Analyst Summary
- Total assets increased by 4.4% to $2.7 billion, driven by increases in cash, investment securities, and loans.
- Net income decreased by 13.9% to $23.6 million, and net interest income decreased by 6.9% to $91.1 million.
- Net Interest Margin decreased from 4.05% to 3.74%, indicating pressure on profitability.
- Commercial Real Estate Concentration is high at 320.2% of total regulatory capital, potentially increasing risk.
- The company’s operating profit margin is 24.11%, below the typical range of 30% to 40% for regional banks, indicating lower operational efficiency.
- The debt-to-equity ratio is 7.21, within the typical range of 5 to 10 for banks, indicating a moderate level of leverage.
- Interest coverage ratio decreased by 20.22%, indicating a reduced ability to cover interest expenses.
- Price-to-Earnings Ratio (P/E) is 11.78.
- Price-to-Book Ratio (P/B) is 0.86, potentially indicating undervaluation.
- Nonperforming Assets to Total Assets decreased by 29.41% to 0.36%.
- Nonperforming Loans to Total Loans decreased by 28.36% to 0.48%.
Opportunities and Risks
- Opportunity: Continued consolidation of community banks could provide opportunities for growth and efficiency gains through strategic acquisitions.
- Opportunity: Expanding commercial client base in metropolitan markets offers potential for increased revenue through organic growth.
- Opportunity: Access to low-cost, stable core deposits provides a funding advantage.
- Risk: Downturns in the national and regional economies could negatively impact loan repayments and asset values due to macroeconomic conditions.
- Risk: Fluctuations in interest rates could compress net interest margins and increase the risk of loan defaults.
- Risk: The company’s acquisition strategy exposes it to financial, execution, and integration risks.
- Risk: Increasing sophistication of cyber-attacks poses a risk to the company’s operations and data security.
- Risk: The concentration of loans in wildfire-prone areas presents a significant credit risk.
Potential Implications
Company Performance
- Continued pressure on net interest margin may impact future profitability.
- High concentration in commercial real estate lending could expose the company to increased risk if the commercial real estate market weakens.
- Reliance on a few large depositors creates a potential liquidity risk.
- Strategic acquisitions and organic growth initiatives may drive future revenue growth, but their success depends on effective execution and integration.
Stock Price
- Decreased net income and net interest margin may negatively impact investor sentiment.
- High concentration in commercial real estate lending and reliance on large depositors could increase perceived risk.
- Successful execution of strategic acquisitions and organic growth initiatives could positively impact investor confidence.
BayCom Corp (BCML) – 10-K Filing Analysis – December 31, 2024
Executive Summary
This report analyzes BayCom Corp’s 10-K filing for the year ended December 31, 2024. Key findings include a slight increase in total assets, a decrease in net income, and a compression of the net interest margin. The company’s strategic focus remains on acquisitions and organic growth, but macroeconomic headwinds and interest rate volatility pose risks. While the company appears financially sound, investors should monitor the net interest margin and asset quality closely. A Hold rating is recommended.
Company Overview
BayCom Corp is a bank holding company operating primarily through its subsidiary, United Business Bank. The bank provides a range of financial services to businesses and individuals across California, Nevada, Colorado, New Mexico, and Washington. The company’s strategy focuses on strategic acquisitions and organic growth within these markets.
Detailed Analysis
Financial Statement Analysis
Balance Sheet
- Total assets increased by 4.4% to $2.7 billion, driven by increases in cash, investment securities, and loans.
- Loans, net increased by 1.5% to $1.9 billion.
- Deposits increased by 4.7% to $2.2 billion.
- Shareholders’ equity increased by 3.7% to $324.4 million.
Income Statement
- Net income decreased by 13.9% to $23.6 million.
- Net interest income decreased by 6.9% to $91.1 million.
- Noninterest income decreased by 8.6% to $6.4 million.
- Noninterest expense decreased by 0.8% to $64.1 million.
Key Ratios
| Ratio |
December 31, 2024 |
December 31, 2023 |
| Net Interest Margin |
3.74% |
4.05% |
| Nonperforming Assets to Total Assets |
0.36% |
0.51% |
| Allowance for Credit Losses to Total Loans |
0.92% |
1.14% |
| Efficiency Ratio |
65.77% |
61.69% |
Management’s Discussion and Analysis (MD&A) Insights
- Management emphasizes strategic acquisitions and organic growth as key drivers.
- The company acknowledges the impact of interest rate fluctuations on net interest margin.
- The MD&A highlights the importance of maintaining strong asset quality through disciplined lending practices.
Red Flags and Uncommon Metrics
- Net Interest Margin Compression: The decrease in net interest margin suggests increasing pressure on profitability due to rising funding costs.
- Commercial Real Estate Concentration: The high concentration in commercial real estate lending (320.2% of total regulatory capital) could expose the company to increased risk if the commercial real estate market weakens.
- Large Depositor Concentration: The reliance on a few large depositors (13.6% of total deposits) creates a potential liquidity risk.
Risk and Opportunity Assessment
Risks
- Macroeconomic Conditions: Downturns in the national and regional economies could negatively impact loan repayments and asset values.
- Interest Rate Risk: Fluctuations in interest rates could compress net interest margins and increase the risk of loan defaults.
- Acquisition Risks: The company’s acquisition strategy exposes it to financial, execution, and integration risks.
- Cybersecurity Threats: Increasing sophistication of cyber-attacks poses a risk to the company’s operations and data security.
- Wildfire Risk: The concentration of loans in wildfire-prone areas presents a significant credit risk.
Opportunities
- Strategic Acquisitions: Continued consolidation of community banks could provide opportunities for growth and efficiency gains.
- Organic Growth: Expanding commercial client base in metropolitan markets offers potential for increased revenue.
- Low-Cost Deposits: Access to low-cost, stable core deposits provides a funding advantage.
Conclusion and Actionable Insights
BayCom Corp demonstrates a commitment to growth and profitability, but faces challenges from macroeconomic conditions and interest rate volatility. The company’s high concentration in commercial real estate and reliance on large depositors warrant close monitoring. While the company’s financial position appears stable, investors should exercise caution and monitor key metrics such as net interest margin and asset quality. A Hold rating is recommended.
1. Commentary
BayCom Corp. (BCML) experienced a decrease in net income from 2023 to 2024, alongside a reduction in net interest income, indicating challenges in profitability. Despite the decrease in net income, the company’s total assets increased, driven by growth in loans and deposits. Asset quality metrics, such as the nonperforming assets to total assets ratio, remained relatively stable, suggesting effective risk management. Capital ratios remain strong, exceeding regulatory requirements, providing a buffer against potential losses. The company’s strategic focus on community bank acquisitions and organic growth in metropolitan markets appears to be ongoing, but its impact on financial performance requires further observation.
2. Financial Ratio and Metric Analysis
Profitability
Gross Profit Margin
Metric: Not applicable for banks as they do not have a cost of goods sold.
Industry: Not applicable.
Operating Profit Margin
Metric: Calculated as (Net Interest Income + Total Noninterest Income – Total Noninterest Expense) / Total Revenue = ($91,141 + $6,377 – $64,133) / ($131,710 + $6,377) = 24.11%
Trend: (24.11% – (97,874 + 6,977 – 64,678) / (126,337 + 6,977)) / (97,874 + 6,977 – 64,678) / (126,337 + 6,977) = -14.28%
Industry: The operating profit margin for regional banks typically ranges from 30% to 40%. BCML’s operating profit margin is below this range, indicating lower operational efficiency compared to its peers.
Net Profit Margin
Metric: Net Income / Total Revenue = $23,614 / ($131,710 + $6,377) = 17.09%
Trend: (17.09% – 27,425 / (126,337 + 6,977)) / (27,425 / (126,337 + 6,977)) = -24.58%
Industry: The net profit margin for well-performing regional banks is generally between 20% and 30%. BCML’s net profit margin is below this range, suggesting lower overall profitability.
Return on Assets (ROA)
Metric: Net Income / Average Total Assets = $23,614 / $2,572,479 = 0.92%
Trend: (0.92% – 27,425 / 2,557,471) / (27,425 / 2,557,471) = -14.08%
Industry: An ROA of 1% or higher is generally considered good for banks. BCML’s ROA is slightly below this benchmark, indicating moderate efficiency in utilizing assets to generate profit.
Return on Equity (ROE)
Metric: Net Income / Average Equity = $23,614 / $318,668 = 7.41%
Trend: (7.41% – 27,425 / 312,895) / (27,425 / 312,895) = -14.84%
Industry: An ROE of 10% or higher is typically considered a good benchmark for banks. BCML’s ROE is below this level, suggesting that the company could improve its efficiency in generating profits from shareholders’ investments.
Earnings Per Share (EPS) – Basic and Diluted
Metric: Basic EPS = $2.10, Diluted EPS = $2.10
Trend: (2.10 – 2.27) / 2.27 = -7.49%
Industry: EPS varies significantly based on the bank’s size, business model, and market conditions.
Liquidity
Current Ratio
Metric: Total Current Assets / Total Current Liabilities. Since a detailed breakdown of current assets and liabilities is not provided, a precise calculation cannot be made. However, using the provided data: $364,032 (Cash and cash equivalents) / $14,632 (Interest payable and other liabilities) = 24.88. This is not a true current ratio for a bank.
Industry: For banks, this ratio is less relevant than other liquidity ratios.
Quick Ratio (Acid-Test Ratio)
Metric: (Total Current Assets – Inventory) / Total Current Liabilities. Since banks do not typically have inventory, and a detailed breakdown of current assets and liabilities is not provided, a precise calculation cannot be made.
Industry: For banks, this ratio is less relevant than other liquidity ratios.
Cash Ratio
Metric: Cash and Cash Equivalents / Total Current Liabilities. Since a detailed breakdown of current liabilities is not provided, a precise calculation cannot be made. However, using the provided data: $364,032 / $14,632 (Interest payable and other liabilities) = 24.88. This is not a true cash ratio for a bank.
Industry: A cash ratio above 1.0 is generally considered strong.
Solvency/Leverage
Debt-to-Equity Ratio
Metric: Total Liabilities / Total Shareholders’ Equity = $2,340,142 / $324,366 = 7.21
Trend: (7.21 – 2,239,091 / 312,869) / (2,239,091 / 312,869) = 4.64%
Industry: A debt-to-equity ratio for banks typically ranges from 5 to 10. BCML’s ratio is within this range, indicating a moderate level of leverage.
Debt-to-Assets Ratio
Metric: Total Liabilities / Total Assets = $2,340,142 / $2,664,508 = 0.88
Trend: (0.88 – 2,239,091 / 2,551,960) / (2,239,091 / 2,551,960) = 1.41%
Industry: A debt-to-assets ratio for banks is typically high, often above 0.8. BCML’s ratio is within the expected range, reflecting the nature of the banking business.
Interest Coverage Ratio (Times Interest Earned)
Metric: Earnings Before Interest and Taxes (EBIT) / Interest Expense = (Net Income + Provision for Income Taxes + Total Interest Expense) / Total Interest Expense = ($23,614 + $8,506 + $40,569) / $40,569 = 1.79
Trend: (1.79 – (27,425 + 10,733 + 28,463) / 28,463) / (27,425 + 10,733 + 28,463) / 28,463 = -20.22%
Industry: An interest coverage ratio above 1.5 is generally considered acceptable. BCML’s ratio is above this level, but the decrease indicates a reduced ability to cover interest expenses.
Activity/Efficiency
Inventory Turnover
Metric: Not applicable for banks as they do not typically have inventory.
Industry: Not applicable.
Days Sales Outstanding (DSO)
Metric: Not directly applicable to banks.
Industry: Not applicable.
Days Payable Outstanding (DPO)
Metric: Not directly applicable to banks.
Industry: Not applicable.
Asset Turnover
Metric: Total Revenue / Average Total Assets = ($131,710 + $6,377) / $2,572,479 = 0.054 or 5.40%
Trend: (0.054 – (126,337 + 6,977) / 2,557,471) / ((126,337 + 6,977) / 2,557,471) = 1.54%
Industry: Asset turnover for banks is typically low, often below 10%. BCML’s ratio is within the expected range, indicating moderate efficiency in utilizing assets to generate revenue.
Valuation
Price-to-Earnings Ratio (P/E)
Metric: Market Cap / Net Income. Market Cap = Shares Outstanding * Stock Price = 11,121,475 * $25.02 = $278,259,304.5. P/E = $278,259,304.5 / $23,614,000 = 11.78
Industry: The P/E ratio for banks varies widely depending on factors such as growth prospects, risk profile, and market sentiment.
Price-to-Book Ratio (P/B)
Metric: Market Cap / Total Shareholders’ Equity = $278,259,304.5 / $324,366,000 = 0.86
Industry: A P/B ratio of around 1.0 suggests that the market values the company at its book value. A ratio below 1.0 may indicate undervaluation.
Price-to-Sales Ratio (P/S)
Metric: Market Cap / Total Revenue = $278,259,304.5 / ($131,710,000 + $6,377,000) = 2.01
Industry: The P/S ratio for banks is typically low.
Enterprise Value to EBITDA (EV/EBITDA)
Metric: EV = Market Cap + Total Debt – Cash and Cash Equivalents. Total Debt = Junior subordinated deferrable interest debentures, net + Subordinated debt, net = $8,645 + $63,736 = $72,381. EV = $278,259,304.5 + $72,381,000 – $364,032,000 = -$13,391,695.5. EBITDA = Net Income + Interest Expense + Taxes + Depreciation and Amortization. Depreciation and Amortization = $2,045. EBITDA = $23,614 + $40,569 + $8,506 + $2,045 = $74,734. EV/EBITDA = -$13,391,695.5 / $74,734,000 = -0.18
Industry: A negative EV/EBITDA ratio is unusual and can occur when a company has a large amount of cash relative to its market capitalization and earnings.
Growth Rates
Revenue Growth
Metric: (Current Year Revenue – Previous Year Revenue) / Previous Year Revenue = (($131,710 + $6,377) – ($126,337 + $6,977)) / ($126,337 + $6,977) = 3.58%
Industry: Revenue growth for banks varies depending on economic conditions and the bank’s strategic initiatives.
Net Income Growth
Metric: (Current Year Net Income – Previous Year Net Income) / Previous Year Net Income = ($23,614 – $27,425) / $27,425 = -13.82%
Industry: Net income growth is a key indicator of a bank’s financial health.
EPS Growth
Metric: (Current Year EPS – Previous Year EPS) / Previous Year EPS = (2.10 – 2.27) / 2.27 = -7.49%
Industry: EPS growth is an important metric for shareholders.
Other Relevant Metrics
Nonperforming Assets to Total Assets
Metric: Nonperforming Assets / Total Assets = $9,467 / $2,664,508 = 0.36%
Trend: (0.36% – 12,977 / 2,551,960) / (12,977 / 2,551,960) = -29.41%
Industry: A lower ratio is generally better, indicating fewer assets are at risk of default.
Nonperforming Loans to Total Loans
Metric: Nonperforming Loans / Total Loans = $9,467 / $1,952,747 = 0.48%
Trend: (0.48% – 12,977 / 1,927,773) / (12,977 / 1,927,773) = -28.36%
Industry: A lower ratio is generally better, indicating a healthier loan portfolio.
⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️