BayCom Corp 10-Q

Item 1. Financial Statements ​ Condensed Consolidated Balance Sheets (unaudited) 3 Condensed Consolidated Statements of Income (unaudited) 4 Condensed Consolidated Statements of Comprehensive Income (unaudited) 5 Condensed Consolidated Statements of Changes in Shareholders’ Equity (unaudited) 6 Condensed Consolidated Statements of Cash Flows (unaudited) 7 Notes to Condensed Consolidated Financial Statements (unaudited) 9 ​ ​ ​ 2 Table of Contents ​ BAYCOM CORP AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except for share data) (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ December 31, ​ 2022 2021 ASSETS ​ ​ Cash and due from banks ​ $ 32,206 ​ $ 21,178 Federal funds sold and interest bearing balances in banks ​ 192,475 ​ 358,509 Cash and cash equivalents ​ ​ 224,681 ​ 379,687 Time deposits in banks ​ ​ 2,490 ​ 3,585 Investment securities available-for-sale ​ ​ 167,213 ​ 174,435 Federal Home Loan Bank ("FHLB") stock, at par ​ ​ 10,679 ​ 8,385 Federal Reserve Bank ("FRB") stock, at par ​ ​ 9,595 ​ 7,650 Loans held for sale ​ ​ 3,491 ​ 6,470 Loans, net of allowance for loan losses of $ 18,050 at September 30, 2022 and $ 17,700 December 31, 2021 ​ ​ 1,976,916 ​ 1,647,190 Premises and equipment, net ​ ​ 13,697 ​ 14,370 Other real estate owned ("OREO") ​ ​ 21 ​ 21 Core deposit intangible, net ​ ​ 5,718 ​ 6,489 Cash surrender value of bank owned life insurance ("BOLI") policies, net ​ ​ 22,043 ​ 21,590 Right-of-use assets ("ROU"), net ​ ​ 15,875 ​ ​ 12,127 Goodwill ​ ​ 38,838 ​ 38,838 Interest receivable and other assets ​ ​ 43,241 ​ 29,860 Total assets ​ $ 2,534,498 ​ $ 2,350,697 LIABILITIES AND SHAREHOLDERS’ EQUITY ​ ​ ​ ​ ​ Noninterest and interest bearing deposits ​ $ 2,115,451 ​ $ 1,985,239 Junior subordinated deferrable interest debentures, net ​ 8,464 ​ 8,403 Subordinated debt, net ​ ​ 63,669 ​ ​ 63,542 Salary continuation plan ​ 4,724 ​ 4,393 Lease liabilities ​ 16,411 ​ 12,657 Interest payable and other liabilities ​ 11,376 ​ 13,856 Total liabilities ​ 2,220,095 ​ 2,088,090 Commitments and contingencies (Note 18) ​ ​ Shareholders' equity ​ ​ Preferred stock, no par value; 10,000,000 shares authorized; no shares issued and outstanding at both September 30, 2022 and December 31, 2021 ​ — ​ — Common stock, no par value; 100,000,000 shares authorized; 13,075,447 and 10,680,386 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively ​ 208,483 ​ 157,098 Additional paid in capital ​ 287 ​ 287 Accumulated other comprehensive (loss) income, net of tax ​ ( 14,338 ) ​ 2,166 Retained earnings ​ 119,971 ​ 103,056 Total shareholders’ equity ​ 314,403 ​ 262,607 Total liabilities and shareholders’ equity ​ $ 2,534,498 ​ $ 2,350,697 ​ ​ ​ 3 Table of Contents ​ BAYCOM CORP AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except for share and per share data) (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended ​ Nine months ended ​ ​ ​ September 30, ​ September 30, ​ ​ 2022 2021 2022 2021 ​ Interest income: ​ ​ ​ ​ Loans, including fees ​ $ 24,010 ​ $ 18,451 ​ $ 69,921 ​ $ 56,348 ​ Investment securities ​ 1,555 ​ 1,077 ​ 4,483 ​ 2,714 ​ Fed funds sold and interest bearing balances in banks ​ ​ 1,286 ​ ​ 198 ​ ​ 2,303 ​ ​ 479 ​ FHLB dividends ​ 160 ​ 125 ​ 467 ​ 346 ​ FRB dividends ​ 126 ​ 112 ​ 387 ​ 341 ​ Total interest and dividend income ​ 27,137 ​ 19,963 ​ 77,561 ​ 60,228 ​ Interest expense: ​ ​ ​ ​ ​ Deposits ​ 1,387 ​ 1,240 ​ 4,310 ​ 3,674 ​ Subordinated debt ​ ​ 896 ​ ​ 896 ​ ​ 2,687 ​ ​ 2,686 ​ Other borrowings ​ 129 ​ 85 ​ 319 ​ 261 ​ Total interest expense ​ 2,412 ​ 2,221 ​ 7,316 ​ 6,621 ​ Net interest income ​ 24,725 ​ 17,742 ​ 70,245 ​ 53,607 ​ Provision for (reversal of) loan losses ​ 1,194 ​ 477 ​ 3,824 ​ ( 30 ) ​ Net interest income after provision for loan losses ​ 23,531 ​ 17,265 ​ 66,421 ​ 53,637 ​ Noninterest income: ​ ​ ​ ​ ​ Gain on sale of loans ​ 1,278 ​ 2,176 ​ 2,714 ​ 3,705 ​ Service charges and other fees ​ 817 ​ 611 ​ 2,165 ​ 1,819 ​ Loan servicing and other loan fees ​ 488 ​ 458 ​ 1,670 ​ 1,423 ​ (Loss) income on investment in Small Business Investment Company (“SBIC”) fund ​ ( 63 ) ​ 526 ​ 155 ​ 1,021 ​ Bargain purchase gain ​ ​ — ​ ​ — ​ ​ 1,665 ​ ​ — ​ Other income and fees ​ 224 ​ 236 ​ 796 ​ 731 ​ Total noninterest income ​ 2,744 ​ 4,007 ​ 9,165 ​ 8,699 ​ Noninterest expense: ​ ​ ​ ​ ​ Salaries and employee benefits ​ 10,164 ​ 8,163 ​ 29,751 ​ 25,158 ​ Occupancy and equipment ​ 2,043 ​ 1,945 ​ 6,388 ​ 5,610 ​ Data processing ​ 1,562 ​ 1,482 ​ 5,502 ​ 4,235 ​ Other expense ​ 2,327 ​ 2,290 ​ 7,986 ​ 6,371 ​ Total noninterest expense ​ 16,096 ​ 13,880 ​ 49,627 ​ 41,374 ​ Income before provision for income taxes ​ 10,179 ​ 7,392 ​ 25,959 ​ 20,962 ​ Provision for income taxes ​ 2,950 ​ 1,980 ​ 7,024 ​ 5,709 ​ Net income ​ $ 7,229 ​ $ 5,412 ​ $ 18,935 ​ $ 15,253 ​ Earnings per common share: ​ ​ ​ ​ ​ Basic earnings per common share ​ $ 0.54 ​ $ 0.51 ​ $ 1.44 ​ $ 1.39 ​ Weighted average shares outstanding ​ 13,307,555 ​ 10,692,781 ​ 13,179,263 ​ 10,949,286 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Diluted earnings per common share ​ $ 0.54 ​ $ 0.51 ​ $ 1.44 ​ $ 1.39 ​ Weighted average shares outstanding ​ 13,307,555 ​ 10,692,781 ​ 13,179,263 ​ 10,949,286 ​ ​ ​ ​ 4 Table of Contents ​ BAYCOM CORP AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands) (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended ​ Nine months ended ​ ​ ​ September 30, ​ September 30, ​ ​ 2022 2021 2022 2021 Net income ​ $ 7,229 ​ $ 5,412 ​ $ 18,935 ​ $ 15,253 ​ Other comprehensive income (loss): ​ ​ ​ ​ ​ ​ Change in unrealized loss on available-for-sale securities ​ ( 7,198 ) ​ ( 830 ) ​ ( 23,172 ) ​ ( 282 ) ​ Deferred tax benefit ​ 2,071 ​ 239 ​ 6,668 ​ 77 ​ Other comprehensive loss, net of tax ​ ( 5,127 ) ​ ( 591 ) ​ ( 16,504 ) ​ ( 205 ) ​ Total comprehensive income ​ $ 2,102 ​ $ 4,821 ​ $ 2,431 ​ $ 15,048 ​ ​ ​ ​ 5 Table of Contents ​ BAYCOM CORP AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (In thousands, except for share and per share data) (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ Common ​ Additional ​ Other ​ ​ ​ ​ Total ​ ​ Number of ​ Stock ​ Paid in ​ Comprehensive ​ Retained ​ Shareholders’ ​ ​ Shares ​ Amount ​ Capital ​ Income/(Loss) ​ Earnings ​ Equity Balance, December 31, 2020 ​ 11,295,397 ​ $ 167,242 ​ $ 287 ​ $ 2,697 ​ $ 82,365 ​ $ 252,591 Net income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 4,532 ​ ​ 4,532 Other comprehensive loss, net ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 785 ) ​ ​ ​ ​ ​ ( 785 ) Restricted stock granted ​ 24,187 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ — Stock based compensation ​ ​ ​ ​ 413 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 413 Repurchase of shares ​ ( 132,123 ) ​ ​ ( 2,201 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 2,201 ) Balance, March 31, 2021 ​ 11,187,461 ​ $ 165,454 ​ $ 287 ​ $ 1,912 ​ $ 86,897 ​ $ 254,550 Net income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 5,308 ​ ​ 5,308 Other comprehensive income, net ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1,171 ​ ​ ​ ​ ​ 1,171 Stock based compensation ​ ​ ​ ​ 351 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 351 Repurchase of shares ​ ( 488,020 ) ​ ​ ( 8,831 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 8,831 ) Balance, June 30, 2021 ​ 10,699,441 ​ $ 156,974 ​ $ 287 ​ $ 3,083 ​ $ 92,205 ​ $ 252,549 Net income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 5,412 ​ ​ 5,412 Other comprehensive loss, net ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 591 ) ​ ​ ​ ​ ​ ( 591 ) Restricted stock granted ​ 12,228 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ — Restricted stock forfeited ​ ( 2,692 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ — Stock based compensation ​ ​ ​ ​ 326 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 326 Repurchase of shares ​ ( 23,466 ) ​ ​ ( 426 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 426 ) Balance, September 30, 2021 ​ 10,685,511 ​ $ 156,874 ​ $ 287 ​ $ 2,492 ​ $ 97,617 ​ $ 257,270 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance, December 31, 2021 ​ 10,680,386 ​ ​ 157,098 ​ ​ 287 ​ ​ 2,166 ​ ​ 103,056 ​ ​ 262,607 Net income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 6,488 ​ ​ 6,488 Other comprehensive loss, net ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 6,952 ) ​ ​ ​ ​ ​ ( 6,952 ) Restricted stock granted ​ 22,473 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ — Restricted stock forfeited ​ ( 532 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ — Issuance of common shares to acquire Pacific Enterprise Bancorp ​ 3,032,579 ​ ​ 64,140 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 64,140 Cash dividends of $ 0.05 per share ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 685 ) ​ ​ ( 685 ) Stock based compensation ​ ​ ​ ​ 324 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 324 Repurchase of shares ​ ( 57,177 ) ​ ​ ( 1,268 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 1,268 ) Balance, March 31, 2022 13,677,729 ​ $ 220,294 ​ $ 287 ​ $ ( 4,786 ) ​ $ 108,859 ​ $ 324,654 Net income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 5,218 ​ ​ 5,218 Other comprehensive loss, net ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 4,425 ) ​ ​ ​ ​ ​ ( 4,425 ) Restricted stock forfeited ​ ( 1,322 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ — Cash dividends of $ 0.05 per share ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 677 ) ​ ​ ( 677 ) Stock based compensation ​ ​ ​ ​ 233 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 233 Repurchase of shares ​ ( 205,044 ) ​ ​ ( 4,448 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 4,448 ) Balance, June 30, 2022 13,471,363 ​ $ 216,079 ​ $ 287 ​ $ ( 9,211 ) ​ $ 113,400 ​ $ 320,555 Net income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 7,229 ​ ​ 7,229 Other comprehensive loss, net ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 5,127 ) ​ ​ ​ ​ ​ ( 5,127 ) Restricted stock granted 10,618 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ — Cash dividends of $ 0.05 per share ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 658 ) ​ ​ ( 658 ) Stock based compensation ​ ​ ​ ​ 232 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 232 Repurchase of shares ​ ( 406,534 ) ​ ​ ( 7,828 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 7,828 ) Balance, September 30, 2022 13,075,447 ​ $ 208,483 ​ $ 287 ​ $ ( 14,338 ) ​ $ 119,971 ​ $ 314,403 ​ ​ ​ 6 Table of Contents ​ BAYCOM CORP AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine months ended ​ ​ ​ ​ September 30, ​ ​ ​ 2022 2021 ​ Cash flows from operating activities: ​ ​ ​ Net income ​ $ 18,935 ​ $ 15,253 ​ ​ Adjustments to reconcile net income to net cash provided by operating activities: ​ ​ ​ ​ Provision for (reversal of) loan losses ​ 3,824 ​ ( 30 ) ​ ​ Decrease in deferred tax assets ​ ( 7 ) ​ ( 671 ) ​ ​ Accretion on acquired loans ​ ( 417 ) ​ ( 1,067 ) ​ ​ Gain on sale of loans ​ ( 2,714 ) ​ ( 3,705 ) ​ ​ Gain on sale of securities ​ ​ — ​ ​ 22 ​ ​ Proceeds from sale of loans ​ 41,833 ​ 36,025 ​ ​ Loans originated for sale ​ ( 35,948 ) ​ ( 43,612 ) ​ ​ Loss on sale of premises, net ​ ​ — ​ ​ ( 12 ) ​ ​ Gain on sale of OREO ​ — ​ ( 15 ) ​ ​ Bargain purchase gain ​ ( 1,665 ) ​ — ​ ​ Accretion on junior subordinated debentures ​ 61 ​ 61 ​ ​ Increase in cash surrender value of life insurance policies ​ ( 453 ) ​ ( 512 ) ​ ​ Amortization/accretion of premiums/discounts on investment securities, net ​ 452 ​ 442 ​ ​ Depreciation and amortization ​ 1,500 ​ 1,535 ​ ​ Core deposit intangible amortization ​ 1,527 ​ 1,359 ​ ​ Stock based compensation expense ​ 789 ​ 1,090 ​ ​ (Decrease) increase in deferred loan origination fees, net ​ ( 1,645 ) ​ 118 ​ ​ Increase in interest receivable and other assets ​ ( 90 ) ​ ( 223 ) ​ ​ Increase in salary continuation plan, net ​ 331 ​ 277 ​ ​ Decrease in interest payable and other liabilities ​ ( 2,557 ) ​ ( 944 ) ​ ​ Net cash provided by operating activities ​ 23,756 ​ 5,391 ​ ​ Cash flows from investing activities: ​ ​ ​ ​ Proceeds from maturities of time deposits in banks ​ 1,095 ​ 3,635 ​ ​ Purchase of investment securities ​ ( 25,679 ) ​ ( 49,749 ) ​ ​ Proceeds from the maturities, repayments and calls of investment securities ​ 9,217 ​ 20,966 ​ ​ Proceeds from the sales of investment securities ​ 63 ​ 1,306 ​ ​ Purchase of Federal Home Loan Bank stock ​ — ​ ( 648 ) ​ ​ Purchase of Federal Reserve Bank stock ​ ( 1,003 ) ​ ( 35 ) ​ ​ Increase in loans, net ​ 81,107 ​ 11,990 ​ ​ Proceeds from sale of premises ​ ​ — ​ ​ 46 ​ ​ Proceeds from sale of OREO ​ — ​ 423 ​ ​ Purchase of equipment and leasehold improvements, net ​ ( 606 ) ​ ( 1,092 ) ​ ​ Net cash received for acquisitions ​ 18,423 ​ — ​ ​ Net cash provided by (used in) investing activities ​ 82,617 ​ ( 13,158 ) ​ ​ ​ ​ 7 Table of Contents ​ BAYCOM CORP AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS – (continued) (In thousands) (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine months ended ​ ​ ​ September 30, ​ ​ 2022 2021 Cash flows from financing activities: ​ ​ (Decrease) increase in noninterest and interest bearing deposits ​ ( 19,205 ) ​ 506,667 Decrease in time deposits, net ​ ( 227,268 ) ​ ( 337,313 ) Repayment of Federal Home Loan Bank borrowings ​ — ​ ( 5,000 ) Repurchase of common stock ​ ( 13,544 ) ​ ( 11,458 ) Cash dividends declared on common stock ​ ​ ( 1,362 ) ​ ​ — ​ Net cash (used in) provided by financing activities ​ ( 261,379 ) ​ 152,896 (Decrease) increase in cash and cash equivalents ​ ( 155,006 ) ​ 145,129 Cash and cash equivalents at beginning of period ​ 379,687 ​ 299,329 Cash and cash equivalents at end of period ​ $ 224,681 ​ $ 444,458 ​ ​ ​ ​ ​ ​ ​ ​ ​ Supplemental disclosure of cash flow information: ​ ​ ​ Cash paid during the year for: ​ ​ ​ Interest expense ​ $ 8,295 ​ $ 7,704 ​ Income taxes paid, net ​ ​ 5,898 ​ 5,218 ​ Non-cash investing and financing activities: ​ ​ ​ Change in unrealized (loss) gain on available-for-sale securities, net of tax ​ $ ( 16,504 ) ​ $ ( 205 ) ​ Recognition of ROU assets ​ ​ 1,425 ​ ​ 832 ​ Recognition of lease liability ​ ​ 1,429 ​ ​ 833 ​ Cash dividends declared on common stock ​ ​ ( 2,020 ) ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ Acquisition: ​ ​ ​ Assets acquired, net of cash received ​ $ 440,785 ​ $ — ​ Liabilities assumed ​ 380,055 ​ — ​ Common stock issued ​ 64,140 ​ — ​ ​ ​ ​ 8 Table of Contents BAYCOM CORP AND SUBSIDIARY NOTES TO CONDENSED FINANCIAL STATEMENTS (Tables in thousands, except for share data and per share data) (unaudited) ​ NOTE 1 – BASIS OF PRESENTATION BayCom Corp (the “Company”) is a bank holding company headquartered in Walnut Creek, California. United Business Bank (the “Bank”), the Company’s wholly owned banking subsidiary, is a California state-chartered bank which provides a broad range of financial services primarily to local small and mid-sized businesses, service professionals and individuals. In the 18 years of operation, the Bank has grown to 34 full-service banking branches with 16 locations in California, two in Washington, five in Central New Mexico and 11 in Colorado. The condensed consolidated financial statements include the accounts of the Company and the Bank. All intercompany transactions and balances have been eliminated in consolidation. The condensed consolidated financial statements include all adjustments of a normal and recurring nature, which are, in the opinion of management, necessary for a fair presentation of the financial position and results of operations for the periods presented. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information and footnotes normally included in annual financial statements prepared in conformity with accounting principles generally accepted in the United States of America. Accordingly, these condensed consolidated financial statements should be read in conjunction with the consolidated audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. Results of operations for interim periods are not necessarily indicative of results for the full year. Certain prior year information has been reclassified to conform to the current year presentation. None of the reclassifications impacted consolidated net income, earnings per share or shareholders’ equity. 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 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. Accordingly, our condensed consolidated financial statements may not be comparable to companies that comply with such new or revised accounting standards. On February 1, 2022 , the Company completed its acquisition of Pacific Enterprise Bancorp (“PEB”) and its wholly owned subsidiary of Pacific Enterprise Bank, headquartered in Irvine, California (“PEB Merger”). See “Note 3 – Acquisitions” for additional information on the PEB Merger. NOTE 2 - ACCOUNTING GUIDANCE NOT YET EFFECTIVE AND ADOPTED ACCOUNTING GUIDANCE Recent Accounting Guidance Not Yet Effective In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” and subsequent amendments to the initial guidance in November 2018, ASU No. 2018-19, April 2019, ASU 2019-04, May 2019, ASU 2019-05, November 2019, ASU 2019-11, February 2020, ASU 2020-02, and March 2020, ASU 2020-03, all of which clarifies codification and corrects unintended application of the guidance. 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. The standard will replace today’s “incurred loss” approach with an “expected loss” model. The new model, referred to as the current expected credit loss (“CECL”) model, will apply to: (1) financial assets subject to credit losses and measured at amortized cost, and (2) certain off-balance sheet credit exposures. This includes, but is not limited to, loans, leases, held-to-maturity securities, loan commitments, and financial guarantees. 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 9 Table of Contents BAYCOM CORP AND SUBSIDIARY NOTES TO CONDENSED FINANCIAL STATEMENTS – (continued) (Tables in thousands, except for share and per share data) (unaudited) ​ 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. ASU 2016-13 also expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the allowance for loan and lease losses. In addition, public business entities will need to disclose the amortized cost balance for each class of financial asset by credit quality indicator, disaggregated by the year of origination. ASU 2018-19 clarifies that receivables arising from operating leases are accounted for using lease guidance and not as financial instruments. 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. 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). 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. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of reference Rate Reform on Financial Reporting . 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 (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. Amendments in this ASU to the expedients and exceptions in Topic 848 capture the incremental consequences of the scope clarification and tailor the existing guidance to derivative instruments affected by the discounting transition. An entity may elect to apply the amendments in this ASU on a full retrospective basis. The amendments in this ASU have differing effective dates, beginning with an interim period including and subsequent to March 12, 2020 through December 31, 2022. The Company does not expect the adoption of ASU 2020-04 to have a material impact on its consolidated financial statements. In March 2022 the FASB issued ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures . 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 10 Table of Contents BAYCOM CORP AND SUBSIDIARY NOTES TO CONDENSED FINANCIAL STATEMENTS – (continued) (Tables in thousands, except for share and per share data) (unaudited) ​ 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. NOTE 3 – ACQUISITIONS Acquisition of Pacific Enterprise Bancorp (“PEB”) On February 1, 2022, the Company completed the PEB Merger. As of the acquisition date, PEB merged into the Company and Pacific Enterprise Bank, PEB’s wholly owned bank subsidiary, merged into United Business Bank. The acquisition expanded the Company’s market share in California with one branch in Irvine. 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 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: ​ ​ ​ ​ ​ ​ PEB ​ ​ Acquisition ​ ​ ​ Date ​ ​ ​ February 1, 2022 ​ Fair value of assets: ​ Cash and due from banks ​ $ 5,350 ​ Total cash and cash equivalents ​ 5,350 ​ ​ ​ ​ ​ ​ Interest bearing deposits in banks ​ 13,348 ​ Investment securities available-for-sale ​ ​ 3 ​ FHLB stock, at par ​ 2,294 ​ FRB stock, at par ​ 942 ​ Loans, net ​ 412,851 ​ Premises and equipment, net ​ ​ 221 ​ Core deposit intangible ​ 756 ​ Deferred tax assets, net ​ 1,192 ​ Interest receivable and other assets ​ ​ 9,178 ​ Total assets acquired ​ 446,135 ​ Liabilities: ​ ​ Deposits ​ ​ Noninterest bearing ​ 60,006 ​ Interest bearing ​ 316,679 ​ Total Deposits ​ 376,685 ​ ​ ​ ​ ​ ​ Interest payable and other liabilities ​ ​ 3,370 ​ Total liabilities assumed ​ ​ 380,055 ​ ​ ​ ​ ​ ​ Stock consideration ​ 64,140 ​ Cash consideration ​ 275 ​ Bargain purchase gain ​ $ 1,665 ​ ​ 11 Table of Contents BAYCOM CORP AND SUBSIDIARY NOTES TO CONDENSED FINANCIAL STATEMENTS – (continued) (Tables in thousands, except for share and per share data) (unaudited) ​ The following table presents the net assets acquired and the estimated fair value adjustments, which resulted in bargain purchase gain at the acquisition date: ​ ​ ​ ​ ​ ​ ​ PEB ​ ​ Acquisition ​ ​ ​ Date ​ ​ ​ February 1, 2022 ​ Book value of net assets acquired ​ $ 61,469 ​ Fair value adjustments: ​ ​ Loans, net ​ 5,840 ​ Premises and equipment, net ​ ​ 26 ​ Core deposit intangible ​ 756 ​ Time deposits ​ ​ ( 869 ) ​ Reserve for unfunded commitments ​ 283 ​ Write-up right-of-use asset ​ 439 ​ Total purchase accounting adjustments ​ 6,475 ​ ​ ​ ​ ​ ​ Tax effect of purchase accounting adjustments at 27.9 % ​ ( 1,864 ) ​ Fair value of assets acquired ​ 66,080 ​ Value of stock issued/cash paid for stock options ​ 64,415 ​ Bargain purchase gain ​ $ ( 1,665 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pro Forma Results of Operations 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. The unaudited pro forma information in the following table is intended for informational purposes only and is not necessarily indicative of future operating results or operating results that would have occurred had the mergers been completed at the beginning of the respective years. No assumptions have been applied to the pro forma results of operation regarding possible revenue enhancements, expense efficiencies or asset dispositions. Unaudited pro forma net interest income, net income and earnings per share are presented below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ Nine Months Ended September 30, ​ ​ ​ 2022 ​ ​ 2021 ​ ​ 2022 ​ ​ 2021 Net interest income ​ $ 24,725 ​ $ 24,761 ​ $ 71,097 ​ $ 73,497 Net income ​ 7,229 ​ 7,933 ​ 15,575 ​ 21,109 Basic earnings per share ​ $ 0.54 ​ $ 0.58 ​ $ 1.15 ​ $ 1.51 Diluted earnings per share ​ ​ 0.54 ​ ​ 0.58 ​ ​ 1.15 ​ ​ 1.51 ​ These amounts include the third-party acquisition related-expenses, accretion of the discounts on acquired loans and amortization of the fair value mark adjustments on core deposit intangible. Acquisition expenses Acquisition expenses are recognized as incurred and continue until all systems are converted and operational functions become fully integrated. No third-party acquisition expenses were recognized in the consolidated statements of 12 Table of Contents BAYCOM CORP AND SUBSIDIARY NOTES TO CONDENSED FINANCIAL STATEMENTS – (continued) (Tables in thousands, except for share and per share data) (unaudited) ​ 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 ​ ​ ​ Three month ended ​ ​ Nine months ended ​ ​ September 30 ​ ​ September 30 Severance expense $ — $ 556 Occupancy expense ​ — ​ 375 Data processing ​ — ​ 1,073 Professional fees ​ ​ ​ ​ ​ 724 Other expenses ​ — ​ 347 Total ​ $ — ​ $ 3,075 ​ ​ NOTE 4 – INVESTMENT SECURITIES 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross Gross ​ ​ ​ ​ Amortized ​ unrealized ​ unrealized ​ Estimated ​ ​ cost ​ gains ​ losses ​ fair value September 30, 2022 ​ ​ ​ ​ ​ U.S. Government Agencies ​ $ 1,506 ​ $ — ​ $ — ​ $ 1,506 Preferred equity securities ​ ​ 18,374 ​ ​ — ​ ​ ( 3,971 ) ​ ​ 14,403 Municipal securities ​ 21,494 ​ 3 ​ ( 2,194 ) ​ 19,303 Mortgage-backed securities ​ 35,472 ​ 30 ​ ( 4,256 ) ​ 31,246 Collateralized mortgage obligations ​ 28,653 ​ — ​ ( 2,768 ) ​ 25,885 SBA securities ​ 4,694 ​ 25 ​ ( 107 ) ​ 4,612 Corporate bonds ​ 77,150 ​ 92 ​ ( 6,984 ) ​ 70,258 Total ​ $ 187,343 ​ $ 150 ​ $ ( 20,280 ) ​ $ 167,213 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross Gross ​ ​ ​ ​ Amortized ​ unrealized ​ unrealized ​ Estimated ​ ​ cost ​ gains ​ losses ​ fair value December 31, 2021 ​ ​ ​ ​ ​ U.S. Government Agencies ​ $ 1,510 ​ $ — ​ $ — ​ $ 1,510 Preferred equity securities ​ ​ 18,331 ​ ​ 446 ​ ​ — ​ ​ 18,777 Municipal securities ​ 23,646 ​ 493 ​ ( 16 ) ​ 24,123 Mortgage-backed securities ​ 33,973 ​ 1,333 ​ ( 210 ) ​ 35,096 Collateralized mortgage obligations ​ 27,228 ​ 436 ​ ( 158 ) ​ 27,506 SBA securities ​ 6,055 ​ 53 ​ ( 20 ) ​ 6,088 Corporate bonds ​ 60,650 ​ 851 ​ ( 166 ) ​ 61,335 Total ​ $ 171,393 ​ $ 3,612 ​ $ ( 570 ) ​ $ 174,435 ​ 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. 13 Table of Contents BAYCOM CORP AND SUBSIDIARY NOTES TO CONDENSED FINANCIAL STATEMENTS – (continued) (Tables in thousands, except for share and per share data) (unaudited) ​ The estimated fair value and gross unrealized losses for securities available-for-sale aggregated by the length of time that individual securities have been in a continuous unrealized loss position at the dates indicated are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Less than 12 months ​ 12 months or more ​ Total ​ Estimated Unrealized Estimated Unrealized Estimated Unrealized ​ ​ fair value ​ loss ​ fair value ​ loss ​ fair value ​ loss September 30, 2022 ​ ​ ​ ​ ​ ​ ​ Preferred Equity Securities ​ ​ 18,372 ​ ​ ( 3,971 ) ​ ​ — ​ ​ — ​ ​ 18,372 ​ ​ ( 3,971 ) Municipal securities ​ ​ 15,518 ​ ​ ( 1,874 ) ​ ​ 2,216 ​ ​ ( 320 ) ​ ​ 17,734 ​ ​ ( 2,194 ) Mortgage-backed securities ​ ​ 25,682 ​ ​ ( 2,988 ) ​ ​ 5,089 ​ ​ ( 1,268 ) ​ ​ 30,771 ​ ​ ( 4,256 ) Collateralized mortgage obligations ​ 51,074 ​ ​ ( 1,673 ) ​ ​ 7,291 ​ ​ ( 1,095 ) ​ 58,365 ​ ( 2,768 ) SBA securities ​ 1,063 ​ ​ ( 99 ) ​ ​ 499 ​ ​ ( 8 ) ​ 1,562 ​ ( 107 ) Corporate bonds ​ 54,417 ​ ​ ( 5,742 ) ​ ​ 11,508 ​ ​ ( 1,242 ) ​ 65,925 ​ ( 6,984 ) Total ​ $ 166,126 ​ $ ( 16,347 ) ​ $ 26,603 ​ $ ( 3,933 ) ​ $ 192,729 ​ $ ( 20,280 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Less than 12 months ​ 12 months or more ​ Total ​ Estimated Unrealized Estimated Unrealized Estimated Unrealized ​ ​ fair value ​ loss ​ fair value ​ loss ​ fair value ​ loss December 31, 2021 ​ ​ ​ ​ ​ ​ ​ Municipal securities ​ $ 3,932 ​ $ ( 16 ) ​ $ — ​ $ — ​ $ 3,932 ​ $ ( 16 ) Mortgage-backed securities ​ 2,954 ​ ( 111 ) ​ 2,133 ​ ( 99 ) ​ 5,087 ​ ( 210 ) Collateralized mortgage obligations ​ 9,236 ​ ( 108 ) ​ 1,605 ​ ( 50 ) ​ 10,841 ​ ( 158 ) SBA securities ​ 134 ​ — ​ 1,058 ​ ( 20 ) ​ 1,192 ​ ( 20 ) Corporate bonds ​ 23,084 ​ ( 166 ) ​ — ​ — ​ 23,084 ​ ( 166 ) Total ​ $ 39,340 ​ $ ( 401 ) ​ $ 4,796 ​ $ ( 169 ) ​ $ 44,136 ​ $ ( 570 ) ​ 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. The Company anticipates full recovery of amortized cost with respect to these securities at maturity or sooner in the event of a more favorable market interest rate environment. The amortized cost and estimated fair value of securities available-for-sale at the dates indicated by contractual maturity are shown below. 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. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2022 ​ December 31, 2021 ​ Amortized Estimated Amortized Estimated ​ ​ cost ​ fair value ​ cost ​ fair value Available-for-sale ​ ​ ​ ​ Due in one year or less ​ $ 1,007 ​ $ 1,000 ​ $ 862 ​ $ 865 Due after one through five years ​ 41,833 ​ 37,073 ​ 41,850 ​ 42,950 Due after five years through ten years ​ 95,356 ​ 85,813 ​ 79,116 ​ 79,993 Due after ten years ​ 49,147 ​ 43,327 ​ 49,565 ​ 50,627 Total ​ $ 187,343 ​ $ 167,213 ​ $ 171,393 ​ $ 174,435 ​ ​ ​ ​ ​ 14 Table of Contents BAYCOM CORP AND SUBSIDIARY NOTES TO CONDENSED FINANCIAL STATEMENTS – (continued) (Tables in thousands, except for share and per share data) (unaudited) ​ NOTE 5 – LOANS The Company’s loan portfolio at the dates indicated is summarized below: ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, December 31, ​ ​ 2022 ​ 2021 Commercial and industrial (1) ​ $ 219,514 ​ $ 230,177 Construction and land ​ 12,231 ​ 13,371 Commercial real estate ​ 1,670,283 ​ 1,299,684 Residential ​ 88,902 ​ 118,423 Consumer ​ 4,294 ​ 5,138 Total loans ​ 1,995,224 ​ 1,666,793 Net deferred loan fees ​ ( 258 ) ​ ( 1,903 ) Allowance for loan losses ​ ( 18,050 ) ​ ( 17,700 ) Net loans ​ $ 1,976,916 ​ $ 1,647,190 ​ (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. Total loans include $ 35.4 million and $ 69.6 million of PPP loans as of September 30, 2022 and December 31, 2021, respectively. 15 Table of Contents BAYCOM CORP AND SUBSIDIARY NOTES TO CONDENSED FINANCIAL STATEMENTS – (continued) (Tables in thousands, except for share and per share data) (unaudited) ​ ​ The Company’s total impaired loans, including nonaccrual loans TDR loans, and accreting purchase credit impaired (“PCI”) loans that have experienced post-acquisition declines in cash flows expected to be collected are summarized as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial Construction Commercial ​ ​ ​ ​ ​ and industrial ​ and land ​ real estate ​ Residential ​ Consumer ​ Total September 30, 2022 ​ ​ ​ ​ ​ ​ ​ Recorded investment in impaired loans: ​ ​ ​ ​ ​ ​ With no specific allowance recorded ​ $ 1,780 ​ $ — ​ $ 12,123 ​ $ 2,001 ​ $ — ​ $ 15,904 With a specific allowance recorded ​ 840 ​ — ​ 259 ​ 125 ​ — ​ 1,224 Total recorded investment in impaired loans ​ $ 2,620 ​ $ — ​ $ 12,382 ​ $ 2,126 ​ $ — ​ $ 17,128 Specific allowance on impaired loans ​ $ 725 ​ $ — ​ $ 259 ​ $ 14 ​ $ — ​ $ 998 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ ​ ​ ​ ​ ​ Recorded investment in impaired loans: ​ ​ ​ ​ ​ ​ With no specific allowance recorded ​ $ 112 ​ $ 36 ​ $ 5,015 ​ $ 1,441 ​ $ — ​ $ 6,604 With a specific allowance recorded ​ 681 ​ — ​ 262 ​ 146 ​ — ​ 1,089 Total recorded investment in impaired loans ​ $ 793 ​ $ 36 ​ $ 5,277 ​ $ 1,587 ​ $ — ​ $ 7,693 Specific allowance on impaired loans ​ $ 681 ​ $ — ​ $ 224 ​ $ 25 ​ $ — ​ $ 930 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended September 30, 2022 ​ ​ ​ ​ ​ ​ Average recorded investment in impaired loans ​ $ 2,899 ​ $ — ​ $ 8,490 ​ $ 1,998 ​ $ — ​ $ 13,387 Interest recognized ​ 17 ​ — ​ 17 ​ 18 ​ — ​ 52 Nine months ended September 30, 2022 ​ ​ ​ ​ ​ ​ Average recorded investment in impaired loans ​ $ 3,068 ​ $ 406 ​ $ 6,992 ​ $ 1,448 ​ $ — ​ $ 11,914 Interest recognized ​ 18 ​ 5 ​ 34 ​ 27 ​ — ​ 84 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended September 30, 2021 ​ ​ ​ ​ ​ ​ Average recorded investment in impaired loans ​ $ 683 ​ $ 36 ​ $ 5,338 ​ $ 2,363 ​ $ — ​ $ 8,420 Interest recognized ​ 17 ​ — ​ ​ 15 ​ 27 ​ — ​ 59 Nine months ended September 30, 2021 ​ ​ ​ ​ ​ ​ Average recorded investment in impaired loans ​ $ 796 ​ $ 36 ​ $ 5,711 ​ $ 2,609 ​ $ — ​ $ 9,152 Interest recognized ​ 53 ​ — ​ ​ 92 ​ 43 ​ — ​ 188 ​ Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Impaired loans on accrual are comprised solely of TDR loans performing under modified loan agreements, whose principal and interest is determined to be collectible. Nonaccrual loans are loans where principal and interest have been determined to not be fully collectible. In situations where, for economic or legal reasons related to a borrower’s financial difficulties, the Company grants a concession to the borrower that it would not otherwise consider, the related loan is classified as a TDR loan. TDR loans are generally placed on nonaccrual status at the time of restructuring and included in impaired loans. 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 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 16 Table of Contents BAYCOM CORP AND SUBSIDIARY NOTES TO CONDENSED FINANCIAL STATEMENTS – (continued) (Tables in thousands, except for share and per share data) (unaudited) ​ 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 September 30, 2022. ​ A summary of TDR loans by type of concession and type of loan, as of the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of Rate Term Rate & term ​ ​ ​ loans ​ modification ​ modification ​ modification ​ Total September 30, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial and industrial 3 ​ $ — ​ $ 1,699 ​ $ — ​ $ 1,699 Construction and land — ​ — ​ — ​ — ​ — Commercial real estate 6 ​ — ​ 5,345 ​ — ​ 5,345 Residential 2 ​ — ​ ​ 974 ​ — ​ 974 Consumer — ​ — ​ — ​ — ​ — Total 11 ​ $ — ​ $ 8,018 ​ $ — ​ $ 8,018 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of Rate Term Rate & term ​ ​ ​ loans ​ modification ​ modification ​ modification ​ Total September 30, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial and industrial 2 ​ $ — ​ $ 26 ​ $ — ​ $ 26 Construction and land — ​ — ​ — ​ — ​ — Commercial real estate 4 ​ — ​ 2,267 ​ — ​ 2,267 Residential 1 ​ — ​ 146 ​ — ​ 146 Consumer — ​ — ​ — ​ — ​ — Total 7 ​ $ — ​ $ 2,439 ​ $ — ​ $ 2,439 ​ 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 The Company evaluates and assigns a risk grade to each loan based on certain criteria to assess the credit quality of each loan. The assignment of a risk rating is done for each individual loan. Loans are graded from inception and on a continuing basis until the debt is repaid. Any adverse or beneficial trends will trigger a review of the loan risk rating. Each loan is assigned a risk grade based on its characteristics. Loans with low to average credit risk are assigned a lower risk grade than those with higher credit risk as determined by the individual loan characteristics. The Company’s Pass loans includes loans with acceptable business or individual credit risk where the borrower’s operations, cash flow or financial condition provides evidence of low to average levels of risk. Loans that are assigned higher risk grades are loans that exhibit the following characteristics: Special Mention loans have potential weaknesses that deserve close attention. If left uncorrected, these potential weaknesses may result in a deterioration of the repayment prospects for the loan or in the Company’s credit position at some future date. Special Mention loans are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification. A Special Mention rating is a temporary rating, pending the occurrence of an event that would cause the risk rating either to improve or to be downgraded. 17 Table of Contents BAYCOM CORP AND SUBSIDIARY NOTES TO CONDENSED FINANCIAL STATEMENTS – (continued) (Tables in thousands, except for share and per share data) (unaudited) ​ Loans in this category would be characterized by any of the following situations: ● Credit that is currently protected but is potentially a weak asset; ● Credit that is difficult to manage because of an inadequate loan agreement, the condition of and/or control over collateral, failure to obtain proper documentation, or any other deviation from product lending practices; and ● Adverse financial trends. Substandard loans are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged. Loans classified substandard must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. Loans are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. The potential loss does not have to be recognizable in an individual credit for that credit to be risk rated Substandard. A loan can be fully and adequately secured and still be considered Substandard. Some characteristics of Substandard loans are: ● Inability to service debt from ordinary and recurring cash flow; ● Chronic delinquency; ● Reliance upon alternative sources of repayment; ● Term loans that are granted on liberal terms because the borrower cannot service normal payments for that type of debt; ● Repayment dependent upon the liquidation of collateral; ● Inability to perform as agreed, but adequately protected by collateral; ● Necessity to renegotiate payments to a non-standard level to ensure performance; and ● The borrower is bankrupt, or for any other reason, future repayment is dependent on court action. Doubtful loans have all the weaknesses inherent in loans classified as Substandard with the added characteristic that the weaknesses make collection or liquidation in full, based on currently existing facts, conditions, and value, highly questionable and improbable. Doubtful loans have a high probability of loss, yet certain important and reasonably specific pending factors may work toward the strengthening of the credit. Losses are recognized as charges to the allowance when the loan or portion of the loan is considered uncollectible or at the time of foreclosure. Recoveries on loans previously charged off are credited to the allowance for loan losses. The following tables present the internally assigned risk grade by class of loans at the dates indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Special ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ Mention ​ Substandard ​ Doubtful ​ Total September 30, 2022 ​ ​ ​ ​ ​ Commercial and industrial ​ $ 208,422 ​ $ 4,846 ​ $ 6,246 ​ $ — ​ $ 219,514 Construction and land ​ 12,165 ​ 66 ​ — ​ — ​ 12,231 Commercial real estate ​ 1,602,109 ​ 52,693 ​ 15,481 ​ — ​ 1,670,283 Residential ​ 86,490 ​ 258 ​ 2,154 ​ — ​ 88,902 Consumer ​ 4,273 ​ — ​ 21 ​ — ​ 4,294 Total ​ $ 1,913,459 ​ $ 57,863 ​ $ 23,902 ​ $ — ​ $ 1,995,224 ​ 18 Table of Contents BAYCOM CORP AND SUBSIDIARY NOTES TO CONDENSED FINANCIAL STATEMENTS – (continued) (Tables in thousands, except for share and per share data) (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Special ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ Mention ​ Substandard ​ Doubtful ​ Total December 31, 2021 ​ ​ ​ ​ ​ Commercial and industrial ​ $ 216,611 ​ $ 9,178 ​ $ 4,388 ​ $ — ​ $ 230,177 Construction and land ​ 13,264 ​ 71 ​ 36 ​ — ​ 13,371 Commercial real estate ​ 1,264,269 ​ 28,438 ​ 6,977 ​ — ​ 1,299,684 Residential ​ 115,534 ​ 1,250 ​ 1,639 ​ — ​ 118,423 Consumer ​ 5,116 ​ — ​ 22 ​ — ​ 5,138 Total ​ $ 1,614,794 ​ $ 38,937 ​ $ 13,062 ​ $ — ​ $ 1,666,793 ​ The following tables provide an aging of the Company’s loans receivable as of the dates indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Recorded ​ ​ ​ ​ ​ 90 Days ​ ​ ​ ​ ​ ​ ​ ​ investment > ​ ​ 30–59 Days ​ 60–89 Days ​ or more ​ Total ​ ​ ​ ​ ​ ​ ​ Total loans ​ 90 days and ​ ​ past due ​ past due ​ past due ​ past due ​ Current ​ PCI loans ​ receivable ​ accruing September 30, 2022 ​ ​ ​ ​ ​ ​ ​ ​ Commercial and industrial ​ $ 759 ​ $ 3,717 ​ $ 5,862 ​ $ 10,338 ​ $ 205,013 ​ $ 4,163 ​ $ 219,514 ​ $ 3,315 Construction and land ​ 391 ​ — ​ — ​ 391 ​ 7,780 ​ 4,060 ​ 12,231 ​ — Commercial real estate ​ 293 ​ — ​ 6,071 ​ 6,364 ​ 1,643,105 ​ 20,814 ​ 1,670,283 ​ — Residential ​ 188 ​ — ​ ​ 758 ​ 946 ​ 86,849 ​ 1,107 ​ 88,902 ​ — Consumer ​ — ​ — ​ — ​ — ​ 4,294 ​ — ​ 4,294 ​ — Total ​ $ 1,631 ​ $ 3,717 ​ $ 12,691 ​ $ 18,039 ​ $ 1,947,041 ​ $ 30,144 ​ $ 1,995,224 ​ $ 3,315 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Recorded ​ ​ ​ ​ ​ 90 Days ​ ​ ​ ​ ​ ​ ​ ​ investment > ​ ​ 30–59 Days ​ 60–89 Days ​ or more ​ Total ​ ​ ​ ​ ​ ​ ​ Total loans ​ 90 days and ​ ​ past due ​ past due ​ past due ​ past due ​ Current ​ PCI loans ​ receivable ​ accruing December 31, 2021 ​ ​ ​ ​ ​ ​ ​ ​ Commercial and industrial ​ $ 275 ​ $ 10 ​ $ 606 ​ $ 891 ​ $ 228,980 ​ $ 306 ​ $ 230,177 ​ $ — Construction and land ​ — ​ 338 ​ 36 ​ 374 ​ 12,997 ​ — ​ 13,371 ​ — Commercial real estate ​ 196 ​ 410 ​ 2,621 ​ 3,227 ​ 1,286,311 ​ 10,146 ​ 1,299,684 ​ — Residential ​ 1,442 ​ 21 ​ 1,031 ​ 2,494 ​ 114,162 ​ 1,767 ​ 118,423 ​ — Consumer ​ 3 ​ — ​ — ​ 3 ​ 5,135 ​ — ​ 5,138 ​ — Total ​ $ 1,916 ​ $ 779 ​ $ 4,294 ​ $ 6,989 ​ $ 1,647,585 ​ $ 12,219 ​ $ 1,666,793 ​ $ — ​ 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 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 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 In connection with the Company's acquisitions, the contractual amount and timing of undiscounted principal and interest payments and the estimated amount and timing of undiscounted expected principal and interest payments were 19 Table of Contents BAYCOM CORP AND SUBSIDIARY NOTES TO CONDENSED FINANCIAL STATEMENTS – (continued) (Tables in thousands, except for share and per share data) (unaudited) ​ used to estimate the fair value of PCI loans at the acquisition date. The difference between these two amounts represented the nonaccretable difference. On the acquisition date, the amount by which the undiscounted expected cash flows exceed the estimated fair value of the acquired loans is the “accretable yield”. The accretable yield is then measured at each financial reporting date and represented the difference between the remaining undiscounted expected cash flows and the current carrying value of the loans. For PCI loans the accretable yield is accreted into interest income over the life of the estimated remaining cash flows. At each financial reporting date, the carrying value of each PCI loan is compared to an updated estimate of expected principal payment or recovery on each loan. To the extent that the loan carrying amount exceeds the updated expected principal payment or recovery, a provision of loan loss would be recorded as a charge to income and an allowance for loan loss established. The unpaid principal balance and carrying value of the Company’s PCI loans at the dates indicated are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2022 ​ December 31, 2021 ​ Unpaid ​ ​ Unpaid ​ ​ ​ ​ principal ​ Carrying ​ principal ​ Carrying ​ ​ balance ​ value ​ balance ​ value Commercial and industrial ​ $ 5,145 ​ $ 4,163 ​ $ 546 ​ $ 306 Construction and land ​ 4,309 ​ 4,060 ​ — ​ — Commercial real estate ​ 22,472 ​ ​ 20,814 ​ 11,519 ​ 10,146 Residential ​ 1,265 ​ 1,107 ​ 2,202 ​ 1,767 Total ​ $ 33,191 ​ $ 30,144 ​ $ 14,267 ​ $ 12,219 ​ The following table reflects the changes in the accretable yield of PCI loans for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended ​ Nine months ended ​ ​ September 30, September 30, ​ ​ ​ 2022 ​ 2021 ​ 2022 ​ 2021 ​ Balance at beginning of period ​ $ 1,572 ​ $ 316 ​ $ 508 ​ $ 383 ​ Additions ​ — ​ — ​ 1,277 ​ — ​ Removals ​ ( 71 ) ​ ( 4 ) ​ ( 133 ) ​ ( 153 ) ​ Accretion ​ ( 133 ) ​ ( 139 ) ​ ( 284 ) ​ ( 57 ) ​ Balance at end of period ​ $ 1,368 ​ $ 173 ​ $ 1,368 ​ $ 173 ​ ​ ​ ​ 20 Table of Contents BAYCOM CORP AND SUBSIDIARY NOTES TO CONDENSED FINANCIAL STATEMENTS – (continued) (Tables in thousands, except for share and per share data) (unaudited) ​ 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 nine months ended September 30, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial ​ Construction ​ Commercial ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ and industrial and land real estate Residential Consumer Total Three months ended September 30, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for loan losses ​ ​ ​ ​ ​ ​ Beginning balance ​ $ 2,871 ​ $ 74 ​ $ 13,830 ​ $ 1,007 ​ $ 18 ​ $ 17,800 Charge-offs ​ ( 1,095 ) ​ — ​ ​ — ​ — ​ ​ — ​ ( 1,095 ) Recoveries ​ 151 ​ — ​ — ​ — ​ — ​ 151 Provision for (reversal of) loan losses ​ 1,029 ​ ( 12 ) ​ 13 ​ 162 ​ 2 ​ 1,194 Ending balance ​ $ 2,956 ​ $ 62 ​ $ 13,843 ​ $ 1,169 ​ $ 20 ​ $ 18,050 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine months ended September 30, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for loan losses ​ ​ ​ ​ ​ ​ Beginning balance ​ $ 3,261 ​ $ 175 ​ $ 12,709 ​ $ 1,536 ​ $ 19 ​ $ 17,700 Charge-offs ​ ( 3,620 ) ​ — ​ ( 1 ) ​ ( 6 ) ​ ( 6 ) ​ ( 3,633 ) Recoveries ​ 159 ​ — ​ — ​ ​ — ​ — ​ 159 Provision for (reversal of) loan losses ​ 3,156 ​ ​ ( 113 ) ​ ​ 1,135 ​ ​ ( 361 ) ​ ​ 7 ​ 3,824 Ending balance ​ $ 2,956 ​ $ 62 ​ $ 13,843 ​ $ 1,169 ​ $ 20 ​ $ 18,050 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for loan losses by methodology: ​ ​ ​ ​ ​ ​ Loans individually evaluated for impairment ​ $ 725 ​ $ — ​ $ 259 ​ $ 14 ​ $ — ​ $ 998 Loans collectively evaluated for impairment ​ 2,231 ​ 62 ​ 13,584 ​ 1,155 ​ 20 ​ 17,052 PCI loans ​ — ​ — ​ — ​ — ​ — ​ — ​ ​ ​ ​ ​ ​ ​ Loans receivable by methodology: ​ ​ ​ ​ ​ ​ Individually evaluated for impairment ​ $ 2,620 ​ $ — ​ $ 12,382 ​ $ 2,126 ​ $ — ​ $ 17,128 Collectively evaluated for impairment ​ 212,731 ​ 8,171 ​ 1,637,087 ​ 85,669 ​ 4,294 ​ 1,947,952 PCI loans ​ 4,163 ​ 4,060 ​ 20,814 ​ 1,107 ​ — ​ 30,144 Total loans ​ $ 219,514 ​ $ 12,231 ​ $ 1,670,283 ​ $ 88,902 ​ $ 4,294 ​ $ 1,995,224 ​ ​ 21 Table of Contents BAYCOM CORP AND SUBSIDIARY NOTES TO CONDENSED FINANCIAL STATEMENTS – (continued) (Tables in thousands, except for share and per share data) (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial ​ Construction ​ Commercial ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ and industrial and land real estate Residential Consumer Total Three months ended September 30, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for loan losses ​ ​ ​ ​ ​ ​ Beginning balance ​ $ 3,645 ​ $ 224 ​ $ 11,328 ​ $ 1,782 ​ $ 21 ​ $ 17,000 Charge-offs ​ ( 180 ) ​ — ​ ( 1 ) ​ — ​ — ​ ( 181 ) Recoveries ​ 3 ​ 1 ​ — ​ — ​ — ​ 4 Provision for (reversal of) loan losses ​ ( 113 ) ​ 15 ​ 717 ​ ( 141 ) ​ ( 1 ) ​ 477 Ending balance ​ $ 3,355 ​ $ 240 ​ $ 12,044 ​ $ 1,641 ​ $ 20 ​ $ 17,300 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine months ended September 30, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for loan losses ​ ​ ​ ​ ​ ​ Beginning balance ​ $ 4,042 ​ $ 378 ​ $ 11,211 ​ $ 1,856 ​ $ 13 ​ $ 17,500 Charge-offs ​ ( 182 ) ​ — ​ ( 1 ) ​ — ​ — ​ ( 183 ) Recoveries ​ 9 ​ 4 ​ — ​ — ​ — ​ 13 Provision for (reversal of) loan losses ​ ( 514 ) ​ ​ ( 142 ) ​ ​ 834 ​ ​ ( 215 ) ​ ​ 7 ​ ( 30 ) Ending balance ​ $ 3,355 ​ $ 240 ​ $ 12,044 ​ $ 1,641 ​ $ 20 ​ $ 17,300 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for loan losses by methodology: ​ ​ ​ ​ ​ ​ Loans individually evaluated for impairment ​ $ 580 ​ $ — ​ $ 98 ​ $ 22 ​ $ — ​ $ 700 Loans collectively evaluated for impairment ​ 2,775 ​ 240 ​ 11,928 ​ 1,616 ​ 20 ​ 16,579 PCI loans ​ — ​ — ​ 18 ​ 3 ​ — ​ 21 ​ ​ ​ ​ ​ ​ ​ ​ Loans receivable by methodology: ​ ​ ​ ​ ​ ​ Individually evaluated for impairment ​ $ 692 ​ $ 36 ​ $ 5,681 ​ $ 1,688 ​ $ — ​ $ 8,097 Collectively evaluated for impairment ​ 282,635 ​ 16,348 ​ 1,199,601 ​ 121,487 ​ 4,060 ​ 1,624,131 PCI loans ​ 304 ​ 40 ​ 10,329 ​ 1,900 ​ — ​ 12,573 Total loans ​ $ 283,631 ​ $ 16,424 ​ $ 1,215,611 ​ $ 125,075 ​ $ 4,060 ​ $ 1,644,801 ​ ​ ​ 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 22 Table of Contents BAYCOM CORP AND SUBSIDIARY NOTES TO CONDENSED FINANCIAL STATEMENTS – (continued) (Tables in thousands, except for share and per share data) (unaudited) ​ 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, December 31, ​ ​ 2022 ​ 2021 Premises owned ​ $ 11,120 ​ $ 11,015 Leasehold improvements ​ 2,233 ​ 2,608 Furniture, fixtures and equipment ​ 6,730 ​ 6,201 Less accumulated depreciation and amortization ​ ( 6,386 ) ​ ( 5,454 ) Total premises and equipment, net ​ $ 13,697 ​ $ 14,370 ​ 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 The Company leases 19 branches under noncancelable operating leases. 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, 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. ​ The Company uses the rate implicit in the lease whenever this rate is readily determinable. 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 September 30, 2022: ​ ​ ​ ​ ​ For remainder of 2022 ​ $ 3,895 2023 ​ 3,888 2024 ​ 3,669 2025 ​ 2,803 2026 ​ ​ 2,065 Thereafter ​ 4,991 Total undiscounted cash flows ​ ​ 21,311 Less: interest ​ ​ ( 4,900 ) Present value of lease payments ​ $ 16,411 ​ The following table presents the weighted average lease term and discount rate at the date indicated: ​ ​ ​ ​ ​ ​ September 30, 2022 Weighted-average remaining lease term 5.5 years Weighted-average discount rate 3.10 % ​ 23 Table of Contents BAYCOM CORP AND SUBSIDIARY NOTES TO CONDENSED FINANCIAL STATEMENTS – (continued) (Tables in thousands, except for share and per share data) (unaudited) ​ 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 Goodwill is determined as the excess of the fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquiree, over the fair value of the net assets acquired and the liabilities assumed as of the acquisition date. Goodwill and other intangible assets are assessed for impairment annually or whenever events or changes in circumstances indicate the carrying amount may not be recoverable. Intangible assets with definite useful lives are amortized over their estimated useful lives to their estimated residual values. Core deposit intangible represents the estimated future benefit of deposits related to an acquisition and is booked separately from the related deposits and amortized over an estimated useful live of seven to ten years . Goodwill The Company’s policy is to assess goodwill for impairment at the reporting unit level on an annual basis or between annual assessments if a triggering event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Impairment exists when a reporting unit’s fair value is less than its carrying amount, including goodwill. Changes in the Company's goodwill at September 30, 2022 and December 31, 2021 are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, December 31, ​ ​ 2022 ​ 2021 Balance at beginning of period ​ $ 38,838 ​ $ 38,838 Acquired goodwill ​ — ​ — Impairment ​ — ​ — Balance at end of period ​ $ 38,838 ​ $ 38,838 ​ Core Deposit Intangible Changes in the Company’s core deposit intangible at September 30, 2022 and December 31, 2021 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, December 31, ​ ​ 2022 ​ 2021 Balance at beginning of period ​ $ 6,489 ​ $ 8,302 Additions ​ 756 ​ — Less amortization ​ ( 1,527 ) ​ ( 1,813 ) Balance at end of period ​ $ 5,718 ​ $ 6,489 ​ 24 Table of Contents BAYCOM CORP AND SUBSIDIARY NOTES TO CONDENSED FINANCIAL STATEMENTS – (continued) (Tables in thousands, except for share and per share data) (unaudited) ​ Estimated annual amortization expense at September 30, 2022 is as follows: ​ ​ ​ ​ ​ For remainder of 2022 ​ $ 517 2023 ​ 1,286 2024 ​ 1,222 2025 ​ 948 2026 ​ ​ 455 Thereafter ​ 1,290 Total ​ $ 5,718 ​ ​ ​ NOTE 10 – INTEREST RECEIVABLE AND OTHER ASSETS The Company’s interest receivable and other assets at the dates indicated consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, December 31, ​ ​ 2022 ​ 2021 Tax assets, net ​ $ 16,548 ​ $ 10,573 Accrued interest receivable ​ 7,587 ​ 5,929 Investment in Small Business Investment Company ("SBIC") fund ​ 4,887 ​ 4,731 Investment in Community Reinvestment Act fund ​ ​ 2,000 ​ ​ — Prepaid assets ​ 1,713 ​ 1,598 Servicing assets ​ 2,299 ​ 1,947 Investment in Low Income Housing Tax Credit ("LIHTC") partnerships, net ​ 2,778 ​ 3,129 Investment in statutory trusts ​ 489 ​ 484 Other assets ​ 4,940 ​ 1,469 Total ​ $ 43,241 ​ $ 29,860 ​ ​ ​ ​ NOTE 11 – DEPOSITS The Company’s deposits consisted of the following at the dates indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, December 31, ​ ​ 2022 ​ 2021 Demand deposits ​ $ 813,510 ​ $ 710,137 NOW accounts and savings ​ 463,039 ​ 484,847 Money market ​ 614,414 ​ 568,094 Time deposits ​ 224,488 ​ 222,161 Total ​ $ 2,115,451 ​ $ 1,985,239 ​ ​ NOTE 12 – BORROWINGS 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 September 30, 2022 and December 31, 2021, the Company had no FHLB advances outstanding. 25 Table of Contents BAYCOM CORP AND SUBSIDIARY NOTES TO CONDENSED FINANCIAL STATEMENTS – (continued) (Tables in thousands, except for share and per share data) (unaudited) ​ The Company has Federal Funds lines with four corresponding banks. 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 . Subordinated debt – On August 6, 2020, the Company issued and sold $ 65.0 million aggregate principal amount of 5.25 % Fixed-to-Floating Rate Subordinated Notes due 2030 (the “Notes”) at a public offering price equal to 100 % of the aggregate principal amount of the Notes. The offering of the Notes closed on August 10, 2020. The Notes initially bears a fixed interest rate of 5.25 % per year. Commencing on September 15, 2025, the interest rate on the Notes resets quarterly to the three-month Secured Overnight Financing rate plus a spread of 521 basis points ( 5.21 %), payable quarterly in arrears. Interest on the Notes is payable semi-annually on March 15 and September 15 of each year through September 15, 2025 and quarterly thereafter on March 15, June 15, September 15 and December 15 of each year through the maturity date or early redemption date. 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 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, December 31, ​ ​ 2022 ​ 2021 Accrued expenses ​ $ 7,124 ​ $ 7,339 Accounts payable ​ 535 ​ 506 Reserve for unfunded commitments ​ 315 ​ 315 Accrued interest payable ​ 293 ​ 1,180 Other liabilities ​ 3,109 ​ 4,516 Total ​ $ 11,376 ​ $ 13,856 ​ ​ ​ 26 Table of Contents BAYCOM CORP AND SUBSIDIARY NOTES TO CONDENSED FINANCIAL STATEMENTS – (continued) (Tables in thousands, except for share and per share data) (unaudited) ​ NOTE 14 – OTHER EXPENSES The Company’s other expenses for the periods indicated consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended ​ Nine months ended ​ ​ September 30, September 30, ​ ​ 2022 ​ 2021 ​ 2022 ​ 2021 ​ Professional fees ​ $ 453 ​ $ 620 ​ $ 2,335 ​ $ 1,668 ​ Core deposit premium amortization ​ 516 ​ 453 ​ 1,527 ​ 1,359 ​ Marketing and promotions ​ 235 ​ 196 ​ 769 ​ 413 ​ Stationery and supplies ​ 89 ​ 84 ​ 266 ​ 274 ​ Insurance (including FDIC premiums) ​ 235 ​ 206 ​ 704 ​ 618 ​ Communication and postage ​ 232 ​ 190 ​ 689 ​ 595 ​ Loan default related expense ​ 119 ​ 59 ​ 257 ​ 119 ​ Director fees ​ 83 ​ 81 ​ 282 ​ 241 ​ Bank service charges ​ 21 ​ 68 ​ 145 ​ 191 ​ Courier expense ​ 193 ​ 175 ​ 558 ​ 506 ​ Other ​ 151 ​ 158 ​ 454 ​ 387 ​ Total ​ $ 2,327 ​ $ 2,290 ​ $ 7,986 ​ $ 6,371 ​ ​ The Company expenses marketing and promotions costs as they are incurred. 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 Equity Incentive Plans 2017 Omnibus Equity Incentive Plan The shareholders approved the Omnibus Equity Incentive Plan (“2017 Plan”) in November 2017. The 2017 Plan provides for the awarding by the Company’s Board of Directors of equity incentive awards to employees and non-employee directors. 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 period. Generally, awards are restricted and have a vesting period of no longer than ten years. Subject to adjustment as provided in the 2017 Plan, the maximum number of shares of common stock that may be delivered pursuant to awards granted under the 2017 Plan is 450,000 . The 2017 Plan provides for an annual restricted stock grant limits to officers, employees and directors. The annual stock grant limit per person for officers and employees is the lessor of 50,000 shares or a value of $ 2.0 million, and per person for directors, the maximum is 25,000 shares. All unvested restricted shares outstanding vest in the event of a change in control of the Company. 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 September 30, 2022, a total of 86,085 shares were available for future issuance under the 2017 Plan. 27 Table of Contents BAYCOM CORP AND SUBSIDIARY NOTES TO CONDENSED FINANCIAL STATEMENTS – (continued) (Tables in thousands, except for share and per share data) (unaudited) ​ 2014 Omnibus Equity Incentive Plan In 2014, the shareholders approved the Omnibus Equity Incentive Plan (the “2014 Plan”). A total of 148,962 equity incentive awards were granted under the 2014 Plan. The awards are shares of restricted stock and have a vesting period of one to five years . No future equity awards will be made from the 2014 Plan. 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 $ 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 . The following table provides the restricted stock grant activity for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 ​ 2021 ​ ​ ​ Weighted-average ​ Weighted-average ​ ​ ​ ​ grant date ​ ​ ​ grant date ​ ​ Shares ​ fair value ​ Shares ​ fair value Non-vested at January 1, 139,275 ​ $ 16.29 ​ 204,515 ​ $ 17.71 ​ Granted 22,473 ​ 18.79 ​ 24,187 ​ 15.17 ​ Vested ( 15,560 ) ​ 18.34 ​ ( 14,164 ) ​ 18.50 ​ Forfeited ​ ( 532 ) ​ ​ 18.79 ​ — ​ ​ — ​ Non-Vested, at March 31, 145,656 ​ ​ 16.45 ​ 214,538 ​ ​ 16.06 ​ Vested ( 45,997 ) ​ ​ 16.29 ​ ( 63,028 ) ​ ​ 17.84 ​ Forfeited ​ ( 1,322 ) ​ ​ 18.16 ​ — ​ ​ — ​ Non-Vested, at June 30, 98,337 ​ ​ 16.50 ​ 151,510 ​ ​ 15.32 ​ Granted 10,618 ​ 20.98 ​ 12,228 ​ 18.16 ​ Vested ( 11,078 ) ​ 18.14 ​ ( 21,771 ) ​ 10.33 ​ Forfeited ​ — ​ ​ — ​ ( 2,692 ) ​ ​ 18.45 ​ Non-Vested, at September 30, 97,877 ​ $ 16.80 ​ 139,275 ​ $ 16.29 ​ ​ ​ NOTE 16 – FAIR VALUE MEASUREMENT ASC Topic 820, “Fair Value Measurement,” defines fair value, establishes a framework for measuring fair value including a three-level valuation hierarchy, and expands disclosures about fair value measurements. Fair value is defined as the exchange price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date reflecting assumptions that a market participant would use when pricing an asset or liability. The hierarchy uses three levels of inputs to measure the fair value of assets and liabilities as follows: 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. Level 2 – Observable prices in active markets for similar assets and liabilities; prices for identical or similar assets or liabilities in markets that are not active; directly observable market inputs for substantially the full term of the asset and liability; market inputs that are not directly observable but are derived from or corroborated by observable market data. 28 Table of Contents BAYCOM CORP AND SUBSIDIARY NOTES TO CONDENSED FINANCIAL STATEMENTS – (continued) (Tables in thousands, except for share and per share data) (unaudited) ​ 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. We use fair value to measure certain assets and liabilities on a recurring basis, primarily securities available-for-sale. For assets measured at the lower of cost or fair value, the fair value measurement criteria may or may not be met during a reporting period and such measurements are therefore considered “nonrecurring” for purposes of disclosing our fair value measurements. Fair value is used on a nonrecurring basis to adjust carrying values for impaired loans and other real estate owned and also to record impairment on certain assets, such as goodwill, core deposit intangible, and other long-lived assets. In certain cases, the inputs used to measure fair value may fall into different levels of the hierarchy. In such cases, the lowest level of inputs that is significant to the measurement is used to determine the hierarchy for the entire asset or liability. Transfers between levels of the fair value hierarchy are recognized on the actual date of the event or circumstances that caused the transfer, which generally coincides with our quarterly valuation process. There were no transfers between levels during 2022 or 2021. The following assets are measured at fair value on a recurring basis as of the dates indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Level 1 Level 2 Level 3 September 30, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. Government Agencies ​ $ 1,506 ​ $ — ​ $ 1,506 ​ $ — Preferred equity securities ​ ​ 14,403 ​ ​ 14,403 ​ ​ — ​ ​ — Municipal securities ​ 19,303 ​ — ​ 19,303 ​ — Mortgage-backed securities ​ 31,246 ​ — ​ 31,246 ​ — Collateralized mortgage obligations ​ 25,885 ​ — ​ 25,885 ​ — SBA securities ​ 4,612 ​ — ​ 4,612 ​ — Corporate bonds ​ 70,258 ​ — ​ 70,258 ​ — Total ​ $ 167,213 ​ $ 14,403 ​ $ 152,810 ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Level 1 Level 2 Level 3 December 31, 2021 ​ ​ ​ ​ U.S. Government Agencies ​ $ 1,914 ​ $ — ​ $ 1,914 ​ $ — Preferred equity securities ​ ​ 18,777 ​ ​ 18,777 ​ ​ — ​ ​ — Municipal securities ​ 24,123 ​ — ​ 24,123 ​ — Mortgage-backed securities ​ 34,692 ​ — ​ 34,692 ​ — Collateralized mortgage obligations ​ 27,506 ​ — ​ 27,506 ​ — SBA securities ​ 6,088 ​ — ​ 6,088 ​ — Corporate bonds ​ 61,335 ​ — ​ 61,335 ​ — Total ​ $ 174,435 ​ $ 18,777 ​ $ 155,658 ​ $ — ​ The following assets are measured at fair value on a nonrecurring basis as of the dates indicated: ​ 29 Table of Contents BAYCOM CORP AND SUBSIDIARY NOTES TO CONDENSED FINANCIAL STATEMENTS – (continued) (Tables in thousands, except for share and per share data) (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Level 1 Level 2 Level 3 September 30, 2022 ​ ​ ​ ​ Performing impaired loans ​ $ 759 ​ $ — ​ $ — ​ $ 759 Nonperforming impaired loans ​ 16,369 ​ — ​ — ​ 16,369 OREO ​ 21 ​ — ​ — ​ 21 Total ​ $ 17,149 ​ $ — ​ $ — ​ $ 17,149 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Level 1 Level 2 Level 3 December 31, 2021 ​ ​ ​ ​ Performing impaired loans ​ $ 805 ​ $ — ​ $ — ​ $ 805 Nonperforming impaired loans ​ 6,888 ​ — ​ — ​ 6,888 OREO ​ 21 ​ — ​ — ​ 21 Total ​ $ 7,714 ​ $ — ​ $ — ​ $ 7,714 ​ The Company does not record loans at fair value on a recurring basis. However, from time to time, a loan may be considered impaired and an allowance for loan losses is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. The fair value of impaired loans is estimated using one of several methods, including collateral value, market value of similar debt, enterprise and liquidation value and discounted cash flows. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. When the fair value of the collateral is based on an observable market price or a current appraised value which uses substantially observable data, the Company records the impaired loan as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value or the appraised value contains a significant assumption and there is no observable market price, the Company records the impaired loan as nonrecurring Level 3. The Company records OREO at fair value on a nonrecurring basis based on the collateral value of the property. When the fair value of the collateral is based on an observable market price or a current appraised value which uses substantially observable data, the Company records the OREO as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value or the appraised value contains a significant assumption, and there is no observable market price, the Company records the impaired loan as nonrecurring Level 3. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Management also incorporates assumptions regarding market trends or other relevant factors and selling and commission costs ranging from 5% to 7%. Such adjustments and assumptions are typically significant and result in a Level 3 classification of the inputs for determining fair value. ​ ​ ​ ​ ​ ​ ​ 30 Table of Contents BAYCOM CORP AND SUBSIDIARY NOTES TO CONDENSED FINANCIAL STATEMENTS – (continued) (Tables in thousands, except for share and per share data) (unaudited) ​ NOTE 17 – FAIR VALUE OF FINANCIAL INSTRUMENTS The following methods and assumptions were used to estimate the fair value disclosure for financial instruments: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Carrying ​ Fair ​ Fair value measurements ​ amount value Level 1 Level 2 Level 3 September 30, 2022 ​ ​ ​ ​ ​ Financial assets: ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 224,681 ​ $ 224,681 ​ $ 224,681 ​ $ — ​ $ — Time deposits in banks ​ 2,490 ​ 2,490 ​ 2,490 ​ — ​ — Investment securities available-for-sale ​ 167,213 ​ 167,213 ​ 14,403 ​ 152,810 ​ — Investment in FHLB and FRB Stock ​ 20,274 ​ 20,274 ​ 20,274 ​ — ​ — Loans held for sale ​ 3,491 ​ 3,491 ​ — ​ 3,491 ​ — Loans, net ​ 1,976,916 ​ 1,966,985 ​ — ​ — ​ 1,966,985 Accrued interest receivable ​ 7,587 ​ 7,587 ​ — ​ 7,587 ​ — Financial liabilities: ​ ​ ​ ​ ​ Deposits ​ 2,115,451 ​ 2,117,020 ​ — ​ 2,117,020 ​ — Junior subordinated deferrable interest debentures, net ​ ​ 8,464 ​ ​ 7,775 ​ ​ — ​ ​ — ​ ​ 7,775 Subordinated debt, net ​ ​ 63,669 ​ 63,669 ​ — ​ ​ 63,669 ​ ​ — Accrued interest payable ​ 293 ​ 293 ​ — ​ 293 ​ — Off-balance sheet liabilities: ​ ​ ​ ​ ​ ​ Undisbursed loan commitments, lines of credit, standby letters of credit ​ 102,713 ​ 102,398 ​ — ​ — ​ 102,398 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Carrying ​ Fair ​ Fair value measurements ​ amount value Level 1 Level 2 Level 3 December 31, 2021 ​ ​ ​ ​ ​ Financial assets: ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 379,687 ​ $ 379,687 ​ $ 379,687 ​ $ — ​ $ — Time deposits in banks ​ 3,585 ​ 3,585 ​ 3,585 ​ — ​ — Investment securities available-for-sale ​ 174,435 ​ 174,435 ​ 18,777 ​ 155,658 ​ — Investment in FHLB and FRB Stock ​ 16,035 ​ 16,035 ​ 16,035 ​ — ​ — Loans held for sale ​ 6,470 ​ 6,470 ​ — ​ 6,470 ​ — Loans, net ​ 1,647,190 ​ 1,659,811 ​ — ​ — ​ 1,659,811 Accrued interest receivable ​ 5,929 ​ 5,929 ​ — ​ 5,929 ​ — Financial liabilities: ​ ​ ​ ​ ​ Deposits ​ 1,985,239 ​ 1,986,651 ​ — ​ 1,986,651 ​ — Junior subordinated deferrable interest debentures, net ​ 8,403 ​ 8,612 ​ — ​ — ​ 8,612 Subordinated debt, net ​ 63,542 ​ 63,542 ​ — ​ 63,542 ​ — Accrued interest payable ​ 1,180 ​ 1,180 ​ — ​ 1,180 ​ — Off-balance sheet liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Undisbursed loan commitments, lines of credit, standby letters of credit ​ 104,139 ​ 103,824 ​ — ​ — ​ 103,824 ​ ​ ​ 31 Table of Contents BAYCOM CORP AND SUBSIDIARY NOTES TO CONDENSED FINANCIAL STATEMENTS – (continued) (Tables in thousands, except for share and per share data) (unaudited) ​ NOTE 18 – COMMITMENTS AND CONTINGENCIES Lending and Letter of Credit Commitments We operate in a highly regulated environment. From time to time we are a party to various claims and litigation matters incidental to the conduct of our business. We are not presently party to any legal proceedings where we believe the resolution would have a material adverse effect on our business, financial condition, or results of operations. Nevertheless, given the nature, scope and complexity of the extensive legal and regulatory landscape applicable to our business (including laws and regulations governing consumer protection, fair lending, fair labor, privacy, information security and anti-money laundering and anti-terrorism laws), we, like all banking organizations, are subject to heightened legal and regulatory compliance and litigation risk. In the normal course of business, the Company enters into various commitments to extend credit, which are not reflected in the financial statements. These commitments consist of the undisbursed balance on personal, commercial lines, including commercial real estate secured lines of credit, and of undisbursed funds on construction and development loans. The Company also issues standby letter of credit commitments, primarily for the third-party performance obligations of clients. The following table presents a summary of commitments described above as of the dates indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, December 31, ​ ​ 2022 ​ 2021 Commitments to extend credit ​ $ 101,947 ​ $ 100,686 Standby letters of credit ​ 766 ​ 3,453 Total commitments ​ $ 102,713 ​ $ 104,139 ​ Commitments generally have fixed expiration dates or other termination clauses. The actual liquidity needs or the credit risk that the Company will experience will be lower than the contractual amount of commitments to extend credit because a significant portion of these commitments are expected to expire without being drawn upon. The commitments are generally variable rate and include unfunded home equity lines of credit, commercial real estate construction where disbursement is made over the course of construction, commercial revolving lines of credit, and unsecured personal lines of credit. 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 September 30, 2022 and December 31, 2021. Commercial Real Estate Concentrations 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. Although management believes that loans within these concentrations have no more than the normal risk of collectability, a decline in the performance of the economy in general or a decline in real estate value in the Company’s primary market areas in particular, could have an adverse impact on collectability . Other Assets The Company has commitments to fund investments in LIHTC partnerships and an SBIC fund. 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. 32 Table of Contents BAYCOM CORP AND SUBSIDIARY NOTES TO CONDENSED FINANCIAL STATEMENTS – (continued) (Tables in thousands, except for share and per share data) (unaudited) ​ Deposits 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. Local Agency Deposits and Other Advances In the normal course of business, the Company accepts deposits from local agencies. The Company is required to provide collateral for certain local agency deposits in the states of California, Colorado, New Mexico and Washington. 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. ​ ​ ​ 33 Table of Contents ​