BayCom Corp.
11/07/2025 | Press release | Distributed by Public on 11/07/2025 16:04
Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain matters discussed in this Form 10-Q may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to our financial condition, results of operations, plans, objectives, future performance or business. Forward-looking statements are not statements of historical fact, are based on certain assumptions and are generally identified by use of the words "believes," "expects," "anticipates," "estimates," "forecasts," "intends," "plans," "targets," "potentially," "probably," "projects," "outlook" or similar expressions or future or conditional verbs such as "may," "will," "should," "would" and "could." Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, assumptions and statements about, among other things, expectations of the business environment in which we operate, projections of future performance or financial items, perceived opportunities in the market, potential future credit experience, and statements regarding our mission and vision. These forward-looking statements are based upon current management expectations and may, therefore, involve risks and
uncertainties. Our actual results, performance, or achievements may differ materially from those suggested, expressed, or implied by forward- looking statements as a result of a wide variety or range of factors including, but not limited to:
| ● | adverse impacts to economic conditions in general and in California, Nevada, Colorado, New Mexico and Washington specifically, as well as other markets where the Company has lending relationships; |
| ● | effects of employment levels, labor shortages, persistent inflation, ongoing or renewed recessionary pressures, political instability or uncertainty, and rising debt levels; |
| ● | changes in interest rate levels and the duration of such changes, including actions by the Board of Governors of the Federal Reserve System ("Federal Reserve"), 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 inflation and monetary and fiscal policy responses thereto, and their impact on consumer and business behavior; |
| ● | fiscal policy disputes or disruptions, including the effects of any federal government shutdown, or delays in federal budget approvals; |
| ● | the credit risks of lending and securities activities, including delinquencies, write-offs, and changes in our allowance for credit losses and provision for credit losses; |
| ● | changes in the levels of general interest rates and the relative differences between short and long-term interest rates and loan and deposit interest rates; |
| ● | unexpected outflows of uninsured deposits, which may require us to sell investment securities at a loss; |
| ● | our net interest margin and funding sources; |
| ● | fluctuations in the demand for loans, unsold homes, land and other properties; |
| ● | fluctuations in real estate values in our market areas; |
| ● | secondary market conditions for loans and our ability to sell loans in the secondary market; |
| ● | results of examinations of us by regulatory authorities and the possibility that any such regulatory authority may, among other things, limit our business activities, require us to change our business mix, increase our allowance for credit losses, write down asset values or increase our capital levels, affect our ability to borrow funds or maintain or increase deposits; |
| ● | risks related to our acquisition strategy, including our ability to identify future suitable acquisition candidates, exposure to potential asset and credit quality risks and unknown or contingent liabilities, the need for capital to finance such transactions, our ability to obtain required regulatory approvals and possible failures in realizing the anticipated benefits from acquisitions; |
| ● | challenges arising from attempts to expand into new geographic markets, products, or services; |
| ● | goodwill impairment; |
| ● | bank failures or adverse developments at other banks and related negative press about the banking industry in general on investor and depositor sentiment; |
| ● | legislation or regulatory changes, including but not limited to shifts in capital requirements, banking regulations, tax laws, or consumer protection laws; |
| ● | our ability to attract and retain deposits; |
| ● | our ability to control operating costs and expenses; |
| ● | use of estimates in determining the fair value of certain of our assets and liabilities, which may prove incorrect; |
| ● | staffing fluctuations in response to product demand or corporate implementation strategies; |
| ● | the effectiveness of our risk management framework; |
| ● | vulnerabilities in information systems or third-party service providers, including disruptions, breaches, or attacks; |
| ● | our ability to adapt to rapid technological changes, including advancements in artificial intelligence, digital banking, and cybersecurity; |
| ● | risks associated with dependence on our Chief Executive Officer and other members of our senior management team and our ability to attract, motivate and retain qualified personnel; |
| ● | costs and effects of litigation, including settlements and judgments; |
| ● | our ability to implement our business strategies, including expectations regarding key growth initiatives and strategic priorities; |
| ● | liquidity issues, including our ability to borrow funds or raise additional capital, if needed or desired; |
| ● | the loss of our large loan and deposit relationships; |
| ● | increased competitive pressures, including repricing and competitors' pricing initiatives, and their impact on our market position and our loan and deposit products; |
| ● | changes in consumer spending, borrowing and savings habits; |
| ● | the availability of resources to address changes in laws, rules, or regulations or to respond to regulatory actions; |
| ● | our ability to pay dividends on our common stock; |
| ● | the quality and composition of our securities portfolio and the impact of any adverse changes in the securities markets; |
| ● | the inability of key third-party providers to perform their obligations; |
| ● | changes in accounting principles, policies or guidelines and practices, as may be adopted by the financial institution regulatory agencies, the Public Company Accounting Oversight Board or the Financial Accounting Standards Board; |
| ● | environmental, social and governance goals; |
| ● | geopolitical developments and international conflicts, including but not limited to tensions or instability in Eastern Europe, the Middle East, and Asia, or the imposition of new or increased tariffs and trade restrictions, which may disrupt financial markets, global supply chains, energy prices, or economic activity in specific industry sectors; |
| ● | effects of climate change, severe weather events, natural disasters, pandemics, epidemics and other public health crises, acts of war or terrorism, domestic political unrest and other external events; |
| ● | other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services; and |
| ● | risks described in other reports filed with or furnished to the Securities and Exchange Commission ("SEC"), including our Annual Report on Form 10-K for the year ended December 31, 2024 ("2024 Annual Report") and this Form 10-Q. |
In light of these risks, uncertainties and assumptions, the forward-looking statements discussed in this report might not occur, and you should not put undue reliance on any forward-looking statements. Moreover, you should treat these statements as speaking only as of the date they are made and based only on information then actually known to us. We do not undertake and specifically disclaim any obligation to revise any forward-looking statements included in this report or the reasons why actual results could differ from those contained in such statements, whether as a result of new information or to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. These risks could cause our actual results for the remainder of 2025 and beyond to differ materially from those expressed in any forward-looking statements by, or on behalf of, us and could negatively affect our consolidated financial condition and results of operations as well as our stock price performance.
Executive Overview
General.BayCom is a bank holding company headquartered in Walnut Creek, California. BayCom's wholly owned banking subsidiary, United Business Bank, provides a broad range of financial services to businesses and business owners as well as individuals through its network of 34 full-service branches at September 30, 2025, with 16 locations in California, one in Nevada, one in Washington, five in New Mexico and 11 in Colorado. BayCom's business activities generally are limited to passive investment activities and oversight of its investment in the Bank. Accordingly, the information set forth in this report, including the consolidated financial statements and related data, relates primarily to the Bank.
Our principal business objective is to enhance shareholder value and generate consistent earnings growth by expanding our commercial banking franchise through both strategic acquisitions and organic growth. Since 2010, we have expanded our geographic footprint through ten strategic acquisitions. We believe that our selective acquisition of community banks has yielded economies of scale and improved our efficiency. We have also grown organically by leveraging the potential within metropolitan and community markets where we operate. These markets offer significant opportunities to expand our commercial client base, increase interest-earning assets, and enhance market share. We believe
our geographic footprint, which now includes the San Francisco Bay area, the metropolitan markets of Los Angeles, California; Seattle, Washington; Denver, Colorado; and Las Vegas, Nevada, and community markets including Albuquerque, New Mexico, and Custer, Delta, and Grand Counties, Colorado, provides us access to low cost, stable core deposits in community markets that we can use to fund commercial loan growth. We strive to provide an enhanced banking experience for our clients by providing them with a comprehensive suite of sophisticated banking products and services tailored to meet their needs, while delivering the high-quality, relationship-based client service of a community bank. At September 30, 2025, on a consolidated basis, the Company had approximately $2.6 billion in total assets, $2.0 billion in total loans, $2.2 billion in total deposits and $334.3 million in shareholders' equity.
We continue to focus on growing our commercial loan portfolios through acquisitions as well as organic growth. At September 30, 2025, our $2.0 billion total loan portfolio included $245.1 million, or 12.0%, of loans acquired through business combinations (all of which were recorded to their estimated fair values at the time of acquisition), and the remaining $1.7 billion, or 86.9%, consisted of loans we originated or purchased not as part of a business combination.
The profitability of our operations depends primarily on our net interest income after provision for credit losses, which is the difference between interest earned on interest earning assets and interest paid on interest bearing liabilities less provision for credit losses. Our net income is also affected by other factors, including the provision for credit losses on loans, noninterest income and noninterest expense.
Set forth below is a discussion of the primary factors affecting our results of operations:
Net interest income. Net interest income represents interest income less interest expense. We generate interest income from interest and fees received on interest earning assets, including loans and investment securities and dividends on Federal Home Loan Bank of San Francisco ("FHLB") and Federal Reserve Bank of San Francisco ("FRB") stock we own. We incur interest expense from interest paid on interest bearing liabilities, including interest bearing deposits and borrowings. To evaluate net interest income, we measure and monitor: (i) yields on our loans and other interest earning assets; (ii) the costs of our deposits and other funding sources; (iii) our net interest margin; and (iv) the regulatory risk weighting associated with our assets. Net interest margin is calculated as the annualized net interest income divided by average interest earning assets. Because noninterest bearing sources of funds, such as noninterest bearing deposits and shareholders' equity, also fund interest earning assets, net interest margin reflects the benefit of these noninterest bearing sources.
Changes in market interest rates, the slope of the yield curve, and interest we earn on interest earning assets or pay on interest bearing liabilities, as well as the volume and composition of interest earning assets, interest bearing and noninterest bearing liabilities, and shareholders' equity, usually have the most significant impact on our net interest spread, net interest margin and net interest income during a reporting period. Following a period of monetary easing that began in the second half of 2024, the Federal Open Market Committee (FOMC) of the Federal Reserve reduced the target range for the federal funds rate by a cumulative 125 basis points through September 2025, bringing the target range to 4.00% to 4.25%. On October 29, 2025, subsequent to quarter-end, the FOMC announced a further 25 basis point cut, bringing the target range to 3.75% to 4.00%.
Noninterest income. Noninterest income consists of, among other things: (i) service charges on loans and deposits; (ii) gain on sale of loans; (iii) gain (loss) on equity securities; and (iv) other noninterest income. Gain on sale of loans includes income (or losses) from the sale of the guaranteed portion of Small Business Administration ("SBA") loans, capitalized loan servicing rights and other related income.
Provision for credit losses. We have established an allowance for credit losses by charging amounts to provision for credit losses at a level required to reflect estimated credit losses in the loan and available-for sale investment securities portfolios. For loans, management considers many factors, including, among others, historical loss experience, types and amounts of loans in the portfolio and adverse situations that may affect borrowers' ability to repay. See "Critical Accounting Policies and Estimates - Allowance for Credit Losses" for a description of the manner in which the provision for credit losses is established.
For investments, the Company evaluates available-for-sale debt securities in an unrealized loss position to determine whether the decline in the fair value below the amortized cost basis is due to credit-related factors or noncredit-
related factors. Such situations may result from either a decline in the financial condition of the issuing entity or, in the case of fixed interest rate investments, from rising interest rates. In making this assessment, management considers the length of time and the extent to which fair value is less than amortized cost, the nature of the security, the underlying collateral, and the financial condition and prospects of the issuer, among other factors. This assessment also includes a determination of whether the Company intends to sell the security, or if it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis less any current-period credit losses. If the present value of the cash flows expected to be collected from the security is less than the amortized cost basis of the security, a credit loss exists and an allowance for credit losses for available-for-sale securities is recorded for the credit loss, limited by the amount that the fair value is less than the amortized costs basis. Any impairment that has not been recorded through an allowance for credit losses for available-for-sale securities is recognized in other comprehensive income. Changes in the allowance for credit losses for available-for-sale securities are recorded as provision for (or reversal of) credit loss. Losses are charged against the allowance for credit losses for available-for-sale securities, with a corresponding adjustment to the security's amortized cost basis, when management believes the uncollectibility of an available-for-sale security is confirmed or when either criteria regarding intent or requirement to sell is met.
Noninterest expense. Noninterest expense includes, among other things: (i) salaries and related benefits; (ii) occupancy and equipment expense; (iii) data processing expense; (iv) Federal Deposit Insurance Corporation ("FDIC") and state assessments; (v) outside and professional services; and (vi) other general and administrative expenses, including amortization of intangible assets. Salaries and related benefits include compensation, employee benefits and employment tax expenses for our personnel. Occupancy and equipment expense includes depreciation expense on our owned properties and equipment, lease expense on our leased properties and other occupancy-related expenses. Data processing expense includes fees paid to our third-party data processing system provider and other data service providers. FDIC and state assessments expense represents the assessments that we pay to the FDIC for deposit insurance and other regulatory costs to various states. Outside and professional fees include legal, accounting, consulting and other outsourcing arrangements. Amortization of intangibles represents the amortization of our core deposit intangible from various acquisitions. Other general and administrative expenses include expenses associated with travel, meals, training, supplies and postage. Noninterest expenses generally increase as we grow our business. Noninterest expenses have increased significantly over the past few years as we have grown through acquisitions and organically, and as we have built out our operational infrastructure.
Critical Accounting Policies and Estimates
Our accounting and reporting policies conform to accounting principles generally accepted in the United States of America ("GAAP") and to general practices within the banking industry. To prepare financial statements and interim financial statements in conformity with GAAP, management makes estimates, assumptions and judgments based on available information. These estimates, assumptions and judgments affect the amounts reported in the financial statements and accompanying notes and are based on information available as of the dates of the financial statements. As this information changes, actual results could differ from the estimates, assumptions and judgments reflected in the financial statements. In particular, management has identified several accounting policies that, due to the estimates, assumptions and judgments inherent in those policies, are critical in understanding our financial statements.
These critical accounting policies and estimates include determining the allowance for credit losses and related provision.
There have been no material changes in the Company's critical accounting policies and estimates as previously disclosed in the Company's 2024 Annual Report. For a detailed discussion, refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Estimates" in the Company's 2024 Annual Report, which was filed with the SEC on March 14, 2025.
`Comparison of Financial Condition at September 30, 2025 and December 31, 2024
Total assets.Total assets decreased $60.7 million, or 2.3%, to $2.6 billion at September 30, 2025, from December 31, 2024. The decrease primarily was due to a $135.6 million, or 37.2%, decline in cash and cash equivalents
and a $1.8 million, or 841.0%, decline in loans held for sale, partially offset by a $89.4 million, or 4.6%, increase in loans receivable, net.
Cash and cash equivalents. Cash and cash equivalents decreased $135.6 million, or 37.2%, to $228.4 million at September 30, 2025, from $364.0 million at December 31, 2024. The decrease primarily was due to a $135.6 million decrease in federal funds sold and interest bearing balances in banks as excess funds were used to fund the Company's early redemption of the remaining $63.7 million of its outstanding 5.25% Fixed-to-Floating Rate Subordinated Notes due 2030 ("Notes"), as well as to fund loan growth and deposit withdrawals.
Investment securities available-for-sale. Investment securities available-for-sale decreased $5.6 million, or 2.9%, to $187.8 million at September 30, 2025 from $193.3 million at December 31, 2024. The decrease was primarily attributable to routine maturities, principal repayments, and calls of investment securities, partially offset by purchases of investment securities and an upward fair value adjustment related to unrealized gains on investment securities available-for-sale.
The following table sets forth certain information regarding contractual maturities and the weighted average yields of our available for sale investment securities as of September 30, 2025. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. The weighted average yields were calculated by multiplying each carrying value by its yield and dividing the sum of these results by the total carrying values. Yields on tax-exempt investments are not calculated on a fully tax equivalent basis.
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Amount Due or Repricing Within: |
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One Year |
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Over One |
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Over Five |
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Over |
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or Less |
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to Five Years |
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to Ten Years |
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Ten Years |
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Total |
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Weighted |
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Weighted |
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Weighted |
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Weighted |
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Weighted |
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Amortized |
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Average |
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Amortized |
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Average |
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Amortized |
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Average |
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Amortized |
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Average |
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Amortized |
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Average |
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Cost |
Yield |
Cost |
Yield |
Cost |
Yield |
Cost |
Yield |
Cost |
Yield |
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(Dollars in thousands) |
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U.S. Government Agencies |
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$ |
- |
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- |
% |
$ |
- |
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- |
% |
$ |
- |
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- |
% |
$ |
1,738 |
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9.09 |
% |
$ |
1,738 |
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9.09 |
% |
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Municipal securities |
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|
856 |
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2.85 |
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9,372 |
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1.57 |
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|
7,120 |
|
3.37 |
|
|
7,871 |
|
4.72 |
|
|
25,219 |
|
3.11 |
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Mortgage-backed securities |
|
|
17 |
|
2.35 |
|
|
1,382 |
|
2.54 |
|
|
12,710 |
|
2.54 |
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|
35,431 |
|
4.73 |
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|
49,540 |
|
4.11 |
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Collateralized mortgage obligations |
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|
1,181 |
|
4.64 |
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|
1,716 |
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1.85 |
|
|
2,438 |
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2.38 |
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|
42,527 |
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4.44 |
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|
47,862 |
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4.22 |
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SBA securities |
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5 |
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5.11 |
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22 |
|
4.85 |
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|
2,006 |
|
4.43 |
|
|
1,144 |
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6.01 |
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|
3,177 |
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5.00 |
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Corporate bonds |
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- |
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- |
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|
5,750 |
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6.58 |
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64,594 |
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4.38 |
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750 |
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3.37 |
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|
71,094 |
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4.54 |
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Total |
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$ |
2,059 |
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3.88 |
% |
$ |
18,242 |
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3.25 |
% |
$ |
88,868 |
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3.98 |
% |
$ |
89,461 |
|
4.68 |
% |
$ |
198,630 |
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4.23 |
% |
Equity securities. Equity securities increased $187,000, or 1.4%, to $13.3 million at September 30, 2025 from $13.1 million at December 31, 2024, primarily due to mark-to-market adjustments recorded during the nine months ended September 30, 2025.
Loans receivable, net. We originate a wide variety of loans with a focus on commercial real estate ("CRE") loans and commercial and industrial loans. Total loans increased $89.4 million, or 4.6%, to $2.0 billion at September 30, 2025 from $1.9 billion at December 31, 2024. The increase was due to $337.2 million of new loan originations and $24.6 million of loan purchases, partially offset by $271.6 million of loan repayments and $3.4 million of loans sold.
The following table provides information about our loan portfolio by type of loan, with purchase credit deteriorated ("PCD") loans presented as a separate balance, at the dates presented.
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September 30, |
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December 31, |
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2025 |
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2024 |
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% Change |
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(Dollars in thousands) |
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Commercial and industrial |
$ |
177,250 |
$ |
173,948 |
1.9 |
% |
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Real estate: |
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Residential |
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115,181 |
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109,409 |
5.3 |
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Multifamily residential |
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279,542 |
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222,932 |
25.4 |
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Owner occupied CRE |
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487,896 |
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490,493 |
(0.5) |
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Non-owner occupied CRE |
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958,828 |
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931,615 |
2.9 |
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Construction and land |
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5,124 |
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1,509 |
239.6 |
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Total real estate |
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1,846,571 |
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1,755,958 |
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5.2 |
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Consumer |
|
749 |
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391 |
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91.6 |
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||
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PCD loans |
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17,113 |
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22,450 |
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(23.8) |
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Total Loans |
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2,041,683 |
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1,952,747 |
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4.6 |
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Net deferred loan fees |
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654 |
|
149 |
|
337.9 |
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Allowance for credit losses |
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(20,800) |
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(17,900) |
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16.2 |
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Loans, net |
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$ |
2,021,537 |
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$ |
1,934,996 |
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4.5 |
% |
The following table shows as of September 30, 2025, the geographic distribution of our loan portfolio, by type of loan, in dollar amounts and percentages:
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San Francisco Bay |
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Total in State of |
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Area (1) |
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Other California (2) |
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California |
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All Other States (3) |
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Total |
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% of |
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% of |
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% of |
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% of |
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% of |
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Total in |
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Total in |
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Total in |
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Total in |
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Total in |
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Amount |
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Category |
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Amount |
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Category |
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Amount |
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Category |
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Amount |
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Category |
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Amount |
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Category |
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(Dollars in thousands) |
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September 30, 2025 |
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Commercial and industrial |
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$ |
30,011 |
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7.4 |
% |
$ |
69,628 |
|
8.1 |
% |
$ |
99,639 |
7.9 |
% |
$ |
77,611 |
10.0 |
% |
$ |
177,250 |
8.7 |
% |
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Real estate: |
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Residential |
|
11,834 |
|
2.9 |
|
51,209 |
|
6.0 |
|
63,043 |
5.0 |
|
52,249 |
6.8 |
|
115,292 |
5.6 |
|
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Multifamily residential |
|
58,320 |
|
14.3 |
|
143,048 |
|
16.6 |
|
201,368 |
15.9 |
|
79,332 |
10.3 |
|
280,700 |
13.7 |
|
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|
Owner occupied CRE |
|
148,734 |
|
36.5 |
|
289,614 |
|
33.7 |
|
438,348 |
34.6 |
|
55,782 |
7.2 |
|
494,130 |
24.2 |
|
||||||||||
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Non-owner occupied CRE |
|
158,576 |
|
38.9 |
|
302,236 |
|
35.1 |
|
460,812 |
36.3 |
|
507,626 |
65.6 |
|
968,438 |
47.4 |
|
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Construction and land |
|
- |
|
- |
|
4,742 |
|
- |
|
4,742 |
- |
|
382 |
0.0 |
|
5,124 |
- |
|
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Total real estate |
|
377,464 |
|
|
|
790,849 |
|
|
|
1,168,313 |
|
|
695,371 |
|
|
1,863,684 |
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|
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Consumer |
|
45 |
|
- |
% |
1 |
|
- |
% |
46 |
- |
% |
703 |
0.1 |
% |
749 |
- |
% |
||||||||||
|
Total loans |
|
$ |
407,520 |
|
|
|
|
$ |
860,478 |
|
|
|
|
$ |
1,267,998 |
|
$ |
773,685 |
|
$ |
2,041,683 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2024 |
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Commercial and industrial |
|
$ |
29,922 |
|
|
7.8 |
% |
$ |
66,163 |
|
|
8.3 |
% |
$ |
96,085 |
|
8.1 |
% |
$ |
77,863 |
|
10.1 |
% |
$ |
173,948 |
|
8.9 |
% |
|
Real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
|
11,140 |
|
|
2.9 |
|
|
41,609 |
|
|
5.2 |
|
$ |
52,749 |
|
4.5 |
|
|
56,913 |
|
7.4 |
|
|
109,662 |
|
5.6 |
|
|
Multifamily residential |
|
|
37,236 |
|
|
9.7 |
|
|
114,806 |
|
|
14.4 |
|
|
152,042 |
|
12.8 |
|
|
73,152 |
|
9.5 |
|
|
225,194 |
|
11.5 |
|
|
Owner occupied CRE |
|
|
158,486 |
|
|
41.1 |
|
|
280,631 |
|
|
35.1 |
|
|
439,117 |
|
37.1 |
|
|
60,798 |
|
7.9 |
|
|
499,915 |
|
25.6 |
|
|
Non-owner occupied CRE |
|
|
148,710 |
|
|
38.6 |
|
|
294,779 |
|
|
36.9 |
|
|
443,489 |
|
37.4 |
|
|
498,633 |
|
64.9 |
|
|
942,122 |
|
48.2 |
|
|
Construction and land |
|
|
- |
|
|
- |
|
|
1,090 |
|
|
0.1 |
|
|
1,090 |
|
0.1 |
|
|
425 |
|
0.1 |
|
|
1,515 |
|
0.1 |
|
|
Total real estate |
|
|
355,572 |
|
|
|
|
|
732,915 |
|
|
|
|
|
1,088,487 |
|
|
|
|
689,921 |
|
|
|
|
1,778,408 |
|
|
|
|
Consumer |
|
|
5 |
|
|
- |
% |
|
1 |
|
|
- |
% |
6 |
|
- |
% |
|
385 |
|
0.1 |
% |
|
391 |
|
- |
% |
|
|
Total loans |
|
$ |
385,499 |
|
|
|
|
$ |
799,079 |
|
|
|
|
$ |
1,184,578 |
|
$ |
768,169 |
|
$ |
1,952,747 |
|
||||||
| (1) | Includes Alameda, Contra Costa, Solano, Sonoma, Marin, San Francisco, San Mateo and Santa Clara counties. |
| (2) | Includes loans in Sacramento and Northern California counties totaling $88.5 million and loans in Los Angeles and Orange counties totaling $564.2 million at September 30, 2025. At December 31, 2024, loans in Sacramento and Northern California counties and loans in Los Angeles and Orange counties totaled $86.4 million and $537.1 million, respectively. |
| (3) | Includes loans primarily in the states of Colorado, New Mexico and Washington. At September 30, 2025, loans in Colorado, New Mexico and Washington totaled $137.4 million, $71.5 million and $85.4 million, respectively. At December 31, 2024, loans in Colorado, New Mexico and Washington totaled $134.9 million, $84.6 million and $83.4 million, respectively. |
Acquired loans. As of September 30, 2025, our total loan portfolio included $245.1 million, or 12.0%, of loans acquired through business combinations (all of which were recorded at their estimated fair values as of the time of acquisition), of which $134.4 million had no remaining net premium or discount.
As of September 30, 2025, acquired non-PCD loans totaled $110.7 million, with a remaining net premium of $1.4 million, compared to $140.6 million with a remaining net premium of $1.8 million as of December 31, 2024. The net premium for acquired non-PCD loans includes a credit discount based on estimated losses in the acquired loans, partially offset by any premium based on market interest rates on the date of acquisition.
As of September 30, 2025, acquired PCD loans totaled $17.7 million, with a remaining net non-credit discount of $1.3 million, compared to $24.0 million with a remaining net non-credit discount of $1.5 million as of December 31, 2024.
Nonperforming assets and loans. Nonperforming assets generally consist of nonperforming loans and other real estate owned ("OREO"). Nonperforming loans include nonaccrual loans and accruing loans 90 days or more past due. Nonperforming assets increased $4.4 million to $13.9 million, or 0.68% of total loans, at September 30, 2025, compared to $9.5 million, or 0.48% of total loans, at December 31, 2024. The Company held no OREO at either date.
Nonperforming loans totaled $13.9 million, or 0.68% of total loans, at September 30, 2025, compared to $9.5 million, or 0.48% of total loans, at December 31, 2024. The increase in nonperforming loans was primarily due to 11 new commercial real estate loans (secured by various types of real estate) totaling $12.2 million being placed on nonaccrual status during the nine months ended September 30, 2025, and to a lesser extent a $175,000 increase in loans 90 days or more past due and still accruing, which were in the process of collection. These increases were partially offset by payoffs of nine nonaccrual loans totaling $5.8 million, one $3.2 million non-accrual loan returned to accrual status as the loan is current and in the process of collection, and one fully charged off nonaccrual loan of $105,000. The rise in nonperforming loans reflects elevated credit risk primarily within the commercial and industrial and commercial real estate portfolios. At September 30, 2025, nonaccrual loans included $8,000 of loans 30-89 days past due and $8.4 million of loans less than 30 days past due. The $8.4 million of nonaccrual loans less than 30 days past due consisted of 18 loans, all of which were placed on nonaccrual due to borrower-specific financial concerns, indicators of credit deterioration, and other credit related factors, which provided reasonable doubt about the full collectability of principal and interest, rather than delinquency. At December 31, 2024, nonaccrual loans included $643,000 of loans 30-89 days past due and no loans less than 30 days past due.
Of the nonperforming loans at September 30, 2025, approximately $939,000 were guaranteed by governmental agencies, compared to $2.0 million at December 31, 2024. The decrease in government-guaranteed nonaccrual loans reflects the runoff of previously guaranteed balances without comparable additions during the current nine-month period.
In general, loans are placed on nonaccrual status after being contractually delinquent for more than 90 days, or earlier, if management believes full collection of future principal and interest on a timely basis is unlikely. When a loan is placed on nonaccrual status, all interest accrued but not received is charged against interest income. When the ability to fully collect nonaccrual loan principal is in doubt, cash payments received are applied against the principal balance of the loan until such time as full collection of the remaining recorded balance is expected. Interest received on such loans is recognized as interest income when received. A nonaccrual loan is restored to an accrual basis when principal and interest payments are brought current, and full payment of principal and interest is probable. Loans that are well secured and in the process of collection will remain on accrual status.
Loans may be acquired at a premium or discount to par value, in which case the premium is amortized (subtracted from) or accreted (added to) interest income over the remaining life of the loan. Generally, over time, the effects of loan discount accretion and loan premium amortization decrease as the purchased loans mature or pay off before maturity. Upon the pay-off of a loan before maturity, any remaining (unaccreted) discount or (unamortized) premium is immediately taken into interest income; as loan payoffs may vary significantly from quarter to quarter, so may the impact of discount accretion and premium amortization on interest income.
Modified loans to borrowers experiencing financial difficulty. Occasionally, the Company offers modifications of loans to borrowers experiencing financial difficulty by providing principal forgiveness, interest rate reductions, other-than-insignificant payment delays, term extensions or any combination of these. When principal is forgiven, the amount of the forgiveness is charged-off against the allowance for credit losses for loans. Upon the Company's subsequent determination that a modified loan (or a portion thereof) is uncollectible, the loan (or portion thereof) is charged off. The amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses for loans is adjusted by the same amount.
Modified loans to borrowers experiencing financial difficulty as of September 30, 2025 and December 31, 2024, totaled $1.4 million and $2.7 million, respectively. All such modified loans were on nonaccrual status as of each respective reporting date. Modified loans that are accruing and performing in accordance with their modified terms are not classified as nonperforming loans, as they continue to accrue interest and demonstrate satisfactory payment performance despite their modified terms. There were no such modified loans at September 30, 2025 and December 31, 2024. The related allowance for credit losses on individually evaluated modified loans was none and $24,000 at September 30, 2025 and December 31, 2024, respectively.
The following table provides information regarding nonperforming loans, nonperforming assets and modified loans as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
|
||
|
|
2025 |
2024 |
|||||
|
|
|
(Dollars in thousands) |
|
||||
|
Loans accounted for on a nonaccrual basis: |
|
|
|
|
|
|
|
|
Commercial and industrial |
|
$ |
863 |
|
$ |
293 |
|
|
Real estate: |
|
|
|
|
|
|
|
|
Residential |
|
|
753 |
|
|
1,103 |
|
|
Multifamily residential |
|
|
55 |
|
|
77 |
|
|
Owner occupied CRE |
|
|
4,127 |
|
|
4,284 |
|
|
Non-owner occupied CRE |
|
|
7,679 |
|
|
3,486 |
|
|
Construction and land |
|
|
- |
|
|
- |
|
|
Total real estate |
|
|
12,614 |
|
|
8,950 |
|
|
Consumer |
|
|
- |
|
|
4 |
|
|
Total nonaccrual loans |
|
|
13,477 |
|
|
9,247 |
|
|
Accruing loans 90 days or more past due |
|
|
395 |
|
|
220 |
|
|
Total nonperforming loans |
|
|
13,872 |
|
|
9,467 |
|
|
Real estate owned |
|
|
- |
|
|
- |
|
|
Total nonperforming assets (1) |
|
$ |
13,872 |
|
$ |
9,467 |
|
|
Modified loans to borrowers experiencing financial difficulty - performing |
|
$ |
- |
|
$ |
- |
|
|
PCD loans |
|
$ |
17,113 |
|
$ |
22,450 |
|
|
Nonperforming assets to total assets (1) |
|
|
0.53 |
% |
|
0.36 |
% |
|
Nonperforming loans to total loans (1) |
|
|
0.68 |
% |
|
0.48 |
% |
|
(1) |
Performing modified loans to borrowers experiencing financial difficulty are neither included in nonperforming loans above nor are they included in the numerators used to calculate these ratios. There were no performing modified loans at September 30, 2025 or December 31, 2024. |
Interest foregone on nonaccrual loans was approximately $257,000 and $896,000 for the three and nine months ended September 30, 2025, compared to $397,000 and $1.1 million for the three and nine months ended September 30, 2024. Interest income recognized on nonaccrual loans was approximately $70,000 and $136,000 for the three and nine months ended September 30, 2025, and $7,400 and $93,600 for the three and nine months ended September 30, 2024, respectively.
Allowance for credit losses for loans. The allowance for credit losses is determined by the Company on a quarterly basis, although management monitors the appropriate level of the allowance more frequently. We assess the allowance for credit losses based on three categories: (i) originated loans, (ii) acquired non-PCD loans, and (iii) acquired PCD loans. The allowance for credit losses reflects management's estimate of current expected credit losses inherent in the loan portfolios. The computation includes elements of judgment and high levels of subjectivity.
At September 30, 2025, the Company's allowance for credit losses for loans was $20.8 million, or 1.02% of total loans, compared to $17.9 million, or 0.92% of total loans, at December 31, 2024. Management currently believes that the $20.8 million allowance for credit losses at September 30, 2025 is adequate to absorb expected credit losses inherent in the Company's loan portfolio. No assurance can be given, however, that adverse economic conditions or other circumstances will not result in increased losses in the portfolio.
The increase in the allowance for credit losses at September 30, 2025 compared to December 31, 2024, was primarily attributable to growth in the loan portfolio, an increase in the reserve for pooled loans, the replenishment of the allowance during the period, and to a lesser extent, an increase in the reserve for individually evaluated loans. The increase in the allowance for credit losses on pooled loans primarily reflected higher quantitative reserves resulting from the Company's annual update to its CECL model methodology. The update incorporated more recent economic data and revised segment-specific peer group comparisons, which together contributed to a higher modeled reserve level. To a lesser extent, the increase also reflected a higher forecasted national unemployment rate, a weaker outlook for national gross domestic product and loan growth during the quarter, as well as changes in the risk level of one qualitative factor. Specifically, the Company incorporated an increase in forecasted national unemployment and a decline in projected national gross domestic product ("GDP") at September 30, 2025, as compared to December 31, 2024. Both of these are key economic indicators used in estimating expected credit losses under the CECL, model.
Net charge-offs were $833,000 and $948,000 for the three and nine months ended September 30, 2025, compared to net charge-offs of $1.5 million and $5.0 million for the three and nine months ended September 30, 2024, respectively. The lower net charge-offs primarily reflect fewer nonaccrual loan charge-offs, as well as payoffs and collections on previously nonaccrual loans. Approximately $8.4 million of nonaccrual loans were less than 30 days past due as of September 30, 2025, and were placed on nonaccrual primarily due to borrower-specific financial concerns or elevated risk in the underlying collateral rather than payment delinquency. The Company continues to monitor these loans closely, and certain loans may return to accrual status if the borrowers' financial positions stabilize and full collection of principal and interest becomes probable.
The following table presents certain credit ratios at the dates and for the periods indicated and each component of the ratio's calculations:
|
|
|
|
|
|
|
|
|
|
|
|
|
At and for the nine months ended September 30, |
|
|||||
|
|
2025 |
2024 |
|
|
||||
|
|
|
(Dollars in thousands) |
|
|||||
|
Allowance for credit losses on loans as a percentage of total loans outstanding at period end |
|
|
1.02 |
% |
|
0.96 |
% |
|
|
Allowance for credit losses on loans |
|
$ |
20,800 |
|
$ |
18,310 |
|
|
|
Total loans outstanding |
|
|
2,042,337 |
|
|
1,912,105 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonaccrual loans as a percentage of total loans outstanding at period end |
|
|
0.66 |
% |
|
0.51 |
% |
|
|
Total nonaccrual loans |
|
$ |
13,477 |
|
$ |
9,707 |
|
|
|
Total loans outstanding |
|
|
2,042,337 |
|
|
1,912,105 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses on loans as a percentage of nonaccrual loans at period end |
|
|
154.34 |
% |
|
188.63 |
% |
|
|
Allowance for credit losses on loans |
|
$ |
20,800 |
|
$ |
18,310 |
|
|
|
Total nonaccrual loans |
|
|
13,477 |
|
|
9,707 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net charge-offs during period to average loans outstanding: |
|
|
|
|
|
|
|
|
|
Commercial and industrial: |
|
|
0.10 |
% |
|
0.81 |
% |
|
|
Net charge-offs |
|
$ |
172 |
|
$ |
1,319 |
|
|
|
Average loans outstanding |
|
|
181,018 |
|
|
163,178 |
|
|
|
Construction and land: |
|
|
- |
% |
|
- |
% |
|
|
Net charge-offs |
|
$ |
- |
|
$ |
- |
|
|
|
Average loans outstanding |
|
|
6,116 |
|
|
8,248 |
|
|
|
Commercial real estate: |
|
|
0.05 |
% |
|
0.23 |
% |
|
|
Net charge-offs |
|
$ |
770 |
|
$ |
3,772 |
|
|
|
Average loans outstanding |
|
|
1,697,880 |
|
|
1,622,223 |
|
|
|
Residential: |
|
|
- |
% |
|
(0.11) |
% |
|
|
Net charge-offs |
|
$ |
- |
|
$ |
(99) |
|
|
|
Average loans outstanding |
|
|
107,077 |
|
|
91,078 |
|
|
|
Consumer: |
|
|
0.97 |
% |
|
0.15 |
% |
|
|
Net charge-offs |
|
$ |
6 |
|
$ |
1 |
|
|
|
Average loans outstanding |
|
|
621 |
|
|
648 |
|
|
|
Total loans: |
|
|
0.05 |
% |
|
0.26 |
% |
|
|
Total net charge-offs |
|
$ |
948 |
|
$ |
4,993 |
|
|
|
Total average loans outstanding |
|
|
1,992,713 |
|
|
1,885,374 |
|
|
As of September 30, 2025, the Company individually evaluated $18.8 million in loans, inclusive of the $13.5 million of nonperforming loans. Of these individually evaluated loans, $4.7 million had a specific allowance totaling $868,000 as of September 30, 2025. As of December 31, 2024, the Company individually evaluated $17.4 million in loans, inclusive of the $9.2 million of nonperforming loans, with $2.7 million having a specific allowance totaling $392,000.
Management considers the allowance for credit losses for loans at September 30, 2025 to be adequate to cover expected credit losses inherent in the loan portfolio based on the assessment of current portfolio performance, historical loss experience, and relevant qualitative and quantitative factors, including current economic conditions and reasonable and supportable forecasts. While management believes the estimates and assumptions used in determining the adequacy of the allowance are reasonable, actual credit losses may differ from those expected. Changes in economic conditions, borrower performance, or other factors could result in actual losses exceeding the current allowance, which could adversely affect the Company's financial condition and results of operations. In addition, the methodology, assumptions, and judgments used in determining the allowance for credit losses is subject to review by bank regulators, as part of their routine examination process, which may result in adjustments to the provision for credit losses based upon information available to them at the time of their examination.
Deposits. Deposits are our primary source of funding and generally consist of core deposits from the communities served by our branch and office locations. We offer a variety of deposit accounts with a competitive range of interest rates
and terms to both consumers and businesses. Deposits include interest bearing and noninterest bearing demand accounts, savings accounts, money market accounts, certificates of deposit and individual retirement accounts. These accounts earn interest at rates established by management based on competitive market factors, management's desire to increase certain product types or maturities, and consistent with our asset/liability, liquidity and profitability objectives. Competitive products, competitive pricing and high touch client service are important to attracting and retaining these deposits.
Total deposits decreased $5.9 million, or 0.3%, to $2.2 billion at September 30, 2025, compared to December 31, 2024. At September 30, 2025, noninterest-bearing demand deposits totaled $618.1 million, or 27.7% of total deposits, compared to $689.0 million, or 30.8% of total deposits, at December 31, 2024, representing a decrease of $70.9 million. From December 31, 2024 to September 30, 2025, interest-bearing deposits generally increased, with money market accounts increasing $55.8 million, NOW accounts increasing $9.2 million, and time deposits increasing $10.8 million. In contrast, savings accounts declined $10.9 million during the same period. Time deposits included no brokered deposits as of September 30, 2025, compared to $35.5 million of brokered deposits at December 31, 2024.
The overall decline in total deposits primarily reflects the reduction in noninterest-bearing demand deposits, partially offset by growth in interest-bearing deposit accounts. The shift in deposit composition reflects continued customer migration toward interest-bearing products in response to the prevailing rate environment. The decrease in brokered time deposits also contributed to the net decline in deposit balances. Management continues to monitor deposit mix and pricing strategies in the context of funding costs, liquidity needs, and interest rate risk.
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, 2025, our average deposit account size (excluding public funds), calculated by dividing period-end deposits by the population of accounts with balances, was approximately $63,000. See "Note 17 - Commitments and Contingencies" of the Notes to Condensed Consolidated Financial Statements in this Form 10-Q for information regarding our top ten depositors.
The following table sets forth the dollar amount of deposits in the various types of deposit programs offered at the dates indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
|
|
|||
|
|
|
2025 |
|
2024 |
|
% Change |
|||
|
|
|
(Dollars in thousands) |
|
|
|||||
|
Demand deposits (1) |
$ |
618,055 |
$ |
688,996 |
(10.3) |
% |
|||
|
NOW accounts |
|
270,650 |
|
261,430 |
3.5 |
|
|||
|
Saving |
|
|
71,431 |
|
|
82,300 |
|
(13.2) |
|
|
Money market |
|
700,703 |
|
644,880 |
8.7 |
|
|||
|
Time deposits |
|
567,213 |
|
556,403 |
1.9 |
|
|||
|
Total |
|
$ |
2,228,052 |
|
$ |
2,234,009 |
(0.3) |
% |
|
| (1) | Noninterest bearing. |
Borrowings. Although deposits are our primary source of funds, we may from time to time utilize borrowings as a cost-effective source of funds when they can be invested at a positive interest rate spread, for additional capacity to fund loan demand, or to meet our asset/liability management goals. We are a member of and may obtain advances from the FHLB of San Francisco, which is part of the Federal Home Loan Bank System. The eleven regional Federal Home Loan Banks provide a central credit facility for their member institutions. These advances are provided upon the security of certain of our mortgage loans and mortgage-backed securities. These advances may be made pursuant to several different credit programs, each of which has its own interest rate, range of maturities and call features.
At September 30, 2025 and December 31, 2024, we could borrow up to $595.0 million and $540.2 million, respectively, from the FHLB of San Francisco. At both September 30, 2025 and December 31, 2024, there were no FHLB advances outstanding.
The Bank has been approved for discount window advances from the FRB of San Francisco secured by certain types of loans. At September 30, 2025 and December 31, 2024, we had the ability to borrow up to $43.4 million and
$41.9 million, respectively, from the FRB of San Francisco. At both September 30, 2025 and December 31, 2024, we had no FRB of San Francisco advances outstanding.
We may also utilize Fed Funds purchased from correspondent banks as a source of short-term funding. At both September 30, 2025 and December 31, 2024, we had a total of $65.0 million in federal funds lines available from third-party financial institutions and no balances outstanding at these dates.
At both September 30, 2025 and December 31, 2024, the Company had outstanding junior subordinated deferrable interest debentures, net of fair value adjustments, assumed in connection with its previous acquisitions totaling $8.7 million and $8.6 million, respectively.
At September 30, 2025, the Company had no outstanding subordinated debt, net of costs to issue compared to $63.7 million at December 31, 2024.
We are required to provide collateral for certain local agency deposits. At both September 30, 2025 and December 31, 2024, the FHLB of San Francisco had issued letters of credit on behalf of the Bank totaling $41.1 million, as collateral for local agency deposits.
Shareholders' equity. Shareholders' equity increased $9.9 million, to $334.3 million at September 30, 2025 from $324.4 million at December 31, 2024. The increase in shareholders' equity primarily was due to $17.1 million of net income earned during the first nine months of 2025 and $5.0 million in other comprehensive income, net of taxes, which primarily reflected changs in the unrealized gain on available-for-sale securities. These increases were partially offset by the repurchase of $6.1 million of Company common stock and $6.6 million of cash dividends paid or accrued during the period. During the nine months ended September 30, 2025, the Company repurchased a total of 232,543 shares of its common stock at a total cost of $6.1 million and an average price of $26.24 per share, leaving 231,555 shares available for future purchases under the current stock repurchase plan. For additional information see Part II, Item 2, "Unregistered Sales of Equity Securities and Use of Proceeds."
Comparison of Results of Operations for the Three and Nine months Ended September 30, 2025 and 2024
Earnings summary. Net income was $5.0 million for the three months ended September 30, 2025, compared to $6.0 million for the three months ended September 30, 2024, a decrease of $1.0 million or 13.6%. The decrease was primarily as a result of a $1.7 million increase in provision for credit losses and a $496,000 decrease in noninterest income, partially offset by a $543,000 increase in net interest income, a $128,000 decrease in noninterest expense, and a $543,000 decrease in provision for income taxes. Basic and diluted earnings per share were $0.46 for the three months ended September 30, 2025, compared to $0.54 for the three months ended September 30, 2024.
Net income was $17.1 million for the nine months ended September 30, 2025, compared to $17.5 million for the nine months ended September 30, 2024, a decrease of $421,000 or 2.4%. The decrease was primarily a result of a $2.2 million increase in provision for credit losses and a $1.1 million decrease in noninterest income, partially offset by a $1.9 million increase in net interest income, a $468,000 decrease in noninterest expense, and a $468,000 decrease in provision for income taxes. Basic and diluted earnings per share were $1.55 for both the nine months ended September 30, 2025 and 2024.
Our efficiency ratio, which is calculated by dividing noninterest expense by the sum of net interest income before provision for credit losses and noninterest income, was 62.15% and 63.88% for the three and nine months ended September 30, 2025, compared to 62.76% and 65.20% for the three and nine months ended September 30, 2024, respectively. The improvement in the efficiency ratio for the three-month period was primarily driven by higher net interest income and a modest reduction in noninterest expense. For the nine-month period, the improvement was due to a decrease in noninterest expense and a slight increase in total revenue, as higher net interest income more than offset a decline in noninterest income.
Interest income. Interest income for the three months ended September 30, 2025 was $35.0 million, compared to $33.4 million for the three months ended September 30, 2024, an increase of $1.5 million or 4.6%. Increased yields
earned on interest-earning assets, along with an increase in the average balance of loans, were the primary drivers of the increase in interest income, partially offset by decreases in the average balances of investment securities and fed funds sold and interest bearing balances in banks.
Interest income on loans, including fees, increased $3.0 million, or 11.4%, to $29.2 million for the three months ended September 30, 2025 from $26.2 million for the three months ended September 30, 2024, due to a $148.3 million increase in the average balance of loans and a 17 basis point increase in the average loan yield. The average balance of loans was $2.0 billion for the third quarter of 2025, compared to $1.9 billion for the third quarter of 2024. The average yield on loans was 5.70% for the third quarter of 2025, compared to 5.53% for the third quarter of 2024. The increase in the average yield on loans reflected increased rates on variable rate loans, as well as new loans being originated at higher market interest rates.
Interest income on loans for the three months ended September 30, 2025 and 2024 included $155,000 and $114,000 in accretion of the net discount on acquired loans and revenue from PCD loans in excess of discounts. Remaining net discounts on these acquired loans totaled $146,000 and $449,000 at September 30, 2025 and 2024, respectively. Additionally, interest income on loans for the three months ended September 30, 2025 and 2024, included $119,000 and $12,000, respectively, in fees related to prepayment penalties.
Interest income on investment securities decreased $78,000, or 3.3%, to $2.3 million for the three months ended September 30, 2025, compared to $2.4 million for the three months ended September 30, 2024, as a result of decreases in the average balance, with the average yield remaining unchanged at 4.60% for both periods. The average balance of investment securities totaled $199.8 million for the three months ended September 30, 2025, compared to $207.0 million for the three months ended September 30, 2024. In addition, during the third quarter of 2025, we received $401,000 in cash dividends on our FRB and FHLB stock, compared to $393,000 during the third quarter of 2024.
Interest income on federal funds sold and interest-bearing balances in banks decreased $1.4 million, or 31.6%, to $3.0 million for the three months ended September 30, 2025, compared to $4.4 million for the three months ended September 30, 2024, as a result of changes in the average yield and average balance. The average yield decreased 89 basis points to 4.44% for the three months ended September 30, 2025, compared to 5.43% for the three months ended September 30, 2024, reflecting the effects of Federal Reserve rate reductions during the second half of 2024. The average balance of federal funds sold and interest-bearing balance in banks totaled $269.8 million and $323.6 million for the three months ended September30, 2025 and 2024, respectively.
Interest income for the nine months ended September 30, 2025 was $101.0 million, compared to $97.6 million for the nine months ended September 30, 2024, an increase of $3.4 million or 3.6%. The increase reflects increases in interest income on loans and investment securities, partially offset by decreases in federal funds sold and interest-bearing balances in banks. Increased yields earned on interest-earning assets, along with an increase in the average balances of loans and investment securities, were the primary drivers for the increase in interest income, partially offset by a decrease in the average balance of and yield on fed funds sold and interest bearing balances in banks.
Interest income on loans, including fees, increased $7.8 million, or 10.2%, to $84.3 million for the nine months ended September 30, 2025 from $76.5 million for nine months ended September 30, 2024, primarily due to a $108.2 million increase in the average balance of loans and a 24 basis point increase in the average loan yield. The average balance of loans was $2.0 billion for the nine months ended September 30 2025, compared to $1.9 billion for the nine months ended September 30, 2024. The average yield on loans was 5.66% for the nine months ended September 30, 2025, compared to 5.42% for the nine months ended September 30, 2024. The increase in the average yield on loans 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 for the nine months ended September 30, 2025 and 2024 included $579,000 and $107,000 in accretion of the net discount on acquired loans and revenue from PCD loans in excess of discounts, as well as $391,000 and $259,000, respectively, in fees related to prepayment penalties.
Interest income on investment securities increased $645,000, or 9.9%, to $7.2 million for the nine months ended September 30, 2025, compared to $6.5 million for the nine months ended September 30, 2024. The average yield on investment securities increased 22 basis points to 4.67% for the nine months ended September 30, 2025, compared to
4.45% for the nine months ended September 30, 2024. The increase in average yield was due to higher market interest rates on newly purchased securities. The average balance of investment securities totaled $205.5 million for the nine months ended September 30, 2025, compared to $196.0 million for the nine months ended September 30, 2024. In addition, during both the nine months ended September 30, 2025 and 2024, we received $1.2 million in cash dividends on our FRB and FHLB stock.
Interest income on federal funds sold and interest-bearing balances in banks decreased $4.9 million, or 37.4%, to $8.4 million for the nine months ended September 30, 2025, compared to $13.3 million for the nine months ended September 30, 2024, as a result of changes in the average yield and average balance. The average yield decreased 101 basis points to 4.45% for the nine months ended September 30, 2025, compared to 5.46% for the nine months ended September 30, 2024, reflecting the effects of Federal Reserve rate reductions during the second half of 2024. The average balance totaled $251.1 million for the nine months ended September 30, 2025, compared to $326.7 million for the nine months ended September 30, 2024.
Interest expense. Interest expense increased $981,000, or 9.3%, to $11.5 million for the three months ended September 30, 2025, compared to $10.6 million for the three months ended September 30, 2024. The increase was primarily due to increased interest expense on subordinated debt, which included $835,000 of amortized debt issuance costs recognized in connection with the Company's redemption of its subordinated notes during the current quarter, and to a lesser extent, higher deposit rates, reflecting increased market rates and competitive pricing pressures.
Interest expense on deposits increased $330,000, or 3.5%, to $9.8 million for the three months ended September 30, 2025, compared to $9.4 million for the same period in 2024. The increase was due to higher overall average deposit balances, partially offset by lower rates on time deposits. The average rate paid on money market accounts decreased five basis points to 2.42% during the third quarter of 2025, compared to 2.47% in the same period of 2024, and the average rate on time deposits declined 34 basis points to 3.73%, compared to 4.07% for the prior-year period. The average cost of all interest-bearing deposits was 2.41% for the three months ended September 30, 2025, compared to 2.45% for the three months ended September 30, 2024. The overall average cost of deposits was 1.74% for the third quarter of 2025, compared to 1.75% for the third quarter of 2024. The average cost of total interest-bearing liabilities was 2.73% for the third quarter of 2025, compared to 2.54% for the third quarter of 2024.
Total average interest-bearing liabilities increased $67.8 million, or 4.2%, to $1.7 billion for the three months ended September 30, 2025, compared to $1.6 billion for the three months ended September 30, 2024. The average balance of interest-bearing deposits increased to $1.6 billion for the three months ended September 30, 2025, from $1.5 billion for the same period in 2024. Within this category, the average balance of money market accounts rose $21.5 million, or 3.2%, to $685.6 million, while time deposits increased $74.0 million, or 5.1%, to $586.3 million. In contrast, average balances for savings accounts declined over the same period.
The average balance of noninterest-bearing deposits increased $1.6 million, or 0.3%, to $617.5 million for the three months ended September 30, 2025, compared to $615.8 million for the same period in 2024. This shift in deposit composition from noninterest-bearing demand deposits and savings accounts to interest-bearing time, NOW, and money market accounts reflects continued customer migration toward higher-yielding products in response to prevailing market rates and competitive offerings.
Interest expense on borrowings increased $650,000 or 58.4%, to $1.8 million for the three months ended September 30, 2025, compared to $1.1 million for the three months ended September 30, 2024. The increase was primarily due to the acceleration of the amortization of deferred debt issuance costs. The average cost of total borrowings increased to 11.4% for the three months ended September 30, 2025, compared to 6.1% for the three months ended September 30, 2024, and amortization of deferred debt issuance costs negatively impacted the average cost of interest-bearing liabilities by 19 basis points in 2025, compared to minimal impact in 2024. The average balance of borrowings decreased $10.9 million to $61.4 million during the three months ended September 30, 2025, compared to $72.3 million during the three months ended September 30, 2024.
Interest expense increased $1.6 million, or 5.3%, to $31.6 million for the nine months ended September 30, 2025, compared to $30.0 million for the nine months ended September 30, 2024. The increase reflects higher funding costs, primarily due to increased market rates on money market accounts and a higher average balance of money market and
time deposit accounts, partially offset by a decline in the average rate paid on time deposits, as well as an increase in interest expense on subordinated debt, which included $835,000 of amortized debt issuance costs recognized in connection with the Company's redemption of all outstanding subordinated debt during the current quarter. The average rate paid on interest-bearing liabilities was 2.59% for the nine months ended September 30, 2025, compared to 2.52% for the nine months ended September 30, 2024. Total average interest-bearing liabilities increased $42.5 million, or 2.7%, to $1.6 billion for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024.
Interest expense on deposits increased $992,000, or 3.87%, to $27.7 million for the nine months ended September 30, 2025, compared to $26.7 million for the nine months ended September 30, 2024. The increase was driven by higher rates paid on money market accounts and, to a lesser extent, an increase in the average balance of time deposits and money market accounts, partially offset by a decrease in the rate paid on time deposits. Rates on money market accounts increased four basis points during the nine months ended September 30, 2025, compared to the same period in 2024, while rates on time deposits decreased 24 basis points.The average balance of money market accounts increased $25.9 million, or 4.0%, to $668.0 million for the nine months ended September 30, 2025, compared to $642.1 million for the nine months ended September 30, 2024. The average balance of time deposits increased $46.0 million, or 9.1%, to $552.4 million for the nine months ended September 30, 2025, compared to $506.4 million for the same period the prior year.
The overall average cost of deposits for the nine months ended September 30, 2025 and 2024 was 1.70% and 1.66%, respectively. The average rate paid on all interest-bearing deposits increased two basis points to 2.37% for the nine months ended September 30, 2025, compared to 2.35% for the nine months ended September 30, 2024. The average balance of interest-bearing deposits totaled $1.6 billion for the nine months ended September 30, 2025, compared to $1.5 billion for the nine months ended September 30, 2024. Meanwhile, the average balance of noninterest-bearing deposits decreased $16.6 million, or 2.7%, to $608.8 million for the nine months ended September 30, 2025 compared to $625.3 million for the nine months ended September 30, 3024.
Interest expense on borrowings increased $600,000, or 18.0%, to $3.9 million for the nine months ended September 30, 2025, compared to $3.3 million for the nine months ended September 30, 2024. The increase was primarily due to the amortization and acceleration of deferred debt issuance costs, partially offset by a 129 basis point decrease in the average rate paid on junior subordinated debentures. The average cost of total borrowings increased to 7.65% for the nine months ended September 30, 2025, compared to 6.15% for the nine months ended September 30, 2024. The average balance of borrowings decreased $3.5 million to $68.7 million during the nine months ended September 30, 2025, compared to $72.3 million during the nine months ended September 30, 2024.
Net interest income and net interest margin.Net interest income increased $544,000 million, or 2.4%, to $23.4 million for the three months ended September 30, 2025, compared to $22.9 million for the three months ended September 30, 2024. The increase in net interest income primarily reflects increases in interest income on loans, which rose by $3.0 million or 11.4%, due to higher average balances and yields. This was partially offset by decreases in interest income on fed funds sold and interest-bearing balances in banks and investment securities, which declined by $1.5 million or 30.6%, as well as higher interest expense on deposits and subordinated debt, which increased by $1.0 million or 9.3%. Average interest-earning assets increased $87.5 million, or 3.6%, compared to the third quarter of 2024.
The average annualized yield on interest-earning assets was 5.49% for the three months ended September 30, 2025, representing a four basis point increase from 5.45% for the three months ended September 30, 2024. This increase reflects the repricing of adjustable-rate loans and securities to higher rates, as well as the origination of new loans and the purchase of new securities at higher rates. The average annualized cost of interest-bearing liabilities was 2.73% for the three months ended September 30, 2025, representing a 11 basis point increase from 2.62% for the three months ended September 30, 2024. As a result, the annualized net interest margin declined to 3.68% for the three months ended September 30, 2025, compared to 3.73% for the same period in 2024. The decline in the net interest margin was due to the amortization of debt issuance costs and the rate paid on interest-bearing liabilities rising faster than the yield on interest earning assets.
Net interest income increased $1.9 million, or 2.8%, to $69.5 million for the nine months ended September 30, 2025, compared to $67.6 million for the nine months ended September 30, 2024. The increase was primarily driven by a $7.8 million, or 10.2%, increase in interest income on loans, reflecting both higher average balances and yields. Interest income on investment securities also rose by $645,000 or 9.9%. These increases were partially offset by a $5.0 million, or
37.4%, decline in interest income on fed funds sold and interest-bearing balances in banks, and a $1.6 million, or 5.3%, increase in interest expense, primarily due to higher rates on subordinated debt and time deposits.
The average annualized yield on interest-earning assets was 5.47% for the nine months ended September 30, 2025, representing a 10 basis point increase from 5.37% for the nine months ended September 30, 2024. The average cost of interest-bearing liabilities increased to 2.59%, up seven basis points from 2.52% in the prior-year period. As a result, the annualized net interest margin improved to 3.76% for the nine months ended September 30, 2025, compared to 3.72% for the same period in 2024. The expansion in net interest margin was primarily due to the increase in yields on interest-earning assets, which outpaced the increase in the cost of interest-bearing liabilities.
Average Balances, Interest and Average Yields/Cost. The following tables present, for the periods indicated, information about (i) average balances, the total dollar amount of interest income from interest earning assets and the resultant average yields; (ii) average balances, the total dollar amount of interest expense on interest bearing liabilities and the resultant average costs; (iii) net interest income; (iv) the interest rate spread; and (v) the net interest margin. Nonaccrual loans have been included in the table as loans carrying a zero yield. Yields have been calculated on a pre-tax basis. Loan yields include the effect of amortization or accretion of deferred loan fees/costs and purchase accounting premiums/discounts to interest and fees on loans.
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|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
||||||||||||||
|
|
|
2025 |
|
2024 |
|
||||||||||||
|
|
|
|
|
|
|
|
|
Annualized |
|
|
|
|
|
|
|
Annualized |
|
|
|
|
Average |
|
|
|
|
Average |
|
Average |
|
|
|
|
Average |
|
||
|
|
Balance(4) |
Interest |
Yield/Cost |
Balance(4) |
Interest |
Yield/Cost |
|
||||||||||
|
|
|
(Dollars in thousands) |
|
||||||||||||||
|
Interest earning assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fed Funds sold and interest bearing balances in banks |
|
$ |
269,795 |
|
$ |
$ 3,017 |
4.44 |
% |
$ |
323,629 |
|
$ |
4,414 |
5.43 |
% |
||
|
Investments securities |
|
|
199,789 |
|
2,315 |
4.60 |
% |
207,033 |
|
2,393 |
4.60 |
% |
|||||
|
FHLB Stock |
|
|
11,524 |
|
253 |
8.70 |
% |
11,313 |
|
243 |
8.55 |
% |
|||||
|
FRB Stock |
|
|
9,655 |
|
145 |
5.94 |
% |
9,643 |
|
144 |
5.92 |
% |
|||||
|
Total loans (1) |
|
|
2,034,570 |
|
29,220 |
5.70 |
% |
1,886,231 |
|
26,232 |
5.53 |
% |
|||||
|
Total interest earning assets |
|
|
2,525,333 |
|
34,950 |
5.49 |
% |
2,437,849 |
|
33,426 |
5.45 |
% |
|||||
|
Noninterest earning assets |
|
|
132,407 |
|
|
|
|
134,801 |
|
|
|
|
|||||
|
Total average assets |
|
$ |
2,657,740 |
|
|
|
|
$ |
2,572,650 |
|
|
|
|
||||
|
Interest bearing liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Savings |
|
$ |
73,657 |
|
|
$ 23 |
|
0.12 |
% |
$ |
92,225 |
|
|
30 |
0.13 |
% |
|
|
NOW accounts |
|
|
267,115 |
|
59 |
0.09 |
% |
265,397 |
|
63 |
0.09 |
% |
|||||
|
Money market |
|
|
685,625 |
|
4,187 |
2.42 |
% |
664,114 |
|
4,116 |
2.47 |
% |
|||||
|
Time deposits |
|
|
586,265 |
|
5,508 |
3.73 |
% |
512,229 |
|
5,239 |
4.07 |
% |
|||||
|
Total interest bearing deposit accounts |
|
|
1,612,662 |
|
9,777 |
2.41 |
% |
1,533,965 |
|
9,448 |
2.45 |
% |
|||||
|
Subordinated debt, net |
|
|
52,742 |
|
|
1,571 |
|
11.82 |
% |
|
63,667 |
|
|
892 |
|
5.58 |
% |
|
Junior subordinated debentures, net |
|
|
8,694 |
|
|
193 |
|
8.78 |
% |
|
8,612 |
|
|
221 |
|
10.22 |
% |
|
Other borrowings |
|
|
- |
|
- |
- |
|
16 |
|
|
- |
- |
|
||||
|
Total interest bearing liabilities |
|
|
1,674,098 |
|
11,541 |
2.73 |
% |
1,606,260 |
|
10,561 |
2.62 |
% |
|||||
|
Noninterest bearing deposits |
|
|
617,481 |
|
|
|
|
|
|
|
615,844 |
|
|
|
|
|
|
|
Other noninterest bearing liabilities |
|
|
31,533 |
|
|
|
|
|
|
|
31,203 |
|
|
|
|
|
|
|
Noninterest bearing liabilities |
|
|
649,014 |
|
|
|
|
647,047 |
|
|
|
|
|||||
|
Total average liabilities |
|
|
2,323,112 |
|
|
|
|
2,253,307 |
|
|
|
|
|||||
|
Average equity |
|
|
334,610 |
|
|
|
|
319,343 |
|
|
|
|
|||||
|
Total average liabilities and equity |
|
$ |
2,657,722 |
|
|
|
|
$ |
2,572,650 |
|
|
|
|
||||
|
Net interest income |
|
|
|
$ |
23,409 |
|
|
|
|
$ |
22,865 |
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate spread (2) |
|
|
|
|
2.76 |
% |
|
|
|
2.83 |
% |
||||||
|
Net interest margin (3) |
|
|
|
|
3.68 |
% |
|
|
|
3.73 |
% |
||||||
|
Ratio of average interest earning assets to average interest bearing liabilities |
|
|
|
|
150.85 |
% |
|
|
|
151.77 |
% |
||||||
| (1) | Loan average balances are net of deferred origination fees and costs. Non-accrual loans are included in the average balances. Interest income on non-accruing loans is reflected in the period that it is collected, to the extent it is not applied to principal. |
| (2) | Interest rate spread is calculated as the average rate earned on interest earning assets minus the average rate paid on interest bearing liabilities. |
| (3) | Net interest margin is calculated as net interest income divided by total average interest earning assets. |
| (4) | Average balances are computed using average daily balances. |
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|
Nine months ended September 30, |
|||||||||||||||
|
|
|
2025 |
|
2024 |
|
||||||||||||
|
|
|
(Dollars in thousands) |
|||||||||||||||
|
|
|
|
|
|
|
|
|
Annualized |
|
|
|
|
|
|
|
Annualized |
|
|
|
|
Average |
|
|
|
|
Average |
|
Average |
|
|
|
|
Average |
|
||
|
|
Balance (4) |
Interest |
Yield/Cost |
Balance (4) |
Interest |
Yield/Cost |
|
||||||||||
|
|
|
(Dollars in thousands) |
|
||||||||||||||
|
Interest earning assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fed Funds sold and interest-bearing balances in banks |
|
$ |
251,077 |
|
$ |
$ 8,359 |
4.45 |
% |
$ |
326,658 |
|
$ |
13,348 |
5.46 |
% |
||
|
Investments securities |
|
|
205,456 |
|
7,175 |
4.67 |
% |
195,998 |
|
6,530 |
4.45 |
% |
|||||
|
FHLB Stock |
|
|
11,441 |
|
750 |
8.76 |
% |
11,313 |
|
762 |
9.00 |
% |
|||||
|
FRB Stock |
|
|
9,651 |
|
434 |
6.01 |
% |
9,633 |
|
433 |
6.01 |
% |
|||||
|
Total loans (1) |
|
|
1,993,602 |
|
84,331 |
5.66 |
% |
1,885,402 |
|
76,503 |
5.42 |
% |
|||||
|
Total interest earning assets |
|
|
2,471,227 |
|
101,049 |
5.47 |
% |
2,429,004 |
|
97,576 |
5.37 |
% |
|||||
|
Noninterest earning assets |
|
|
132,657 |
|
|
|
|
133,248 |
|
|
|
|
|||||
|
Total average assets |
|
$ |
2,603,884 |
|
|
|
|
$ |
2,562,252 |
|
|
|
|
||||
|
Interest bearing liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Savings |
|
$ |
76,790 |
|
|
$ 71 |
|
0.12 |
% |
$ |
95,246 |
|
|
93 |
0.13 |
% |
|
|
NOW accounts |
|
|
266,281 |
|
178 |
0.09 |
% |
273,732 |
|
189 |
0.09 |
% |
|||||
|
Money market |
|
|
668,043 |
|
11,886 |
2.38 |
% |
642,128 |
|
11,238 |
2.34 |
% |
|||||
|
Time deposits |
|
|
552,383 |
|
15,534 |
3.76 |
% |
506,364 |
|
15,157 |
4.00 |
% |
|||||
|
Total interest bearing deposit accounts |
|
|
1,563,497 |
|
27,669 |
2.37 |
% |
1,517,470 |
|
26,677 |
2.35 |
% |
|||||
|
Subordinated debt, net |
|
|
60,056 |
|
|
3,354 |
|
7.47 |
% |
|
63,669 |
|
|
2,676 |
|
5.61 |
% |
|
Junior subordinated debentures, net |
|
|
8,673 |
|
|
577 |
|
8.90 |
% |
|
8,593 |
|
|
656 |
|
10.19 |
% |
|
Other borrowings |
|
|
11 |
|
- |
- |
% |
20 |
|
|
- |
- |
% |
||||
|
Total interest bearing liabilities |
|
|
1,632,237 |
|
31,600 |
2.59 |
% |
1,589,752 |
|
30,009 |
2.52 |
% |
|||||
|
Noninterest bearing deposits |
|
|
608,757 |
|
|
|
|
|
|
|
625,310 |
|
|
|
|
|
|
|
Other noninterest bearing liabilities |
|
|
31,172 |
|
|
|
|
|
|
|
30,449 |
|
|
|
|
|
|
|
Noninterest bearing liabilities |
|
|
639,929 |
|
|
|
|
655,759 |
|
|
|
|
|||||
|
Total average liabilities |
|
|
2,272,166 |
|
|
|
|
2,245,511 |
|
|
|
|
|||||
|
Average equity |
|
|
331,718 |
|
|
|
|
316,741 |
|
|
|
|
|||||
|
Total average liabilities and equity |
|
$ |
2,603,884 |
|
|
|
|
$ |
2,562,252 |
|
|
|
|
||||
|
Net interest income |
|
|
|
$ |
69,449 |
|
|
|
|
$ |
67,567 |
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate spread (2) |
|
|
|
|
2.88 |
% |
|
|
|
2.85 |
% |
||||||
|
Net interest margin (3) |
|
|
|
|
3.76 |
% |
|
|
|
3.72 |
% |
||||||
|
Ratio of average interest earning assets to average interest bearing liabilities |
|
|
|
|
151.40 |
% |
|
|
|
152.79 |
% |
||||||
| (1) | Loan average balances are net of deferred origination fees and costs. Non-accrual loans are included in the average balances. Interest income on non-accruing loans is reflected in the period that it is collected, to the extent it is not applied to principal. |
| (2) | Interest rate spread is calculated as the average rate earned on interest earning assets minus the average rate paid on interest bearing liabilities. |
| (3) | Net interest margin is calculated as net interest income divided by total average interest earning assets. |
| (4) | Average balances are computed using average daily balances. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rate/Volume Analysis. Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest earning assets and interest bearing liabilities, as well as changes in weighted average interest rates. The following table sets forth the effects of changing rates and volumes on our net interest income during the periods shown. Information is provided with respect to (i) effects on interest income attributable to changes in volume (changes in volume multiplied by prior rate) and (ii) effects on interest income attributable to changes in rate (changes in rate multiplied by prior volume). Changes applicable to both volume and rate have been allocated to volume.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
Nine months ended September 30, |
|||||||||||||||
|
|
|
2025 compared to 2024 |
|
2025 compared to 2024 |
|||||||||||||||
|
|
|
Increase/(Decrease) |
|
Increase/(Decrease) |
|||||||||||||||
|
|
|
Attributable to |
|
Attributable to |
|||||||||||||||
|
|
Rate |
Volume |
Total |
|
Rate |
Volume |
Total |
||||||||||||
|
|
|
(Dollars in thousands) |
|
(Dollars in thousands) |
|||||||||||||||
|
Interest earning assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fed funds sold and interest bearing balances in banks |
|
$ |
(661) |
|
$ |
(736) |
|
$ |
(1,397) |
|
|
$ |
(1,903) |
|
$ |
(3,086) |
|
$ |
(4,989) |
|
Investments securities |
|
6 |
|
(84) |
|
(78) |
|
|
330 |
|
315 |
|
645 |
||||||
|
FHLB stock and FRB stock |
|
7 |
|
4 |
|
11 |
|
|
(20) |
|
8 |
|
(12) |
||||||
|
Total loans |
|
919 |
|
2,069 |
|
2,988 |
|
|
3,442 |
|
4,386 |
|
7,828 |
||||||
|
Total interest income |
|
271 |
|
1,253 |
|
1,524 |
|
|
1,849 |
|
1,623 |
|
3,472 |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings |
|
(1) |
|
(6) |
|
(7) |
|
|
(4) |
|
(18) |
|
(22) |
||||||
|
NOW accounts |
|
(4) |
|
- |
|
(4) |
|
|
(6) |
|
(5) |
|
(11) |
||||||
|
Money market accounts |
|
(63) |
|
134 |
|
71 |
|
|
195 |
|
453 |
|
648 |
||||||
|
Time deposits |
|
(490) |
|
759 |
|
269 |
|
|
(999) |
|
1,376 |
|
377 |
||||||
|
Total deposit accounts |
|
(558) |
|
887 |
|
329 |
|
|
(814) |
|
1,806 |
|
992 |
||||||
|
Subordinated debt, net |
|
833 |
|
(154) |
|
679 |
|
|
830 |
|
(152) |
|
678 |
||||||
|
Junior subordinated debentures, net |
|
(30) |
|
2 |
|
(28) |
|
|
(85) |
|
6 |
|
(79) |
||||||
|
Total interest expense |
|
245 |
|
735 |
|
980 |
|
|
(69) |
|
1,660 |
|
1,591 |
||||||
|
Net interest income |
|
$ |
26 |
|
$ |
518 |
|
$ |
544 |
|
|
$ |
1,918 |
|
$ |
(37) |
|
$ |
1,881 |
Provision for credit losses.We recorded a provision for credit losses of $3.0 million and $3.8 million for the three and nine months ended September 30, 2025, compared to $1.2 million and $1.7 million for the three and nine months ended September 30, 2024. The provision for credit losses during the three and nine months ended September 30, 2025, was primarily driven by loan growth, charge-offs during the current quarter, and increased reserves on pooled loans. Net charge-offs totaled $948,000 for the nine months ended September 30, 2025, compared to $5.0 million for nine months ended September 30, 2024. The lower net charge-offs primarily reflect fewer nonaccrual loan charge-offs, as well as payoffs and collections on previously nonaccrual loans. Approximately $8.4 million of nonaccrual loans were less than 30 days past due as of September 30, 2025, and were placed on nonaccrual primarily due to borrower-specific financial concerns or elevated risk in the underlying collateral rather than payment delinquency. The Company continues to monitor these loans closely, and certain loans may return to accrual status if the borrowers' financial positions stabilize and full collection of principal and interest becomes probable.
Noninterest income.Noninterest income decreased $497,000, or 18.1%, to $2.2 million for the third quarter of 2025, compared to $2.7 million for the third quarter of 2024. The decrease was primarily due to a $649,000 decrease in gain on equity securities as a result of positivefair value adjustments on these securities due to changes in market conditions, a $73,000 decrease in service charges and other fees, and a $78,000 decrease in other income and fees. These decreases were partially offset by a $224,000 decrease in loss on investment in SBIC fund and a $79,000 increase in loan servicing and other fees.
Noninterest income decreased $1.1 million or 17.3%, to $5.2 million for the nine months ended September 30, 2025, compared to $6.3 million for the nine months ended September 30, 2024. The decrease in noninterest income was primarily due to a $1.1 million decrease in gain on equity securities as a result of positivefair value adjustments on these securities due to changes in market conditions, a $153,000 increase in loss on investment in SBIC fund, and a $114,000
decrease in other income and fees, partially offset by a $212,000 increase in service charges and other fees and a $151,000 increase in loan servicing and other loan fees.
The following table presents the key components of noninterest income for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
|
|
|
||||||
|
|
2025 |
2024 |
$ Change |
% Change |
||||||||
|
|
|
(Dollars in thousands) |
|
|
||||||||
|
Gain on sale of loans |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
100.0 |
% |
|
Gain on equity securities |
|
|
771 |
|
|
1,420 |
|
|
(649) |
|
45.7 |
% |
|
Service charges and other fees |
|
825 |
|
898 |
|
(73) |
(8.1) |
% |
||||
|
Loan servicing and other loan fees |
|
403 |
|
324 |
|
79 |
24.4 |
% |
||||
|
Loss on investment in SBIC fund |
|
(29) |
|
(253) |
|
224 |
(88.5) |
% |
||||
|
Other income and fees |
|
278 |
|
356 |
|
(78) |
(21.9) |
% |
||||
|
Total noninterest income |
|
$ |
2,248 |
|
$ |
2,745 |
|
$ |
(497) |
(18.1) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, |
|
|
|
|
|
||||||
|
|
2025 |
2024 |
$ Change |
% Change |
|
||||||||
|
|
|
(Dollars in thousands) |
|
|
|
||||||||
|
Gain on sale of loans |
|
$ |
251 |
|
$ |
287 |
|
$ |
(36) |
|
(12.5) |
% |
|
|
Gain on equity securities |
|
|
523 |
|
|
1,672 |
|
|
(1,149) |
|
(68.7) |
% |
|
|
Service charges and other fees |
|
2,683 |
|
2,471 |
|
212 |
8.6 |
% |
|
||||
|
Loan servicing and other loan fees |
|
1,308 |
|
1,157 |
|
151 |
13.1 |
% |
|
||||
|
Loss on investment in SBIC fund |
|
(365) |
|
(212) |
|
(153) |
72.2 |
% |
|
||||
|
Other income and fees |
|
801 |
|
915 |
|
(114) |
(12.5) |
% |
|
||||
|
Total noninterest income |
|
$ |
5,201 |
|
$ |
6,290 |
|
$ |
(1,089) |
(17.3) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/M - Not meaningful |
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest expense.Noninterest expense decreased $128,000, or 0.8%, to $16.0 million for the three months ended September 30, 2025, compared to $16.1 million for the three months ended September 30, 2024. The decrease was primarily due to a $726,000 decrease in other expense and a $66,000 decrease in occupancy and equipment expense. The decrease in other expense was due to lower legal and professional service costs, reduced deposit premium amortization, and lower default related expenses. In addition, $400,000 in excess funds were returned to the Bank in the current quarter from a loss reserve account previously established under the California Capital Access Program (CalCAP), which supports small business lending by requiring contributions to a reserve fund that covers potential loan losses. These funds were no longer needed due to strong loan performance. No unused CalCAP funds were returned in the same quarter a year ago. These decreases were offset by a $599,000 increase in salaries and wages, resulting from higher incentive compensation and increased base wages, and a $65,000 increase in data processing expense.
Noninterest expense decreased $468,000 million, or 1.0%, to $47.7 million for the nine months September 30, 2025 compared to $48.2 million for the nine months ended September 30, 2024. The decrease in noninterest expense was primarily due to $1.4 million decrease in other expense due to return of unused CalCAP reserve funds, as discussed above, a reduction in legal and professional service costs, a reduction in FDIC insurance costs and a lower level of fraudulent check losses, partially offset by a $584,000 increase in salaries and wages, resulting from higher incentive compensation and increased base wages, and a $428,000 increase in data processing expense due to newly implemented services in 2025.
The following table details the components of noninterest expense for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
|
|
|
||||||
|
|
2025 |
2024 |
$ Change |
% Change |
||||||||
|
|
|
(Dollars in thousands) |
|
|
||||||||
|
Salaries and related benefits |
|
$ |
10,168 |
|
$ |
9,569 |
|
$ |
599 |
|
6.3 |
% |
|
Occupancy and equipment |
|
2,143 |
|
2,209 |
|
(66) |
(3.0) |
% |
||||
|
Data processing |
|
2,038 |
|
1,973 |
|
65 |
3.3 |
% |
||||
|
Other |
|
1,597 |
|
2,323 |
|
(726) |
(31.3) |
% |
||||
|
Total noninterest expense |
|
$ |
15,946 |
|
$ |
16,074 |
|
$ |
(128) |
(0.8) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, |
|
|
|
|
|
||||||
|
|
2025 |
2024 |
$ Change |
% Change |
|
||||||||
|
|
|
(Dollars in thousands) |
|
|
|
||||||||
|
Salaries and employee benefits |
|
$ |
29,831 |
|
$ |
29,247 |
|
$ |
584 |
|
2.0 |
% |
|
|
Occupancy and equipment |
|
6,462 |
|
6,496 |
|
(34) |
(0.5) |
% |
|
||||
|
Data processing |
|
5,804 |
|
5,376 |
|
428 |
8.0 |
% |
|
||||
|
Other |
|
5,592 |
|
7,038 |
|
(1,446) |
(20.5) |
% |
|
||||
|
Total noninterest expense |
|
$ |
47,689 |
|
$ |
48,157 |
|
$ |
(468) |
(1.0) |
% |
|
|
Income taxes. The provision for income taxes decreased $543,000, or 23.9%, to $1.7 million for the three months ended September 30, 2025, compared to $2.3 million for the three months ended September 30, 2024. The provision for income taxes decreased $421,000, or 2.4%, to $6.1 million for the nine months ended September 30, 2025 compared to $6.5 million for the nine months ended September 30, 2024. These decreases primarily were due to lower taxable income.
The Company's effective tax rate was 25.7% and 26.2% for the three and nine months ended September 30, 2025, compared to 27.4% and 27.2% for the three and nine months ended September 30, 2024, respectively. The effective tax rate decreased for the three and nine months ended September 30, 2025, compared to the same periods in 2024, primarily due to greater low income housing tax credits in the current quarter.
Liquidity and Capital Resources
Planning for our normal business liquidity needs, both expected and unexpected, is done on a daily and short-term basis through the cash management function. On a longer-term basis, it is accomplished through the budget and strategic planning functions, with support from internal asset/liability management software model projections.
Management maintains a liquidity position that it believes will adequately provide funding for loan demand and deposit run off that may occur in the normal course of business. We rely on multiple sources to meet our potential liquidity needs. Our primary sources of funds are deposits, escrow and custodial deposits, principal and interest payments on loans and proceeds from sales of loans. During the nine months ended September 30, 2025, the Bank sold $3.4 million in loan participation interests and received $271.6 million in principal loan repayments. While maturities and scheduled amortizations of loans are generally predictable sources of funds, deposit flows and loan prepayments are greatly influenced by market interest rates, economic conditions, and competition.
Deposits decreased $6.0 million to $2.2 billion and liquid assets, in the form of cash and cash equivalents and time deposit in banks, decreased $135.8 million to $228.4 million at September 30, 2025 from $364.3 million at December 31, 2024. In addition, investment securities available-for-sale decreased $8.6 million to $187.8 million at September 30, 2025 from $193.3 million at December 31, 2024. Management believes that our securities portfolio is of high quality and that the securities would therefore be marketable. Securities purchasedduring the nine months ended September 30, 2025 were $11.6 million, while securities repayments, maturities and sales during that period were $24.7 million. Certificates of deposit scheduled to mature in one year or less at September 30, 2025, totaled $460.9 million. It is management's policy to maintain deposit rates that are competitive with other local financial institutions. Based on this management strategy, we believe that most of our maturing certificates of deposit will remain with us.
In addition to these primary sources of funds, management has several secondary sources available to meet potential funding requirements. As of September 30, 2025, the Bank had an available borrowing capacity of $595.0 million with the FHLB of San Francisco, with no borrowings outstanding at that date or at December 31, 2024. At September 30, 2025, we had the ability to borrow up to $43.4 million from the FRB of San Francisco, with no borrowings outstanding at that date. The Bank also had, as of that date, federal funds lines with four correspondent banks, with available commitments totaling $65.0 million. There were no amounts outstanding under these facilities at September 30, 2025 and December 31, 2024. Subject to market conditions, we expect to utilize these borrowing facilities from time to time in the future to fund loan originations and deposit withdrawals, to satisfy other financial commitments, repay maturing debt and to take advantage of investment opportunities to the extent feasible.
Liquidity management is both a daily and long-term function of the Company's management. Excess liquidity is generally invested in short-term investments, such as overnight deposits and federal funds. On a longer-term basis, a strategy is maintained of investing in various lending products and investment securities, including U.S. Government obligations and U.S. agency securities. We use our sources of funds primarily to meet our ongoing commitments, to pay maturing deposits and fund withdrawals, and to fund loan commitments. At September 30, 2025, loan commitments and letters of credit totaled $76.8 million, including $5.4 million of undisbursed construction and development loan commitments. For information regarding our commitments, see "Note 17 - Commitments and Contingencies" of the Notes to Condensed Consolidated Financial Statements included in "Item 1. Financial Information" of Part I of this report.
Our cash flows are comprised of three primary classifications: cash flows from operating activities, cash flows from investing activities, and cash flows from financing activities. Net cash provided by operating activities for the nine months ended September 30, 2025 and 2024 was $23.0 million and $22.4 million, respectively. During the nine months ended September 30, 2025, net cash used in investing activities was $78.0 million, which consisted primarily of loan fundings and purchases of loans and investment securities, partially offset by proceeds from maturities, repayments and calls of investment securities AFS and normal recuring loan payments and maturities, compared to $19.4 million of net cash used in investing activities for the nine months ended September 30, 2024. Net cash used in financing activities for the nine months ended September 30, 2025 was $80.6 million, which was comprised primarily of the redemption of all of the outstanding Notes, a decrease in noninterest and interest bearing deposits in banks, net, stock repurchases and dividend payments to shareholders, partially offset by an increase in time deposits, net, compared to $9.3 million of net cash used in financing activities during the nine months ended September 30, 2024. Management believes our capital sources are adequate to meet all reasonably foreseeable short-term and long-term cash requirements. There has not been a material change in our liquidity and capital resources since the information disclosed in our 2024 Annual Report other than set forth above. We are not aware of any reasonably likely material changes in the mix and relative cost of such resources.
BayCom Corp is a separate legal entity from the Bank and must provide for its own liquidity. At September 30, 2025, BayCom Corp had liquid assets of $11.1 million. In addition to its operating expenses, BayCom Corp is responsible for paying to its shareholders any dividends that have been declared, funding stock repurchases, and making payments on its junior subordinated debentures. BayCom Corp can receive dividends and other capital distributions from the Bank, although there are regulatory restrictions on the ability of the Bank to pay dividends and make other capital distributions.
On August 21, 2025, the Company announced that its Board of Directors declared a quarterly cash dividend of $0.25 per share on the Company's outstanding common stock, which was paid on September 11, 2025 to shareholders of record as of the close of business on October 9, 2025. The Company expects to continue to pay quarterly cash dividends on its common stock, subject to the Board of Directors' discretion to modify or terminate this practice at any time and for any reason without prior notice. Assuming continued payment of the cash dividend at the rate of $0.25 per share, our average total dividend paid each quarter would be approximately $2.7 million based on the number of our outstanding shares at September 30, 2025. The dividends we pay may be limited as more fully discussed under "Business - Supervision and Regulation - BayCom Corp - Dividends" and "- Regulatory Capital Requirements" contained in "Part I. Item 1. Business" of the 2024 Annual Report.
From time to time, our Board of Directors has authorized stock repurchase programs. In general, stock repurchases allow us to proactively manage our capital position and return excess capital to shareholders. Stock repurchases also provide us with shares of common stock necessary to satisfy obligations related to stock compensation awards. As of September 30, 2025, there remained 231,555 shares available for repurchase under the Company's current
stock repurchase program. For additional information on the Company's stock repurchases, see "Item 2. Unregistered Sales of Equity Securities and Use of Proceeds" contained in Part II of this report.
Regulatory Capital
The Bank, as a state-chartered, federally insured commercial bank and member of the Board of Governors of the Federal Reserve System, is subject to capital requirements established by the Federal Reserve. The Federal Reserve requires the Bank to maintain levels of capital adequacy that generally parallel the FDIC's requirements. The capital adequacy requirements are quantitative measures established by regulation that require the Bank to maintain minimum amounts and ratios of capital. The FDIC requires the Bank to maintain minimum ratios of Total Capital, Tier 1 Capital, and Common Equity Tier 1 Capital to risk-weighted assets as well as Tier 1 Leverage Capital to average assets. Consistent with our goal to operate a sound and profitable organization, our policy is for the Bank to maintain "Well Capitalized" status under the Federal Reserve regulations. Based on capital levels at September 30, 2025 and December 31, 2024, the Bank was considered Well Capitalized at both of those dates.
The table below shows the capital ratios under the Basel III capital framework as of the dates indicated:
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At September 30, 2025 |
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At December 31, 2024 |
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Amount |
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Ratio |
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Amount |
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Ratio |
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(Dollars in thousands) |
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Leverage Ratio |
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BayCom Corp |
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$ |
300,387 |
11.80 |
% |
$ |
289,525 |
11.76 |
% |
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Minimum requirement for "Well Capitalized" |
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127,259 |
5.00 |
% |
123,063 |
5.00 |
% |
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Minimum regulatory requirement |
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101,807 |
4.00 |
% |
98,451 |
4.00 |
% |
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United Business Bank |
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283,745 |
10.88 |
% |
333,965 |
13.23 |
% |
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Minimum requirement for "Well Capitalized" |
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130,441 |
5.00 |
% |
126,213 |
5.00 |
% |
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Minimum regulatory requirement |
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104,353 |
4.00 |
% |
100,970 |
4.00 |
% |
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Common Equity Tier 1 Ratio |
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BayCom Corp |
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300,387 |
14.25 |
% |
289,525 |
14.41 |
% |
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Minimum requirement for "Well Capitalized" |
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137,053 |
6.50 |
% |
130,584 |
6.50 |
% |
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Minimum regulatory requirement |
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94,883 |
4.50 |
% |
90,404 |
4.50 |
% |
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United Business Bank |
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283,745 |
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13.54 |
% |
333,965 |
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16.81 |
% |
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Minimum requirement for "Well Capitalized" |
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136,165 |
6.50 |
% |
129,125 |
6.50 |
% |
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Minimum regulatory requirement |
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94,268 |
4.50 |
% |
89,394 |
4.50 |
% |
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Tier 1 Risk-Based Capital Ratio |
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BayCom Corp |
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309,872 |
14.70 |
% |
299,010 |
14.88 |
% |
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Minimum requirement for "Well Capitalized" |
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168,680 |
8.00 |
% |
160,719 |
8.00 |
% |
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Minimum regulatory requirement |
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126,510 |
6.00 |
% |
120,539 |
6.00 |
% |
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United Business Bank |
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283,745 |
13.54 |
% |
333,965 |
16.81 |
% |
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Minimum requirement for "Well Capitalized" |
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167,588 |
8.00 |
% |
158,923 |
8.00 |
% |
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Minimum regulatory requirement |
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125,691 |
6.00 |
% |
119,192 |
6.00 |
% |
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Total Risk-Based Capital Ratio |
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BayCom Corp |
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331,242 |
15.71 |
% |
382,595 |
19.04 |
% |
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Minimum requirement for "Well Capitalized" |
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210,850 |
10.00 |
% |
200,899 |
10.00 |
% |
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Minimum regulatory requirement |
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168,680 |
8.00 |
% |
160,719 |
8.00 |
% |
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United Business Bank |
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305,115 |
14.56 |
% |
352,865 |
17.76 |
% |
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Minimum requirement for "Well Capitalized" |
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209,485 |
10.00 |
% |
198,654 |
10.00 |
% |
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Minimum regulatory requirement |
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167,588 |
8.00 |
% |
158,923 |
8.00 |
% |
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In addition to the minimum capital ratios, the Bank must maintain a capital conservation buffer consisting of additional Common Equity Tier 1 capital greater than 2.5% above the required minimum levels in order to avoid limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses based on percentages of eligible retained income that could be utilized for such actions. At September 30, 2025, the Bank's Common Equity Tier 1 capital exceeded the required capital conservation buffer.
For a bank holding company with less than $3.0 billion in assets, the capital guidelines apply on a bank-only basis and the Federal Reserve expects the holding company's subsidiary bank(s) to be Well Capitalized under the prompt corrective action regulations. If the Company were subject to regulatory guidelines for bank holding companies with $3.0 billion or more in assets, at September 30, 2025, the Company would have exceeded all regulatory capital requirements.
For additional information, see "Item 1. Business - Supervision and Regulation - United Business Bank - Capital Requirements" and "Note 19 - Regulatory Matters" in the Notes to the Consolidated Financial Statements, included in "Item 8. Financial Statements and Supplementary Data" in the 2024 Annual Report.
BayCom Corp. published this content on November 07, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on November 07, 2025 at 22:05 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]