Bank of Marin's Quiet Turnaround: One-Way Sales and Construction Revival Drive Margin Expansion
The Bay Area lender continues to rebuild profitability, using a unique deposit management tactic to expand NIM while credit quality improves.
BMRC · Earnings Call · 2026-07-27
A Second Consecutive Quarter of Progress
Bank of Marin Bancorp (BMRC) reported its second-quarter 2026 results on July 27, and the story is one of steady, deliberate improvement. Net income nearly doubled year-over-year to $9.2 million, or $0.58 per share, while the tax-equivalent net interest margin expanded 14 basis points to 3.38%. This is the second consecutive quarter of meaningful margin expansion, a direct payoff from the balance-sheet restructuring executed over the past year. As CEO Timothy Myers stated in the prepared remarks, “Our second quarter results reflected another quarter of improving financial performance increasing profitability and enhanced earnings power.” — Timothy D. Myers, President and Chief Executive Officer · 2026-07-27
The improvement is not just on the income statement. Credit quality also moved in the right direction: special mention loans declined meaningfully after the planned exit of a $19 million criticized relationship, non-accrual loans fell to 0.40% of total loans, and the bank recorded a $320,000 reversal of provision for credit losses. Capital ratios strengthened across the board—tangible common equity rose to 8.52%, and the total capital ratio reached 15.58%.
The "Way Sale" Tactic: An Unusual Tool for Balance Sheet Management
The most distinctive element of the call was the discussion of way sale (likely a transcription of "one-way sales") of deposits. CFO David Bonaccorso explained that the bank has been using one-way sales as a risk-management tool, moving higher-cost deposits off the balance sheet to improve NIM and reduce excess cash. This tactic, while not new to the bank, was larger this quarter and contributed to the margin expansion. As David put it, “We are always looking to actively manage the balance sheet. Use of one-way sales has persisted for a few quarters now a little bit larger this quarter.” — David Bonaccorso, Chief Financial Officer · 2026-07-27 This is a nuanced approach that goes beyond simple deposit pricing, and it highlights the bank's disciplined balance-sheet management.
The one-way sales also helped the bank lower its cost of deposits. Average cost of total deposits declined to 1.28%, and the spot cost fell a further 3 basis points. Combined with higher yields on new loan fundings (up 62 basis points quarter-over-quarter), the bank is extracting more value from its asset mix.
Construction Lending: A Piston Firing Again
Another theme was the revival of construction lending, particularly in San Francisco. CEO Timothy Myers noted that “We are starting to see a revival of our construction lending activity” — Timothy D. Myers, President and Chief Executive Officer · 2026-07-27—a segment that had been dormant for years. The bank is financing condo and single-family infill projects in the city, and this is expected to provide both loan growth and higher yields. This is a positive indicator for the Bay Area real estate market, which has been recovering from the pandemic-era slump.
The bank's loan production also showed strength: $98 million in new loan commitments, a 24% increase year-over-year. The growth is coming from new hires and a renewed focus on C&I and construction, as well as improving productivity in existing markets. The bank added nearly 1,000 new accounts during the quarter, with 41% from new relationships.
Consistency with Prior Messaging
The current call reinforces themes from previous quarters. In the prior quarter (April 2026), Tim Myers had said about the balance-sheet restructure: “we had said we were going to earn our way back into a median leverage ratio or CET1 ratio coming back toward peer levels.” — Timothy D. Myers, Chief Executive Officer · 2026-04-27 This quarter, the bank has made clear progress on that path. However, buybacks remain constrained by the California regulator; Tim reiterated that “I would not call any buybacks imminent for that reason.” — Timothy D. Myers, President and Chief Executive Officer · 2026-07-27 The company is also keeping an eye on M&A, though nothing is in the works.
From a fundamentals perspective, the trajectory is positive. Net income in the latest quarter was $9.2 million, up from $5.2 million a year earlier (according to the call; the fundamentals data as of Q1 2026 shows a similar trend). The bank's Loan yields are improving, and the deposit rate discipline is evident in the NIM expansion.
What's Next?
The bank is not guiding to specific loan growth, but management's confidence is growing. The pipeline is strong, and construction lending is re-accelerating. The key question is whether the bank can translate improving production into net balance-sheet growth while managing deposit volatility. The recent 90-day stock performance has been flat, but the fundamentals are slowly improving. The bank's ability to sustain margin expansion and credit quality will be the watch items for the next few quarters.
All in all, BMRC is showing a quiet but steady turnaround, with the novel "way sale" strategy as a distinctive lever. If the bank can continue to execute on its growth and capital plans, the market may start to pay more attention.