Description
BayCom (BCML) is a small well run West Coast bank in strong markets that is not widely followed. We believe it is currently priced 25% below fair value and can continue to grow EPS 10+% moving forward.
Company Description
BayCom Corp is a bank holding company headquartered in Northern California. United Business Bank, its wholly owned banking subsidiary, is a California state-chartered bank which provides a broad range of financial services primarily to local small and mid-sized businesses, service professionals and individuals. It has grown organically and through acquisitions. It is currently generating an ROA of 1.3% and trades at just 1.5 of tangible book.
Background
The Bank was founded in 2004 by George Guarini, who still serves as Chief Executive Officer. To management’s credit the bank avoided much of the malaise in the credit crisis of 2008. Instead, the economic recession served as a springboard to grow as other banks struggled during the recession. They declined receiving TARP funds, and grew organically while others shrank.
One of the overall visions of the bank is to be a strategic consolidator of West Coast banks and a career destination for experienced bankers who want to work in an entrepreneurial culture. Since 2010, BayCom completed six acquisitions with total assets $1.4 billion. They have expanded from Northern California, to Southern California, Seattle and New Mexico.
Acquisitions
2011- Global Trust Bank
2014- Community Bank of San Joaquin
2015- Valley Community Bank
2017- United Business Bank
2017- Plaza Bank
2017- MyBank
2018- Uniti Financial
The largest most transformative acquisition was that of United Business Bank in 2017.
IPO
In May of 2018, MyCom had an underwritten IPO raising $67 million and began to trade under the ticker BCML.
Its most recent acquisition in December of Uniti Financial recently closed. It was a $350 million asset bank with 3 branches in Southern California (Orange County).
Geographic Regions
San Francisco/Oakland, CA
San Jose/Santa Clara, CA
Stockton/Lodi, CA
Los Angeles/Anaheim, CA
Seattle/Tacoma, WA
Albuquerque, NM
Sacramento/Roseville, CA
Napa/Sonoma, CA
Corporate Strategy-Organic and Acquisitions
BCML’s principal objective is to increase shareholder value and generate consistent earnings growth by expanding its commercial banking franchise through both strategic acquisitions and organic growth. This strategy of selectively acquiring and integrating banks allows economies of scale and improved overall efficiency. The acquisitions have also allowed BCML to diversify its risk geographically and by customer type. The bank serves various multi-cultural communities including Korean, Indian, and Latino.
Its geographic footprint provides access to low cost, stable core deposits in community markets that is used to fund commercial loan growth.
BCML is solely focused on business banking. It offers a full suite of products from commercial mortgages, business loans, merchant card processing and other various banking products. Commercial Real Estate represents about 65% of loans while Commercial and Industrial loans sit at around 15%.
Pipeline of Acquisitions: The list of banks within its target footprint sits at almost 200 banks with assets of about $15 billion.
Management
Management could adequately be described as seasoned and has been through a few cycles. We view this as a positive given where we are in today’s cycle. The Founder CEO George Guarini is 64 years old and previously was President of Summit Bank, and served in various leadership roles for Imperial Bank, and an SVP for California Republic Bank.
The Chairman of the bank is 71 years old and formerly worked for the US Treasury Department in the IRS. He has worked for First Nationwide Bank and Independence Saving and Loan. He has over 25 years experience in the banking industry.
Insiders own about 5% of the company
Earnings Model
|
In Millions
|
2019
|
2020
|
|
Net Interest Income
|
70
|
78
|
|
Non Interest Income
|
8
|
10
|
|
Revenue
|
78
|
88
|
|
Operating Expense
|
45
|
48
|
|
Pretax
|
33
|
40
|
|
Tax
|
8
|
10
|
|
Net Income
|
25
|
30
|
|
EPS
|
2.15
|
2.50
|
| |
|
|
|
YE Balance Sheet
|
|
|
|
Total Assets
|
1,900
|
1,950
|
|
Total Loans
|
1,280
|
1,310
|
|
Total Deposits
|
1,750
|
1,810
|
|
Tangible Book/share
|
17.70
|
20.20
|
Valuation
BCML is a well run growing bank in strong economic regions that generates a ROA of 1.3% going to 1.5% next year. It is business only and has a loyal diverse customer base and has visibility to grow from a small asset base. For this reason, we believe it should trade at the high end of small bank valuations at approximately 1.8 book or 14X earnings. Vs. 1.3x and 11x today. Based on next year’s numbers, the stock looks even cheaper.
Risks
The economy, integrating acquisitions, bad loan underwriting, major West Coast earthquake.
I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise do not hold a material investment in the issuer's securities.
Catalyst
Earnings
More Analyst Coverage
More accretive acquisitions