BayCom Corp.
11/09/2026 | Press release | Distributed by Public on 11/09/2026 14:06
Quarterly Report for Quarter Ending September 30, 2026 (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 range of factors including, but not limited to:
| ● | the Company's ability to successfully execute its strategic plan under its new executive leadership team and retain key employees and clients; |
| ● | adverse economic conditions in the Company's local market areas or other markets where the Company has lending relationships; |
| ● | employment levels, labor supply, inflation, recessionary pressures, or the level of economic growth; |
| ● | changes in interest rate levels and volatility, and the timing and pace 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 and their effects 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 publicity about the banking industry in general on investor and depositor sentiment; |
| ● | legislative or regulatory changes, including changes in banking, securities and tax laws, in regulatory policies and principles, or the interpretation of regulatory capital or other rules; |
| ● | our ability to attract and retain deposits, including the risk that changes to federal deposit insurance limits or coverage rules, or customer concerns regarding the safety of uninsured deposits, could adversely affect deposit stability; |
| ● | 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 cyberattacks; |
| ● | our ability to adapt to rapid technological changes, including advancements in artificial intelligence ("AI"), digital banking platforms, and cybersecurity; |
| ● | risks associated with the use of AI in credit underwriting, customer service, and operations, including model error, algorithmic bias, regulatory scrutiny under fair lending laws, and reliance on third-party AI providers; |
| ● | risks associated with dependence on the 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 matters; |
| ● | geopolitical developments and international conflicts, or the imposition of new or increased tariffs and trade restrictions, which may disrupt financial markets, global supply chains, commodity 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, 2025 ("2025 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 2026 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, 2026, 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 organic growth, strategic loan and deposit transactions, and strategic acquisitions. Since its founding in 2010, growth has been predominantly acquisition-driven, and we have expanded our geographic footprint through ten successful acquisitions. We believe that our selective acquisition of community banks has yielded economies of scale and improved our efficiency. We have also achieved organic growth by leveraging opportunities within the metropolitan and community markets in which we operate. These markets provide 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 access to low-cost, stable core deposits in community markets that can be used to fund commercial loan growth. We strive to create an enhanced banking experience for our clients by providing a comprehensive suite of sophisticated banking products and services tailored to meet their needs, while delivering the high-quality, relationship-based client service associated with a community bank. At September 30, 2026, on a consolidated basis, the Company had approximately $2.68 billion in total assets, $2.13 billion in total loans, $2.29 billion in total deposits and $334.8 million in shareholders' equity.
Our near-term focus is on growing our commercial loan portfolio organically. We continue to evaluate acquisition opportunities, and we expect acquisitions to remain part of our long-term growth strategy, although there can be no assurance that we will complete any future acquisitions. At September 30, 2026, our $2.13 billion total loan portfolio included $175.5 million, or 8.2%, of loans acquired through business combinations (all of which were recorded at their estimated fair values at the time of acquisition), and the remaining $1.98 billion, or 91.8%, consisted of loans we originated or purchased other than 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 the rates we earn on interest earning assets or pay on interest bearing liabilities have a significant impact on our net interest spread, net interest margin and net interest income. After lowering the federal funds target range by 75 basis points in late 2025, to 3.50%-3.75%, the Federal Open Market Committee of the Federal Reserve held rates steady until September 2026, when it increased the target range by 25 basis points to 3.75%-4.00%. The prime rate was 7.00% at September 30, 2026. Additional details regarding net interest income are discussed below.
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 cost 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 losses. 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.
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 to 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 2025 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 2025 Annual Report, which was filed with the SEC on March 16, 2026.
Comparison of Financial Condition at September 30, 2026 and December 31, 2025
Total assets. Total assets increased $82.7 million, or 3.2%, to $2.7 billion at September 30, 2026, from December 31, 2025. The increase primarily was due to an $83.6 million, or 4.1%, increase in loans receivable, net and a $12.0 million, or 5.8%, increase in cash and cash equivalents, partially offset by a $9.9 million, or 78.8%, decrease in equity securities, at fair value and an $8.0 million, or 4.4%, decrease in investment securities available-for-sale at fair value.
Cash and cash equivalents. Cash and cash equivalents increased $12.0 million, or 5.8%, to $218.5 million at September 30, 2026, from $206.5 million at December 31, 2025. The increase primarily was due to a $16.2 million increase in federal funds sold and interest bearing balances at banks resulting from an increase in deposits and proceeds from sales and maturities of investment securities, partially offset by loan originations and purchase of investment securities available-for-sale.
Investment securities available-for-sale. Investment securities available-for-sale decreased $8.0 million, or 4.4%, to $171.7 million at September 30, 2026, from $179.7 million at December 31, 2025. The decrease was primarily attributable to sales, routine maturities, principal repayments, and calls of investment securities, partially offset by purchases of investment securities.
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, 2026. 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 |
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Yield |
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Cost |
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Yield |
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Cost |
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Yield |
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Cost |
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Yield |
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Cost |
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Yield |
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(Dollars in thousands) |
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Municipal securities |
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$ |
- |
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- |
% |
|
495 |
|
5.64 |
% |
|
631 |
|
3.21 |
% |
|
3,274 |
|
4.01 |
% |
$ |
4,400 |
|
4.08 |
% |
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Mortgage-backed securities |
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6,316 |
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4.42 |
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9,765 |
|
3.93 |
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|
19,600 |
|
4.44 |
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39,911 |
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5.16 |
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|
75,592 |
|
4.75 |
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Collateralized mortgage obligations |
|
|
11,216 |
|
4.27 |
|
|
- |
|
- |
|
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- |
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- |
|
|
20,965 |
|
5.63 |
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|
32,181 |
|
5.16 |
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SBA securities |
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|
1,397 |
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5.29 |
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- |
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- |
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- |
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- |
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- |
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- |
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1,397 |
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5.29 |
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ABS securities |
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10,055 |
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5.15 |
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- |
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- |
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- |
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- |
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- |
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- |
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|
10,055 |
|
5.15 |
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Corporate bonds |
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|
47,398 |
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5.26 |
|
|
7,000 |
|
7.23 |
|
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- |
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- |
|
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- |
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- |
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|
54,398 |
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5.51 |
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Total |
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$ |
76,382 |
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5.03 |
% |
$ |
17,260 |
|
5.32 |
% |
$ |
20,231 |
|
4.40 |
% |
$ |
64,150 |
|
5.25 |
% |
$ |
178,023 |
|
5.07 |
% |
Equity securities. Equity securities decreased $9.9 million, or 78.8%, to $2.7 million at September 30, 2026 from $12.6 million at December 31, 2025, primarily due to the sale of $7.8 million of equity securities and the redemption of two equity securities for $1.7 million at par, with no gain or loss recognized on redemptions, during the nine months ended September 30, 2026.
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 an $83.6 million, or 4.1%, to $2.1 billion at September 30, 2026 from $2.0 billion at December 31, 2025. The increase was due to $260.6 million of new loan originations and $118.4 million of loan purchases, offset by $277.8 million of loan repayments and $13.7 million of loans sold. The Company's purchase of loans was to supplement lower organic origination volume in the first half of 2026, with new loan originations increasing during the third quarter, with minimal additional loan purchases anticipated in 2026.
The following table provides information about our loan portfolio by type of loan, with purchase credit deteriorated ("PCD") loans presented as a separate balance, at the dates presented.
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September 30, |
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December 31, |
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2026 |
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2025 |
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% Change |
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(Dollars in thousands) |
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Commercial and industrial |
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$ |
180,170 |
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$ |
175,409 |
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2.7 |
% |
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Real estate: |
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Residential |
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216,775 |
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113,143 |
91.6 |
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Multifamily residential |
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375,132 |
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309,331 |
21.3 |
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Owner occupied CRE |
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467,834 |
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500,419 |
(6.5) |
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Non-owner occupied CRE |
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888,514 |
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940,469 |
(5.5) |
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Construction and land |
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9,760 |
|
8,958 |
9.0 |
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Total real estate |
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1,958,015 |
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1,872,320 |
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4.6 |
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Consumer |
|
911 |
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1,175 |
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(22.5) |
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PCD loans |
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12,741 |
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16,788 |
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(24.1) |
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Total Loans |
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2,151,837 |
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2,065,692 |
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4.2 |
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Net deferred loan fees |
|
603 |
|
644 |
|
(6.3) |
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Allowance for credit losses |
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(23,700) |
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(21,210) |
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11.7 |
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Loans, net |
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$ |
2,128,740 |
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$ |
2,045,126 |
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4.1 |
% |
The following table shows as of September 30, 2026, 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, 2026 |
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Commercial and industrial |
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$ |
25,577 |
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6.5 |
% |
$ |
66,204 |
|
7.1 |
% |
$ |
91,781 |
6.9 |
% |
$ |
88,389 |
10.8 |
% |
$ |
180,170 |
8.4 |
% |
|||||
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Real estate: |
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Residential |
|
10,761 |
|
2.7 |
|
49,941 |
|
5.3 |
|
60,702 |
4.6 |
|
156,136 |
19.0 |
|
216,838 |
10.1 |
|
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|
Multifamily residential |
|
76,705 |
|
19.4 |
|
222,581 |
|
23.8 |
|
299,286 |
22.5 |
|
76,796 |
9.4 |
|
376,082 |
17.5 |
|
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Owner occupied CRE |
|
128,452 |
|
32.6 |
|
282,356 |
|
30.2 |
|
410,808 |
30.9 |
|
62,736 |
7.6 |
|
473,544 |
22.0 |
|
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|
Non-owner occupied CRE |
|
153,085 |
|
38.8 |
|
305,741 |
|
32.7 |
|
458,826 |
34.5 |
|
435,706 |
53.1 |
|
894,532 |
41.6 |
|
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Construction and land |
|
- |
|
- |
|
9,509 |
|
1.0 |
|
9,509 |
0.7 |
|
251 |
0.0 |
|
9,760 |
0.5 |
|
||||||||||
|
Total real estate |
|
369,003 |
|
|
|
870,128 |
|
|
|
1,239,131 |
|
|
731,625 |
|
|
1,970,756 |
|
|
||||||||||
|
Consumer |
|
6 |
|
- |
% |
- |
|
- |
% |
6 |
- |
% |
905 |
0.1 |
% |
911 |
- |
% |
||||||||||
|
Total loans |
|
$ |
394,586 |
|
|
|
|
$ |
936,332 |
|
|
|
|
$ |
1,330,918 |
|
|
$ |
820,919 |
|
|
$ |
2,151,837 |
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Commercial and industrial |
|
$ |
30,421 |
|
|
7.6 |
% |
$ |
66,697 |
|
|
7.4 |
% |
$ |
97,118 |
|
7.4 |
% |
$ |
78,291 |
|
10.3 |
% |
$ |
175,409 |
|
8.5 |
% |
|
Real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
|
11,625 |
|
|
2.9 |
|
|
50,603 |
|
|
5.6 |
|
|
62,228 |
|
4.8 |
|
|
50,958 |
|
6.7 |
|
|
113,186 |
|
5.5 |
|
|
Multifamily residential |
|
|
64,813 |
|
|
16.1 |
|
|
170,570 |
|
|
18.9 |
|
|
235,383 |
|
18.0 |
|
|
74,944 |
|
9.8 |
|
|
310,327 |
|
15.0 |
|
|
Owner occupied CRE |
|
|
143,624 |
|
|
35.7 |
|
|
292,914 |
|
|
32.5 |
|
|
436,538 |
|
33.5 |
|
|
69,661 |
|
9.1 |
|
|
506,199 |
|
24.5 |
|
|
Non-owner occupied CRE |
|
|
151,619 |
|
|
37.7 |
|
|
312,832 |
|
|
34.7 |
|
|
464,451 |
|
35.6 |
|
|
485,987 |
|
63.8 |
|
|
950,438 |
|
46.0 |
|
|
Construction and land |
|
|
- |
|
|
- |
|
|
8,408 |
|
|
0.9 |
|
|
8,408 |
|
0.6 |
|
|
550 |
|
0.1 |
|
|
8,958 |
|
0.4 |
|
|
Total real estate |
|
|
371,681 |
|
|
|
|
|
835,327 |
|
|
|
|
|
1,207,008 |
|
|
|
|
682,100 |
|
|
|
|
1,889,108 |
|
|
|
|
Consumer |
|
|
43 |
|
|
- |
% |
|
1 |
|
|
- |
% |
44 |
|
- |
% |
|
1,131 |
|
0.1 |
% |
|
1,175 |
|
0.1 |
% |
|
|
Total loans |
|
$ |
402,145 |
|
|
|
|
$ |
902,025 |
|
|
|
|
$ |
1,304,170 |
|
|
$ |
761,522 |
|
|
$ |
2,065,692 |
|
|
|||
| (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 $93.2 million and loans in Los Angeles and Orange counties totaling $629.9 million at September 30, 2026. At December 31, 2025, loans in Sacramento and Northern California counties and loans in Los Angeles and Orange counties totaled $92.3 million and $601.5 million, respectively. |
| (3) | Includes loans primarily in the states of Colorado, Nevada, New Mexico and Washington and other states. At September 30, 2026, loans in Colorado, Nevada, New Mexico, Washington and other states totaled $120.0 million, $46.6 million, $70.4 million, $87.4 million and $496.5 million, respectively. At December 31, 2025, loans in Colorado, Nevada, New Mexico, Washington and other states totaled $132.2 million, $44.5 million, $69.6 million, $89.9 million, and $425.3 million respectively. |
Acquired loans. As of September 30, 2026, our total loan portfolio included $175.5 million, or 8.2%, of loans acquired through business combinations (all of which were recorded at their estimated fair values as of the time of acquisition), of which $37.6 million had a remaining net premium or discount.
As of September 30, 2026, non-PCD loans acquired through business combinations totaled $35.5 million, with a remaining net premium of $422,000, compared to $121.1 million with a remaining net premium of $397,000 as of December 31, 2025. The decrease from December 31, 2025 was due to payoffs, paydowns, and migration to the general pool of $58.9 million of acquired loans during the second quarter of 2026, as the portfolio continued to season and such acquired loans exhibited risk characteristics indistinguishable from the Company's originated loans with most of these loans having not been renewed or re-underwritten during the first nine months of 2026. 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, 2026, PCD acquired loans through business combinations totaled $2.1 million, with a remaining net non-credit discount of $295,000, compared to $16.1 million with a remaining net non-credit discount of $1.2 million as of December 31, 2025. The decrease was primarily due to payoffs and paydowns.
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. The Company held no OREO at September 30, 2026 or December 31, 2025. Nonperforming loans decreased $2.2 million to $11.2 million, or 0.52% of total loans, at September 30, 2026, compared to $13.4 million, or 0.65% of total loans, at December 31, 2025.
The decrease in nonperforming loans was primarily due to the payoff of ten nonaccrual loans totaling $4.1 million and the sale of two nonaccrual loans totaling $7.7 million, partially offset by four new nonaccrual CRE loans totaling $9.6 million. The majority of nonperforming loans remain concentrated in the CRE portfolio, while consumer and other commercial loans continue to exhibit low levels of delinquencies. At September 30, 2026, nonaccrual loans included $3.7 million of loans 30-89 days past due and $2.8 million of loans less than 30 days past due. The $3.7 million of loans 30-89 days past due consisted of two loans and the $2.8 million of nonaccrual loans less than 30 days past due consisted of nine loans, all of which were placed on nonaccrual due to borrower-specific financial concerns and other credit-related factors that raised reasonable doubt about the full collectability of principal and interest, rather than delinquency. At December 31, 2025, nonaccrual loans included $562,000 of loans 30-89 days past due and $9.4 million of loans less than 30 days past due. At December 31, 2025, the $9.4 million of loans less than 30 days past due was comprised of 15 loans all of which were placed on nonaccrual due to concerns over the financial condition of the borrowers.
Of the nonperforming loans at September 30, 2026, approximately $849,000 were guaranteed by governmental agencies, compared to $1.7 million at December 31, 2025. The decrease in government-guaranteed nonaccrual loans during this period reflected paydowns.
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 payoff 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, 2026 and December 31, 2025, totaled $2.0 million and $1.4 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 because they continue to accrue interest and demonstrate satisfactory payment performance despite their modified terms. There were no such modified loans at September 30, 2026 and December 31, 2025. At September 30, 2026 and December 31, 2025, individually evaluated modified loans to borrowers experiencing financial difficulty had related allowances of $607,000 and none, respectively.
The following table provides information regarding nonperforming loans, nonperforming assets, modified loans and PCD loans as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
|
||
|
|
|
2026 |
|
2025 |
|
||
|
|
|
(Dollars in thousands) |
|
||||
|
Loans accounted for on a nonaccrual basis: |
|
|
|
|
|
|
|
|
Commercial and industrial |
|
$ |
735 |
|
$ |
839 |
|
|
Real estate: |
|
|
|
|
|
|
|
|
Residential |
|
|
- |
|
|
716 |
|
|
Multifamily residential |
|
|
- |
|
|
- |
|
|
Owner occupied CRE |
|
|
2,380 |
|
|
4,513 |
|
|
Non-owner occupied CRE |
|
|
7,415 |
|
|
7,375 |
|
|
Construction and land |
|
|
- |
|
|
- |
|
|
Total real estate |
|
|
9,795 |
|
|
12,604 |
|
|
Consumer |
|
|
- |
|
|
- |
|
|
Total nonaccrual loans |
|
|
10,530 |
|
|
13,443 |
|
|
Accruing loans 90 days or more past due |
|
|
623 |
|
|
- |
|
|
Total nonperforming loans |
|
|
11,153 |
|
|
13,443 |
|
|
Real estate owned |
|
|
- |
|
|
- |
|
|
Total nonperforming assets (1) |
|
$ |
11,153 |
|
$ |
13,443 |
|
|
Performing modified loans to borrowers experiencing financial difficulty - performing |
|
$ |
- |
|
$ |
- |
|
|
PCD loans |
|
$ |
12,741 |
|
$ |
16,788 |
|
|
Nonperforming assets to total assets (1) |
|
|
0.42 |
% |
|
0.52 |
% |
|
Nonperforming loans to total loans (1) |
|
|
0.52 |
% |
|
0.65 |
% |
|
(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. PCD loans are considered performing and are not included in nonperforming assets in the table above. |
Interest foregone on nonaccrual loans was approximately $270,000 and $693,000 for the three and nine months ended September 30, 2026, compared to $257,000 and $896,000 for the three and nine months ended September 30, 2025, respectively. Interest income recognized on nonaccrual loans was approximately $155,000 and $633,000 for the three and nine months ended September 30, 2026 and $70,000 and $136,000 for the three and nine months ended September 30, 2025, 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. The Company assesses the allowance for credit losses based on specific allowances for individually analyzed loans and a pooled loans component which includes both quantitative and qualitative factors for loans that share similar risk characteristics. The Company also maintains a separate reserve for unfunded loan commitments, which is included in other liabilities. The allowance for credit losses reflects management's estimate of expected credit losses over the contractual term of the loan portfolio, adjusted for expected prepayments. The computation includes elements of judgment and high levels of subjectivity.
At September 30, 2026, the Company's allowance for credit losses for loans was $23.7 million, or 1.10% of total loans, compared to $21.2 million, or 1.03% of total loans, at December 31, 2025. Management currently believes that the allowance for credit losses at September 30, 2026 is adequate to cover expected credit losses 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, 2026 compared to December 31, 2025, was primarily attributable to growth in the loan portfolio and increased reserves on individually evaluated and pooled loans,
partially offset by improvements in macroeconomic forecasts and the revision of the qualitative factor described below. During the third quarter of 2026 the qualitative factor for lending policies and procedures was revised from minor risk to neutral, reflecting improvement in the loan exception metrics. All other qualitative factors were unchanged from December 31, 2025.
Net charge-offs were $13,000 and $2.9 million for the three and nine months ended September 30, 2026, compared to $833,000 and $948,000 for the three and nine months ended September 30, 2025, respectively. Net charge-offs for the nine months ended September 30, 2026 primarily related to the sale of two nonaccrual loans.
The following table presents certain credit ratios at the dates and for the periods indicated and each component of the ratios' calculations:
|
|
|
|
|
|
|
|
|
|
|
|
|
At and for the nine months ended September 30, |
|
|||||
|
|
|
2026 |
|
2025 |
|
|
||
|
|
|
(Dollars in thousands) |
|
|||||
|
Allowance for credit losses on loans as a percentage of total loans outstanding at period end |
|
|
1.10 |
% |
|
1.02 |
% |
|
|
Allowance for credit losses on loans |
|
$ |
23,700 |
|
$ |
20,800 |
|
|
|
Total loans outstanding |
|
|
2,152,440 |
|
|
2,042,337 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonaccrual loans as a percentage of total loans outstanding at period end |
|
|
0.49 |
% |
|
0.66 |
% |
|
|
Total nonaccrual loans |
|
$ |
10,530 |
|
$ |
13,477 |
|
|
|
Total loans outstanding |
|
|
2,152,440 |
|
|
2,042,337 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses on loans as a percentage of nonaccrual loans at period end |
|
|
225.07 |
% |
|
154.34 |
% |
|
|
Allowance for credit losses on loans |
|
$ |
23,700 |
|
$ |
20,800 |
|
|
|
Total nonaccrual loans |
|
|
10,530 |
|
|
13,477 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net charge-offs during period to average loans outstanding: |
|
|
|
|
|
|
|
|
|
Commercial and industrial: |
|
|
(0.01) |
% |
|
0.10 |
% |
|
|
Net (recoveries) charge-offs |
|
$ |
(18) |
|
$ |
172 |
|
|
|
Average loans outstanding |
|
|
164,089 |
|
|
181,018 |
|
|
|
Construction and land: |
|
|
(0.05) |
% |
|
- |
% |
|
|
Net recoveries |
|
$ |
(7) |
|
$ |
- |
|
|
|
Average loans outstanding |
|
|
13,924 |
|
|
6,116 |
|
|
|
Commercial real estate: |
|
|
0.17 |
% |
|
0.05 |
% |
|
|
Net charge-offs |
|
$ |
2,898 |
|
$ |
770 |
|
|
|
Average loans outstanding |
|
|
1,728,408 |
|
|
1,697,880 |
|
|
|
Residential: |
|
|
- |
% |
|
- |
% |
|
|
Net charge-offs |
|
$ |
- |
|
$ |
- |
|
|
|
Average loans outstanding |
|
|
144,185 |
|
|
107,077 |
|
|
|
Consumer: |
|
|
0.10 |
% |
|
0.97 |
% |
|
|
Net charge-offs |
|
$ |
1 |
|
$ |
6 |
|
|
|
Average loans outstanding |
|
|
1,171 |
|
|
621 |
|
|
|
Total loans: |
|
|
0.14 |
% |
|
0.05 |
% |
|
|
Total net charge-offs |
|
$ |
2,874 |
|
$ |
948 |
|
|
|
Total average loans outstanding |
|
|
2,051,777 |
|
|
1,992,713 |
|
|
As of September 30, 2026, the Company individually evaluated $11.3 million in loans, of which $6.4 million had a specific allowance totaling $2.6 million as of September 30, 2026. As of December 31, 2025, the Company individually evaluated $14.9 million in loans, of which $4.5 million had a specific allowance totaling $1.4 million.
Management considers the allowance for credit losses for loans at September 30, 2026 to be adequate to cover expected credit losses 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 are 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 increased $78.5 million, or 3.5%, to $2.3 billion at September 30, 2026, compared to December 31, 2025. At September 30, 2026, noninterest-bearing demand deposits totaled $574.2 million, or 25.1% of total deposits, compared to $578.1 million, or 26.1% of total deposits, at December 31, 2025, representing a decrease of $3.9 million. From December 31, 2025 to September 30, 2026, interest-bearing deposits generally increased, with money market account increasing $111.8 million, NOW accounts increasing $13.8 million, and savings accounts increasing $2.4 million, partially offset by time deposits decreasing $45.6 million. Time deposits included no brokered deposits as of September 30, 2026, and December 31, 2025.
The overall increase in total deposits from December 31, 2025 primarily reflects growth in money market deposits, partially offset by decreases in time deposits due to maturity of higher rate deposits. The increase in money market deposits reflects continued customer migration within the deposit portfolio in response to the prevailing rate environment. 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 our customers the ability to place deposits in Certificate of Deposit Account Registry Service ("CDARS") and Insured Cash Sweep ("ICS") money market product services via the IntraFi Network, to ensure deposits above FDIC insurance limits. At September 30, 2026, our average deposit account size (excluding public funds), calculated by dividing period-end deposits by the population of accounts with balances, was approximately $66,000. 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, |
|
|
|||
|
|
|
2026 |
|
2025 |
|
% Change |
|||
|
|
|
(Dollars in thousands) |
|
|
|||||
|
Demand deposits (1) |
|
$ |
574,208 |
|
$ |
578,068 |
|
(0.7) |
% |
|
NOW accounts |
|
278,799 |
|
264,967 |
5.2 |
|
|||
|
Savings |
|
|
73,526 |
|
|
71,166 |
|
3.3 |
|
|
Money market |
|
844,050 |
|
732,256 |
15.3 |
|
|||
|
Time deposits |
|
521,604 |
|
567,183 |
(8.0) |
|
|||
|
Total |
|
$ |
2,292,187 |
|
$ |
2,213,640 |
3.5 |
% |
|
| (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, 2026 and December 31, 2025, we could borrow up to $579.8 million and $580.7 million, respectively, from the FHLB of San Francisco. At both September 30, 2026 and December 31, 2025, the Bank had no FHLB borrowings outstanding.
At September 30, 2026 and December 31, 2025, we could borrow up to $41.8 million and $49.3 million, respectively, from the FRB of San Francisco. At both September 30, 2026 and December 31, 2025, there were no FRB advances outstanding.
At both September 30, 2026 and December 31, 2025, we had a total of $65.0 million in federal funds lines available from third-party correspondent banks and no balances outstanding at these dates.
At September 30, 2026 and December 31, 2025, the Company had outstanding junior subordinated deferrable interest debentures, net of fair value adjustments, assumed in connection with its previous acquisitions totaling $5.9 million and $8.7 million, respectively. The decrease reflects the redemption of one debenture during the first quarter of 2026.
The Bank is required to provide collateral for certain local agency deposits. At September 30, 2026 and December 31, 2025, the FHLB of San Francisco had issued letters of credit on behalf of the Bank totaling $42.1 million and $41.6 million, respectively, as collateral for local agency deposits.
Shareholders' equity. Shareholders' equity decreased $3.7 million, or 1.1%, to $334.8 million at September 30, 2026 from $338.6 million at December 31, 2025. The decrease in shareholders' equity primarily was due to $9.8 million of cash dividends paid or accrued during the period. This decrease was partially offset by a $1.6 million increase in common stock due to stock-based compensation primarily related to accelerated vesting of shares for departing executives, net income of $2.4 million earned during the first nine months of 2026 and $2.1 million in other comprehensive income, net of taxes, which primarily reflected a decrease in net unrealized losses on available-for-sale securities, including the reclassification of realized losses on securities sold. During the nine months ended September 30, 2026, the Company did not repurchase any shares of common stock, compared to the repurchase of $6.1 million of common stock during the nine months ended September 30, 2025. 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, 2026 and 2025
Earnings summary. The Company reported a net income of $1.1 million for the three months ended September 30, 2026, compared to net income of $5.0 million for the three months ended September 30, 2025, a decrease of $3.9 million. The decrease was primarily a result of an $8.1 million decrease in noninterest income, largely attributable to the $6.8 million loss on the sale of available-for-sale investment securities, and a $1.7 million increase in noninterest expense. These changes were partially offset by a $2.2 million increase in net interest income, a $2.1 million decrease in the provision for credit losses, and $1.6 million decrease in the provision for income taxes. Basic and diluted earnings per share were $0.10 for the three months ended September 30, 2026, compared to $0.46 for the three months ended September 30, 2025.
Net income was $2.4 million for the nine months ended September 30, 2026, compared to $17.1 million for the nine months ended September 30, 2025, a decrease of $14.7 million, or 86.2%. The decrease was the result of a $13.6 million increase in noninterest expense, primarily reflecting executive separation costs, an $8.0 million decrease in noninterest income, primarily reflecting a $6.8 million loss on the sale of available-for-sale securities, and a $1.6 million increase in the provision for credit losses, partially offset by a $5.0 million increase in net interest income and a $3.5 million decrease in the provision for income taxes. Basic and diluted earnings per share were $0.22 for the nine months ended September 30, 2026, compared to $1.55 for the nine months ended September 30, 2025.
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 89.41% and 85.52% for the three and nine months ended September 30, 2026, compared to 62.15% and 63.88% for the three and nine months ended September 30, 2025, respectively. The increase in the efficiency ratio for the current quarter was primarily attributable to the decrease in noninterest income resulting from the $6.8 million loss on the sale of available-for-sale securities, partially offset by higher net interest income. For the nine-month period, the increase was primarily due to higher noninterest expense, including $10.5 million of costs related to the previously announced departures of three senior executives, and the decrease in noninterest income resulting from the loss on the sale of available-for-sale securities, partially offset by higher net interest income.
Interest income. Interest income on loans, including fees, increased $1.0 million, or 3.6%, to $30.3 million for the three months ended September 30, 2026 from $29.2 million for the three months ended September 30, 2025, due to a $63.4 million increase in the average balance of loans and a two basis point increase in the average loan yield. The average
balance of loans was $2.1 billion for the third quarter of 2026, up 3.11% compared to the third quarter of 2025. The average yield on loans was 5.72% for the third quarter of 2026, compared to 5.70% for the third quarter of 2025. The increase in the average yield on loans reflected new loans being originated at higher market interest rates, partially offset by higher amortization of net premiums on acquired loans.
Interest income on loans for the three months ended September 30, 2026 included $67,000 of amortization of net premiums on acquired loans, compared to $155,000 accretion of the net discount for the three months ended September 30, 2025, with no significant impact to the average loan yield during these periods. At September 30, 2026, these acquired loans had a net premium of $127,000 compared to a $146,000 net discount at September 30, 2025. Additionally, interest income on loans for the three months ended September 30, 2026 and 2025, included $84,000 and $119,000, respectively, in fees related to prepayment penalties.
Interest income on investment securities decreased $72,000, or 3.1%, to $2.2 million for the three months ended September 30, 2026, compared to $2.3 million for the three months ended September 30, 2025, as a result of a decrease in the average balance, partially offset by an increase in the average yield. The average balance of investment securities totaled $184.6 million for the three months ended September 30, 2026, compared to $199.8 million for the three months ended September 30, 2025. The average yield on investment securities was 4.82% for the three months ended September 30, 2026, compared to 4.60% for the three months ended September 30, 2025. The decrease in the average balance from the same quarter a year ago was due to paydowns, calls and sales of securities, while the increase in the average yield reflected purchases of higher yielding securities, partially offset by rate resets on variable rate securities. In addition, during the third quarter of 2026, we received $400,000 in cash dividends on our FRB and FHLB stock, including $142,000 in special dividends from the FHLB, compared to $398,000 during the third quarter of 2025. Excluding the special dividends, dividends decreased, primarily due to the FHLB lowering its dividend rate in the second quarter of 2026.
Interest income on federal funds sold and interest-bearing balances in banks decreased $1.4 million, or 47.8%, to $1.6 million for the three months ended September 30, 2026, compared to $3.0 million for the three months ended September 30, 2025, as a result of decreases in both the average yield and average balance. The average yield decreased 71 basis points to 3.73% for the three months ended September 30, 2026, compared to 4.44% for the three months ended September 30, 2025, reflecting decreases in Federal Reserve policy rates. The average balance of federal funds sold and interest-bearing balances in banks totaled $167.4 million and $269.8 million for the three months ended September 30, 2026 and 2025, respectively.
Interest income on loans, including fees, increased $3.7 million, or 4.4%, to $88.1 million for the nine months ended September 30, 2026 from $84.3 million for nine months ended September 30, 2025, primarily due to a $60.2 million increase in the average balance of loans to $2.1 billion, and a seven basis point increase in the average loan yield. The average yield on loans was 5.73% for the nine months ended September 30, 2026, compared to 5.66% for the nine months ended September 30, 2025. The increase in the average yield on loans from the same period last year was primarily due to the discount accretion and recovery of interest on one large payoff discussed below and new loans being originated at higher market interest rates, partially offset by accelerated premium amortization on acquired loans.
Interest income on loans for the nine months ended September 30, 2026 and 2025 included $136,000 and $579,000 in accretion of the net discount on acquired loans and revenue from PCD loans in excess of discounts, respectively. During the first quarter of 2026, one $4.0 million acquired CRE loan paid off, resulting in $555,000 of discount accretion and recovery of interest of $610,000. The recovery of interest positively impacted the average loan yield by four basis points. Interest income on loans for the nine months ended September 30, 2026 and 2025, included $439,000 and $391,000, respectively, in fees related to prepayment penalties.
Interest income on investment securities decreased $533,000, or 7.4%, to $6.6 million for the nine months ended September 30, 2026, compared to $7.2 million for the nine months ended September 30, 2025, primarily due to a decrease in the average balance. The average yield on investment securities increased two basis points to 4.69% for the nine months ended September 30, 2026, compared to 4.67% for the nine months ended September 30, 2025. The increase in average yield was due to higher market interest rates on newly purchased securities. The average balance of investment securities totaled $189.1 million for the nine months ended September 30, 2026, compared to $205.5 million for the nine months ended September 30, 2025. In addition, during the nine months ended September 30, 2026, we received $1.2 million in cash dividends on our FRB and FHLB stock, including $472,000 in special dividends from the FHLB, up 4.6% from $1.2
million received during the nine months ended September 30, 2025. The $472,000 in special dividends received from the FHLB is not expected to recur at a predictable frequency.
Interest income on federal funds sold and interest-bearing balances in banks decreased $3.0 million, or 36.0%, to $5.3 million for the nine months ended September 30, 2026, compared to $8.4 million for the nine months ended September 30, 2025, as a result of decreases in both the average yield and average balance. The average yield decreased 74 basis points to 3.71% for the nine months ended September 30, 2026, compared to 4.45% for the nine months ended September 30, 2025, reflecting the Federal Reserve's rate reductions. The average balance totaled $192.7 million for the nine months ended September 30, 2026, compared to $251.1 million for the nine months ended September 30, 2025.
Interest expense. Interest expense on deposits decreased $978,000, or 10.0%, to $8.8 million for the three months ended September 30, 2026, compared to $9.8 million for the same period in 2025. The decrease was primarily due to lower rates on money market and time deposits and a decrease in the average balance of time deposits, partially offset by an increase in average balance of money market deposits. The average rate paid on money market accounts decreased 30 basis points to 2.12% during the third quarter of 2026, compared to 2.42% in the same period of 2025, and the average rate on time deposits declined 26 basis points to 3.47%, compared to 3.73% for the prior-year period. The average cost of all interest-bearing deposits was 2.12% for the three months ended September 30, 2026, compared to 2.41% for the three months ended September 30, 2025. The average balance of interest-bearing deposits was $1.6 billion both for the three months ended September 30, 2026 and 2025.
The average cost of deposits (including noninterest bearing deposits) was 1.57% for the third quarter of 2026, compared to 1.74% for the third quarter of 2025. The average balance of deposits totaled $2.2 billion for both the three months ended September 30, 2026 and 2025. Within this category, the average balance of money market accounts rose $125.1 million, or 18.2%, to $810.7 million. In contrast, average balances for time deposits decreased $89.7 million, or 15.3%, to $496.6 million, while savings accounts also declined over the same period. The average balance of noninterest-bearing deposits decreased $39.8 million, or 6.5%, to $577.7 million for the three months ended September 30, 2026, compared to $617.5 million for the same period in 2025. The decrease in average noninterest-bearing deposits reflects continued customer migration to higher-yielding deposit products during the period, despite relatively stable period-end noninterest-bearing deposit balances. Overall deposit costs benefited from lower rates paid on money market accounts and time deposits as those products repriced in response to changes in market interest rates.
Interest expense on borrowings decreased $1.6 million, or 93.3%, to $119,000 for the three months ended September 30, 2026, compared to $1.8 million for the three months ended September 30, 2025. The decrease was primarily due to the Company's redemption of all outstanding subordinated debt in the prior year and a decrease in the average balance of junior subordinated debentures, resulting in lower interest expense. The average cost of total borrowings decreased to 8.0% for the three months ended September 30, 2026, compared to 11.4% for the three months ended September 30, 2025. The average balance of borrowings decreased $55.5 million to $5.9 million during the three months ended September 30, 2026, compared to $61.4 million during the three months ended September 30, 2025.
Interest expense on deposits decreased $1.5 million, or 5.4%, to $26.2 million for the nine months ended September 30, 2026, compared to $27.7 million for the nine months ended September 30, 2025. The decrease was driven by lower rates paid on money market accounts and time deposits, partially offset by an increase in the average balance of money market deposits. Specifically, the average rate paid on money market accounts decreased 26 basis points to 2.12% from 2.38%, while the average rate paid on time deposits decreased 28 basis points to 3.48% from 3.76% for the nine months ended September 30, 2026, compared to the same period in 2025. The average balance of money market accounts increased $99.5 million, or 14.9%, to $767.6 million for the nine months ended September 30, 2026, compared to $668.0 million for the nine months ended September 30, 2025. The average balance of time deposits decreased $25.1 million, or 4.5%, to $527.3 million for the nine months ended September 30, 2026, compared to $552.4 million for the same period the prior year. The average cost of all interest-bearing deposits decreased 22 basis points and was 2.15% and 2.37% for the nine months ended September 30, 2026 and 2025, respectively. The average balance of interest-bearing deposits was $1.6 billion for both the nine months ended September 30, 2026 and 2025.
The overall average cost of deposits (including noninterest-bearing deposits) for the nine months ended September 30, 2026 and 2025 was 1.59% and 1.70%, respectively. The average balance of total deposits was $2.2 billion for both the nine months ended September 30, 2026 and 2025, respectively. The average balance of noninterest-bearing
deposits decreased $30.3 million, or 5.0%, to $578.5 million for the nine months ended September 30, 2026 compared to $608.8 million for the nine months ended September 30, 2025.
Interest expense on borrowings decreased $3.3 million, or 83.9%, to $631,000 for the nine months ended September 30, 2026, compared to $3.9 million for the nine months ended September 30, 2025, due to the full redemption of the Company's subordinated notes in the third quarter of 2025. The average cost of total borrowings increased to 12.52% for the nine months ended September 30, 2026, compared to 7.65% for the nine months ended September 30, 2025. The average cost of borrowings was negatively impacted due to the Company's redemption of one junior subordinated debenture in the first quarter of 2026, which included $222,000 of accelerated amortization of previously deferred debt issuance costs. The average balance of borrowings decreased $62.0 million to $6.7 million for the nine months ended September 30, 2026, compared to $68.7 million for the nine months ended September 30, 2025.
Net interest income and net interest margin. Net interest income increased $2.2 million, or 9.2%, to $25.6 million for the three months ended September 30, 2026, compared to $23.4 million for the three months ended September 30, 2025. The increase in net interest income primarily reflects increases in interest income on loans, including fees, and decreases in interest expense on deposits, and subordinated debt. These changes were partially offset by decreases in interest income on federal funds sold and interest-bearing balances in banks, FRB dividends and interest income on investment securities. Average interest-earning assets decreased $55.6 million, or 2.2%, compared to the third quarter of 2025.
The annualized net interest margin increased to 4.11% for the three months ended September 30, 2026, compared to 3.68% for the same period in 2025. The average annualized yield on interest-earning assets was 5.54% for the three months ended September 30, 2026, representing a five basis point increase from 5.49% for the three months ended September 30, 2025. This increase reflects a favorable shift in the mix of interest-earning assets, reflecting higher average yields on loans and investment securities, partially offset by lower yields on federal funds sold and interest-bearing balances in banks. The average annualized cost of interest-bearing liabilities was 2.15% for the three months ended September 30, 2026, representing a 58 basis point decrease from 2.73% for the three months ended September 30, 2025. This decrease reflects the payoff of the subordinated debt in the prior year, payoff of one junior subordinated debenture in the first quarter of 2026, and lower rates paid on money market and time deposits, reflecting similar market-driven repricing conditions.
Net interest income increased $5.0 million, or 7.2%, to $74.5 million for the nine months ended September 30, 2026, compared to $69.4 million for the nine months ended September 30, 2025. The increase in net interest income primarily reflects increases in interest income on loans, including fees, FHLB dividends, and decreases in interest expense on deposits and subordinated debt. These changes were partially offset by decreases in interest income on federal funds sold and interest-bearing balances in banks, investment securities, FRB dividends, and an increase in the interest expense on junior subordinated debentures.
Annualized net interest margin was 4.06% for the nine months ended September 30, 2026, compared to 3.76% for the nine months ended September 30, 2025. The reported net interest margin for the nine months ended September 30, 2026 included the impact of several significant items that are not expected to recur at similar levels in future periods, including: (i) $555,000 of discount accretion and $610,000 of interest recovery on the payoff of a single acquired CRE loan during the first quarter of 2026; (ii) $380,000 of accelerated premium amortization in the second quarter of 2026, primarily related to acquired loans migrating to the originated loan pool due to seasoning and exhibiting risk characteristics indistinguishable from the Company's originated loans; (iii) $472,000 of FHLB special dividends; and (iv) $222,000 of accelerated amortization of previously deferred debt issuance costs related to junior subordinated debentures.
The average annualized yield on interest-earning assets was 5.51% for the nine months ended September 30, 2026, representing a four basis point increase from 5.47% for the nine months ended September 30, 2025. This increase reflects higher average loan yields, higher average investment yields, one-time items impacting the loan yields and FHLB dividends discussed above, partially offset by lower average yields on federal funds sold and interest bearing balances in banks. The average annualized cost of interest-bearing liabilities was 2.19% for the nine months ended September 30, 2026, representing a 40 basis point decrease from 2.59% for the nine months ended September 30, 2025. This decrease reflects the payoff of the subordinated debt and one junior subordinated debenture and lower rates paid on money market
and time deposits, reflecting similar market-driven repricing conditions, partially offset by the accelerated costs discussed above.
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) 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, |
|
||||||||||||||
|
|
|
2026 |
|
2025 |
|
||||||||||||
|
|
|
|
|
|
|
|
|
Annualized |
|
|
|
|
|
|
|
Annualized |
|
|
|
|
Average |
|
|
|
|
Average |
|
Average |
|
|
|
|
Average |
|
||
|
|
|
Balance(5) |
|
Interest |
|
Yield/Cost |
|
Balance(5) |
|
Interest |
|
Yield/Cost |
|
||||
|
|
|
(Dollars in thousands) |
|
||||||||||||||
|
Interest earning assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fed Funds sold and interest bearing balances in banks |
|
$ |
167,437 |
|
$ |
1,576 |
3.73 |
% |
$ |
269,795 |
|
$ |
3,017 |
4.44 |
% |
||
|
Investment securities |
|
|
184,597 |
|
2,243 |
4.82 |
% |
199,789 |
|
2,315 |
4.60 |
% |
|||||
|
FHLB Stock |
|
|
12,046 |
|
284 |
9.35 |
% |
11,524 |
|
253 |
8.70 |
% |
|||||
|
FRB Stock |
|
|
7,754 |
|
116 |
5.93 |
% |
9,655 |
|
145 |
5.94 |
% |
|||||
|
Total loans (1) |
|
|
2,097,942 |
|
30,259 |
5.72 |
% |
2,034,570 |
|
29,220 |
5.70 |
% |
|||||
|
Total interest earning assets |
|
|
2,469,776 |
|
34,478 |
5.54 |
% |
2,525,333 |
|
34,950 |
5.49 |
% |
|||||
|
Noninterest earning assets |
|
|
132,161 |
|
|
|
|
132,407 |
|
|
|
|
|||||
|
Total average assets |
|
$ |
2,601,937 |
|
|
|
|
$ |
2,657,740 |
|
|
|
|
||||
|
Interest bearing liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Savings |
|
$ |
71,762 |
|
|
$ 22 |
|
0.12 |
% |
$ |
73,657 |
|
|
23 |
|
0.12 |
% |
|
NOW accounts |
|
|
264,366 |
|
113 |
0.17 |
% |
267,115 |
|
59 |
0.09 |
% |
|||||
|
Money market |
|
|
810,679 |
|
4,323 |
2.12 |
% |
685,625 |
|
4,187 |
2.42 |
% |
|||||
|
Time deposits |
|
|
496,614 |
|
4,341 |
3.47 |
% |
586,265 |
|
5,508 |
3.73 |
% |
|||||
|
Total interest bearing deposit accounts |
|
|
1,643,421 |
|
8,799 |
2.12 |
% |
1,612,662 |
|
9,777 |
2.41 |
% |
|||||
|
Subordinated debt, net |
|
|
- |
|
|
- |
|
- |
% |
|
52,742 |
|
|
1,571 |
|
11.82 |
% |
|
Junior subordinated debentures, net |
|
|
5,894 |
|
|
119 |
|
8.00 |
% |
|
8,694 |
|
|
193 |
|
8.78 |
% |
|
Other borrowings |
|
|
- |
|
- |
- |
% |
- |
|
- |
- |
% |
|||||
|
Total interest bearing liabilities |
|
|
1,649,315 |
|
8,918 |
2.15 |
% |
1,674,098 |
|
11,541 |
2.73 |
% |
|||||
|
Noninterest bearing deposits |
|
|
577,652 |
|
|
|
|
|
|
|
617,481 |
|
|
|
|
|
|
|
Other noninterest bearing liabilities |
|
|
37,015 |
|
|
|
|
|
|
|
31,533 |
|
|
|
|
|
|
|
Noninterest bearing liabilities |
|
|
614,667 |
|
|
|
|
649,014 |
|
|
|
|
|||||
|
Total average liabilities |
|
|
2,263,982 |
|
|
|
|
2,323,112 |
|
|
|
|
|||||
|
Average equity |
|
|
337,955 |
|
|
|
|
334,610 |
|
|
|
|
|||||
|
Total average liabilities and equity |
|
$ |
2,601,937 |
|
|
|
|
$ |
2,657,722 |
|
|
|
|
||||
|
Net interest income |
|
|
|
$ |
25,560 |
|
|
|
|
$ |
23,409 |
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate spread (2) |
|
|
|
|
3.39 |
% |
|
|
|
2.76 |
% |
||||||
|
Net interest margin (3) |
|
|
|
|
4.11 |
% |
|
|
|
3.68 |
% |
||||||
|
Ratio of average interest earning assets to average interest bearing liabilities |
|
|
|
|
149.75 |
% |
|
|
|
150.85 |
% |
||||||
|
Cost of deposits (4) |
|
|
|
|
|
|
|
1.57 |
% |
|
|
|
|
|
|
1.74 |
% |
| (1) | Loan average balances are net of deferred origination fees and costs. Nonaccrual loans are included in the average balances. Interest income on nonaccruing 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) | Annualized. |
| (5) | Average balances are computed using average daily balances. |
|
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|
|
|
|
|
|
|
|
Nine months ended September 30, |
|||||||||||||||
|
|
|
2026 |
|
2025 |
|
||||||||||||
|
|
|
(Dollars in thousands) |
|||||||||||||||
|
|
|
|
|
|
|
|
|
Annualized |
|
|
|
|
|
|
|
Annualized |
|
|
|
|
Average |
|
|
|
|
Average |
|
Average |
|
|
|
|
Average |
|
||
|
|
|
Balance (5) |
|
Interest |
|
Yield/Cost |
|
Balance (5) |
|
Interest |
|
Yield/Cost |
|
||||
|
|
|
(Dollars in thousands) |
|
||||||||||||||
|
Interest earning assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fed Funds sold and interest-bearing balances in banks |
|
$ |
192,739 |
|
$ |
5,346 |
3.71 |
% |
$ |
251,077 |
|
$ |
8,359 |
4.45 |
% |
||
|
Investment securities |
|
|
189,143 |
|
6,642 |
4.69 |
% |
205,456 |
|
7,175 |
4.67 |
% |
|||||
|
FHLB Stock |
|
|
11,843 |
|
891 |
10.06 |
% |
11,441 |
|
750 |
8.76 |
% |
|||||
|
FRB Stock |
|
|
7,736 |
|
348 |
6.01 |
% |
9,651 |
|
434 |
6.01 |
% |
|||||
|
Total loans (1) |
|
|
2,053,798 |
|
88,050 |
5.73 |
% |
1,993,602 |
|
84,331 |
5.66 |
% |
|||||
|
Total interest earning assets |
|
|
2,455,259 |
|
101,277 |
5.51 |
% |
2,471,227 |
|
101,049 |
5.47 |
% |
|||||
|
Noninterest earning assets |
|
|
133,616 |
|
|
|
|
132,657 |
|
|
|
|
|||||
|
Total average assets |
|
$ |
2,588,875 |
|
|
|
|
$ |
2,603,884 |
|
|
|
|
||||
|
Interest bearing liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Savings |
|
$ |
72,546 |
|
$ |
66 |
|
0.12 |
% |
$ |
76,790 |
|
$ |
71 |
|
0.12 |
% |
|
NOW accounts |
|
|
260,195 |
|
219 |
0.11 |
% |
266,281 |
|
178 |
0.09 |
% |
|||||
|
Money market |
|
|
767,573 |
|
12,162 |
2.12 |
% |
668,043 |
|
11,886 |
2.38 |
% |
|||||
|
Time deposits |
|
|
527,326 |
|
13,715 |
3.48 |
% |
552,383 |
|
15,534 |
3.76 |
% |
|||||
|
Total interest bearing deposit accounts |
|
|
1,627,640 |
|
26,162 |
2.15 |
% |
1,563,497 |
|
27,669 |
2.37 |
% |
|||||
|
Subordinated debt, net |
|
|
- |
|
|
- |
|
- |
% |
|
60,056 |
|
|
3,354 |
|
7.47 |
% |
|
Junior subordinated debentures, net |
|
|
6,648 |
|
|
628 |
|
12.64 |
% |
|
8,673 |
|
|
577 |
|
8.90 |
% |
|
Other borrowings |
|
|
97 |
|
3 |
4.07 |
% |
11 |
|
- |
- |
% |
|||||
|
Total interest bearing liabilities |
|
|
1,634,385 |
|
26,793 |
2.19 |
% |
1,632,237 |
|
31,600 |
2.59 |
% |
|||||
|
Noninterest bearing deposits |
|
|
578,470 |
|
|
|
|
|
|
|
608,757 |
|
|
|
|
|
|
|
Other noninterest bearing liabilities |
|
|
33,580 |
|
|
|
|
|
|
|
31,172 |
|
|
|
|
|
|
|
Noninterest bearing liabilities |
|
|
612,050 |
|
|
|
|
639,929 |
|
|
|
|
|||||
|
Total average liabilities |
|
|
2,246,435 |
|
|
|
|
2,272,166 |
|
|
|
|
|||||
|
Average equity |
|
|
342,440 |
|
|
|
|
331,718 |
|
|
|
|
|||||
|
Total average liabilities and equity |
|
$ |
2,588,875 |
|
|
|
|
$ |
2,603,884 |
|
|
|
|
||||
|
Net interest income |
|
|
|
$ |
74,484 |
|
|
|
|
$ |
69,449 |
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate spread (2) |
|
|
|
|
3.32 |
% |
|
|
|
2.88 |
% |
||||||
|
Net interest margin (3) |
|
|
|
|
4.06 |
% |
|
|
|
3.76 |
% |
||||||
|
Ratio of average interest earning assets to average interest bearing liabilities |
|
|
|
|
150.23 |
% |
|
|
|
151.40 |
% |
||||||
|
Cost of deposits (4) |
|
|
|
|
|
|
|
1.59 |
% |
|
|
|
|
|
|
1.70 |
% |
| (1) | Loan average balances are net of deferred origination fees and costs. Nonaccrual loans are included in the average balances. Interest income on nonaccruing 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) | Annualized. |
| (5) | 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 and interest expense attributable to changes in volume (changes in volume multiplied by prior rate) and (ii) effects on interest income and interest expense attributable to changes in rate (changes in rate multiplied by prior volume). Changes applicable to both volume and rate have been allocated to rate.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
Nine months ended September 30, |
|||||||||||||||
|
|
|
2026 compared to 2025 |
|
2026 compared to 2025 |
|||||||||||||||
|
|
|
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 |
|
$ |
(297) |
|
$ |
(1,144) |
|
$ |
(1,441) |
|
|
$ |
(1,071) |
|
$ |
(1,942) |
|
$ |
(3,013) |
|
Investment securities |
|
104 |
|
(176) |
|
(72) |
|
|
36 |
|
(569) |
|
(533) |
||||||
|
FHLB stock and FRB stock |
|
28 |
|
(26) |
|
2 |
|
|
140 |
|
(85) |
|
55 |
||||||
|
Total loans |
|
130 |
|
909 |
|
1,039 |
|
|
1,174 |
|
2,545 |
|
3,719 |
||||||
|
Total interest income |
|
(35) |
|
(437) |
|
(472) |
|
|
279 |
|
(51) |
|
228 |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings |
|
- |
|
(1) |
|
(1) |
|
|
(1) |
|
(4) |
|
(5) |
||||||
|
NOW accounts |
|
53 |
|
1 |
|
54 |
|
|
45 |
|
(4) |
|
41 |
||||||
|
Money market accounts |
|
(628) |
|
764 |
|
136 |
|
|
(1,495) |
|
1,771 |
|
276 |
||||||
|
Time deposits |
|
(324) |
|
(843) |
|
(1,167) |
|
|
(1,114) |
|
(705) |
|
(1,819) |
||||||
|
Total deposit accounts |
|
(899) |
|
(79) |
|
(978) |
|
|
(2,565) |
|
1,058 |
|
(1,507) |
||||||
|
Subordinated debt, net |
|
- |
|
(1,571) |
|
(1,571) |
|
|
- |
|
(3,354) |
|
(3,354) |
||||||
|
Junior subordinated debentures, net |
|
(12) |
|
(62) |
|
(74) |
|
|
186 |
|
(135) |
|
51 |
||||||
|
Other borrowings |
|
- |
|
- |
|
- |
|
|
2 |
|
1 |
|
3 |
||||||
|
Total interest expense |
|
(911) |
|
(1,712) |
|
(2,623) |
|
|
(2,377) |
|
(2,430) |
|
(4,807) |
||||||
|
Net interest income |
|
$ |
876 |
|
$ |
1,275 |
|
$ |
2,151 |
|
|
$ |
2,656 |
|
$ |
2,379 |
|
$ |
5,035 |
Provision for credit losses. We recorded a provision for credit losses of $843,000 and $3.0 million for the three months ended September 30, 2026 and 2025, respectively. The provision for credit losses in the current quarter primarily reflected loan growth and higher historical loss rates, partially offset by modest improvements in forecasted national unemployment and gross domestic product relative to the prior quarter's forecasts, decreased specific reserves on certain individually evaluated loans, and the revision of the qualitative factor for lending policies and procedures.
We recorded a provision for credit losses of $5.4 million and $3.8 million for the nine months ended September 30, 2026 and 2025, respectively. The provision for credit losses in the current year nine-month period reflected the impact of net charge-offs during the period, together with loan growth and increased specific reserves on certain individually evaluated loans, partially offset by improvements in macroeconomic forecasts.
Net charge-offs totaled $13,000 and $2.9 million for the three and nine months ended September 30, 2026, respectively, compared to net charge-offs of $833,000 and $948,000 for the three and nine months ended September 30, 2025, respectively
Noninterest income. Noninterest income decreased $8.1 million, or 358.4%, to a loss of $5.8 million for the third quarter of 2026, compared to income of $2.2 million for the three months ended September 30, 2025. The decrease was primarily due to a $6.8 million loss on sale of available-for-sale investment securities during the third quarter of 2026, as the Company completed a strategic repositioning of investment securities to improve future profitability and its interest rate risk profile. The Company sold $106.8 million of investment securities available-for-sale, resulting in a loss of $6.8 million. The proceeds were redeployed into higher-yielding, shorter-duration securities, generating an approximately 122 basis point improvement in the yield on redeployed assets. In addition, the decrease was due to a $1.4 million unfavorable
swing to a loss on preferred equity securities due to negative fair value adjustments to reflect declining market conditions, a $46,000 increase in loss on investment in SBIC fund and a $34,000 decrease in service charges and other fees, partially offset by a $113,000 increase in gain on sale of loans and a $102,000 increase in loan servicing fees and other fees.
Noninterest income decreased $8.0 million, or 153.4%, to a loss of $2.8 million for the nine months ended September 30, 2026, compared to income of $5.2 million for the nine months ended September 30, 2025. The decrease was primarily due to a $6.8 million loss on sale of available-for-sale investment securities, as repositioning improved the Company's earning-asset mix by facilitating the redeployment of sale proceeds into higher-yielding assets while enhancing balance sheet flexibility, a $959,000 unfavorable swing to a loss on preferred equity securities due to negative fair value adjustment to reflect declining market conditions, a $276,000 decrease in service charges and other fees due to lower customer activities, and a $163,000 decrease in loan servicing and other loan fees due to lower loan origination volumes, partially offset by a $182,000 decrease in loss on investment in SBIC fund and a $74,000 increase in gain on sale of loans.
The following table presents the key components of noninterest income for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
|
|
|
||||||
|
|
|
2026 |
|
2025 |
|
$ Change |
|
% Change |
||||
|
|
|
(Dollars in thousands) |
|
|
||||||||
|
Gain on sale of loans |
|
$ |
113 |
|
$ |
- |
|
$ |
113 |
|
N/M |
|
|
(Loss) gain on equity securities |
|
|
(589) |
|
|
771 |
|
|
(1,360) |
|
(176.4) |
% |
|
Loss on sale of AFS securities |
|
|
(6,832) |
|
|
- |
|
|
(6,832) |
|
N/M |
|
|
Service charges and other fees |
|
791 |
|
825 |
|
(34) |
(4.1) |
% |
||||
|
Loan servicing and other loan fees |
|
505 |
|
403 |
|
102 |
25.3 |
% |
||||
|
Loss on investment in SBIC fund |
|
(75) |
|
(29) |
|
(46) |
N/M |
|
||||
|
Other income and fees |
|
279 |
|
278 |
|
1 |
0.4 |
% |
||||
|
Total noninterest income |
|
$ |
(5,808) |
|
$ |
2,248 |
|
$ |
(8,056) |
(358.4) |
% |
|
|
N/M - Not meaningful |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, |
|
|
|
|
|
||||||
|
|
|
2026 |
|
2025 |
|
$ Change |
|
% Change |
|
||||
|
|
|
(Dollars in thousands) |
|
|
|
||||||||
|
Gain on sale of loans |
|
$ |
325 |
|
$ |
251 |
|
$ |
74 |
|
29.5 |
% |
|
|
(Loss) gain on equity securities |
|
|
(436) |
|
|
523 |
|
|
(959) |
|
(183.4) |
% |
|
|
Loss on sale of AFS securities |
|
|
(6,832) |
|
|
- |
|
|
(6,832) |
|
N/M |
|
|
|
Service charges and other fees |
|
2,407 |
|
2,683 |
|
(276) |
(10.3) |
% |
|
||||
|
Loan servicing and other loan fees |
|
1,145 |
|
1,308 |
|
(163) |
(12.5) |
% |
|
||||
|
Loss on investment in SBIC fund |
|
(183) |
|
(365) |
|
182 |
49.9 |
% |
|
||||
|
Other income and fees |
|
797 |
|
801 |
|
(4) |
(0.5) |
% |
|
||||
|
Total noninterest income |
|
$ |
(2,777) |
|
$ |
5,201 |
|
$ |
(7,978) |
(153.4) |
% |
|
|
|
N/M - Not meaningful |
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest expense. Noninterest expense increased $1.7 million, or 10.7%, to $17.7 million for the three months ended September 30, 2026, compared to $16.0 million for the three months ended September 30, 2025. The increase in noninterest expense was primarily due to a $1.1 million increase in salaries and employee benefits related to increased base wages, higher employee insurance claims, and increased stock compensation expense, as well as a $593,000 increase in other expense due to higher professional service and legal costs, partially offset by reduced deposit premium amortization. Occupancy and equipment expense and data processing expense increased $34,000 and $33,000, respectively.
Noninterest expense increased $13.6 million, or 28.6%, to $61.3 million for the nine months ended September 30, 2026, compared to $47.7 million for the nine months ended September 30, 2025. The increase in noninterest expense was primarily due to a $13.3 million increase in salaries and employee benefits, including $10.5 million of severance, accelerated equity award vesting, and employee benefit costs associated with the previously announced departures of three senior executives recorded in the second quarter of 2026, and increased base wages, a $344,000 increase in data processing
expense due to newly implemented services in 2026 and higher vendor data processing charges, and a $75,000 increase in other expense, partially offset by a $73,000 decrease in occupancy and equipment expense.
The following table details the components of noninterest expense for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
|
|
|
||||||
|
|
|
2026 |
|
2025 |
|
$ Change |
|
% Change |
||||
|
|
|
(Dollars in thousands) |
|
|
||||||||
|
Salaries and employee benefits |
|
$ |
11,222 |
|
$ |
10,168 |
|
$ |
1,054 |
|
10.4 |
% |
|
Occupancy and equipment |
|
2,177 |
|
2,143 |
|
34 |
1.6 |
% |
||||
|
Data processing |
|
2,071 |
|
2,038 |
|
33 |
1.6 |
% |
||||
|
Other |
|
2,190 |
|
1,597 |
|
593 |
37.1 |
% |
||||
|
Total noninterest expense |
|
$ |
17,660 |
|
$ |
15,946 |
|
$ |
1,714 |
10.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, |
|
|
|
|
|
||||||
|
|
|
2026 |
|
2025 |
|
$ Change |
|
% Change |
|
||||
|
|
|
(Dollars in thousands) |
|
|
|
||||||||
|
Salaries and employee benefits |
|
$ |
43,120 |
|
$ |
29,831 |
|
$ |
13,289 |
|
44.5 |
% |
|
|
Occupancy and equipment |
|
6,389 |
|
6,462 |
|
(73) |
(1.1) |
% |
|
||||
|
Data processing |
|
6,148 |
|
5,804 |
|
344 |
5.9 |
% |
|
||||
|
Other |
|
5,667 |
|
5,592 |
|
75 |
1.3 |
% |
|
||||
|
Total noninterest expense |
|
$ |
61,324 |
|
$ |
47,689 |
|
$ |
13,635 |
28.6 |
% |
|
|
Income taxes. The provision for income taxes decreased $1.6 million, or 94.0%, to $104,000 for the three months ended September 30, 2026, compared to $1.7 million for the three months ended September 30, 2025. The provision for income taxes decreased $3.5 million, or 57.1%, to $2.6 million for the nine months ended September 30, 2026, compared to $6.1 million for the nine months ended September 30, 2025. The decrease in provision for income taxes for both periods was due to lower pre-tax income for the three and nine months ended September 30, 2026.
The Company's effective tax rate was 8.3% and 52.4% for the three and nine months ended September 30, 2026, and 25.7% and 26.2% for the three and nine months ended September 30, 2025, respectively. The effective tax rate decreased for the three months ended September 30, 2026, compared to the same period in 2025, primarily due to lower tax rate due to lower pre-tax income resulting from the loss on sale of available-for-sale securities. The effective tax rate for the nine months ended September 30, 2026 was higher than the Company's statutory tax rate primarily due to the impact of Internal Revenue Code Section 162(m) limitations on the deductibility of executive departure severance and other compensation obligations, which were recognized during the second quarter of 2026, combined with lower pre-tax income during the period.
Liquidity and Capital Resources
Planning for our normal business liquidity needs, both expected and unexpected, is conducted 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, 2026, the Bank sold $4.0 million in loan participation interests and received $279.1 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 increased $78.5 million to $2.3 billion at September 30, 2026, compared to December 31, 2025, and liquid assets, in the form of cash and cash equivalents, increased $12.0 million to $218.5 million at September 30, 2026, from $206.5 million at December 31, 2025. In addition, investment securities available-for-sale decreased a $8.0 million
to $171.7 million at September 30, 2026 from $179.7 million at December 31, 2025. Management believes that our securities portfolio is of high quality and that the securities would therefore be marketable. Securities purchased during the nine months ended September 30, 2026 were $133.7 million, while securities repayments, maturities and sales during that period totaled $137.6 million. Certificates of deposit scheduled to mature in one year or less at September 30, 2026, totaled $470.7 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, 2026, the Bank had an available borrowing capacity of $579.8 million from the FHLB of San Francisco, with no borrowings outstanding at that date or at December 31, 2025. At September 30, 2026, we had the ability to borrow up to $41.8 million from the FRB of San Francisco, with no borrowings outstanding at that date or at December 31, 2025. The Bank also had, as of September 30, 2026, federal funds lines with four correspondent banks, with available commitments totaling $65.0 million. There were no amounts outstanding under these facilities at that date or December 31, 2025. 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, to 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, 2026, loan commitments and letters of credit totaled $91.9 million, including $267,000 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, 2026 and 2025 was $24.9 million and $23.0 million, respectively. During the nine months ended September 30, 2026, net cash used in investing activities was $78.6 million, which consisted primarily of $133.7 million in purchases of investment securities and $118.4 million in loan purchases, partially offset by $106.3 million in proceeds from sales of investment securities available-for-sale, $31.3 million in proceeds from maturities, repayments and calls of investment securities available-for-sale, an $18.3 million net decrease in loans and $9.9 million in proceeds from sales of loans held for investment, compared to $78.0 million of net cash used in investing activities for the nine months ended September 30, 2025. Net cash provided by financing activities for the nine months ended September 30, 2026 was $65.6 million, which was comprised primarily of a $124.1 million increase in noninterest and interest-bearing deposits, partially offset by a $45.6 million decrease in time deposits, $9.8 million in dividends paid to shareholders and a $3.1 million repayment of junior subordinated debentures, compared to $80.6 million of net cash used in financing activities during the nine months ended September 30, 2025. 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 2025 Annual Report, other than as described 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, 2026, BayCom Corp had liquid assets of $14.3 million. In addition to its operating expenses, BayCom Corp is responsible for paying dividends declared to its shareholders, funding stock repurchases, and making payments on its junior subordinated debentures. BayCom Corp may receive dividends and other capital distributions from the Bank, although regulatory restrictions may limit the ability of the Bank to pay dividends and make other capital distributions. BayCom Corp's liquidity needs are primarily met through dividends received from the Bank, which management believes will be sufficient to satisfy obligations at the holding company level for the foreseeable future.
On August 19, 2026, the Company announced that its Board of Directors declared a quarterly cash dividend of $0.30 per share on the Company's outstanding common stock, which was paid on October 8, 2026 to shareholders of record as of the close of business on September 10, 2026. 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 $0.30 per share, the cash requirement for quarterly dividend payments would be approximately $3.3 million based on the number of outstanding shares at September 30, 2026. 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 2025 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, 2026, 202,444 shares remained 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, 2026 and December 31, 2025, 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, 2026 |
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At December 31, 2025 |
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Amount |
|
Ratio |
|
Amount |
|
Ratio |
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|
|
|
(Dollars in thousands) |
|||||||||
|
Leverage Ratio |
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|
|
|
|
|
|
|
|
|
|
|
BayCom Corp |
|
$ |
298,270 |
11.87 |
% |
$ |
303,598 |
12.21 |
% |
||
|
Minimum requirement for "Well Capitalized" |
|
125,605 |
5.00 |
% |
124,277 |
5.00 |
% |
||||
|
Minimum regulatory requirement |
|
100,484 |
4.00 |
% |
99,421 |
4.00 |
% |
||||
|
|
|
|
|
|
|
|
|
|
|
||
|
United Business Bank |
|
286,915 |
11.24 |
% |
291,596 |
11.45 |
% |
||||
|
Minimum requirement for "Well Capitalized" |
|
127,645 |
5.00 |
% |
127,308 |
5.00 |
% |
||||
|
Minimum regulatory requirement |
|
102,116 |
4.00 |
% |
101,846 |
4.00 |
% |
||||
|
|
|
|
|
|
|
|
|
|
|
||
|
Common Equity Tier 1 Ratio |
|
|
|
|
|
|
|
||||
|
BayCom Corp |
|
298,270 |
13.91 |
% |
303,598 |
14.32 |
% |
||||
|
Minimum requirement for "Well Capitalized" |
|
139,393 |
6.50 |
% |
137,847 |
6.50 |
% |
||||
|
Minimum regulatory requirement |
|
96,503 |
4.50 |
% |
95,433 |
4.50 |
% |
||||
|
|
|
|
|
|
|
|
|
|
|
||
|
United Business Bank |
|
286,915 |
|
13.39 |
% |
291,596 |
|
13.84 |
% |
||
|
Minimum requirement for "Well Capitalized" |
|
139,237 |
6.50 |
% |
136,946 |
6.50 |
% |
||||
|
Minimum regulatory requirement |
|
96,395 |
4.50 |
% |
94,809 |
4.50 |
% |
||||
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|
|
|
|
|
|
|
|
|
|
||
|
Tier 1 Risk-Based Capital Ratio |
|
|
|
|
|
|
|
||||
|
BayCom Corp |
|
304,662 |
14.21 |
% |
313,083 |
14.76 |
% |
||||
|
Minimum requirement for "Well Capitalized" |
|
171,560 |
8.00 |
% |
169,658 |
8.00 |
% |
||||
|
Minimum regulatory requirement |
|
128,670 |
6.00 |
% |
127,243 |
6.00 |
% |
||||
|
|
|
|
|
|
|
|
|
|
|
||
|
United Business Bank |
|
286,915 |
13.39 |
% |
291,596 |
13.84 |
% |
||||
|
Minimum requirement for "Well Capitalized" |
|
171,368 |
8.00 |
% |
168,549 |
8.00 |
% |
||||
|
Minimum regulatory requirement |
|
128,526 |
6.00 |
% |
126,412 |
6.00 |
% |
||||
|
|
|
|
|
|
|
|
|
|
|
||
|
Total Risk-Based Capital Ratio |
|
|
|
|
|
|
|
||||
|
BayCom Corp |
|
328,822 |
15.33 |
% |
334,703 |
15.78 |
% |
||||
|
Minimum requirement for "Well Capitalized" |
|
214,450 |
10.00 |
% |
212,072 |
10.00 |
% |
||||
|
Minimum regulatory requirement |
|
171,560 |
8.00 |
% |
169,658 |
8.00 |
% |
||||
|
|
|
|
|
|
|
|
|
|
|
||
|
United Business Bank |
|
311,075 |
14.52 |
% |
313,216 |
14.87 |
% |
||||
|
Minimum requirement for "Well Capitalized" |
|
214,210 |
10.00 |
% |
210,686 |
10.00 |
% |
||||
|
Minimum regulatory requirement |
|
171,368 |
8.00 |
% |
168,549 |
8.00 |
% |
||||
In addition to the minimum capital ratios, the Bank must maintain a capital conservation buffer consisting of Common Equity Tier 1 capital in excess of 2.5% above the required minimum capital ratios to avoid limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses based on the percentage of eligible retained income that may be utilized for such actions. At September 30, 2026, 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, 2026, 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 18 - Regulatory Matters" in the Notes to the Consolidated Financial Statements, included in "Item 8. Financial Statements and Supplementary Data" in our 2025 Annual Report.
BayCom Corp. published this content on November 09, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on November 09, 2026 at 20:06 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]