BayCom Corp — FY2022 Form 10-K Summary
Business context and reporting period. This filing covers the fiscal year ended December 31, 2022; it is an annual report, not a standalone fourth-quarter report. BayCom Corp is the bank holding company for United Business Bank, operating 34 branches across California, Colorado, New Mexico, and Washington. In February 2022, BayCom acquired Pacific Enterprise Bancorp (PEB), adding approximately $446 million of assets and $377 million of deposits at acquisition.
Financial performance and position
| Metric | FY2022 / December 31, 2022 | Prior comparable period |
|---|---|---|
| Total assets | $2.513 billion | $2.351 billion at December 31, 2021; up 6.9% |
| Loans, net | $2.002 billion | $1.647 billion; up 21.6% |
| Deposits | $2.085 billion | $1.985 billion; up 5.0% |
| Net interest income | $96.7 million | $72.8 million; up 32.8% |
| Net interest margin | 3.90% | 3.34%; up 56 basis points |
| Net income | $27.0 million | $20.7 million; up 30.4% |
| Diluted earnings per share | $2.06 | $1.90 |
| Efficiency ratio | 61.40% | 65.57% |
| Cash and cash equivalents | $176.8 million | $379.7 million at December 31, 2021 |
| Shareholders’ equity | $317.1 million | $262.6 million at December 31, 2021 |
Interest income was $107.1 million and interest expense was $10.4 million. The provision for loan losses rose to $4.4 million from $466,000; net charge-offs were $3.2 million, including $3.1 million of cumulative losses on one shared-credit participation. Noninterest income declined 5.3% to $10.7 million, while noninterest expense rose 19.6% to $65.9 million. The latter included $3.1 million of PEB acquisition expenses and higher staffing, wage, occupancy, and technology costs.
Operating cash flow was $39.6 million. Investing activities provided $53.9 million, including net loan-related cash flows and acquisition proceeds; financing activities used $296.4 million, primarily reflecting deposit outflows in the cash-flow statement, stock repurchases, and dividends. Cash and cash equivalents fell $202.9 million over the year.
At year-end, the allowance for loan losses was $18.9 million, or 0.94% of loans. Nonperforming loans were $15.2 million, or 0.75% of loans; nonperforming assets were $15.2 million, or 0.61% of assets. Real estate loans accounted for 89.3% of total loans, and commercial real estate lending was close to the regulatory supervisory concentration benchmark.
Deposits included $773.3 million of noninterest-bearing demand deposits, 37.1% of total deposits. Management estimated approximately $1.1 billion of deposits were uninsured. Available liquidity included $473.6 million of FHLB borrowing capacity and $65.0 million of Federal Funds lines; no FHLB or Federal Funds borrowings were outstanding at year-end. Debt included $63.7 million of subordinated notes and $8.5 million of junior subordinated debentures.
Material changes versus FY2021
- PEB’s acquisition and new originations contributed to loan growth; net loans acquired in the merger were approximately $412.9 million. BayCom issued $64.1 million of common stock as consideration and recorded a $1.7 million bargain purchase gain.
- Higher market rates and growth in average loan and securities balances drove higher interest income and net interest margin. The average cost of interest-bearing liabilities also rose, though more slowly than asset yields during 2022.
- Credit costs increased: provision expense rose by approximately $4.0 million and net charge-offs increased from $266,000 to $3.2 million. Nonperforming loans increased from $6.9 million to $15.2 million.
- Available-for-sale securities had $21.0 million of gross unrealized losses at year-end, primarily attributed by management to higher interest rates. The after-tax other comprehensive loss for 2022 was $17.0 million; management reported no other-than-temporary impairment.
- BayCom repurchased 905,740 shares for approximately $18.0 million and paid $2.7 million in declared dividends during 2022. The quarterly dividend was increased to $0.10 per share in February 2023, subject to board discretion and regulatory limits.
Outlook, commentary, risks, and unusual items
Management emphasized continued organic commercial lending, expense management, and selective acquisitions. It said the balance sheet was positioned to benefit from further rate increases, while also warning that rate changes could affect funding costs, borrowers’ repayment capacity, securities values, and economic conditions. The filing provides no specific earnings or revenue guidance for 2023.
- CECL became effective for BayCom on January 1, 2023. Management estimated adoption would increase the loan-loss allowance by $1 million to $3 million, with the final amount dependent on portfolio and economic conditions.
- Key risks include the concentration in commercial real estate and California markets, deposit retention and uninsured-deposit exposure, inflation and recession risk, rising deposit costs, credit deterioration, acquisition integration, and cybersecurity and third-party service disruptions.
- Management stated that the Bank was “Well Capitalized” and met the capital conservation buffer at year-end. It also stated that liquid assets and available credit were adequate for obligations over at least the next 12 months.
- The 2022 financial statements received an unqualified audit opinion. The auditor was not engaged to audit internal control over financial reporting; management concluded disclosure controls and internal control over financial reporting were effective.
- No pending legal proceeding was identified as likely to have a material adverse effect. The filing reported no unresolved SEC staff comments and no material changes in internal controls during the fourth quarter.
Important facts for investors to verify
- Track subsequent nonperforming loans, charge-offs, criticized assets, and allowance levels, particularly in commercial real estate and the shared-credit exposure.
- Review deposit trends, uninsured balances, concentration among large and related depositors, and the cost of deposits as rates and competition change.
- Check realized and unrealized securities losses, liquidity and borrowing capacity, and the sensitivity of net interest income to rate movements.
- Confirm the final CECL adoption adjustment and its effect on retained earnings, credit-loss allowances, and regulatory capital.
- Assess PEB integration, recurring expenses after acquisition costs, loan growth quality, and whether dividend and repurchase activity remain supportable.
- Reconcile reported figures against the audited financial statements and notes: the filing includes some differing descriptions of loan and nonperforming-asset ratios, so verify definitions and denominators before comparing them.