BMRC

Bank of Marin Bancorp

NASDAQ · FINANCIALS · STATE COMMERCIAL BANKS

27.11

−0.23 −0.84%

USD · close Oct 23

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MKT CAP $439MP/E —DIV YIELD 3.69%FCF YIELD 8.73%REV TTM —NET INCOME −$14.3M −306.3%NET CASH —52W 23.58 – 30.30SEC XBRL · TTM TO Invalid Date

How BMRC rewrote its risk factors

10-K ITEM 1A · FY2024 → FY2025

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RESULTS OF OPERATIONS Overview 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.
Financial Highlights The following are highlights of our financial condition and results of operations.
At December 31, (dollars in thousands, except per share data) 2025 2024 Selected financial condition data: Total assets $ 3,904,778 $ 3,701,335 Investment securities $ 1,327,812 $ 1,266,733 Loans, net of allowance for credit losses on loans $ 2,090,764 $ 2,052,600 Deposits $ 3,415,542 $ 3,220,015 Borrowings and other obligations $ 709 $ 154 Subordinated notes, net $ 43,857 $ — Stockholders' equity $ 394,654 $ 435,407 Book value per share $ 24.51 $ 27.06 Tangible book value per share $ 19.87 $ 22.37 Asset quality ratios: Allowance for credit losses to total loans 1.42 % 1.47 % Allowance for credit losses to non-accrual loans 1.12x 0.90x Non-accrual loans to total loans 1.27 % 1.63 % Classified loans (graded substandard and doubtful) as a percentage of total loans 1.51 % 2.17 % Capital ratios: Equity to total assets 10.11 % 11.76 % Tangible common equity to tangible assets 8.35 % 9.93 % Total capital (to risk-weighted assets) 15.25 % 16.54 % Tier 1 capital (to risk-weighted assets) 12.34 % 15.32 % Tier 1 capital (to average assets) 8.26 % 10.46 % Common equity Tier 1 capital (to risk-weighted assets) 12.34 % 15.32 % Other data: Loan-to-deposit ratio 62.09 % 64.70 % Number of branches 27 27 Full-time equivalent employees 311 285 For the Years Ended December 31, (dollars in thousands, except per share data) 2025 2024 2023 Selected operating data: Net interest income $ 106,037 $ 91,582 $ 100,352 Provision for credit losses on loans 375 5,550 2,575 Provision for (reversal of) credit losses on unfunded loan commitments 185 (233) (342) Non-interest income (76,650) (21,360) 4,989 Non-interest expense 81,310 78,740 77,072 Net (loss) income (35,675) (8,409) 19,895 Net (loss) income per common share: Basic $ (2.24) $ (0.52) $ 1.24 Diluted $ (2.24) $ (0.52) $ 1.24 Performance and other financial ratios: Return on average assets (0.94) % (0.22) % 0.49 % Return on average equity (8.19) % (1.93) % 4.69 % Tax-equivalent net interest margin 2.94 % 2.55 % 2.56 % Cost of deposits 1.39 % 1.50 % 0.82 % Cost of funds 1.40 % 1.51 % 1.09 % Efficiency ratio 276.69 % 112.13 % 73.16 % Net charge-offs $ 942 $ 66 $ 386 Net charge-offs to average loans 0.05 % NM 0.02 % Cash dividend payout ratio on common stock 1 NM NM 80.65 % Cash dividends per common share $ 1.00 $ 1.00 $ 1.00 1 Calculated as cash dividends per common share divided by basic net income per common share.
Restatement and Revision of Prior Period Financial Statements and Financial Highlights 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.
Summary of Reclassifications and Impacts ($ in thousands) FY 2025 FY 2024 FY 2023 Q4 2025 Q3 2025 Q2 2025 Q1 2025 Q4 2024 Q3 2024 Q2 2024 Q1 2024 Non-interest-Bearing Deposits - end of period As reported 1,492,249 1,399,900 1,441,987 1,492,249 1,458,230 1,379,814 1,426,446 1,399,900 1,473,379 1,417,661 1,444,435 As Adjusted 1,254,416 1,274,747 1,309,711 1,254,416 1,245,247 1,218,648 1,277,505 1,274,747 1,331,853 1,285,901 1,318,261 Change -237,833 -125,153 -132,276 -237,833 -212,983 -161,166 -148,941 -125,153 -141,526 -131,760 -126,174 Interest-Bearing Deposits - end of period As reported 1,923,293 1,820,115 1,848,088 1,923,293 1,924,346 1,865,234 1,875,525 1,820,115 1,835,870 1,796,116 1,839,667 As Adjusted 2,161,126 1,945,268 1,980,364 2,161,126 2,137,329 2,026,400 2,024,466 1,945,268 1,977,396 1,927,876 1,965,841 Change 237,833 125,153 132,276 237,833 212,983 161,166 148,941 125,153 141,526 131,760 126,174 Non-interest-Bearing Deposits as a percentage of Total Deposits - end of period As reported 43.7% 43.5% 43.8% 43.7% 43.1% 42.5% 43.2% 43.5% 44.5% 44.1% 44.0% As Adjusted 36.7% 39.6% 39.8% 36.7% 36.8% 37.6% 38.7% 39.6% 40.2% 40.0% 40.1% Change -7.0% -3.9% -4.0% -7.0% -6.3% -5.0% -4.5% -3.9% -4.3% -4.1% -3.8% Non-interest-Bearing Deposits - average As reported 1,433,223 1,448,346 1,656,047 1,506,847 1,419,872 1,398,570 1,406,648 1,452,966 1,460,011 1,421,543 1,458,686 As Adjusted 1,261,562 1,316,737 1,544,208 1,285,578 1,254,958 1,245,025 1,260,482 1,318,943 1,321,648 1,290,874 1,335,405 Change -171,661 -131,609 -111,839 -221,269 -164,914 -153,545 -146,166 -134,023 -138,363 -130,669 -123,281 Interest-Bearing Deposits - average As reported 1,886,828 1,838,015 1,726,811 1,925,424 1,925,873 1,855,477 1,839,161 1,831,956 1,820,531 1,839,468 1,860,365 As Adjusted 2,058,489 1,969,624 1,838,650 2,146,693 2,090,787 2,009,022 1,985,327 1,965,979 1,958,894 1,970,137 1,983,646 Change 171,661 131,609 111,839 221,269 164,914 153,545 146,166 134,023 138,363 130,669 123,281 Interest Expense As reported 42,196 46,613 36,733 10,651 10,876 10,376 10,293 11,246 12,050 11,865 11,452 As Adjusted 46,391 49,691 39,142 12,051 11,913 11,316 11,111 11,970 12,866 12,672 12,183 Change 4,195 3,078 2,409 1,400 1,037 940 818 724 816 807 731 Net Interest Income As reported 110,232 94,660 102,761 31,181 28,193 25,912 24,946 25,230 24,269 22,467 22,694 As Adjusted 106,037 91,582 100,352 29,781 27,156 24,972 24,128 24,506 23,453 21,660 21,963 Change -4,195 -3,078 -2,409 -1,400 -1,037 -940 -818 -724 -816 -807 -731 Non-interest Expense As reported 85,505 81,818 79,481 21,423 21,328 21,490 21,264 18,338 20,417 21,894 21,169 As Adjusted 81,310 78,740 77,072 20,023 20,291 20,550 20,446 17,614 19,601 21,087 20,438 Change -4,195 -3,078 -2,409 -1,400 -1,037 -940 -818 -724 -816 -807 -731 Net Interest Margin, reported As reported 3.04% 2.61% 2.60% 3.31% 3.07% 2.91% 2.84% 2.78% 2.68% 2.50% 2.48% As Adjusted 2.92% 2.53% 2.54% 3.16% 2.95% 2.81% 2.75% 2.70% 2.59% 2.41% 2.40% Change -0.12% -0.08% -0.06% -0.15% -0.12% -0.10% -0.09% -0.08% -0.09% -0.09% -0.08% Net Interest Margin, tax-equivalent As reported 3.06% 2.63% 2.63% 3.32% 3.08% 2.93% 2.86% 2.80% 2.70% 2.52% 2.50% As Adjusted 2.94% 2.55% 2.56% 3.18% 2.97% 2.83% 2.77% 2.72% 2.61% 2.43% 2.42% Change -0.12% -0.08% -0.06% -0.14% -0.11% -0.10% -0.09% -0.08% -0.09% -0.09% -0.08% Cost of Deposits As reported 1.26% 1.41% 0.74% 1.19% 1.29% 1.28% 1.29% 1.36% 1.46% 1.45% 1.38% As Adjusted 1.39% 1.50% 0.82% 1.35% 1.41% 1.39% 1.39% 1.45% 1.56% 1.54% 1.47% Change 0.13% 0.09% 0.07% 0.16% 0.12% 0.11% 0.10% 0.09% 0.10% 0.09% 0.09% Cost of Interest-Bearing Deposits As reported 2.22% 2.52% 1.46% 2.12% 2.24% 2.24% 2.27% 2.44% 2.63% 2.56% 2.46% As Adjusted 2.24% 2.51% 1.50% 2.16% 2.26% 2.26% 2.27% 2.42% 2.61% 2.56% 2.45% Change 0.02% -0.01% 0.04% 0.04% 0.02% 0.02% 0.00% -0.02% -0.02% 0.00% -0.01% Efficiency Ratio, GAAP As reported 254.6% 111.6% 73.8% -60.4% 68.9% 208.8% 76.4% 65.5% 75.2% -300.4% 83.2% As Adjusted 276.7% 112.1% 73.2% -54.3% 67.9% 219.8% 75.7% 64.6% 74.4% -260.5% 82.7% Change 22.1% 0.5% -0.6% 6.1% -1.1% 11.0% -0.7% -0.9% -0.7% 39.9% -0.5% Efficiency Ratio, non-GAAP excluding losses on securities sales As reported 70.2 % 77.3 % 69.9 % 63.0 % 68.9 % 74.0 % 76.4 % 65.5 % 75.2 % 86.7 % 83.2 % As Adjusted 69.1 % 76.6 % 69.3 % 61.4 % 67.9 % 73.2 % 75.7 % 64.6 % 74.4 % 86.3 % 82.7 % Change -1.1 % -0.7 % -0.6 % -1.6 % -1.1 % -0.9 % -0.7 % -0.9 % -0.8 % -0.4 % -0.5 % Executive Summary 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.
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.
The following are highlights of operating and financial performance for the year ended December 31, 2025: • 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. • 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. • 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. • 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 . • 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 c ontinue to remain strong and made up 36.7% of total deposits as of December 31, 2025, compared to 39.6% as of December 31, 2024.
Estimated uninsured and/or uncollateralized deposits comprised 31% of total deposits as of December 31, 2025. • 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. • 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. • 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. • 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. • 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.
Average Statements of Condition and Analysis of Net Interest Income Year ended Year ended Year ended December 31, 2025 December 31, 2024 December 31, 2023 Interest Interest Interest Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/ (dollars in thousands; unaudited) Balance Expense Rate Balance Expense Rate Balance Expense Rate Assets Interest-earning deposits with banks 1 $ 222,747 $ 9,535 4.22 % $ 128,752 $ 6,714 5.13 % $ 42,864 $ 2,329 5.36 % Investment securities 2, 3 1,283,380 38,710 3.02 % 1,361,859 33,349 2.45 % 1,753,708 39,100 2.23 % Loans 1, 3, 4, 5 2,074,565 104,870 4.99 % 2,074,971 101,912 4.83 % 2,099,719 99,018 4.65 % Total interest-earning assets 1 3,580,692 153,115 4.22 % 3,565,582 141,975 3.92 % 3,896,291 140,447 3.56 % Cash and non-interest-bearing due from banks 37,299 36,692 37,868 Bank premises and equipment, net 7,474 7,310 8,348 Interest receivable and other assets, net 180,356 164,298 135,200 Total assets $ 3,805,821 $ 3,773,882 $ 4,077,707 Liabilities and Stockholders' Equity Interest-bearing transaction accounts $ 357,877 $ 5,408 1.51 % $ 325,065 $ 4,279 1.32 % $ 352,363 $ 3,445 0.98 % Savings accounts 224,428 2,329 1.04 % 227,061 2,003 0.88 % 281,611 867 0.31 % Money market accounts 1,257,049 31,841 2.53 % 1,155,016 33,914 2.94 % 1,013,620 18,553 1.83 % Time accounts, including CDARS 219,135 6,436 2.94 % 262,482 9,254 3.53 % 191,056 4,715 2.47 % Borrowings and other obligations 1 253 9 3.53 % 4,628 241 5.13 % 221,623 11,562 5.15 % Subordinated notes 5,189 368 7.10 % — — — % — — — % Total interest-bearing liabilities 2,063,931 46,391 2.25 % 1,974,252 49,691 2.52 % 2,060,273 39,142 1.90 % Demand accounts 1,261,562 1,316,737 1,544,208 Interest payable and other liabilities 44,668 47,823 49,442 Stockholders' equity 435,660 435,070 423,784 Total liabilities & stockholders' equity $ 3,805,821 $ 3,773,882 $ 4,077,707 Tax-equivalent net interest income/margin 1,3 $ 106,724 2.94 % $ 92,284 2.55 % $ 101,305 2.56 % Reported net interest income/margin 1 $ 106,037 2.92 % $ 91,582 2.53 % $ 100,352 2.54 % Tax-equivalent net interest rate spread 1.97 % 1.38 % 1.63 % 1 Interest income/expense is divided by actual number of days in the period times 360 days to correspond to stated interest rate terms, where applicable. 2 Yields on available-for-sale securities are calculated based on amortized cost balances rather than fair value, as changes in fair value are reflected as a component of stockholders' equity.
The amortized portion of net loan origination fees is included in interest income on loans, representing an adjustment to the yield. 5 Net loan origination (costs) fees included in interest income totaled $(1.7) million, $(1.6) million, and $(1.3) million in 2025, 2024, and 2023, respectively.
Mix variances are attributable to the change in yields or rates multiplied by the change in average balances. 2025 compared to 2024 2024 compared to 2023 (in thousands, unaudited) Volume Yield/Rate Mix Total Volume Yield/Rate Mix Total Interest-earning deposits with banks $ 4,902 $ (1,187) $ (894) $ 2,821 $ 4,667 $ (100) $ (182) $ 4,385 Investment securities 1 (1,922) 7,728 (445) 5,361 (8,737) 3,845 (859) (5,751) Loans 1 (20) 3,266 (288) 2,958 (1,167) 3,828 233 2,894 Total interest-earning assets 2,960 9,807 (1,627) 11,140 (5,237) 7,573 (808) 1,528 Interest-bearing transaction accounts 432 647 50 1,129 (267) 1,181 (80) 834 Savings accounts (23) 360 (11) 326 (168) 1,610 (306) 1,136 Money market accounts 2,996 (4,577) (492) (2,073) 2,588 11,128 1,645 15,361 Time accounts, including CDARS (1,528) (1,524) 234 (2,818) 1,763 2,002 774 4,539 Borrowings and other obligations (228) (76) 72 (232) (11,321) (50) 50 (11,321) Subordinated notes — — 368 368 — — — — Total interest-bearing liabilities 1,649 (5,170) 221 (3,300) (7,405) 15,871 2,083 10,549 Tax-equivalent net interest income $ 1,311 $ 14,977 $ (1,848) $ 14,440 $ 2,168 $ (8,298) $ (2,891) $ (9,021) 1 Yields and interest income on tax-exempt securities and loans are presented on a taxable-equivalent basis using the federal statutory rate of 21%. 2025 Compared to 2024 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.
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. 2024 Compared to 2023 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.

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Gone since FY2024

Goodwill 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.
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.
RESULTS OF OPERATIONS Financial Highlights The following are highlights of our financial condition and results of operations.
At December 31, (dollars in thousands, except per share data) 2024 2023 Selected financial condition data: Total assets $ 3,701,335 $ 3,803,903 Investment securities $ 1,266,733 $ 1,477,226 Loans, net of allowance for credit losses on loans $ 2,052,600 $ 2,048,548 Deposits $ 3,220,015 $ 3,290,075 Borrowings and other obligations $ 154 $ 26,298 Stockholders' equity $ 435,407 $ 439,062 Book value per share $ 27.06 $ 27.17 Tangible book value per share $ 22.37 $ 22.44 Asset quality ratios: Allowance for credit losses to total loans 1.47 % 1.21 % Allowance for credit losses to non-accrual loans 0.90x 3.15x Non-accrual loans to total loans 1.63 % 0.39 % Classified loans (graded substandard and doubtful) as a percentage of total loans 2.17 % 1.56 % Capital ratios: Equity to total assets 11.76 % 11.54 % Tangible common equity to tangible assets 9.93 % 9.73 % Total capital (to risk-weighted assets) 16.54 % 16.89 % Tier 1 capital (to risk-weighted assets) 15.32 % 15.91 % Tier 1 capital (to average assets) 10.46 % 10.46 % Common equity Tier 1 capital (to risk-weighted assets) 15.32 % 15.91 % Other data: Loan-to-deposit ratio 64.70 % 63.03 % Number of branches 27 27 Full-time equivalent employees 285 329 For the Years Ended December 31, (dollars in thousands, except per share data) 2024 2023 2022 Selected operating data: Net interest income $ 94,660 $ 102,761 $ 127,492 Provision for (reversal of) credit losses on loans 5,550 2,575 (63) Reversal of credit losses on unfunded loan commitments (233) (342) (318) Non-interest income (21,360) 4,989 10,905 Non-interest expense 81,818 79,481 75,269 Net (loss) income (8,409) 19,895 46,586 Net (loss) income per common share: Basic $ (0.52) $ 1.24 $ 2.93 Diluted $ (0.52) $ 1.24 $ 2.92 Performance and other financial ratios: Return on average assets (0.22) % 0.49 % 1.08 % Return on average equity (1.93) % 4.69 % 11.16 % Tax-equivalent net interest margin 2.63 % 2.63 % 3.11 % Cost of deposits 1.41 % 0.74 % 0.06 % Cost of funds 1.42 % 1.02 % 0.07 % Efficiency ratio 111.62 % 73.76 % 54.39 % Net charge-offs (recoveries) $ 66 $ 386 $ (23) Net charge-offs (recoveries) to average loans NM 0.02 % NM Cash dividend payout ratio on common stock 1 NM 80.65 % 33.45 % Cash dividends per common share $ 1.00 $ 1.00 $ 0.98 1 Calculated as cash dividends per common share divided by basic net income per common share.
Executive Summary 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.
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.
The following are highlights of operating and financial performance for the year ended December 31, 2024: • 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. • 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. • 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. • 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 . • 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 c ontinue to remain strong compared to our peers and made up 43.5% of total deposits as of December 31, 2024, compared to 43.8% as of December 31, 2023.
Estimated uninsured and/or uncollateralized deposits comprised 29% of total deposits as of December 31, 2024. • 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. • 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. • 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 ). • 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.
Average Statements of Condition and Analysis of Net Interest Income Year ended Year ended Year ended December 31, 2024 December 31, 2023 December 31, 2022 Interest Interest Interest Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/ (dollars in thousands; unaudited) Balance Expense Rate Balance Expense Rate Balance Expense Rate Assets Interest-earning deposits with banks 1 $ 128,752 $ 6,714 5.13 % $ 42,864 $ 2,329 5.36 % $ 120,395 $ 1,407 1.15 % Investment securities 2, 3 1,361,859 33,349 2.45 % 1,753,708 39,100 2.23 % 1,796,628 35,534 1.98 % Loans 1, 3, 4, 5 2,074,971 101,912 4.83 % 2,099,719 99,018 4.65 % 2,175,259 94,614 4.29 % Total interest-earning assets 1 3,565,582 141,975 3.92 % 3,896,291 140,447 3.56 % 4,092,282 131,555 3.17 % Cash and non-interest-bearing due from banks 36,692 37,868 53,534 Bank premises and equipment, net 7,310 8,348 7,400 Interest receivable and other assets, net 164,298 135,200 151,295 Total assets $ 3,773,882 $ 4,077,707 $ 4,304,511 Liabilities and Stockholders' Equity Interest-bearing transaction accounts $ 193,456 $ 1,201 0.62 % $ 240,524 $ 1,036 0.43 % $ 294,682 $ 421 0.14 % Savings accounts 227,061 2,003 0.88 % 281,611 867 0.31 % 341,710 125 0.04 % Money market accounts 1,155,016 33,914 2.94 % 1,013,620 18,553 1.83 % 1,065,104 1,589 0.15 % Time accounts, including CDARS 262,482 9,254 3.53 % 191,056 4,715 2.47 % 140,547 323 0.23 % Borrowings and other obligations 1 4,628 241 5.13 % 221,623 11,562 5.15 % 2,295 91 3.90 % Total interest-bearing liabilities 1,842,643 46,613 2.53 % 1,948,434 36,733 1.89 % 1,844,338 2,549 0.14 % Demand accounts 1,448,346 1,656,047 1,993,373 Interest payable and other liabilities 47,823 49,442 49,456 Stockholders' equity 435,070 423,784 417,344 Total liabilities & stockholders' equity $ 3,773,882 $ 4,077,707 $ 4,304,511 Tax-equivalent net interest income/margin 1,3 $ 95,362 2.63 % $ 103,714 2.63 % $ 129,006 3.11 % Reported net interest income/margin 1 $ 94,660 2.61 % $ 102,761 2.60 % $ 127,492 3.07 % Tax-equivalent net interest rate spread 1.39 % 1.67 % 3.03 % 1 Interest income/expense is divided by actual number of days in the period times 360 days to correspond to stated interest rate terms, where applicable. 2 Yields on available-for-sale securities are calculated based on amortized cost balances rather than fair value, as changes in fair value are reflected as a component of stockholders' equity.
The amortized portion of net loan origination fees is included in interest income on loans, representing an adjustment to the yield. 5 Net loan origination (costs) fees included in interest income totaled $(1.6) million, $(1.3) million, and $1.1 million in 2024, 2023, and 2022, respectively.
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. 2024 compared to 2023 2023 compared to 2022 (in thousands, unaudited) Volume Yield/Rate Mix Total Volume Yield/Rate Mix Total Interest-earning deposits with banks $ 4,667 $ (100) $ (182) $ 4,385 $ (906) $ 5,135 $ (3,307) $ 922 Investment securities 1 (8,737) 3,845 (859) (5,751) (849) 4,523 (108) 3,566 Loans 1 (1,167) 3,828 233 2,894 (3,286) 7,966 (276) 4,404 Total interest-earning assets (5,237) 7,573 (808) 1,528 (5,041) 17,624 (3,691) 8,892 Interest-bearing transaction accounts (203) 453 (85) 165 (77) 848 (156) 615 Savings accounts (168) 1,610 (306) 1,136 (22) 926 (162) 742 Money market accounts 2,588 11,128 1,645 15,361 (77) 17,906 (865) 16,964 Time accounts, including CDARS 1,763 2,002 774 4,539 116 3,146 1,130 4,392 Borrowings and other obligations (11,321) (50) 50 (11,321) 8,697 29 2,745 11,471 Total interest-bearing liabilities (7,341) 15,143 2,078 9,880 8,637 22,855 2,692 34,184 Tax-equivalent net interest income $ 2,104 $ (7,570) $ (2,886) $ (8,352) $ (13,678) $ (5,231) $ (6,383) $ (25,292) 1 Yields and interest income on tax-exempt securities and loans are presented on a taxable-equivalent basis using the federal statutory rate of 21%. 2024 Compared to 2023 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.
The tax-equivalent net interest margin was 2.63% for 2024, consistent with 2023.

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