KBRA assigns a senior unsecured debt rating of BBB, a subordinated debt rating of BBB-, and a short-term debt rating of K3 to Novato, California-based Bank of Marin Bancorp (NASDAQ:BMRC) ("Marin" or "the company"). In addition, KBRA assigns deposit and senior unsecured debt ratings of BBB+, a subordinated debt rating of BBB, and short-term deposit and debt ratings of K2 to its main subsidiary, Bank of Marin. The Outlook for all long-term ratings is Stable.
BMRC's ratings are supported by its strong funding profile, underpinned by a healthy deposit franchise. The cost of deposits of just 1.28% through 9M25 is partially driven by a robust level of noninterest-bearing deposits at 43% of total deposits, which leads among traditional commercial banks in KBRA's rated universe. The deposit base has historically demonstrated stability as well, with no major outflows amidst liquidity stresses experienced in 2023 at other CA-based banks.
Earnings volatility in recent periods has been driven primarily by losses on securities portfolio restructuring, which is expected to drive NIM improvement in the coming years following compression through interest rate volatility on limited rate cut pass-through to deposits and slower asset repricing as the Fed hiked beginning in 2022. Profitability also has the potential to improve from efficiency gains following recent technology investments as BMRC continues to grow. Moreover, Marin has taken strategic balance sheet actions to reduce sensitivity and improve the earnings profile, including previously mentioned securities portfolio restructurings in recent years, which should enhance NIM and ROA on a go-forward basis. As such, we expect profitability to move closer to historical levels (ROA of 1.0% or higher) over the medium term.
Credit quality stands out as a strength relative to peers, as evidenced by minimal NCOs in recent years outside of very modest lumpiness driven by losses on proactive sales of acquired loans in 4Q23 and 1Q25. That said, KBRA notes elevated geographic and segment concentration, particularly in investor CRE, which heavily exposes the company to the economic condition of the Bay Area. However, we view the portfolio as conservatively underwritten and supported by a management team with deep experience in that market. The concentration risk is partially offset by loss absorption capacity, driven by robust capitalization (CET1 ratio of 14.9% as of 3Q25) and reserves (1.43% of total loans at 3Q25) relative to peers and its credit history. While capital has the potential to decrease with stronger loan growth or further securities portfolio restructurings, we believe that ratios will remain comfortable for the rated peer group and be rebuilt in a timely manner.
BMRC is spread reliant, with fee income contributing less than 10% of operating revenues, comprised mostly of wealth management, interchange, and deposit service charges, but revenue diversification remains an area of emphasis, notably within wealth management.
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Methodologies
- Financial Institutions: Bank & Bank Holding Company Global Rating Methodology
- ESG Global Rating Methodology
Disclosures
Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.
A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.
Information on the meaning of each rating category can be located here.
Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.
About KBRA
Kroll Bond Rating Agency, LLC (KBRA), one of the major credit rating agencies (CRA), is a full-service CRA registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a Designated Rating Organization (DRO) by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized as a Qualified Rating Agency by Taiwan's Financial Supervisory Commission and is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider (CRP) in the U.S.
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