Bay p(BCML) - 2025 Q2 - Quarterly Report

PART I — FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis for BayCom Corp Item 1. Financial Statements This section presents BayCom Corp's unaudited condensed consolidated financial statements and detailed notes for Q2 2025 and FY2024 Condensed Consolidated Balance Sheets (unaudited) This table provides a snapshot of BayCom Corp's financial position, detailing assets, liabilities, and equity at specific dates | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | :------- | | Total assets | $2,622,379 | $2,664,508 | $(42,129) | -1.58% | | Cash and cash equivalents | $291,624 | $364,032 | $(72,408) | -19.89% | | Investment securities AFS | $184,682 | $193,328 | $(8,646) | -4.47% | | Loans, net | $1,981,549 | $1,934,996 | $46,553 | 2.40% | | Total liabilities | $2,291,817 | $2,340,142 | $(48,325) | -2.06% | | Noninterest and interest bearing deposits | $2,186,634 | $2,234,009 | $(47,375) | -2.12% | | Total shareholders' equity | $330,562 | $324,366 | $6,196 | 1.91% | Condensed Consolidated Statements of Income (unaudited) This table presents BayCom Corp's financial performance, detailing revenues, expenses, and net income for the periods | Metric | Three months ended June 30, 2025 (in thousands) | Three months ended June 30, 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :------------------------------------ | :------------------------------------ | :-------------------- | :------- | | Total interest and dividend income | $33,453 | $32,406 | $1,047 | 3.23% | | Total interest expense | $10,293 | $10,111 | $182 | 1.80% | | Net interest income | $23,160 | $22,295 | $865 | 3.88% | | Provision for credit losses | $203 | $171 | $32 | 18.71% | | Total noninterest income | $1,513 | $1,483 | $30 | 2.02% | | Total noninterest expense | $15,754 | $16,012 | $(258) | -1.61% | | Net income | $6,364 | $5,600 | $764 | 13.64% | | Basic earnings per common share | $0.58 | $0.50 | $0.08 | 16.00% | | Diluted earnings per common share | $0.58 | $0.50 | $0.08 | 16.00% | | Metric | Six months ended June 30, 2025 (in thousands) | Six months ended June 30, 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :---------------------------------- | :---------------------------------- | :-------------------- | :------- | | Total interest and dividend income | $66,099 | $64,150 | $1,949 | 3.04% | | Total interest expense | $20,059 | $19,448 | $611 | 3.14% | | Net interest income | $46,040 | $44,702 | $1,338 | 2.99% | | Provision for credit losses | $845 | $423 | $422 | 99.76% | | Total noninterest income | $2,953 | $3,545 | $(592) | -16.70% | | Total noninterest expense | $31,743 | $32,083 | $(340) | -1.06% | | Net income | $12,066 | $11,477 | $589 | 5.13% | | Basic earnings per common share | $1.09 | $1.01 | $0.08 | 7.92% | | Diluted earnings per common share | $1.09 | $1.01 | $0.08 | 7.92% | Condensed Consolidated Statements of Comprehensive Income (unaudited) This table outlines BayCom Corp's total comprehensive income, including net income and other comprehensive income components | Metric | Three months ended June 30, 2025 (in thousands) | Three months ended June 30, 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :------------------------------------ | :------------------------------------ | :-------------------- | :------- | | Net income | $6,364 | $5,600 | $764 | 13.64% | | Other comprehensive income, net of tax | $789 | $506 | $283 | 55.93% | | Total comprehensive income | $7,153 | $6,106 | $1,047 | 17.15% | | Metric | Six months ended June 30, 2025 (in thousands) | Six months ended June 30, 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :---------------------------------- | :---------------------------------- | :-------------------- | :------- | | Net income | $12,066 | $11,477 | $589 | 5.13% | | Other comprehensive income, net of tax | $2,884 | $990 | $1,894 | 191.31% | | Total comprehensive income | $14,950 | $12,467 | $2,483 | 19.92% | Condensed Consolidated Statements of Changes in Shareholders' Equity (unaudited) This table details changes in BayCom Corp's shareholders' equity, including net income, dividends, and share repurchases | Metric | Three months ended June 30, 2025 (in thousands) | Three months ended June 30, 2024 (in thousands) | | :-------------------------------- | :------------------------------------ | :------------------------------------ | | Balance, April 1 | $329,337 | $314,235 | | Net income | $6,364 | $5,600 | | Other comprehensive income, net | $789 | $506 | | Cash dividends paid | $(2,197) | $(1,109) | | Stock based compensation | $151 | $164 | | Repurchase of shares | $(3,881) | $(4,131) | | Balance, June 30 | $330,562 | $315,265 | | Metric | Six months ended June 30, 2025 (in thousands) | Six months ended June 30, 2024 (in thousands) | | :-------------------------------- | :---------------------------------- | :---------------------------------- | | Balance, January 1 | $324,366 | $312,869 | | Net income | $12,066 | $11,477 | | Other comprehensive income, net | $2,884 | $990 | | Cash dividends paid | $(3,869) | $(2,266) | | Stock based compensation | $302 | $324 | | Repurchase of shares | $(5,187) | $(8,129) | | Balance, June 30 | $330,562 | $315,265 | Condensed Consolidated Statements of Cash Flows (unaudited) This table summarizes BayCom Corp's cash inflows and outflows from operating, investing, and financing activities | Cash Flow Activity | Six months ended June 30, 2025 (in thousands) | Six months ended June 30, 2024 (in thousands) | | :-------------------------------- | :------------------------------------ | :------------------------------------ | | Net cash provided by operating activities | $15,648 | $12,751 | | Net cash (used in) provided by investing activities | $(33,825) | $39,415 | | Net cash (used in) provided by financing activities | $(54,231) | $31,503 | | (Decrease) increase in cash and cash equivalents | $(72,408) | $83,669 | | Cash and cash equivalents at end of period | $291,624 | $391,208 | Notes to Condensed Consolidated Financial Statements (unaudited) This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements NOTE 1 – BASIS OF PRESENTATION BayCom Corp operates through United Business Bank across five states, with unaudited financials prepared per Form 10-Q - BayCom Corp operates through United Business Bank, a California state-chartered bank with 34 full-service branches across California, Nevada, Washington, New Mexico, and Colorado as of June 30, 2025[23] - The unaudited condensed consolidated financial statements are prepared in accordance with Form 10-Q and include all normal and recurring adjustments necessary for fair presentation[24][25] NOTE 2 - ACCOUNTING GUIDANCE NOT YET EFFECTIVE AND ADOPTED ACCOUNTING GUIDANCE The Company adopted ASU 2023-07 with no material impact and is evaluating other ASUs not expected to be material - ASU No. 2023-07, Segment Reporting, adopted for annual periods beginning after December 15, 2023, did not have a material effect on the Company's consolidated financial statements[26] - The Company is evaluating ASU 2023-05 (Business Combinations—Joint Venture Formations) and ASU 2023-09 (Income Taxes—Improvements to Income Tax Disclosures), neither of which are expected to have a material effect on its consolidated financial statements[27][30] NOTE 3 – INVESTMENT SECURITIES AFS securities decreased to $184.7 million, with $14.7 million gross unrealized losses, while equity securities saw a slight decline | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | | Investment securities AFS, at fair value | $184,682 | $193,328 | | Gross unrealized gains (AFS) | $501 | $359 | | Gross unrealized losses (AFS) | $(14,653) | $(18,544) | | Equity securities, at fair value | $12,872 | $13,120 | - At June 30, 2025, the Company held 328 AFS securities, with 186 in an unrealized loss position for more than twelve months and 35 for less than twelve months. Management anticipates full recovery of amortized cost, attributing declines primarily to interest rate changes, not credit quality[36][40] | Metric | Three months ended June 30, 2025 (in thousands) | Three months ended June 30, 2024 (in thousands) | | :-------------------------------- | :------------------------------------ | :------------------------------------ | | Net gain (loss) on equity securities | $7 | $(321) | | Metric | Six months ended June 30, 2025 (in thousands) | Six months ended June 30, 2024 (in thousands) | | :-------------------------------- | :---------------------------------- | :---------------------------------- | | Net gain (loss) on equity securities | $(248) | $252 | NOTE 4 – LOANS Net loans grew to $1.98 billion, but nonaccrual loans increased to $13.5 million due to credit deterioration | Loan Type | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | % Change | | :------------------------ | :----------------------------- | :------------------------------- | :-------------------- | :------- | | Commercial and industrial | $182,153 | $173,948 | $8,205 | 4.72% | | Construction and land | $2,589 | $1,515 | $1,074 | 70.89% | | Commercial real estate | $1,708,715 | $1,667,231 | $41,484 | 2.49% | | Residential | $105,555 | $109,662 | $(4,107) | -3.75% | | Consumer | $611 | $391 | $220 | 56.27% | | Total loans | $1,999,623 | $1,952,747 | $46,876 | 2.40% | | Net loans | $1,981,549 | $1,934,996 | $46,553 | 2.40% | - Nonaccrual loans increased to $13.5 million at June 30, 2025, from $9.2 million at December 31, 2024, reflecting borrower-specific credit deterioration, primarily in commercial and industrial and commercial real estate portfolios[63] - At June 30, 2025, $2.9 million of loans were 90 days or more past due and still accruing, with $2.8 million of these fully guaranteed by government agencies[65] - The Company had $1.05 billion in qualifying loans pledged to FHLB and $73.2 million pledged to FRB of San Francisco at June 30, 2025[67] NOTE 5 – ALLOWANCE FOR CREDIT LOSSES FOR LOANS ACL for loans increased to $18.7 million due to loan growth and reserve increases, with minimal net charge-offs | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | | Allowance for credit losses (ACL) | $18,700 | $17,900 | | Reserve for unfunded commitments | $530 | $600 | - For the three months ended June 30, 2025, net charge-offs were $13,000, compared to $76,000 for the same period in 2024[69] - For the six months ended June 30, 2025, net charge-offs totaled $115,000, significantly lower than $3.5 million for the same period in 2024[70] - The increase in ACL was mainly driven by loan growth, an increase in the reserve for pooled loans, an increase in the reserve for individually evaluated loans, and the replenishment of the allowance, reflecting changes in portfolio mix and updated economic forecasts[70] NOTE 6 – PREMISES AND EQUIPMENT Net premises and equipment slightly increased to $13.7 million, with consistent depreciation and amortization expenses | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | | Total premises and equipment, net | $13,686 | $13,386 | | Depreciation and amortization (3 months) | $496 | $518 | | Depreciation and amortization (6 months) | $1,000 | $1,000 | NOTE 7 – LEASES The Company leases 19 branches, with lease liabilities of $14.1 million and a weighted-average term of 4.3 years - The Company leases 19 branches under noncancelable operating leases, with maturities through 2030[76] | Metric | June 30, 2025 | | :-------------------------------- | :------------ | | Present value of lease payments | $14,120 (in thousands) | | Weighted-average remaining lease term | 4.3 years | | Weighted-average discount rate | 3.9 % | | Metric | Three months ended June 30, 2025 (in thousands) | Six months ended June 30, 2025 (in thousands) | | :-------------------------------- | :------------------------------------ | :---------------------------------- | | Total operating lease cost, net | $1,016 | $2,037 | NOTE 8 – GOODWILL AND INTANGIBLE ASSETS Goodwill remained stable at $38.8 million, while core deposit intangible decreased to $2.2 million due to amortization | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | | Goodwill | $38,838 | $38,838 | | Core deposit intangible, net | $2,187 | $2,693 | - Core deposit intangible amortization for the six months ended June 30, 2025, was $506,000[82] NOTE 9 – INTEREST RECEIVABLE AND OTHER ASSETS Interest receivable and other assets decreased to $38.7 million, including tax assets and accrued interest | Asset Type | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | | Tax assets, net | $15,681 | $16,048 | | Accrued interest receivable | $8,127 | $8,507 | | Investment in SBIC fund | $2,905 | $3,241 | | Investment in LIHTC partnerships, net | $3,694 | $4,035 | | CalCAP reserve receivable | $1,375 | $4,023 | | Total interest receivable and other assets | $38,712 | $43,718 | NOTE 10 – DEPOSITS Total deposits decreased to $2.19 billion, with noninterest-bearing demand deposits declining and brokered deposits eliminated | Deposit Type | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | | Demand deposits (noninterest bearing) | $616,096 | $688,996 | | NOW accounts | $279,139 | $261,430 | | Savings | $76,179 | $82,300 | | Money market | $658,384 | $644,880 | | Time deposits | $556,835 | $556,403 | | Total deposits | $2,186,634 | $2,234,009 | - Uninsured deposits totaled $1.0 billion (47.0% of total deposits) at June 30, 2025, compared to $1.0 billion (46.8%) at December 31, 2024[86] - Brokered deposits decreased from $35.5 million at December 31, 2024, to zero at June 30, 2025[86] NOTE 11 – BORROWINGS The Company maintained substantial unused borrowing capacity from FHLB, FRB, and Federal Funds lines, with no outstanding balances | Borrowing Facility | June 30, 2025 (in millions) | December 31, 2024 (in millions) | | :-------------------------------- | :---------------------------- | :------------------------------ | | FHLB borrowing capacity | $581.6 | $540.2 | | FRB borrowing capacity | $40.3 | $41.9 | | Federal Funds lines | $65.0 | $65.0 | | Junior subordinated deferrable interest debentures, net | $8.7 | $8.6 | | Subordinated debt, net | $63.8 | $63.7 | - No FHLB, FRB, or Federal Funds borrowings were outstanding at June 30, 2025, or December 31, 2024[87][88][89] NOTE 12 – INTEREST PAYABLE AND OTHER LIABILITIES Total interest payable and other liabilities decreased to $13.7 million, driven by lower accrued expenses and other liabilities | Liability Type | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | | Accrued expenses | $7,594 | $7,797 | | Reserve for unfunded commitments | $530 | $600 | | Accrued interest payable | $3,129 | $3,118 | | Other liabilities | $1,870 | $2,503 | | Total | $13,696 | $14,632 | NOTE 13 – OTHER EXPENSES Total other expenses decreased due to reductions in professional fees and loan default-related expenses | Expense Type | Three months ended June 30, 2025 (in thousands) | Three months ended June 30, 2024 (in thousands) | | :-------------------------------- | :------------------------------------ | :------------------------------------ | | Professional fees | $512 | $673 | | Core deposit premium amortization | $242 | $305 | | Marketing and promotions | $252 | $246 | | Loan default related expense | $(141) | $148 | | Total other expense | $1,930 | $2,587 | | Expense Type | Six months ended June 30, 2025 (in thousands) | Six months ended June 30, 2024 (in thousands) | | :-------------------------------- | :---------------------------------- | :---------------------------------- | | Professional fees | $1,048 | $1,260 | | Core deposit premium amortization | $506 | $611 | | Marketing and promotions | $409 | $369 | | Loan default related expense | $(151) | $158 | | Total other expense | $3,995 | $4,715 | NOTE 14 – EQUITY INCENTIVE PLANS The 2024 Omnibus Equity Incentive Plan has 264,855 shares available for future issuance as of June 30, 2025 - The 2024 Omnibus Equity Incentive Plan, approved in June 2024, allows for the grant of various equity incentive awards to employees and directors[94] - As of June 30, 2025, 264,855 shares were available for future issuance under the 2024 Plan[95] | Restricted Stock Activity | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Non-vested at January 1 | 74,346 shares | 81,365 shares | | Granted | 22,221 shares | 24,471 shares | | Vested | (20,568) shares | (19,927) shares | | Forfeited | (3,221) shares | (505) shares | | Non-Vested, at June 30 | 72,778 shares | 85,404 shares | NOTE 15 – FAIR VALUE MEASUREMENT Fair value measurements categorize assets and liabilities into Level 1, 2, or 3, with no transfers between levels - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[99][100][101] | Asset Type (June 30, 2025) | Total Estimated Fair Value (in thousands) | Level 1 (in thousands) | Level 2 (in thousands) | Level 3 (in thousands) | | :-------------------------------- | :------------------------------------ | :--------------------- | :--------------------- | :--------------------- | | U.S. Government Agencies | $1,779 | $— | $1,779 | $— | | Municipal securities | $21,401 | $— | $21,401 | $— | | Mortgage-backed securities | $48,270 | $— | $48,270 | $— | | Corporate bonds | $66,492 | $— | $66,492 | $— | | Equity securities | $12,872 | $12,872 | $— | $— | | Total | $197,554 | $12,872 | $184,682 | $— | | Asset Type (June 30, 2025) | Total Estimated Fair Value (in thousands) | Level 1 (in thousands) | Level 2 (in thousands) | Level 3 (in thousands) | | :-------------------------------- | :------------------------------------ | :--------------------- | :--------------------- | :--------------------- | | Individually evaluated loans | $12,492 | $— | $— | $12,492 | NOTE 16 – FAIR VALUE OF FINANCIAL INSTRUMENTS This note details the carrying amounts and estimated fair values of financial instruments across the fair value hierarchy | Financial Instrument (June 30, 2025) | Carrying amount (in thousands) | Fair value (in thousands) | Level 1 (in thousands) | Level 2 (in thousands) | Level 3 (in thousands) | | :----------------------------------- | :----------------------------- | :------------------------ | :--------------------- | :--------------------- | :--------------------- | | Cash and cash equivalents | $291,624 | $291,624 | $291,624 | $— | $— | | Investment securities AFS | $184,682 | $184,682 | $— | $184,682 | $— | | Equity securities | $12,872 | $12,872 | $12,872 | $— | $— | | Loans, net | $1,981,549 | $1,935,000 | $— | $— | $1,935,000 | | Deposits | $2,186,634 | $2,194,657 | $— | $2,194,657 | $— | | Junior subordinated deferrable interest debentures, net | $8,686 | $8,452 | $— | $— | $8,452 | | Subordinated debt, net | $63,821 | $63,821 | $— | $63,821 | $— | | Undisbursed loan commitments, lines of credit, standby letters of credit | $65,914 | $65,384 | $— | $— | $65,384 | NOTE 17 – COMMITMENTS AND CONTINGENCIES No material legal proceedings are pending, with total commitments decreasing to $65.9 million and a concentration in commercial real estate loans - The Company is not a party to any pending legal proceedings that it believes would have a material adverse effect on its financial condition or results of operations[112][264] | Commitment Type | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | | Commitments to extend credit | $64,557 | $72,737 | | Standby letters of credit | $1,357 | $677 | | Total commitments | $65,914 | $73,414 | - At June 30, 2025, a concentration of loans existed in commercial real estate related loans[116] - At June 30, 2025, the top ten depositors accounted for approximately $245.2 million, or 11.2%, of the Company's total deposits[119] NOTE 18 – SEGMENT INFORMATION The Company operates as a single banking segment, with performance assessed by the CEO using consolidated financial metrics - The Company operates as one reportable segment: banking operations, generating revenue primarily from loans, securities, deposits, and non-interest income[121] - The Chief Operating Decision Maker (CODM) is the Chief Executive Officer, who evaluates consolidated balance sheets, income statements, and net interest margin analyses[122] NOTE 19 – SUBSEQUENT EVENTS No subsequent events requiring adjustments or disclosures were identified through the filing date of this Form 10-Q - No subsequent events requiring adjustments or disclosures were identified through the filing of this Quarterly Report on Form 10-Q[125] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition and results for Q2 2025 and 2024, covering income, expenses, and capital SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS This cautionary note highlights risks and uncertainties that could cause actual results to differ from forward-looking statements - Forward-looking statements are based on current management expectations and involve risks and uncertainties that could cause actual results to differ materially[126][127] - Key risk factors include adverse economic conditions, changes in interest rates, credit risks of lending, unexpected outflows of uninsured deposits, regulatory changes, and challenges related to acquisition strategy and technological advancements[127][132] Executive Overview BayCom Corp, operating through United Business Bank, aims for shareholder value through growth, with $2.6 billion in assets - BayCom Corp's principal business objective is to enhance shareholder value and generate consistent earnings growth through strategic acquisitions and organic expansion of its commercial banking franchise[131] - The Company's geographic footprint provides access to low-cost, stable core deposits to fund commercial loan growth[134] | Metric | June 30, 2025 (in millions) | | :-------------------------------- | :-------------------------- | | Total assets | $2,600 | | Total loans | $2,000 | | Total deposits | $2,200 | | Shareholders' equity | $330.6 | - At June 30, 2025, 13.1% of the total loan portfolio ($261.5 million) was acquired through business combinations, while 86.9% ($1.7 billion) consisted of originated or purchased loans[135] Net Interest Income Net interest income, a key profitability driver, is influenced by interest rates, asset yields, and liability costs - Net interest income is the difference between interest earned on interest-earning assets and interest paid on interest-bearing liabilities, less provision for credit losses[136][137] - The Federal Open Market Committee (FOMC) lowered the target range for the federal funds rate three times in the second half of 2024, reaching 4.25% to 4.50% by June 30, 2025[138] Noninterest Income Noninterest income includes service charges, gains/losses on loan sales, equity securities, and other miscellaneous income - Noninterest income sources include service charges on loans and deposits, gain on sale of loans (e.g., SBA loans), gain (loss) on equity securities, and other noninterest income[139] Provision for Credit Losses The Company establishes ACL for loans and AFS securities, reflecting estimated credit losses and impairment assessments - The allowance for credit losses is established by charging amounts to provision for credit losses to reflect estimated credit losses in the loan and available-for-sale investment securities portfolios[140] - For AFS debt securities, impairment is evaluated based on credit loss or changes in required yields, considering factors like security nature, government guarantees, issuer creditworthiness, and management's intent to sell[141][143] Noninterest Expense Noninterest expense includes salaries, occupancy, data processing, and professional fees, increasing with business growth - Noninterest expense includes salaries and related benefits, occupancy and equipment expense, data processing, FDIC and state assessments, outside and professional services, and amortization of intangible assets[144] - Noninterest expenses have increased significantly over the past few years due to growth through acquisitions and organic expansion, and the build-out of operational infrastructure[144] Critical Accounting Policies and Estimates The allowance for credit losses is a critical accounting policy, with no material changes since the 2024 Annual Report - The determination of the allowance for credit losses and related provision is identified as a critical accounting policy and estimate[146] - There have been no material changes in the Company's critical accounting policies and estimates as previously disclosed in the 2024 Annual Report[147] Comparison of Financial Condition at June 30, 2025 and December 31, 2024 This section analyzes changes in balance sheet items, including assets, liabilities, and equity, between 2024 and 2025 Total Assets Total assets decreased by $42.1 million to $2.6 billion at June 30, 2025, primarily due to lower cash - Total assets decreased by $42.1 million, or 1.6%, to $2.6 billion at June 30, 2025, from December 31, 2024[148] - The decrease was primarily due to a $72.4 million decline in cash and cash equivalents and a $2.2 million decline in loans held for sale, partially offset by a $47.4 million increase in net loans receivable[148] Cash and Cash Equivalents Cash and cash equivalents decreased by $72.4 million to $291.6 million due to funding loan growth and withdrawals - Cash and cash equivalents decreased by $72.4 million, or 19.9%, to $291.6 million at June 30, 2025, from $364.0 million at December 31, 2024[150] - The decrease was primarily due to a $71.0 million decrease in federal funds sold and interest-bearing balances in banks, as excess funds were used to fund loan growth and deposit withdrawals[150] Investment Securities Available-for-Sale AFS securities decreased by $8.6 million to $184.7 million due to maturities and repayments, partially offset by purchases - Investment securities available-for-sale decreased by $8.6 million, or 4.5%, to $184.7 million at June 30, 2025, from $193.3 million at December 31, 2024[151] - The decrease was primarily due to routine maturities, principal repayments, and calls of investment securities, partially offset by purchases and an upward fair value adjustment[151] | Maturity | Amortized Cost (in thousands) | Weighted Average Yield | | :-------------------------------- | :---------------------------- | :--------------------- | | One Year or Less | $889 | 2.89 % | | Over One to Five Years | $20,924 | 3.69 % | | Over Five to Ten Years | $90,665 | 4.00 % | | Over Ten Years | $86,356 | 4.57 % | | Total | $198,834 | 4.21 % | Equity Securities Equity securities decreased by $255,000 to $12.9 million due to mark-to-market downward adjustments - Equity securities decreased by $255,000, or 1.9%, to $12.9 million at June 30, 2025, from $13.1 million at December 31, 2024[153] - The decrease was primarily due to mark-to-market downward adjustments recorded during the six months ended June 30, 2025[153] Loans Receivable, Net Total loans increased by $47.4 million to $2.0 billion, driven by new originations and purchases - Total loans increased by $47.4 million, or 2.4%, to $2.0 billion at June 30, 2025, from $1.9 billion at December 31, 2024[154] - The increase was due to $227.2 million of new loan originations and $20.6 million of loan purchases, partially offset by $199.8 million of loan repayments and $3.4 million of loans sold[154] | Loan Type | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | % Change | | :------------------------ | :----------------------------- | :------------------------------- | :------- | | Commercial and industrial | $182,153 | $173,948 | 4.7 % | | Residential | $105,394 | $109,409 | (3.7) % | | Multifamily residential | $251,669 | $222,932 | 12.9 % | | Owner occupied CRE | $484,685 | $490,493 | (1.2) % | | Non-owner occupied CRE | $955,145 | $931,615 | 2.5 % | | Construction and land | $2,589 | $1,509 | 71.6 % | | Consumer | $611 | $391 | 56.3 % | | PCD loans | $17,377 | $22,450 | (22.6) % | | Total Loans | $1,999,623 | $1,952,747 | 2.4 % | - As of June 30, 2025, acquired non-PCD loans totaled $123.5 million, and acquired PCD loans totaled $18.0 million[161][162] Nonperforming Assets and Loans Nonperforming assets and loans increased to $16.4 million, primarily due to new nonaccrual commercial real estate loans - Nonperforming assets increased by $6.9 million to $16.4 million (0.62% of total assets) at June 30, 2025, from $9.5 million (0.36% of total assets) at December 31, 2024[163][170] - Nonperforming loans totaled $16.4 million (0.82% of total loans) at June 30, 2025, compared to $9.5 million (0.48% of total loans) at December 31, 2024[164][170] - The increase in nonperforming loans was primarily due to seven new commercial real estate loans ($5.2 million) placed on nonaccrual status and a $2.8 million increase in loans 90 days or more past due and still accruing[164] - Government-guaranteed nonaccrual loans decreased to $610,000 at June 30, 2025, from $2.0 million at December 31, 2024[165] | Metric | Three months ended June 30, 2025 (in thousands) | Three months ended June 30, 2024 (in thousands) | | :-------------------------------- | :------------------------------------ | :------------------------------------ | | Interest foregone on nonaccrual loans | $370 | $226 | | Interest income recognized on nonaccrual loans | $31 | $79 | | Metric | Six months ended June 30, 2025 (in thousands) | Six months ended June 30, 2024 (in thousands) | | :-------------------------------- | :---------------------------------- | :---------------------------------- | | Interest foregone on nonaccrual loans | $639 | $709 | | Interest income recognized on nonaccrual loans | $66 | $86 | Allowance for Credit Losses for Loans ACL for loans increased to $18.7 million (0.94% of total loans) due to loan growth and reserve increases - The allowance for credit losses for loans increased to $18.7 million (0.94% of total loans) at June 30, 2025, from $17.9 million (0.92% of total loans) at December 31, 2024[175] - The increase was primarily due to loan growth, an increase in the reserve for pooled loans, an increase in the reserve for individually evaluated loans, and replenishment of the allowance[176] - Net charge-offs were $13,000 for the three months ended June 30, 2025, compared to $76,000 for the same period in 2024[177] - Net charge-offs totaled $115,000 for the six months ended June 30, 2025, significantly lower than $3.5 million for the same period in 2024[177] | Credit Ratio (at and for six months ended June 30) | 2025 | 2024 | | :------------------------------------------------- | :----- | :----- | | Allowance for credit losses for loans as a percentage of total loans outstanding | 0.93 % | 1.02 % | | Nonaccrual loans as a percentage of total loans outstanding | 0.67 % | 0.87 % | | Allowance for credit losses for loans as a percentage of nonaccrual loans | 138.82 % | 117.81 % | | Total net charge-offs to total average loans outstanding | 0.01 % | 0.18 % | Deposits Total deposits decreased by $47.4 million to $2.2 billion, with noninterest-bearing demand deposits declining - Total deposits decreased by $47.4 million, or 2.1%, to $2.2 billion at June 30, 2025, from December 31, 2024[181] - Noninterest-bearing demand deposits decreased by $72.9 million to $616.1 million (28.2% of total deposits) at June 30, 2025, from $689.0 million (30.8%) at December 31, 2024[181] - Time deposits increased by $432,000, while money market accounts increased by $13.5 million and NOW and savings accounts increased by $11.6 million[181] - Brokered deposits in time deposits decreased from $35.5 million at December 31, 2024, to zero at June 30, 2025[181] | Deposit Type | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | % Change | | :-------------------------------- | :----------------------------- | :------------------------------- | :------- | | Demand deposits (noninterest bearing) | $616,096 | $688,996 | (10.6)% | | NOW accounts | $279,139 | $261,430 | 6.8 % | | Saving | $76,179 | $82,300 | (7.4)% | | Money market | $658,384 | $644,880 | 2.1 % | | Time deposits | $556,835 | $556,403 | 0.1 % | | Total | $2,186,634 | $2,234,009 | (2.1)% | Borrowings The Company maintained significant unused borrowing capacity from FHLB, FRB, and Federal Funds lines - Available borrowing capacity from FHLB was $581.6 million at June 30, 2025, and $540.2 million at December 31, 2024, with no outstanding advances at either date[187] - Available borrowing capacity from FRB was $440.3 million at June 30, 2025, and $41.9 million at December 31, 2024, with no outstanding advances at either date[188] - Federal Funds lines totaled $65.0 million at both dates, with no outstanding balances[189] - Junior subordinated deferrable interest debentures were $8.7 million at June 30, 2025, and subordinated debt was $63.8 million[190] Shareholders' Equity Shareholders' equity increased by $6.2 million to $330.6 million, driven by net income and other comprehensive income - Shareholders' equity increased by $6.2 million to $330.6 million at June 30, 2025, from $324.4 million at December 31, 2024[192] - The increase was primarily due to $12.1 million of net income and $2.9 million in other comprehensive income, net of taxes[192] - These increases were partially offset by the repurchase of $5.2 million of common stock and $3.9 million of cash dividends paid or accrued[192] - During the six months ended June 30, 2025, the Company repurchased 199,243 shares of common stock for $5.2 million, with 264,855 shares remaining available under the current repurchase plan[192] Comparison of Results of Operations for the Three and Six Months Ended June 30, 2025 and 2024 This section compares operational results for Q2 2025 and 2024, detailing changes in income, expenses, and key performance metrics Earnings Summary Net income increased by 13.6% for Q2 2025 and 5.1% for the six months, with improved efficiency ratios | Metric | Three months ended June 30, 2025 (in thousands) | Three months ended June 30, 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :------------------------------------ | :------------------------------------ | :-------------------- | :------- | | Net income | $6,364 | $5,600 | $764 | 13.6% | | Basic and diluted EPS | $0.58 | $0.50 | $0.08 | 16.0% | | Efficiency ratio | 63.85% | 67.34% | -3.49% | -5.18% | | Metric | Six months ended June 30, 2025 (in thousands) | Six months ended June 30, 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :---------------------------------- | :---------------------------------- | :-------------------- | :------- | | Net income | $12,066 | $11,477 | $589 | 5.1% | | Basic and diluted EPS | $1.09 | $1.01 | $0.08 | 7.9% | | Efficiency ratio | 64.79% | 66.49% | -1.70% | -2.56% | Interest Income Total interest income increased for both periods, driven by higher yields and average balances in investment securities and loans - Total interest income increased by $1.1 million (3.2%) to $33.5 million for the three months ended June 30, 2025, driven by increased yields and average balances of investment securities and loans[197] - Loan interest income increased by $2.9 million (11.8%) to $28.0 million for the three months ended June 30, 2025, due to a $133.4 million increase in average loan balance and a 22 basis points increase in average loan yield (5.63%)[198] - Investment securities interest income increased by $225,000 (10.3%) to $2.4 million for the three months ended June 30, 2025, with average yield increasing by 18 basis points to 4.68%[200] - Federal funds sold and interest-bearing balances in banks interest income decreased by $2.1 million (44.1%) to $2.7 million for the three months ended June 30, 2025, due to a 102 basis points decrease in average yield (4.45%) and lower average balance[202] - Total interest income increased by $1.9 million (3.0%) to $66.1 million for the six months ended June 30, 2025, reflecting increased yields and average balances of loans and investment securities[203] Interest Expense Total interest expense increased due to higher rates on money market deposits and increased average balances - Total interest expense increased by $611,000 (3.1%) to $10.3 million for the three months ended June 30, 2025, primarily due to higher rates paid on money market deposits and increased average balances of money market and time deposit accounts[208] - Interest expense on deposits increased by $207,000 (6.1%) to $9.2 million for the three months ended June 30, 2025, due to higher deposit rates, with the average cost of all interest-bearing deposits remaining unchanged at 2.37%[209][210] - Average interest-bearing liabilities increased by $29.7 million (1.86%) to $1.6 billion for the three months ended June 30, 2025[212] - Average noninterest-bearing deposits decreased by $15.5 million (2.5%) to $604.9 million for the three months ended June 30, 2025[213] - Total interest expense increased by $611,000 (3.1%) to $20.1 million for the six months ended June 30, 2025, reflecting higher funding costs, mainly from money market accounts[215] - Interest expense on deposits increased by $663,000 (3.8%) to $17.9 million for the six months ended June 30, 2025, driven by higher rates and average balances in money market and time deposit accounts[216] Net Interest Income and Net Interest Margin Net interest income and margin improved for both periods, driven by higher asset yields outpacing liability costs - Net interest income increased by $865,000 (3.9%) to $23.2 million for the three months ended June 30, 2025[219] - The annualized net interest margin improved to 3.77% for the three months ended June 30, 2025, from 3.69% in the prior-year period, driven by an eight basis points increase in the average annualized yield on interest-earning assets (5.45%)[221] - Net interest income increased by $1.3 million (3.0%) to $46.0 million for the six months ended June 30, 2025[222] - The annualized net interest margin improved to 3.80% for the six months ended June 30, 2025, from 3.71% in the prior-year period, as asset yields (5.45%) outpaced the cost of interest-bearing liabilities (2.51%)[223] Average Balances, Interest and Average Yields/Cost This table presents average balances, interest, and yields/costs for interest-earning assets and interest-bearing liabilities | Category | Average Balance (3 months ended June 30, 2025, in thousands) | Interest (in thousands) | Annualized Average Yield/Cost | | :-------------------------------- | :------------------------------------------- | :---------------------- | :---------------------------- | | Total interest earning assets | $2,462,990 | $33,453 | 5.45 % | | Total interest bearing liabilities | $1,628,460 | $10,293 | 2.54 % | | Net interest income | | $23,160 | | | Interest rate spread | | | 2.91 % | | Net interest margin | | | 3.77 % | | Category | Average Balance (6 months ended June 30, 2025, in thousands) | Interest (in thousands) | Annualized Average Yield/Cost | | :-------------------------------- | :------------------------------------------- | :---------------------- | :---------------------------- | | Total interest earning assets | $2,443,725 | $66,099 | 5.45 % | | Total interest bearing liabilities | $1,610,962 | $20,059 | 2.51 % | | Net interest income | | $46,040 | | | Interest rate spread | | | 2.94 % | | Net interest margin | | | 3.80 % | Rate/Volume Analysis This table analyzes the impact of rate and volume changes on total interest income, expense, and net interest income | Category | Rate Effect (3 months, in thousands) | Volume Effect (3 months, in thousands) | Total Change (3 months, in thousands) | | :-------------------------------- | :----------------------------------- | :------------------------------------- | :------------------------------------ | | Total interest income | $632 | $415 | $1,047 | | Total interest expense | $(246) | $428 | $182 | | Net interest income | $878 | $(13) | $865 | | Category | Rate Effect (6 months, in thousands) | Volume Effect (6 months, in thousands) | Total Change (6 months, in thousands) | | :-------------------------------- | :----------------------------------- | :------------------------------------- | :------------------------------------ | | Total interest income | $1,574 | $375 | $1,949 | | Total interest expense | $(317) | $928 | $611 | | Net interest income | $1,891 | $(553) | $1,338 | Provision for Credit Losses Provision for credit losses increased due to loan growth and reserve increases, despite lower net charge-offs - Provision for credit losses was $203,000 for the three months ended June 30, 2025, compared to $171,000 for the same period in 2024[232] - Provision for credit losses was $845,000 for the six months ended June 30, 2025, compared to $423,000 for the same period in 2024[232] - The provision increase was primarily driven by loan growth, charge-offs, and increased reserve on pooled loans. Net charge-offs for the six months ended June 30, 2025, were $115,000, significantly lower than $3.2 million in the prior year[232] Noninterest Income Noninterest income saw mixed changes, increasing for Q2 but decreasing for the six months due to various factors - Noninterest income increased by $30,000 (2.0%) to $1.5 million for the three months ended June 30, 2025[233] - This increase was primarily due to a $328,000 decrease in loss on equity securities and a $179,000 increase in loan servicing and other fees, partially offset by a $233,000 decrease in gain on sale of loans and a $298,000 increase in loss on investment in SBIC fund[233] - Noninterest income decreased by $592,000 (16.7%) to $3.0 million for the six months ended June 30, 2025[234] - This decrease was due to a $500,000 increase in loss on equity securities and a $377,000 increase in loss on investment in SBIC fund, partially offset by a $285,000 increase in service charges and other fees[234] Noninterest Expense Noninterest expense decreased for both periods, primarily due to lower other expenses, partially offset by data processing - Noninterest expense decreased by $258,000 (1.6%) to $15.8 million for the three months ended June 30, 2025[236] - The decrease was primarily due to a $657,000 decrease in other expense (reduction in legal/professional fees and return of unused CalCap reserve funds), partially offset by a $263,000 increase in data processing expense and an $86,000 increase in salaries and wages[236] - Noninterest expense decreased by $340,000 (1.1%) to $31.7 million for the six months ended June 30, 2025[237] - This decrease was mainly due to a $720,000 decrease in other expense (legal/professional fees, FDIC insurance, fraudulent check losses, and CalCap reserve funds), partially offset by a $363,000 increase in data processing expense[237] Income Taxes Income tax provision increased by $357,000 for Q2 2025 and $75,000 for the six months, with an effective tax rate of 27.0% for Q2 2025 - The provision for income taxes increased by $357,000 (17.9%) to $2.4 million for the three months ended June 30, 2025, due to higher taxable income[239] - The provision for income taxes increased by $75,000 (1.8%) to $4.3 million for the six months ended June 30, 2025[239] - The effective tax rate was 27.0% for the three months and 26.5% for the six months ended June 30, 2025. The six-month rate was lower than the prior year due to higher low income housing tax credits[240] Liquidity and Capital Resources This section details the Company's liquidity management, cash flow activities, and regulatory capital position, confirming 'Well Capitalized' status Liquidity Management The Company manages liquidity through primary and secondary funding sources, including significant unused borrowing capacity - The Company's liquidity strategy involves daily and long-term planning to fund loan demand and deposit runoff, utilizing deposits, loan payments, and proceeds from loan sales as primary sources[241][242] - Secondary liquidity sources include available borrowing capacity from the FHLB ($581.6 million), FRB ($40.3 million), and federal funds lines ($65.0 million), with no outstanding borrowings at June 30, 2025[244] - Net cash provided by operating activities was $15.6 million for the six months ended June 30, 2025. Net cash used in investing activities was $33.8 million, and net cash used in financing activities was $54.2 million[246] - The Board of Directors declared a quarterly cash dividend of $0.20 per share, paid on July 10, 2025. The Company also has a stock repurchase program with 264,855 shares available for repurchase as of June 30, 2025[248][249] Regulatory Capital United Business Bank maintained 'Well Capitalized' status, exceeding all regulatory capital requirements at June 30, 2025 - United Business Bank maintained 'Well Capitalized' status under Federal Reserve regulations at both June 30, 2025, and December 31, 2024[251] | Capital Ratio (June 30, 2025) | BayCom Corp Amount (in thousands) | BayCom Corp Ratio | United Business Bank Amount (in thousands) | United Business Bank Ratio | | :-------------------------------- | :-------------------------------- | :---------------- | :--------------------------------------- | :------------------------- | | Leverage Ratio | $298,579 | 12.02 % | $357,137 | 14.03 % | | Common Equity Tier 1 Ratio | $298,579 | 14.41 % | $357,137 | 17.35 % | | Tier 1 Risk-Based Capital Ratio | $298,579 | 14.41 % | $357,137 | 17.35 % | | Total Risk-Based Capital Ratio | $391,979 | 18.92 % | $376,367 | 18.28 % | - At June 30, 2025, the Bank's Common Equity Tier 1 capital exceeded the required capital conservation buffer[253] PART II — OTHER INFORMATION This section provides additional information, including legal proceedings, risk factors, equity sales, and exhibits Item 1. Legal Proceedings No pending legal proceedings are expected to have a material adverse effect on the Company's financial condition or operations - The Company is not presently party to any legal proceedings where the resolution would have a material adverse effect on its business, financial condition, or results of operations[112][264] Item 1A. Risk Factors No material changes to the risk factors previously disclosed in the Company's 2024 Annual Report - No material changes in the Risk Factors previously disclosed in Item 1A of the 2024 Annual Report[265] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The Company repurchased 148,450 shares for $26.14 average per share, with 264,855 shares remaining for repurchase | Period | Total shares purchased | Average price paid per share | Shares purchased as part of publicly announced plans | Maximum shares that may yet be purchased | | :-------------------------------- | :--------------------- | :--------------------------- | :------------------------------------------------- | :--------------------------------------- | | April 1, 2025 - April 30, 2025 | 82,529 | $25.54 | 82,529 | 330,776 | | May 1, 2025 - May 31, 2025 | 18,713 | $26.94 | 18,713 | 312,063 | | June 1, 2025 - June 30, 2025 | 47,208 | $26.88 | 47,208 | 264,855 | | Total (3 months ended June 30, 2025) | 148,450 | $26.14 | 148,450 | | - The current stock repurchase program, approved in May 2024, authorizes the purchase of up to 560,000 shares over a one-year period[266] Item 3. Defaults Upon Senior Securities This item is not applicable to the Company for the reporting period - Not applicable[267] Item 4. Mine Safety Disclosures This item is not applicable to the Company for the reporting period - Not applicable[268][269] Item 5. Other Information No director or officer adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements in Q2 2025 - No director or officer adopted or terminated a 'Rule 10b5-1 trading arrangement' or 'non-Rule 10b5-1 trading arrangement' during the three months ended June 30, 2025[270] Item 6. Exhibits This section lists exhibits filed with Form 10-Q, including corporate documents and CEO/CFO certifications - Exhibits include Articles of Incorporation, Amended and Restated Bylaws, CEO and CFO certifications (Sections 302 and 906 of Sarbanes-Oxley Act), and XBRL formatted financial statements[272] SIGNATURES The report is signed by BayCom Corp's President/CEO and Senior EVP/CFO/Secretary on August 11, 2025 - The report is signed by George J. Guarini, President and Chief Executive Officer, and Keary L. Colwell, Senior Executive Vice President, Chief Financial Officer and Secretary, on August 11, 2025[275]