What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2022-03-31 compared with 2021-03-23 · 132 added, 162 removed, 631 unchanged (32% of the section changed)

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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.

In March 2020, the outbreak of COVID-19 was recognized as a pandemic by the World Health Organization.

The spread of COVID-19 has created a global public health crisis that has resulted in unprecedented uncertainty, volatility and disruption in financial markets and in governmental, commercial and consumer activity in the United States and globally, including the markets that we serve.

Governmental responses to the pandemic have included orders to close businesses not deemed essential and directing individuals to restrict their movements, observe social distancing and shelter in place.

These actions, together with responses to the pandemic by businesses and individuals, have resulted in rapid decreases in commercial and consumer activity, temporary, and some permanent, closures of many businesses that have led to a loss of revenues and a rapid increase in unemployment, material decreases in business valuations, disrupted global supply chains, market downturns and volatility, changes in consumer behavior related to pandemic fears, related emergency response legislation and an expectation that the Board of Governors of the Federal Reserve System (“Federal Reserve”) will maintain a low interest rate environment for the foreseeable future.

Although financial markets have rebounded from significant declines that occurred earlier in the pandemic and global economic conditions showed signs of improvement beginning during the second quarter of 2020, many of the effects that arose or became more pronounced after the onset of the COVID-19 pandemic have persisted through the end of the year.

These changes have had and are likely to continue to have a significant adverse effect on the markets in which we conduct our business and the demand for our products and services.

See Item 1A., “Risk Factors – Risks Related to Macroeconomic Conditions – The COVID-19 pandemic has adversely impacted our ability to conduct business and is expected to adversely impact our financial results and those of our customers.

The ultimate impact will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and actions taken by governmental authorities in response to the pandemic” , contained in this report.

As of December 31, 2021, we had, on a consolidated basis, total assets of $2.4 billion, total deposits of $2.0 billion, total loans of $1.7 billion (net of allowances) and total shareholders’ equity of $262.6 million.

We continue to focus on growing our commercial loan portfolios through acquisitions as well as organic growth.

At December 31, 2021, our $1.7 billion total loan portfolio included $414.0 million, or 24.8%, of acquired loans (all of which were recorded to their estimated fair values at the time of acquisition), and the remaining $1.3 billion, or 75.2%, consisted of loans we originated.

During the last two years the Bank participated in the U.S.

Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”), a guaranteed unsecured loan program enacted under the CARES Act to provide near-term relief to help small businesses impacted by COVID-19 sustain operations.

The PPP ended on May 31, 2021.

Under this program we began processing applications for loan forgiveness in the fourth quarter of 2020.

At December 31, 2021, there were 323 PPP loans outstanding totaling $69.6 million, as compared to 1,330 PPP loans totaling $135.6 million at December 31, 2020.

The profitability of our operations depends primarily on our net interest income after provision for loan losses, which is the difference between interest earned on interest earning assets and interest paid on interest bearing liabilities less provision for loan losses.

Our net income is also affected by other factors, including the provision for credit losses on loans, noninterest income and noninterest expense.

Our History and Growth.

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The severe economic recession beginning in 2008 and the ongoing consolidation in the banking industry created an opportunity for our management team and board to build an attractive commercial banking franchise and create long-term value for our shareholders by employing an acquisition strategy that focuses on opportunities that grow our product portfolio and expand the business geographically.

Since 2010, we have implemented our vision of becoming a strategic consolidator of community banks and a destination for seasoned bankers and business persons who share our entrepreneurial spirit.

Since 2010, we have implemented our vision of becoming a strategic consolidator of community banks and a destination for seasoned bankers and businesspersons who share our entrepreneurial spirit.

While not without risk, we believe there are certain advantages resulting from mergers and acquisitions.

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In February 2020, we acquired Grand Mountain Bancshares, Inc.

(“GMB”), the holding company for Grand Mountain Bank, headquartered in Granby, Colorado, which had four branch locations across Grand County and a loan

office in Summit County, Colorado.

(“GMB”), the holding company for Grand Mountain Bank, headquartered in Granby, Colorado, which had four branch locations across Grand County and a loan office in Summit County, Colorado.

At the time of acquisition, GMB had approximately $130.9 million in total assets and $118.1 million in deposits.

Recent Developments.

In February 2022, we acquired PEB, the holding company for Pacific Enterprise Bank, which had one branch location located in Irvine, California.

At the time of acquisition, PEB had approximately $441.0 million in assets, $411.6 million in loans, $375.8 million in deposits and $61.4 million in stockholders’ equity.

We target our services to small and medium-sized businesses, professional firms, real estate professionals, nonprofit businesses, labor unions and related nonprofit entities and businesses and individual consumers.

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We generally lend in markets where we have a physical presence through our branch offices.

A majority of our branches are located in the San Francisco Bay Area which includes the counties of Alameda, Contra Costa, Marin, Napa, San Francisco, San Mateo, Santa Clara, Solano, and Sonoma, California.

A majority of our branches are located in the San Francisco Bay Area which includes the counties of Alameda, Contra Costa, Marin, San Francisco, San Joaquin, San Mateo, Santa Clara, Solano, and Sonoma, California.

We operate primarily in the San Francisco- Oakland-Hayward, and the San Jose-Sunnyvale-Santa Clara, California Metropolitan Statistical Areas (“MSA”) with additional operations in the Los Angeles-Long Beach-Anaheim, California MSA, with borrowers or properties located in Northern California comprising 35.4% and Southern California comprising 34.8% of our loan portfolio as of December 31, 2021.

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With a population of approximately 4.7 million, the San Francisco-Oakland-Hayward MSA represents the second most populous area in California and the twelfth largest in the United States.

In addition to its current size, the market also demonstrates key characteristics we believe provide the opportunity for additional growth, including projected population growth of 5.9% through 2022 versus the national average of 3.7%, a median household income of $88,685 versus a national average of $57,462, and the third highest population density in the nation.

The San Jose-Sunnyvale-Santa Clara MSA also demonstrates key characteristics that provide us growth opportunities, including a population of approximately 2.0 million, projected population growth of 6.0% through 2022, and a median household income of $101,689.

In addition to its current size, the market also demonstrates key characteristics we believe provide the opportunity for additional growth, with a median household income of $114,696 versus a national average of $67,521, and the third highest population density in the nation.

The San Jose-Sunnyvale-Santa Clara MSA also demonstrates key characteristics that provide us growth opportunities, including a population of approximately $2.0 million and a median household income of $130,865.

The Los Angeles-Long Beach-Anaheim, California MSA, with over $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.

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The economic base of the area is heavily dependent on small and medium-sized businesses, providing us with a market rich in potential customers.

We believe the market’s projected population growth of 4.2% through 2022, its median household income of $64,343, 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 believe the market’s median household income of $78,908, 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.

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Lending Activities.

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 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.

Our preference is for owner-occupied real estate and commercial and industrial loans.

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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.

During the year ended December 31, 2020, the Bank participated in the SBA Paycheck Protection Program (“PPP”), a guaranteed unsecured loan program enacted under the CARES Act, enacted March 27, 2020, to provide near-term relief to help small businesses impacted by COVID-19 sustain operations.

During the year ended December 31, 2021, the Bank participated in the SBA PPP, a guaranteed unsecured loan program enacted under the CARES Act, enacted March 27, 2020, to provide near-term relief to help small businesses impacted by COVID-19 sustain operations.

The deadline for PPP loan applications to the SBA was initially August 8, 2020.

Under this program we funded 1,359 PPP loans totaling $140.2 million, of which 704 PPP loans totaling $85.5 million were for new clients and began processing applications for loan forgiveness in the fourth quarter of 2020.

As of December 31, 2021, we had received SBA forgiveness for 1,794 PPP loans totaling $164.8 million resulting in 306 PPP loans remaining with an aggregate balance of $69.6 million.

As of December 31, 2020, we had received SBA forgiveness for 29 PPP loans totaling $5.9 million resulting in a remaining 1,330 PPP loans with an aggregate balance of $135.6 million.

The CAA, 2021 enacted in December 2020 renewed and extended the PPP until March 31, 2021 by authorizing an additional $284.5 billion for the program for eligible small businesses and nonprofits.

In January, the Bank began accepting and processing loan applications under this second PPP program and will continue working with our clients to assist them with accessing other borrowing options, including SBA and other government sponsored lending programs, as appropriate

At December 31, 2021, we had net loans of $1.6 billion, representing 70.1% of our total assets.

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The geographic concentration of our loans subjects our business to the general economic conditions within California, Colorado, New Mexico and Washington.

The risks created by such concentrations have been considered by management in the

determination of the adequacy of the allowance for loan losses.

The risks created by such concentrations have been considered by management in the determination of the adequacy of the allowance for loan losses.

Management believes the allowance for loan losses is adequate to cover probable incurred losses in our loan portfolio as of December 31, 2021.

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Borrower Type

Single Family

(Dollars in thousands)

Commercial real estate investor

Real estate investor

Commercial real estate investor

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The underwriting guidelines include, among other things, approval limitation and hierarchy, documentation standards, loan-to-value limits, debt coverage ratio, overall credit-worthiness of the borrower, guarantor support, etc.

Loan originations are obtained through a variety of sources, including existing customers, walk-in customers, referrals from brokers or existing customers, and advertising.

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.

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.

Loan decisions are documented as to the borrower’s business, purpose of the loan, evaluation of repayment source and the associated risks, evaluation of collateral, covenants and monitoring requirements, and the risk rating rationale.

Our strategy for approving or disapproving loans is to follow our loan policies and underwriting practices, on a consistent basis, which include:

● maintaining close relationships among our clients and their designated bankers, to ensure ongoing credit monitoring and loan servicing;

● granting credit on a sound basis, with full knowledge of the purpose and source of repayment for such credit;

● ensuring that primary and secondary sources of repayment are adequate in relation to the amount of the loan;

● developing and maintaining targeted levels of diversification for our loan portfolio as a whole and for loans within each category;

● ensuring that each loan is properly documented and that any insurance coverage requirements are satisfied.

Managing credit risk is an enterprise-wide process.

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The Bank’s lending and credit policies require management to regularly review the Bank’s loan portfolio so that the Bank can monitor the quality of its assets.

If during the ordinary course of business, management becomes aware that a borrower may not be able to meet the contractual payment obligations under a loan, then such policies require that the loan be supervised more closely with consideration given to, among other things, placing the loan on non-accrual status, requiring additional allowance for loan losses, and (if appropriate) charging-off a part or all of the loan.

If during the ordinary course of business, management becomes aware that a borrower may not be able to meet the contractual payment obligations under a loan, then such policies require that the

loan be supervised more closely with consideration given to, among other things, placing the loan on non-accrual status, requiring additional allowance for loan losses, and (if appropriate) charging-off a part or all of the loan.

Potential problem loans are those loans that are currently accruing interest and are not considered impaired, but which we are monitoring because the financial information of the borrower causes us concern as to their ability to comply with their loan repayment terms.

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Results of loan reviews by consultants as well as examination of the loan portfolio by state and federal regulators are also considered by management and the board in determining the level of the allowance for loan losses.

Our loan policies generally include other underwriting guidelines for loans collateralized by real estate.

These underwriting standards are designed to determine the maximum loan amount that a borrower has the capacity to repay based upon the type of collateral securing the loan and the borrower’s income.

Such loan policies include maximum amortization schedules loan to value and other loan terms for each category of loans collateralized by liens on real estate.

In addition, our loan policies provide the following:

● guidelines for personal guarantees

● an environmental review

● loans to employees, executive officers and directors

● problem loan identification

● maintenance of an adequate allowance for loan losses;

● other matters relating to lending practices

General economic factors affecting a borrower’s ability to repay include interest, inflation and unemployment rates, as well as other factors affecting a borrower’s clients, suppliers and employees.

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Currently, we maintain an in-house limit of $8.9 million for unsecured loans and $14.8 million for secured loans.

At December 31, 2020, there were four loans to an aggregate of six individuals or entities or related interests that exceeded these internal limits.

At December 31, 2021, there were five loans to an aggregate of five individuals or entities or related interests that exceeded these internal limits.

We provide a variety of loans to meet our clients’ needs.

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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 junior lien covering up to 40% of the total cost, and a contribution of at least 10% equity from the borrower.

a non-profit corporation established to contribute to the economic development of its community by working together with the SBA and private sector lenders such as the Bank, to provide financing to small businesses.

Debenture limits are $5.0 million for regular 504 loans and $5.5 million for those 504 loans that meet a public policy goal.

The CDC is a non-profit corporation established to contribute to the economic development of its community by working together with the SBA and private sector lenders such as the Bank, to provide financing to small businesses.

SBA debenture limits are $5.0 million for regular SBA 504 loans and $5.5 million for those SBA 504 loans that meet a public policy goal.

The Company generally offers SBA 504 loans within a range of $600,000 to $5.0 million.

At December 31, 2021, our commercial real estate loan portfolio included $44.0 million of loans originated under the SBA’s 504 loan program.

The Bank has sold, and may in the future sell, the guaranteed portion of certain of its SBA 7(a) loans in the secondary market.

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 2021, the Bank originated $39.9 million in commercial real estate SBA 7(a) loans, of which $3.5 million represented the unguaranteed portion.

During 2021, the Bank sold $32.8 million of the guaranteed portion of its commercial real estate SBA 7(a) loans, for which it recognized a gain of $3.5 million.

Payments on loans secured by such properties are often dependent on the successful operation (in the case of owner-occupied real estate) or management (in the case of non-owner occupied real estate) of the properties.

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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, 2020, the average loan size in our commercial real estate portfolio was approximately $909,000 with a weighted average loan-to-value ratio of 56.6%.

At December 31, 2021, the average loan size in our commercial real estate portfolio was approximately $1.0 million with a weighted average loan-to-value ratio of 49.3%.

Agriculture is a major industry in the Central Valley of California, one of our lending markets.

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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.

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.

Commodity prices also present a risk, which may be managed by the use of set price contracts.

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As of December 31, 2021, the largest commercial real estate loan had a net outstanding balance of $23.5 million and was secured by a first deed of trust on a retail strip center located in Sacramento, California.

The largest commercial real estate loan secured by multifamily property as of December 31, 2020, was a 21-unit apartment complex with a net outstanding principal balance of $14.3 million, located in the Sacramento area, California.

The largest commercial real estate loan secured by multifamily property as of December 31, 2021, was a 32-unit apartment complex with a net outstanding principal balance of $11.3 million, located in Southern California.

Both of these loans were performing according to their respective loan repayment terms as of December 31, 2021.

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Because of uncertainties inherent in estimating construction costs, the market value of the completed project and the effects of governmental regulation on real property, it can be difficult to accurately evaluate the total funds required to complete a project and the related loan-to-value ratio.

As a result of these uncertainties, construction lending often involves the

disbursement of substantial funds, with repayment dependent, in part, on the success of the ultimate project rather than the ability of a borrower or guarantor to repay the loan.

As a result of these uncertainties, construction lending often involves the disbursement of substantial funds, with repayment dependent, in part, on the success of the ultimate project rather than the ability of a borrower or guarantor to repay the loan.

If we are forced to foreclose on a project prior to completion, there is no assurance that we will be able to recover the entire unpaid portion of the loan.

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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, 2020, home equity loans and lines of credit totaled $17.3 million, or 1.0% of total loans, of which $1.7 million were secured by junior liens.

At December 31, 2021, home equity loans and lines of credit totaled $10.3 million, or 0.6% of total loans, of which $733,000 were secured by junior liens.

Unfunded commitments on home equity lines of credit at December 31, 2021, totaled $15.6 million.

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Loan proceeds under this program can be used for most business purposes including working capital, machinery and equipment, furniture and fixtures, land and building (including purchase, renovation and new construction), leasehold improvements and debt refinancing.

Loan maturity is generally up to 10 years for non-real estate collateral and up to 25

years for real estate collateral.

Loan maturity is generally up to 10 years for non-real estate collateral and up to 25 years for real estate collateral.

In general, the SBA guarantees up to 75% of the loan amount depending on loan size.

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During 2020, the Bank originated $9.7 million in SBA 7(a) loans, of which $6.8 million represented the guaranteed portion.

During 2020, the Bank elected to sell $9.9 million of the guaranteed portion of its commercial and industrial SBA 7(a) loans, for which it recognized a gain of $783,000.

At December 31, 2020, our commercial and industrial loan portfolio included the unguaranteed portion of its SBA 7(a) loans totaling $1.1 million.

During 2021, the Bank originated $14.6 million in commercial and industrial SBA 7(a) loans, of which $1.4 million represented the unguaranteed portion.

During 2021, the Bank sold $13.0 million of the guaranteed portion of its commercial and industrial SBA 7(a) loans, for which it recognized a gain of $1.3 million.

Commercial and industrial loans also include loans originated under the PPP, a specialized low-interest loan program funded by the SBA.

The Bank, as a qualified SBA lender, was authorized to originate PPP loans.

PPP loans have an interest rate of 1.0%, a two-year or five-year loan term to maturity, and principal and interest payments deferred until the lender receives the applicable forgiven amount or ten months after the end of the borrower’s loan forgiveness covered period.

The SBA guarantees 100% of the PPP loans made to eligible borrowers.

The entire principal amount of the borrower's PPP loan, including any accrued interest, is eligible to be forgiven and repaid by the SBA if the borrower meets the PPP conditions.

As of December 31, 2021, we had received SBA forgiveness for 1,794 PPP loans totaling $164.8 million resulting in remaining 306 PPP loans with an aggregate balance of $69.6 million.

As of December 31, 2020, we had received SBA forgiveness for 29 PPP loans totaling $5.9 million resulting in a remaining 1,330 PPP loans with an aggregate balance of $135.6 million.

The Bank expects that the great majority of its remaining PPP borrowers will also seek full or partial forgiveness of their loan obligations.

For additional information regarding these loans, see Item 1A.

Risk Factors - “Risks Related to Our Lending - Loans originated under the SBA Paycheck Protection Program subject us to credit, forgiveness and guarantee risk.”

We also make agricultural operating loans, including loans to finance the purchase of machinery, equipment and breeding stock;

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and operating and revolving loans used to purchase livestock for resale and related livestock production expense.

Agricultural operating loans are generally originated at an adjustable- or fixed-rate of interest and generally for a term of up to seven years.

In the case of agricultural operating loans secured by breeding livestock and/or farm equipment, such loans are originated at fixed rates of interest for a term of up to five years.

We typically originate agricultural operating loans on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s agricultural business.

As a result, the availability of funds for the repayment of agricultural operating loans may be substantially dependent on the success of the business itself and the general economic environment.

A significant number of agricultural borrowers with these types of loans may qualify for relief under a chapter of the U.S.

Bankruptcy Code that is designed specifically for the reorganization of financial obligations of family farmers and which provides certain preferential procedures to agricultural borrowers compared to traditional bankruptcy proceedings pursuant to other chapters of the U.S.

Bankruptcy Code.

As of December 31, 2020, we had agricultural operating loans of $2.3 million or 0.1% of total loans.

As of December 31, 2021, we had agricultural operating loans of $770,000 or 0.05% of total loans.

In general, commercial and industrial loans may involve increased credit risk;

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Furthermore, the application of various federal and state laws may limit the amount which can be recovered on such loans.

As of December 31, 2020, consumer loans totaled approximately $5.2 million or 0.3% of total loans.

As of December 31, 2021, consumer loans totaled $5.1 million or 0.3% of total loans.

For additional information concerning our loan portfolio, see “Item 7.

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At December 31, 2021, we had $12.5 million in reciprocal CDARS and $96.1 million in one-way CDARS and ICS deposits.

Additionally, we offer escrow services on commercial transactions and facilitate tax-deferred commercial exchanges through the Bank’s division, Business Escrow Services (“BES”).

This affords us a low cost core deposit base.

These deposits fluctuate as the sellers of the real estate have up to nine months to invest in replacement real estate to defer the income tax on the property sold.

Deposits related to BES totaled $4.0 million at December 31, 2020.

The Company has decided to wind this activity down in 2021.

The Company discontinued its escrow services in 2021.

We offered escrow services on commercial transactions and facilitate tax-deferred commercial exchanges through the Bank’s division, Business Escrow Services (“BES”).

This afforded us a low cost core deposit base.

These deposits fluctuated as the sellers of the real estate have up to nine months to invest in replacement real estate to defer the income tax on the property sold.

Deposits related to BES totaled $1.7 million and $4.0 million at December 31, 2021 and December 31, 2020, respectively.

For additional information concerning our deposits, see “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Comparison of Financial Condition at December 31, 2021 and 2020 — Deposits” contained in this report.

Although deposits are our primary source of funds, we may from time to time utilize borrowings as a cost-effective source of funds when they can be invested at a positive interest rate spread, for additional capacity to fund loan demand, or to meet our asset/liability management goals.

We are a member of and may obtain advances from the FHLB of San Francisco, which is part of the Federal Home Loan Bank System.

The eleven regional Federal Home Loan Banks provide a central credit facility for their member institutions.

These advances are provided upon the security of certain mortgage loans and mortgage-backed securities.

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.

In addition to FHLB advances, we may also utilize Fed Funds purchased from correspondent banks as a source of short-term funding.

At December 31, 2020, we had the ability to borrow up to $421.2 million from the FHLB and $75.0 million available under our Fed Funds lines, none of which was outstanding.

In May 2020, the Bank secured a $10.0 million advance from the FHLB of San Francisco, comprised of two $5.0 million tranches, at no cost, maturing in November 2020 and May 7, 2021.

As of December 31, 2020, the first tranche was repaid and the second tranche matures on May 7, 2021.

Additionally, the Federal Reserve recently established the Paycheck Protection Program Liquidity Facility (“PPPLF”) to bolster the effectiveness of the PPP.

The Bank may utilize the PPPLF, pursuant to which it will pledge PPP loans at face value as collateral to obtain FRB non-recourse advances.

There were no borrowings outstanding under this program at December 31, 2020.

While deposits are the primary source of funds for our lending and investment activities and for general business purposes, we also use borrowings to supplement our supply of lendable funds, to meet deposit withdrawal requirements and to more efficiently leverage our capital position.

The Federal Home Loan Bank of San Francisco (the “FHLB”) serves as our primary borrowing source.

The FHLB provides credit for member financial institutions such as the Bank.

As a 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.

Limitations on the amount of advances are based on the financial condition of the member institution, the adequacy of collateral pledged to secure the credit, and FHLB stock ownership requirements.

The Bank has an approved secured borrowing facility with the FHLB for up to 25% of total assets for a term not to exceed five years under a blanket lien of certain types of loans.

At December 31, 2021, there were no FHLB borrowings outstanding, and based on pledged collateral, the Bank had $483.1 million of available credit capacity with the FHLB.

In addition to the availability of liquidity from the FHLB, the Bank maintained a short-term borrowing line of credit with the Federal Reserve Bank (“FRB”) of San Francisco, with available credit capacity of $69.6 million as of December 31, 2021 based on loans that qualify as collateral for the FRB line of credit.

At December 31, 2021, there were no FRB borrowings outstanding.

The Bank also has uncommitted Federal Funds lines with three corresponding banks as of December 31, 2021 totaling $65.0 million.

There were no amounts outstanding under these facilities at December 31, 2021.

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.

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The primary objectives of our investment policy are to provide a source of liquidity, to provide an appropriate return on funds invested, to manage interest rate risk, to meet pledging requirements and to meet regulatory capital requirements.

Our current investment portfolio consists of obligations of U.S.

government agencies or sponsored entities, including mortgage-backed securities, collateralized mortgage obligations, municipal securities, SBA securities and corporate bonds.

As of December 31, 2021, our investment portfolio totaled $174.4 million, with an average yield of 3.0% and an estimated duration of approximately 5.5 years.

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All securities transactions are reported to the Board of Directors on a monthly basis.

Our investment policy outlines investment type limitations, security mix parameters, authorization guidelines and risk management guidelines.

The policy authorizes us to invest in a variety of investment securities, subject to various limitations.

Our current investment portfolio consists of obligations of U.S.

government agencies or sponsored entities, including mortgage-backed securities, collateralized mortgage obligations, municipal securities, SBA securities and corporate bonds.

For additional information concerning our investments, see “Item 7.

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United Business Bank

As a state-chartered, federally insured commercial banks, the Bank is subject to extensive regulation and must comply with various statutory and regulatory requirements, including prescribed minimum capital standards.

As a state-chartered, federally insured commercial bank, the Bank is subject to extensive regulation and must comply with various statutory and regulatory requirements, including prescribed minimum capital standards.

The Bank is regularly examined by the Federal Reserve and the DFPI and must file periodic reports concerning its activities and financial condition with these banking regulators.

The Bank’s relationship with depositors and borrowers also is regulated to a great extent by both federal and state law, especially in such matters as the ownership of deposit accounts and the form and content of mortgage and other loan documents.

The Bank’s relationship with depositors and borrowers also is

regulated to a great extent by both federal and state law, especially in such matters as the ownership of deposit accounts and the form and content of mortgage and other loan documents.

Federal and state banking laws and regulations govern all areas of the operation of the Bank, including reserves, loans, investments, deposits, capital, issuance of securities, payment of dividends and establishment of branches.

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As a California-chartered commercial bank with branches in the States of California, 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, New Mexico and Washington law and regulations.

These state laws and regulations govern the Bank’s ability to take deposits and pay interest thereon, make loans on or invest in

residential and other real estate, make consumer loans, invest in securities, offer various banking services to its clients and establish branch offices.

These state laws and regulations govern the Bank’s ability to take deposits and pay interest thereon, make loans on or invest in residential and other real estate, make consumer loans, invest in securities, offer various banking services to its clients and establish branch offices.

Deposit Insurance.

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The FDIC has authority to increase insurance assessments, and any significant increases may have an adverse effect on the operating expenses and results of operations of the Company.

The Bank paid $580,000 in FDIC assessments for the year ending December 31, 2021.

Management cannot predict what assessment rates will be in the future.

In a banking industry emergency, the FDIC may also impose a special assessment.

The FDIC announced that the DIF reserve ratio surpassed 1.35% as of September 30, 2018 which triggered two changes under the regulations:

surcharges on large banks (total consolidated assets of $10 billion or more) ended and small banks (total consolidated assets of less than $10 billion, which includes the Bank) were awarded assessment credits for the portion of their assessments that contributed to the growth in the reserve ratio from 1.15% to 1.35% to be applied when the reserve ratio is at least 1.35%.

The Bank applied $369,000 of small bank credits received to its quarterly deposit insurance assessments paid during 2019, reducing the Bank’s FDIC expense for the year to $138,000.

The Bank paid $491,000 in FDIC assessments for the year ending December 31, 2020, after using the remaining $79,000 of such credits.

The FDIC also may prohibit any insured institution from engaging in any activity determined by regulation or order to pose a serious risk to the DIF.

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The information security program must be designed to ensure the security and confidentiality of client information, protect against any unanticipated threats or hazards to the security or integrity of such information, protect against unauthorized access to or use of such information that could result in substantial harm or inconvenience to any client, and ensure the proper disposal of client and consumer information.

Each insured depository institution must also develop and implement a risk-based response program to address incidents of unauthorized access to client information in client information systems.

Each insured depository institution must also develop and implement a risk-based

response program to address incidents of unauthorized access to client information in client information systems.

If the FDIC determines that an institution fails to meet any of these guidelines, it may require an institution to submit to the FDIC an acceptable plan to achieve compliance.

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Consolidated regulatory capital requirements identical to those applicable to subsidiary banks are generally apply to bank holding companies.

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 are not subject to the consolidated holding company capital requirements unless otherwise directed by the Federal Reserve Board.

The Federal Reserve expects a holding company’s subsidiary banks to be Well Capitalized under the prompt corrective action regulations, discussed below.

Under the capital regulations, the minimum capital ratios are:

(1) a CET1 capital ratio of 4.5% of risk-weighted assets;

(1) a common equity Tier 1, or CET1, capital ratio of 4.5% of risk-weighted assets;

(2) a Tier 1 capital ratio of 6.0% of risk-weighted assets;

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Subordinated Notes, such as the ones the Company issued in 2020, are also included in Tier 2 Capital.

Mortgage servicing assets and deferred tax assets over designated percentages of CET1 are deducted from capital.

In addition, Tier 1 capital includes AOCI, which includes all unrealized gains and losses on available for sale debt and equity securities.

However, because of our asset size, we were eligible to elect, and did elect, to permanently opt out of the inclusion of unrealized gains and losses on available for sale debt and equity securities in our capital calculations.

For purposes of determining risk-based capital, assets and certain off-balance sheet items are risk- weighted from 0% to 1,250%, depending on the risk characteristics of the asset or item.

The current regulations include a 150% risk weight for certain high volatility commercial real estate acquisition, development and construction loans, and for non-residential mortgage loans that are 90 days past due or otherwise in nonaccrual status;

a 20% credit conversion factor for the unused portion of a commitment with an original maturity of one year or less that is not unconditionally cancellable;

and a 250% risk weight for mortgage servicing and deferred tax assets that are not deducted from capital.

In addition to the minimum CET1, Tier 1, leverage ratio and total capital ratios, the capital regulations require a capital conservation buffer consisting of additional CET1 capital greater than 2.5% of risk-weighted assets above the required minimum risk-based capital levels in order to avoid limitations on paying dividends, repurchasing shares, and paying discretionary bonuses.

To be considered “Well Capitalized,” a bank holding company must have, on a consolidated basis, a total risk-based capital ratio of 10.0% or greater and a Tier 1 risk-based capital ratio of 6.0% or greater and must not be subject to an individual order, directive or agreement under which the Federal Reserve requires it to maintain a specific capital level.

To be considered “well capitalized,” a depository institution must have a Tier 1 risk-based capital ratio of at least 8%, a total risk-based capital ratio of at least 10%, a CET1 capital ratio of at least 6.5% and a leverage ratio of at least 5%, and not be subject to an individualized order, directive or agreement under which its primary federal banking regulator requires it to maintain a specific capital level.

As of December 31, 2021, the Bank met the requirements to be “well capitalized” and met the fully phased-in capital conservation buffer requirement.

The Economic Growth, Regulatory Relief and Consumer Protection Act (“EGRRCPA”), enacted in May 2018, required the federal banking agencies to establish for institutions with assets of less than $10 billion a “community bank leverage ratio” of between 8 to 10%.

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CECL covers a broader range of assets than the current method of recognizing credit losses and generally results in earlier recognition of credit losses.

Upon adoption of CECL, a banking organization must record a one-time adjustment to its credit loss allowances as of the beginning of the fiscal year of adoption equal to the difference, if any, between the amount of credit loss allowances under the current methodology and the amount required under CECL.

Upon adoption of CECL, a banking organization must

record a one-time adjustment to its credit loss allowances as of the beginning of the fiscal year of adoption equal to the difference, if any, between the amount of credit loss allowances under the current methodology and the amount required under CECL.

For a banking organization, implementation of CECL is generally likely to reduce retained earnings, and to affect other items, in a manner that reduces its regulatory capital.

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The Bank believes that the guidelines are applicable to it, as it has a relatively high concentration in commercial real estate loans.

The Bank and its Board of Directors have discussed the guidelines and believe that the Bank’s underwriting policies, management information systems, independent credit administration process, and monitoring of real estate loan concentrations are sufficient to address the guidelines.

The Bank and its Board of Directors

have discussed the guidelines and believe that the Bank’s underwriting policies, management information systems, independent credit administration process, and monitoring of real estate loan concentrations are sufficient to address the guidelines.

Activities and Investments of Insured State-Chartered Financial Institutions.

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An insured state bank is not prohibited from, among other things, (1) acquiring or retaining a majority interest in a subsidiary, (2) investing as a limited partner in a partnership the sole purpose of which is direct or indirect investment in the acquisition, rehabilitation or new construction of a qualified housing project, provided that such limited partnership investments may not exceed 2% of the bank’s total assets, (3) acquiring up to 10% of the voting stock of a company that solely provides or re-insures directors’, trustees’ and officers’ liability insurance coverage or bankers’ blanket bond group insurance coverage for insured depository institutions, and (4) acquiring or retaining the voting shares of a depository institution if certain requirements are met.

In addition, the FDIC is authorized to permit a state bank to engage in state-authorized activities or investments not permissible for national banks (other than non-subsidiary equity investments) if it meets all applicable capital requirements and it is determined that such activities or investments do not pose a significant risk to the DIF.

Environmental Issues Associated with Real Estate Lending.

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Federal Reserve System.

The Bank is a member of the Federal Reserve Bank (“FRB”) of San Francisco.

As a member of the FRB, the Bank is required to own stock in the FRB of San Francisco based on a specified ratio relative to our capital.

FRB stock is carried at cost and may be sold back to the FRB at its par value.

The FRB requires that all depository institutions maintain reserves on transaction accounts or non-personal time deposits.

These reserves may be in the form of cash or noninterest bearing deposits with the regional Federal Reserve Bank.

Interest bearing checking accounts and other types of accounts that permit payments or transfers to third parties fall within the definition of transaction accounts and are subject to Regulation D reserve requirements, as are any non-personal time deposits at a bank.

The Bank is a member of the Federal Reserve Bank of San Francisco.

The Federal Reserve requires all depository institutions to maintain reserves at specified levels against their transaction accounts, primarily checking accounts.

In response to the COVID-19 pandemic, the Federal Reserve reduced reserve requirement ratios to zero percent effective on March 26, 2020, to support lending to households and businesses.

At December 31, 2021, the Bank was in compliance with the reserve requirements in place at that time.

Affiliate Transactions.

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Community Reinvestment Act.

The Bank is subject to the provisions of the Community Reinvestment Act of 1977 (“CRA”), which requires the appropriate federal bank regulatory agency to assess a bank’s performance under the

CRA in meeting the credit needs of the community serviced by the bank, including low and moderate income neighborhoods.

The Bank is subject to the provisions of the Community Reinvestment Act of 1977 (“CRA”), which requires the appropriate federal bank regulatory agency to assess a bank’s performance under the CRA in meeting the credit needs of the community serviced by the bank, including low and moderate income neighborhoods.

The regulatory agency’s assessment of the bank’s record is made available to the public.

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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.

Privacy Standards.

The Bank is subject to federal regulations implementing the privacy protection provisions of the Gramm-Leach-Bliley Financial Services Modernization Act of 1999.

These regulations require the Bank to disclose its privacy policy, including informing consumers of their information sharing practices and informing consumers of their rights to opt out of certain practices.

In addition, other state cybersecurity and data privacy laws and regulations may expose the Bank to risk and result in certain risk management costs.

Privacy Standards and Cybersecurity.

The Gramm-Leach-Bliley Financial Services Modernization Act of 1999 modernized the financial services industry by establishing a comprehensive framework to permit affiliations among commercial banks, insurance companies, securities firms and other financial service providers.

Federal banking agencies, including the FDIC, have adopted guidelines for establishing information security standards and cybersecurity programs for implementing safeguards under the supervision of the board of directors.

These guidelines, along with related regulatory materials, increasingly focus on risk management and processes related to information technology and the use of third parties in the provision of financial services.

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.

In addition, on November 18, 2021, the federal banking agencies announced the adoption of a final rule providing for new notification requirements for banking organizations and their service providers for significant cybersecurity incidents.

Specifically, the new rule requires a banking organization to notify its primary federal regulator as soon as possible, and no later than 36 hours after, the banking organization determines that a “computer-security incident” rising to the level of a “notification incident” has occurred.

Notification is required for incidents that have materially affected or are reasonably likely to materially affect the viability of a banking organization’s operations, its ability to deliver banking products and services, or the stability of the financial sector.

Service providers are required under the rule to notify affected banking organization clients as soon as possible when the provider determines that it has experienced a computer-security incident that has materially affected or is reasonably likely to materially affect the banking organization’s clients for four or more hours.

Compliance with the new rule is required by May 1, 2022.

Further, state cybersecurity and data privacy laws and regulations may expose the Bank to risk and result in certain risk management costs.

Notably, the California Consumer Privacy Act of 2018 (the "CCPA"), which became effective on January 1, 2020, gives California residents the right to request disclosure of information collected about them, and whether that information has been sold or shared with others, the right to request deletion of personal information (subject to certain exceptions), the right to opt out of the sale of personal information, and the right not to be discriminated against for exercising these rights.

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In November 2020, voters in the State of California approved the California Privacy Rights Act (“CPRA”), a ballot measure that amends and supplements the CCPA by creating the California Privacy Protection Agency, a watchdog privacy agency to be appointed shortly after the CPRA’s enactment.

The CPRA also modifies the CCPA by expanding both the scope of businesses covered by the law and certain rights relating to personal information and its use, collection, and disclosure by covered businesses.

The CPRA also modifies the CCPA by expanding both the scope of businesses

covered by the law and certain rights relating to personal information and its use, collection, and disclosure by covered businesses.

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.

Non-compliance with federal, or similar state privacy and cybersecurity laws and regulations could lead to substantial regulatory imposed fines and penalties, damages from private causes of action and/or reputational harm.

Anti-Money Laundering and Client Identification.

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In general, enforcement actions may be initiated for violations of law and regulations and unsafe or unsound practices.

The Company is also being required to file certain reports with, and otherwise comply with the rules and regulations of the SEC.

The Company also is required to file certain reports with, and otherwise comply with the rules and regulations of the SEC.

The Bank Holding Company Act.

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The Dodd-Frank Act.

The Dodd-Frank-Act imposed new restrictions and an expanded framework of regulatory oversight for depository institutions and their holding companies, and capital requirements that are discussed above under the section entitled “Capital Requirements.”

In addition, among other changes, the Dodd-Frank Act requires public companies to (i) provide their shareholders with a non-binding vote (a) at least once every three years on the compensation paid to executive officers and (b) at least once every six years on whether they should have a “say on pay” vote every one, two or three years;

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The company as an “emerging growth company,” unlike other public companies that are not emerging growth companies under the JOBS Act, will not be required to comply with the foregoing disclosure requirements for as long as it maintains its emerging growth company status.

We will remain an emerging growth company until the earliest of (i) the end of the fiscal year during which we have total annual gross revenues of $1.07 billion or more, (ii) the end of the fiscal year following the fifth anniversary of the completion of this offering, (iii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt and (iv) the date on which we are deemed to be a “large accelerated filer” under the Exchange Act.

We will remain an emerging growth company until the earliest of (i) the end of the fiscal year during which we have total annual gross revenues of $1.07 billion or more, (ii) the end of the fiscal year following the fifth anniversary of the completion of our initial public offering (i.e., December 31, 2023), (iii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt and (iv) the date on which we are deemed to be a “large accelerated filer” under the Exchange Act.

The regulations to implement the provisions of Section 619 of the Dodd-Frank Act, commonly referred to as the Volcker Rule, contain prohibitions and restrictions on the ability of financial institutions holding companies and their affiliates to engage in proprietary trading and to hold certain interests in, or to have certain relationships with, various types of investment funds, including hedge funds and private equity funds.

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Under the Dodd-Frank Act, the federal banking agencies may generally approve interstate de novo branching.

A bank holding company must maintain an adequate capital position and generally should not pay cash dividends unless the company’s net income for the past year is sufficient to fully fund the cash dividends and that the prospective rate of earnings appears consistent with the company’s capital needs, asset quality, and overall financial condition.

The Federal Reserve has issued a policy statement on the payment of cash dividends by bank holding companies, which expresses its view that although there are no specific regulations restricting dividend payments by bank holding companies other than state corporate laws, a bank holding company must maintain an adequate capital position and generally should not pay cash dividends unless the company’s net income for the past year is sufficient to fully fund the cash dividends and that the prospective rate of earnings appears consistent with the company’s capital needs, asset quality, and overall financial condition.

The Federal Reserve policy statement also indicates that it would be inappropriate for a company experiencing serious financial problems to borrow funds to pay dividends.

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Except for certain “Well Capitalized” and highly rated bank holding companies, a bank holding company is required to give the Federal Reserve prior written notice of any purchase or redemption of its outstanding equity securities if the gross consideration for the purchase or redemption, when combined with the net consideration paid for all such purchases or redemptions during the preceding twelve months, is equal to 10% or more of its consolidated net worth.

The Federal Reserve may disapprove such a purchase or redemption if it determines that the proposal would constitute an unsafe or unsound practice, violate any law or regulation, Federal Reserve order, any condition imposed by or written agreement with, the Federal Reserve.

The Federal Reserve may disapprove such a purchase or redemption if it determines that the proposal would constitute an unsafe or unsound practice, or violate any law or regulation, Federal Reserve order, or any condition imposed by or written agreement with, the Federal Reserve.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities – Stock Repurchases” contained in this report.

Recent Regulatory Reform

In response to the COVID-19 pandemic, the United States Congress, through the enactment of the CARES Act and the CAA, 2021, and the federal banking agencies, though rulemaking, interpretive guidance and modifications to agency policies and procedures, have taken a series of actions to provide national emergency economic relief measures including, among others, the following:

● The CARES Act, as amended by the CAA, 2021, allows banks to elect to suspend requirements under GAAP for loan modifications related to the COVID-19 pandemic (for loans that were not more than 30 days past due as of December 31, 2019) that would otherwise be categorized as a troubled debt restructuring (“TDR”) for accounting purposes, until the earlier of 60 days after the termination date of the national emergency or, January 1, 2022.

The suspension of GAAP is applicable for the entire term of the modification.

The federal banking agencies also issued guidance to encourage banks to make loan modifications for borrowers affected by COVID-19 by providing that short-term modifications made in response to COVID-19, such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant related to the loans in which the borrower is less than 30 days past due on its contractual payments at the time a modification is implemented is not a TDR.

The Bank is applying this guidance to qualifying COVID-19 modifications.

Management’s Discussion and Analysis of Financial Condition and Results of Operations – BayCom’s Response to COVID-19” for further information about the COVID-19 modifications completed by the Bank.

● The CARES Act amended the SBA’s loan program, in which the Bank participates, to create a guaranteed, unsecured loan program, the PPP, to fund payroll and operational costs of eligible businesses, organizations and self-employed persons during COVID-19.

The loans are provided through participating financial institutions, such as the Bank, that process loan applications and service the loans and are eligible for SBA repayment and loan forgiveness if the borrower meets the PPP conditions.

The application period for a PPP loan closed on August 8, 2020.

The SBA began approving PPP forgiveness applications and remitting forgiveness payments to PPP lenders on October 2, 2020.

The CAA, 2021 which was signed into law on December 27, 2020, renews and extends the PPP until March 31, 2021.

As a result, as a participating lender, the Bank began originating PPP loans again in January 2021 and will continue to monitor legislative, regulatory, and supervisory developments related to the PPP.

● Pursuant to the CARES Act, the federal banking agencies authorities adopted in April 2020 an interim rule, effective until the earlier of the termination of the coronavirus emergency declaration by the President and December 31, 2020, to (i) reduce the minimum CBLR from 9% to 8% percent and (ii) give community banks two-quarter grace period to satisfy such ratio if such ratio falls out of compliance by no more than 1%.

Effective October 1, 2020, the final rule adopted by the federal banking agencies authorities lowers the CBLR as set forth in the interim rule and provides a gradual transition back to the prior level.

Under the final rule the CBLR was 8% for 2020, and will be 8.5% for 2021, and 9% beginning January 1, 2022.

The final rule also retains the grace period.

A community banking organization that falls below the CBRL will still be deemed to be well capitalized during a two-quarter grace period so long as the banking organization maintains a CBRL greater than 7.5% during 2021, and greater than 8% thereafter.

As the on-going COVID-19 pandemic evolves, federal regulatory authorities continue to issue additional guidance with respect to the implementation, lifecycle, and eligibility requirements for the various CARES Act programs as well as industry-specific recovery procedures for COVID-19.

In addition, it is possible that the United States Congress will enact supplementary COVID-19 response legislation.

The Company continues to assess the impact of the CARES Act and other statues, regulations and supervisory guidance related to the COVID-19 pandemic.

COVID-19 Legislation.

In response to the COVID-19 pandemic, Congress, through the enactment of the CARES Act and CAA 2021, and the federal banking agencies, though rulemaking, interpretive guidance and modifications to agency policies and procedures, have taken a series of actions to provide national emergency economic relief measures including, among others, the CARES Act and CAA 2021.

As the on-going COVID-19 pandemic evolves, federal and state regulatory authorities continue to issue additional guidance with respect to COVID-19.

In addition, it is possible that Congress will enact additional COVID-19 response legislation.

We will continue to assess the impact of the CARES Act, CAA 2021 and other statues, regulations and supervisory guidance related to the COVID-19 pandemic.

The financial services industry is highly competitive as we compete for loans, deposits and client relationships in our market.

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As of December 31, 2021, we had approximately 307 full-time equivalent employees.

At that date, approximately 76% of our workforce identified as female and 24% as male, and women held 70% of the Company’s management roles.

The average tenure of employees was 5.2 years.

The ethnicity of our workforce was 41% White, 27% Asian, 22% Hispanic/Latino, 5% Black, 2% Two or More Races, and 3% Other.

The following chart depicts the percentage of self-identified females and minorities in our workforce at December 31, 2021, by job classification as defined by the Equal Employment Opportunity Commission (“EEOC”):

Job Classification

Distribution by EEOC Job Classification

Executive / Senior level officers

Mid-level officers and managers

Professionals

Administrative support

(1) Includes employees self-disclosed as Asian, Black, Native Hawaiian or Other Pacific Islander, or Two or More Races.

During the year ended December 31, 2021, the Board of Directors had three of its eleven directors who identified as female and two directors who identified as members of an underrepresented community (including one who identified as a member of two or more races).

An “underrepresented community” is defined under California law to include any individual who self-identifies as Black, African American, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian or Alaska Native, or who self identifies as gay, lesbian, bisexual or transgender.

None of our employees are represented by any collective bargaining unit or is a party to a collective bargaining agreement, and management considers its relationship with employees to be good.

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and that offer choice where possible so they can customize their benefits to meet their needs and the needs of their families.

In response to the

COVID-19 pandemic, we implemented significant operating environment changes that we determined were in the best interest of our employees, as well as the communities in which we operate, and which comply with government regulations.

This includes having the vast majority of our employees work from home, while implementing additional safety measures for employees continuing critical on-site work.

In response to the COVID-19 pandemic, we implemented significant operating environment changes that we determined were in the best interest of our employees, as well as the communities in which we operate, and which comply with government regulations.

A core tenet of our talent system is to both develop talent from within and supplement with external hires.

This approach has yielded loyalty and commitment in our employee base which in turn grows our business, our products, and our customers, while adding new employees and external ideas supports a continuous improvement mindset.

This approach has yielded loyalty and commitment in our employee base which in turn grows our business, our products, and our clients, while adding new employees and external ideas supports a continuous improvement mindset.

Information about Executive Officers

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Mary Therese (Terry) Curley:

Curley, age 63, joined the Bank as Executive Vice President, Director of Labor Service Division in April 2017, in connection with our acquisition of First ULB Corp and its wholly owned subsidiary, United Business Bank, FSB.

At the prior bank, Ms.

Curley, age 64, joined the Bank as Executive Vice President, and Director of Labor Service Division in April 2017, in connection with our acquisition of First ULB Corp and its wholly owned subsidiary, United Business Bank, FSB.

In 2022 she was also appointed as Chief Credit Officer of the Bank, At her prior bank, Ms.

Curley served as EVP/ Chief Credit Officer (2012 – 2017), SVP/Credit Administrator (2009 – 2012), Credit Card Administrator (2008 – 2009), SVP/Regional Sales Manager (2005 – 2009), VP/Branch Manager (2000 – 2005) and Business Development Officer (1995 – 2000).

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In 2005, she earned a graduate certificate from the Pacific Coast Banking School at University of Washington, Seattle.

David Funkhouser:

Funkhouser, age 65, has been serving the Bank in the capacity of Executive Vice President and Chief Credit Officer since June 2015.

He has over 30 years of experience in banking.

Funkhouser is responsible for the overall management of the Bank’s credit quality including oversight of the Credit Administration Department, the underwriting and loan review analysis processes, all functions that provide lending support, direction, credit information, and loan policies, procedures and processes to ensure the overall quality of the Bank’s loan portfolio.

Prior to joining the Bank, Mr.

Funkhouser was a banking consultant (DJF Consulting LLC) from April 2014 – June 2015 and served as President and CEO at Trans Pacific National Bank from July 2010 – March 2014.

Funkhouser holds a B.A.

degree from California State University, San Jose and earned a graduate certificate from the Pacific Coast Banking School at University of Washington, Seattle.

Pak, age 51, has been in the banking industry for over 30 years and has served the Bank as its Executive Vice President and Chief Lending Officer since January 2019.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business