What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-11-10 compared with 2022-08-15 · 194 added, 135 removed, 729 unchanged (31% of the section changed)

9 unchanged sentences

(In thousands, except for share data)

September 30,

Cash and due from banks

Federal funds sold

Federal funds sold and interest bearing balances in banks

Cash and cash equivalents

Interest bearing deposits in banks

Time deposits in banks

Investment securities available-for-sale

2 unchanged sentences

Loans held for sale

Loans, net of allowance for loan losses of $ 17,800 at June 30, 2022 and $ 17,700 December 31, 2021

Loans, net of allowance for loan losses of $ 18,050 at September 30, 2022 and $ 17,700 December 31, 2021

Premises and equipment, net

16 unchanged sentences

10,000,000 shares authorized;

no shares issued and outstanding at both June 30, 2022 and December 31, 2021

no shares issued and outstanding at both September 30, 2022 and December 31, 2021

Common stock, no par value;

100,000,000 shares authorized;

13,471,363 and 10,680,386 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively

13,075,447 and 10,680,386 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively

Additional paid in capital

7 unchanged sentences

Three months ended

Six months ended

Nine months ended

September 30,

Interest income:

Loans, including fees

Investment securities and interest bearing deposits in banks

Investment securities

Fed funds sold and interest bearing balances in banks

FHLB dividends

12 unchanged sentences

Loan servicing and other loan fees

Gain on sale of premises

Income on investment in Small Business Investment Company (“SBIC”) fund

(Loss) income on investment in Small Business Investment Company (“SBIC”) fund

Bargain purchase gain

18 unchanged sentences

Three months ended

Six months ended

Nine months ended

September 30,

Other comprehensive income (loss):

Change in unrealized (loss) gain on available-for-sale securities

Deferred tax benefit (expense)

Other comprehensive (loss) income, net of tax

Change in unrealized loss on available-for-sale securities

Deferred tax benefit

Other comprehensive loss, net of tax

Total comprehensive income

15 unchanged sentences

Balance, June 30, 2021

Other comprehensive loss, net

Restricted stock granted

Restricted stock forfeited

Stock based compensation

Repurchase of shares

Balance, September 30, 2021

Balance, December 31, 2021

13 unchanged sentences

Balance, June 30, 2022

Other comprehensive loss, net

Restricted stock granted

Cash dividends of $ 0.05 per share

Stock based compensation

Repurchase of shares

Balance, September 30, 2022

BAYCOM CORP AND SUBSIDIARY

1 unchanged sentence

(In thousands)

Six months ended

Nine months ended

September 30,

Cash flows from operating activities:

1 unchanged sentence

Provision for (reversal of) loan losses

Increase (decrease) in deferred tax assets

Decrease in deferred tax assets

Accretion on acquired loans

Gain on sale of loans

Gain on sale of securities

Proceeds from sale of loans

Loans originated for sale

Gain on sale of premises, net

Loss on sale of premises, net

Gain on sale of OREO

9 unchanged sentences

Increase in salary continuation plan, net

(Decrease) increase in interest payable and other liabilities

Decrease in interest payable and other liabilities

Net cash provided by operating activities

Cash flows from investing activities:

Proceeds from maturities of interest bearing deposits in banks

Proceeds from maturities of time deposits in banks

Purchase of investment securities

3 unchanged sentences

Purchase of Federal Reserve Bank stock

Decrease in loans, net

Increase in loans, net

Proceeds from sale of premises

2 unchanged sentences

Net cash received for acquisitions

Net cash provided by investing activities

Net cash provided by (used in) investing activities

BAYCOM CORP AND SUBSIDIARY

1 unchanged sentence

(In thousands)

Six months ended

Nine months ended

September 30,

Cash flows from financing activities:

(Decrease) increase in noninterest and interest bearing deposits in banks, net

(Decrease) increase in noninterest and interest bearing deposits

Decrease in time deposits, net

1 unchanged sentence

Repurchase of common stock

Cash dividends declared on common stock

Net cash (used in) provided by financing activities

8 unchanged sentences

Change in unrealized (loss) gain on available-for-sale securities, net of tax

Transfer of loans to other real estate owned

Recognition of ROU assets

20 unchanged sentences

On April 5, 2012, the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”) was signed into law.

The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies.

As an “emerging growth company” we may delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies.

The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for public companies that qualify as an “emerging growth company”, or EGC.

The Company qualifies as an EGC and will remain an EGC until December 31, 2023, the last day of the Company’s fiscal year following the fifth anniversary of the completion of the Company’s initial public offering, or sooner under certain circumstances none of which currently apply.

As an EGC, we may delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies.

We intend to take advantage of the benefits of this extended transition period.

8 unchanged sentences

ASU 2016-13 significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income.

In issuing the standard, the FASB is responding to criticism that today’s guidance delays recognition of credit losses.

The standard will replace today’s “incurred loss” approach with an “expected loss” model.

3 unchanged sentences

The CECL model does not apply to available-for-sale (“AFS”) debt securities.

For AFS debt securities with unrealized losses, entities will measure credit losses in a manner similar to what they do today, except that the losses will be recognized as allowances rather than reductions in the amortized cost of the securities.

As a result, entities will recognize improvements to estimated credit losses immediately

For AFS debt securities with unrealized losses, entities will measure credit losses in a manner

BAYCOM CORP AND SUBSIDIARY

1 unchanged sentence

(Tables in thousands, except for share and per share data)

in earnings rather than as interest income over time, as they do today.

similar to what they do today, except that the losses will be recognized as allowances rather than reductions in the amortized cost of the securities.

As a result, entities will recognize improvements to estimated credit losses immediately in earnings rather than as interest income over time, as they do today.

The ASU also simplifies the accounting model for purchased credit-impaired (“PCI”) debt securities and loans.

3 unchanged sentences

ASU 2019-04, “Codification Improvements to Topic 326, Financial Instruments — Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments,” affects a variety of topics in the Codification and applies to all reporting entities within the scope of the affected accounting guidance.

ASU 2019-05 allows entities to irrevocably elect, upon adoption of ASU 2016-13, the fair value option on financial instruments that (1) were previously recorded at amortized cost and (2) are within the scope of ASC 326-20 if the instruments are eligible for the fair value option under ASC 825-10.

The fair value option election does not apply to held-to-maturity debt securities.

Entities are required to make this election on an instrument-by-instrument basis.

The amendments in these ASUs are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022, with early adoption permitted for smaller reporting companies, such as the Company.

Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (i.e., modified retrospective approach).

The Company is reviewing the requirements of these ASUs and expects to begin developing and implementing processes and procedures to ensure it is fully compliant with the amendments at the adoption date.

Upon adoption , the Company expects changes in the processes and procedures used to calculate the allowance for loan losses, including changes in assumptions and estimates to consider expected credit losses over the life of the loan versus the current accounting practice that utilizes the incurred loss model.

The new guidance may result in an increase in the allowance for loan losses which will also reflect the new requirement to include the nonaccretable principal differences on purchased credit-impaired loans;

however, the Company is still in the process of determining the magnitude of the change and its impact on the Company's consolidated financial statements.

We plan to adopt this new standard on January 1, 2023.

The Company has established a multidisciplinary project team and implementation plan, evaluated various loss methodologies to determine their correlation to our various loan categories historical performance, captured and validated data, and engaged an outside third-party CECL vendor to develop loan loss driver models.

Based on these activities, we determined that our primary credit loss methodology will utilize a discounted cash flow approach that considers the probability of default and loss given default.

Ongoing CECL implementation activities include, among other things, refining segmentation of the loan portfolio, refining forecast methodologies and sourcing tools to forecast future economic conditions, running multiple loan loss driver analyses that correlate our credit loss experience with one or more economic factors, and evaluating the qualitative factor framework and assumptions.

In addition, the Company also continues to focus on researching and resolving interpretive accounting issues in the ASU, contemplating various related accounting policies, developing processes and related controls and considering various reporting disclosures.

The magnitude of the change in the Company’s allowance for credit losses at the adoption date will depend upon the nature and characteristics of the portfolio at the adoption date, as well as macroeconomic conditions and forecasts at that time, and other management judgements .

We are not yet able to disclose the quantitative effect on our consolidated financial position and results of operations as we are continuing to evaluate the impact of the adoption of this ASU.

In March 2020, the FASB issued ASU No.

2 unchanged sentences

This ASU applies to contracts, hedging relationships and other transactions that reference LIBOR or other rate references expected to be discontinued because of reference rate reform.

The ASU permits an entity to make necessary modifications to eligible contracts or transactions without requiring contract remeasurement or reassessment of a previous accounting determination.

The ASU permits an entity to make necessary modifications to eligible contracts (e.g., loans, debt securities, derivatives, borrowings) or transactions without requiring contract remeasurement or reassessment of a previous accounting determination.

In January 2021, ASU 2021-01 updated amendments in the new ASU to clarify that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform.

6 unchanged sentences

The ASU eliminates the accounting guidance for loans modified as troubled debt restructurings (“TDR loans”) by creditors while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty.

Additionally, the ASU requires disclosure of current-period gross write-offs by year of origination for financing receivables and net investments in leases.

This ASU will be effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, upon the Corporation’s adoption of the amendments in ASU 2016-13, which is referred to as the current expected credit loss model.

Additionally, the ASU requires disclosure

BAYCOM CORP AND SUBSIDIARY

1 unchanged sentence

(Tables in thousands, except for share and per share data)

of current-period gross write-offs by year of origination for financing receivables and net investments in leases.

NOTE 3 – ACQUISITIONS

4 unchanged sentences

Pursuant to the merger agreement, at the effective time of the PEB Merger, BayCom paid aggregate consideration to PEB shareholders of approximately $ 64.1 million consisting of 3,032,579 shares of BayCom common stock and $ 275,000 in cash.

Noninterest income for the current quarter included $ 1.6 million in bargain purchase gain, offset by $ 3.1 million of nonrecurring acquisition-related expenses included in noninterest expense related to the Company’s acquisition of PEB.

Noninterest income for the nine months ended September 30, 2022 included $ 1.6 million in bargain purchase gain, and included in noninterest expense was $ 3.1 million of nonrecurring acquisition-related expenses related to the Company’s acquisition of PEB.

The following table summarizes the fair value of the assets acquired and liabilities assumed at the acquisition date:

38 unchanged sentences

Pro Forma Results of Operations

The operating results of the Company for the three and six months ended June 30, 2022 in the condensed consolidated statements of income include the operating results of PEB, since its acquisition date.

The operating results of the Company for the three and nine months ended September 30, 2022 in the condensed consolidated statements of income include the operating results of PEB, since its acquisition date.

The following table represents the net interest income, net income, basic and diluted earnings per share, as if the PEB Merger was effective January 1, 2021.

2 unchanged sentences

Unaudited pro forma net interest income, net income and earnings per share are presented below:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Net interest income

8 unchanged sentences

(Tables in thousands, except for share and per share data)

income for the three and six months ended June 30, 2021.

The Company recognized third-party acquisition expenses for the three and six months ended June 30, 2022, as follows:

Three months ended

Six months ended

income for the three and nine months ended September 30, 2021.

The Company recognized third-party acquisition expenses for the three and nine months ended September 30, 2022, as follows:

Three month ended

Nine months ended

Severance expense

5 unchanged sentences

The amortized cost, gross unrealized gains and losses, and estimated fair values of securities available-for-sale at the dates indicated are summarized as follows:

June 30, 2022

September 30, 2022

Government Agencies

13 unchanged sentences

Corporate bonds

During the three and six months ended June 30, 2022, the Company sold no ne and one available-for-sale securities for minimal realized gains, respectively, and did not sell any securities available-for-sale during the three and six months ended June 30, 2021.

During the three and nine months ended September 30, 2022, the Company sold no ne and one available-for-sale securities for minimal realized gains, respectively, and the Company sold six securities available-for-sale for net realized gains of $ 22,000 during the three and nine months ended September 30, 2021.

BAYCOM CORP AND SUBSIDIARY

4 unchanged sentences

12 months or more

June 30, 2022

September 30, 2022

Preferred Equity Securities

12 unchanged sentences

Corporate bonds

At June 30, 2022, the Company held 347 investment securities, of which 19 were in an unrealized loss position for more than twelve months and 237 were in an unrealized loss position for less than twelve months.

At September 30, 2022, the Company held 348 investment securities, of which 38 were in an unrealized loss position for more than twelve months and 256 were in an unrealized loss position for less than twelve months.

These temporary unrealized losses relate principally to current interest rates for similar types of securities.

2 unchanged sentences

Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

June 30, 2022

September 30, 2022

December 31, 2021

9 unchanged sentences

The Company’s loan portfolio at the dates indicated is summarized below:

September 30,

Commercial and industrial (1)

3 unchanged sentences

Allowance for loan losses

(1) During the second quarter of 2022, the Bank continued its participation in the U.S.

(1) During the third quarter of 2022, the Bank continued its participation in the U.S.

Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”), by processing applications for PPP loan forgiveness.

Includes $ 68.8 million and $ 69.6 million of PPP loans as of June 30, 2022 and December 31, 2021, respectively.

Total loans include $ 35.4 million and $ 69.6 million of PPP loans as of September 30, 2022 and December 31, 2021, respectively.

BAYCOM CORP AND SUBSIDIARY

3 unchanged sentences

and industrial

June 30, 2022

September 30, 2022

Recorded investment in impaired loans:

9 unchanged sentences

Specific allowance on impaired loans

Three months ended June 30, 2022

Three months ended September 30, 2022

Average recorded investment in impaired loans

Interest recognized

Six months ended June 30, 2022

Nine months ended September 30, 2022

Average recorded investment in impaired loans

Interest recognized

Three months ended June 30, 2021

Three months ended September 30, 2021

Average recorded investment in impaired loans

Interest recognized

Six months ended June 30, 2021

Nine months ended September 30, 2021

Average recorded investment in impaired loans

6 unchanged sentences

These loans are returned to accrual status after the borrower demonstrates performance with the modified terms for a sustained period of time (generally six months) and has the capacity to continue to perform in accordance with the modified terms of the restructured debt.

For the three and six months ended June 30, 2022, the Company recorded a $ 2.4 million charge-off related to one TDR loan and no charge-offs related to TDR loans, respectively.

For the three and six months ended June 30, 2021, the Company recorded no charge-offs related to TDR loans.

During the three and six months ended June 30, 2022 and 2021, there were no TDR loans for which there was a payment default within the first 12 months of the modification.

As of June 30, 2022 and December 31, 2021, TDR loans had a related allowance of $ 279,000 and $ 259,000 , respectively.

For the three and nine months ended September 30, 2022, the Company recorded TDR loan charge-offs of $ 750,000 and $ 3.2 million, respectively, related to a participation interest in a national shared credit.

For additional information see “Comparison of Results of Operations for the Three and Nine Months Ended September 30, 2022 and 2021-Provision for Loan Losses” included in “Item 2.

Management’s Discussion and Analysis of Financial Condition” of Part I this report.

For the three and nine months ended September 30, 2021, the Company recorded no charge-offs

BAYCOM CORP AND SUBSIDIARY

1 unchanged sentence

(Tables in thousands, except for share and per share data)

As of June 30, 2022 and December 31, 2021, $ 746,000 and $ 765,000 , respectively, of TDR loans were performing in accordance with their modified terms.

related to TDR loans.

During the three and nine months ended September 30, 2022 and 2021, there were no TDR loans for which there was a payment default within the first 12 months of the modification.

As of September 30, 2022 and December 31, 2021, TDR loans had a related allowance of $ 282,000 and $ 259,000 , respectively.

As of September 30, 2022 and December 31, 2021, $ 759,000 and $ 765,000 , respectively, of TDR loans were performing in accordance with their modified terms.

All TDR loans are also included in the loans individually evaluated for impairment as part of the calculation of the allowance for loan losses.

There were no commitments to lend additional amounts to borrowers with outstanding loans that are classified as TDR loans at June 30, 2022.

There were no commitments to lend additional amounts to borrowers with outstanding loans that are classified as TDR loans at September 30, 2022.

A summary of TDR loans by type of concession and type of loan, as of the periods indicated:

June 30, 2022

September 30, 2022

Commercial and industrial

1 unchanged sentence

Commercial real estate

June 30, 2021

September 30, 2021

Commercial and industrial

1 unchanged sentence

Commercial real estate

There was no loans and one loan modified as a TDR during the three and six months ended June 30, 2022, respectively.

There were no loans and one loan modified as TDRs during the three and six months ended June 30, 2021, respectively.

There were three loans and four loans modified as a TDR during the three and nine months ended September 30, 2022, respectively.

There were no loans and one loan modified as TDRs during the three and nine months ended September 30, 2021, respectively.

Risk Rating System

37 unchanged sentences

The following tables present the internally assigned risk grade by class of loans at the dates indicated:

June 30, 2022

September 30, 2022

Commercial and industrial

9 unchanged sentences

The following tables provide an aging of the Company’s loans receivable as of the dates indicated:

June 30, 2022

September 30, 2022

Commercial and industrial

5 unchanged sentences

Commercial real estate

The balance of nonaccrual loans guaranteed by a government agency, which reduces the Company’s credit exposure, was $ 780,000 at June 30, 2022 compared to $ 822,000 at December 31, 2021.

At June 30, 2022, nonaccrual loans included $ 2.6 million of loans 30-89 days past due and $2.3 million of loans less than 30 days past due.

The balance of nonaccrual loans guaranteed by a government agency, which reduces the Company’s credit exposure, was $ 862,000 at September 30, 2022 compared to $ 822,000 at December 31, 2021.

At September 30, 2022, nonaccrual loans included $ 19,000 of loans 30-89 days past due and $ 7.0 million of loans less than 30 days past due.

At December 31, 2021, nonaccrual loans included $ 113,000 of loans 30-89 days past due and $ 2.5 million of loans less than 30 days past due.

At June 30, 2022, nonaccrual loans 30-89 days past due of $ 2.6 million primarily was comprised of one $ 2.5 million commercial and industrial loan restructured as a TDR during the six months ended June 30, 2022, and the $ 2.3 million of loans less than 30 days past due are comprised of 13 loans.

At September 30, 2022, nonaccrual loans 30-89 days past due of $ 19,000 was comprised of one loan and the $ 7.0 million of loans less than 30 days past due was comprised of 20 loans.

All of these loans were placed on nonaccrual due to concerns over the financial condition of the borrowers.

There was one loan totaling $ 255,000 that was 90 days or more past due and still accruing interest at June 30, 2022, compared to no loans at December 31, 2021.

Interest foregone on nonaccrual loans was approximately $ 72,700 and $ 157,000 for the three and six months ended June 30, 2022 compared to $ 69,000 and $ 157,300 for the three and six months ended June 30, 2021, respectively.

There were 21 loans totaling $ 3.3 million in accruing SBA guaranteed PPP loans which matured, are 90 days or more past due, and are in the process of forgiveness at September 30, 2022.

There were no other loans that were 90 days or more past due and still accruing at December 31, 2021.

Interest foregone on nonaccrual loans was approximately $ 230,000 and $ 388,000 for the three and nine months ended September 30, 2022 compared to $ 61,000 and $ 157,500 for the three and nine months ended September 30, 2021, respectively.

Purchased Credit Impaired Loans

11 unchanged sentences

The unpaid principal balance and carrying value of the Company’s PCI loans at the dates indicated are as follows:

June 30, 2022

September 30, 2022

December 31, 2021

4 unchanged sentences

Three months ended

Six months ended

Nine months ended

September 30,

Balance at beginning of period

4 unchanged sentences

NOTE 6 – ALLOWANCE FOR LOAN LOSSES

The following tables summarize the Company’s allowance for loan losses and loan balances individually and collectively evaluated for impairment by type of loan as of or for the three and six months ended June 30, 2022 and 2021:

and industrial

Three months ended June 30, 2022

Three months ended September 30, 2022

Allowance for loan losses

2 unchanged sentences

Ending balance

Six months ended June 30, 2022

Nine months ended September 30, 2022

Allowance for loan losses

2 unchanged sentences

Ending balance

June 30, 2022

September 30, 2022

Allowance for loan losses by methodology:

8 unchanged sentences

and industrial

Three months ended June 30, 2021

Three months ended September 30, 2021

Allowance for loan losses

2 unchanged sentences

Ending balance

Six months ended June 30, 2021

Nine months ended September 30, 2021

Allowance for loan losses

2 unchanged sentences

Ending balance

June 30, 2021

September 30, 2021

Allowance for loan losses by methodology:

4 unchanged sentences

Collectively evaluated for impairment

As part of the acquisition of PEB, the Company acquired certain small business loans to borrowers qualified under The California Capital Access Program for Small Business, a state guaranteed loan program sponsored by the California Pollution Control Financing Authority (“CalCAP”).

PEB ceased originating loans under this loan program in 2017.

Under this loan program, the borrower, CalCAP and the Company contributed funds to a loss reserve account that is held in a demand deposit account at the Bank.

The borrower contributions to the loss reserve account are attributed to the Company.

Losses on qualified loans are charged to this account after approval by CalCAP.

Under the program, if a loan defaults, the Company has immediate coverage of 100 % of the loss.

The Company must return recoveries from the borrower, less expenses, to the loan loss reserve account.

The funds in the loss reserve account are the property of CalCAP, however, in the event that the Company leaves the program any excess funds, after all loans have been repaid or unenrolled from the program by the Company and provided there are no pending claims for reimbursement, are distributed to CalCAP and the Company based on their respective contributions to the loss reserve account.

Funds contributed by the Company to the loss reserve account are treated as a receivable from CalCAP and evaluated for impairment quarterly.

As of September 30, 2022, the Company had $ 30.0 million of loans enrolled in this loan program.

The Company had a loss reserve account of $ 13.7 million as of September 30, 2022.

In addition, as successor to PEB, the Company was approved by the CalCAP, in partnership with the California Air Resources Board, to originate loans to California truckers in the On-Road Heavy-Duty Vehicle Air Quality Loan Program.

Under this loan program, CalCAP solely contributes funds to a loss reserve account that is held in a demand deposit account at the Bank.

Losses are handled in the same manner as described above.

The funds are the property of CalCAP and are payable upon termination of the program.

When the loss reserve account balance exceeds the total associated loan balance, the excess is to be remitted to CalCAP.

The Company has originated $ 4.4 million of loans under this program during the nine months ended September 30, 2022.

As of September 30, 2022, the Company had $ 29.3

BAYCOM CORP AND SUBSIDIARY

NOTES TO CONDENSED FINANCIAL STATEMENTS – (continued)

(Tables in thousands, except for share and per share data)

million of loans enrolled in this program.

The Company had a loss reserve account of $ 6.1 million as of September 30, 2022.

NOTE 7 – PREMISES AND EQUIPMENT

Premises and equipment consisted of the following at the dates indicated:

September 30,

Premises owned

3 unchanged sentences

Total premises and equipment, net

Depreciation and amortization included in occupancy and equipment expense totaled $ 503,000 and $ 1.0 million for the three and six months ended June 30, 2022 and $ 502,000 and $ 1.0 million for the three and six months ended June 30, 2021, respectively.

Depreciation and amortization included in occupancy and equipment expense totaled $ 489,000 and $ 1.5 million for the three and nine months ended September 30, 2022 and $ 519,000 and $ 1.5 million for the three and nine months ended September 30, 2021, respectively.

NOTE 8 – LEASES

1 unchanged sentence

These leases expire on various dates through 2030.

The Company’s leases often have an option to renew one or more times, at the Company’s discretion,

BAYCOM CORP AND SUBSIDIARY

NOTES TO CONDENSED FINANCIAL STATEMENTS – (continued)

(Tables in thousands, except for share and per share data)

following the expiration of the initial term.

The Company’s leases often have an option to renew one or more times, at the Company’s discretion, following the expiration of the initial term.

If at lease inception, the Company considers the exercising of a renewal option to be reasonably certain, the Company will include the extended term in the calculation of the ROU asset and lease liability.

1 unchanged sentence

As this rate is rarely determinable, the Company utilizes its incremental borrowing rate at lease inception, on a collateralized basis, over a similar term.

The below maturity schedule represents the undiscounted lease payments for the five-year period and thereafter as of June 30, 2022:

The below maturity schedule represents the undiscounted lease payments for the five-year period and thereafter as of September 30, 2022:

For remainder of 2022

2 unchanged sentences

The following table presents the weighted average lease term and discount rate at the date indicated:

June 30, 2022

September 30, 2022

Weighted-average remaining lease term

Weighted-average discount rate

Rental expense included in occupancy and equipment expense totaled $ 893,000 and $ 2.2 million for the three and six months ended June 30, 2022 and $ 834,000 and $ 1.6 million for three and six months ended June 30, 2021, respectively.

BAYCOM CORP AND SUBSIDIARY

NOTES TO CONDENSED FINANCIAL STATEMENTS – (continued)

(Tables in thousands, except for share and per share data)

Rental expense included in occupancy and equipment expense totaled $ 934,000 and $ 3.2 million for the three and nine months ended September 30, 2022 and $ 906,000 and $ 2.6 million for the three and nine months ended September 30, 2021, respectively.

NOTE 9 – GOODWILL AND INTANGIBLE ASSETS

5 unchanged sentences

Impairment exists when a reporting unit’s fair value is less than its carrying amount, including goodwill.

BAYCOM CORP AND SUBSIDIARY

NOTES TO CONDENSED FINANCIAL STATEMENTS – (continued)

(Tables in thousands, except for share and per share data)

Changes in the Company's goodwill at June 30, 2022 and December 31, 2021 are as follows:

Changes in the Company's goodwill at September 30, 2022 and December 31, 2021 are as follows:

September 30,

Balance at beginning of period

2 unchanged sentences

Core Deposit Intangible

Changes in the Company’s core deposit intangible at June 30, 2022 and December 31, 2021 were as follows:

Changes in the Company’s core deposit intangible at September 30, 2022 and December 31, 2021 were as follows:

September 30,

Balance at beginning of period

1 unchanged sentence

Balance at end of period

Estimated annual amortization expense at June 30, 2022 is as follows:

BAYCOM CORP AND SUBSIDIARY

NOTES TO CONDENSED FINANCIAL STATEMENTS – (continued)

(Tables in thousands, except for share and per share data)

Estimated annual amortization expense at September 30, 2022 is as follows:

For remainder of 2022

1 unchanged sentence

The Company’s interest receivable and other assets at the dates indicated consisted of the following:

September 30,

Tax assets, net

6 unchanged sentences

Investment in statutory trusts

BAYCOM CORP AND SUBSIDIARY

NOTES TO CONDENSED FINANCIAL STATEMENTS – (continued)

(Tables in thousands, except for share and per share data)

At June 30, 2022, the Company had remaining commitments to the LIHTC partnerships and the SBIC fund of $ 3.1 million and $ 122,000 , respectively.

At June 30, 2021, the Company had remaining commitments to the LIHTC partnerships and the SBIC fund of $ 2.4 million and $ 122,000 , respectively.

NOTE 11 – DEPOSITS

The Company’s deposits consisted of the following at the dates indicated:

September 30,

Demand deposits

3 unchanged sentences

Other borrowings – The Bank has an approved secured borrowing facility with the Federal Home Loan Bank of San Francisco (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 both June 30, 2022 and December 31, 2021, the Company had no FHLB advances outstanding.

At both September 30, 2022 and December 31, 2021, the Company had no FHLB advances outstanding.

BAYCOM CORP AND SUBSIDIARY

NOTES TO CONDENSED FINANCIAL STATEMENTS – (continued)

(Tables in thousands, except for share and per share data)

The Company has Federal Funds lines with four corresponding banks.

Cumulative available commitments totaled $ 65.0 million at both June 30, 2022 and December 31, 2021.

There were no amounts outstanding under these facilities at either June 30, 2022 or December 31, 2021.

Junior subordinated deferrable interest debentures – In connection with its previous acquisitions, the Company acquired junior subordinated deferrable interest debentures, totaling $ 8.4 million net of mark-to-market adjustments June 30, 2022 with a weighted average interest rate of 4.48 % , compared to $ 8.4 million with a weighted average rate of 2.79 % at December 31, 2021 .

Cumulative available commitments totaled $ 65.0 million at both September 30, 2022 and December 31, 2021.

There were no amounts outstanding under these facilities at September 30, 2022 or December 31, 2021.

Junior subordinated deferrable interest debentures – In connection with its previous acquisitions, the Company acquired junior subordinated deferrable interest debentures, totaling $ 8.5 million net of mark-to-market adjustments September 30, 2022 with a weighted average interest rate of 5.95 % , compared to $ 8.4 million with a weighted average rate of 2.79 % at December 31, 2021 .

The junior subordinated deferrable interest debentures have a stated maturity term of 30 years .

5 unchanged sentences

The Company, at its option, may redeem the Notes, in whole or in part, on any interest payment date on or after September 15, 2025, without a premium.

At June 30, 2022 and December 31, 2021, the Company had outstanding Notes, net of cost to issue, totaling $ 63.6 million and $ 63.5 million, respectively.

BAYCOM CORP AND SUBSIDIARY

NOTES TO CONDENSED FINANCIAL STATEMENTS – (continued)

(Tables in thousands, except for share and per share data)

At September 30, 2022 and December 31, 2021, the Company had outstanding Notes, net of cost to issue, totaling $ 63.7 million and $ 63.5 million, respectively.

NOTE 13 – INTEREST PAYABLE AND OTHER LIABILITIES

The Company’s interest payable and other liabilities at the dates indicated consisted of the following:

September 30,

Accrued expenses

3 unchanged sentences

Other liabilities

BAYCOM CORP AND SUBSIDIARY

NOTES TO CONDENSED FINANCIAL STATEMENTS – (continued)

(Tables in thousands, except for share and per share data)

NOTE 14 – OTHER EXPENSES

1 unchanged sentence

Three months ended

Six months ended

Nine months ended

September 30,

Professional fees

9 unchanged sentences

The Company expenses marketing and promotions costs as they are incurred.

Advertising expense included in marketing and promotions totaled $ 21,000 and $ 42,000 for the three and six months ended June 30, 2022 and $ 26,000 and $ 42,000 for the three and six months ended June 30, 2021, respectively.

Advertising expense included in marketing and promotions totaled $ 12,000 and $ 54,000 for the three and nine months ended September 30, 2022 and $ 13,000 and $ 55,000 for the three and nine months ended September 30, 2021, respectively.

NOTE 15 – EQUITY INCENTIVE PLANS

4 unchanged sentences

An equity incentive award may be an option, stock appreciation rights, restricted stock units, stock award, other stock-based award or performance award granted under the 2017 Plan.

Factors considered by the Board in awarding equity incentives to officers and employees include the performance of the Company, the employee’s or officer’s job performance, the importance of his or her position, and his or her contribution to the organization’s goals for the award

BAYCOM CORP AND SUBSIDIARY

NOTES TO CONDENSED FINANCIAL STATEMENTS – (continued)

(Tables in thousands, except for share and per share data)

Generally, awards are restricted and have a vesting period of no longer than ten years.

4 unchanged sentences

Awarded shares of restricted stock vest over (i) a one-year period following the date of grant, in the case of the non-employee directors, and (ii) a three-year or five-year period following the date of grant, with the initial vesting occurring on the one-year anniversary of the date of grant, in the case of the executive officers.

As of June 30, 2022, a total of 96,703 shares were available for future issuance under the 2017 Plan.

As of September 30, 2022, a total of 86,085 shares were available for future issuance under the 2017 Plan.

BAYCOM CORP AND SUBSIDIARY

NOTES TO CONDENSED FINANCIAL STATEMENTS – (continued)

(Tables in thousands, except for share and per share data)

2014 Omnibus Equity Incentive Plan

4 unchanged sentences

The Company recognizes compensation expense for the restricted stock awards based on the fair value of the shares at the award date.

Total compensation expense for these plans was $ 233,000 and $ 557,000 for the three and six months ended June 30, 2022 and $ 351,000 and $ 764,000 for the three and six months ended June 30, 2021, respectively.

As of June 30, 2022, there was $ 1.2 million of total unrecognized compensation cost related to non-vested shares granted as restricted stock awards.

Total compensation expense for these plans was $ 232,000 and $ 797,000 for the three and nine months ended September 30, 2022 and $ 325,000 and $ 1.1 million for the three and nine months ended September 30, 2021, respectively.

As of September 30, 2022, there was $ 1.2 million of total unrecognized compensation cost related to non-vested shares granted as restricted stock awards.

The cost is expected to be recognized over the remaining weighted-average vesting period of approximately three years .

5 unchanged sentences

Non-Vested, at June 30,

Non-Vested, at September 30,

NOTE 16 – FAIR VALUE MEASUREMENT

3 unchanged sentences

Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the reporting entity has the ability to access at the measurement date.

BAYCOM CORP AND SUBSIDIARY

NOTES TO CONDENSED FINANCIAL STATEMENTS – (continued)

(Tables in thousands, except for share and per share data)

Level 2 – Observable prices in active markets for similar assets and liabilities;

2 unchanged sentences

market inputs that are not directly observable but are derived from or corroborated by observable market data.

BAYCOM CORP AND SUBSIDIARY

NOTES TO CONDENSED FINANCIAL STATEMENTS – (continued)

(Tables in thousands, except for share and per share data)

Level 3 – Unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability.

7 unchanged sentences

The following assets are measured at fair value on a recurring basis as of the dates indicated:

June 30, 2022

September 30, 2022

Government Agencies

17 unchanged sentences

(Tables in thousands, except for share and per share data)

June 30, 2022

September 30, 2022

Performing impaired loans

22 unchanged sentences

Fair value measurements

June 30, 2022

September 30, 2022

Financial assets:

Cash and cash equivalents

Interest bearing deposits in banks

Time deposits in banks

Investment securities available-for-sale

Investment in FHLB and FRB Stock

Loans held for sale

Accrued interest receivable

9 unchanged sentences

Cash and cash equivalents

Interest bearing deposits in banks

Time deposits in banks

Investment securities available-for-sale

21 unchanged sentences

The following table presents a summary of commitments described above as of the dates indicated:

September 30,

Commitments to extend credit

5 unchanged sentences

The Company’s outstanding loan commitments are made using the same underwriting standards as comparable outstanding loans.

The reserve associated with these commitments included in interest payable and other liabilities on the consolidated balance sheets was $ 315,000 at both June 30, 2022 and December 31, 2021.

The reserve associated with these commitments included in interest payable and other liabilities on the consolidated balance sheets was $ 315,000 at both September 30, 2022 and December 31, 2021.

Commercial Real Estate Concentrations

At June 30, 2022 and December 31, 2021, in management’s judgment, a concentration of loans existed in commercial real estate related loans.

At September 30, 2022 and December 31, 2021, in management’s judgment, a concentration of loans existed in commercial real estate related loans.

The Company’s commercial real estate loans are secured by owner-occupied and non-owner occupied commercial real estate and multifamily properties.

1 unchanged sentence

The Company has commitments to fund investments in LIHTC partnerships and an SBIC fund.

At June 30, 2022, the remaining commitments to the LIHTC partnerships and the SBIC fund were approximately $ 3.1 million and $ 122,000 , respectively.

At September 30, 2022, the remaining commitments to the LIHTC partnerships and the SBIC fund were approximately $ 3.1 million and $ 122,000 , respectively.

At December 31, 2021, the remaining commitments to the LIHTC partnerships and the SBIC fund were $ 2.3 million and $ 122,000 , respectively.

2 unchanged sentences

(Tables in thousands, except for share and per share data)

At June 30, 2022, approximately $ 247.1 million, or 11.2 %, of the Company's deposits were derived from its top ten depositors.

At September 30, 2022, approximately $ 190.8 million, or 9.17 %, of the Company's deposits were derived from its top ten depositors.

At December 31, 2021, approximately $ 198.6 million, or 10.0 %, of the Company's deposits were derived from its top ten depositors.

2 unchanged sentences

The Company is required to provide collateral for certain local agency deposits in the states of California, Colorado, New Mexico and Washington.

At both June 30, 2022 and December 31, 2021, the FHLB issued letters of credit on behalf of the Company totaling $ 42.0 million as collateral for local agency deposits.

At both September 30, 2022 and December 31, 2021, the FHLB issued letters of credit on behalf of the Company totaling $ 42.0 million as collateral for local agency deposits.

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-Q

Item 1. Financial Statements