Core Viewpoint - BayCom Corp reported a decrease in net income for the fourth quarter of 2023 compared to both the previous quarter and the same quarter last year, primarily due to a decline in net interest income and an increase in provisions for credit losses, although overall financial condition remains strong [1][2][3]. Financial Performance - Net income for Q4 2023 was $6.4 million, or $0.55 per diluted share, down from $6.6 million in Q3 2023 and $7.6 million in Q4 2022 [1]. - Net interest income decreased by $1.3 million, or 5.2%, from the prior quarter and by $2.9 million, or 11.1%, from the same quarter last year [6][12]. - Noninterest income increased by $1.0 million, or 61.8%, compared to the prior quarter and by $1.8 million, or 196.0%, compared to the same quarter last year [18]. Credit Quality - The provision for credit losses for Q4 2023 was $2.3 million, significantly higher than the provisions of $674,000 in Q3 2023 and $617,000 in Q4 2022 [15]. - Nonperforming loans totaled $13.0 million, or 0.67% of total loans, at the end of Q4 2023, down from $14.3 million, or 0.73%, in Q3 2023 [23]. Deposits and Borrowings - Total deposits were $2.1 billion at December 31, 2023, unchanged from the same date last year but down from $2.2 billion at September 30, 2023 [27]. - Noninterest-bearing deposits decreased to $646.3 million, or 30.3% of total deposits, from $667.3 million, or 30.9%, in the previous quarter [27]. Shareholder Actions - The company repurchased 122,559 shares at an average cost of $19.91 per share during Q4 2023, compared to 239,649 shares at $18.86 in Q3 2023 [5]. - A cash dividend of $0.10 per share was declared on November 28, 2023, and paid on January 12, 2024 [5]. Overall Financial Condition - The company maintained a "well-capitalized" status for regulatory capital purposes as of December 31, 2023 [5]. - Shareholders' equity totaled $312.9 million at December 31, 2023, an increase from $307.3 million at September 30, 2023 [31].

Financial Position - As of September 30, 2023, the company had approximately $2.6 billion in total assets, $2.0 billion in total loans, $2.2 billion in total deposits, and $307.3 million in shareholders' equity[184]. - Total assets increased by $61.1 million, or 2.4%, to $2.6 billion as of September 30, 2023, compared to December 31, 2022[217]. - Cash and cash equivalents rose by $125.1 million, or 70.8%, to $301.9 million at September 30, 2023, driven by a $121.7 million increase in federal funds sold and interest-bearing balances[218]. - Total deposits increased by $74.0 million, or 3.5%, to $2.2 billion as of September 30, 2023, compared to December 31, 2022[250]. - Shareholders' equity decreased by $9.9 million to $307.3 million at September 30, 2023, primarily due to stock repurchases and dividends[257]. Loan Portfolio - The total loan portfolio included $426.6 million, or 21.7%, of acquired loans, while $1.5 billion, or 78.3%, consisted of originated loans[185]. - Loans receivable, net, decreased by $53.2 million, or 2.7%, as of September 30, 2023[217]. - Total loans amounted to $1.968 billion, down 2.6% from $2.021 billion at the end of 2022[222]. - New loan originations amounted to $135.0 million, partially offsetting $180.0 million in loan repayments[220]. - The commercial and industrial loan portfolio decreased by 7.5% to $170.7 million as of September 30, 2023[222]. - The owner-occupied commercial real estate loans decreased by 19.8% to $514.5 million, while non-owner occupied CRE loans increased by 12.6% to $909.9 million[222]. Credit Losses and Allowance - The company established an allowance for credit losses to reflect estimated credit losses in its loan and investment portfolios[192]. - The allowance for credit losses increased by 4.8% to $(19.8) million as of September 30, 2023, from $(18.9) million at the end of 2022[222]. - The allowance for credit losses for loans was $19.8 million, representing 1.01% of total loans as of September 30, 2023, compared to $18.9 million or 0.94% at December 31, 2022[241]. - The company recorded net charge-offs of $399,000 for the nine months ended September 30, 2023, compared to $3.5 million for the same period in 2022[242]. - The allowance for credit losses on loans as a percentage of nonaccrual loans was 138.26% at September 30, 2023, up from 110.27% at September 30, 2022[246]. Income and Expenses - Net income for the three months ended September 30, 2023, was $6.6 million, a decrease of $340,000 or 4.9% compared to the same period in 2022[258]. - Net income for the nine months ended September 30, 2023, increased by $4.9 million or 30.6% to $21.0 million compared to $16.1 million for the same period in 2022[259]. - Interest income for the three months ended September 30, 2023, was $32.8 million, an increase of $5.7 million or 21.0% compared to $27.1 million for the same period in 2022[260]. - Noninterest income decreased by $728,000, or 30.6%, to $1,654,000 for Q3 2023 compared to $2,382,000 for Q3 2022[290]. - Noninterest expense increased by $423,000, or 2.6%, to $16,519,000 for Q3 2023 compared to $16,096,000 for Q3 2022[294]. Interest Rates and Margins - The Federal Reserve has increased the target range for the federal funds rate by 525 basis points since March 2022, with a range of 5.25% to 5.50% as of the latest quarter[190]. - The net interest margin is influenced by changes in market interest rates and the composition of interest-earning assets and liabilities[190]. - The annualized net interest margin for the three months ended September 30, 2023, was 4.03%, compared to 3.99% for the same period in 2022[281]. - Interest expense increased by $5.6 million, or 232.5%, to $8.0 million for the three months ended September 30, 2023, reflecting higher funding costs due to increased market rates[271]. - Average yield on loans increased to 5.42% for the three months ended September 30, 2023, from 4.73% for the same period in 2022[263]. Strategic Initiatives - The company completed the acquisition of Pacific Enterprise Bancorp on February 1, 2022, enhancing its market presence[186]. - The company aims to continue expanding its commercial banking franchise through strategic acquisitions and organic growth, having completed 10 acquisitions since 2010[184]. - The company is focused on enhancing its banking experience by providing a comprehensive suite of banking products and services tailored to client needs[184]. Regulatory and Capital Position - The Bank maintained "Well Capitalized" status under Federal Reserve regulations as of September 30, 2023[311]. - The Common Equity Tier 1 capital ratio for BayCom Corp was 14.12% as of September 30, 2023, exceeding the minimum requirement for "Well Capitalized" status[313]. - As of September 30, 2023, the Bank had a borrowing capacity of $597.6 million with the FHLB of San Francisco, with no borrowings outstanding[300]. Market Risks - Interest rate risk is considered a significant market risk, with assessments conducted quarterly to manage exposure[318].

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-38483 BAYCOM CORP | --- | --- | --- | |----------------------------------------------------------------|----------------- ...

PART I — FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial information for BayCom Corp, including financial statements, management's discussion, market risk disclosures, and controls and procedures [ITEM 1. FINANCIAL STATEMENTS](index=2&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents BayCom Corp's unaudited condensed consolidated financial statements for Q1 2023, detailing balance sheets, income, cash flows, and notes on key accounting policies and acquisitions [Condensed Consolidated Balance Sheets (unaudited)](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20%28unaudited%29) This table presents the unaudited condensed consolidated balance sheets for BayCom Corp as of March 31, 2023, and December 31, 2022 | ASSETS (in thousands) | March 31, 2023 | December 31, 2022 | | :---------------------------------------------------------------------------------------------------------------------------------------------------- | :------------- | :---------------- | | Cash and cash equivalents | $197,538 | $176,815 | | Investment securities available-for-sale (AFS), at fair value, net of allowance for credit losses of $1,100 at March 31, 2023 and $0 at December 31, 2022 | 165,261 | 167,761 | | Loans, net of allowance for credit losses of $20,400 at March 31, 2023 and $18,900 at December 31, 2022 | 2,024,136 | 2,002,224 | | Total assets | $2,548,060 | $2,513,334 | | LIABILITIES AND SHAREHOLDERS' EQUITY (in thousands) | | | | Noninterest and interest bearing deposits | $2,127,769 | $2,085,479 | | Total liabilities | 2,234,588 | 2,196,185 | | Total Shareholders' equity | 313,472 | 317,149 | [Condensed Consolidated Statements of Income (unaudited)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20%28unaudited%29) This table presents the unaudited condensed consolidated statements of income for BayCom Corp for the three months ended March 31, 2023 and 2022 | (In thousands, except for share and per share data) | Three months ended March 31, 2023 | Three months ended March 31, 2022 | | :-------------------------------------------------- | :-------------------------------- | :-------------------------------- | | Total interest and dividend income | $30,056 | $24,805 | | Total interest expense | 4,799 | 2,452 | | Net interest income | 25,257 | 22,353 | | Provision for credit losses | 1,375 | 7 | | Net interest income after provision for credit losses | 23,882 | 22,346 | | Total noninterest income | 2,457 | 4,399 | | Total noninterest expense | 16,529 | 18,321 | | Income before provision for income taxes | 9,810 | 8,424 | | Provision for income taxes | 2,764 | 1,936 | | Net income | $7,046 | $6,488 | | Basic earnings per common share | $0.55 | $0.51 | | Diluted earnings per common share | $0.55 | $0.51 | [Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29%20%28unaudited%29) This table presents the unaudited condensed consolidated statements of comprehensive income (loss) for BayCom Corp for the three months ended March 31, 2023 and 2022 | (In thousands) | Three months ended March 31, 2023 | Three months ended March 31, 2022 | | :------------- | :-------------------------------- | :-------------------------------- | | Net income | $7,046 | $6,488 | | Other comprehensive loss, net of tax | (1,152) | (6,952) | | Total comprehensive income (loss) | $5,894 | $(464) | [Condensed Consolidated Statements of Changes in Shareholders' Equity (unaudited)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Shareholders%27%20Equity%20%28unaudited%29) This table presents the unaudited condensed consolidated statements of changes in shareholders' equity for BayCom Corp for the three months ended March 31, 2023 | (In thousands, except for share data) | Balance, December 31, 2022 | Net income | Other comprehensive loss, net | Cumulative change from adoption of ASU 2016-13, net of tax | Cash dividends of $0.10 per share | Stock based compensation | Repurchase of shares | Balance, March 31, 2023 | | :------------------------------------ | :------------------------- | :--------- | :---------------------------- | :--------------------------------------------------------- | :-------------------------------- | :----------------------- | :------------------- | :---------------------- | | Total Shareholders' Equity | $317,149 | $7,046 | $(1,152) | $(491) | $(1,264) | $250 | $(8,066) | $313,472 | [Condensed Consolidated Statements of Cash Flows (unaudited)](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20%28unaudited%29) This table presents the unaudited condensed consolidated statements of cash flows for BayCom Corp for the three months ended March 31, 2023 and 2022 | (In thousands) | Three months ended March 31, 2023 | Three months ended March 31, 2022 | | :------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by operating activities | $7,544 | $2,846 | | Net cash (used in) provided by investing activities | (21,045) | 77,463 | | Net cash provided by (used in) financing activities | 34,224 | (32,797) | | Increase in cash and cash equivalents | 20,723 | 47,512 | | Cash and cash equivalents at end of period | $197,538 | $427,199 | [Notes to Condensed Consolidated Financial Statements (unaudited)](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20%28unaudited%29) This section provides detailed notes to the unaudited condensed consolidated financial statements, explaining accounting policies, acquisitions, and financial instrument specifics [NOTE 1 – BASIS OF PRESENTATION](index=10&type=section&id=NOTE%201%20%E2%80%93%20BASIS%20OF%20PRESENTATION) This note outlines the basis of presentation for the financial statements, including the company's structure and emerging growth company status - BayCom Corp is a bank holding company headquartered in Walnut Creek, California, with its wholly-owned subsidiary, United Business Bank, operating **34 full-service branches** across California, Washington, New Mexico, and Colorado[28](index=28&type=chunk) - The Company qualifies as an 'emerging growth company' (EGC) until December 31, 2023, allowing it to delay adoption of new or revised accounting pronouncements applicable to public companies[31](index=31&type=chunk) [NOTE 2 - ACCOUNTING GUIDANCE NOT YET EFFECTIVE AND ADOPTED ACCOUNTING GUIDANCE](index=10&type=section&id=NOTE%202%20-%20ACCOUNTING%20GUIDANCE%20NOT%20YET%20EFFECTIVE%20AND%20ADOPTED%20ACCOUNTING%20GUIDANCE) This note details the adoption of new accounting guidance, including CECL methodology and ASU 2022-02, and their financial impacts - Effective January 1, 2023, the Company adopted ASU 2016-13 (CECL methodology), resulting in a **$1.5 million increase** in the allowance for credit loss on loans and a **$45,000 increase** for unfunded commitments, with a corresponding after-tax decrease to opening retained earnings of **$491,000**[33](index=33&type=chunk)[35](index=35&type=chunk) - The Company also adopted ASU 2022-02, eliminating recognition measurement guidance for troubled debt restructured (TDR) loans and introducing new disclosure requirements for modifications to borrowers experiencing financial difficulty, with no material impact observed on deferred fees and costs[36](index=36&type=chunk) - The Company has not yet elected to apply amendments from ASU No. 2020-04 and ASU No. 2022-06 regarding Reference Rate Reform (LIBOR transition), but does not expect a material impact on its financial statements[37](index=37&type=chunk)[38](index=38&type=chunk) [NOTE 3 – ACQUISITIONS](index=14&type=section&id=NOTE%203%20%E2%80%93%20ACQUISITIONS) This note provides details on the acquisition of Pacific Enterprise Bancorp, including its financial impact and related noninterest items - On February 1, 2022, BayCom Corp completed the acquisition of Pacific Enterprise Bancorp (PEB) for approximately **$64.1 million**, consisting of **3,032,579 shares** of common stock and **$275,000 in cash**, expanding the Company's market share in California[32](index=32&type=chunk)[41](index=41&type=chunk) - Noninterest income for Q1 2022 included a **$1.6 million bargain purchase gain** from the PEB acquisition, while noninterest expense included **$3.1 million** of nonrecurring acquisition-related expenses[41](index=41&type=chunk)[51](index=51&type=chunk) PEB Acquisition Date Financials (February 1, 2022) | Item | Acquisition Date February 1, 2022 (in thousands) | | :--------------------------------------- | :----------------------------------------------- | | Total assets acquired | $446,135 | | Total liabilities assumed | 380,055 | | Stock consideration | 64,140 | | Cash consideration | 275 | | Bargain purchase gain | $1,665 | [NOTE 4 – INVESTMENT SECURITIES](index=16&type=section&id=NOTE%204%20%E2%80%93%20INVESTMENT%20SECURITIES) This note details the Company's investment securities portfolio, including available-for-sale securities and associated credit loss allowances Investment Securities Available-for-Sale (AFS) Summary (in thousands) | Category | March 31, 2023 Amortized Cost | March 31, 2023 Estimated Fair Value | December 31, 2022 Amortized Cost | December 31, 2022 Estimated Fair Value | | :------------------------------------ | :---------------------------- | :-------------------------- | :----------------------------- | :--------------------------- | | U.S. Government Agencies | $1,502 | $1,502 | $1,505 | $1,505 | | Preferred equity securities | 18,303 | 12,834 | 18,330 | 13,757 | | Municipal securities | 21,045 | 19,862 | 21,099 | 19,557 | | Mortgage-backed securities | 34,714 | 31,121 | 37,199 | 33,010 | | Collateralized mortgage obligations | 29,662 | 27,234 | 28,153 | 25,424 | | SBA securities | 4,158 | 4,094 | 4,381 | 4,305 | | Corporate bonds | 79,400 | 68,614 | 77,900 | 70,203 | | **Total** | **$188,784** | **$165,261** | **$188,567** | **$167,761** | - As of March 31, 2023, the Company held **338 investment securities**, with **209** in an unrealized loss position for over twelve months and **78** for less than twelve months[55](index=55&type=chunk) - A **$1.1 million allowance for credit losses** was recorded for one preferred equity security due to credit quality concerns[57](index=57&type=chunk) [NOTE 5 – LOANS](index=19&type=section&id=NOTE%205%20%E2%80%93%20LOANS) This note provides a detailed breakdown of the loan portfolio, including impaired loans and the impact of new accounting standards Loan Portfolio Summary (in thousands) | Loan Type | March 31, 2023 | December 31, 2022 | | :-------------------------- | :------------- | :---------------- | | Commercial and industrial | $197,573 | $188,538 | | Construction and land | 10,265 | 13,163 | | Commercial real estate | 1,737,927 | 1,704,716 | | Residential | 96,591 | 110,606 | | Consumer | 2,196 | 4,183 | | Total loans | 2,044,552 | 2,021,206 | | Net deferred loan fees | (16) | (82) | | Allowance for credit losses | (20,400) | (18,900) | | Net loans | $2,024,136 | $2,002,224 | - Total loans include **$5.9 million** and **$11.1 million** of PPP loans as of March 31, 2023 and December 31, 2022, respectively[62](index=62&type=chunk) - The Company adopted ASU No. 2022-02 on January 1, 2023, eliminating the TDR classification, but continues to monitor modified loans to borrowers experiencing financial difficulty[66](index=66&type=chunk) - As of March 31, 2023, there were **10 such loans** totaling **$6.1 million**, primarily term modifications[70](index=70&type=chunk) Recorded Investment in Impaired Loans (in thousands) | Category | March 31, 2023 | December 31, 2022 | | :------------------------------------ | :------------- | :---------------- | | Total recorded investment in impaired loans | $13,857 | $15,048 | | Specific allowance on impaired loans | $822 | $1,168 | [NOTE 6 – ALLOWANCE FOR CREDIT LOSSES FOR LOANS](index=29&type=section&id=NOTE%206%20%E2%80%93%20ALLOWANCE%20FOR%20CREDIT%20LOSSES%20FOR%20LOANS) This note details the allowance for credit losses for loans, including the impact of CECL adoption, charge-offs, and nonaccrual loans Allowance for Credit Losses (ACL) for Loans (in thousands) | Item | Three months ended March 31, 2023 | | :------------------------------------ | :-------------------------------- | | Beginning balance | $18,900 | | Impact of CECL adoption | 1,500 | | Charge-offs | (334) | | Recoveries | 19 | | Provision for credit losses | 315 | | Ending balance | $20,400 | - The provision for credit losses for loans in Q1 2023 was primarily due to new loan originations and net charge-offs of **$315,000**, partially offset by improvements in national unemployment and GDP forecasts[94](index=94&type=chunk)[214](index=214&type=chunk) Nonaccrual Loans (in thousands) | Category | March 31, 2023 | December 31, 2022 | | :-------------------------- | :------------- | :---------------- | | Total non-accrual loans | $13,089 | $14,289 | | Interest income recognized on non-accrual loans | $65 | $15 | - The Company has **$26.3 million** of loans enrolled in the CalCAP for Small Business program with a **$13.7 million loss reserve account**, and **$22.7 million** in the On-Road Heavy-Duty Vehicle Air Quality Loan Program with a **$6.3 million loss reserve account**[100](index=100&type=chunk)[101](index=101&type=chunk) [NOTE 7 – PREMISES AND EQUIPMENT](index=33&type=section&id=NOTE%207%20%E2%80%93%20PREMISES%20AND%20EQUIPMENT) This note provides a summary of premises and equipment, net of depreciation and amortization Premises and Equipment, Net (in thousands) | Item | March 31, 2023 | December 31, 2022 | | :------------------------------------ | :------------- | :---------------- | | Premises owned | $11,154 | $11,120 | | Leasehold improvements | 2,259 | 2,259 | | Furniture, fixtures and equipment | 6,901 | 6,760 | | Less accumulated depreciation and amortization | (7,306) | (6,861) | | Total premises and equipment, net | $13,008 | $13,278 | - Depreciation and amortization expense was **$453,000** for Q1 2023, down from **$507,000** in Q1 2022[104](index=104&type=chunk) [NOTE 8 – LEASES](index=33&type=section&id=NOTE%208%20%E2%80%93%20LEASES) This note outlines the Company's operating lease commitments, including remaining lease terms and undiscounted payment schedules - The Company leases **19 branches** under noncancelable operating leases expiring through 2030, with a weighted-average remaining lease term of **5.2 years** and a weighted-average discount rate of **3.1%** as of March 31, 2023[105](index=105&type=chunk)[106](index=106&type=chunk) Undiscounted Lease Payments Maturity Schedule (in thousands) | Period | Amount | | :-------------------------- | :----- | | 2023 (remainder) | $2,862 | | 2024 | 3,997 | | 2025 | 3,175 | | 2026 | 2,423 | | 2027 | 1,936 | | Thereafter | 3,649 | | Total undiscounted payments | 18,042 | | Less: imputed interest | (1,713) | | Present value of lease liabilities | $16,329 | [NOTE 9 – GOODWILL AND INTANGIBLE ASSETS](index=34&type=section&id=NOTE%209%20%E2%80%93%20GOODWILL%20AND%20INTANGIBLE%20ASSETS) This note details the Company's goodwill and core deposit intangible assets, including amortization Goodwill (in thousands) | Item | March 31, 2023 | December 31, 2022 | | :------------------------- | :------------- | :---------------- | | Balance at beginning of period | $38,838 | $38,838 | | Acquired goodwill | — | — | | Impairment | — | — | | Balance at end of period | $38,838 | $38,838 | Core Deposit Intangible (in thousands) | Item | March 31, 2023 | December 31, 2022 | | :------------------------- | :------------- | :---------------- | | Balance at beginning of period | $5,201 | $6,489 | | Additions | — | 756 | | Less amortization | (369) | (2,044) | | Balance at end of period | $4,832 | $5,201 | [NOTE 10 – INTEREST RECEIVABLE AND OTHER ASSETS](index=35&type=section&id=NOTE%2010%20%E2%80%93%20INTEREST%20RECEIVABLE%20AND%20OTHER%20ASSETS) This note provides a breakdown of interest receivable and other assets, including tax assets and accrued interest Interest Receivable and Other Assets (in thousands) | Item | March 31, 2023 | December 31, 2022 | | :-------------------------------------------------------------------- | :------------- | :---------------- | | Tax assets, net | $16,568 | $18,762 | | Accrued interest receivable | 8,101 | 7,659 | | Investment in Small Business Investment Company ("SBIC") fund | 4,711 | 4,389 | | CalCAP reserve receivable | 4,023 | 4,023 | | Total | $43,832 | $45,532 | [NOTE 11 – DEPOSITS](index=35&type=section&id=NOTE%2011%20%E2%80%93%20DEPOSITS) This note details the composition of the Company's deposit base, including demand, savings, money market, and time deposits Deposits (in thousands) | Deposit Type | March 31, 2023 | December 31, 2022 | | :------------------------- | :------------- | :---------------- | | Demand deposits | $705,941 | $773,274 | | NOW accounts and savings | 424,106 | 441,064 | | Money market | 607,782 | 577,792 | | Time deposits | 389,940 | 293,349 | | Total | $2,127,769 | $2,085,479 | - Time deposits include certificates of deposit over **$250 thousand** totaling **$63.7 million** at March 31, 2023, up from **$57.8 million** at December 31, 2022[119](index=119&type=chunk) [NOTE 12 – BORROWINGS](index=35&type=section&id=NOTE%2012%20%E2%80%93%20BORROWINGS) This note outlines the Company's borrowing capacity and outstanding subordinated debt - The Company had no FHLB advances or Federal Funds lines outstanding at March 31, 2023, with available borrowing capacity of **$506.2 million** from FHLB and **$65.0 million** from correspondent banks[120](index=120&type=chunk)[223](index=223&type=chunk)[255](index=255&type=chunk) Subordinated Debt (in thousands) | Debt Type | March 31, 2023 | December 31, 2022 | | :------------------------------------------ | :------------- | :---------------- | | Junior subordinated deferrable interest debentures, net | $8,504 | $8,484 | | Subordinated debt, net | 63,754 | 63,711 | [NOTE 13 – INTEREST PAYABLE AND OTHER LIABILITIES](index=37&type=section&id=NOTE%2013%20%E2%80%93%20INTEREST%20PAYABLE%20AND%20OTHER%20LIABILITIES) This note provides a summary of interest payable and other liabilities, including accrued expenses and unfunded commitments Interest Payable and Other Liabilities (in thousands) | Item | March 31, 2023 | December 31, 2022 | | :------------------------- | :------------- | :---------------- | | Accrued expenses | $5,368 | $8,598 | | Accounts payable | 633 | 452 | | Reserve for unfunded commitments | 320 | 315 | | Accrued interest payable | 1,141 | 1,413 | | Other liabilities | 5,849 | 5,755 | | Total | $13,311 | $16,533 | [NOTE 14 – OTHER EXPENSES](index=37&type=section&id=NOTE%2014%20%E2%80%93%20OTHER%20EXPENSES) This note details the components of other noninterest expenses, such as professional fees and marketing costs Other Expenses (in thousands) | Item | Three months ended March 31, 2023 | Three months ended March 31, 2022 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Professional fees | $447 | $1,306 | | Core deposit premium amortization | 369 | 495 | | Marketing and promotions | 146 | 296 | | Total | $2,001 | $3,312 | [NOTE 15 – EQUITY INCENTIVE PLANS](index=39&type=section&id=NOTE%2015%20%E2%80%93%20EQUITY%20INCENTIVE%20PLANS) This note describes the Company's equity incentive plans, including shares available and compensation expense - The Company has two equity incentive plans: the 2017 Omnibus Equity Incentive Plan (**450,000 shares maximum**, **57,693 shares available** for future issuance as of March 31, 2023) and the 2014 Equity Incentive Plan (no future awards)[128](index=128&type=chunk)[129](index=129&type=chunk) - Total compensation expense for these plans was **$250,000** for Q1 2023, down from **$324,000** for Q1 2022[129](index=129&type=chunk) - Unrecognized compensation cost related to non-vested shares was **$1.3 million** as of March 31, 2023, expected to be recognized over approximately three years[129](index=129&type=chunk) [NOTE 16 – FAIR VALUE MEASUREMENT](index=41&type=section&id=NOTE%2016%20%E2%80%93%20FAIR%20VALUE%20MEASUREMENT) This note explains the Company's fair value measurement hierarchy and details assets measured at fair value on a recurring and nonrecurring basis - The Company uses a three-level hierarchy for fair value measurements, with Level 1 for quoted prices in active markets, Level 2 for observable inputs other than Level 1, and Level 3 for unobservable inputs[133](index=133&type=chunk)[134](index=134&type=chunk) - There were no transfers between levels during Q1 2023 and Q1 2022[136](index=136&type=chunk) Assets Measured at Fair Value on a Recurring Basis (in thousands) | Item | March 31, 2023 Total | March 31, 2023 Level 1 | March 31, 2023 Level 2 | | :------------------------------------ | :------------------- | :------------------- | :------------------- | | U.S. Government Agencies | $1,502 | $1,502 | — | | Preferred equity securities | 12,834 | 12,834 | — | | Municipal securities | 19,862 | — | 19,862 | | Mortgage-backed securities | 31,121 | — | 31,121 | | Collateralized mortgage obligations | 27,234 | — | 27,234 | | SBA securities | 4,094 | — | 4,094 | | Corporate bonds | 68,614 | — | 68,614 | | Total | $165,261 | $12,834 | $152,427 | Assets Measured at Fair Value on a Nonrecurring Basis (in thousands) | Item | March 31, 2023 Total | March 31, 2023 Level 3 | | :------------------------------------ | :------------------- | :------------------- | | Individually evaluated loans | $13,090 | $13,090 | | OREO | 21 | 21 | | Total | $13,111 | $13,111 | [NOTE 17 – FAIR VALUE OF FINANCIAL INSTRUMENTS](index=43&type=section&id=NOTE%2017%20%E2%80%93%20FAIR%20VALUE%20OF%20FINANCIAL%20INSTRUMENTS) This note presents the fair value of the Company's financial assets and liabilities compared to their carrying amounts Fair Value of Financial Assets (in thousands) | Financial Assets | March 31, 2023 Carrying Amount | March 31, 2023 Fair Value | | :------------------------------------ | :----------------------------- | :------------------------ | | Cash and cash equivalents | $197,538 | $197,538 | | Investment securities available-for-sale | 165,261 | 165,261 | | Loans, net | 2,024,136 | 1,970,297 | | Total Financial Assets | $2,389,184 | $2,335,246 | Fair Value of Financial Liabilities (in thousands) | Financial Liabilities | March 31, 2023 Carrying Amount | March 31, 2023 Fair Value | | :------------------------------------ | :----------------------------- | :------------------------ | | Deposits | $2,127,769 | $2,129,654 | | Junior subordinated deferrable interest debentures, net | 8,504 | 8,486 | | Subordinated debt, net | 63,754 | 63,754 | | Total Financial Liabilities | $2,200,027 | $2,201,894 | [NOTE 18 – COMMITMENTS AND CONTINGENCIES](index=45&type=section&id=NOTE%2018%20%E2%80%93%20COMMITMENTS%20AND%20CONTINGENCIES) This note outlines the Company's lending and letter of credit commitments, legal proceedings, and deposit concentration - The Company is not currently party to any legal proceedings expected to have a material adverse effect on its financial condition or operations[148](index=148&type=chunk) Lending and Letter of Credit Commitments (in thousands) | Commitment Type | March 31, 2023 | December 31, 2022 | | :------------------------------------ | :------------- | :---------------- | | Commitments to extend credit | $85,515 | $96,774 | | Standby letters of credit | 878 | 768 | | Total commitments | $86,393 | $97,542 | - At March 31, 2023, approximately **$200.9 million (10.4%)** of deposits were from its top ten depositors, and **$1.0 billion (48.7%)** of total deposits were uninsured[154](index=154&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=48&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's analysis of the Company's financial condition and results for Q1 2023, covering key metrics, accounting policies, and capital adequacy [SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS](index=48&type=section&id=SPECIAL%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This note highlights that the report contains forward-looking statements subject to various risks and uncertainties, including economic and regulatory factors - The report contains forward-looking statements subject to various risks and uncertainties, including economic conditions, integration of acquisitions, credit risks, interest rate changes, deposit outflows, regulatory actions, and technological advancements[156](index=156&type=chunk)[159](index=159&type=chunk) [Executive Overview](index=51&type=section&id=Executive%20Overview) This section provides an executive overview of BayCom Corp's strategic goals, market presence, and key financial metrics - BayCom Corp aims to increase shareholder value and earnings growth through strategic acquisitions and organic growth, expanding its commercial banking franchise across California, Washington, New Mexico, and Colorado[161](index=161&type=chunk)[162](index=162&type=chunk) Key Financial Metrics as of March 31, 2023 (in millions) | Metric | Amount | | :-------------------- | :----- | | Total assets | $2,500 | | Total loans | $2,000 | | Total deposits | $2,100 | | Shareholders' equity | $313.5 | - The loan portfolio consists of **24.3% acquired loans ($497.4 million)** and **75.7% originated loans ($1.5 billion)**[163](index=163&type=chunk) [Discussion of Primary Factors Affecting Results of Operations](index=51&type=section&id=Discussion%20of%20Primary%20Factors%20Affecting%20Results%20of%20Operations) This section discusses the primary factors influencing the Company's results of operations, including net interest income, noninterest income, and expenses [Net interest income](index=51&type=section&id=Net%20interest%20income) This section explains how net interest income, a key profitability driver, is influenced by asset yields, liability costs, and federal funds rate changes - Net interest income is the primary driver of profitability, influenced by yields on interest-earning assets and costs of interest-bearing liabilities[164](index=164&type=chunk) - The Federal Open Market Committee (FOMC) increased the federal funds rate by **475 basis points** since March 2022, including **50 basis points** in Q1 2023, positively impacting variable-rate interest-earning assets[167](index=167&type=chunk) [Noninterest income](index=53&type=section&id=Noninterest%20income) This section describes the components of noninterest income, including service charges, loan sales, and other fees - Noninterest income includes service charges, gain on sale of loans (especially SBA loans), and other fees[168](index=168&type=chunk) [Provision for credit losses](index=53&type=section&id=Provision%20for%20credit%20losses) This section explains the provision for credit losses, established to cover estimated credit losses in loan and investment portfolios - The allowance for credit losses is established to reflect estimated credit losses in loan and available-for-sale investment securities portfolios, considering historical experience, portfolio types, and borrower repayment ability[168](index=168&type=chunk)[169](index=169&type=chunk) [Noninterest expense](index=53&type=section&id=Noninterest%20expense) This section details noninterest expenses, such as salaries, occupancy, and data processing, which generally increase with business growth - Noninterest expense includes salaries, occupancy, data processing, FDIC assessments, professional services, and amortization of intangible assets[170](index=170&type=chunk) - These expenses generally increase with business growth and acquisitions[171](index=171&type=chunk) [Critical Accounting Policies and Estimates](index=55&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section outlines the Company's critical accounting policies and estimates, particularly the adoption and application of the CECL methodology - The Company adopted ASU 2016-13 (CECL methodology) on January 1, 2023, which significantly changed the measurement of expected credit losses for financial assets and off-balance sheet credit exposures[173](index=173&type=chunk) - The CECL methodology for loans incorporates historical experience, current conditions, and reasonable and supportable forecasts over the contractual life of an asset, using quantitative models (PD, LGD, EAD) and qualitative factors[177](index=177&type=chunk)[179](index=179&type=chunk)[182](index=182&type=chunk)[185](index=185&type=chunk)[186](index=186&type=chunk)[187](index=187&type=chunk) - For available-for-sale debt securities, credit-related impairment is recognized as an allowance for credit losses on the balance sheet, limited by the amount fair value is less than amortized cost, with non-credit related impairment recognized in other comprehensive income[174](index=174&type=chunk)[175](index=175&type=chunk) [Comparison of Financial Condition at March 31, 2023 and December 31, 2022](index=61&type=section&id=Comparison%20of%20Financial%20Condition%20at%20March%2031%2C%202023%20and%20December%2031%2C%202022) This section compares the Company's financial condition at March 31, 2023, to December 31, 2022, focusing on asset, liability, and equity changes [Total assets](index=61&type=section&id=Total%20assets) This section analyzes the changes in total assets, primarily driven by increases in net loans and cash equivalents - Total assets increased by **$34.7 million (1.4%)** to **$2.5 billion** at March 31, 2023, primarily driven by a **$21.9 million increase** in net loans receivable and a **$20.7 million increase** in cash and cash equivalents[191](index=191&type=chunk) [Cash and cash equivalents](index=61&type=section&id=Cash%20and%20cash%20equivalents) This section details the increase in cash and cash equivalents, mainly due to federal funds sold and interest-bearing balances - Cash and cash equivalents increased by **$20.7 million (11.7%)** to **$197.5 million** at March 31, 2023, mainly due to an **$18.9 million increase** in federal funds sold and interest-bearing balances in banks[191](index=191&type=chunk) [Securities](index=61&type=section&id=Securities) This section discusses the decrease in investment securities available-for-sale, attributed to unrealized losses and credit loss allowances - Investment securities available-for-sale decreased by **$2.5 million (1.5%)** to **$165.3 million** at March 31, 2023, primarily due to increased unrealized losses (**$1.5 million**) and a **$1.1 million allowance for credit losses** on one preferred equity security[192](index=192&type=chunk) [Loans receivable, net](index=61&type=section&id=Loans%20receivable%2C%20net) This section analyzes the increase in net loans receivable, driven by new originations partially offset by repayments and sales - Loans receivable, net, increased by **$21.9 million (1.1%)** to **$2.0 billion** at March 31, 2023, driven by **$85.1 million** in new originations, partially offset by **$56.3 million** in repayments and **$6.3 million** in sales[193](index=193&type=chunk) Loan Portfolio by Type (in thousands) | Loan Type | March 31, 2023 | December 31, 2022 | % Change | | :-------------------------- | :------------- | :---------------- | :------- | | Commercial and industrial | $193,101 | $184,521 | 4.6% | | Residential | 95,975 | 109,927 | (12.7)% | | Multifamily residential | 243,965 | 234,868 | 3.9% | | Owner occupied CRE | 667,940 | 641,815 | 4.1% | | Non-owner occupied CRE | 801,532 | 807,996 | (0.8)% | | Construction and land | 9,964 | 9,109 | 9.4% | | Consumer | 2,196 | 4,183 | (47.5)% | | PCD loans | 29,879 | 28,787 | 3.8% | | Total Loans | $2,044,552 | $2,021,206 | 1.2% | [Nonperforming assets and loans](index=64&type=section&id=Nonperforming%20assets%20and%20loans) This section details the decrease in nonperforming assets and loans, including the impact of loan renewals and charge-offs - Nonperforming assets decreased by **$2.1 million (14.0%)** to **$13.1 million (0.51% of total assets)** at March 31, 2023, from **$15.2 million (0.61% of total assets)** at December 31, 2022[198](index=198&type=chunk) - Nonperforming loans totaled **$13.1 million (0.64% of total loans)** at March 31, 2023, down from **$15.2 million (0.75% of total loans)** at December 31, 2022, due to the renewal of one loan and the charge-off of five non-accrual loans[198](index=198&type=chunk)[199](index=199&type=chunk) Nonaccrual Loans (in thousands) | Loan Type | March 31, 2023 | December 31, 2022 | | :-------------------------- | :------------- | :---------------- | | Commercial and industrial | $792 | $869 | | Residential | 1,737 | 2,213 | | Multifamily residential | 5,337 | 5,351 | | Owner occupied CRE | 5,178 | 5,491 | | Non-owner occupied CRE | 45 | 365 | | Total nonaccrual loans | $13,089 | $14,289 | [Troubled Loan Modifications](index=64&type=section&id=Troubled%20Loan%20Modifications) This section reports on loan modifications for borrowers experiencing financial difficulty, including performing modified loans - Loan modifications to borrowers experiencing financial difficulty totaled **$6.1 million** at March 31, 2023, with **$768,000** performing according to modified terms, a slight decrease from **$6.3 million** and **$759,000**, respectively, at December 31, 2022[203](index=203&type=chunk) [Allowance for credit losses for loans and unfunded commitments](index=66&type=section&id=Allowance%20for%20credit%20losses%20for%20loans%20and%20unfunded%20commitments) This section details the allowance for credit losses for loans under the CECL framework, including provisions and nonaccrual loan coverage - The allowance for credit losses for loans was **$20.4 million (1.0% of total loans)** at March 31, 2023, under the CECL framework, up from **$18.9 million (0.94% of total loans)** at December 31, 2022, under the ALLL framework[214](index=214&type=chunk)[217](index=217&type=chunk) - A **$275,000 provision for credit losses** for loans was recorded in Q1 2023, compared to **$7,000** in Q1 2022, primarily due to new loan production and net charge-offs of **$315,000**[214](index=214&type=chunk) - The allowance for credit losses for loans as a percentage of nonaccrual loans increased to **155.86%** at March 31, 2023, from **142.35%** at March 31, 2022[217](index=217&type=chunk) [Deposits](index=70&type=section&id=Deposits) This section analyzes the changes in total deposits, including the decrease in noninterest-bearing demand deposits and uninsured deposits - Total deposits increased by **$42.3 million (2.0%)** to **$2.1 billion** at March 31, 2023[221](index=221&type=chunk) - Noninterest-bearing demand deposits decreased by **8.7%** to **$705.9 million**, representing **33.2%** of total deposits[225](index=225&type=chunk) - Uninsured deposits totaled **$1.0 billion** at March 31, 2023, down from **$1.1 billion** at December 31, 2022[221](index=221&type=chunk) [Borrowings](index=70&type=section&id=Borrowings) This section outlines the Company's borrowing status, including FHLB advances, federal funds lines, and subordinated debt - The Company had no FHLB advances or Federal Funds lines outstanding at March 31, 2023[223](index=223&type=chunk) - Junior subordinated debt remained at **$8.5 million**, and subordinated debt increased slightly to **$63.8 million**[224](index=224&type=chunk) [Shareholders' equity](index=72&type=section&id=Shareholders%27%20equity) This section details the decrease in shareholders' equity, primarily due to stock repurchases, cash dividends, and CECL adoption impact - Shareholders' equity decreased by **$3.7 million** to **$313.5 million** at March 31, 2023, primarily due to **$8.1 million** in common stock repurchases, **$1.3 million** in cash dividends, and a **$491,000** after-tax decrease to retained earnings from CECL adoption[227](index=227&type=chunk) - Increased unrealized losses on available-for-sale securities also adversely impacted shareholders' equity by **$1.2 million**[227](index=227&type=chunk) [Comparison of Results of Operations for the Three Months Ended March 31, 2023 and 2022](index=72&type=section&id=Comparison%20of%20Results%20of%20Operations%20for%20the%20Three%20Months%20Ended%20March%2031%2C%202023%20and%202022) This section compares the Company's results of operations for Q1 2023 and Q1 2022, focusing on earnings, income, and expense trends [Earnings summary](index=72&type=section&id=Earnings%20summary) This section summarizes the Company's earnings performance, including net income, diluted EPS, and efficiency ratio improvements - Net income increased by **$558,000 (8.6%)** to **$7.0 million** for Q1 2023, compared to **$6.5 million** for Q1 2022[228](index=228&type=chunk) - Diluted EPS was **$0.55** for Q1 2023, up from **$0.51** for Q1 2022[228](index=228&type=chunk) - The efficiency ratio improved to **59.64%** for Q1 2023, from **68.48%** for Q1 2022, due to lower noninterest expenses and higher revenues[229](index=229&type=chunk) [Interest income](index=72&type=section&id=Interest%20income) This section analyzes the increase in interest income, driven by higher yields and average balances across interest-earning assets - Interest income increased by **$5.3 million (21.2%)** to **$30.1 million** for Q1 2023, driven by higher yields and average balances across all interest-earning asset categories[230](index=230&type=chunk) Interest Income Changes (Q1 2023 vs Q1 2022, in thousands) | Category | Change in Interest Income | | :------------------------------------ | :------------------------ | | Loans, including fees | +$3,300 | | Fed funds sold and interest-bearing balances in banks | +$1,600 | | Investment securities available-for-sale | +$243 | [Interest expense](index=74&type=section&id=Interest%20expense) This section details the increase in interest expense, primarily due to higher average cost of deposits and borrowings - Interest expense increased by **$2.3 million (95.7%)** to **$4.8 million** for Q1 2023, primarily due to a **69 basis point increase** in the average cost of deposits to **1.10%**[236](index=236&type=chunk)[237](index=237&type=chunk) - The average cost of borrowings increased to **6.05%** for Q1 2023, from **5.53%** for Q1 2022[238](index=238&type=chunk) [Net interest income and net interest margin](index=74&type=section&id=Net%20interest%20income%20and%20net%20interest%20margin) This section discusses the increase in net interest income and the improvement in net interest margin, reflecting asset mix and market rates - Net interest income increased by **$2.9 million (13.0%)** to **$25.3 million** for Q1 2023, driven by higher interest income on loans and cash equivalents, partially offset by increased funding costs[239](index=239&type=chunk) - The annualized net interest margin improved to **4.26%** for Q1 2023, from **3.63%** for Q1 2022, reflecting an improved mix of interest-earning assets and higher market interest rates[240](index=240&type=chunk) [Average Balances, Interest and Average Yields/Cost](index=76&type=section&id=Average%20Balances%2C%20Interest%20and%20Average%20Yields%2FCost) This table presents average balances, interest, and average yields/costs for interest-earning assets and interest-bearing liabilities Average Yields/Costs (Q1 2023 vs Q1 2022) | Item | Q1 2023 Average Yield/Cost | Q1 2022 Average Yield/Cost | | :------------------------------------ | :------------------------- | :------------------------- | | Total interest earning assets | 5.07% | 4.03% | | Total interest bearing liabilities | 1.35% | 0.64% | | Interest rate spread | 3.72% | 3.39% | | Net interest margin | 4.26% | 3.63% | [Rate/Volume Analysis](index=77&type=section&id=Rate%2FVolume%20Analysis) This table provides a rate/volume analysis of changes in net interest income for Q1 2023 compared to Q1 2022 Net Interest Income Increase Attributable to Rate/Volume (Q1 2023 vs Q1 2022, in thousands) | Item | Increase/(Decrease) Attributable to Rate | Increase/(Decrease) Attributable to Volume | Total | | :------------------------------------ | :--------------------------------------- | :----------------------------------------- | :---- | | Total interest income | $3,670 | $1,581 | $5,251 | | Total interest expense | $2,396 | $(49) | $2,347 | | Net interest income | $1,274 | $1,630 | $2,904 | [Provision for credit losses](index=77&type=section&id=Provision%20for%20credit%20losses) This section details the provision for credit losses for loans and investment securities, driven by new loan production and economic forecasts - Provision for credit losses for loans was **$275,000** for Q1 2023, up from **$7,000** for Q1 2022, due to new loan production, deteriorating economic forecasts, and **$315,000** in net charge-offs[245](index=245&type=chunk) - An additional **$1.1 million provision** was recorded for investment securities due to credit quality concerns[245](index=245&type=chunk) [Noninterest income](index=77&type=section&id=Noninterest%20income) This section analyzes the decrease in noninterest income, primarily due to the absence of a bargain purchase gain and lower loan sale gains - Noninterest income decreased by **$1.9 million (44.2%)** to **$2.5 million** for Q1 2023, primarily due to the absence of a **$1.6 million bargain purchase gain** recognized in Q1 2022 and a **$725,000 decrease** in gain on sale of loans[246](index=246&type=chunk) Noninterest Income Components (Q1 2023 vs Q1 2022, in thousands) | Item | Q1 2023 | Q1 2022 | % Change | | :------------------------------------ | :------ | :------ | :------- | | Gain on sale of loans | $412 | $1,137 | (63.8)% | | Service charges and other fees | 885 | 630 | 40.5% | | Income on investment in SBIC fund | 489 | 197 | 148.2% | | Bargain purchase gain | — | 1,665 | N/M | | Total noninterest income | $2,457 | $4,399 | (44.1)% | [Noninterest expense](index=78&type=section&id=Noninterest%20expense) This section details the decrease in noninterest expense, mainly due to the absence of acquisition-related expenses from the prior year - Noninterest expense decreased by **$1.8 million (10.0%)** to **$16.5 million** for Q1 2023, mainly due to the absence of **$3.1 million** in nonrecurring acquisition-related expenses from the PEB merger in Q1 2022[248](index=248&type=chunk) - Excluding acquisition-related expenses, noninterest expenses increased by **$1.2 million**, driven by higher salaries and employee benefits (**$1.3 million**) and data processing expenses (**$265,000**)[249](index=249&type=chunk) [Income taxes](index=78&type=section&id=Income%20taxes) This section discusses the increase in provision for income taxes and the effective tax rate, influenced by non-taxable gains in the prior year - Provision for income taxes increased by **$828,000 (42.8%)** to **$2.8 million** for Q1 2023[250](index=250&type=chunk) - The effective tax rate rose to **28.2%** from **23.0%** in Q1 2022, due to the non-taxable bargain purchase gain in the prior year[250](index=250&type=chunk) [Liquidity and Capital Resources](index=79&type=section&id=Liquidity%20and%20Capital%20Resources) This section outlines the Company's liquidity management strategies, borrowing capacity, cash flow activities, and share repurchase programs - The Company manages liquidity daily and long-term, relying on deposits, loan payments, and proceeds from loan sales[251](index=251&type=chunk)[254](index=254&type=chunk) - Liquid assets increased by **$18.2 million** to **$365.0 million** at March 31, 2023[256](index=256&type=chunk) - Available borrowing capacity includes **$506.2 million** from FHLB and **$65.0 million** from federal funds lines, with no outstanding borrowings at March 31, 2023[255](index=255&type=chunk) - Net cash provided by operating activities was **$7.5 million** for Q1 2023, while net cash used in investing activities was **$21.0 million**, and net cash provided by financing activities was **$34.2 million**[257](index=257&type=chunk) - The Board declared a quarterly cash dividend of **$0.10 per share**, payable April 14, 2023[259](index=259&type=chunk) - The Company repurchased **422,877 shares** for **$8.1 million** in Q1 2023, with **58,915 shares** remaining under the existing program and a new program for up to **619,000 shares** approved in April 2023[259](index=259&type=chunk)[262](index=262&type=chunk) [Regulatory Capital](index=82&type=section&id=Regulatory%20Capital) This section confirms United Business Bank's 'Well Capitalized' status and presents its regulatory capital ratios - United Business Bank maintains 'Well Capitalized' status under Federal Reserve regulations, exceeding all minimum capital ratios at March 31, 2023, and December 31, 2022[263](index=263&type=chunk)[265](index=265&type=chunk) Regulatory Capital Ratios (March 31, 2023) | Capital Ratio | BayCom Corp Ratio | United Business Bank Ratio | Minimum Requirement for "Well Capitalized" | | :------------------------------------ | :---------------- | :------------------------- | :----------------------------------------- | | Leverage Ratio | 11.71% | 13.26% | 5.00% | | Common Equity Tier 1 Ratio | 13.99% | 16.41% | 6.50% | | Tier 1 Risk-Based Capital Ratio | 14.46% | 16.41% | 8.00% | | Total Risk-Based Capital Ratio | 18.69% | 17.44% | 10.00% | [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=58&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The Company's significant market risk is interest rate risk, assessed quarterly, with no material change since the 2022 Annual Report - Interest rate risk is a significant market risk for the Company, measured and assessed quarterly, with no material change since the 2022 Annual Report[270](index=270&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=58&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) The Company's disclosure controls and procedures were effective as of March 31, 2023, with no significant changes in internal control over financial reporting - As of March 31, 2023, the Company's disclosure controls and procedures were deemed effective by its principal executive and financial officers[271](index=271&type=chunk)[272](index=272&type=chunk) - There were no significant changes in the Company's internal control over financial reporting during the three months ended March 31, 2023[272](index=272&type=chunk) PART II — OTHER INFORMATION This section provides other information not covered in Part I, including legal proceedings, risk factors, equity sales, and exhibits [ITEM 1. LEGAL PROCEEDINGS](index=59&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The Company is not currently involved in any legal proceedings expected to have a material adverse effect on its financial condition or operations - The Company is not a party to any pending legal proceedings that it believes would have a material adverse effect on its financial condition or operations[275](index=275&type=chunk) [ITEM 1A. RISK FACTORS](index=59&type=section&id=ITEM%201A.%20RISK%20FACTORS) No material changes have occurred in the risk factors previously disclosed in the Company's 2022 Annual Report on Form 10-K - No material changes in the Risk Factors previously disclosed in Item 1A of the 2022 Annual Report[276](index=276&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=59&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) The Company repurchased 422,877 shares for $8.1 million in Q1 2023, with a new repurchase program for up to 619,000 shares approved in April 2023 Stock Repurchases (Three Months Ended March 31, 2023) | Period | Total Shares Purchased | Average Price Paid Per Share | | :------------------------------------ | :--------------------- | :--------------------------- | | January 1, 2023 - January 31, 2023 | 129,526 | $19.32 | | February 1, 2023 - February 28, 2023 | 91,300 | $19.65 | | March 1, 2023 - March 31, 2023 | 202,051 | $18.66 | | Total | 422,877 | $19.05 | - As of March 31, 2023, **58,915 shares** remained available under the existing stock repurchase program[278](index=278&type=chunk) - A new program for up to **619,000 shares** (approximately **5.0%** of outstanding common stock) was approved in April 2023[262](index=262&type=chunk)[278](index=278&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=59&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) This item is not applicable to the Company for the reporting period [ITEM 4. MINE SAFETY DISCLOSURES](index=60&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to the Company for the reporting period [ITEM 5. OTHER INFORMATION](index=60&type=section&id=ITEM%205.%20OTHER%20INFORMATION) No other information is reported under this item [ITEM 6. EXHIBITS](index=60&type=section&id=ITEM%206.%20EXHIBITS) This section lists the exhibits filed with the Form 10-Q, including corporate documents, certifications, and XBRL financial statements - Exhibits include Articles of Incorporation, Amended and Restated Bylaws, CEO and CFO certifications (Sarbanes-Oxley Act Sections 302 and 906), and XBRL formatted financial statements[281](index=281&type=chunk) SIGNATURES The report is signed by George J. Guarini, President and CEO, and Keary L. Colwell, Senior Executive VP, CFO, and Secretary, on May 15, 2023 - The report is signed by George J. Guarini, President and CEO, and Keary L. Colwell, Senior Executive VP, CFO, and Secretary, on May 15, 2023[285](index=285&type=chunk)

Loan Portfolio - As of December 31, 2022, the company had net loans of $2.0 billion, representing 80.4% of total assets[40] - The loan portfolio primarily consists of commercial real estate loans totaling $1.7 billion, which constitutes 85.0% of total loans[41] - The company’s commercial and industrial loans amounted to $188.5 million, representing 9.3% of total loans as of December 31, 2022[41] - The aggregate amount of loans to the 10 largest borrowers was approximately $180.0 million, or 8.9% of total loans[43] - The company held $1.8 billion in loans secured by real estate, representing 90.5% of total loans receivable[53] - The commercial real estate loan portfolio included $107.6 million of loans originated under the SBA's 504 loan program as of December 31, 2022[59] - During 2022, the company originated $36.4 million in commercial real estate SBA 7(a) loans and sold $28.4 million of the guaranteed portion, recognizing a gain of $2.2 million[60] - The average loan size in the commercial real estate portfolio was approximately $1.1 million with an estimated weighted average loan-to-value ratio of 45.5%[61] - The company’s authorized legal lending limit for unsecured loans was $53.4 million, and for specific secured loans, it was $89.0 million as of December 31, 2022[52] - The company’s commercial real estate loans included $658.2 million of owner-occupied loans, or 32.6% of the total loan portfolio[54] - As of December 31, 2022, agricultural real estate secured loans totaled $17.3 million, representing 0.9% of total loans[62] - The commercial real estate loan portfolio amounted to $1,704.7 million, with retail loans making up 24.4% and multifamily residential loans at 14.1%[65] - Construction and land loans outstanding were $13.2 million, accounting for 0.7% of total loans, with an average loan size of approximately $235,000[66] - One-to-four family residential loans totaled $110.6 million, or 5.5% of total loans, including a significant loan of $26.8 million secured by a multi-unit residential property[70] - Home equity loans and lines of credit reached $7.7 million, representing 0.4% of total loans, with unfunded commitments totaling $8.7 million[71] - Commercial and industrial loans included $19.7 million in SBA 7(a) loans, with $14.8 million of the guaranteed portion not yet sold as of December 31, 2022[77] - Agricultural operating loans amounted to $17.2 million, or 1.0% of total loans, reflecting the dependency on the agricultural business's cash flow for repayment[79] - Loans enrolled in the California Capital Access Program totaled $26.3 million, representing 1.3% of total loans, providing coverage for losses on qualified loans[80] - The largest commercial real estate loan had a net outstanding balance of $26.8 million, secured by a church in San Diego, California[65] - The average loan-to-value ratio for construction and land loans was estimated at 50.7%[66] - As of December 31, 2022, loans enrolled in the On-Road Heavy-Duty Vehicle Air Quality Loan Program totaled $26.2 million, representing 1.3% of total loans[82] - Consumer loans amounted to $4.2 million, which is 0.2% of total loans as of December 31, 2022[85] Financial Position - The investment portfolio totaled $167.8 million with an average yield of 3.4% and an estimated duration of approximately 6.7 years as of December 31, 2022[101] - At December 31, 2022, the Bank had $70.3 million in reciprocal CDARS deposits and $56.3 million in ICS deposits[93] - The Bank had $473.6 million of available credit capacity with the Federal Home Loan Bank as of December 31, 2022[95] - Outstanding subordinate debt, net of costs to issue, totaled $63.7 million as of December 31, 2022[99] - The Company discontinued its escrow services in 2021, which previously provided a low-cost core deposit base[94] - The Bank's borrowing from the Federal Reserve Bank was closed during 2022, with no outstanding borrowings as of December 31, 2022[95] Regulatory Compliance - The Company is subject to significant regulation by federal and state laws, which may impact its operations and financial condition[104] - The Bank paid $680,000 in FDIC assessments for the year ended December 31, 2022[115] - As of December 31, 2022, the Bank met the requirements to be "well capitalized" and satisfied the fully phased-in capital conservation buffer requirement[124] - The Bank's aggregate recorded loan balances for construction, land development, and land loans were 7.1% of total regulatory capital as of December 31, 2022[134] - The Bank's commercial real estate loans represented 297.8% of total regulatory capital as of December 31, 2022[134] - The FDIC's base assessment rates are between 3 to 30 basis points, subject to adjustments based on supervisory ratings and financial ratios[112] - The FDIC projected that the DIF reserve ratio was at risk of not reaching the statutory minimum of 1.35% by September 30, 2028[113] - The Bank's adoption of the CECL model is estimated to result in a $1 million to $3 million increase to its allowance for credit losses for loans[126] - The revised assessment rate schedules by the FDIC are intended to increase the likelihood that the DIF reserve ratio reaches the statutory minimum level of 1.35% by September 30, 2028[115] - The minimum capital ratios required include a CET1 capital ratio of 4.5%, a Tier 1 capital ratio of 6.0%, and a total risk-based capital ratio of 8.0%[120] - The Bank's total average consolidated assets less average tangible equity capital is used to determine the assessment base for FDIC[112] - The Bank was in compliance with the reserve requirements set by the Federal Reserve as of December 31, 2022[140] Community and Employee Engagement - The Bank received a "satisfactory" rating during its most recent Community Reinvestment Act examination, which assesses performance in meeting community credit needs[142] - Dividends payable by the Bank to the Company depend on the Bank's earnings and capital position, limited by federal and state laws[143] - The Bank must maintain a capital conservation buffer requirement to avoid restrictions on dividend payments[144] - The Bank is subject to the California Consumer Privacy Act, which imposes requirements for data privacy and can lead to significant compliance costs[148] - The Bank's policies comply with the USA Patriot Act and the Bank Secrecy Act, which require programs to prevent money laundering and terrorist financing[149] - The Company is subject to comprehensive regulation by the Federal Reserve and must file quarterly reports[152] - The Bank Holding Company Act requires the Company to serve as a source of financial strength to its subsidiary banks[153] - The Federal Reserve may approve the ownership of shares by a bank holding company in companies closely related to banking activities[157] - Bank holding companies with less than $3 billion in consolidated assets are generally no longer subject to the Federal Reserve's capital regulations[158] - The company will maintain its status as an "emerging growth company" until it reaches total annual gross revenues of $1.07 billion or more, or until December 31, 2023, whichever comes first[159] - As of December 31, 2022, the company had approximately 374 full-time equivalent employees, with 72% identifying as female and 28% as male[175] - The average tenure of employees was 5.0 years, with 68% of management roles held by women[175] - The company is committed to supporting its community during the COVID-19 pandemic, with all branches open as of December 31, 2022[167] - The company faces competition from various financial institutions, including credit unions and FinTech companies, in both commercial and retail banking[168][171] - The Federal Reserve requires prior written notice for stock repurchases if the gross consideration equals 10% or more of the company's consolidated net worth[166] - The company is subject to heightened legal and regulatory compliance risks due to the complex legal landscape governing its operations[174] - The company has a diverse workforce, with 34% White, 31% Asian, 25% Hispanic/Latino, 5% Black, and 3% identifying as Two or More Races[175] - The company emphasizes employee development through ongoing training programs and educational reimbursement[181] Leadership and Management - Ms. Mary Therese Curley joined the Bank as Executive Vice President and Director of Labor Service Division in April 2017, and was appointed Chief Credit Officer in 2022[190] - Mr. Rick Pak has been responsible for overall organic loan growth in Commercial Real Estate and various government guaranteed programs since January 2019[191] - Ms. Izabella Zhu Mitchell oversees risk governance and regulatory relations as Chief Risk Officer since September 2013[192]

Table of Contents BAYCOM CORP | --- | --- | --- | |----------------------------------------------------------------|-----------------------------------------------------------|-------------------------------------------| | California | (Exact Name of Registrant as Specified in its Charter) \n | 37-1849111 | | (State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) | | 500 Ygnacio Valley Road, Suite 200, Walnut Creek, California | | 94596 | | (Address of princi ...

Table of Contents BAYCOM CORP | --- | --- | --- | |----------------------------------------------------------------|-----------------------------------------------------------|-------------------------------------------| | California | (Exact Name of Registrant as Specified in its Charter) \n | 37-1849111 | | (State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) | | 500 Ygnacio Valley Road, Suite 200, Walnut Creek, California | | 94596 | | (Address of princi ...

Table of Contents BAYCOM CORP | --- | --- | --- | |----------------------------------------------------------------|-----------------------------------------------------------|-------------------------------------------| | California | (Exact Name of Registrant as Specified in its Charter) \n | 37-1849111 | | (State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) | | 500 Ygnacio Valley Road, Suite 200, Walnut Creek, California | | 94596 | | (Address of princi ...

Loan Portfolio - As of December 31, 2021, the company had net loans of $1.6 billion, representing 70.1% of total assets[39] - The loan portfolio primarily consists of commercial real estate loans totaling $1.3 billion, which constitutes 78.8% of total loans[40] - Commercial and industrial loans, including PPP loans, amounted to $230.2 million, representing 13.8% of total loans[40] - The company held $1.4 billion in loans secured by real estate, accounting for 85.9% of total loans receivable[53] - The average loan size in the commercial real estate portfolio was approximately $1.0 million with a weighted average loan-to-value ratio of 49.3%[59] - As of December 31, 2021, the aggregate amount of loans to the 10 largest borrowers was approximately $148.4 million, or 8.9% of total loans[43] - The company originated $39.9 million in commercial real estate SBA 7(a) loans during 2021, selling $32.8 million of the guaranteed portion[58] - The commercial real estate loan portfolio included $44.0 million of loans originated under the SBA's 504 loan program[57] - As of December 31, 2021, agricultural real estate secured loans totaled $17.3 million, representing 1.3% of total loans[63] - The commercial real estate loan portfolio amounted to $1.3 billion, with retail loans at $326.3 million (25.1% of total), multifamily residential at $203.9 million (15.7%), and hotel/motel loans at $171.6 million (13.2%)[65] - Construction and land loans outstanding were $13.4 million, accounting for 0.8% of total loans, with an average loan size of approximately $147,000 and a weighted average loan-to-value ratio of 51.4%[66] - The one-to-four family loan portfolio totaled $118.4 million, or 7.1% of total loans, primarily acquired through mergers and purchases[70] - Home equity loans and lines of credit amounted to $10.3 million, representing 0.6% of total loans, with unfunded commitments totaling $15.6 million[71] - Commercial and industrial loans included $14.6 million in SBA 7(a) loans originated in 2021, with $1.4 million as the unguaranteed portion[76] - As of December 31, 2021, the bank received SBA forgiveness for 1,794 PPP loans totaling $164.8 million, leaving 306 loans with an aggregate balance of $69.6 million[77] - Agricultural operating loans totaled $770,000, representing 0.05% of total loans, reflecting the dependency on the agricultural business's cash flow for repayment[78] - Consumer loans amounted to $5.1 million, or 0.3% of total loans, with higher risk due to potential difficulties in assessing collateral value[81] Financial Position - As of December 31, 2021, the investment portfolio totaled $174.4 million with an average yield of 3.0% and an estimated duration of approximately 5.5 years[95] - The company had $12.5 million in reciprocal CDARS and $96.1 million in one-way CDARS and ICS deposits as of December 31, 2021[87] - At December 31, 2021, there were no FHLB borrowings outstanding, with $483.1 million of available credit capacity with the FHLB[89] - The company maintained a short-term borrowing line of credit with the Federal Reserve Bank with available credit capacity of $69.6 million as of December 31, 2021[89] - The company paid $580,000 in FDIC assessments for the year ending December 31, 2021[103] - Deposits related to Business Escrow Services totaled $1.7 million and $4.0 million at December 31, 2021 and December 31, 2020, respectively[88] - The company has implemented deposit gathering strategies that utilize technology to enhance commercial depository services[85] - The company offers a variety of deposit accounts with competitive interest rates to attract a diverse client base[83] - The company has an approved secured borrowing facility with the FHLB for up to 25% of total assets[89] Capital Adequacy - As of December 31, 2021, the Bank met the requirements to be "well capitalized" with a Tier 1 risk-based capital ratio of at least 8% and a total risk-based capital ratio of at least 10%[113] - The minimum capital ratios required include a common equity Tier 1 (CET1) capital ratio of 4.5%, a Tier 1 capital ratio of 6.0%, and a total risk-based capital ratio of 8.0%[111] - The Bank's aggregate recorded loan balances for construction, land development, and land loans were 7.1% of total regulatory capital as of December 31, 2021[123] - The Bank's commercial real estate loans represented 342.5% of total regulatory capital as of December 31, 2021, indicating a relatively high concentration in commercial real estate loans[124] - The capital conservation buffer requirement mandates an additional CET1 capital greater than 2.5% of risk-weighted assets above the required minimum risk-based capital levels[112] - The Bank's compliance with reserve requirements was confirmed as of December 31, 2021, following the Federal Reserve's reduction of reserve requirement ratios to zero percent effective March 26, 2020[129] - The Community Bank Leverage Ratio (CBLR) provides a simple measure of capital adequacy for qualifying institutions, requiring a leverage ratio greater than 9.0%[114] Regulatory Compliance - The Bank received a "satisfactory" rating during its most recent Community Reinvestment Act examination, reflecting its performance in meeting community credit needs[132] - The Bank's dividends are limited by federal and state laws, dependent on its earnings and capital position, and cannot exceed the lesser of retained earnings or net income for the last three fiscal years[134] - The Federal Reserve requires that covered transactions between a bank and its affiliates be on terms as favorable to the bank as transactions with non-affiliates, limiting such transactions to 10% of the bank's capital and surplus[130] - The Bank is required to notify its primary federal regulator within 36 hours of determining a significant cybersecurity incident has occurred[135] - The California Consumer Privacy Act (CCPA) grants California residents rights regarding their personal information, including the right to request deletion and opt-out of sales[136] - The Bank must comply with various consumer protection laws, including the Truth-in-Lending Act and the Fair Credit Reporting Act, to avoid penalties and enforcement actions[142] - The Company is subject to comprehensive regulation by the Federal Reserve and must file quarterly reports[143] - The Dodd-Frank Act requires public companies to provide shareholders with a non-binding vote on executive compensation at least once every three years[149] - The Company is considered "well capitalized" and is not subject to individualized capital level requirements under the Federal Reserve's regulations[148] - The Federal Reserve must approve any acquisition of control of a bank located in a different state[154] - The Federal Reserve has issued guidelines regarding cash dividends, emphasizing the need for adequate capital before payment[156] - A bank holding company must notify the Federal Reserve prior to purchasing or redeeming equity securities if the amount exceeds 10% of its consolidated net worth[157] Workforce and Diversity - As of December 31, 2021, the company had approximately 307 full-time equivalent employees, with 76% identifying as female and 24% as male[165] - The average tenure of employees was 5.2 years, with a workforce composition of 41% White, 27% Asian, 22% Hispanic/Latino, 5% Black, 2% Two or More Races, and 3% Other[167] - The Board of Directors includes three female directors and two directors from underrepresented communities, reflecting a commitment to diversity[169] - The company offers a comprehensive total rewards program, including annual bonuses, a matched 401(k) plan, and various health benefits to attract and retain talent[169] - The company is focused on developing talent from within while also supplementing with external hires to foster loyalty and continuous improvement[172] Market Competition and Risks - The company emphasizes competitive pricing, personalized service, and community involvement to effectively compete in the financial services market[163] - The company faces competition from larger financial institutions and FinTech companies, which may have greater resources and product offerings[161] - The company is committed to maintaining a strong risk management process while pursuing growth strategies[182] - The company noted that loan delinquencies, problem assets, and foreclosures may increase due to economic downturns, particularly in the San Francisco Bay Area[193] - The company faces risks from potential declines in the value of collateral for loans, especially real estate, which could lead to increased loan losses[197] - The Federal Reserve's near-zero federal funds rate may reduce the yield on assets more than the decline in interest-bearing liabilities, impacting net interest margin[188] - The company highlighted that significant inflation and supply chain disruptions continue to affect its operational environment[187] - The uncertain future developments related to COVID-19 could materially and adversely affect the company's business and financial condition[191] Acquisition Strategy - The company intends to continue selectively acquiring other financial institutions, but the market for acquisitions remains highly competitive[235] - The company is incurring time and expense associated with identifying, evaluating, and negotiating potential acquisitions[237] - The company’s strategy of pursuing acquisitions exposes it to financial, execution, compliance, and operational risks that could adversely affect growth prospects[234] Loan Losses and Provisions - The company believes the allowance for loan losses is adequate to cover probable incurred losses in the loan portfolio as of December 31, 2021[41] - The company’s allowance for loan losses may prove insufficient to absorb potential losses, requiring additional provisions[222] - The company is evaluating the impact of the CECL accounting model, which may require an increase in the allowance for loan losses starting from the first fiscal year after December 15, 2022[225] - The company has not incurred any other-than-temporary impairments on its securities portfolio for the year ended December 31, 2021[233]

Table of Contents BAYCOM CORP | --- | --- | --- | |----------------------------------------------------------------|-----------------------------------------------------------|-------------------------------------------| | California | (Exact Name of Registrant as Specified in its Charter) \n | 37-1849111 | | (State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) | | 500 Ygnacio Valley Road, Suite 200, Walnut Creek, California | | 94596 | | (Address of princi ...