BCML — Q2 2026 Financial Report Analysis

A $7 million loss from executive severance, while the core bank widened its margin and cleaned up bad loans

BayCom Corp, the holding company for United Business Bank (34 branches across California, Washington, New Mexico, Colorado and Nevada), reported a Q2 2026 net loss of $7.0 million, or $(0.64) per diluted share, versus a $6.4 million profit ($0.58) a year earlier. The loss is almost entirely the cost of a leadership change: $10.5 million of severance, accelerated stock-award vesting and benefit costs tied to the departure of three senior executives. Underneath that, net interest income — what the bank earns on loans and securities minus what it pays depositors — rose 2.5% year over year, its net interest margin widened to 3.95% from 3.77%, and nonperforming loans fell by more than 40% in a quarter, helped by selling $7.7 million of problem loans. The less comfortable parts: a $2.8 million charge-off (a loan written off as uncollectible), a $95.5 million drop in deposits in the quarter, and a lower capital cushion than a year ago.

At a glance

• $10.5 million of executive-departure costs — more than the whole quarter's pre-tax loss of $7.2 million. Without them the bank would have earned about $3.3 million before tax (our calculation), still well below last year because of a much larger loan-loss provision.
• Net interest margin of 3.95% (up from 3.77%) — the bank kept more of each dollar of interest, mainly because it paid less on deposits (cost of deposits 1.56% vs 1.71%) and retired its $63.8 million of subordinated debt, which had cost $892,000 a quarter.
• Nonperforming loans down to 0.47% of loans from 0.83% — mostly because the bank sold two nonaccrual loans ($7.7 million), part of what management calls "exiting certain loan relationships that do not fit our go-forward business model."

The quarter in numbers

For the first half, net income was $1.2 million ($0.11 per share), down from $12.1 million ($1.09).

What happened: three separate stories

1. A one-time leadership cost. Salaries and benefits jumped to $21.0 million from $9.7 million a year earlier. The release attributes $10.5 million to "severance, accelerated equity award vesting, and employee benefit costs associated with the previously announced departures of three senior executives," and describes it as the "full and one-time" cost. Other expenses rose a further $493,000 versus Q1, mainly professional and legal fees tied to the transition. That pushed the efficiency ratio — the share of revenue eaten by operating costs — to 107.7%, meaning costs exceeded revenue this quarter; in Q1 it was 61.7%.

2. The lending business is earning more per dollar. Net interest income rose to $23.7 million from $23.2 million despite total interest income falling, because interest expense dropped faster: deposit costs fell $810,000 and the subordinated debt that cost $892,000 in Q2 2025 is gone (redeemed in 2025). Against Q1 2026, the margin slipped to 3.95% from 4.11%, but Q1 had been lifted by $1.2 million of one-off accretion and interest recovery from a single loan payoff (worth 23 basis points of loan yield) and a $330,000 special dividend from the Federal Home Loan Bank; Q2 instead absorbed $380,000 of premium amortization on acquired loans (8 basis points). Adjusting for those, the underlying margin was roughly stable quarter on quarter.

3. Credit: fewer bad loans, but a real loss. The bank charged off a net $2.8 million in the quarter, versus essentially nothing in Q1 and in Q2 2025, and booked a $5.2 million provision (money set aside for expected future loan losses) to cover that, loan growth, and "increased required reserves on certain individually evaluated loans." Nonperforming loans fell to $9.8 million from $16.7 million — driven by the sale of two nonaccrual loans ($7.7 million) and one payoff ($685,000), partly offset by two new nonaccrual commercial real estate loans ($3.5 million). Classified (substandard or worse) assets fell to $35.6 million from $43.8 million. The allowance for credit losses rose to 1.11% of loans from 0.94% a year ago.

What the headline numbers hide

• The severance is mostly not yet paid in cash. "Accrued expenses" rose to $18.5 million at June 30 from $9.6 million at the start of the year, and common stock rose $1.2 million from accelerated vesting — consistent with much of the $10.5 million being an accrual and a non-cash stock charge. Operating cash flow for the half was $12.1 million, against net income of $1.2 million, so cash generation held up far better than reported profit.
• The tax line didn't cushion the loss much. The effective tax rate was just 3.1%, versus 27.0% a year ago, because part of the executive pay is not tax-deductible under Section 162(m) (the federal limit on deducting pay above $1 million for top executives). A normal ~27% benefit would have cut the loss by about $1.7 million more.
• Loan growth came partly from buying loans. The $63.9 million quarterly loan increase combined $79.8 million of new originations with $63.4 million of purchased loans, against $71.2 million of repayments. Purchased loans add balance quickly but don't come with the customer relationships that bring deposits.
• Deposits went the other way. Total deposits fell $95.5 million (4.2%) in the quarter, mostly in time deposits (CDs fell to $460.9 million from $587.1 million) — the bank appears to have let higher-cost CDs run off, which helps the margin but pushed the loan-to-deposit ratio up to 95.6% from 88.8% and led it to take $25 million of overnight Federal Home Loan Bank advances. Noninterest-bearing deposits, the cheapest funding, fell to 26.6% of deposits from 28.2% a year ago.
• Capital is lower than a year ago, though still strong. The bank's CET1 ratio (core capital as a share of risk-weighted assets; regulators require 6.5% to be "well capitalized") was 13.76%, down from 14.54% in March and 17.35% a year earlier. The release doesn't explain the year-over-year decline; over the same period the holding company retired its $63.8 million of subordinated debt and the loan book grew. At the holding-company level, tangible book value per share still rose 2.2% year on year to $27.04, and tangible equity was 11.62% of tangible assets.
• No buyback effect on EPS. BayCom bought back no shares in the first half of 2026 (it repurchased $5.2 million in the first half of 2025), so the share count is flat at 10.9 million.

Takeaway: BayCom's reported loss is a one-quarter leadership bill, not a sign the bank stopped earning — the margin is wider than a year ago and nonperforming loans are down by 40% — but the new team's clean-up came with a $2.8 million charge-off and shrinking deposits, so the next quarters will show whether it can grow loans without leaning on purchased loans and wholesale borrowing.

Outlook

BayCom gives no earnings guidance. The new CEO, Christopher Baron, says "healthy deposit and loan pipelines" support the coming quarters, and the release calls the $10.5 million "full and one-time," so Q3 should not carry similar charges. The board kept the quarterly dividend at $0.30 per share.

Our read: with severance behind it, the bank's run-rate looks like roughly $25 million of quarterly revenue (Q2's level) and $16.5–17 million of operating costs (Q1 2026's $16.5 million plus some transition-related fees), which implies a return to profit in Q3 if credit costs normalize. The three things to watch are: (1) whether deposits stabilize after the Q2 runoff, because the loan-to-deposit ratio of 95.6% leaves less room to keep growing loans without more borrowing; (2) whether the two new nonaccrual commercial real estate loans and the "individually evaluated" loans lead to more charge-offs; and (3) what the new management team does with its capital — a 13.8% CET1 ratio still leaves room for buybacks, loan growth or acquisitions.