BayCom Corp (BCML) Q3 2026 earnings review
BayCom lending margin widens, while one-off bond sales cut profit
BayCom Corp, the California parent of United Business Bank, expanded its core lending profit while taking deliberate losses on older investments. Reported profit fell to $0.10 per share because executive vice chairman William Black sold low-yielding bonds and preferred stock, cutting earnings by about $0.50 per share. Excluding those actions, profit per share was about $0.60 by our math, as the lending spread reached 4.11%.
| Net interest income | $25.6M +9.2% from a year ago |
|---|---|
| Net interest margin | 4.11% +0.43 percentage points from a year ago |
| Profit per share, excluding one-offs | $0.60 by our math; $0.10 reported after $0.50 repositioning drag |
| Loans 30–89 days past due | $12.4M $2.2M last quarter |
⚖️ Verdict: 🟢 Bullish
The story got better because the new leadership team cleaned up the balance sheet while growing both loans and low-cost deposits. Selling old bonds at 3.79% to buy new ones at 5.01% locks in higher interest income for coming quarters, and executive severance charges are now behind the bank. One caution: loans 30 to 89 days past due jumped by $10 million, led by a single $8.5 million hotel loan.
The question now is whether that delinquent hotel loan is a temporary late payment or the start of another commercial real estate write-off. If the borrower catches up, the wider lending spread and higher bond yields will flow straight to profit; if it defaults, credit provisions will eat up those gains. Fourth-quarter nonaccrual loan balances and credit provisions will settle it.
🐂 Bull Case
Deposit Costs Held Steady While Lending Margin Expanded
BayCom Corp, the California parent of United Business Bank, makes most of its money on the spread between loan interest and deposit interest. Chief executive Christopher Baron said the average cost of deposits rose one hundredth of a percentage point from last quarter to 1.57%, "despite competitive pressure and the Fed’s September rate increase". Over the same period, the yield on average loans climbed 0.12 percentage points to 5.72%.
- Net interest margin (the profit spread on earning assets): 4.11%, up 0.16 percentage points from last quarter
- Net interest margin vs a year ago: up 0.43 percentage points from 3.68%
- Net interest income: $25.6 million, up 7.7% from last quarter and 9.2% from a year ago
- Interest-free deposits: $574.2 million, or 25.1% of total deposits
This spread widened because new loans carried higher rates while deposit pricing barely budged. Compared with a year ago, interest expense fell 22.7% because the bank paid off its expensive subordinated debt last year and paid lower rates on certificates of deposit. Holding deposit costs down while writing higher-rate loans lifts recurring profit before any portfolio changes take effect.
What to watch: the share of interest-free deposits in the fourth quarter. If that share keeps slipping below 25%, the bank will have to fund future loan growth with higher-rate money market accounts.
Bond Sale Trades One-Off Loss for Higher Yield
"This quarter we took several deliberate actions to strengthen future earnings," executive vice chairman William Black said. The bank sold $106.8 million of available-for-sale bonds yielding 3.79%, taking a $6.8 million pre-tax loss, and reinvested $109.3 million into shorter-term bonds yielding 5.01%. Black said these moves, along with preferred stock sales and staff cuts, reduced third-quarter profit by about $0.50 per share.
Adding that $0.50 drag back to the reported $0.10 per share gives $0.60 per share excluding one-offs by our math, up 30% from $0.46 a year ago. The 1.22 percentage point yield pickup on the reinvested bonds adds about $1.3 million of yearly interest income by our math. Because the bank had already recorded the bond value drop in shareholders' equity, selling them barely changed tangible book value per share.
What to watch: average yield on investment securities in the fourth quarter. A full quarter with the new bonds should push the portfolio yield above 5.00% from 4.82% in the third quarter.
Loan Growth Returned Through Home and Apartment Lending
After shrinking in the first quarter and growing slowly in the second, the loan book expanded 3.7% from last quarter to $2.15 billion. The bank originated $146.2 million of new loans and bought $51.8 million, easily outpacing $117.4 million in customer repayments. Baron noted that home mortgages, apartment buildings and commercial business lending led the increase, while non-owner occupied commercial real estate loans shrank 7.3% from a year ago.
Shifting toward residential and apartment loans reduces the bank's reliance on commercial real estate, which still makes up 63% of total loans. However, purchasing $51.8 million of loans — up from $3.2 million in the first quarter — means a third of the gross additions came from outside originations rather than the bank's own relationship teams.
What to watch: quarterly loan originations versus loan purchases in the fourth quarter. Originations staying above $120 million without heavy purchases would show the realigned banking teams are winning business on their own.
🐻 Bear Case
Early Loan Delinquencies Multiplied on One Hotel Loan
United Business Bank highlighted that its classified assets — loans graded substandard or doubtful — fell 11.1% from last quarter to $31.7 million, and net loan write-offs dropped to $13,000 from $2.8 million. That headline improvement hides a jump in early-stage trouble: accruing loans 30 to 89 days past due rose from $2.2 million in June to $12.4 million in September.
- Loans 30–89 days past due: $12.4 million, up $10.2 million from last quarter
- New delinquent commercial real estate loans: four loans totaling $10.5 million, including one $8.5 million hotel loan
- Nonaccrual loans (no longer paying interest): $10.5 million, up $1.4 million after one $3.3 million commercial real estate loan defaulted
- Loan loss reserve: 1.10% of total loans, down from 1.11% last quarter
This matters because the 30-to-89-day bucket is the pipeline for future defaults and credit loss provisions. During the third quarter, the bank set aside $843,000 for credit losses, down from $5.2 million in the second quarter. If the $8.5 million hotel loan does not cure, the bank will have to move it to nonaccrual status and book a much larger credit provision.
What to watch: accruing loans 30 to 89 days past due and nonaccrual balances in the fourth-quarter report. A drop in early delinquencies without a matching rise in nonaccrual loans would show the hotel borrower caught up on payments.
Operating Expenses Rose Faster Than Lending Income
Black said the company is looking for ways to improve legacy cost structures after taking $10.5 million in severance charges for three departing executives last quarter. Yet third-quarter noninterest expense — overhead costs like staff pay, branches and software — reached $17.7 million, up 10.7% from $15.9 million a year ago. Even stripping out $192,000 of third-quarter severance, overhead grew 9.5% from a year ago, outpacing the 9.2% rise in net interest income.
Salaries and employee benefits rose $1.1 million, or 10.4% from a year ago, to $11.2 million on higher base wages, employee insurance claims, loan-growth bonus accruals and stock awards. Other operating expenses climbed $593,000, or 37.1%, to $2.2 million because of higher legal and professional fees. By our math, salaries and benefits took 41.3% of revenue excluding securities losses, up 0.4 percentage points from a year ago.
What to watch: quarterly noninterest expense in the fourth quarter. A drop back toward $16.5 million would show that the elevated legal bills and staff realignment costs were temporary.
👓 Other Themes
New Leadership Realigned Staff and Exited Preferred Stock
Following April's leadership change, Black and Baron continued reshaping the balance sheet and workforce. The bank sold $7.8 million of preferred stock "to eliminate the market volatility impact on future earnings from these securities", booking a $589,000 loss and leaving $2.7 million in equity holdings. It also began restructuring its $24.9 million bank-owned life insurance portfolio and realigned relationship teams "around our most productive talent and markets", reducing headcount by six to 323.
💲 Other KPIs
Total deposits grew $122.3 million, or 5.6% from last quarter, reversing a 4.2% drop in the second quarter, and rose 2.9% from a year ago. Growth came from new customer balances and bringing deposits back onto the balance sheet from partner-bank sweep networks. The cash influx let the bank pay off all $25.0 million of overnight borrowings.
Classified assets — loans the bank grades as substandard or doubtful because the borrower shows financial weakness — fell 11.1% from last quarter and 41.4% from $54.1 million a year ago. It is the third straight quarterly decline, aided by the payoff of four nonaccrual loans totaling $1.8 million and the sale of a $1.0 million nonperforming loan.
Net worth per share excluding goodwill and other intangible assets dipped $0.06 from $27.04 last quarter and rose 0.4% from $26.88 a year ago. The $0.30 quarterly dividend exceeded reported profit of $0.10 per share, but a $1.3 million reduction in unrealized bond losses offset most of the retained earnings drop.
🔮 Guidance
New. Black said the bank expects "to recoup the costs of these actions within approximately three years" after selling $106.8 million of bonds at a $6.8 million loss and starting to restructure its life insurance policies. Reinvesting $109.3 million at a 5.01% yield adds 1.22 percentage points of yield, or about $1.3 million a year by our math, leaving the rest of the payback to come from the insurance restructuring.
❓ Key Questions
What is the status of the $8.5 million hotel loan?
Four commercial real estate loans totaling $10.5 million fell 30 to 89 days past due this quarter, led by one $8.5 million hotel loan. Whether the borrower is catching up or heading toward default determines if credit provisions stay low in the fourth quarter.
How much will the life insurance restructuring cost and yield?
Black said the bond sale and bank-owned life insurance restructuring together should pay back their costs in about three years. By our math, the bond yield pickup covers about $4 million over three years, leaving a $2.8 million gap that the undisclosed insurance terms must explain.
How much deposit growth came from balance-sheet sweep retention?
Deposits rose $122.3 million, partly because the bank kept customer sweep balances on its own balance sheet rather than placing them with partner banks. Knowing how much came from that policy shift versus new customer relationships clarifies the true funding momentum.
When will acquired loans moved to the general pool be re-underwritten?
The company moved $58.9 million of seasoned acquired loans into its general loan pool in the second quarter, and noted that most had not been renewed or re-underwritten in the third quarter. Re-underwriting them will test whether those borrowers meet current credit standards.