Bank of Marin Bancorp (NASDAQ:BMRC) Q3 2023 Earnings Call Transcript - Page 7 of 7 - InvestingChannel

Bank of Marin Bancorp (NASDAQ:BMRC) Q3 2023 Earnings Call Transcript

Operator: The next question comes from the line of Tim Coffey. Your line is open. Please go ahead.

Tim Coffey: Great. Thank you, Morning, everybody.

Tani Girton: Good morning, Tim.

Tim Coffey: Tim, if we can circle back to the San Francisco office book. How much of that is criticized or classified at this point?

Tani Girton: We’ll see here, let me do the math. So about of the $71 million, there’s about 25% that’s in the classified bucket. And then yes.

Tim Myers: And that continues and has been skewed, Tim, by that large substandard that we downgraded two Decembers ago. So we’ve had the movement in there. We just mentioned into criticized, but that one large $17 million loan really contributes the bulk of that it has for some time.

Tani Girton: It’s one borrower. We’re not seeing any deterioration, not any notable improvement, but no deterioration. There’s good sponsorship behind it. So loan payments are being made as agreed, and we’re continuing to work with the borrower.

Tim Coffey: Okay. Okay. That’s great. And then, Tim, as you talk to some of the commercial real estate investors and your bank. What’s their temperature like right now? Are they still waiting for things to get worse and pick up better deals? Or do you see them getting more interested in being back in the market?

Tim Myers: We’re seeing interest pick up. I don’t want to – we don’t have a large enough portfolio to be statistically relevant there with my opinion, but we are seeing activity pick up, whether it’s a North Face Sacramento, but we are seeing people interested at acquiring properties at what look like depressed or degraded prices, and that’s creating opportunities. So and that rightsizes the credit risk, right, as we’re doing those at higher returns. We’re also funding loans that are rationalized appraised value in this environment. So I don’t want to – I don’t know if that’s a trend yet, but it’s becoming more visible.

Tim Coffey: Okay. Well, that’s positive relative to where we were earlier in this year. And then as you kind of go forward with your deposit for gathering strategies, do you have a target loan-to-deposit ratio you’d like to get to?

Tim Myers: Well, I mean, we’d love it to be higher than it is, right? So we want to lend into this with the higher yields. And so we’d love to continue to raise deposits at manageable costs at a relationship deposits that will come down in cost over time and pay off the borrowings, et cetera. But we really want to grow the loans. And so if we can get back to a historical trend line for us on that, that’s really where we’d like to be. But no one set number target.

Tani Girton: Yes. We have a lot of headroom to go where – I mean, we used to talk about what would the cap be on that? And unlike a lot of the larger banks, we don’t really have an appetite or haven’t historically for getting loan-to-deposit ratios over even not only 100, but even 90 to 95. So.

Tim Coffey: Great. Okay. Well, thank you very much for your time. Those were my questions.

Tim Myers: Thank you very much.

Operator: There are no further questions in the queue. I will now pass the call over to Tim Myers for closing remarks.

Tim Myers: Thank you again, everyone, for your interest in joining us and the outstanding questions, and we look forward to talking to you again next quarter.

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