Executive Summary / Key Takeaways

• Strategic Growth and Shareholder Returns: BayCom Corp (BCML) is executing a dual growth strategy of strategic acquisitions and organic expansion, successfully expanding its commercial banking franchise across the Western US, while consistently increasing shareholder returns through dividend hikes and share repurchases.
• Robust Financial Performance: The company demonstrated strong financial momentum in Q2 and H1 2025, with net income increasing by 13.6% and 5.1% year-over-year, respectively, driven by expanding net interest income and improved efficiency, despite a dynamic interest rate environment.
• Net Interest Margin Expansion: BCML's annualized net interest margin improved to 3.77% in Q2 2025 and 3.80% in H1 2025, reflecting effective asset-liability management and higher yields on interest-earning assets that outpaced rising funding costs.
• Digital Integration and Deposit Management: Leveraging a comprehensive suite of digital banking services and strategic partnerships like the IntraFi Network, BCML is enhancing client experience and generating noninterest income, effectively managing deposit composition shifts towards interest-bearing accounts.
• Credit Quality Under Scrutiny: While overall credit losses remain low, an increase in nonperforming assets, particularly within commercial real estate and industrial portfolios, warrants close monitoring, reflecting elevated credit risk in specific segments.

A Regional Powerhouse with a Clear Vision

BayCom Corp, established in 2004 and headquartered in Walnut Creek, California, operates through its wholly-owned subsidiary, United Business Bank. The bank provides a broad spectrum of financial services to small and mid-sized businesses, service professionals, and individuals across its 34 full-service branches. Its geographic footprint spans California, Nevada, Washington, New Mexico, and Colorado, offering a diversified market presence.

Since 2010, BayCom has pursued an aggressive growth strategy, completing ten strategic acquisitions that have expanded its reach and enhanced operational efficiency. This inorganic growth is complemented by organic expansion, as the company capitalizes on opportunities within its metropolitan and community markets to grow its client base and interest-earning assets. This dual approach underpins the company's primary objective: to enhance shareholder value and generate consistent earnings growth.

The Digital Edge: Enhancing Service and Efficiency

In today's competitive banking landscape, technological prowess is not merely an advantage but a necessity. BayCom Corp offers a comprehensive suite of digital banking services, including online and mobile banking, automated teller machines, remote deposit capture, and treasury management solutions. These services encompass balance reporting, account transfers, wire transfer initiation, ACH origination, and stop payments, providing essential tools for its business-focused clientele.

A notable operational detail is the company's use of the IntraFi Network for services like CDARS and ICS money market products. This strategic integration allows BCML to offer enhanced deposit insurance options to customers, contributing to an increase in service charges and other fees, thereby boosting noninterest income. The company's data processing expenses increased due to newly implemented services in 2025, indicating ongoing investment in its technological infrastructure. While specific quantifiable performance metrics for its proprietary technology are not detailed, these investments are crucial for maintaining competitiveness, improving operational efficiency, and adapting to rapid technological changes, including advancements in artificial intelligence and cybersecurity.

Competitive Arena: Standing Tall Among Regional Rivals

BayCom operates in a highly competitive regional banking market, contending with both direct and indirect rivals. Direct competitors include institutions like Columbia Banking System (COLB), Pacific Premier Bancorp (PPBI), and Heritage Commerce Corp (HTBK), all vying for similar commercial and real estate lending opportunities in the Western US. BCML distinguishes itself through its localized expertise and strong community relationships, which foster customer loyalty and enable tailored service delivery for underserved segments, particularly small businesses.

However, BCML's smaller scale and more concentrated geographic presence present vulnerabilities compared to larger peers like COLB, which may possess greater operational efficiencies and a stronger brand. While BCML's agility and personalized approach can lead to superior customer retention and potentially better pricing power in niche markets, it may lag in overall growth rates and innovation speed compared to rivals who can deploy more aggressive expansion strategies or invest more heavily in advanced digital tools. For instance, BCML's TTM Net Profit Margin of 17.38% is competitive, but COLB's 18% and PPBI's 19% suggest slightly higher profitability, while HTBK's 16% is comparable. Similarly, BCML's Debt/Equity Ratio of 0.26 is favorable compared to COLB's 0.76 and PPBI's 0.09, indicating a prudent approach to leverage.

Indirect competition from fintech companies like Block, Inc. (SQ) and PayPal (PYPL), along with larger national banks, also poses a threat. These players offer accessible digital payment and lending platforms that can be substantially easier to implement for tech-savvy businesses, potentially eroding BCML's market share and pressuring margins. BayCom's strategic response involves emphasizing its high-quality, relationship-based client service and continuously enhancing its comprehensive suite of banking products to maintain its competitive edge.

Financial Momentum: Growth in a Shifting Rate Environment

BayCom Corp delivered a strong financial performance in the second quarter and first half of 2025, underscoring its operational effectiveness. Net income for Q2 2025 rose by 13.6% year-over-year to $6.4 million, with diluted earnings per share (EPS) increasing to $0.58 from $0.50. For the first half of 2025, net income grew by 5.1% to $12.1 million, and diluted EPS reached $1.09, up from $1.01 in the prior-year period.

A key driver of this performance was the expansion in net interest income, which increased by $865,000 (3.9%) in Q2 2025 to $23.2 million, and by $1.4 million (3.0%) in H1 2025 to $46.0 million. This growth was primarily fueled by higher yields on interest-earning assets, particularly loans and investment securities. The average loan yield increased by 22 basis points to 5.63% in Q2 2025, benefiting from rising rates on variable-rate loans and new originations at higher market rates. Similarly, the average yield on investment securities rose by 18 basis points to 4.68%.

The annualized net interest margin (NIM) improved to 3.77% in Q2 2025 (from 3.69% in Q2 2024) and to 3.80% in H1 2025 (from 3.71% in H1 2024). This expansion demonstrates effective asset-liability management, as the increase in yields on interest-earning assets outpaced the rise in the cost of interest-bearing liabilities. The efficiency ratio also showed significant improvement, reaching 63.85% in Q2 2025 (down from 67.34%) and 64.79% in H1 2025 (down from 66.49%), reflecting higher net interest income and a modest reduction in noninterest expenses.

Total loans increased by $47.4 million (2.4%) to $2.00 billion at June 30, 2025, driven by $227.2 million in new originations and $20.6 million in purchases. This growth was partially offset by $199.8 million in repayments and $3.4 million in loan sales. Total deposits, however, decreased by $47.4 million (2.1%) to $2.19 billion, primarily due to a $72.9 million reduction in noninterest-bearing demand deposits. This shift reflects a broader industry trend of customer migration towards interest-bearing products in response to the prevailing rate environment, which management is actively monitoring through its deposit mix and pricing strategies.

Prudent Capital Management and Shareholder Returns

BayCom Corp maintains a strong capital position, with its banking subsidiary, United Business Bank, consistently achieving "Well Capitalized" status under Federal Reserve regulations. This robust capital base provides flexibility for strategic initiatives and resilience against economic fluctuations. Shareholders' equity increased by $6.2 million to $330.6 million at June 30, 2025, primarily due to net income and other comprehensive income, which included unrealized gains on available-for-sale securities.

The company has demonstrated a clear commitment to returning value to shareholders. In May 2025, the Board of Directors increased the quarterly cash dividend by 33% to $0.20 per share, followed by another 25% increase to $0.25 per share in August 2025. This consistent dividend growth signals management's confidence in future earnings and financial stability.

Additionally, BayCom actively manages its capital through share repurchase programs. In the first half of 2025, the company repurchased 199,243 shares for $5.2 million, with 264,855 shares remaining available under the current program.

Credit Quality and Risk Vigilance

While BayCom's financial performance shows strength, an increase in nonperforming assets (NPAs) warrants investor attention. NPAs rose by $6.9 million to $16.4 million, representing 0.82% of total loans at June 30, 2025, up from 0.48% at December 31, 2024. This increase primarily reflects elevated credit risk within the commercial and industrial (C&I) and commercial real estate (CRE) portfolios, with seven new CRE loans totaling $5.2 million placed on nonaccrual status.

The allowance for credit losses (ACL) for loans increased to $18.7 million (0.94% of total loans) at June 30, 2025, from $17.9 million (0.92%) at December 31, 2024. This adjustment was driven by loan growth, an increased reserve for pooled and individually evaluated loans, and changes in portfolio mix, including growth in higher-risk categories. Management's assessment also incorporated modest changes in forecasted economic conditions, such as an increase in national unemployment partially offset by an improvement in projected national GDP. Net charge-offs were significantly lower in H1 2025 at $115,000, compared to $3.2 million in H1 2024, indicating a more contained credit loss environment in the current period.

A significant risk factor is the concentration of loans in commercial real estate, which, in management's judgment, could be adversely impacted by a decline in the general economy or real estate values in its primary market areas. Furthermore, approximately 11.2% of the company's deposits were derived from its top ten depositors at June 30, 2025, down from 13.6% at December 31, 2024, highlighting a need for continued diversification of its funding base.

Outlook: Sustaining Momentum Amidst Macro Headwinds

BayCom Corp's outlook is anchored in its proven strategy of balanced growth and prudent financial management. The company's consistent dividend increases and ongoing share repurchase program signal a commitment to shareholder returns, which are expected to continue, subject to Board discretion. While specific quantitative guidance for future earnings or revenue is not provided, the recent financial performance, particularly the expanding net interest margin and improving efficiency ratio, suggests a positive trajectory.

The company's ability to adapt to a dynamic interest rate environment and manage its deposit mix will be crucial. Continued investment in digital banking services and strategic partnerships will be essential to enhance client experience and maintain competitiveness against both traditional and fintech rivals. BayCom's exposure to macroeconomic factors, including employment levels, inflation, and potential recessionary pressures, remains a key consideration. The management's ongoing assessment of credit risk, particularly within its commercial loan portfolios, will be vital for sustaining long-term financial health.

Conclusion

BayCom Corp presents a compelling investment thesis built on a foundation of strategic expansion, disciplined financial management, and a commitment to shareholder value. The company's history of successful acquisitions, coupled with organic growth initiatives, has established a robust regional banking franchise. Recent financial results demonstrate strong operational execution, highlighted by expanding net interest income, improved efficiency, and a healthy capital position.

While the increase in nonperforming assets and concentrations in commercial real estate warrant careful monitoring, management's proactive approach to credit loss provisioning and liquidity management provides a degree of resilience. BayCom's strategic integration of digital banking solutions, including its leverage of the IntraFi Network, positions it to enhance customer service and generate noninterest income in an evolving industry. For investors seeking exposure to a well-managed regional bank with a clear growth strategy and a track record of returning capital, BayCom Corp offers a promising opportunity for sustained returns.