BayCom Corp (“BayCom” or the “Company”) (NASDAQ: BCML), the
holding company for United Business Bank (the “Bank” or “UBB”),
announced earnings of $6.6 million, or $0.56 per diluted common
share, for the third quarter of 2023, compared to earnings of $7.2
million, or $0.59 per diluted common share, for the second quarter
of 2023 and $7.0 million, or $0.52 per diluted common share, for
the third quarter of 2022.
Net income for the third quarter of 2023 compared to the second
quarter of 2023 decreased $576,000 or 8.0%, primarily as a result
of a $1.9 million increase in provision for credit losses,
reflecting a $674,000 provision for credit losses for the current
quarter compared to a $1.3 million reversal of the allowance for
credit losses during the second quarter of 2023, partially offset
by a $528,000 increase in net interest income, $568,000 increase in
noninterest income and a $224,000 decrease in provision for income
taxes. Net income for the third quarter of 2023 compared to the
third quarter of 2022 decreased $340,000 or 4.9%, primarily as a
result of $728,000 decrease in noninterest income and $423,000
increase in noninterest expense, partially offset by a $520,000
decrease in provision for credit losses, a $84,000 increase in net
interest income and $207,000 decrease in provision for income
taxes.
Net income for the nine months ended September 30, 2023 compared
to the same period in 2022 increased $4.9 million or 30.6%,
primarily as a result of a $4.1 million increase in net interest
income and a $4.1 million decrease in provision for credit losses,
reflecting a $311,000 reversal of the allowance for credit losses
for the nine months ended September 30, 2023 compared to a $3.8
million provision for credit losses for the same period in 2022,
partially offset by a $891,000 decrease in noninterest income and a
$2.4 million increase in provision for income taxes.
George Guarini, Founder, President, and Chief Executive Officer
of the Company, stated, "Our financial performance for the third
quarter of 2023 remained resilient despite the challenges
confronting the banking industry. Similar to other banks, we
experienced some pressure on our net interest margin, but this
appears to have eased somewhat in the recent quarter. During the
quarter, we proactively bolstered our loan loss reserves, primarily
in response to specific loans. On the whole, our credit quality
remains solid, and we have not identified any systemic credit
issues within our loan portfolio."
Guarini concluded, "Our financial indicators remain stable, with
a net interest margin exceeding 4.0%, a return on assets surpassing
1.0%, and an improving efficiency ratio. Our liquidity and deposit
levels have held steady throughout the quarter. We are committed to
enhancing our tangible book value through earnings and the
repurchase of our shares, which are currently trading well below
our tangible book value. Additionally, we maintain the belief that
merger and acquisition opportunities may arise as other banks
recognize the advantages of consolidation in the current
operational environment."
Third Quarter Performance Highlights:
- Annualized net interest margin was 4.03% for the current
quarter, compared to 4.02% in the preceding quarter and 3.99% in
the same quarter a year ago.
- Annualized return on average assets was 1.03% for the current
quarter, compared to 1.13% in the preceding quarter and 1.07% in
the same quarter a year ago.
- Assets totaled $2.6 billion at both September 30, 2023 and June
30, 2023, compared to $2.5 billion at September 30, 2022.
- Loans, net of deferred fees, totaled $2.0 billion at September
30, 2023, remaining relatively unchanged from June 30, 2023, and
September 30, 2022.
- Nonperforming loans totaled $14.3 million or 0.73% of total
loans at September 30, 2023, compared to $12.8 million or 0.64% of
total loans at June 30, 2023, and $19.7 million or 0.99% of total
loans at September 30, 2022.
- The allowance for credit losses for loans totaled $19.8
million, or 1.01% of total loans outstanding, at September 30,
2023, compared to $19.1 million, or 0.95% of total loans
outstanding, at June 30, 2023, and $18.1 million, or 0.90% of total
loans outstanding, at September 30, 2022. The Company adopted the
Current Expected Credit Losses (“CECL”) standard as of January 1,
2023, which resulted in a one-time adjustment to the allowance for
credit losses for loans by $1.5 million (which included the
reclassification of the net credit discount on acquired purchased
credit impaired loans totaling $845,000) and an allowance for
unfunded credit commitments of $45,000, and an after-tax decrease
to opening retained earnings of $491,000 during the first quarter
of 2023.
- A $674,000 provision for credit losses for loans was recorded
during the current quarter compared to a $1.3 million reversal of
the allowance for credit losses for loans and $1.2 million
provision for credit losses for loans in the prior quarter and the
same quarter a year ago, respectively.
- Deposits totaled $2.2 billion at September 30, 2023 compared to
$2.1 billion at both June 30, 2023 and September 30, 2022. At
September 30, 2023, noninterest bearing deposits totaled $667.3
million, or 30.9% of total deposits, compared to $664.1 million, or
30.9% of total deposits at June 30, 2023, and $813.5 million, or
38.5% of total deposits, at September 30, 2022.
- The Company repurchased 239,649 shares of common stock at an
average cost of $18.86 per share during the third quarter of 2023,
compared to 543,955 shares repurchased at an average cost of $16.71
per share during the second quarter of 2023, and 406,534 shares
repurchased at an average cost of $19.14 per share during the third
quarter of 2022.
- On August 18, 2023, the Company announced the declaration of a
cash dividend on the Company’s common stock of $0.10 per share,
which was paid on October 13, 2023 to stockholders of record as of
September 15, 2023.
- The Bank remained a “well-capitalized” institution for
regulatory capital purposes at September 30, 2023.
Earnings
Net interest income increased $528,000, or 2.2%, to $24.8
million for the third quarter of 2023 from $24.3 million in the
prior quarter, and increased $84,000, or 0.3%, from $24.7 million
in the same quarter a year ago. The increase in net interest income
from the previous quarter and same quarter in 2022 reflects
increases in interest income on loans, federal funds sold and
interest-bearing balances in banks and, to a lesser extent,
investment securities, including dividends on Federal Reserve Bank
(“FRB”) and Federal Home Loan Bank (“FHLB”) stock, partially offset
by higher funding costs related to our deposits and junior
subordinated debt due to higher market rates. Average
interest-earning assets increased $21.7 million, or 0.8%, and
decreased $12.0 million, or 0.46% for the three months ended
September 30, 2023 compared to the second quarter of 2023 and the
third quarter of 2022, respectively. Average yield (annualized) on
interest earning assets for the third quarter of 2023 was 5.34%,
compared to 5.18% for the second quarter of 2023 and 4.38% for the
third quarter of 2022. The average rate paid on interest-bearing
liabilities for third quarter of 2023 was 2.04 %, compared to 1.82%
for the second quarter of 2023, and 0.66% for the third quarter of
2022. The increases in average yield on interest-earning assets and
average rate paid on interest-bearing liabilities during the
current quarter reflect increases in market interest rates due to
recent increases in the target range for federal funds, including a
100 basis-point increase during the first nine months of 2023, to a
range of 5.25% to 5.50%.
Interest income on loans, including fees, increased $562,000, or
2.1%, to $27.2 million for the three months ended September 30,
2023 compared to the three months ended June 30, 2023, primarily
due to a 14 basis point increase in the average loan yield,
partially offset by a $36.0 million decrease in the average balance
of loans. Interest income on loans, including fees, increased $3.2
million, or 13.4%, for the three months ended September 30, 2023
compared to the three months ended September 30, 2022, primarily
due to a 69 basis point increase in the average loan yield,
partially offset by a $24.2 million decrease in the average balance
of loans. The average balance of loans was $2.0 billion for the
third quarter of 2023, second quarter of 2023 and the same quarter
a year ago. The average yield on loans was 5.42% for the third
quarter of 2023, compared to 5.28% for the second quarter of 2023
and 4.73% for the third quarter of 2022. The increase in the
average yield on loans from the third quarter of 2023 and the third
quarter of 2022 was due to the impact of increased rates on
variable rate loans as well as new loans being originated at higher
market interest rates.
Interest income on loans included $372,000, $5,000, and $63,000
in accretion of the net discount on acquired loans for the three
months ended September 30, 2023, June 30, 2023, and September 30,
2022, respectively. The balance of the net discounts on these
acquired loans totaled $419,000, $331,000, and $480,000 at
September 30, 2023, June 30, 2023, and September 30, 2022,
respectively. Interest income included minimal fees earned related
to Paycheck Protection Program (“PPP”) loans in the quarters ended
September 30, 2023 and June 30, 2023, and $161,000 during the
quarter ended September 30, 2022. Interest income also included
fees related to prepayment penalties of $142,000 in the quarter
ended September 30, 2023, compared to $48,000 in the second quarter
of 2023, and $195,000 in the third quarter of 2022.
Interest income on investment securities increased $11,000, or
0.6%, from the prior quarter and totaled $1.7 million for both the
three months ended September 30, 2023 and the three months ended
June 30, 2023, and increased $149,000, or 9.6%, from $1.6 million
for the three months ended September 30, 2022. Average yield on
investment securities increased two basis points to 4.01% for the
three months ended September 30, 2023, compared to 3.99% for the
three months ended June 30, 2023, and increased 74 basis points
from 3.27% for the three months ended September 30, 2022. The
average balance of investment securities totaled $168.6 million for
the three months ended September 30, 2023, compared to $170.1
million and $188.7 million for the three months ended June 30, 2023
and September 30, 2022, respectively. In addition, during the third
quarter of 2023, we received $376,000 in cash dividends on our FRB
and FHLB stock, up 10.6% from $340,000 in the second quarter of
2023 and up 31.9% from $285,000 in the third quarter of 2022.
Interest income on federal funds sold and interest-bearing
balances in banks increased $961,000, or 37.5%, to $3.5 million for
the three months ended September 30, 2023, compared to $2.6 million
for the three months ended June 30, 2023, and increased $2.2
million, or 173.8%, from $1.3 million for the three months ended
September 30, 2022 as a result of an increase in the average yield.
The average yield on federal funds sold and interest-bearing
balances in banks increased 24 basis points to 5.38% for the three
months ended September 30, 2023, compared to 5.14% for the three
months ended June 30, 2023, and increased 320 basis points from
2.18% for the three months ended September 30, 2022. The average
balance of federal funds sold and interest-bearing balance in banks
totaled $259.6 million for the three months ended September 30,
2023, compared to $199.9 million and $234.6 million for the three
months ended June 30, 2023 and September 30, 2022,
respectively.
Interest expense increased $1.0 million, or 14.9%, to $8.0
million for the three months ended September 30, 2023, compared to
$7.0 million for the three months ended June 30, 2023, and
increased $5.6 million, or 232.5%, compared to $2.4 million for the
three months ended September 30, 2022, reflecting higher funding
costs primarily related to increased market rates of interest on
our deposits. Average balance of deposits totaled $2.2 billion for
the third quarter of 2023 compared to $2.1 billion for the second
quarter of 2023, and $2.2 billion for the third quarter of 2022.
The average cost of funds for the third quarter of 2023 was 2.04%,
compared to 1.82% for the second quarter of 2023 and 0.66% for the
third quarter of 2022. The increase in the average cost of funds
during the current quarter compared to the prior quarter of 2023
and the third quarter of 2022 was due to higher interest rates paid
on money market and time deposits due to increased competition and
pricing pressures and a change in deposit mix due to shift of
deposits from noninterest bearing accounts to higher costing money
market and time deposits. The average cost of total deposits for
the three months ended September 30, 2023 was 1.27%, compared to
1.10% for the three months ended June 30, 2023, and 0.25% for the
three months ended September 30, 2022. The average balance of
noninterest bearing deposits decreased $2.7 million, or 0.4%, to
$674.8 million for the three months ended September 30, 2023,
compared to $677.5 million for the three months ended June 30, 2023
and decreased $127.1 million, or 15.8%, compared to $801.9 million
for the three months ended September 30, 2022. Interest expense on
junior subordinated debt increased $14,000, or 6.9% to $217,000 for
the three months ended September 30, 2023 compared to $203,000 for
the three months ended June 30, 2023, and increased $88,000, or
68.2%, compared to $129,000 for the three months ended September
30, 2022, due to higher market rates.
Annualized net interest margin was 4.03% for the third quarter
of 2023, compared to 4.02% for the second quarter of 2023 and 3.99%
for third quarter of 2022. The average yield on interest earning
assets for the third quarter of 2023 increased 16 basis points and
96 basis points over the average yields for the second quarter of
2023 and the third quarter of 2022, respectively, while the average
rate paid on interest-bearing liabilities for third quarter of 2023
increased 22 basis points and 138 basis points over the average
rates paid for the second quarter of 2023 and the third quarter of
2022, respectively. Net interest margin in the third quarter of
2023 was positively impacted by increasing yields on loans and
accretion of the net discount and increasing yields on investment
securities, fed funds sold and interest bearing-balances in banks,
which outpaced on a percentage basis higher funding costs.
The average yield on PPP loans, including the recognition of
deferred PPP loan fees, was 1.00% during the third and second
quarters of 2023, resulting in a minimal negative impact to the net
interest margin, compared to an average yield of 2.28% during the
third quarter of 2022 resulting in a positive impact to the net
interest margin of three basis points. Accretion of the net
discount increased the average yield on loans by eight basis points
during the third quarter of 2023, compared to no effect and a one
basis point increase on the average yield on loans during the prior
quarter of 2023 and the third quarter of 2022, respectively. At
September 30, 2023, there was a total of $4.3 million of PPP loans
outstanding, with a minimal amount of unrecognized deferred fees
and costs.
Based on our review of the allowance for credit losses at
September 30, 2023, the Company recorded a $674,000 provision for
credit losses for the third quarter of 2023, compared to a $1.3
million reversal of the allowance for credit losses in the prior
quarter of 2023 and a $1.2 million provision for credit losses in
the third quarter of 2022. The provision for credit losses for
loans in the third quarter of 2023 was primarily due to $1.2
million increase in reserve for individually evaluated loans, which
included the loan to the Trust discussed below and previously
disclosed, and an increase in qualitative reserves, partially
offset by improvements in forecasted economic conditions,
specifically, national gross domestic product and national
unemployment, indicators utilized to estimate credit losses and, to
a lesser extent, a decrease in outstanding loan balances and
$25,000 in net charge-offs during the third quarter of 2023.
During the quarter ended September 30, 2023, the Company
determined that a certificate of deposit-secured line of credit
loan made to a revocable living trust (the “Trust” or the
“Borrower”) with an outstanding balance of approximately $1.0
million as of September 30, 2023 was impaired as a result of the
sole trustee and beneficiary of the Trust filing for personal
bankruptcy in July 2023. At June 30, 2023, the loan had an
outstanding balance of $5.0 million and was secured by a $4.0
million certificate of deposit held at the Bank. An additional $1.0
million in cash collateral securing the loan had previously been
released by the Bank into a third-party escrow account at the
request of the Borrower to be used as a refundable retainer in
connection with a separate transaction by the Borrower. The loan
matured on July 16, 2023, and the Bank received notification that
the sole trustee and beneficiary of the Trust filed for personal
bankruptcy on July 18, 2023. After receiving this notification, the
Bank used the $4.0 million certificate of deposit held at the Bank
to offset amounts owed on the loan and contacted the third-party
escrow agent for the return of the additional $1.0 million of
collateral. The Bank was advised by the escrow agent that the
previously escrowed funds had been released by the escrow agent,
which was done without the Bank’s consent and contrary to the
written escrow instructions. The Bank has initiated legal action
against the Borrower, the Borrower’s related parties and the escrow
agent to recover the previously escrowed collateral. The results of
the planned legal action and the Bank’s ability to recover the
previously escrowed collateral are currently uncertain. The loan
was fully reserved for at September 30, 2023.
Noninterest income for the third quarter of 2023 increased
$568,000, or 52.3%, to $1.7 million compared to $1.1 million in the
prior quarter of 2023 and decreased $728,000, or 30.6%, compared to
$2.4 million for the third quarter of 2022. The increase in
noninterest income for the current quarter compared to the prior
quarter of 2023 was primarily due to a $643,000 decrease in loss on
equity securities as a result of improvement in fair value
adjustments on these securities, a $91,000 increase in service
charges and other fees and a $36,000 increase in other income and
fees, partially offset by a $162,000 decrease in loan servicing
fees and other fees, and a $40,000 decrease in gain on sale of SBA
loans (guaranteed portion) generally due to a decrease in the
volume of SBA loans sold during the current quarter. The decrease
in noninterest income for the current quarter compared to the same
quarter in 2022 was primarily due to a $1.3 million decrease in
gain on sale of loans due to a decrease in the volume of and
premiums observed on SBA loans (guaranteed portion) sold and a
$57,000 decrease in loan servicing fees and other fees, partially
offset by a $288,000 increase in income from our investment in a
Small Business Investment Company (“SBIC”) fund, a $156,000
increase in service charges and other fees, a $88,000 decrease in
loss on equity securities and a $47,000 increase in other income
and fees.
Noninterest expense for the third quarter of 2023 decreased
$38,000, or 0.2%, to $16.5 million compared to $16.6 million for
the prior quarter of 2023, and increased $423,000, or 2.6%,
compared to $16.1 million for the third quarter of 2022. The
decrease in noninterest expense for the third quarter of 2023
compared to the prior quarter of 2023 was primarily due to a
$461,000 decrease in salaries and employee benefits as a result of
decline in other benefits expense, partially offset by a $159,000
increase in occupancy and equipment expense due to higher
depreciation and property maintenance expense, a $158,000 increase
in data processing and a $106,000 increase in other expense. The
increase in noninterest expense for the third quarter of 2023
compared to the third quarter of 2022 was primarily due to a
$212,000 increase in data processing, a $120,000 increase in
salaries and employee benefits due to wage increases and an
increase in full-time equivalent employees, and a $90,000 increase
in occupancy and equipment.
The provision for income taxes decreased $224,000, or 7.8%, to
$2.6 million for the third quarter of 2023 compared to $2.9 million
for the prior quarter of 2023 and decreased $207,000, or 7.3%, to
$2.8 million compared to the third quarter of 2022. The effective
tax rate for the third quarter of 2023 was 28.5%, compared to 28.4%
for the prior quarter of 2023, and 29.0% for the third quarter of
2022. The effective tax rate was lower for the third quarter of
2023 compared to the third quarter of 2022 due to accrual for
non-deductible compensation expenses.
Loans and Credit Quality
Loans, net of deferred fees, decreased $44.5 million and $26.2
million from the prior quarter-end and September 30, 2022,
respectively, and totaled $2.0 billion at September 30, 2023, June
30, 2023 and September 30, 2022. The decrease in loans at September
30, 2023 compared to June 30, 2023 primarily was due to $15.6
million of new loan originations, which was more than offset by
$58.6 million of loan repayments, including $584,000 in PPP loan
repayments. At September 30, 2023, there was a total of $4.3
million in PPP loans outstanding compared to $4.9 million at June
30, 2023, and $35.4 million at September 30, 2022.
Nonperforming loans, consisting of non-accrual loans and
accruing loans 90 days or more past due, totaled $14.3 million or
0.73% of total loans at September 30, 2023, compared to $12.8
million or 0.64% of total loans at June 30, 2023, and $19.7 million
or 0.99% of total loans at September 30, 2022. The increase in
nonperforming loans from the prior quarter-end was primarily due to
the line of credit loan discussed above made to the Trust that was
placed on nonaccrual during the current quarter. The portion of
nonaccrual loans guaranteed by government agencies totaled $801,000
at both September 30, 2023 and June 30, 2023, compared to $862,000
at September 30, 2022. There were no loans, 90 days or more past
due and still accruing and in the process of collection at both
September 30, 2023 and June 30, 2023, compared to 18 loans totaling
$3.3 million in accruing SBA guaranteed PPP loans which were 90
days or more past due and in the process of forgiveness at
September 30, 2022. Accruing loans past due between 30 and 89 days
at September 30, 2023, were $2.6 million, compared to $1.6 million
at June 30, 2023, and $5.3 million at September 30, 2022. The
increase in accruing loans past due between 30-89 days from the
prior quarter-end was primarily due to timing of borrower
payments.
At September 30, 2023, the Company’s allowance for credit losses
for loans was $19.8 million, or 1.01% of total loans, compared to
$19.1 million, or 0.95% of total loans, at June 30, 2023 and $18.1
million, or 0.90% of total loans, at September 30, 2022. We
recorded net charge-offs of $25,000 for the third quarter of 2023,
compared to net charge-offs of $60,000 in the prior quarter of 2023
and net charge-offs of $944,000 in the third quarter of 2022.
In accordance with acquisition accounting, acquired loans were
recorded at their estimated fair value, which resulted in a net
discount to the loans’ contractual amounts. Credit discounts are
included in the determination of fair value and as a result, no
allowance for credit losses is recorded for acquired loans at the
acquisition date. However, the allowance for credit losses includes
an estimate for credit deterioration of acquired loans that occurs
after the date of acquisition, which is included in the provision
for credit losses in the period that the deterioration occurred.
The discount recorded on the acquired loans is not reflected in the
allowance for credit losses on loans or the related allowance
coverage ratios. As of September 30, 2023, acquired loans net of
their discount totaled $224.4 million with a remaining net discount
on these loans of $419,000, compared to $234.7 million of acquired
loans with a remaining net discount of $331,000 at June 30, 2023,
and $229.4 million of acquired loans with a remaining net discount
of $480,000 at September 30, 2022. The net discount includes a
credit discount based on estimated losses on the acquired loans,
partially offset by a premium, if any, based on market interest
rates on the date of acquisition.
Deposits and Borrowings
Deposits totaled $2.2 billion at September 30, 2023, compared to
$2.1 billion at both June 30, 2023 and September 30, 2022. The
deposit mix shifted, in part, due to interest rate sensitive
clients moving a portion of their non-operating deposit balances
from lower costing deposits, including noninterest bearing
deposits, into higher costing money market and time deposits. At
September 30, 2023, noninterest bearing deposits totaled $667.3
million, or 30.9% of total deposits, compared to $664.1 million, or
30.9% of total deposits at June 30, 2023, and $813.5 million, or
38.5% of total deposits at September 30, 2022.
We consider our deposit base to be seasoned, stable and
well-diversified, and we do not have any significant industry
concentrations among our non-insured deposits. We also offer an
insured cash sweep product (ICS) that allows customers to insure
deposits above FDIC insurance limits. At September 30, 2023, our
average deposit account size (excluding public funds), calculated
by dividing period-end deposits by the population of accounts with
balances, was approximately $59,000.
The Bank has an approved secured borrowing facility with the
FHLB of San Francisco for up to 25% of total assets for a term not
to exceed five years under a blanket lien of certain types of
loans. At September 30, 2023, June 30, 2023 and September 30, 2022,
the Bank had no FHLB advances outstanding. The Bank has Federal
Funds lines with four corresponding banks. Cumulative available
commitments on these lines totaled $65.0 million at September 30,
2023, June 30, 2023 and September 30, 2022. There were no amounts
outstanding under these facilities at September 30, 2023, June 30,
2023 or September 30, 2022.
At September 30, 2023, June 30, 2023 and September 30, 2022, the
Company had outstanding junior subordinated debt, net of fair value
adjustments, related to junior subordinated deferrable interest
debentures assumed in connection with its previous acquisitions
totaling $8.5 million. At both September 30, 2023 and June 30,
2023, the Company also had outstanding subordinated debt, net of
costs to issue, totaling $63.8 million, compared to $63.7 million
at September 30, 2022.
At September 30, 2023, June 30, 2023 and September 30, 2022, the
Company had no other borrowings outstanding.
Shareholders’ Equity
Shareholders’ equity totaled $307.3 million at September 30,
2023, compared to $307.0 million at June 30, 2023, and $314.4
million at September 30, 2022. The increase at September 30, 2023
compared to June 30, 2023, reflects $6.6 million of net income
during the current quarter, partially offset by repurchases of $4.5
million of common stock, $1.2 million of accrued cash dividends
payable and a $840,000 increase in accumulated other comprehensive
loss, net of taxes, during the current quarter. At September 30,
2023, 482,311 shares remained available for future purchases under
the Company’s current stock repurchase plan.
The decrease in shareholders’ equity at September 30, 2023,
compared to September 30, 2022, primarily was due to the repurchase
of $21.7 million of Company common stock, cash dividends paid and
accrued of $3.6 million, and a $5.7 million increase in accumulated
other comprehensive loss, net of taxes, partially offset by $21.0
million of net income earned during the first nine months of 2023
and the fourth quarter of 2022.
About BayCom Corp
The Company, through its wholly owned operating subsidiary,
United Business Bank, offers a full-range of loans, including SBA,
CalCAP, FSA and USDA guaranteed loans, and deposit products and
services to businesses and their affiliates in California,
Washington, New Mexico and Colorado. The Bank is an Equal Housing
Lender and a member of FDIC. The Company’s common stock is listed
on the NASDAQ Global Select Market under the symbol “BCML”. For
more information, go to www.unitedbusinessbank.com.
Forward-Looking Statements
This release, as well as other public or shareholder
communications by the Company, may contain forward-looking
statements, including, but not limited to, (i) statements regarding
the financial condition, results of operations and business of the
Company, (ii) statements about the Company’s plans, objectives,
expectations and intentions and other statements that are not
historical facts and (iii) other statements identified by the words
or phrases “will likely result,” “are expected to,” “will
continue,” “is anticipated,” “estimate,” “project,” “intends” or
similar expressions that are intended to identify “forward-looking
statements” within the meaning of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements are not historical
facts but instead are based on current beliefs and expectations of
the Company’s management and are inherently subject to significant
business, economic and competitive uncertainties and contingencies,
many of which are beyond the Company’s control. In addition, these
forward-looking statements are subject to assumptions with respect
to future business strategies and decisions that are subject to
change.
There are a number of factors that could cause future results to
differ materially from historical performance and these
forward-looking statements. Factors which could cause actual
results to differ materially from the results anticipated or
implied by our forward-looking statements include, but are not
limited to: potential adverse impacts to economic conditions in our
local market areas, other markets where the Company has lending
relationships, or other aspects of the Company’s business
operations or financial markets, including, without limitation, as
a result of employment levels, labor shortages and the effects of
inflation, a potential recession or slowed economic growth; changes
in the interest rate environment, including the recent increases in
the Federal Reserve benchmark rate and duration at which such
increased interest rate levels are maintained, which could
adversely affect our revenues and expenses, the values of our
assets and obligations, and the availability and cost of capital
and liquidity; the impact of continuing high inflation and the
current and future monetary policies of the Federal Reserve in
response thereto; the effects of any federal government shutdown;
the impact of bank failures or adverse developments at other banks
and related negative press about the banking industry in general on
investor and depositor sentiment; review of the Company’s
accounting, accounting policies and internal control over financial
reporting; risks and uncertainties related to the recent
restatement of certain of our historical consolidated financial
statements; the subsequent discovery of additional adjustments to
the Company’s previously issued financial statements; future
acquisitions by the Company of other depository institutions or
lines of business; fluctuations in interest rates; the risks of
lending and investing activities, including changes in the level
and direction of loan delinquencies and write-offs and changes in
estimates of the adequacy of the allowance for credit losses; the
Company's ability to access cost-effective funding; fluctuations in
real estate values and both residential and commercial real estate
market conditions; demand for loans and deposits in the Company's
market area; increased competitive pressures; changes in
management’s business strategies; disruptions, security breaches,
or other adverse events, failures or interruptions in, or attacks
on, our information technology systems or on the third-party
vendors who perform critical processing functions for us; the
effects of climate change, severe weather events, natural
disasters, pandemics, epidemics and other public health crises,
acts of war or terrorism, and other external events on our
business; and other factors described in the Company’s latest
Annual Report on Form 10-K and Quarterly Reports on Form 10-Q and
other reports filed with or furnished to the Securities and
Exchange Commission (“SEC”) that are available on our website at
www.unitedbusinessbank.com and on the SEC's website at
www.sec.gov.
The factors listed above could materially affect the Company’s
financial performance and could cause the Company’s actual results
for future periods to differ materially from any opinions or
statements expressed with respect to future periods in any current
statements.
The Company does not undertake - and specifically declines any
obligation - to publicly release the result of any revisions, that
may be made to any forward-looking statements to reflect events or
circumstances after the date of such statements or to reflect the
occurrence of anticipated or unanticipated events whether as a
result of new information, future events or otherwise, except as
may be required by law or NASDAQ rules. When considering
forward-looking statements, you should keep in mind these risks and
uncertainties. You should not place undue reliance on any
forward-looking statement, which speaks only as of the date
made.
BAYCOM CORP
STATEMENTS OF COMPREHENSIVE
INCOME (UNAUDITED)
(Dollars in thousands, except per
share data)
Three months ended
Nine months ended
September 30,
June 30,
September 30,
September 30,
September 30,
2023
2023
2022
2023
2022
(As Restated)
(As Restated)
Interest income
Loans, including fees
$
27,229
$
26,667
$
24,010
$
80,151
$
69,921
Investment securities
1,704
1,693
1,555
5,037
4,483
Fed funds sold and interest-bearing
balances in banks
3,521
2,560
1,286
7,910
2,303
FHLB dividends
232
196
160
616
467
FRB dividends
144
144
126
432
387
Total interest and dividend income
32,830
31,260
27,137
94,146
77,561
Interest expense
Deposits
6,908
5,881
1,387
16,489
4,310
Subordinated debt
896
895
896
2,687
2,687
Junior subordinated debt
217
203
129
623
319
Total interest expense
8,021
6,979
2,412
19,799
7,316
Net interest income
24,809
24,281
24,725
74,347
70,245
Provision for (reversal of) credit
losses
674
(1,260
)
1,194
(311
)
3,824
Net interest income after provision for
(reversal of) credit losses
24,135
25,541
23,531
74,658
66,421
Noninterest income
Gain on sale of loans
28
68
1,278
508
2,714
Loss on equity securities
(274
)
(917
)
(362
)
(2,087
)
(3,971
)
Service charges and other fees
973
882
817
2,740
2,165
Loan servicing fees and other fees
431
593
488
1,434
1,670
Income on investment in SBIC fund
225
225
(63
)
939
155
Bargain purchase gain
—
—
—
—
1,665
Other income and fees
271
235
224
769
796
Total noninterest income
1,654
1,086
2,382
4,303
5,194
Noninterest expense
Salaries and employee benefits
10,284
10,745
10,164
32,065
29,751
Occupancy and equipment
2,133
1,974
2,043
6,134
6,388
Data processing
1,774
1,616
1,562
4,855
5,502
Other expense
2,328
2,222
2,327
6,551
7,986
Total noninterest expense
16,519
16,557
16,096
49,605
49,627
Income before provision for income
taxes
9,270
10,070
9,817
29,356
21,988
Provision for income taxes
2,640
2,864
2,847
8,327
5,882
Net income
$
6,630
$
7,206
$
6,970
$
21,029
$
16,106
Net income per common share:
Basic
$
0.56
$
0.59
$
0.52
$
1.72
$
1.22
Diluted
0.56
0.59
0.52
1.72
1.22
Weighted average shares used to compute
net income per common share:
Basic
11,812,583
12,228,206
13,307,555
12,243,506
13,179,263
Diluted
11,812,583
12,228,206
13,307,555
12,243,506
13,179,263
Comprehensive income
Net income
$
6,630
$
7,206
$
6,970
$
21,029
$
16,106
Other comprehensive loss:
Change in unrealized loss on
available-for-sale securities
(1,178
)
(4,999
)
(6,835
)
(8,001
)
(19,200
)
Deferred tax benefit
338
1,437
1,967
2,302
5,525
Other comprehensive loss, net of tax
(840
)
(3,562
)
(4,868
)
(5,699
)
(13,675
)
Comprehensive income
$
5,790
$
3,644
$
2,102
$
15,330
$
2,431
BAYCOM CORP
STATEMENTS OF CONDITION
(UNAUDITED)
(Dollars in thousands)
September 30,
June 30,
September 30,
2023
2023
2022
(As Restated)
Assets
Cash and due from banks
$
30,444
$
36,637
$
32,206
Federal funds sold and interest-bearing
balances in banks
271,490
213,562
192,475
Cash and cash equivalents
301,934
250,199
224,681
Time deposits in banks
1,743
1,992
2,490
Investment securities available-for-sale
(AFS)
145,845
146,506
152,810
Equity securities
11,639
11,912
14,403
Federal Home Loan Bank ("FHLB") stock, at
par
11,313
11,313
10,679
Federal Reserve Bank ("FRB") stock, at
par
9,621
9,616
9,595
Loans held for sale
1,274
—
3,491
Loans, net of deferred fees
1,968,804
2,013,307
1,994,966
Allowance for credit losses for loans
(19,800)
(19,100
)
(18,050
)
Premises and equipment, net
13,466
13,039
13,697
Other real estate owned ("OREO")
—
—
21
Core deposit intangible
4,221
4,527
5,718
Cash surrender value of bank owned life
insurance policies, net
22,698
22,528
22,043
Right-of-use assets
15,220
15,270
15,875
Goodwill
38,838
38,838
38,838
Interest receivable and other assets
47,570
47,539
43,241
Total Assets
$
2,574,386
$
2,567,486
$
2,534,498
Liabilities and Shareholders’ Equity
Noninterest bearing deposits
$
667,336
$
664,096
$
813,510
Interest bearing deposits
Transaction accounts and savings
790,089
775,117
937,076
Premium money market
270,675
248,730
140,377
Time deposits
431,344
459,123
224,488
Total deposits
2,159,444
2,147,066
2,115,451
Junior subordinated deferrable interest
debentures, net
8,544
8,524
8,464
Subordinated debt, net
63,839
63,796
63,669
Salary continuation plans
4,886
4,955
4,724
Lease liabilities
16,017
15,947
16,411
Interest payable and other liabilities
14,396
20,184
11,376
Total Liabilities
2,267,126
2,260,472
2,220,095
Shareholders’ Equity
Common stock, no par value
183,499
187,866
208,770
Accumulated other comprehensive loss, net
of tax
(17,260
)
(16,420
)
(11,509
)
Retained earnings
141,021
135,568
117,142
Total shareholders’ equity
307,260
307,014
314,403
Total Liabilities and Shareholders’
Equity
$
2,574,386
$
2,567,486
$
2,534,498
BAYCOM CORP
FINANCIAL HIGHLIGHTS
(UNAUDITED)
(Dollars in thousands, except per
share data)
At and for the three months
ended
At and for the nine months
ended
September 30,
June 30,
September 30,
September 30,
September 30,
Selected
Financial Ratios and Other Data:
2023
2023
2022
2023
2022
(As Restated)
(As Restated)
Performance Ratios:
Return on average assets (1)
1.03
%
1.13
%
1.07
%
1.10
%
0.81
%
Return on average equity (1)
8.55
9.22
8.65
8.93
6.76
Yield on earning assets (1)
5.34
5.18
4.38
5.21
4.12
Rate paid on average interest-bearing
liabilities
2.04
1.82
0.66
1.75
0.64
Interest rate spread - average during the
period
3.30
3.36
3.72
3.46
3.48
Net interest margin (1)
4.03
4.02
3.99
4.12
3.73
Loan to deposit ratio
91.17
93.77
94.30
91.17
94.30
Efficiency ratio (2)
62.42
65.27
59.38
63.07
65.78
Charge-offs, net
$
25
$
60
$
944
$
400
$
3,474
Per Share Data:
Shares outstanding at end of period
11,673,830
11,900,022
13,075,447
11,673,830
13,075,447
Average diluted shares outstanding
11,812,583
12,228,206
13,307,555
12,243,506
13,179,263
Diluted earnings per share
$
0.56
$
0.59
$
0.52
$
1.72
$
1.22
Book value per share
26.32
25.80
24.05
26.32
24.05
Tangible book value per share (3)
22.63
22.16
20.64
22.63
20.64
Asset Quality Data:
Nonperforming assets to total assets
(4)
0.56
%
0.50
%
0.78
%
Nonperforming loans to total loans (5)
0.73
%
0.64
%
0.99
%
Allowance for credit losses on loans to
nonperforming loans (5)
138.26
%
148.86
%
91.70
%
Allowance for credit losses on loans to
total loans
1.01
%
0.95
%
0.90
%
Classified assets (graded substandard and
doubtful)
$
29,366
$
21,546
$
23,904
Total accruing loans 30‑89 days past
due
2,592
1,623
5,343
Total loans 90 days past due and still
accruing
—
—
3,315
Capital Ratios (6):
Tier 1 leverage ratio — Bank
13.26
%
13.05
%
12.90
%
Common equity tier 1 — Bank
17.20
%
16.60
%
16.16
%
Tier 1 capital ratio — Bank
17.20
%
16.60
%
16.16
%
Total capital ratio — Bank
18.23
%
17.59
%
17.07
%
Equity to total assets — end of period
11.94
%
11.97
%
12.40
%
Tangible equity to tangible assets — end
of period (3)
10.44
%
10.45
%
10.84
%
Loans:
Real estate
$
1,785,640
$
1,816,355
$
1,746,157
Non-real estate
168,350
183,780
233,178
Nonaccrual loans
14,321
12,831
16,369
Mark to fair value at acquisition
419
331
(480
)
Total Loans
1,968,730
2,013,297
1,995,224
Net deferred fees on loans (7)
74
10
(258
)
Loans, net of deferred fees
$
1,968,804
$
2,013,307
$
1,994,966
Other Data:
Number of full-service offices
35
34
34
Number of full-time equivalent
employees
376
383
375
(1)
Annualized.
(2)
Total noninterest expense as a percentage
of net interest income and total noninterest income.
(3)
Represents a non-GAAP financial measure.
See “Non-GAAP Financial Measures” below.
(4)
Nonperforming assets consist of nonaccrual
loans, accruing loans that are 90 days or more past due, and other
real estate owned.
(5)
Nonperforming loans consist of nonaccrual
loans and accruing loans that are 90 days or more past due.
(6)
Capital ratios are for United Business
Bank only.
(7)
Deferred fees include $2,600, $2,800 and
$227,000 as of September 30, 2023, June 30, 2023, and September 30,
2022, respectively, in fees related to PPP loans
Non-GAAP Financial Measures:
In addition to results presented in accordance with generally
accepted accounting principles utilized in the United States
(“GAAP”), this earnings release contains tangible book value per
share, a non-GAAP financial measure. Tangible book value per share
is calculated by dividing tangible common shareholders’ equity by
the number of common shares outstanding at the end of the period.
Tangible common shareholders’ equity excludes intangible assets
from shareholders’ equity. For this financial measure, the
Company’s intangible assets are goodwill and core deposit
intangibles. The Company believes that this measure is consistent
with the capital treatment by our bank regulatory agencies, which
excludes intangible assets from the calculation of risk-based
capital ratios, and presents this measure to facilitate comparison
of the quality and composition of the Company’s capital over time
in comparison to its peers. Non-GAAP financial measures have
inherent limitations, are not required to be uniformly applied, and
are not audited. Further, these non-GAAP financial measure should
not be considered in isolation or as a substitute for the
comparable financial measures determined in accordance with GAAP
and may not be comparable to similarly titled measures reported by
other companies.
Reconciliation of the GAAP and non-GAAP financial measures is
presented below:
Non-GAAP Measures
(Dollars in thousands, except per
share data)
September 30,
June 30,
September 30,
2023
2023
2022
Tangible Book Value:
Total common shareholders’ equity
(GAAP)
$
307,260
$
307,014
$
314,403
less: Goodwill and other intangibles
43,059
43,365
44,556
Tangible common shareholders’ equity
(Non-GAAP)
$
264,201
$
263,649
$
269,847
Total assets (GAAP)
$
2,574,386
$
2,567,486
$
2,534,498
less: Goodwill and other intangibles
43,059
43,365
44,556
Total tangible assets (Non-GAAP)
$
2,531,327
$
2,524,121
$
2,489,942
Equity to total assets (GAAP)
11.94
%
11.96
%
12.40
%
Tangible equity to tangible assets
(Non-GAAP)
10.44
%
10.45
%
10.84
%
Book value per share (GAAP)
$
26.32
$
25.80
$
24.05
Tangible book value per share
(Non-GAAP)
$
22.63
$
22.16
$
20.64
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231019588863/en/
BayCom Corp Keary Colwell, 925-476-1800
kcolwell@ubb-us.com
BayCom (NASDAQ:BCML)
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