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BayCom Corp

BayCom CorpBCMLEarnings & Financial Report

Nasdaq · Financials · State Commercial Banks

BayCom Corp is a U.S.-headquartered bank holding company operating through its wholly owned subsidiary Bay Commercial Bank. It primarily serves small and medium-sized enterprises and retail customers across Northern California, offering commercial lending, deposit products, personal banking services, and localized wealth management solutions.

What changed in BayCom Corp's 10-K — 2023 vs 2024

Top changes in BayCom Corp's 2024 10-K

511 paragraphs added · 576 removed · 430 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

150 edited+7 added−45 removed197 unchanged
We believe our geographic footprint, which now includes the San Francisco Bay area, the metropolitan markets of Los Angeles, California, Seattle, Washington, and Denver, Colorado, Las Vegas, Nevada and community markets including Albuquerque, New Mexico, and Custer, Delta, and Grand counties, Colorado, provides us access to low cost, stable core deposits in community markets that we can use to fund commercial loan growth.
We believe our geographic footprint, which now includes the San Francisco Bay area, the metropolitan markets of Los Angeles, California; Seattle, Washington; Denver, Colorado; and Las Vegas, Nevada, and community markets including Albuquerque, New Mexico, and Custer, Delta, and Grand Counties, Colorado, provides us access to low cost, stable core deposits in community markets that we can use to fund commercial loan growth.
We make commercial and industrial loans, including commercial lines of credit, working capital loans, term loans, equipment financing, acquisition, expansion and development loans, SBA loans, letters of credit and other loan products, primarily in our target markets, which are underwritten based on the borrower’s ability to service the debt from operating income.
We make commercial and industrial loans, including commercial lines of credit, working capital loans, term loans, equipment financing loans, acquisition loans, expansion and development loans, SBA loans, letters of credit and other loan products, primarily in our target markets, which are underwritten based on the borrower’s ability to service the debt from operating income.
These loans generally are secured by a combination of assets that may include equipment, receivables, inventory, business real property, and sometimes a lien on the personal residence of the borrower. SBA 7(a) loans are all adjustable-rate loans based upon the Wall Street Journal 13 Table of Contents prime lending rate.
These loans generally are secured by a combination of assets that may include equipment, receivables, inventory, business real property, and sometimes a lien on the personal residence of the borrower. SBA 7(a) loans are all adjustable-rate loans based upon the Wall Street Journal prime lending 13 Table of Contents rate.
We employ client acquisition strategies to generate new account and deposit growth, such as client referral incentives, search engine optimization, targeted direct mail and email campaigns, in addition to conventional marketing initiatives and advertising. Our goal is to cross-sell our deposit products to our loan clients.
We employ client acquisition strategies to generate new account and deposit growth, such as client referral incentives, search engine optimization, and targeted direct mail and email campaigns, in addition to conventional marketing initiatives and advertising. Our goal is to cross-sell our deposit products to our loan clients.
While deposits serve as the primary source of funds for our lending, investment activities, and general business needs, we also use borrowings to supplement our supply of lendable funds, meet deposit withdrawal requirements, and to leverage our capital position more efficiently.
While deposits serve as the primary source of funds for our lending activities, investment activities, and general business needs, we also use borrowings to supplement our supply of lendable funds, meet deposit withdrawal requirements, and leverage our capital position more efficiently.
An unsatisfactory rating may be the basis for denial of certain applications. The Bank received a “satisfactory” rating during its most recently completed CRA examination. On October 24, 2023, the federal banking agencies, including the Federal Reserve issued a final rule designed to strengthen and modernize regulations implementing the CRA.
An unsatisfactory rating may be the basis for denial of certain applications. The Bank received a “satisfactory” rating during its most recently completed CRA examination. On October 24, 2023, the federal banking agencies, including the Federal Reserve issued a final rule designed to strengthen and modernize the regulations implementing the CRA.
The Company, as sole shareholder of the Bank, is a bank holding company registered with the Federal Reserve. Bank holding companies are subject to comprehensive regulation by the Federal Reserve under the under the BHCA, and the regulations of the Federal Reserve.
The Company, as sole shareholder of the Bank, is a bank holding company registered with the Federal Reserve. Bank holding companies are subject to comprehensive regulation by the Federal Reserve under the BHCA and the regulations of the Federal Reserve.
Nor may the Federal Reserve approve an application if the applicant (and its depository institution affiliates) controls or would control more than 10.0% of the insured deposits in the United States or 30% or more of the deposits in the target bank’s home state or in any state in which the target bank maintains a branch.
Nor may the Federal Reserve approve an application if the applicant (and its depository institution affiliates) controls or would control more than 10.0% of the insured deposits in the United States or 30% or more of the deposits in the target bank’s home state or any state in which the target bank maintains a branch.
Our major competitors include larger national, regional and local financial institutions and other providers of financial services, including finance companies, mutual funds, insurance companies, that may have the ability to make loans on larger projects than we can or provide a larger mix of product offerings.
Our major competitors include larger national, regional and local financial institutions and other providers of financial services, including finance companies, mutual funds and insurance companies, that may have the ability to make loans on larger projects than we can or provide a larger mix of product offerings.
We also offer convenience-related services, including banking by appointment (before or after normal business hours on weekdays and on weekends), online banking services, access to a national automated teller machine network, extended drive-through hours, remote deposit capture, and courier service so that clients’ deposit and other banking needs may be served without the client having to make a trip to the branch.
We offer convenience-related services, including banking by appointment (before or after normal business hours on weekdays and on weekends), online banking services, access to a national automated teller machine network, extended drive-through hours, remote deposit capture, and courier service so that clients’ deposit and other banking needs may be served without the client having to make a trip to the branch.
Commercial real estate secured loans generally carry higher interest rates and have shorter terms than one-to-four family residential real estate loans. Commercial real estate lending typically involves higher loan principal amount and the repayment of the loan is dependent, in large part, on sufficient income from the properties securing the loans, to cover operating expenses and debt service.
Commercial real estate secured loans generally carry higher interest rates and have shorter terms than one-to-four family residential real estate loans. Commercial real estate lending typically involves a higher loan principal amount and the repayment of the loan is dependent, in large part, on sufficient income from the properties securing the loans, to cover operating expenses and debt service.
Typically, a SBA 504 project includes a loan secured from a private-sector lender, such as the Bank, with a senior lien, a loan secured from a CDC (funded by a 100% SBA-guaranteed debenture) with a 10 Table of Contents junior lien covering up to 40% of the total cost, and a contribution of at least 10% equity from the borrower.
Typically, an SBA 504 project includes a loan secured from a private-sector lender, such as the Bank, with a senior lien, a loan secured from a CDC (funded by a 100% SBA-guaranteed debenture) with a junior lien 10 Table of Contents covering up to 40% of the total cost, and a contribution of at least 10% equity from the borrower.
The repayment is also subject to other economic and weather conditions, as well as market prices for agricultural products, which can be highly volatile. Among the more common risks involved in agricultural lending, are weather conditions, disease, water availability and water distribution rights, which can be mitigated through multi-peril crop insurance.
Repayment is also subject to economic and weather conditions, as well as market prices for agricultural products, which can be highly volatile. Among the more common risks involved in agricultural lending are weather conditions, disease, water availability and water distribution rights, which can be mitigated through multi-peril crop insurance.
The CFPB is responsible for the implementation of the federal financial consumer protection and fair lending laws and regulations and has authority to impose new requirements. Any change in applicable laws, regulations, or regulatory policies may have a material effect on our business, operations, and prospects.
The CFPB is responsible for the implementation of the federal financial consumer protection and fair lending laws and regulations and has statutory authority to impose new requirements. Any change in applicable laws, regulations, or regulatory policies may have a material effect on our business, operations, and prospects.
We cannot predict the nature or the extent of the effects on our business and earnings that any fiscal or monetary policies or new federal or state legislation may have in the future. We also cannot predict whether or when any such changes may occur. United Business Bank General.
We cannot predict the nature or the extent of the effects on our business and earnings that any fiscal or monetary policies or new federal or state legislation or regulations may have in the future. We also cannot predict whether or when any such changes may occur. United Business Bank General.
In underwriting commercial real estate loans, we seek to minimize risks in a variety of ways, including considering the property’s age, condition, operating history, future operating projections, current and projected market rental rates, vacancy rates, location and physical condition.
In underwriting commercial real estate loans, we seek to minimize risks in a variety of ways, including by considering the property’s age, condition, operating history, future operating projections, current and projected market rental rates, vacancy rates, location and physical condition.
As a California-chartered commercial bank with branches in the States of California, Nevada, Colorado, New Mexico and Washington, the Bank is subject not only to the applicable provisions of California law and regulations, but is also subject to applicable Colorado, Nevada, New Mexico and Washington law and regulations.
As a California-chartered commercial bank with branches in the States of California, Nevada, Colorado, New Mexico and Washington, the Bank is subject not only to the applicable provisions of California law and regulations, but is also subject to applicable Colorado, Nevada, New Mexico and Washington laws and regulations.
At the time of acquisition, UFC had approximately $318.0 million in total assets and $265.8 million in deposits. In October 2019, we acquired TIG Bancorp (“TIG”), the holding company for First State Bank of Colorado, headquartered in Greenwood Village, Colorado, which had seven branch offices and serves the Denver metropolitan area and other Colorado communities.
At the time of acquisition, UFC had approximately $318.0 million in total assets and $265.8 million in deposits. In October 2019, we acquired TIG Bancorp (“TIG”), the holding company for First State Bank of Colorado, headquartered in Greenwood Village, Colorado, which had seven branch offices and served the Denver metropolitan area and other Colorado communities.
According to California law, neither a bank nor any majority-owned subsidiary of a bank may make a distribution to its shareholders in an amount which exceeds the lesser of (i) the bank’s retained earnings or (ii) the bank’s net income for its last three fiscal years, less the amount of any distributions made by the bank or by any majority-owned subsidiary of the bank during such period.
Under California law, neither a bank nor any majority-owned subsidiary of a bank may make a distribution to its shareholders in an amount which exceeds the lesser of (i) the bank’s retained earnings or (ii) the bank’s net income for its last three fiscal years, less the amount of any distributions made by the bank or by any majority-owned subsidiary of the bank during such period.
A bank that has experienced rapid growth in commercial real estate lending, has notable exposure to a specific type of commercial real estate loan, or is approaching or exceeding the following supervisory criteria may be identified for further supervisory analysis with respect to commercial real estate concentration risk: ● Total reported loans for construction, land development and other land represent 100% or more of the bank’s total regulatory capital; or ● Total commercial real estate loans (as defined in the guidance) represent 300% or more of the bank’s total regulatory capital, and the outstanding balance of the bank’s commercial real estate loan portfolio has increased by 50% or more during the prior 36 months.
A bank that has experienced rapid growth in commercial real estate lending, has notable exposure to a specific type of commercial real estate loan, or is approaching or exceeding the following supervisory criteria may be identified for further supervisory analysis with respect to commercial real estate concentration risk: 20 Table of Contents ● Total reported loans for construction, land development and other land represent 100% or more of the bank’s total regulatory capital; or ● Total commercial real estate loans (as defined in the guidance) represent 300% or more of the bank’s total regulatory capital, and the outstanding balance of the bank’s commercial real estate loan portfolio has increased by 50% or more during the prior 36 months.
Loan originations are obtained through a variety of sources, including existing clients, walk-in clients, referrals from brokers or existing clients, and advertising. Our Board of Directors has granted loan approval authority to certain officers up to prescribed limits, depending on the officer’s experience, the type of loan and whether the loan is secured or unsecured.
Loan originations are obtained through a variety of sources, including existing clients, walk-in clients, referrals from brokers or existing clients, and advertising. The Bank’s Board of Directors has granted loan approval authority to certain officers up to prescribed limits, depending on the officer’s experience, the type of loan and whether the loan is secured or unsecured.
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Comparison of Financial Condition at December 31, 2023 and 2022 — Securities” contained in this Form 10-K. Supervision and Regulation BayCom and United Business Bank are subject to significant regulation by federal and state laws and regulations, and the policies of applicable federal and state banking agencies.
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Comparison of Financial Condition at December 31, 2024 and 2023 — Securities” contained in this Form 10-K. Supervision and Regulation BayCom and United Business Bank are subject to significant regulation by federal and state laws and regulations, and the policies of applicable federal and state banking agencies.
If insurance of accounts is terminated, the accounts at the institution at the time of the termination, less subsequent withdrawals, shall continue to be insured for a period of six months to two years, as determined by the FDIC. Management is not aware of any existing circumstances which would result in termination of the deposit insurance of the Bank.
If insurance of accounts is terminated, the accounts at the institution at the time of the termination, less subsequent withdrawals, will continue to be insured for a period of six months to two years, as determined by the FDIC. Management is not aware of any existing circumstances which would result in termination of the deposit insurance of the Bank.
We offer a full range of lending products, including commercial and multifamily real estate loans (including owner-occupied and investor real estate loans), commercial and industrial loans (including equipment loans and working capital lines of credit), SBA loans including income producing real estate loans and small business loans under the SBA 7(a) and 504 loan programs, construction and land loans, agriculture-related loans and consumer loans.
We offer a full range of lending products, including commercial and multifamily real estate loans (including owner-occupied and investor real estate loans), commercial and industrial loans (including equipment loans and working capital lines of credit), Small Business Administration (“SBA”) loans (including income producing real estate loans and small business loans under the SBA 7(a) and 504 loan programs), construction and land loans, agriculture-related loans and consumer loans.
We also consider the borrower’s management succession, life insurance and business continuation plan when evaluating agricultural real estate secured loans.
We also consider the borrower’s management succession plan, life insurance policies and business continuation plan when evaluating agricultural real estate secured loans.
The CBLR provides for a simple measure of capital adequacy for qualifying institutions. A bank that elects to use the Community Bank Leverage Ratio will generally be considered Well Capitalized and to have met the risk-based and leverage capital requirements of the capital regulations if it has a leverage ratio greater than 9.0%.
The CBLR provides for a simplified measure of capital adequacy for qualifying institutions. A bank that elects to use the Community Bank Leverage Ratio will generally be considered Well Capitalized and to have met the risk-based and leverage capital requirements of the capital regulations if it has a leverage ratio greater than 9.0%.
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Comparison of Financial Condition at December 31, 2023 and 2022 — Loans and “Note 4 – Loans” in the Notes to Consolidated Financial Statements contained in “Item 8. Financial Statements and Supplementary Data” of this Form 10-K. Sources of Funds Deposits.
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Comparison of Financial Condition at December 31, 2024 and 2023 — Loans and “Note 4 – Loans” in the Notes to Consolidated Financial Statements contained in “Item 8. Financial Statements and Supplementary Data” of this Form 10-K. Sources of Funds Deposits.
For additional information concerning our loan portfolio, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Comparison of Financial Condition at December 31, 2023 and 2022 — Loans”, contained in this Form 10-K. Concentrations of Credit Risk.
For additional information concerning our loan portfolio, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Comparison of Financial Condition at December 31, 2024 and 2023 — Loans”, contained in this Form 10-K. Concentrations of Credit Risk.
Significantly, the CCPA introduces a private right of action for data security breaches, exposing the Bank to potential statutory damages and the likelihood of class actions. While the Bank enjoys certain exemptions under the CCPA, these exemptions do not provide immunity from the private right of action concerning data security breaches.
Significantly, the CCPA introduces a private right of action for data security breaches, exposing the Bank to potential statutory damages and the likelihood of class action lawsuits. While the Bank enjoys certain exemptions under the CCPA, these exemptions do not provide immunity from the private right of action concerning data security breaches.
Commodity prices also present a risk, which may be managed by using set price contracts. As part of our underwriting, the borrower is required to obtain multi-peril crop insurance. Normally, in making agricultural real estate secured loans, our required beginning and projected operating margins provide for reasonable reserves to offset unexpected yield and price deficiencies.
Commodity prices also present a risk, which can generally be managed by using set price contracts. As part of our underwriting, the borrower is required to obtain multi-peril crop insurance. Normally, in making agricultural real estate secured loans, our required beginning and projected operating margins provide for reasonable reserves to offset unexpected yield and price deficiencies.
We serve the Albuquerque MSA, in Central New Mexico the most populous city in the state of New Mexico through five branch offices we acquired from FULB and BFC, in 2017 and 2018, respectively. We serve the Denver MSA and the Colorado communities in Custer, Delta, and Grand counties through eleven branch offices.
In Central New Mexico, we serve the Albuquerque MSA, the most populous city in the state of New Mexico, through five branch offices we acquired from FULB and BFC, in 2017 and 2018, respectively. We serve the Denver MSA and the communities of Custer, Delta, and Grand Counties, Colorado through 11 branch offices.
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Comparison of Financial Condition at December 31, 2023 and 2022 — Deposits” and “Note 11 – Deposits” in the Notes to Consolidated Financial Statements contained in “Item 8. Financial Statements and Supplementary Data” of this Form 10-K. Borrowings.
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Comparison of Financial Condition at December 31, 2024 and 2023 — Deposits” and “Note 11 – Deposits” in the Notes to Consolidated Financial Statements contained in “Item 8. Financial Statements and Supplementary Data” of this Form 10-K. Borrowings.
Many of our commercial loans are, or will likely be, made to small- to-medium-sized businesses that may be less able to withstand competitive, economic and financial pressures than larger borrowers. 9 Table of Contents Our loan policies provide general guidelines for loan-to-value ratios that restrict the size of loans to a maximum percentage of the value of the collateral securing the loans, which varies by the type of collateral.
Many of our commercial loans are made to small- to-medium-sized businesses that may be less able to withstand competitive, economic and financial pressures than larger borrowers. 9 Table of Contents Our loan policies provide general guidelines for loan-to-value ratios that restrict the size of loans to a maximum percentage of the value of the collateral securing the loans, which varies by the type of collateral.
The Company’s business activities generally are limited to passive investment activities and oversight of its investment in the Bank. Accordingly, the information set forth in this Form 10-K, including consolidated financial statements and related data, relate primarily to the Bank.
The Company’s business activities generally are limited to passive investment activities and the monitoring of its investment in the Bank. Accordingly, the information set forth in this Form 10-K, including consolidated financial statements and related data, relate primarily to the Bank.
We believe we have a successful track record of selectively acquiring, integrating and consolidating community banks. Since 2010, we have completed 10 acquisitions with aggregate total assets of approximately $2.3 billion and total deposits of approximately $1.9 billion.
We believe we have a successful track record of selectively acquiring, integrating and consolidating community banks. Since 2010, we have completed 10 acquisitions, with aggregate total assets acquired of approximately $2.3 billion and total deposits assumed of approximately $1.9 billion.
The underwriting analysis also may include credit verification, reviews of appraisals, environmental hazards or reports, the borrower’s liquidity and leverage, management experience of the owners or principals, economic condition, industry trends and any guarantees, including SBA loan guarantees.
The underwriting analysis also may include credit verification, reviews of appraisals, environmental hazards or reports, the borrower’s liquidity and leverage, management experience of the owners or principals, economic conditions, industry trends and any guarantees, including SBA loan guarantees.
The Bank did not participate in the Federal Reserve Bank of San Francisco Bank Term Funding Program. ​ 16 Table of Contents On August 6, 2020, the Company issued and sold $65.0 million aggregate principal amount of 5.25% Fixed-to-Floating Rate Subordinated Notes due 2030 (the “Notes”) at a public offering price equal to 100% of the aggregate principal amount of the Notes.
The Bank did not participate in the Federal Reserve Bank of San Francisco Bank Term Funding Program. ​ On August 6, 2020, the Company issued and sold $65.0 million aggregate principal amount of 5.25% Fixed-to-Floating Rate Subordinated Notes due 2030 (the “Notes”) at a public offering price equal to 100% of the aggregate principal amount of the Notes.
To the extent that legal uncertainty exists in this area, all creditors, including the Bank, that have made loans secured by properties with potentially hazardous waste contamination (such as petroleum 21 Table of Contents contamination) could be subject to liability for cleanup costs, which costs often substantially exceed the value of the collateral property. Federal Reserve System.
To the extent that legal uncertainty exists in this area, all creditors, including the Bank, that have made loans secured by properties with potentially hazardous waste contamination (such as petroleum contamination) could be subject to liability for cleanup costs, which costs often substantially exceed the value of the collateral property. Federal Reserve System.
In addition, the collateral securing commercial and industrial loans generally includes moveable property such as equipment and inventory, which may decline in value more rapidly than we anticipate, exposing us to increased credit risk. As a result of these additional complexities, variables and risks, commercial and industrial loans require extensive underwriting and servicing. Consumer Loans.
In addition, the collateral securing commercial and industrial loans generally includes moveable property such as equipment and inventory, which may decline in value more rapidly than we anticipate, exposing 14 Table of Contents us to increased credit risk. As a result of these additional complexities, variables and risks, commercial and industrial loans require extensive underwriting and servicing. Consumer Loans.
The Company also offers commercial real estate loans as a SBA “preferred lender” under the SBA’s 504 loan program in conjunction with junior lien financing from a Certified Development Company ("CDC"). Preferred lender status is the highest designation awarded to lenders by the SBA, and accordingly, grants such lenders full lending authority to approve SBA loans.
The Company also offers commercial real estate loans as an SBA “preferred lender” under the SBA’s 504 loan program in conjunction with junior lien financing from a Certified Development Company ("CDC"). Preferred lender status is the highest designation awarded to lenders by the SBA and grants such lenders full authority to approve SBA loans.
The Los Angeles-Long Beach-Anaheim, California MSA, with approximately 13 million residents, is the largest MSA in California, the second largest MSA in the United States, and one of the most significant business markets in the world. The economic base of the area is heavily dependent on small and medium-sized businesses, providing us with a market rich in potential customers.
The Los Angeles-Long Beach-Anaheim, California MSA, with approximately 12.8 million residents, is the largest MSA in California, the second largest MSA in the United States, and one of the most significant business markets in the world. The economic base of the area is heavily dependent on small and medium-sized businesses, providing us with a market rich in potential customers.
In January 2017, the Company became the holding company for the Bank. The Bank commenced banking operations as Bay Commercial Bank in July 2004 and changed the name to United Business Bank in April 2017, following our acquisition of United Business Bank, FSB in April 2017.
In January 2017, the Company became the holding company for the Bank. The Bank commenced operations as Bay Commercial Bank in July 2004 and changed its name to United Business Bank in April 2017, following our acquisition of United Business Bank, FSB in April 2017.
These advantages include, among others, the diversification of our loan portfolio with seasoned loans, the expansion of our market areas and an effective method to augment our growth and risk management infrastructure through the retention of local lending personnel and credit administration personnel to manage the client relationships of the banks being acquired.
These advantages include, among others, the diversification of our loan portfolio with seasoned loans, the expansion of our market areas and an effective method to augment our growth 5 Table of Contents and risk management infrastructure through the retention of local lending personnel and credit administration personnel to manage the client relationships of the banks being acquired.
CET1 generally consists of common stock, retained earnings, accumulated other comprehensive income (“AOCI”) 19 Table of Contents unless an institution elects to exclude AOCI from regulatory capital, and certain minority interests (all of which are subject to applicable regulatory adjustments and deductions). Tier 1 capital generally consists of CET1 and noncumulative perpetual preferred stock.
CET1 generally consists of common stock, retained earnings, accumulated other comprehensive income (“AOCI”) unless an institution elects to exclude AOCI from regulatory capital, and certain minority interests (all of which are subject to applicable regulatory adjustments and deductions). Tier 1 capital generally consists of CET1 and noncumulative perpetual preferred stock.
Our Board of Directors delegates loan approval authority up to board-approved limits to our Director Loan Committee, which is comprised of members of our Board of Directors. Managing credit risk is an enterprise-wide process.
The Bank’s Board of Directors delegates loan approval authority up to board-approved limits to our Director Loan Committee, which is comprised of members of the Bank’s Board of Directors. Managing credit risk is an enterprise-wide process.
The increased risk in commercial and industrial loans derives from the expectation that such loans generally are serviced principally from the operations of the business, and those operations may not be successful.
The increased risk in commercial and industrial loans derives from the expectation that such loans generally are serviced principally from the operations of the business, and those operations might not be successful.
However, the Federal Reserve Board has provided a “Small Bank Holding Company” exception to its consolidated capital requirements, and bank holding companies with less than $3.0 billion of consolidated assets are not subject to the consolidated holding company capital requirements unless otherwise directed by the Federal Reserve Board.
However, the Federal Reserve Board has provided a “Small Bank Holding Company” exception to its consolidated capital requirements, and bank holding companies with less than $3.0 billion of consolidated assets, such as BayCom, are not subject to the consolidated holding company capital requirements unless otherwise directed by the Federal Reserve Board.
Banks are subject to consumer protection regulations issued by the CFPB, but as a financial institution with assets of less than $10 billion, the Bank is generally subject to supervision and enforcement by the Federal Reserve and the DFPI with respect to our compliance with consumer financial protection laws and CFPB regulations.
Banks are subject to consumer protection regulations issued by the CFPB, but as a financial institution with assets of less than $10 billion, the Bank is generally subject to supervision and enforcement by the Federal 23 Table of Contents Reserve and the DFPI with respect to our compliance with consumer financial protection laws and CFPB regulations.
The guidance provides that the strength of an institution’s lending and risk management practices with respect to such concentrations will be taken into account in supervisory guidance on evaluation of capital adequacy. As of December 31, 2023, the Bank’s aggregate recorded loan balances for construction, land development and land loans were 3.2% of total regulatory capital.
The guidance provides that the strength of an institution’s lending and risk management practices with respect to such concentrations will be taken into account in supervisory guidance on evaluation of capital adequacy. As of December 31, 2024, the Bank’s aggregate recorded loan balances for construction, land development and land loans were 2.0% of total regulatory capital.
We believe the market’s median household income of $87,743, large concentration of small and medium-sized businesses, and its highest population density in the nation position the area as an attractive market in which to expand operations. We serve the Seattle-Tacoma-Bellevue MSA, which includes King County (which includes the city of Seattle), through two branch offices.
We believe the market’s median household income of $91,960, large concentration of small and medium-sized businesses, and its highest population density in the nation position the area as an attractive market in which to expand operations. We serve the Seattle-Tacoma-Bellevue MSA, which includes King County (which includes the city of Seattle), through two branch offices.
Commercial real estate loan terms generally are limited to 15 years or less, although payments may be structured on a longer amortization basis up to 20 years with balloon payments or rate adjustments due at the end of three to seven years. We generally charge an origination fee for our services.
Commercial real estate loan terms generally are limited to 15 years or less, although payments may be structured on a longer amortization basis of up to 20 years, with balloon payments or rate adjustments due at the end of three to seven years. We generally charge the borrower an origination fee.
As of December 31, 2023, the Bank met the requirements to be “well capitalized” and met the fully phased-in capital conservation buffer requirement.
As of December 31, 2024, the Bank met the requirements to be “well capitalized” and met the fully phased-in capital conservation buffer requirement.
Federal law generally limits the activities and FDIC-insured equity investments of state-chartered banks to those that are permissible for national banks.
Federal law generally limits the activities and equity investments of state-chartered banks to those that are permissible for national banks.
The SBA 7(a) program serves as the SBA's primary business loan program to help qualified small businesses obtain financing when they might not be eligible for business loans through normal lending channels.
The SBA 7(a) program is the SBA's primary business loan program to help qualified small businesses obtain financing when they might not be eligible for business loans through normal lending channels.
For information regarding the Company’s cybersecurity risk management, strategy, and governance, see “Item 1C. Cybersecurity” in Part I this Form 10-K. 23 Table of Contents Anti-Money Laundering and Client Identification.
For information regarding the Company’s cybersecurity risk management, strategy, and governance, see “Item 1C. Cybersecurity” in Part I of this Form 10-K. Anti-Money Laundering and Client Identification.
The Federal Reserve also has extensive enforcement authority 24 Table of Contents over bank holding companies, including, among other things, the ability to assess civil money penalties, to issue cease and desist or removal orders and to require that a holding company divest subsidiaries (including its bank subsidiaries).
The Federal Reserve also has extensive enforcement authority over bank holding companies, including, among other things, the ability to assess civil money penalties, to issue cease and desist or removal orders and to require that a holding company divest subsidiaries (including its bank subsidiaries).
As a bank holding company registered with the Federal 17 Table of Contents Reserve, we are subject to comprehensive regulation and supervision by the Federal Reserve under the Bank Holding Company Act of 1956, as amended, and the regulations of the Federal Reserve.
As a bank holding company registered with the Federal Reserve, we are subject to comprehensive regulation and supervision by the Federal Reserve under the Bank Holding Company Act of 1956, as amended, and the regulations of the Federal Reserve.
The largest portion of our loan portfolio represents lending conducted with businesses and individuals in Northern California, including the San Francisco Bay Area and Southern California. Our loan portfolio consists primarily of commercial real estate loans (including multifamily) and construction loans, which totaled $1.7 billion and constituted 87.1% of total loans as of December 31, 2023.
The largest portion of our loan portfolio represents lending conducted with businesses and individuals in Northern California, including the San Francisco Bay Area and Southern California. Our loan portfolio consists primarily of commercial real estate loans (including multifamily) and construction loans, which totaled $1.7 billion and constituted 85.5% of total loans as of December 31, 2024.
Commercial and industrial loans totaled $162.9 million and constituted 8.4% of total loans as of December 31, 2023. Our commercial real estate loans are generally secured by first liens on real property. The commercial and industrial loans are typically secured by general business assets, accounts receivable inventory and/or the corporate guaranty of the borrower and personal guaranty of its principals.
Commercial and industrial loans totaled $173.9 million and constituted 8.9% of total loans as of December 31, 2024. Our commercial real estate loans are generally secured by first liens on real property. The commercial and industrial loans are typically secured by general business assets, accounts receivable inventory and/or the corporate guaranty of the borrower and personal guaranty of its principals.
The Bank bases its SBA 7(a) loan sales on the level of its SBA 7(a) loan originations, the premiums available in the secondary market for the sale of such loans, and general liquidity considerations of the Bank. During 2023, the Bank originated $7.5 million in commercial and industrial SBA 7(a) loans.
The Bank bases its SBA 7(a) loan sales on the level of its SBA 7(a) loan originations, the premiums available in the secondary market for the sale of such loans, and general liquidity considerations of the Bank. During 2024, the Bank originated $4.7 million in commercial and industrial SBA 7(a) loans.
Any such purchases or loan participations are made generally consistent with our underwriting standards; however, the loans may be located outside of our normal lending areas. During the years ended December 31, 2023 and 2022, we purchased $137.9 million and $134.5 million, respectively, of loans and loan participation interests, principally commercial and industrial loans and multifamily real estate loans.
Any such purchases or loan participations are made generally consistent with our underwriting standards; however, the loans may be located outside of our normal lending areas. During the years ended December 31, 2024 and 2023, we purchased $86.1 million and $137.9 million, respectively, of loans and loan participation interests, principally commercial and industrial loans and multifamily real estate loans.
These regulations require the Bank to disclose its privacy policy, including informing consumers of its information sharing practices and informing consumers of their rights to opt out of certain practices.
These regulations require the Bank to disclose its privacy policy, including informing consumers of its information sharing practices and informing consumers of their rights to opt out of 22 Table of Contents certain practices.
The San Jose-Sunnyvale-Santa Clara MSA also demonstrates key characteristics that provide us growth opportunities, including a population of approximately 1.9 million and a median household income of $148,900.
The San Jose-Sunnyvale-Santa Clara MSA also demonstrates key characteristics that provide us growth opportunities, including a population of approximately 1.9 million and a median household income of $153,202.
The loan-to-value ratio as established by an independent appraisal typically will not exceed 80% at loan origination and is lower in most cases. At December 31, 2023, the average loan size in our commercial real estate portfolio was approximately $1.2 million with an estimated weighted average loan-to-value ratio of 46.9%.
The loan-to-value ratio as established by an independent appraisal typically will not exceed 80% at loan origination and is lower in most cases. At December 31, 2024, the average loan size in our commercial real estate portfolio was approximately $1.2 million, with an estimated weighted average loan-to-value ratio of 55.5%.
Our commercial real estate loans include loans secured by office buildings, retail facilities, hotels, gas stations, convalescent facilities, industrial use buildings, restaurants, multifamily properties and agricultural real estate. At December 31, 2023, our commercial real estate loan portfolio totaled $1.7 billion, or 86.6% of total loans. Our commercial real estate loans may be owner-occupied or non-owner occupied.
Our commercial real estate loans include loans secured by office buildings, retail facilities, hotels, gas stations, convalescent facilities, industrial use buildings, restaurants, multifamily properties and agricultural real estate. At December 31, 2024, our commercial real estate loan portfolio totaled $1.7 billion, or 85.4% of total loans. Our commercial real estate loans may be owner-occupied or non-owner occupied.
We emphasize personalized “relationship banking,” where the relationship is predicated on ongoing client contact, client access to decision makers, and our understanding of the clients’ business, market and competition which allows us to better meet the needs of our clients. At December 31, 2023, we had net loans of $1.9 billion, representing 74.7% of our total assets.
We emphasize personalized “relationship banking,” where the relationship is predicated on ongoing client contact, client access to decision makers, and our understanding of the clients’ business, market and competition, which allows us to better meet our clients’ needs. At December 31, 2024, we had net loans of $1.9 billion, representing 72.6% of our total assets.
As a FHLB member, the Bank is required to own capital stock in the FHLB and is authorized to apply for advances on the security of that stock and certain of its mortgage loans and securities, provided that certain credit worthiness standards have been met.
As an FHLB member, the Bank is required to own capital stock in the FHLB and is authorized to apply for advances on the security of that stock and certain of its mortgage loans and securities, provided that certain creditworthiness standards have been met.
We believe this diverse geographic footprint provides us with access to low cost, stable core deposits in community markets that we can use to fund commercial loan growth in our metropolitan markets. We generally lend in markets where we have a physical presence through our branch offices.
We believe this diverse geographic footprint provides us with access to low cost, stable core deposits that we can use to fund commercial loan growth. 6 Table of Contents We generally lend in markets where we have a physical presence through our branch offices.
Our full suite of online banking solutions including 15 Table of Contents access to account balances, online transfers, online bill payment and electronic delivery of client statements, mobile banking solutions for iPhone and Android phones, including remote check deposit with mobile bill pay.
Our full suite of online banking solutions includes access to account balances, online transfers, online bill payment and electronic delivery of client statements and mobile banking options for iPhone and Android phones, including remote check deposit with mobile bill pay.
The Federal Reserve has a long-standing policy that a bank holding company is required to serve as a source of financial and managerial strength to its subsidiary banks and may not conduct its operations in an unsafe or unsound manner.
Under the BHCA, as a bank holding company, we are supervised by the Federal Reserve. The Federal Reserve has a long-standing policy that a bank holding company is required to serve as a source of financial and managerial strength to its subsidiary banks and may not conduct its operations in an unsafe or unsound manner.
Moreover, the federal bank regulatory agencies also have the general authority to limit the dividends paid by insured banks if such payments should be deemed to constitute an unsafe and unsound practice and failure to meet the capital conservation buffer requirement will result in restrictions on dividends. 22 Table of Contents Privacy Standards and Cybersecurity.
Moreover, the federal bank regulatory agencies also have the general authority to limit the dividends paid by insured banks if such payments are deemed to constitute an unsafe and unsound practice, and failure to meet the capital conservation buffer requirement will result in restrictions on dividends. Privacy Standards and Cybersecurity.
In addition, at December 31, 2023, the Bank’s commercial real estate loans as calculated in accordance with regulatory guidance were 327.3% of total regulatory capital. The Bank believes that the guidelines are applicable to it, as it has a relatively high concentration in commercial real estate loans.
In addition, at December 31, 2024, the Bank’s commercial real estate loans as calculated in accordance with regulatory guidance were 320.2% of total regulatory capital. The Bank believes that the guidelines are applicable to it, as it has a relatively high concentration in commercial real estate loans.
Construction loans are underwritten to either mature, or transition to a traditional amortizing loan at the completion of the construction phase. The loan-to-value ratio on our construction loans, as established by independent appraisal, typically will not exceed 80% at loan origination, and is lower in most cases.
Construction loans are typically structured with an interest-only period during the construction phase. Construction loans are underwritten to either mature, or transition to a traditional amortizing loan, at the completion of the construction phase. The loan-to-value ratio on our construction loans, as established by independent appraisal, typically will not exceed 80% at loan origination, and is lower in most cases.
The SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at (http://www.sec.gov). ​ 30 Table of Contents
The SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at (http://www.sec.gov). ​
As of December 31, 2023, the aggregate amount of loans to our 10 and 25 largest borrowers (including related entities) amounted to approximately $178.4 million, or 9.3% of total loans, and $312.3 million, or 16.2% of total loans, respectively. The table below shows our five largest borrowing relationships as of December 31, 2023 in descending order.
As of December 31, 2024, the aggregate amount of loans to our 10 and 25 largest borrowers (including related entities) amounted to approximately $184.4 million, or 9.4% of total loans, and $319.3 million, or 16.4% of total loans, respectively. The table below shows our five largest borrowing relationships as of December 31, 2024 in descending order.
Market for Registrant’s Common 26 Table of Contents Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities – Stock Repurchases” contained in this Form 10-K. ​ Competition The financial services industry is highly competitive as we compete for loans, deposits and client relationships in our market. We compete for loans, deposits, and financial services in all our principal markets.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities – Stock Repurchases” contained in this Form 10-K. Competition The financial services industry is highly competitive. We compete for loans, deposits, and other financial services in all our principal markets.
In August 2023, we opened a branch in Las Vegas, Nevada to expand our geographic footprint and market areas and augment our deposit and loan growth. As of December 31, 2023, borrowers or properties located outside of California in the states of Colorado, New Mexico and Washington comprised 4.5%, 2.3% and 5.4% of our loan portfolio, respectively.
In August 2023, we opened a branch in Las Vegas, Nevada to expand our geographic footprint and augment our deposit and loan growth. As of December 31, 2024, borrowers or properties located in the states of Colorado, New Mexico and Washington comprised 6.9%, 3.2% and 4.3% of our loan portfolio, respectively.
As a California chartered bank, the Bank is subject to supervision, periodic examination, and regulation by the California Department of Financial Protection and Innovation (“DFPI”), previously known as the California Department of Business Oversight, and by the Federal Reserve as its primary federal regulator.
As a California chartered bank that is a member of the Federal Reserve System, the Bank is subject to supervision, periodic examination, and regulation by the 17 Table of Contents California Department of Financial Protection and Innovation (“DFPI”), previously known as the California Department of Business Oversight, and by the Federal Reserve as its primary federal regulator.
We retain a valid lien on the real estate, obtain a title insurance policy that insures the property is free from encumbrances and require hazard insurance. At December 31, 2023, home equity loans and lines of credit totaled $5.9 million, or 0.4% of total loans, of which $96,000 were secured by junior liens.
We retain a lien on the real estate, obtain a title insurance policy that insures the property is free from encumbrances and require hazard insurance. At December 31, 2024, home equity loans and lines of credit totaled $5.1 million, or 0.3% of total loans, of which $78,000 were secured by junior liens.
In addition, deposits located in California comprised 61.4% of total deposits as of December 31, 2023. With a population of approximately 4.6 million, the San Francisco-Oakland-Hayward MSA represents the third most populous area in California and the thirteenth largest in the United States.
Deposits located in California comprised 62.7% of our total deposits as of December 31, 2024. With a population of approximately 4.6 million, the San Francisco-Oakland-Hayward MSA represents the third most populous area in California and the thirteenth largest in the United States.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Our acquisition activities strategy involves a number of significant risks, including: • Diverting management attention and resources toward identifying, evaluating, and negotiating potential acquisitions, potentially detracting from our existing business operations. • Reliance on estimates and judgments, which could be inaccurate, in evaluating credit, operational, management, and market risks of the target company or the assets and liabilities we aim to acquire. • Exposure to potential asset quality and credit risks. • Higher than expected deposit attrition; • Potential exposure to unknown or contingent liabilities from acquired banks and businesses, including regulatory and compliance issues. • The risk of not realizing expected revenue increases, cost savings, geographic or product expansions, or other projected acquisition benefits. • Costs and time required to integrate operations and personnel from the combined businesses. • Inconsistencies in standards, procedures, and policies that may adversely affect client and employee relationships; • Potential increase in operating expenses relative to operating income from the new operations. • Short-term adverse effects on our financial results, such as increases in general and administrative expenses initially, which potentially adversely affects our efficiency ratio. • Challenges related to the conversion and integration of financial and client data. 37 Table of Contents • Borrowing funds or alternative financing methods, such as issuing common or convertible preferred stock, that may increase leverage, diminish liquidity, and result in dilution for existing shareholders. • Risks of impairment to goodwill, which would require a charge to earnings. ​ Any of the foregoing could have a material adverse effect on our business, financial condition, and results of operations.
Our acquisition activities strategy involves a number of significant risks, including: • Diverting management attention and resources toward identifying, evaluating, and negotiating potential acquisitions, potentially detracting from our existing business operations. • Reliance on estimates and judgments, which could be inaccurate, in evaluating credit, operational, management, and market risks of the target company or the assets and liabilities we aim to acquire. • Exposure to potential asset quality and credit risks. • Higher than expected deposit attrition; • Potential exposure to unknown or contingent liabilities from acquired banks and businesses, including regulatory and compliance issues. • The risk of not realizing expected revenue increases, cost savings, geographic or product expansions, or other projected acquisition benefits. • Costs and time required to integrate operations and personnel from the combined businesses. • Inconsistencies in standards, procedures, and policies that may adversely affect client and employee relationships; • Potential increase in operating expenses relative to operating income from the new operations. • Short-term adverse effects on our financial results, such as increases in general and administrative expenses initially, which potentially adversely affects our efficiency ratio. • Challenges related to the conversion and integration of financial and client data. • Borrowing funds or alternative financing methods, such as issuing common or convertible preferred stock, that may increase leverage, diminish liquidity, and result in dilution for existing shareholders. • Risks of impairment to goodwill, which would require a charge to earnings. ​ Any of the foregoing could have a material adverse effect on our business, financial condition, and results of operations.
Nonperforming assets adversely affect our earnings in various ways. We do not record interest income on nonaccrual loans or foreclosed assets, and nonaccrual loans and foreclosed assets increase our loan administration costs. Upon foreclosure or similar proceedings, we record the repossessed asset at the estimated fair value, less costs to sell, which may result in a write-down or loss.
Nonperforming assets adversely affect our earnings in various ways. We do not record interest income on nonaccrual loans or foreclosed assets, and nonaccrual loans and foreclosed assets increase our loan administration costs. Upon foreclosure or similar proceedings, we record the repossessed asset at its estimated fair value, less costs to sell, which may result in a write-down or loss.
Certain accounting policies, most notably the allowance for credit losses, are critical to presenting the Company’s financial condition and results of operations. They require management to make difficult, subjective or complex judgments about matters that are uncertain. Materially different amounts could be reported under different conditions or using different assumptions or estimates.
Certain accounting policies, most notably the allowance for credit losses, are critical to presenting our financial condition and results of operations. They require management to make difficult, subjective or complex judgments about matters that are uncertain. Materially different amounts could be reported under different conditions or using different assumptions or estimates.
We performed our test for goodwill impairment at December 31, 2023 and the test concluded that recorded goodwill was not impaired. Our test of goodwill for potential impairment is based on a qualitative assessment by management that takes into consideration macroeconomic conditions, industry and market conditions, cost or margin factors, financial performance and share price.
We performed our test for goodwill impairment at December 31, 2024 and the test concluded that recorded goodwill was not impaired. Our test of goodwill for potential impairment is based on a qualitative assessment by management that takes into consideration macroeconomic conditions, industry and market conditions, cost or margin factors, financial performance and share price.
In some cases, management must select the accounting policy or method to apply from two or more alternatives, any of which might be reasonable under the circumstances, yet might result in the Company’s reporting materially different results than would have been reported under a different alternative.
In some cases, management must select the accounting policy or method to apply from two or more alternatives, any of which might be reasonable under the circumstances, yet might result in us reporting materially different results than would have been reported under a different alternative.
Our enterprise risk management framework seeks to achieve an appropriate balance between risk and return, which is critical to optimizing stockholder value. We have established processes and procedures intended to identify, measure, monitor, report, analyze and control the types of risk to which we are subject.
Our enterprise risk management framework seeks to achieve an appropriate balance between risk and return, which is critical to optimizing shareholder value. We have established processes and procedures intended to identify, measure, monitor, report, analyze and control the types of risk to which we are subject.
Several of our large depositors are locals of labor unions or have business, family, or other relationships with each other, which creates a risk that any one client’s withdrawal of its deposits could lead to a loss of other deposits from clients within the relationship.
Several of our large depositors are local unions of labor unions or have business, family, or other relationships with each other, which creates a risk that any one client’s withdrawal of its deposits could lead to a loss of other deposits from clients within the relationship.
In the event the Bank is unable to pay dividends to us, we may not be able to service any debt we may incur, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
In the event the Bank is unable to pay dividends to BayCom, we may not be able to service any debt we may incur, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
We have established policies and procedures to prevent or limit the impact of system breaches, failures and interruptions. In addition, we outsource certain aspects of our data processing and other operational functions to certain third-party providers. While we select third-party 39 Table of Contents vendors carefully, we do not control their actions.
We have established policies and procedures to prevent or limit the impact of system breaches, failures and interruptions. In addition, we outsource certain aspects of our data processing and other operational functions to certain third-party providers. While we select third-party vendors carefully, we do not control their actions.
Inaccurate estimates or declines in economic conditions or real estate values in the markets where we purchase loans could significantly adversely affect the level of our nonperforming loans and our results of operations. Our allowance for credit losses may prove to be insufficient to absorb losses in our loan portfolio.
Inaccurate estimates or declines in economic conditions or real estate values in the markets where we purchase loans could significantly adversely affect the level of our nonperforming loans and our results of operations. 32 Table of Contents Our allowance for credit losses may prove to be insufficient to absorb losses in our loan portfolio.
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Interest Rate Sensitivity and Market Risk,” of this Form 10-K for a discussion of interest rate risk modeling and the inherent risks in modeling assumptions. 36 Table of Contents We may incur losses on our securities portfolio as a result of increases in interest rates.
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Interest Rate Sensitivity and Market Risk,” of this Form 10-K for a discussion of interest rate risk modeling and the inherent risks in modeling assumptions. We may incur losses on our securities portfolio as a result of increases in interest rates.
Furthermore, our unfamiliarity with new markets or lines of business might adversely affect the success of such actions. External factors, such as compliance with regulations, competitive alternatives and shifting market preferences, may also affect the ultimate implementation of a new line of business or offerings of new products, product enhancements or services.
Furthermore, our unfamiliarity with new markets or lines of business might adversely affect the success of such actions. External factors, such as compliance with regulations, competitive alternatives and shifting market preferences, may also affect the ultimate implementation of a new line of business or offerings of new products, product 35 Table of Contents enhancements or services.
In such cases, any repossessed collateral for a defaulted agricultural operating loan may not provide an adequate source of repayment of the outstanding loan balance as a result of the greater likelihood of damage, loss or depreciation or because the assessed value of the collateral exceeds the eventual realization value.
In such cases, any repossessed collateral for a defaulted agricultural operating loan may not provide an adequate source of repayment of 31 Table of Contents the outstanding loan balance as a result of the greater likelihood of damage, loss or depreciation or because the assessed value of the collateral exceeds the eventual realization value.
Our growth or future losses may require us to raise additional capital in the future, but that capital may not be available when it is needed, or the cost of that capital may be very high. We are required by federal regulatory authorities to maintain adequate levels of capital to support our operations.
Our growth or future losses may require us to raise additional capital in the future, but that capital may not be available when it is needed, or the cost of that capital may be exceedingly high. We are required by regulatory authorities to maintain adequate levels of capital to support our operations.
Our pursuit of acquisitions may disrupt our business, and any equity that we issue as merger consideration may have the effect of diluting the value of your investment.
Our pursuit of acquisitions may disrupt our business, and any equity that we issue as merger consideration may have the effect of diluting the value of your investment in the Company.
The Company’s management must exercise judgment in selecting and applying many of these accounting policies and methods so they comply with generally accepted accounting principles and reflect management’s judgment regarding the most appropriate manner to report the Company’s financial condition and results of operations.
Management must exercise judgment in selecting and applying many of these accounting policies and methods so that they comply with generally accepted accounting principles and reflect management’s judgment regarding the most appropriate manner to report our financial condition and results of operations.
If our policies, procedures and systems are deemed deficient, we would be subject to liability, including fines and regulatory actions, which may include the denial of regulatory approvals to proceed with certain aspects of our business plan, including our acquisition plans.
If our policies, procedures and systems are deemed deficient, we would be subject to liability, including fines and regulatory actions, which may include the denial of regulatory approvals to proceed with certain aspects 39 Table of Contents of our business plan, including our acquisition plans.
If we are forced to pay higher rates on these 43 Table of Contents deposits to retain the funds, or if we are unable to retain the funds and are forced to turn to borrowings and other funding sources for our lending and investment activities, the interest expense associated with such borrowings or other funding sources may be higher than the rates we are paying on these deposits, which could adversely affect our net margin and net income.
If we are forced to pay higher rates on these deposits to retain the funds, or if we are unable to retain the funds and are forced to turn to borrowings and other funding sources for our lending and investment activities, the interest expense associated with such borrowings or other funding sources may be higher than the rates we are paying on these deposits, which could adversely affect our net margin and net income.
A downturn in economic conditions in the market areas we serve, in particular the San Francisco Bay Area, Southern California, Denver, Colorado, Seattle, Washington, Central New Mexico and the agricultural region of the California Central Valley, whether due to inflation, recessionary trends, geopolitical conflicts, adverse weather, or other factors, could have a material adverse effect on our business, financial condition, and results of operations, including but not limited to: ​ ● Reduced demand for our products and services , potentially leading to a decline in our overall loans or assets. ● Elevated levels of loan delinquencies, problematic assets , and foreclosures . ● An increase in our allowance for credit losses on loans. ● Depreciation in collateral values linked to our loans, thereby diminishing borrowing capacities and asset values tied to existing loans . ● Reduced net worth and liquidity of loan guarantors , possibly impairing their ability to meet commitments to us . ● Reduction in our low-cost or noninterest -bearing deposits. ​ A decline in local or regional economic conditions may have a greater effect on our earnings and capital than on the earnings and capital of larger financial institutions whose real estate loan portfolios are geographically diverse.
A downturn in economic conditions in the market areas we serve, in particular the San Francisco Bay Area, Southern California, Denver, Colorado, Seattle, Washington, Central New Mexico and the agricultural region of the California Central Valley, be it due to inflation, recessionary trends, geopolitical conflicts, adverse weather, or other factors, could have a material adverse effect on our business, financial condition, and results of operations, including but not limited to: ​ ● Reduced demand for our products and services , potentially leading to a decline in our overall loans or assets. ● Elevated levels of loan delinquencies, problem assets , and foreclosures . ● An increase in our allowance for credit losses on loans. ● Depreciation in collateral values linked to our loans, thereby diminishing borrowing capacities and asset values tied to existing loans . ● Reduced net worth and liquidity of loan guarantors , possibly impairing their ability to meet commitments to us . ● Reduction in our low-cost or noninterest -bearing deposits. ​ A decline in local or regional economic conditions may have a greater effect on our earnings and capital compared to larger financial institutions with more geographically diverse real estate loan portfolios.
Risks Related to Cybersecurity, Third Parties and Technology We are subject to certain risks in connection with our use of technology. Our security measures may not be sufficient to mitigate the risk of a cyber-attack.
Risks Related to Cybersecurity, Third Parties and Technology 36 Table of Contents We are subject to certain risks in connection with our use of technology. Our security measures may not be sufficient to mitigate the risk of a cyber-attack.
Our access to funding sources in amounts adequate to finance our activities or on terms which are acceptable to us could be impaired by factors that affect us specifically, or the financial services industry or economy in general.
Our access to funding sources in amounts adequate to finance our activities on terms that are acceptable to us could be impaired by factors that affect us specifically, or the financial services industry or economy generally.
I ncreasing scrutiny and evolving expectations from customers, regulators, investors, and other stakeholders with respect to our environmental, social and governance practices may impose additional costs on us or expose us to new or additional risks. 44 Table of Contents Companies are facing increasing scrutiny from customers, regulators, investors, and other stakeholders related to their environmental, social and governance (“ESG”) practices and disclosure.
I ncreasing scrutiny and evolving expectations from customers, regulators, investors, and other stakeholders with respect to our environmental, social and governance practices may impose additional costs on us or expose us to new or additional risks. Companies are facing increasing scrutiny from customers, regulators, investors, and other stakeholders related to their environmental, social, and governance (“ESG”) practices and disclosure.
Management also recognizes that significant new growth in loan portfolios, new loan products, and the refinancing of existing loans can result in 35 Table of Contents portfolios comprised of unseasoned loans that may not perform consistent with a historical or projected manner and will increase the risk that our allowance for credit losses on loans may be insufficient to absorb credit losses without significant additional provisions.
Management also recognizes that significant new growth in loan portfolios, new loan products, and the refinancing of existing loans can result in portfolios comprised of unseasoned loans that may not perform consistently with a historical or projected manner and will increase the risk that our allowance for credit losses on loans may be insufficient to absorb credit losses without significant additional provisions.
A significant increase in the level of nonperforming assets from current levels would also increase our risk profile and may impact the capital levels our regulators believe are appropriate in light of the increased risk profile.
A significant increase in the level of nonperforming assets from current levels would also increase our risk profile and may impact the capital levels our regulators believe are appropriate in light of 29 Table of Contents the increased risk profile.
Higher than anticipated building costs may cause actual results to vary significantly from those estimated. Further, this type of lending often involves larger loan principal amounts and might be concentrated among a limited number of builders.
Higher than anticipated construction costs may cause actual results to vary significantly from those estimated. Further, this type of lending often involves larger loan principal amounts and might be 30 Table of Contents concentrated among a limited number of builders.
Interest rates do not necessarily move in the same direction or by the same magnitude as the prices of goods and services. ​ Risks Related to Our Lending Activities Nonperforming assets take significant time to resolve and adversely affect our results of operations and financial condition and could result in further losses in the future.
However, interest rates do not necessarily move in the same direction or magnitude as the prices of goods and services, creating additional uncertainty in the economic environment. ​ Risks Related to Our Lending Activities Nonperforming assets take significant time to resolve and adversely affect our results of operations and financial condition and could result in further losses in the future.
The $1.7 billion of commercial real estate loans includes $249.5 million of multifamily loans and $9.6 million of commercial construction and land loans. Commercial loans typically involve higher principal amounts than other types of loans, with some of our commercial borrowers have more than one loan outstanding with us.
The $1.7 billion of commercial real estate loans includes $225.2 million of multifamily loans and $1.5 million of commercial construction and land loans. Commercial loans typically involve larger principal amounts than other types of loans, and some of our commercial borrowers have more than one loan outstanding with us.
We rely heavily on our management team and could be adversely affected by the unexpected loss of key officers and relationship managers. We are led by a management team with substantial experience in the markets we serve and the financial products that we offer. Our operating strategy focuses on providing products and services through long-term relationship managers.
We rely heavily on our management team and could be adversely affected by the unexpected loss of key officers and relationship managers. Our management team brings substantial experience in the markets we serve and the financial products we offer. Our operating strategy emphasizes providing products and services through long-term relationship managers.
Our business operations are significantly influenced by the extensive body of accounting regulations in the United States. Regulatory bodies periodically issue new guidance, altering accounting rules and reporting requirements, which 38 Table of Contents can substantially affect the preparation and reporting of our financial statements. These changes might necessitate retrospective application, potentially leading to restatements of prior period financial statements.
Our business operations are significantly influenced by the extensive body of accounting regulations in the United States. Regulatory bodies regularly issue new guidance, altering accounting rules and reporting requirements, which can substantially affect the preparation and presentation of our financial statements. These changes may require retrospective application, potentially leading to restatements of prior period financial statements.
At December 31, 2023, we had $1.8 billion of commercial loans, consisting of $1.7 billion of commercial real estate and construction and land loans, representing 87.1% of total loans, and $162.9 million of commercial and industrial loans, representing 8.4% of total loans, where real estate is not the primary source of collateral.
At December 31, 2024, we had $1.8 billion of commercial loans, consisting of $1.7 billion of commercial real estate and construction and land loans, representing 85.5% of total loans, and $173.9 million of commercial and industrial loans, representing 8.9% of total loans, where real estate is not the primary source of collateral.
During the term of some of our construction loans, borrowers are not required to make payments as accumulated interest is added to the principal through an interest reserve. Therefore, repayment is contingent, in part, on the project's success and the borrower's ability to sell or lease the property, rather than solely on the borrower's repayment capacity.
During the term of some of our construction loans, borrowers do not make payments, as accumulated interest is added to the principal through an interest reserve. Consequently, repayment often depends on the project's success and the borrower's ability to sell or lease the property rather than solely on repayment capacity.
The Company’s reported financial results depend on management’s selection of accounting methods and certain assumptions and estimates, which, if incorrect, could cause unexpected losses in the future. The Company’s accounting policies and methods are fundamental to how the Company records and reports its financial condition and results of operations.
Our reported financial results depend on management’s selection of accounting methods and certain assumptions and estimates, which, if incorrect, could cause unexpected losses in the future. Our accounting policies and methods are fundamental to how we record and report our financial condition and results of operations.
One such significant change from 2022 was the implementation of the CECL model, which we adopted on January 1, 2023. Under the CECL model, financial assets carried at amortized cost, such as loans and held-to-maturity debt securities, are presented at the net amount expected to be collected.
One significant change impacting our operations is the Current Expected Credit Loss (CECL) model, which we adopted on January 1, 2023. Under CECL, financial assets carried at amortized cost, such as loans and held-to-maturity debt securities, are presented at the net amount expected to be collected.
A downturn in the commercial real estate market could increase delinquencies, defaults, foreclosures, and significantly impair the value of our collateral, hindering our ability to sell the collateral upon foreclosure. Dealing with builders who have multiple loans with us exposes us to heightened risks where adverse developments in one credit relationship could substantially increase our risk exposure.
A downturn in the commercial real estate market could increase delinquencies, defaults, foreclosures, and significantly impair the value of our collateral, hindering our ability to sell the collateral upon foreclosure. Builders with multiple loans heighten these risks, as adverse developments in one credit relationship can increase overall exposure.
As of December 31, 2023, our ten largest depositors, none of which include brokered deposits, accounted for $246.0 million in deposits, or approximately 11.5% of total deposits.
As of December 31, 2024, our ten largest depositors, none of which include brokered deposits, accounted for $304.5 million in deposits, or approximately 13.6% of total deposits.
All our branches and most of our deposit clients are located in these five states. A return of recessionary conditions or adverse economic conditions in the markets we serve may reduce our rate of growth, affect our customers’ ability to repay loans and adversely impact our business, financial condition, and results of operations.
All our branches and most of our deposit clients are located in these five states. Adverse economic conditions in our market areas could impact our growth rate, reduce our customers’ ability to repay loans, and adversely impact our business, financial condition, and results of operations.
Any of these results could have a material adverse effect on our business, financial condition, results of operations and growth prospects. ​ If our enterprise risk management framework is not effective at mitigating risk and loss to us, we could suffer unexpected losses.
Additionally, any perceived or actual failure to prevent money laundering or terrorist financing activities could significantly damage our reputation. These outcomes could have a material adverse effect on our business, financial condition, results of operations, and growth prospects. If our enterprise risk management framework is not effective at mitigating risk and loss to us, we could suffer unexpected losses.
At December 31, 2023, $658.3 million, or 30.9%, of our total deposits were comprised of deposits from labor unions, representing 714 different local unions with an average deposit balance per local union of approximately $814,000. At December 31, 2023, 22 labor unions had aggregate deposits of $10.0 million or more, totaling $399.7 million, or 18.7% of our total deposits.
At December 31, 2024, $641.5 million, or 30.1%, of our total deposits were comprised of deposits from labor unions, representing 732 different local unions with an average deposit balance per local union of approximately $770,000. At December 31, 2024, 20 labor unions had aggregate deposits of $10.0 million or more, totaling $385.3 million, or 18.1% of our total deposits.
During this extended financing-to-completion period, the collateral often generates no cash flow. 33 Table of Contents Our business may be adversely affected by credit risk associated with residential property. At December 31, 2023, $86.0 million, or 4.5% of total loans, was secured by first liens on one-to-four family residential real estate.
During these extended periods, the collateral typically generates no cash flow. Our business may be adversely affected by credit risk associated with residential property. At December 31, 2024, $109.7 million, or 5.6% of total loans, was secured by first liens on one-to-four family residential real estate.
As a result, interest rates tend to have a more significant impact on our performance than general levels of inflation or deflation.
Virtually all of our assets and liabilities are monetary in nature and, as a result, market interest rates tend to have a more significant impact on our performance than general levels of inflation or deflation.
Furthermore, a prolonged period of inflation could cause wages and other costs to the Company to increase, which could adversely affect our results of operations and financial condition. Virtually all of our assets and liabilities are monetary in nature.
Furthermore, a prolonged period of inflation could cause wages and other costs to us to increase, which could adversely affect our results of operations and financial condition.
To meet our growth objectives, we may originate or purchase loans outside of our market area which could affect the level of our net interest margin and nonperforming loans.
Significant increases to this reserve could reduce our net income and adversely affect our business, results of operations, and financial condition. To meet our growth objectives, we may originate or purchase loans outside our market areas, which could affect the level of our net interest margin and nonperforming loans.
The purpose of the guidance is to guide banks in developing risk management practices and capital levels commensurate with the level and nature of real estate concentrations. The guidance states that management should employ heightened risk management practices including board and management oversight and strategic planning, development of underwriting standards, risk assessment and monitoring through market analysis and stress testing.
The guidance states that management should employ heightened risk management practices, including board and management oversight and strategic planning, development of underwriting standards, risk assessment and monitoring through market analysis and stress testing.
In addition, adverse weather conditions as well as decreases in market prices for agricultural products grown in our markets can adversely affect agricultural businesses in our markets.
These developments may, in turn, negatively impact these businesses and, by extension, our operations and financial performance. In addition, adverse weather conditions as well as decreases in market prices for agricultural products grown in our markets can adversely affect agricultural businesses in our markets.
In addition, one-to-four family residential loans are generally sensitive to regional and local economic conditions that significantly impact the ability of borrowers to meet their loan payment obligations, making loss levels difficult to predict.
These jumbo loans carry increased risk due to their larger balances and limited liquidity. In addition, one-to-four family residential loans are generally sensitive to regional and local economic conditions that affect borrowers’ ability to meet their loan payment obligations, making loss levels difficult to predict.
We also offer loans on land under development or held for future construction. These loans carry additional risks due to longer development periods, vulnerability to real estate value declines, economic fluctuations delaying projects, political changes affecting land use, and the collateral's illiquid nature.
Our construction loans include speculative construction loans—projects without identified end-purchasers—which pose heightened risks due to market uncertainties. We also provide loans for land under development or held for future construction. These loans carry additional risks, including longer development timelines, exposure to real estate value declines, economic fluctuations, political changes affecting land use, and the collateral's illiquid nature.
These potential negative events may cause us to incur losses and adversely affect our business, financial condition and results of operations. Agricultural lending and volatility in government regulations may adversely affect our financial condition and results of operations. At December 31, 2023, agricultural loans, including agricultural real estate and operating loans, were $15.3 million, or 0.8% of total loans.
These adverse conditions could result in losses and negatively impact our business, financial condition, and results of operations. Agricultural lending and volatility in government regulations may adversely affect our financial condition and results of operations. At December 31, 2024, agricultural loans, including agricultural real estate and operating loans, were $12.0 million, or 0.61% of total loans.
Compliance with the CCPA, the CPRA and other state statutes or regulations designed to protect consumer personal data could potentially require us to implement substantive technology infrastructure and process changes.
Compliance with the CCPA, the CPRA and other state statutes or regulations designed to protect consumer personal data could potentially require us to implement substantive technology infrastructure and process changes. Non-compliance with the CCPA, the CPRA or similar laws and regulations could lead to substantial regulatory imposed fines and penalties, damages from private causes of action and/or reputational harm.
While we have developed policies and procedures designed to assist in compliance with these laws and regulations, no assurance can be given that these policies and procedures will be effective in preventing violations of these laws and regulations.
Failure to comply with these regulations could result in fines or sanctions and limit our ability to get regulatory approval of acquisitions. While we have developed policies and procedures designed to assist in compliance with these laws and regulations, no assurance can be given that these policies and procedures will be effective.
Accordingly, our success depends in large part on the performance of our key personnel, as well as on our ability to attract, motivate and retain highly qualified senior and middle management. Competition for employees is intense, and the process of locating key personnel with the combination of skills and attributes required to execute our business plan may be lengthy.
Consequently, our success relies heavily on the performance of key personnel and our ability to attract, motivate, and retain highly qualified senior and middle management. Competition for skilled employees in the banking industry is intense, and identifying individuals with the necessary combination of expertise and attributes to execute our business plan can be a lengthy process.
These sales have resulted in gains or premiums on the sale of the loans and have created a stream of future servicing income. For the year ended December 31, 2023, we sold a total of $7.2 million in SBA loans (guaranteed portion) for a net gain of $508,000.
Historically, we have sold the guaranteed portion of our SBA 7(a) loans in the secondary market. These sales have resulted in gains or premiums on the sale of the loans and have created a stream of future servicing income.
Such balloon payments may require the borrower to either sell or refinance the underlying property in order to make the payment, which may increase the risk of default or nonpayment. Meanwhile, our commercial business loans are primarily made based on the cash flow of the borrower and secondarily on the underlying collateral provided by the borrower.
In addition, many of our commercial real estate loans are not fully amortizing and require large balloon payments upon maturity, which may compel the borrower to sell or refinance the property, increasing the risk of default. Commercial business loans are typically made based on the cash flow of the borrower and secondarily on the underlying collateral provided by the borrower.
We may not be successful in retaining our key employees and the unexpected loss of services of one or more of our key personnel could have a material adverse effect on our business because of their skills, knowledge of our market and financial products, years of industry experience, long-term client relationships and the difficulty of promptly finding qualified replacement personnel.
The unexpected loss of one or more key personnel could have a material adverse effect on our business due to their skills, market knowledge, industry experience, and long-term client relationships.
Small to medium-sized businesses may be impacted more during periods of high inflation as they are not able to leverage economies of scale to mitigate cost pressures compared to larger businesses. Consequently, the ability of our business clients to repay their loans may deteriorate quickly, which would adversely impact our results of operations and financial condition.
This may particularly affect small to medium-sized businesses, as they are less able to leverage economies of scale to mitigate cost pressures compared to larger businesses. Consequently, our business clients may experience increased financial strain, reducing their ability to repay loans and adversely impacting our results of operations and financial condition.
See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity” of this Form 10-K.
A failure to maintain adequate liquidity could materially and adversely affect our business, financial condition and results of operations. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity” of this Form 10-K.
While we continuously update our policies, programs, processes and practices, many of our data management and aggregation processes are manual and subject to human error or system failure.
Our ability to manage data and aggregate data may be limited by the effectiveness of our policies, programs, processes and practices that govern how data is acquired, validated, stored, protected and processed. While we continuously update our policies, programs, processes and practices, many of our data management and aggregation processes are manual and subject to human error or system failure.
Because our ability to receive dividends or loans from the Bank is restricted, our ability to pay dividends to our shareholders may also be restricted. Also, the Company’s right to participate in a distribution of assets upon a subsidiary’s liquidation or reorganization is subject to the prior claims of the subsidiary’s creditors.
Also, BayCom’s right to participate in the distribution of assets upon a subsidiary’s liquidation or reorganization is subject to the prior claims of the subsidiary’s creditors.
We also could be adversely affected to the extent such an agreement is not renewed by the third-party vendor or is renewed on terms less favorable to us. Additionally, the bank regulatory agencies expect financial institutions to be responsible for all aspects of our vendors’ performance, including aspects which they delegate to third parties.
Furthermore, we could be adversely affected if a vendor agreement is not renewed or is renewed on terms less favorable to us. Regulatory agencies also require financial institutions to remain accountable for all aspects of vendor performance, including activities delegated to third parties.
As a result, our ability to effectively compete to retain or acquire new business may be impaired, and our business, financial condition or results of operations may be adversely affected . Risks Related to Regulatory and Compliance Matters 40 Table of Contents The level of our commercial real estate loan portfolio may subject us to additional regulatory scrutiny.
As a result, our ability to effectively compete to retain or acquire new business may be impaired, and our business, financial condition or results of operations may be adversely affected .
The FDIC, the Federal Reserve and the Office of the Comptroller of the Currency have promulgated joint guidance on sound risk management practices for financial institutions with concentrations in commercial real estate lending. Under this guidance, a financial institution that, like us, is actively involved in commercial real estate lending, should perform a risk assessment to identify concentrations.
Under this guidance, a financial institution that, like us, is actively involved in commercial real estate lending, should perform a risk assessment to identify concentrations.
A substantial portion of our cash flow, including cash flow to pay principal and interest on any debt we may incur, including the Notes, comes from dividends the Company receives from the Bank. Various federal and state laws and regulations limit the amount of dividends that the Bank may pay to the Company.
Our liquidity is dependent on dividends from the Bank. BayCom is a legal entity separate and distinct from the Bank. A substantial portion of BayCom’s cash flow, including cash flow to pay principal and interest on any debt it may incur, including the Notes, comes from dividends BayCom receives from the Bank.
Failure to adapt to or comply with regulatory requirements or investor or stakeholder expectations and standards could negatively impact our reputation, ability to do business with certain partners, and our stock price. New government regulations could also result in new or more stringent forms of ESG oversight and expanding mandatory and voluntary reporting, diligence, and disclosure. ​ Item 1B.
Failure to adapt to or comply with regulatory requirements, or investor or stakeholder expectations and standards, could negatively impact our reputation, ability to do business with certain partners, and our stock price.
There can be no assurance that we will be able to continue originating these loans, that a secondary market will continue to exist or that we will continue to realize premiums upon the sale of the guaranteed portion of these loans.
For the year ended December 31, 2024, we sold a total of $2.2 million in SBA loans (guaranteed portion) for a net gain of $199,000. There can be no assurance that we will be able to continue originating these loans, that a secondary market will continue to exist, or that we will continue to realize premiums on future sales.
Disruptions or failures in the physical infrastructure or operating systems that support our business and clients, or cyber-attacks or security breaches of the networks, systems or devices that our clients use to access our products and services could result in client attrition, regulatory fines, penalties or intervention, reputational damage, reimbursement or other compensation costs, and/or additional compliance costs, any of which could materially adversely affect our results of operations or financial condition.
Additionally, disruptions or failures in the physical infrastructure or operating systems supporting our business and customers, or cyber-attacks or security breaches involving networks, systems, or devices used by our customers to access our services, could lead to client attrition, regulatory fines 40 Table of Contents or penalties, reputational damage, reimbursement or compensation costs, and increased compliance expenses.
Our earnings and cash flows are largely dependent upon our net interest income. Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions and policies of various governmental and regulatory agencies, and particularly the Federal Reserve.
Interest rates are highly sensitive to factors beyond our control, such as general economic conditions and policies set by governmental and regulatory bodies, particularly the Federal Reserve.
However, this forward-looking methodology, reliant on macroeconomic variables, introduces the potential for increased earnings volatility due to unexpected changes in these indicators between periods. An additional consequence of CECL is an accounting asymmetry between loan-related income, recognized periodically based on the effective interest method, and credit losses, recognized upfront at origination.
While CECL improves the timeliness of recognizing credit losses, its reliance on macroeconomic forecasts introduces potential earnings volatility due to unexpected changes in economic indicators. Additionally, CECL creates an accounting asymmetry: loan-related income is recognized periodically using the effective interest method, while expected credit losses are recognized upfront at origination.
This asymmetry might create the perception of reduced profitability during loan expansion periods due to the immediate recognition of expected credit losses. Conversely, periods with stable or declining loan levels might seem relatively more profitable as income accrues gradually for loans where losses had been previously recognized.
This asymmetry may give the impression of reduced profitability during periods of loan growth due to the immediate recognition of expected losses, and relatively higher profitability during periods of stable or declining loan volumes, as income continues to accrue for loans with previously recognized losses.
The lack of empirical data surrounding the credit and other financial risks posed by climate change render it difficult, or even impossible, to predict how specifically climate change may impact our financial condition and results of operations; however, the physical effects of climate change may also directly impact us.
The lack of empirical data regarding the financial and credit risks posed by climate change still makes it difficult to predict its specific impact on our financial condition and results of operations. However, the physical effects of climate change, such as more frequent and severe weather disasters, could directly affect us.
Risks Related to our Merger and Acquisition Strategy Our strategy of pursuing acquisitions exposes us to financial, execution, compliance and operational risks that could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
Additionally, there is no assurance that the declines in market value will not result in credit losses, which would lead to additional provisions for credit losses that could materially affect our net income and capital levels. 34 Table of Contents Risks Related to our Merger and Acquisition Strategy Our strategy of pursuing acquisitions exposes us to financial, execution, compliance and operational risks that could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
At December 31, 2023, our deposit composition included $372.4 million in certificates of deposit maturing within one year and $1.7 billion in noninterest-bearing, NOW checking, savings, and money market accounts. We would incur a higher cost of funds to retain these deposits in a rising interest rate environment.
Conversely, falling rates can increase loan prepayments, leading to reinvestment in lower-yielding assets, reducing income. In a rising rate environment, retaining deposits can become costlier. At December 31, 2024, our deposit composition included $485.2 million in certificates of deposit maturing within one year and $1.7 billion in noninterest-bearing, NOW checking, savings, and money market accounts.
Repayments of loans secured by non-owner occupied properties rely heavily on tenant rent payments, and any downturn in the real estate market or economic conditions heightens our risk. In addition, many of our commercial real estate loans are not fully amortizing and require large balloon payments upon maturity.
For loans secured by non-owner-occupied properties, repayments rely heavily on tenant rent payments, and downturns in the real estate market or economic conditions heighten repayment risks.
Construction and land development loans totaled $9.6 million, or 0.5% of total loans as of December 31, 2023, of which $1.6 million were commercial real estate construction loans and $8.0 million were residential real estate construction loans.
These estimates may be inaccurate, and we may be exposed to significant losses on loans for these projects. Construction and land development loans totaled $1.5 million, or 0.1% of total loans as of December 31, 2024, nearly all of which were commercial real estate construction loans.
The USA PATRIOT and Bank Secrecy Acts require financial institutions to develop programs to prevent financial institutions from being used for money laundering and terrorist activities. If such activities are detected, financial institutions are obligated to file suspicious activity reports with the U.S. Treasury’s Office of Financial Crimes Enforcement Network.
If such activities are detected, financial institutions are obligated to file suspicious activity reports with the U.S. Treasury’s Office of Financial Crimes Enforcement Network. These rules require financial institutions to establish procedures for identifying and verifying the identity of clients seeking to open new financial accounts.
The failure of an external vendor to perform in accordance with the contracted arrangements under service level agreements because of changes in the vendor’s organizational structure, financial condition, support for existing products and services or strategic focus or for any other reason, could be disruptive to our operations, which in turn could have a material negative impact on our financial condition and results of operations.
If a vendor fails to meet its contractual obligations due to changes in its organizational structure, financial condition, support for existing products and services, strategic focus, or any other reason, our operations could be disrupted, potentially causing a material adverse impact on our financial condition and results of operations.
Factors that could detrimentally impact our access to liquidity sources include a decrease in the level of our business activity as a result of a downturn in the markets in which our loans and deposits are concentrated, negative operating results, or adverse regulatory action against us.
Factors that could detrimentally impact our access to liquidity sources include a downturn in the geographic markets in which our loans and operations are concentrated or difficult credit markets. Our access to deposits may also be affected by the liquidity needs of our depositors.
Non-compliance with the CCPA, the CPRA or similar laws and regulations could lead to substantial regulatory imposed fines and penalties, damages from private causes of action and/or reputational harm. 41 Table of Contents Non-compliance with the USA PATRIOT Act, Bank Secrecy Act, or other laws and regulations could result in fines or sanctions and limit our ability to get regulatory approval of acquisitions.
Non-compliance with the USA PATRIOT Act, Bank Secrecy Act, or other laws and regulations could result in fines or sanctions and limit our ability to get regulatory approval of acquisitions. The USA PATRIOT and Bank Secrecy Acts require financial institutions to develop programs to prevent themselves from being used for money laundering and terrorist activities.
If we cannot raise additional capital or issue additional debt when needed, our ability to further expand our operations could be materially impaired and our financial condition and liquidity could be materially and adversely affected. In addition, any additional capital we obtain may dilute the interests of existing holders of our common stock.
If we cannot raise additional capital when needed, our operations could be materially impaired and our financial condition and 41 Table of Contents liquidity could be materially and adversely affected. In addition, if we are unable to raise additional capital when required by our banking regulators, we may be subject to additional adverse regulatory action.
If the services of any of our key personnel should become unavailable for any reason, we may not be able to identify and hire qualified persons on terms acceptable to us, which could have an adverse effect on our business, financial condition and results of operations.
If key personnel become unavailable for any reason, we may face challenges in promptly identifying and hiring suitable replacements on acceptable terms, which could adversely affect our business, financial condition, and results of operations.
In a changing interest rate environment, we may not be able to manage this risk effectively. If we are unable to manage interest rate risk effectively, our business, financial condition and results of operations could be materially affected. A sustained increase in market interest rates could adversely affect our earnings.
If we are unable to manage this risk effectively, our business, financial condition and results of operations could be materially affected. Our net interest margin, the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities, can be adversely affected by interest rate changes.
We rely on numerous external vendors to provide us with products and services necessary to maintain our day-to-day operations. Accordingly, our operations are exposed to risk that these vendors will not perform in accordance with the contracted arrangements under service level agreements.
Risks Related to Our Business and Industry Generally We rely on other companies to provide key components of our business infrastructure. We rely on numerous external vendors to provide products and services necessary for our day-to-day operations. Accordingly, our operations are exposed to risks associated with vendor performance under service level agreements.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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The Director of Information Technology provides periodic reports to the executive risk management committee and the board-level risk committees of the Company and the Bank and the Chief Executive Officer and other members of our senior management, as well as the cross-functional management team that oversees the information security and information technology programs.
The Director of Information Technology provides periodic reports to the executive risk management committee, the board-level risk committees of the Company and the Bank and the Chief Executive Officer and other members of our senior management, as well as the cross-functional management team that oversees the information security and information technology programs.
These risks extend to our customers, shareholders, suppliers, and partners, emphasizing the critical need for a robust cybersecurity stance. In light of these challenges, maintaining resilience in our cybersecurity posture is not just a priority but a fundamental necessity to safeguard our operations, performance, and maintaining customer confidence in our banking services.
These risks extend to our customers, shareholders, suppliers, and partners, emphasizing the critical need for a robust cybersecurity stance. In light of these challenges, maintaining resilience in our cybersecurity posture is not just a priority but a fundamental necessity to safeguard our operations, performance, and the maintenance of customer confidence in our banking services.
These qualifications, certifications, and experience include a degree from the University of California, Santa Barbara with focus on Business Administration coursework, Certified Information Systems Security Professional from ISC2 Organization. ​ ​
These qualifications, certifications, and experience include a degree from the University of California, Santa Barbara with a focus on business administration coursework and a Certified Information Systems Security Professional designation from ISC2 Organization. ​ ​ ​
Our assets are classified and protected based on the results of our risk assessment practices, which assess a variety of critical factors, including the type of data stored, system availability needs, confidentiality requirements, recovery time objectives, transactional processing, the number of users, and the volume and magnitude of transactions.
Our assets are classified and protected based on the results of our risk assessment practices, which assess a variety of critical factors, including the type of data stored, system availability needs, confidentiality requirements, recovery 43 Table of Contents time objectives, transactional processing, the number of users, and the volume and magnitude of transactions.
The Chief Operating Officer, Chief Risk Officer, and board-level risk committees of the Bank provide comprehensive reports to the full Board of Directors regarding pertinent cybersecurity risk management topics. ​ Our Director of Information Technology has more than 20 years’ experience in financial services, substantial relevant expertise and formal training in the areas of information security and cybersecurity risk management and is accountable for managing our enterprise information technology department and developing and implementing our cybersecurity and information security programs.
The Chief Operating Officer, Chief Risk Officer, and board-level risk committees of the Bank also provide comprehensive reports to the full Board of Directors regarding pertinent cybersecurity risk management topics. 44 Table of Contents ​ Our Director of Information Technology has more than 20 years’ experience in financial services, substantial relevant expertise and formal training in the areas of information security and cybersecurity risk management and is accountable for managing our enterprise information technology department and developing and implementing our cybersecurity and information security programs.
In addition to regular risk assessments, we rely on independent assessments, audits, and cybersecurity feeds from vendors, including directly into patch and vulnerability management tools. We engage cybersecurity experts and third-party specialists to perform regular assessments of our infrastructure, software systems and network architecture.
In addition to regular risk assessments, we rely on independent assessments, audits, and cybersecurity feeds from vendors, which integrate directly into our patch and vulnerability management tools. We engage cybersecurity experts and third-party specialists to perform regular assessments of our infrastructure, software systems, and network architecture.
We rely on a series of processes to identify threats, hazards, and other risks to our information assets. We employ a variety of preventative and detective tools from our Managed Security Services provider designed to monitor, detect, block, and provide alerts regarding suspicious and unauthorized activity and to report on suspected advanced persistent threats.
We rely on a series of processes to identify threats, hazards, and other risks to our information assets. We employ a variety of preventative and detective tools from our Managed Security Services provider designed to monitor, detect, block, and alert us to suspicious and unauthorized activity, including suspected advanced persistent threats.
We also leverage internal and external auditors and independent external partners to periodically review our processes, 45 Table of Contents systems, and controls, including with respect to our information security program, to assess their design and operating effectiveness. We have regular and ongoing security education and training for employees and recovery and resilience tests.
We also leverage internal and external auditors and independent external partners to periodically review our processes, systems, and controls, including our information security program, to assess their design and operating effectiveness. We provide regular and ongoing security education and training for employees and conduct recovery and resilience tests.
We expect this trend of state-level activity in those areas to continue, and we continue to monitor relevant legislative and regulatory developments. In the ordinary course of business, we rely on electronic communications and information systems to conduct our operations to store and transmit sensitive data.
Many states have recently updated their data privacy regulations, and we expect this trend to continue. We actively monitor legislative and regulatory developments to ensure compliance. In the ordinary course of business, we rely on electronic communications and information systems to conduct operations and store and transmit sensitive data.
Management and Board Oversight of Cybersecurity Risks Our Cybersecurity Program is managed by the Director of Information Technology who leads our Information Technology team responsible for leading enterprise-wide cybersecurity strategy, policy, standards, architecture, and 46 Table of Contents processes.
Risk Factors” in this Form 10-K for further discussion of risks related to cybersecurity. ​ Management and Board Oversight of Cybersecurity Risks Our Cybersecurity Program is managed by our Director of Information Technology, who leads our Information Technology team responsible for implementing our enterprise-wide cybersecurity strategy, policy, standards, architecture, and processes.
The Bank also retains third-party experts to conduct intrusion and penetration testing on an annual basis. All risk and security assessments results are shared with the Board of Directors.
The Company maintains a cyber insurance policy as part of its overall risk management strategy to mitigate financial losses in the event of a cybersecurity incident. The Bank also retains third-party experts to conduct intrusion and penetration testing on an annual basis. All risk and security assessment results are shared with the Board of Directors.
These reports address key cybersecurity topics, including the implementation and operation of preventative controls and the detection, mitigation, and remediation of cybersecurity incidents.
These reports address key cybersecurity topics, including the implementation and operation of preventative controls and the detection, mitigation, and remediation of cybersecurity incidents. ​ The Board receives formal cybersecurity updates at least quarterly from the Director of Information Technology, the Chief Operating Officer, and the Chief Risk Officer.
Additionally, our robust Vendor Management Program ensures proper oversight during the onboarding of new products, projects, and third-party vendors. ​ Identified Cybersecurity Risks Federal regulators have issued multiple statements and guidance regarding cybersecurity and that financial institutions need to design multiple layers of security controls to establish lines of defense and to ensure that their risk management processes also address the risk posed by compromised client credentials, including security measures to reliably authenticate clients accessing internet-based services of the financial institution.
Additionally, our robust Vendor Management Program ensures proper oversight during the onboarding of new products, projects, and third-party vendors. ​ Identified Cybersecurity Risks Federal and state regulators have issued guidance requiring financial institutions to implement layered security controls, strengthen client authentication for online services, and address risks from compromised credentials.
While to date we have not detected a significant compromise, significant data loss or any material financial losses related to cybersecurity attacks, our systems and those of our clients and third-party service providers are under constant threat and there can be no assurance that our cybersecurity risk management program will be fully effective in protecting the confidentiality, integrity and availability of our information systems and our solutions.
We continuously assess and monitor cybersecurity threats in real time, including risks associated with third-party providers, to enhance our security posture. However, there can be no assurance that our cybersecurity risk management program will fully protect the confidentiality, integrity, and availability of our information systems and solutions. See “Risks Related to Cybersecurity, Third Parties and Technology” under “Item 1A.
We employ a layered, defensive approach that leverages people, processes, and technology to manage and maintain cybersecurity controls. We employ a variety of preventative and detective tools to monitor, block, and provide alerts regarding suspicious activity, as well as to report on any suspected advanced persistent threats.
We employ a layered cybersecurity approach, leveraging people, processes, and technology to monitor, detect, and mitigate threats. Our defenses include a variety of preventative and detective tools designed to block unauthorized activity and identify advanced persistent threats. Despite these measures, cyber-attacks are increasingly sophisticated and frequent, particularly in the financial services sector.
Removed
In addition, a financial institution’s management is expected to maintain sufficient business continuity planning processes to ensure the timely recovery, resumption and maintenance of the institution’s operations in the event of a cyber-attack.
Added
Institutions must also maintain business continuity plans to ensure timely recovery of operations and data following a cyber-attack. Failure to comply with these regulations may result in sanctions, including financial penalties. State regulators have increasingly enacted cybersecurity laws, including requirements for cybersecurity programs, data encryption, and breach notification.
Removed
A financial institution is also expected to develop appropriate processes to enable recovery of data and business operations and address rebuilding network capabilities and restoring data if the institution or its critical service providers fall victim to a cyber-attack. If a financial institution fails to observe the regulatory guidance, they could be subject to various regulatory sanctions, including financial penalties.
Added
While we have not experienced a material cybersecurity incident to date, a significant breach could result in financial losses, operational disruptions, reputational harm, regulatory scrutiny, or legal liability. In addition to securing our own systems, we rely on third-party service providers for various critical functions, including payment processing, cloud storage, and cybersecurity tools.
Removed
State regulators have also been increasingly active in implementing cybersecurity standards and regulations. Recently, several states have adopted laws and/or regulations requiring certain financial institutions to implement cybersecurity programs and providing detailed requirements with respect to these programs, including data encryption requirements. Many such states have also recently implemented or modified their data breach notification and data privacy requirements.
Added
Our systems, as well as those of our clients and third-party vendors, remain under constant threat, and vulnerabilities within these external providers could also pose risks to our operations. Given the evolving nature of cyber threats and the expanding use of online banking and digital services, our risk exposure is expected to remain high.
Removed
Notwithstanding the strength of our defensive measures, the threat from cyber-attacks is severe, attacks are sophisticated and increasing in volume, and attackers respond rapidly to changes in defensive measures.
Added
These reports include updates on emerging threats, incident response activities, regulatory developments, and enhancements to cybersecurity frameworks. Additionally, the Board periodically conducts cybersecurity resilience reviews, including scenario planning and tabletop exercises, to evaluate preparedness for potential cyber incidents.
Removed
Risks and exposures related to cybersecurity attacks are expected to remain high for the foreseeable future due to the rapidly evolving nature and sophistication of these threats, as well as due to the expanding use of Internet banking, mobile banking and other technology-based products and services by us and our clients. See Item 1A.
Removed
Risk Factors for a further discussion of risks related to cybersecurity. See “Risks Related to Cybersecurity, Third Parties and Technology” under “Item 1A. Risk Factors” in this Form 10-K for a further discussion of risks related to cybersecurity.

Item 2. Properties

Properties — owned and leased real estate

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We believe our existing facilities adequately meet our operational needs for the foreseeable future. ​
We believe our existing facilities will adequately meet our operational needs for the foreseeable future. ​ ​
At December 31, 2023, we owned 15 of our banking branches and leased the remaining 20 branches, which leases expire on various dates through 2030. At December 31, 2023, all our leases have an option to renew with renewal periods between three and 12 years. Many of our branches are equipped with automated teller machines and drive through facilities.
At December 31, 2024, we owned 15 of our banking branches and leased the remaining 20 branches, which leases expire on various dates through 2030. At December 31, 2024, all our leases had an option to renew with renewal periods between three and 12 years. Many of our branches are equipped with automated teller machines and drive through facilities.
Including our principal executive offices, we operate a total of 35 full-service banking branches consisting of branch offices in Northern and Southern California; Las Vegas, Nevada; Denver, Colorado and Custer, Delta, and Grand counties, Colorado; Seattle, Washington and Central New Mexico at December 31, 2023.
At December 31, 2024, including our principal executive offices, we operated a total of 35 full-service banking branches consisting of branch offices in Northern and Southern California; Las Vegas, Nevada; Denver, Colorado and Custer, Delta, and Grand Counties, Colorado; Seattle, Washington and Central New Mexico at December 31, 2024.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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The Company’s cash dividend payout policy is reviewed regularly by management and the Board of Directors. Any dividends declared and paid in the future would depend upon a 47 Table of Contents number of factors, including capital requirements, our financial condition and results of operations, tax considerations, statutory and regulatory limitations, and general economic conditions.
The Company’s cash dividend payout policy is reviewed regularly by management and the Board of Directors. Any dividends declared and paid in the future would depend upon a number of factors, including capital requirements, our financial condition and results of operations, tax considerations, statutory and regulatory limitations, and general economic conditions.
The equity compensation plan information presented under subparagraph (d) in Part III, Item 11 of this Form 10-K is incorporated herein by reference. ​ Item 6. [Reserved] ​ ​
The equity compensation plan information presented under subparagraph (d) in Part III, Item 12 of this Form 10-K is incorporated herein by reference. ​ Item 6. [Reserved] ​
Our common stock is listed on the NASDAQ Global Select Market under the symbol “BCML.” At December 31, 2023, we had approximately 783 shareholders of record (not including the number of persons or entities holding stock in nominee or street name through various brokerage firms).
Our common stock is listed on the NASDAQ Global Select Market under the symbol “BCML.” At December 31, 2024, we had approximately 750 shareholders of record (not including the number of persons or entities holding stock in nominee or street name through various brokerage firms).
Our future payment of dividends may depend, in part, upon receipt of dividends from the Bank, which are restricted by federal regulations. Stock Repurchases.
Our future payment of dividends may depend, in part, upon receipt of dividends from the Bank, which are restricted by regulations. 45 Table of Contents Stock Repurchases.
The existing stock repurchase program will expire on October 24, 2024, unless sooner completed. The repurchase program may be suspended, terminated or modified at any time for any reason, including market conditions, the cost of repurchasing shares, the availability of alternative investment opportunities, liquidity, and other factors deemed appropriate.
The repurchase program will expire on April 21, 2025, unless sooner completed. The repurchase program may be suspended, terminated or modified at any time for any reason, including market conditions, the cost of repurchasing shares, the availability of alternative investment opportunities, liquidity, and other factors deemed appropriate.
On February 22, 2024, the Company announced that its Board of Directors declared a quarterly cash dividend of $.10 per share on the Company's outstanding common stock . The cash dividend will be payable on April 12, 2024 to shareholders of record as of the close of business on March 8, 2024. BayCom commenced paying dividends in 2022.
On February 20, 2025, the Company announced that its Board of Directors declared a quarterly cash dividend of $0.15 per share on the Company's outstanding common stock . The cash dividend will be payable on April 10, 2025 to shareholders of record as of the close of business on March 13, 2025. BayCom commenced paying dividends in 2022.
During the year ended December 31, 2023, the Company purchased a total of 1,329,040 shares of the Company’s common stock at an average price of $18.14 per share, compared to 905,740 shares at an average price of $19.83 per share during the year ended December 31, 2022. Equity Compensation Plan Information.
During the year ended December 31, 2024, the Company repurchased a total of 455,654 shares of the Company’s common stock at an average price of $20.31 per share, compared to 1,329,040 shares at an average price of $18.14 per share during the year ended December 31, 2023. Equity Compensation Plan Information.
The following table sets forth information with respect to our repurchases of our outstanding common shares during the three months ended December 31, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total number of shares ​ Maximum number of ​ ​ ​ ​ ​ ​ ​ purchased as part of ​ shares that may yet be ​ ​ Total number of ​ Average price ​ publicly announced ​ purchased under the ​ shares purchased paid per share plans or programs plans or programs (1) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ October 1, 2023 - October 31, 2023 119,543 $ 19.91 ​ 119,543 362,768 November 1, 2023 - November 30, 2023 3,016 ​ ​ 20.01 ​ 3,016 359,752 December 1, 2023 - December 31, 2023 — ​ ​ — ​ — 359,752 ​ 122,559 $ 19.91 122,559 ​ (1) On August 2023, the Company announced that its Board of Directors approved its eighth stock repurchase program, which commenced in August 2023 following the expiration of the seventh stock repurchase program, authorizing the Company to repurchase up to five percent of the BayCom’s common stock, or approximately 588,000 shares.
The following table sets forth information with respect to our repurchases of our outstanding common shares during the three months ended December 31, 2024: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total number of shares ​ Maximum number of ​ ​ ​ ​ ​ ​ ​ purchased as part of ​ shares that may yet be ​ ​ Total number of ​ Average price ​ publicly announced ​ purchased under the ​ shares purchased paid per share plans or programs plans or programs (1) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ October 1, 2024 - October 31, 2024 1,100 $ 24.28 ​ 1,100 464,498 November 1, 2024 - November 30, 2024 400 ​ ​ 24.28 ​ 400 464,098 December 1, 2024 - December 31, 2024 — ​ ​ — ​ — 464,098 ​ 1,500 $ 24.28 1,500 ​ (1) In May 2024, the Company announced that its Board of Directors approved a stock repurchase program authorizing the Company to repurchase up to five percent of BayCom’s common stock, or approximately 560,000 shares.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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We believe our geographic footprint, which now includes the San Francisco Bay area, the metropolitan markets of Los Angeles, California, Seattle, Washington, Denver, Colorado, and Las Vegas, Nevada, and community markets including Albuquerque, New Mexico, and Custer, Delta and Grand counties, Colorado, provides us access to low cost, stable core deposits in community markets that we can use to fund commercial loan growth.
We believe our geographic footprint, which now includes the San Francisco Bay area, the metropolitan markets of Los Angeles, California; Seattle, Washington; Denver, Colorado; and Las Vegas, Nevada, and community markets including Albuquerque, New Mexico and Custer, Delta and Grand counties, Colorado, provides us access to low cost, stable core deposits that we can use to fund commercial loan growth.
Where 52 Table of Contents observations in either case may be insufficient, the global rate, which is simply the aggregate performance of all loan segments of the Bank, is used. ​ The CECL model utilizes a discounted cash flow ("DCF") method to measure the expected credit losses on loans collectively evaluated that are sub-segmented by loan pools with similar credit risk characteristics, which generally correspond to federal regulatory reporting codes (i.e, Call Report codes), with PCD assets pooled separately by similar loan pools to evaluate and measure the allowance for credit losses: ​ ● Loans secured by real estate: o 1-4 family residential construction loans and other construction loans and all land development and other land loans o Secured by farmland and finance agricultural production and other loans to farmers o Revolving, open-end loans secured by 1-4 family residential properties extended under lines of credit and closed-end loans secured by 1-4 family residential properties, secured by junior liens o Closed-end loans secured by 1-4 family residential properties, secured by first liens o Commercial real estate loans secured by owner-occupied non-farm nonresidential properties o Commercial real estate loans secured by other non-farm nonresidential properties and o Secured by multifamily (5 or more units) residential properties ● Commercial and industrial loans ● Loans to individuals for household, family and other personal expenditures (i.e., consumer loans) ​ In determining the PD for each pooled segment, the Bank utilized regression analyses to identify certain economic drivers that were considered highly correlated to historical Bank or peer loan default experience.
Where observations in either case may be insufficient, the global rate, which is simply the aggregate performance of all loan segments of the Bank, is used. ​ The CECL model utilizes a discounted cash flow ("DCF") method to measure the expected credit losses on loans collectively evaluated that are sub-segmented by loan pools with similar credit risk characteristics, which generally correspond to federal regulatory reporting codes (i.e., Call Report codes), with PCD assets pooled separately by similar loan pools to evaluate and measure the allowance for credit losses: ​ ● Loans secured by real estate: o 1-4 family residential construction loans and other construction loans and all land development and other land loans o Secured by farmland and finance agricultural production and other loans to farmers o Revolving, open-end loans secured by 1-4 family residential properties extended under lines of credit and closed-end loans secured by 1-4 family residential properties, secured by junior liens o Closed-end loans secured by 1-4 family residential properties, secured by first liens o Commercial real estate loans secured by owner-occupied non-farm nonresidential properties o Commercial real estate loans secured by other non-farm nonresidential properties and o Secured by multifamily (5 or more units) residential properties ● Commercial and industrial loans ● Loans to individuals for household, family and other personal expenditures (i.e., consumer loans) ​ In determining the PD for each pooled segment, the Bank utilized regression analyses to identify certain economic drivers that were considered highly correlated to historical Bank or peer loan default experience.
For all segments, the Company's actual loss history was not statistically relevant, thus the loss history of peers, defined as commercial financial institutions with asset size of one to five billion, domiciled in California, with similar concentrations of lending were utilized to determine loss rates. The peers utilized in the allowance for credit losses are segment specific.
For all segments, the Company's actual loss history was not statistically relevant, thus the loss history of peers, defined as commercial financial institutions with asset size of one to five billion dollars, domiciled in California, with similar concentrations of lending were utilized to determine loss rates. The peers utilized in the allowance for credit losses are segment specific.
Qualitative internal and external risk factors include, but are not limited to, the following: ​ ● Changes in the nature and volume of the loan portfolio. ● Changes in the volume and severity of past due loans, the volume of nonaccrual loans, and the volume and severity of adversely classified or graded loans. ● Changes in lending policies and procedures, including changes in underwriting standards and collection. 53 Table of Contents ● Changes in economic and business conditions, and developments that affect the collectability of the portfolio. ● Changes in the experience, ability, and depth of credit management and lending staff. ● Changes in the quality of our systematic loan review processes. ● Changes in the value of underlying collateral, where applicable. ● Changes in concentration of credit. ● The effect of other external factors such as legal and regulatory requirements on the level of estimated credit losses in the portfolio. ​ The estimated credit losses associated with unfunded loan commitments are calculated using the same models and methodologies noted above and incorporate utilization assumptions at the estimated time of default.
Qualitative internal and external risk factors include, but are not limited to, the following: ​ ● Changes in the nature and volume of the loan portfolio. ● Changes in the volume and severity of past due loans, the volume of nonaccrual loans, and the volume and severity of adversely classified or graded loans. ● Changes in lending policies and procedures, including changes in underwriting standards and collection. ● Changes in economic and business conditions, and developments that affect the collectability of the portfolio. ● Changes in the experience, ability, and depth of credit management and lending staff. ● Changes in the quality of our systematic loan review processes. ● Changes in the value of underlying collateral, where applicable. ● Changes in concentration of credit. ● The effect of other external factors such as legal and regulatory requirements on the level of estimated credit losses in the portfolio. ​ The estimated credit losses associated with unfunded loan commitments are calculated using the same models and methodologies noted above and incorporate utilization assumptions at the estimated time of default.
We select loans for individual assessment on an ongoing basis using certain criteria such as payment performance, borrower reported and forecasted financial results, and other external factors when appropriate.
We select loans for individual assessment on an ongoing basis using criteria such as payment performance, borrower reported and forecasted financial results, and other external factors when appropriate.
Increased yields earned on interest-earning assets, along with an increase in the average balance of fed funds sold and interest bearing balances in banks, were the primary drivers for the increase in interest income.
Increased average yields on interest-earning assets, along with an increase in the average balance of fed funds sold and interest bearing balances in banks, were the primary drivers for the increase in interest income.
Regardless of the determination that a charge-off is appropriate for financial accounting purposes, the Company manages its loan portfolio by continually monitoring, where possible, a borrower's ability to pay through the collection of financial information, delinquency status, borrower discussion and the encouragement to repay in accordance with the original contract or modified terms, if appropriate. ​ All loans with an outstanding balance of $100,000 or more greater are individually evaluated for expected credit loss when it is probable that we will be unable to collect all amounts due according to the original contractual terms of the loan agreement.
Regardless of the determination that a charge-off is appropriate for financial accounting purposes, the Company manages its loan portfolio by continually monitoring, where possible, a borrower's ability to pay through the collection of financial information, delinquency status, borrower discussion and the encouragement to repay in accordance with the original contract or modified terms, if appropriate. 49 Table of Contents ​ All loans with an outstanding balance of $100,000 or more greater are individually evaluated for expected credit loss when it is probable that we will be unable to collect all amounts due according to the original contractual terms of the loan agreement.
At December 31, 2023, the Bank’s Common Equity Tier 1 capital exceeded the required capital conservation buffer. For a bank holding company with less than $3.0 billion in assets, the capital guidelines apply on a bank only basis and the Federal Reserve expects the holding company’s subsidiary banks to be Well Capitalized under the prompt corrective action regulations.
At December 31, 2024, the Bank’s Common Equity Tier 1 capital exceeded the required capital conservation buffer. For a bank holding company with less than $3.0 billion in assets, the capital guidelines apply on a bank only basis and the Federal Reserve expects the holding company’s subsidiary banks to be Well Capitalized under the prompt corrective action regulations.
The following table sets forth certain information regarding contractual maturities and the weighted average yields of our available for sale investment securities as of December 31, 2023. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.
The following table sets forth certain information regarding contractual maturities and the weighted average yields of our available for sale investment securities as of December 31, 2024. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.
In acquiring United Business Bank, FSB in 2017, we acquired a large deposit base from the local and regional unionized labor community. As of December 31, 2023, our top ten depositors, which included nine labor unions accounted for roughly 11.5% of our total deposits.
In acquiring United Business Bank, FSB in 2017, we acquired a large deposit base from the local and regional unionized labor community. As of December 31, 2024, our top ten depositors, which included nine labor unions, accounted for roughly 11.5% of our total deposits.
Interest rate risk arises from timing differences in the repricing and maturities of interest earning assets and interest 73 Table of Contents bearing liabilities (reprice risk), changes in the expected maturities of assets and liabilities arising from embedded options, such as borrowers’ ability to prepay residential mortgage loans at any time and depositors’ ability to redeem certificates of deposit before maturity (option risk), changes in the shape of the yield curve where interest rates increase or decrease in a nonparallel fashion (yield curve risk), and changes in spread relationships between different yield curves, such as U.S.
Interest rate risk arises from timing differences in the repricing and maturities of interest earning assets and interest bearing liabilities (reprice risk), changes in the expected maturities of assets and liabilities arising from embedded options, such as borrowers’ ability to prepay residential mortgage loans at any time and depositors’ ability to redeem certificates of deposit before maturity (option risk), changes in the shape of the yield curve where interest rates increase or decrease in a nonparallel fashion (yield curve risk), and changes in spread relationships between different yield curves, such as U.S.
While the provision for credit losses associated with unfunded loan commitments is included in "provision for credit losses" on the consolidated statement of income, the allowance for credit losses for unfunded loan commitments is maintained on the consolidated balance sheet in "Interest payable and other liabilities" . Comparison of Financial Condition at December 31, 2023 and 2022 Total assets.
While the provision for credit losses associated with unfunded loan commitments is included in "provision for credit losses" on the consolidated statement of income, the allowance for credit losses for unfunded loan commitments is maintained on the consolidated balance sheet in "Interest payable and other liabilities" . Comparison of Financial Condition at December 31, 2024 and 2023 Total assets.
During the year ended December 31, 2023, there was a shift in interest rate sensitive clients moving a portion of their non-operating deposit balances from lower costing deposits, including noninterest-bearing deposits, into higher costing money market and time deposits.
During the year ended December 31, 2024, there was a shift in interest rate sensitive clients moving a portion of their non-operating deposit balances from lower costing deposits, including noninterest-bearing deposits, into higher costing money market and time deposits.
If the Company were subject to regulatory guidelines for bank holding companies with $3.0 billion or more in assets, at December 31, 2023, the Company would have exceeded all regulatory capital requirements. For additional information see “Item 1.
If the Company were subject to regulatory guidelines for bank holding companies with $3.0 billion or more in assets, at December 31, 2024, the Company would have exceeded all regulatory capital requirements. For additional information see “Item 1.
Loan originations in 2023 were concentrated in California markets, primarily Los Angeles, Irvine/Southern California, San Francisco Bay Area and Sacramento/Northern California with commercial and multifamily real estate secured loans accounting for the majority of the originations.
Loan originations in 2024 were concentrated in California markets, primarily Los Angeles, Irvine/Southern California, San Francisco Bay Area and Sacramento/Northern California, with commercial and multifamily real estate secured loans accounting for the majority of the originations.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” of this Form 10-K for additional information relating to stock. 72 Table of Contents Regulatory capital. The Bank, as a state-chartered, federally insured commercial bank, and member of the Federal Reserve is subject to the capital requirements established by the Federal Reserve.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” of this Form 10-K for additional information relating to stock. Regulatory capital. The Bank, as a state-chartered, federally insured commercial bank, and member of the Federal Reserve is subject to the capital requirements established by the Federal Reserve.
Acquired PCD loans are loans acquired from a business combination with evidence of more than insignificant credit deterioration and are accounted for under ASC Topic 326. Acquired non-PCD loans represent loans acquired from a business combination without more than insignificant evidence of credit deterioration and are accounted for under ASC Topic 310-20.
Acquired PCD loans are loans acquired through a business combination with evidence of more than insignificant credit deterioration and are accounted for under ASC Topic 326. Acquired non-PCD loans represent loans acquired through a business combination without more than insignificant evidence of credit deterioration and are accounted for under ASC Topic 310-20.
We intend to focus on initiatives that we believe will provide opportunities to enhance earnings, including the continued rationalization of our 50 Table of Contents retail banking footprint through the evaluation of possible branch consolidations or opportunities to sell branches. ● Focus on Lending Growth in Our Metropolitan Markets While Increasing Deposits in Our Community Markets.
We intend to focus on initiatives that we believe will provide opportunities to enhance earnings, including the continued rationalization of our retail banking footprint through the evaluation of possible branch consolidations or opportunities to sell branches. ● Focus on Lending Growth in Our Metropolitan Markets While Increasing Deposits in Our Community Markets.
In general, we seek to minimize the impact of changing interest rates on net interest income and the economic values of assets and liabilities. Our ALCO meets quarterly to monitor the level of interest rate risk sensitivity to ensure compliance with the Board of Directors’ approved risk limits.
In general, we seek to minimize the impact of changing interest rates on net interest income and the economic 69 Table of Contents values of assets and liabilities. Our ALCO meets quarterly to monitor the level of interest rate risk sensitivity to ensure compliance with the Board of Directors’ approved risk limits.
It is management’s policy to manage deposit rates that are competitive with other local financial institutions and, as a result of this strategy, we believe that a significant portion of our maturing certificates of deposit will be retained. In addition to these primary sources of funds, management has several secondary sources available to meet potential funding requirements.
It is management’s strategy to offer deposit rates that are competitive with other local financial institutions. As a result of this strategy, we believe that a significant portion of our maturing certificates of deposit will be retained. In addition to these primary sources of funds, management has several secondary sources available to meet potential funding requirements.
The net premium for acquired non-PCD loans includes both a credit discount based on estimated losses in the acquired loans partially offset by any premium, based on market interest rates on the date of acquisition.
The net 55 Table of Contents premium for acquired non-PCD loans includes both a credit discount based on estimated losses in the acquired loans partially offset by any premium, based on market interest rates on the date of acquisition.
Yields have been calculated on a pre-tax basis. Loan yields include the effect of amortization or accretion of deferred loan 67 Table of Contents fees/costs and purchase accounting premiums/ discounts to interest and fees on loans.
Yields have been calculated on a pre-tax basis. Loan yields include the effect of amortization or accretion of deferred loan fees/costs and purchase accounting premiums/ discounts to interest and fees on loans.
PCD loans are considered performing and are not included in nonperforming assets in the table above. At December 31, 2023 and December 31, 2022, we had no PCD loans that were 90 days past due and still accruing. Allowance for credit losses.
PCD loans are considered performing and are not included in nonperforming assets in the table above. At December 31, 2024 and 2023, we had no PCD loans that were 90 days or more past due and still accruing. Allowance for credit losses.
The regression models developed correlate macroeconomic variables to historical credit performance based on call report data over a 64 quarter (16-year) period which captures a full economic cycle from 2004 to 2019.
The regression models developed correlate macroeconomic variables to historical credit performance based on call report data over a 64 quarter 50 Table of Contents (16-year) period which captures a full economic cycle from 2004 to 2019.
At that date, nearly 30.3% of our deposit base was comprised of noninterest bearing demand deposit accounts, significantly lowering our aggregate cost of funds. ● Our Team of Seasoned Bankers Represents an Important Driver of our Organic Growth by Expanding Banking Relationships with Current and Potential Clients.
At that date, nearly 30.8% of our deposit base was comprised of noninterest bearing demand deposit accounts, significantly lowering our aggregate cost of funds. 48 Table of Contents ● Our Team of Seasoned Bankers Represents an Important Driver of our Organic Growth by Expanding Banking Relationships with Current and Potential Clients.
In addition to its operating expenses, the Company is responsible for paying any dividends declared to its shareholders, funds paid out for Company stock repurchases, and payments on trust-preferred securities and the Notes held at the Company level.
In addition to its operating expenses, the Company is responsible for paying any dividends declared to its shareholders, funds paid out for Company stock repurchases, and payments on trust-preferred securities and the subordinated notes issued at the holding company level.
While maturities and scheduled amortization of loans are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by market interest rates, economic conditions, and competition. During the years ended December 31, 2023 and 2022, deposits increased by $47.3 million and $100.2 million, respectively.
While maturities and scheduled amortization of loans are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by market interest rates, economic conditions, and competition. During the years ended December 31, 2024 and 2023, deposits increased by $101.3 million and $47.3 million, respectively.
Based on the current conditions of the loan portfolio, management believes that the $22.0 million allowance for credit losses at December 31, 2023 is adequate to absorb probable losses inherent in the Company’s loan portfolio. No assurance can be given, however, that adverse economic conditions or other circumstances will not result in increased losses in the portfolio.
Based on the current conditions of the loan portfolio, management believes that the $17.9 million allowance for credit losses at December 31, 2024 is adequate to absorb probable losses inherent in the Company’s loan portfolio. No assurance can be given, however, that adverse economic conditions or other circumstances will not result in increased losses in the portfolio.
As of December 31, 2023, the Bank had an available borrowing capacity of $576.9 million with the FHLB of San Francisco, with no borrowings outstanding at that date. The Bank also had Federal Funds lines with available commitments totaling $65.0 million with four correspondent banks. There were no amounts outstanding under these facilities at both December 31, 2023 and 2022.
As of December 31, 2024, the Bank had an available borrowing capacity of $540.2 million with the FHLB of San Francisco, with no borrowings outstanding at that date. The Bank also had Federal Funds lines with available commitments totaling $65.0 million with four correspondent banks. There were no amounts outstanding under these facilities at both December 31, 2024 and 2023.
Interest rate risk is the risk to earnings and value arising from changes in market interest rates.
Interest rate risk is the risk to earnings and values arising from changes in market interest rates.
We incur capital expenditures on an ongoing basis to expand and improve our product offerings, enhance and modernize our technology infrastructure, and to introduce new technology-based products to compete effectively in our 71 Table of Contents markets.
We incur capital expenditures on an ongoing basis to expand and improve our product offerings, enhance and modernize our technology infrastructure, and to introduce new technology-based products to compete effectively in our markets.
These advances may be made pursuant to several different credit programs, each of which has its own interest rate, range of maturities and call features. At December 31, 2023 and 2022, we had the ability to borrow from the FHLB up to $576.9 million and $473.6 million, respectively.
These advances may be made pursuant to several different credit programs, each of which has its own interest rate, range of maturities and call features. At December 31, 2024 and 2023, we had the ability to borrow from the FHLB up to $540.2 million and $576.9 million, respectively.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities – Stock Repurchases” contained in this Form 10-K. 65 Table of Contents Comparison of Operating Results for the Years Ended December 31, 2023 and 2022 Earnings summary.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities – Stock Repurchases” contained in this Form 10-K. Comparison of Operating Results for the Years Ended December 31, 2024 and 2023 Earnings summary.
We believe our credit culture supports accountability amongst our bankers, who maintain an ability to expand our client base as well as make sound decisions for our Company. At December 31, 2023, our ratio of nonperforming assets to total assets was 0.51% and our ratio of nonperforming loans to total loans was 0.67%.
We believe our credit culture supports accountability amongst our bankers, who maintain an ability to expand our client base as well as make sound decisions for our Company. At December 31, 2024, our ratio of nonperforming assets to total assets was 0.36% and our ratio of nonperforming loans to total loans was 0.48%.
Assuming continued payment during 2024 at this rate of $0.10 per share, our average total dividend paid each quarter would be approximately $1.2 million based on the number of our current outstanding shares at December 31, 2023.
Assuming continued payment during 2025 at this rate of $0.15 per share, our average total dividend paid each quarter would be approximately $1.7 million based on the number of our current outstanding shares at December 31, 2024.
At December 31, 2023, the Company, on a consolidated basis, had assets of $2.6 billion, loans receivable, net of $1.9 billion, deposits of $2.1 billion and shareholders’ equity of $312.9 million. We continue to focus on growing our commercial loan portfolios through both acquisitions and organic growth.
At December 31, 2024, the Company, on a consolidated basis, had assets of $2.7 billion, loans receivable, net of $1.9 billion, deposits of $2.2 billion and shareholders’ equity of $324.4 million. We continue to focus on growing our commercial loan portfolios through both acquisitions and organic growth.
Our efficiency ratio, which is calculated by dividing noninterest expense by the sum of net interest income before provision for credit losses and noninterest income, was 61.69% for the year ended December 31, 2023, compared to 64.13% for the year ended December 31, 2022.
Our efficiency ratio, which is calculated by dividing noninterest expense by the sum of net interest income before provision for credit losses and noninterest income, was 65.77% for the year ended December 31, 2024, compared to 61.69% for the year ended December 31, 2023.
Securities purchased during the years ended December 31, 2023 and 2022, excluding FHLB and FRB stock, totaled $25.3 million and $28.9 million, while securities repayments, maturities and sales in those periods were $11.6 million, and $11.1 million, respectively. Certificates of deposit scheduled to mature in one year or less at December 31, 2023, totaled $372.2 million.
Securities purchased during the years ended December 31, 2024 and 2023, excluding FHLB and FRB stock, totaled $49.9 million and $25.3 million, while securities repayments, maturities and sales in those periods were $21.9 million, and $11.6 million, respectively. Certificates of deposit scheduled to mature in one year or less at December 31, 2024, totaled $485.2 million.
BayCom Corp is a separate legal entity from the Bank and must provide for its own liquidity. At December 31, 2023, the Company, on an unconsolidated basis, had liquid assets of $13.0 million.
BayCom Corp is a separate legal entity from the Bank and must provide for its own liquidity. At December 31, 2024, the Company, on an unconsolidated basis, had liquid assets of $9.7 million.
For additional information, see “Item 1–Business – Sources of Funds ”, contained in this Form 10-K. See also, “Note 14 — Subordinated Debt” in the Notes to the Consolidated Financial Statements contained in “Item 8. Financial Statements and Supplementary Data” of this Form 10-K. ​ We are required to provide collateral for certain local agency deposits.
See also, “Note 14 — Subordinated Debt” in the Notes to the Consolidated Financial Statements contained in “Item 8. Financial Statements and Supplementary Data” of this Form 10-K. ​ We are required to provide collateral for certain local agency deposits.
The increase in net interest income primarily was due to increases in interest income on loans, federal funds sold and interest-bearing balances in banks and, to a lesser extent, investment securities, including dividends on FRB and FHLB stock, partially offset by higher funding costs related to our deposits and junior subordinated debentures due to higher market rates.
The decrease in net interest income primarily was due to decreases in interest income on loans, and higher funding costs related to our deposits, partially offset by increases in interest income on federal funds sold and interest-bearing balances in banks and, to a lesser extent, investment securities, including dividends on FRB and FHLB stock.
The average yield earned on loans, including the accretion of the net discount and deferred PPP loan fees recognized for the year ended December 31, 2023 was 5.32%, compared to 4.84% for the year ended December 31, 2022.
The average yield earned on loans, including the accretion of the net discount and deferred loan fees recognized, was 5.49% for the year ended December 31, 2024, compared to 5.32% for the year ended December 31, 2023.
We use our sources of funds primarily to meet our ongoing commitments, pay maturing deposits and fund withdrawals, and to fund loan commitments. Loan commitments and letters of credit were $77.4 million and $97.5 million, including $133,000 and $5.3 million of undisbursed construction and development loan commitments, at December 31, 2023 and 2022, respectively.
We use our sources of funds primarily to meet our ongoing commitments, pay maturing deposits and fund withdrawals, and to fund loan commitments. Loan commitments and letters of credit were $73.4 million and $77.4 million, including $9.6 million and $133,000 of undisbursed construction and development loan commitments, at December 31, 2024 and 2023, respectively.
Liquid assets in the form of cash and cash equivalents, time deposit in banks and investment securities available-for-sale increased to $471.9 million at December 31, 2023 from $333.1 million at December 31, 2022. Further, Management believes that our security portfolio is of high quality, ensuring marketability.
Liquid assets in the form of cash and cash equivalents, time deposit in banks and investment securities available-for-sale increased to $557.6 million at December 31, 2024 from $471.9 million at December 31, 2023. Further, management believes that our security portfolio is of high quality, helping to ensure marketability.
We strive to provide an enhanced banking experience for our clients by providing them with a comprehensive suite of sophisticated banking products and services tailored to meet their needs, while delivering the high-quality, relationship-based client service of a community bank.
We strive to enhance our clients’ banking experience by providing them with a comprehensive suite of sophisticated products and services tailored to meet their needs, while delivering the high-quality, relationship-based service of a community bank.
At December 31, 2023, the $2.1 million of loans less than 30 days past due was comprised of 16 loans all of which were placed on nonaccrual due to concerns over the financial condition of the borrowers.
At December 31, 2024, the $4.4 million of loans less than 30 days past due was comprised of 15 loans all of which were placed on nonaccrual due to concerns over the financial condition of the borrowers.
Net cash provided by operating activities was $30.8 million and $39.6 million for the years ended December 31, 2023 and 2022, respectively.
Net cash provided by operating activities was $31.5 million and $30.8 million for the years ended December 31, 2024 and 2023, respectively.
In addition, at December 31, 2023, we had other future obligations and accrued expenses of $33.7 million. As of December 31, 2023, we project that our future commitments will include $14.8 million of operating lease payments.
In addition, at December 31, 2024, we had other future obligations and accrued expenses of $32.4 million. As of December 31, 2024, we project that our future commitments will include $14.4 million of operating lease payments.
Interest income on loans for the year ended December 31, 2023 and 2022, included $486,000 and $1.3 million respectively, in fees related to prepayment penalties.
Interest income on loans for the year ended December 31, 2024 and 2023, included $523,000 and $486,000 respectively, in fees related to prepayment penalties.
The decrease was primarily due to a $1.1 million loss on equity securities resulting from an adjustment to the fair value of equity securities during the year ended December 31, 2023. ​ Loans, net. We originate a wide variety of loans with a focus on commercial real estate (“CRE”) loans and commercial and industrial loans.
The increase was primarily due to a $463,000 gain on equity securities resulting from an adjustment to the fair value of equity securities during the year ended December 31, 2024. ​ Loans, net. We originate a wide variety of loans with a focus on commercial real estate (“CRE”) loans and commercial and industrial loans.
As of December 31, 2023 acquired PCD loans totaled $27.5 million with a remaining net non-credit discount of $1.8 million, compared to $31.1 million with a remaining net non-credit discount of $2.0 million as of December 31, 2022. Nonperforming assets and nonaccrual loans.
As of December 31, 2024, the unpaid principal balance of acquired PCD loans totaled $24.0 million with a remaining net non-credit discount of $1.5 million, compared to $27.5 million with a remaining net non-credit discount of $1.8 million as of December 31, 2023. Nonperforming assets and nonaccrual loans.
(2) Includes loans located in Sacramento and Northern California counties totaling $95.6 million and loans located in Los Angeles and Orange counties totaling $506.6 million. (3) Includes loans located in the states of Colorado, New Mexico, Washington and other states.
(2) Includes loans located in Sacramento and Northern California counties totaling $86.4 million and loans located in Los Angeles and Orange counties totaling $537.1 million. (3) Includes loans located in the states of Colorado, New Mexico, Washington and other states.
Dividends on FHLB and FRB stock totaled $1.4 million and $1.2 million for the years ended December 31, 2023 and 2022, respectively. Interest income on fed funds sold and interest-bearing balances in banks increased $7.6 million, or 187.9% to $11.6 million for the year ended December 31, 2023 from $4.0 million for the year ended December 31, 2022.
Dividends on FHLB and FRB stock totaled $1.6 million and $1.4 million for the years ended December 31, 2024 and 2023, respectively. Interest income on fed funds sold and interest-bearing balances in banks increased $5.5 million, or 47.4% to $17.1 million for the year ended December 31, 2024 from $11.6 million for the year ended December 31, 2023.
On February 22, 2024, the Company declared a quarterly cash dividend of $0.10 per share on the Company’s outstanding common stock payable on April 12, 2024 to shareholders of record as of the close of business on March 8, 2024.
On February 20, 2025, the Company declared a quarterly cash dividend of $0.15 per share on the Company’s outstanding common stock payable on April 10, 2025 to shareholders of record as of the close of business on March 13, 2025.
There are $4.2 million of scheduled interest payments due on Notes and junior subordinate debentures in 2023 (excluding any other borrowings that may be made after December 31, 2023). In addition, at December 31, 2023, there were other future obligations and accrued expenses of $14.7 million.
As of December 31, 2024, there were $4.1 million of scheduled interest payments due on subordinated notes and junior subordinated debentures (excluding any other borrowings that may be made after December 31, 2024). In addition, at December 31, 2024, there were other future obligations and accrued expenses of $14.0 million.
The Company recognizes operating leases on the Consolidated Balance Sheet as ROU assets and lease liabilities based on the value of the discounted future lease payments. ROU assets decreased $2.6 million, or 15.9%, to $13.9 million at December 31, 2023 from $16.6 million at December 31, 2022.
The Company recognizes operating leases on the Consolidated Balance Sheet as ROU assets and lease liabilities based on the value of the discounted future lease payments. ROU assets decreased $556,000, or 4.0%, to $13.4 million at December 31, 2024 from $13.9 million at December 31, 2023.
Interest expense on deposits increased $17.8 million, or 283.2%, to $24.0 million for the year ended December 31, 2023 from $6.3 million for the year ended December 31, 2022, primarily due to increases in the average rate paid on money market and accounts and time deposits, and an increase in the average balance of time deposits.
Interest expense on deposits increased $12.1 million, or 50.3%, to $36.1 million for the year ended December 31, 2024 from $24.0 million for the year ended December 31, 2023, primarily due to increases in the average rate paid on money market and accounts and time deposits, and an increase in the average balance of time deposits.
The average rate paid on interest bearing liabilities for the year ended December 31, 2023 was 1.87% compared to 0.70% for year ended December 31, 2022.
The average rate paid on interest bearing liabilities for the year ended December 31, 2024 was 2.54% compared to 1.87% for year ended December 31, 2023.
As of December 31, 2023 acquired non-PCD loans totaled $187.7 million with a remaining net premium of $2.1 million, compared to $228.7 million with a remaining net premium of $2.3 million as of December 31, 2022.
As of December 31, 2024, acquired non-PCD loans totaled $140.6 million with a remaining net premium of $1.8 million, compared to $187.7 million with a remaining net premium of $2.1 million as of December 31, 2023.
In addition to the CECL adjustment 60 Table of Contents on January 1, 2023, a $2.2 million provision for credit losses for loans was recorded for the year ended December 31, 2023, compared to a $4.4 million provision for loan losses for the year ended December 31, 2022.
In addition to the CECL adjustment on January 1, 2023, a $2.2 million provision for credit losses for loans was recorded for the year ended December 31, 2023.
We recorded net charge-offs of $550,000 for the year ended December 31, 2023 compared to $3.2 million for the year ended December 31, 2022.
We recorded net charge-offs of $5.0 million for the year ended December 31, 2024 compared to $550,000 for the year ended December 31, 2023.
The uninsured amounts are estimates based on the methodologies and assumptions used for United Business Bank’s regulatory reporting requirements. ​ The following table sets forth the portion of our time deposits that are in excess of the FDIC insurance limit, by remaining time until maturity, as of December 31, 2023. ​ (Dollars in thousands) ​ ​ ​ ​ Less than 3 months ​ $ 14,164 Over 3 through 6 months ​ ​ 17,770 Over 6 through 12 months ​ ​ 17,813 Over 12 months ​ ​ 41,680 Total ​ $ 91,427 64 Table of Contents ​ For additional information regarding our deposits, see “Note 11 – Deposits” of the Notes to Consolidated Financial Statements contained in “Item 8.
The uninsured amounts are estimates based on the methodologies and assumptions used for United Business Bank’s regulatory reporting requirements. ​ The following table sets forth the portion of our time deposits that are in excess of the FDIC insurance limit, by remaining time until maturity, as of December 31, 2024. ​ (Dollars in thousands) ​ ​ ​ ​ Less than 3 months ​ $ 19,666 Over 3 through 6 months ​ ​ 52,019 Over 6 through 12 months ​ ​ 19,766 Over 12 months ​ ​ 9,001 Total ​ $ 100,452 ​ For additional information regarding our deposits, see “Note 11 – Deposits” of the Notes to Consolidated Financial Statements contained in “Item 8.
At both December 31, 2023 and December 31, 2022, the FHLB of San Francisco had issued a letter of credits on behalf of the Bank totaling $40.6 million as collateral for local agency deposits. Shareholders’ equit y. Shareholders’ equity decreased $4.3 million, or 1.3%, to $312.9 million at December 31, 2023 from $317.1 million at December 31, 2022.
At December 31, 2024 and 2023, the FHLB of San Francisco had issued letter of credits on behalf of the Bank totaling $41.1 million and $40.6 million, respectively, as collateral for local agency deposits. Shareholders’ equit y. Shareholders’ equity increased $11.5 million, or 3.7%, to $324.4 million at December 31, 2024 from $312.9 million at December 31, 2023.
During the year ended December 31, 2023, the Company sold $7.2 million of SBA loans (the guaranteed portion), which 69 Table of Contents generated a gain on sale of $508,000, compared to the sale of $34.0 million of SBA loans (the guaranteed portion) with a gain on sale of $2.7 million for the year ended December 31, 2022 .
During the year ended December 31, 2024, the Company sold $3.6 million of SBA loans (the guaranteed portion), which generated a gain on sale of $287,000, compared to the sale of $7.2 million of SBA loans (the guaranteed portion) with a gain on sale of $508,000 for the year ended December 31, 2023 .
Income tax expense increased $2.0 million, or 23.3%, to $10.7 million for the year ended December 31, 2023 from $8.7 million for the year ended December 31, 2022, reflecting an increase in pre-tax income for the period ended December 31, 2023. The Company’s effective tax rate was 28.1% for the year ended December 31, 2023 compared to 26.8% for 2022.
Income tax expense decreased $2.2 million, or 20.7%, to $8.5 million for the year ended December 31, 2024 from $10.7 million for the year ended December 31, 2023, reflecting an decrease in pre-tax income for the period ended December 31, 2024. The Company’s effective tax rate was 26.5% for the year ended December 31, 2024 compared to 28.1% for 2023.
The Company has the ability to receive dividends or capital distributions from the Bank, although there are regulatory restrictions on the ability of the Bank to pay dividends. During 2023, the Company declared $4.8 million of cash dividends on its common stock, of with $1.2 million remained to be paid on January 12, 2024.
The Company has the ability to receive dividends or capital distributions from the Bank, although there are regulatory restrictions on the ability of the Bank to pay dividends. During 2024, the Company declared $5.0 million of cash dividends on its common stock, of with $1.7 million remained to be paid subsequent to year-end.
W e recorded a $2.0 million provision for credit losses for the year ended December 31, 2023, compared to a $4.4 million provision for loan losses for the year ended December 31, 2022, respectively.
W e recorded a $1.3 million provision for credit losses for the year ended December 31, 2024, compared to a $2.0 million provision for credit losses for the year ended December 31, 2023.
At December 31, 2023 and 2022, the Company had outstanding junior subordinated debt, net of marked-to-market, related to junior subordinated deferrable interest debentures assumed in connection with its previous acquisitions totaling $8.6 million and $8.5 million, respectively.
There were no amounts outstanding under these facilities at both December 31, 2024 and 2023. At December 31, 2024 and 2023, the Company had outstanding junior subordinated debt, net of marked-to-market, related to junior subordinated deferrable interest debentures assumed in connection with its previous acquisitions totaling $8.6 million.
During the year ended December 31, 2023, the Company repurchased a total of 1,329,040 shares of its common stock at a total cost of $18.14 per share. At December 31, 2023, 359,752 shares remain available for future purchases under the current stock repurchase plan. For additional information related to our stock repurchases, see “Item 5.
During the year ended December 31, 2024, the Company repurchased a total of 455,654 shares of its common stock at a total cost of $20.31 per share. At December 31, 2024, 464,098 shares remain available for future purchases under the current stock repurchase plan. For additional information related to our stock repurchases, see “Item 5.
Nonperforming assets generally consist of nonaccrual loans, accruing loans more than 90 days delinquent and other real estate owned (“OREO”). Nonperforming assets decreased $2.3 million to $13.0 million, or 0.67% of total loans, at December 31, 2023 compared to $15.2 million, or 0.75% of total loans, at December 31, 202.
Nonperforming assets generally consist of nonaccrual loans, accruing loans 90 days or more past due, and other real estate owned (“OREO”). Nonperforming assets decreased $3.5 million to $9.5 million, or 0.48% of total loans, at December 31, 2024 compared to $13.0 million, or 0.67% of total loans, at December 31, 2023.
During the year ended December 31, 2023 and December 31, 2022, net cash provided by investing activities, which consisted primarily of net change in loans receivable and purchases, sales and maturities of investment securities, was $80.4 million and $53.9 million, respectively.
During the year ended December 31, 2024, net cash used in investing activities, which consisted primarily of net change in loans receivable and purchases, sales and maturities of investment securities, was $62.2 million compared to $80.4 million of net cash provided in investing activities for the year ended December 31, 2023.
Computations of prospective effects of hypothetical interest rate changes are based on numerous assumptions including relative levels of market interest rates, loan prepayments and deposit decay, and should not be relied upon as indicative of actual results. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Interest Income Sensitivity Immediate Changes in Rates (1) ​ ​ -300 ​ -200 -100 +100 +200 +300 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Dollars in thousands) ​ December 31, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Dollar change ​ $ (24,515) ​ $ (13,747) ​ $ (4,176) ​ $ (2,007) ​ $ (2,449) ​ $ (3,424) Percent change ​ (12) % (6) % (2) % (1) % (1) % (2) % December 31, 2022 ​ ​ ​ ​ ​ ​ ​ Dollar change ​ $ (36,258) ​ $ (24,298) ​ $ (32,425) ​ $ (1,395) ​ $ (2,544) ​ $ (4,176) Percent change ​ (16) % (11) % (14) % (1) % (1) % ​ (2) % (1) This data does not reflect any actions that we may undertake in response to changes in interest rates such as changes in rates paid on certain deposit accounts based on local competitive factors, which could reduce the actual impact on net interest income, if any. 74 Table of Contents As with any method used to assess interest rate risk, there are inherent limitations in the methodology described above.
Computations of prospective effects of hypothetical interest rate changes are based on numerous assumptions including relative levels of market interest rates, loan prepayments and deposit decay, and should not be relied upon as indicative of actual results. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Interest Income Sensitivity Immediate Changes in Rates (1) ​ ​ -300 ​ -200 -100 +100 +200 +300 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Dollars in thousands) ​ December 31, 2024 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Dollar change ​ $ (24,725) ​ $ (15,384) ​ $ (6,089) ​ $ 3,559 ​ $ 6,284 ​ $ 8,289 Percent change ​ (12) % (7) % (3) % 2 % 3 % 4 % December 31, 2023 ​ ​ ​ ​ ​ ​ ​ Dollar change ​ $ (24,515) ​ $ (13,747) ​ $ (4,176) ​ $ (2,007) ​ $ (2,449) ​ $ (3,424) Percent change ​ (12) % (6) % (2) % (1) % (1) % ​ (2) % (1) This data does not reflect any actions that we may undertake in response to changes in interest rates such as changes in rates paid on certain deposit accounts based on local competitive factors, which could reduce the actual impact on net interest income, if any.
The total average balance of interest-bearing liabilities increased $37.9 million, or 2.55%, to 66 Table of Contents $1.5 billion for the year ended December 31, 2023, from the year ended December 31, 2022, primarily due to an increase in interest-bearing time deposits.
The total average balance of interest-bearing liabilities increased $78.1 million, or 5.13%, to $1.6 billion for the year ended December 31, 2024, from the year ended December 31, 2023, primarily due to an increase in interest-bearing time deposits.
For additional information, see “Note 13 — Junior Subordinated Deferrable Interest Debentures” in the Notes to the Consolidated Financial Statements contained in “Item 8. Financial Statements and Supplementary Data” of this Form 10-K. At December 31, 2023, the Company had outstanding subordinated debt, net of costs to issue, totaling $63.9 million compared to $63.7 million at December 31, 2022.
Financial Statements and Supplementary Data” of this Form 10-K. ​ At December 31, 2024, the Company had outstanding subordinated debt, net of costs to issue, totaling $63.7 million compared to $63.9 million at December 31, 2023. For additional information, see “Item 1–Business – Sources of Funds ”, contained in this Form 10-K.
Investment securities. Investment securities, all of which are classified as available-for-sale, increased $9.1 million, or 5.9%, to $163.2 million at December 31, 2023 from $154.0 million at December 31, 2022.
Investment securities, all of which are classified as available-for-sale, increased $30.2 million, or 18.5%, to $193.3 million at December 31, 2024 from $163.2 million at December 31, 2023.
The average rate paid on interest bearing deposits increased to 1.66% for the year ended December 31, 2023, from 0.44% for the year ended December 31, 2022, with the average rate paid on money market deposits increasing 115 basis points to 1.64% during 2023 compared to 0.49% during 2022, and the average rate paid on time deposits increasing 231 basis points to 3.22% during 2023 compared to 0.91% during 2022.
The average rate paid on interest bearing deposits increased to 2.37% for the year ended December 31, 2024, from 1.66% for the year ended December 31, 2023, with the average rate paid on money market deposits increasing 72 basis points to 2.36% during 2024 compared to 1.64% during 2023, and the average rate paid on time deposits increasing 77 basis points to 3.99% during 2024 compared to 3.22% during 2023.
The average yield on interest earning assets for the year ended December 31, 2023 was 5.23%, a 92 basis point increase from 4.31% for the year ended December 31, 2022, primarily due to higher market interest rates, while the average cost of interest bearing liabilities for the year ended December 31, 2022 was 1.87%, a 117 basis point increase from 0.70% for the year ended December 31, 2022.
The average yield on interest earning assets for the year ended December 31, 2024 was 5.40%, a 17 basis point increase from 5.23% for the year ended December 31, 2023, primarily due to higher market interest rates, while the average 63 Table of Contents cost of interest bearing liabilities for the year ended December 31, 2024 was 2.54%, a 67 basis point increase from 1.87% for the year ended December 31, 2023.
At December 31, 2023, our $1.9 billion total loan portfolio included $397.0 million, or 20.6%, of acquired loans (all of which were recorded to their estimated fair values at the time of acquisition), and the remaining $1.5 billion, or 79.4%, consisted of loans we originated.
At December 31, 2024, our $1.9 billion total loan portfolio included $299.2 million, or 15.3%, of acquired loans (all of which were recorded to their estimated fair values at the time of acquisition), and the remaining $1.7 billion, or 84.7%, consisted of loans we originated.
Conversely, a decline in interest rates would likely negatively impact our net interest income. The provision for credit losses is dependent on changes in our loan portfolio and management’s assessment of the collectability of our loan portfolio, as well as prevailing economic and market conditions.
The provision for credit losses is dependent on changes in our loan portfolio and management’s assessment of the collectability of our loan portfolio, as well as prevailing economic and market conditions.
During the years ended December 31, 2023, 2022 and 2021, the Bank sold $9.6 million, $42.5 million and $45.8 million in loans and loan participation interests, and received $196.7 million, $469.6 million and $490.3 million in principal repayments, respectively.
During the years ended December 31, 2024, 2023 and 2022, the Bank sold $14.0 million , $9.6 million and 66 Table of Contents $42.5 million in loans and loan participation interests, and received $299.9 million, $196.7 million and $469.6 million in principal repayments, respectively.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 73 ​ ​ ​ ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 76 ​ ​ ​ ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 133 ​ ​ ​ ITEM 9(A). CONTROLS AND PROCEDURES 133 ​ ​ ​ ITEM 9B. OTHER INFORMATION 134 ​ ​ ​
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 69 ​ ​ ​ ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 72 ​ ​ ​ ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 131 ​ ​ ​ ITEM 9(A). CONTROLS AND PROCEDURES 131 ​ ​ ​ ITEM 9B. OTHER INFORMATION 132 ​ ​ ​

Other BCML 10-K year-over-year comparisons