios through the issuance of $45.0 million of subordinated debt. We continue to proactively identify and manage credit risk within the loan portfolio, reflected in the percentage of non-accrual loans which decreased from the prior year, and improvements in credit quality trends during the fourth quarter. We believe the strength of our balance sheet, higher level of loan origination productivity that we are seeing from our banking teams, and positive trends in our net interest margin and operating leverage are key factors that should help mitigate any unforeseen credit quality deterioration that may arise and drive further improvement in our financial performance in the year ahead.
Previous wording
•Loans increased $9.5 million during the year ended December 31, 2024, to $2.083 billion, compared to $2.074 billion at December 31, 2023. Excluding a $35.7 million loan pool purchase of residential real estate loans, loan originations totaled $152.6 million for the year ended December 31, 2024, compared to $144.1 million for the prior year.
Current wording
•Loans increased $37.6 million during the year ended December 31, 2025, to $2.121 billion, compared to $2.083 billion at December 31, 2024. The growth was spread across multiple geographic regions in Northern California and primarily within the commercial and commercial real estate sectors. Loan originations funded totaled $273.5 million for the year ended December 31, 2025, compared to $152.6 million for the prior year.
Previous wording
•Classified loans made up 2.17% of total loans as of December 31, 2024, compared to 1.56% as of December 31, 2023. The Bank continues to proactively identify and manage credit risk within the loan portfolio.
Current wording
•Classified loans made up 1.51% of total loans as of December 31, 2025, compared to 2.17% as of December 31, 2024. The Bank continues to proactively identify and manage credit risk within the loan portfolio. Classified loans decreased by $13.0 million to $32.1 million as of December 31, 2025, compared to $45.1 million as of December 31, 2024. The decrease was largely due to upgrades of $6.9 million and payoffs and paydowns of $7.0 million during 2025. This was partially offset by downgrades to classified loans totaling approximately $942 thousand in 2025.
Previous wording
•Non-accrual loans totaled $33.9 million, or 1.63% of the loan portfolio, compared to $8.0 million, or 0.39%, as of December 31, 2024 and 2023, respectively primarily due to three relationships designated as non-accrual in the second and third quarters of 2024. Of the total non-accrual loans as of December 31, 2024, approximately 56% were paying as agreed, 91% were real estate secured, and all are being closely managed and monitored.
Current wording
•Non-accrual loans totaled $26.9 million, or 1.27% of the loan portfolio, compared to $33.9 million, or 1.63%, as of December 31, 2025 and 2024, respectively. The decrease of $7.0 million in 2025 was primarily due to payoffs of $4.4 million, the sale of one $2.1 million commercial real estate loan which resulted in an $809 thousand charge-off, and paydowns of $1.6 million in addition to upgrades of approximately $700 thousand. Of the total non-accrual loans as of December 31, 2025, approximately 68% were paying as agreed, 97% were real estate secured, and all are being closely managed and monitored.
Previous wording
•A $5.6 million provision for credit losses on loans in 2024 including a $5.2 million specific reserve taken on a commercial real estate loan as a result of declining collateral values brought the allowance for credit losses to 1.47% of total loans, compared to 1.21% as of December 31, 2023.
Current wording
•We recorded a $375 thousand provision for credit losses on loans in 2025 primarily due to loan growth and a modest deterioration in the economic forecast, compared to a $5.6 million provision for credit losses on loans in 2024, including a $6.6 million specific reserve taken on a commercial real estate loan as a result of declining collateral values, partially offset by other factors. The allowance for credit losses as of December 31, 2025 was 1.42% of total loans, compared to 1.47% as of December 31, 2024.
Previous wording
•Total deposits decreased by $70.1 million to $3.220 billion as of December 31, 2024, from $3.290 billion as of December 31, 2023. Non-interest bearing deposits continue to remain strong compared to our peers and madeup 43.5% of total deposits as of December 31, 2024, compared to 43.8% as of December 31, 2023. We believe we are appropriately competitive in regard to deposit pricing, given our relationship banking model, which differentiates Bank of Marin through exceptional service. Estimated uninsured and/or uncollateralized deposits comprised 29% of total deposits as of December 31, 2024.
Current wording
•Total deposits increased by $195.5 million to $3.416 billion as of December 31, 2025, from $3.220 billion as of December 31, 2024. Non-interest bearing deposits continue to remain strong and madeup 36.7% of total deposits as of December 31, 2025, compared to 39.6% as of December 31, 2024. We believe we are appropriately competitive in regard to deposit pricing, given our relationship banking model, which differentiates Bank of Marin through exceptional service. Estimated uninsured and/or uncollateralized deposits comprised 31% of total deposits as of December 31, 2025.
Previous wording
•At December 31, 2024, the Bank had no outstanding borrowings compared to $26.0 million at December 31, 2023, as a result of our strategic balance sheet restructuring in 2023 and 2024. Total available funding sources, including unrestricted cash, unencumbered available-for-sale securities, and total available borrowing capacity, were $1.849 billion, or 57% of total deposits and 197% of estimated uninsured and/or uncollateralized deposits as of December 31, 2024.
Current wording
•At December 31, 2025, the Bank had no outstanding short-term borrowings compared to $26.0 million at December 31, 2024, as a result of our strategic balance sheet restructuring in 2025 and 2024. Total available funding sources, including unrestricted cash, unencumbered available-for-sale securities, and total available borrowing capacity, were $2.148 billion, or 63% of total deposits and 209% of estimated uninsured and/or uncollateralized deposits as of December 31, 2025.
Previous wording
•All capital ratios were above well-capitalized regulatory requirements. Bancorp's total risk-based capital ratio was 16.54% as of December 31, 2024, compared to 16.89% as of December 31, 2023. Tangible common equity to tangible assets ("TCE ratio") increased to 9.93% as of December 31, 2024, from 9.73% as of December 31, 2023. While we do not intend to sell our held-to-maturity securities, the TCE ratio, net of after-tax unrealized losses on held-to-maturity securities as if the losses were realized, was 7.85% as of December 31, 2024 (refer to the discussion and reconciliation of this non-GAAP financial measure in the section below entitled Statement Regarding Use of Non-GAAP Financial Measures).
Current wording
•All capital ratios were above well-capitalized regulatory requirements. Bancorp's total risk-based capital ratio was 15.25% as of December 31, 2025, compared to 16.54% as of December 31, 2024. Tangible common equity to tangible assets ("TCE ratio") decreased to 8.35% as of December 31, 2025, from 9.93% as of December 31, 2024.
Previous wording
•The Board of Directors declared a cash dividend of $0.25 per share on January 23, 2025, which was the 79 th consecutive quarterly dividend paid by Bancorp. The dividend was paid on February 13, 2025 to shareholders of record at the close of business on February 6, 2025.
Current wording
•The Board of Directors declared a cash dividend of $0.25 per share on January 22, 2026, which was the 83 rd consecutive quarterly dividend paid by Bancorp. The dividend was paid on February 12, 2026 to shareholders of record at the close of business on February 5, 2026.
Previous wording
The following table presents the effects of changes in average balances (volume) or changes in average rates on tax-equivalent net interest income for the years indicated. Volume variances are equal to the increase or decrease in average balances multiplied by prior period rates. Rate variances are equal to the increase or decrease in rates multiplied by prior period average balances. Mix variances are attributable to the change in yields or rates multiplied by the change in average balances including one day more in the year ended 2024.
Current wording
The following table presents the effects of changes in average balances (volume) or changes in average rates on tax-equivalent net interest income for the years indicated. Volume variances are equal to the increase or decrease in average balances multiplied by prior period rates. Rate variances are equal to the increase or decrease in rates multiplied by prior period average balances. Mix variances are attributable to the change in yields or rates multiplied by the change in average balances.
Previous wording
Net interest income totaled $94.7 million in 2024, compared to $102.8 million in 2023. The $8.1 million decrease from the prior year was primarily due to higher deposit costs of $21.2 million, partially offset by the reduction of $11.3 million in borrowing costs.
Current wording
Net interest income totaled $91.6 million in 2024, compared to $100.4 million in 2023. The $8.8 million decrease from the prior year was primarily due to higher deposit costs of $21.9 million, partially offset by the reduction of $11.3 million in borrowing costs.
Previous wording
•The tax-equivalent net interest margin was 2.63% for 2024, consistent with 2023. Higher yields on loans increased the margin by 31 basis points, while higher deposit costs resulted in a 64 basis points reduction in the margin. In addition, the year's balance sheet restructuring activities affected the borrowings, interest-bearing cash and investments factors with impacts of 27, 13 and (7) basis points, respectively.
Current wording
The tax-equivalent net interest margin was 2.55% for 2024, compared to 2.56% for 2023. Higher yields on loans increased the margin while higher deposit costs resulted in a reduction in the margin. In addition, the year's balance sheet restructuring activities affected the borrowings, interest-bearing cash and investments factors.
Previous wording
Primarily due to declining inflation, the Federal Reserve lowered the target for the federal funds rate by 100 basis points, to a range of 4.25% to 4.50% in the later months of 2024. At the January 2025 meeting, the FOMC left rates unchanged and signaled slower than originally anticipated rate cuts are likely in 2025. Management and the Board are continuously monitoring and analyzing the impact of market rates on the Company's financial condition and results of operations to enhance performance, safety and soundness and returns to shareholders. See ITEM 7A. Quantitative and Qualitative Disclosure about Market Risk for further information.
Current wording
Primarily due to declining inflation, the Federal Reserve lowered the target for the federal funds rate by 100 basis points, to a range of 4.25% to 4.50% in the later months of 2024. At the January 2025 meeting, the FOMC left rates unchanged and signaled slower than originally anticipated rate cuts are in 2025. Due to a significant easing of inflationary pressures, the FOMC began decreasing rates in September 2025, and made a total of three rate decreases in 2025 ending the year at a range of 3.50% to 3.75%.
Previous wording
The provision in 2024 was due primarily to increases in qualitative risk factors to account for continued uncertainty about inflation and recession risks, and from continued negative trends in adversely graded loans and/or collateral values on our non-owner occupied commercial real estate office and multi-family real estate portfolios including $5.2 million taken in the second quarter due to an increased individual reserve for one non-owner occupied commercial real estate loan totaling $16.7 million that, although current, had experienced a deterioration in the collateral value and, therefore, a material increase in the loan-to-value.
Current wording
The provision in 2024 was due primarily to increases in qualitative risk factors to account for continued uncertainty about inflation and recession risks, and from continued negative trends in adversely graded loans and/or collateral values on our non-owner occupied commercial real estate office and multi-family real estate portfolios including $5.2 million taken in the second quarter due to a $6.6 million increased individual reserve for one non-owner occupied commercial real estate loan totaling $16.7 million that, although current, had experienced a deterioration in the collateral value and, therefore, a material increase in the loan-to-value
Previous wording
Non-interest income showed a loss of $21.4 million for 2024, a $26.3 million decrease from income of $5.0 million for 2023. The decrease in 2024 was primarily due to the $32.5 million net loss on the sale of available-for-sale investment securities in the second quarter related to our balance sheet restructuring. Excluding losses on sale of securities in both years, non-interest income increased by $299 thousand, which included a $275 thousand year-over-year increase in wealth management and trust services income due to increased assets.
Current wording
Non-interest income showed a loss of $76.7 million for 2025, a $55.3 million decrease from a loss of $21.4 million for 2024. The decrease in 2025 was primarily due to the $88.2 million net loss on the sales of available-for-sale investment securities in the second and fourth quarters related to our balance sheet restructuring. Excluding losses on sale of securities in both years, non-interest income increased by $371 thousand, which included $306 thousand death benefit on bank-owned life insurance in 2025, partially offset by a $108 thousand year-over-year decrease in wealth management and trust services income due to decreased assets.
Previous wording
Non-interest expenses increased$2.3 millionto $81.8 million in 2024 from $79.5 million in 2023. Significant fluctuations were as follows:
Current wording
Non-interest expenses increased $1.7 million to $78.7 million in 2024 from $77.1 million in 2023. Significant fluctuations were as follows:
Previous wording
•Professional services expenses increased by$1.5 million, mainly from the legal resolution of a Private Attorneys General Act / putative class action lawsuit of $615 thousand and $354 thousand in the new loan operating system platform and implementation costs.
Current wording
•Professional services expenses increased by $1.5 million, mainly from the legal resolution of a Private Attorneys General Act / putative class action lawsuit of $615 thousand and $354 thousand in the new loan operating system platform and implementation costs.
Previous wording
•Salaries and employee benefits increased by $1.2 million primarily due to severance and salaries paid in relation to the reduction in force in the second quarter, the filling of open positions andthe hiring of several key employees and officers, higher insurance costs, and lower deferred loan origination costs. Increases to salaries and employee benefits were partially offset by a decrease in profit sharing expense mainly from accrual adjustments, a decrease in accrued incentive bonuses, and a decrease in stock-based compensation from changes in award structure and estimated performance award payouts.
Current wording
•Salaries and employee benefits increased by$1.2 million primarily due to severance and salaries paid in relation to the reduction in force in the second quarter, the filling of open positions andthe hiring of several key employees and officers, higher insurance costs, and lower deferred loan origination costs. Increases to salaries and employee benefits were partially offset by a decrease in profit sharing expense mainly from accrual adjustments, a decrease in accrued incentive bonuses, and a decrease in stock-based compensation from changes in award structure and estimated performance award payouts.
Previous wording
•Amortization of the core deposit intangible decreased by$375 thousand as the Bank of Alameda amortization completed in 2023.
Current wording
•Amortization of the core deposit intangible decreased by $375 thousand as the Bank of Alameda amortization completed in 2023.
Previous wording
The benefit for income taxes totaled $5.4 million at an effective tax rate of 39.2% in 2024, compared to the provision of $6.1 million at an effective tax rate of 23.6% in 2023 and $16.9 million at an effective tax rate of 26.6% in 2022. The reversal in the provision for income taxes in 2024, reflected the impact of the net loss before taxes in the year of $13.8 million compared to net income before taxes of $26.0 million in 2023. The 15.6% increase in the effective tax rate in 2024, as compared to 2023, was due to the treatment of certain permanent differences while in a loss position, such as in 2024. The 300 basis point decrease from 2022 to 2023 was primarily due to a larger proportional effect of permanent tax differences on lower pretax income and higher tax-exempt BOLI income. This decrease was partially offset by a reduction in the tax-exempt interest exclusion (due to a larger IRC Section 291(e) interest expense disallowance), compared to 2022.
Current wording
The benefit from income taxes totaled $16.8 million at an effective tax rate of 32.0% in 2025, compared to the benefit from income taxes of $5.4 million at an effective tax rate of 39.2% in 2024 and a provision of $6.1 million at an effective tax rate of 23.6% in 2023. The increase in the benefit from income taxes in 2025 reflected the impact of the net loss before taxes in the year of $52.5 million compared to net loss before taxes of $13.8 million in 2024. The 7.2% decrease in the effective tax rate in 2025, as compared to 2024, was due to the treatment of certain permanent differences while in a larger loss position, such as in 2025. The 15.60% increase from 2023 to 2024 was primarily due to a larger proportional effect of permanent tax differences on lower pretax income and higher tax-exempt BOLI income. This increase was partially offset by a reduction in the tax-exempt interest exclusion (due to a larger IRC Section 291(e) interest expense disallowance), compared to 2023.
Previous wording
We file a consolidated return in the U.S. federal tax jurisdiction and a combined return in the state of California tax jurisdiction. There were no ongoing federal or state income tax examinations at the time of the issuance of this report. As of December 31, 2024 and 2023, neither the Bank nor Bancorp had accruals for interest or penalties related to unrecognized tax benefits.
Current wording
We file a consolidated return in the U.S. federal tax jurisdiction and a combined return in the State of California and the State of New Jersey due to interest on purchased auto loans registered in New Jersey. There were no ongoing federal or state income tax examinations at the time of the issuance of this report. As of December 31, 2025 and 2024, neither the Bank nor Bancorp had accruals for interest or penalties related to unrecognized tax benefits.
Previous wording
We maintain an investment securities portfolio to provide liquidity and generate earnings on funds that have not been loaned to customers. Management determines the maturities and types of securities to be purchased based on liquidity and interest rate risk position, and the desire to attain a reasonable investment yield balanced with risk exposure. The tables below show the composition of the debt securities portfolio by weighted average life at December 31, 2024 and 2023. Weighted average life takes into account the issuer's right to call or prepay obligations, with or without call or prepayment penalties. The weighted average life of the investment portfolio at December 31, 2024 and 2023 was approximately 5.9 and 6.6 years, respectively. The effective duration of the investment portfolio was 4.8 and 5.2 at December 31, 2024 and 2023, respectively.
Current wording
We maintain an investment securities portfolio to provide liquidity and generate earnings on funds that have not been loaned to customers. Management determines the maturities and types of securities to be purchased based on liquidity and interest rate risk position, and the desire to attain a reasonable investment yield balanced with risk exposure. The tables below show the composition of the debt securities portfolio by weighted average life at December 31, 2025 and 2024. Weighted average life takes into account the issuer's right to call or prepay obligations, with or without call or prepayment penalties. The weighted average life of the investment portfolio at December 31, 2025 and 2024 was approximately 4.2 and 5.9 years, respectively. The effective duration of the investment portfolio was 2.8 and 4.6 at December 31, 2025 and 2024, respectively.
Previous wording
The amortized cost of our investment securities portfolio decreased by $240.2 million, or 15.6%, in 2024. In 2024, we sold $325.2 million in available-for-sale securities with an average yield of 1.94%, as part of a balance sheet restructuring, including $190.5 million in agency collateralized mortgage obligations ("CMOs"), $65.0 million in debentures of government sponsored agencies, $39.8 million in agency mortgage-backed securities ("MBSs"), $18.4 million in SBA-backed securities, $6.0 million in corporate bonds and $5.5 million in obligations of state and political subdivisions. The sales of available-for-sale securities generated a net pre-tax loss of $32.5 million.
Current wording
The amortized cost of our investment securities portfolio increased by $55.5 million, or 4.3%, in 2025. In 2025, we sold $778.9 million in available-for-sale securities with an average yield of 1.99%, as part of a balance sheet restructuring, including $279.8 million in agency collateralized mortgage obligations ("CMOs"), $270.8 million in agency mortgage-backed securities ("MBSs"), $98.1 million in debentures of government sponsored agencies, $95.7 million in obligations of state and political subdivisions, $21.0 million in corporate bonds, $12.0 million in U.S. Treasury securities and $1.5 million in SBA-backed securities. The sales of available-for-sale securities generated a net pre-tax loss of $88.2 million. Sales proceeds were deployed into securities with a higher yield and lower effective duration than the securities sold.
Previous wording
We consider agency debentures and CMOs issued by U.S. government sponsored entities to have low credit risk as they carry the credit support of the U.S. federal government. The debentures, CMBSs, CMOs and MBS issued by U.S. government sponsored agencies, SBA-backed securities and U.S. Treasury securities made up 85.1% of the portfolio as of December 31, 2024, compared to 86.6% at December 31, 2023. See the discussion in the section captioned “Securities May Lose Value Due to Credit Quality of the Issuers” in ITEM 1A Risk Factors above.
Current wording
We consider agency debentures and CMOs issued by U.S. government sponsored entities to have low credit risk as they carry the credit support of the U.S. federal government. The debentures, CMBSs, CMOs and MBS issued by U.S. government sponsored agencies made up 95.5% of the portfolio as of December 31, 2025, compared to 85.1% at December 31, 2024. See the discussion in the section captioned “Securities May Lose Value Due to Credit Quality of the Issuers” in ITEM 1A Risk Factors above.
Previous wording
The portion of the portfolio outside the state of California is distributed among twelve states. Of the total investment in obligations of state and political subdivisions, the largest concentrations outside California are in Texas (38.4%), Washington (15.7%), and Wisconsin (9.4%). Our investments in obligations issued by municipal issuers in Texas are either guaranteed by the AAA-rated Texas Permanent School Fund ("PSF"), rated AAA without enhancement, or backed by revenue sources from essential services (such as utilities and transportation).
Current wording
The portion of the portfolio outside the state of California is distributed among twelve states. Of the total investment in obligations of state and political subdivisions, the largest concentrations outside California are in Texas (44.3%), Wisconsin (24.1%) and Virginia (6.7%). Our investments in obligations issued by municipal issuers in Texas are either guaranteed by the AAA-rated Texas Permanent School Fund ("PSF"), rated AAA without enhancement, or backed by revenue sources from essential services (such as utilities and transportation).
Previous wording
Loans increased by $9.5 million in 2024, or 0.5%, to $2.083 billion as of December 31, 2024, from $2.074 billion as of December 31, 2023. Organic loan originations were $152.6 million in 2024, compared to $144.1 million in 2023. Loan purchases totaled $35.7 million in 2024, compared to none in the prior year. Non-PPP payoffs were $120.2 million in 2024, compared to $107.1 million in 2023. PPP loan payoffs during 2024 and 2023 were $443 thousand and $2.7 million, respectively. The majority of the payoffs were a result of cash payoffs and asset sales. In addition, $57.4 million of loan amortization from scheduled repayments, net of credit line utilization, contributed to the change in loan balances for 2024. The originations and payoffs noted above, combined with utilization on lines of credit and amortization on existing loans, resulted in a net increase for this period.
Current wording
Loans increased by $37.6 million in 2025, or 1.8%, to $2.121 billion as of December 31, 2025, from $2.083 billion as of December 31, 2024 and was primarily due to a $92.7 million increase in commercial non-owner occupied real estate loans, offset by a decrease of $32.6 million in residential real estate loans and a decrease of $21.9 million in construction loans. Organic loan originations were $273.5 million in 2025, compared to $152.6 million in 2024. There were loan purchases of approximately $250 thousand in 2025 compared to $35.7 million in 2024. Payoffs were $145.7 million in 2025, compared to $120.6 million in 2024. The majority of the payoffs were a result of asset sales and cash payoffs. In addition, $90.2 million of loan amortization from scheduled repayments, net of credit line utilization, contributed to the change in loan balances for 2025.
Previous wording
Approximately 89% and 90% of total loans were secured by real estate as of December 31, 2024 and 2023, respectively. For additional information on loan concentration risk, see ITEM 1A, Risk Factors.
Current wording
Approximately 90% and 89% of total loans were secured by real estate as of December 31, 2025 and 2024, respectively. For additional information on loan concentration risk, see ITEM 1A, Risk Factors.
Previous wording
Commercial real estate loans increased by $43.0 million in 2024, compared to a $5.8 million increase in 2023. The increase in 2024 was comprised of the $54.2 million increase within the non-owner occupied loan portfolio, partially offset by the $11.2 million decrease within the owner-occupied loan portfolio. Of the commercial real estate loans as of December 31, 2024, 80% were non-owner occupied and 20% were owner-occupied. Almost the entire commercial real estate loan portfolio is comprised of term loans for which the primary source of repayment is either the cash flow from leasing activities of the real estate collateral or the operating cash flow of the owner occupant.
Current wording
Commercial real estate loans increased by $80.9 million in 2025 to $1.676 billion from $1.596 billion at December 31, 2024. The increase in 2025 was comprised of the $92.7 million increase within the non-owner occupied loan portfolio, partially offset by the $11.7 million decrease within the owner-occupied loan portfolio. Of the commercial real estate loans as of December 31, 2025, 81% were non-owner occupied and 19% were owner-occupied. Almost the entire commercial real estate loan portfolio is comprised of term loans for which the primary source of repayment is either the cash flow from leasing activities of the real estate collateral or the operating cash flow of the owner occupant.
Previous wording
With the heightened market concern about non-owner-occupied commercial real estate, and in particular the office sector, we are providing the following additional information: We continue to maintain diversity among property types and within our geographic footprint. In particular, our office commercial real estate portfolio in the City of San Francisco represents just 3% of our total loan portfolio and 5% of our total non-owner-occupied commercial real estate portfolio.
Current wording
With the heightened market concern about non-owner-occupied commercial real estate, and in particular the office sector, we are providing the following additional information: We continue to maintain diversity among property types and within our geographic footprint. In particular, our office commercial real estate portfolio in the City of San Francisco represents just 3% of our total loan portfolio and 4% of our total non-owner-occupied commercial real estate portfolio.
Previous wording
Cons truction loans decreased by $62.2 million in 2024, compared to a decrease of $15.2 million in 2023. The decrease in 2024 was primarily due to $44.5 million in conversions to commercial real estate financing following completion of construction and $15.4 million in payoffs. These decreases were partially offset by $11.5 million in new loans and $4.9 million in advances on existing construction loans. The decrease in 2023 was primarily due to $22.2 million in payoffs and $16.9 million in conversions to commercial real estate financing. These decreases were partially offset by $24.5 million in advances on existing construction loans. Undisbursed construction loan commitments at December 31, 2024 and 2023 were $8.3 million and $13.9 million, respectively.
Current wording
Undisbursed construction loan commitments at December 31, 2025 and 2024 were $10.5 million and $8.3 million, respectively.
Previous wording
The allowance for credit losses on loans is calculated in accordance with ASC 326 based on management's best estimate of current expected credit losses over the loans' contractual terms, adjusted for estimated prepayments where applicable. The contractual terms exclude anticipated extensions, renewals and modifications. Relevant available information includes historical credit loss experience, current conditions and reasonable and supportable forecasts. While historical credit loss experience provides the basis for the estimation of expected credit losses, adjustments to historical loss information may be made for differences in current portfolio-specific risk characteristics, environmental conditions or other relevant factors. All specifically identifiable and quantifiable losses are charged off against the allowance. The ultimate adequacy of the allowance depends on a variety of complex factors, some of which may be beyond management's control, such as volatility in the real estate market, changes in interest rates and economic and political environments. Based on the current conditions of the loan portfolio and reasonable and supportable forecasts, management believes that the $30.7 million allowance for credit losses at December 31, 2024 was adequate to absorb expected credit losses in our loan portfolio. For additional information on our allowance for credit losses methodology, refer to Notes 1 and 3 to the Consolidated Financial Statements in ITEM 8 of this report.
Current wording
The allowance for credit losses on loans is calculated in accordance with ASC 326 based on management's best estimate of current expected credit losses over the loans' contractual terms, adjusted for estimated prepayments where applicable. The contractual terms exclude anticipated extensions, renewals and modifications. Relevant available information includes historical credit loss experience, current conditions and reasonable and supportable forecasts. While historical credit loss experience provides the basis for the estimation of expected credit losses, adjustments to historical loss information may be made for differences in current portfolio-specific risk characteristics, environmental conditions or other relevant factors. All specifically identifiable and quantifiable losses are charged off against the allowance. The ultimate adequacy of the allowance depends on a variety of complex factors, some of which may be beyond management's control, such as volatility in the real estate market, changes in interest rates and economic and political environments. Based on the current conditions of the loan portfolio and reasonable and supportable forecasts, management believes that the $30.1 million allowance for credit losses at December 31, 2025 was adequate to absorb expected credit losses in our loan portfolio. For additional information on our allowance for credit losses methodology, refer to Notes 1 and 3 to the Consolidated Financial Statements in ITEM 8 of this report.
Previous wording
The ratio of the allowance for credit losses to total loans was 1.47% at December 31, 2024 and 1.21% at December 31, 2023.
Current wording
The ratio of the allowance for credit losses to total loans was 1.42% at December 31, 2025 and 1.47% at December 31, 2024.
Previous wording
The $5.5 million increase in the allowance for credit losses on loans in 2024 was largely due tothe specific allowance increase of $6.7 million. This was mainly due to the increased reserve of $5.2 million for one non-owner occupied commercial real estate loan totaling $16.7 million that, although current, had experienced a deterioration in the collateral value and, therefore, a material increase in the loan-to-value. For further information, refer to the Provision for Credit Losses section above, and Notes 1 and 3 to the Consolidated Financial Statements in ITEM 8 of this report.
Current wording
For further information, refer to the Provision for Credit Losses section above, and Notes 1 and 3 to the Consolidated Financial Statements in ITEM 8 of this report.
Previous wording
Non-accrual loans increased by $25.9 million in 2024, primarily due to three relationships designated as non-accrual in the second and third quarters. One non-owner occupied commercial real estate loan was due to material declines in collateral value, as mentioned in earlier sections. Another was a commercial relationship which had a material paydown in the fourth quarter of 2024. The third relationship was another non-owner occupied commercial real estate loan whose renewal negotiations remain ongoing. This property became 100% occupied with a conforming debt service coverage in the fourth quarter. Approximately 91% of the non-accrual loans as of December 31, 2024 were well-secured by either commercial or residential real estate.
Current wording
Non-accrual loans increased by $25.9 million in 2024, primarily due to three relationships designated as non-accrual in the second and third quarters.
Previous wording
Loans designated as special mention, which are not considered adversely classified, decreased by $26.3 million in 2024, primarily due to net downgrades of $2.6 million from the pass or watch category and downgrades of $25.0 million to substandard. Of the downgrades to special mention, $15.3 million was attributed to one recently completed construction loan that will be marketed for sale or paid down to a conforming debt service level. The remaining balance changes consisted of paydowns, payoffs and upgrades from substandard risk rating.
Current wording
Loans designated as special mention decreased by $26.3 million in 2024, primarily due to net downgrades of $2.6 million from the pass or watch category and downgrades of $25.0 million to substandard. Of the downgrades to special mention, $15.3 million was attributed to one recently completed construction loan that will be marketed for sale or paid down to a conforming debt service level. The remaining balance changes consisted of paydowns, payoffs and upgrades from substandard risk rating.
Previous wording
Interest receivable and other assets totaled $72.3 million and $74.9 million at December 31, 2024 and 2023, respectively. The $2.7 million decrease was primarily due to a $3.7 million decrease in net deferred tax assets, as discussed below.
Current wording
Interest receivable and other assets totaled $84.4 million and $72.3 million at December 31, 2025 and 2024, respectively. The $12.1 million increase was primarily due to a $12.3 million increase in net deferred tax assets, as discussed below.
Previous wording
Net deferred tax assets totaled $30.6 million and $34.3 million at December 31, 2024 and 2023, respectively. Deferred tax assets consist primarily of tax benefits expected to be realized in future periods related to temporary differences such as allowances for credit losses and unfunded loan commitments, net operating loss carryforwards, and deferred compensation and salary continuation obligations. The $3.7 million decrease in 2024 was primarily due to an $8.4 million decrease in deferred tax assets related to changes in unrealized losses on available-for-sale investment securities. The decreases in net deferred tax assets was partially offset by a $3.2 million increase in deferred tax assets related to net operating loss carryforwards and $1.6 million increase in the allowance for credit losses on loans and unfunded loan commitments. Management believes deferred tax assets will be realizable due to our expectation that earnings will continue to be at a level adequate to realize such tax benefits. Therefore, no valuation allowance was established as of December 31, 2024 or 2023. For additional information, refer to Note 11 to the Consolidated Financial Statements in ITEM 8 of this report.
Current wording
Net deferred tax assets totaled $42.9 million and $30.6 million at December 31, 2025 and 2024, respectively. Deferred tax assets consist primarily of tax benefits expected to be realized in future periods related to temporary differences such as allowances for credit losses and unfunded loan commitments, net operating loss carryforwards, and deferred compensation and salary continuation obligations. The $12.3 million increase in 2025 was primarily due to the $12.8 million increase in net operating loss carryforwards resulting from the Bank's higher pre-tax loss of $52.5 million in 2025 compared to $13.8 million in 2024. Also contributing to the increase were a $4.4 million increase in operating and finance lease liabilities and a $2.8 million increase in the allowance for credit losses on loans and unfunded loan commitments. The increases in net deferred tax assets were partially offset by a $4.9 million decrease in the net unrealized losses on available-for-sale securities. Management believes deferred tax assets will be realizable due to our expectation that earnings will continue to be at a level adequate to realize such tax benefits. Therefore, no valuation allowance was established as of December 31, 2025 or 2024. For additional information, refer to Note 11 to the Consolidated Financial Statements in ITEM 8 of this report.
Showing the first 40 of 63 pairs. Open the source sections for the rest.
Rearranged current paragraphs (3)
Current report — wording carried from elsewhere
During the second and fourth quarters of 2025, we sold additional securities with relatively low yields and redeployed the proceeds to further reposition our balance sheet, by investing in higher yielding securities. Management and the Board are continuously monitoring and analyzing the impact of market rates on the Company's financial condition and results of operations to enhance performance, safety and soundness and returns to shareholders. See ITEM 7A. Quantitative and Qualitative Disclosure about Market Risk for further information.
Current report — wording carried from elsewhere
Non-interest income showed a loss of $21.4 million for 2024, a $26.3 million decrease from income of $5.0 million for 2023. The decrease in 2024 was primarily due to the $32.5 million net loss on the sale of available-for-sale investment securities in 2024 related to our balance sheet restructuring. Excluding losses on sale of securities in both years, non-interest income increased by $300 thousand, which included a $275 thousand year-over-year increase in wealth management and trust services income due to increased assets and an increase of $226 thousand in net earnings on bank-owned life insurance due to increased rates. These were partially offset by the reduction of $314 thousand in bank-owned life insurance death benefits recorded in 2023 and not repeated in 2024.
Current report — wording carried from elsewhere
Approximately 97% of the non-accrual loans as of December 31, 2025 were well-secured by either commercial or residential real estate.
Rearranged previous paragraphs (5)
Previous report — wording carried elsewhere
Policies. Additionally, because current economic conditions and forecasts can change, as future events are inherently difficult to predict, the estimated credit losses on loans and unfunded commitments could change significantly.
Previous report — wording carried elsewhere
The tax-equivalent net interest margin was 2.63% for 2024, consistent with 2023. Higher yields on loans increased the margin by 31 basis points, while higher deposit costs resulted in a 64 basis points reduction in the margin. In addition, the year's balance sheet restructuring activities affected the borrowings, interest-bearing cash and investments factors with impacts of 27, 13 and (7) basis points, respectively.
Previous report — wording carried elsewhere
Non-interest expenses increased$4.2 millionto $79.5 million in 2023 from $75.3 million in 2022. Significant fluctuations were as follows:
Previous report — wording carried elsewhere
•Salaries and employee benefits increased by $1.4 million primarily due to the filling of open positions andthe hiring of several key employees and officers, an increase in SERP-related expenses largely due tonew and retired participant adjustments lowering costs for 2022, an increase in deferred officer compensation expense from increased participation and interest rates, higher insurance costs, and lower deferred loan origination costs. Increases to salaries and employee benefits were partially offset by a decrease in profit sharing expense mainly from accrual adjustments and because some contributions in 2023 were made from forfeitures rather than paid in cash, a decrease in accrued incentive bonuses, and a decrease in stock-based compensation from changes in award structure and estimated performance award payout estimates.
Previous report — wording carried elsewhere
Non-accrual loans in 2023 were comprised of mostly of commercial and industrial and non-owner occupied commercial real estate loans. Over 66% of the non-accrual loans as of December 31, 2023 were well-secured by either commercial or residential real estate.