What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-31 compared with 2022-03-31 · 249 added, 246 removed, 1384 unchanged (26% of the section changed)

37 unchanged sentences

(In thousands, except for share data)

Cash and due from banks

Federal funds sold

Cash due from banks

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 $ 17,700 at December 31, 2021 and $ 17,500 December 31, 2020

Loans, net of allowance for loan losses of $ 18,900 at December 31, 2022 and $ 17,700 at December 31, 2021

Premises and equipment, net

6 unchanged sentences

Noninterest and interest bearing deposits

Other borrowings

Junior subordinated deferrable interest debentures, net

13 unchanged sentences

Additional paid in capital

Accumulated other comprehensive income, net of tax

Accumulated other comprehensive (loss) income, net of tax

Retained earnings

8 unchanged sentences

Loans, including fees

Investment securities and interest bearing deposits in banks

Investment securities

Fed funds sold and interest-bearing balances in banks

FHLB dividends

3 unchanged sentences

Subordinated debt

Other borrowings

Junior subordinated debt

Total interest expense

6 unchanged sentences

Loan servicing and other loan fees

Gain on sale of premises

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

Gain on sale of OREO

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

Bargain purchase gain

Other income and fees

18 unchanged sentences

(In thousands)

Other comprehensive income:

Other comprehensive (loss) income:

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

Deferred tax benefit (expense)

Other comprehensive (loss)/income, net of tax

Other comprehensive (loss) gain income, net of tax

Total comprehensive income

10 unchanged sentences

Restricted stock granted

Restricted stock forfeited

Stock based compensation

Issuance of shares

Repurchase of shares

( 1,276,869 )

Balance, December 31, 2020

Other comprehensive income, net

Other comprehensive loss, net

Restricted stock granted

2 unchanged sentences

Repurchase of shares

( 1,276,869 )

Balance, December 31, 2021

2 unchanged sentences

Restricted stock forfeited

Cash dividends of $ 0.05 per share

Stock based compensation

Issuance of common shares to acquire Pacific Enterprise Bancorp

Repurchase of shares

14 unchanged sentences

Loans originated for sale

Gain on sale of premises, net

Loss on sale of premises, net

Gain on sale of OREO

Bargain purchase gain

Accretion on junior subordinated debentures

16 unchanged sentences

Purchase of Federal Reserve Bank stock

Increase in loans, net

Increase (decrease) in loans, net

Proceeds from sale of premises

1 unchanged sentence

Purchase of equipment and leasehold improvements, net

Net cash paid out for acquisitions

Net cash used in investing activities

Net cash received (paid) for acquisitions

Net cash provided by (used in) investing activities

The accompanying notes are an integral part of the consolidated financial statements.

4 unchanged sentences

Cash flows from financing activities:

Increase in noninterest and interest bearing deposits in banks, net

Increase (decrease) in time deposits, net

(Decrease) increase in noninterest and interest bearing deposits

(Decrease) increase in time deposits, net

Repayment of junior subordinated debentures

5 unchanged sentences

Repurchase of common stock

Net cash provided by financing activities

Increase in cash and cash equivalents

Dividends paid on common stock

Net cash (used in) provided by financing activities

(Decrease) increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

9 unchanged sentences

Recognition of lease liability

Cash dividends declared on common stock not yet paid

Assets acquired, net of cash received

11 unchanged sentences

The Bank provides a broad range of financial services primarily to local small and mid-sized businesses, service professionals and individuals through its 34 full-service banking branches.

The main office is located in Walnut Creek, California and branch offices are located in Oakland, Castro Valley, Mountain View, Stockton, Pleasanton, Livermore, San Jose, Long Beach, Sacramento, San Francisco, Buena Park, Los Angeles, and Garden Grove, Waterloo, California, and Seattle, Washington ( 2 ), New Mexico ( 5 ) and Colorado ( 11 ).

The main office is located in Walnut Creek, California and branch offices are located in Oakland, Castro Valley, Mountain View, Stockton, Pleasanton, Livermore, San Jose, Long Beach, Sacramento, San Francisco, Buena Park, Los Angeles, and Garden Grove, Waterloo, Irvine, California, and Seattle, Washington ( 2 ), New Mexico ( 5 ) and Colorado ( 11 ).

The Company is subject to regulation by the Board of Governors of the Federal Reserve System (“Federal Reserve”).

24 unchanged sentences

Business Combinations

On February 1, 2022 , the Company acquired all of the assets and assumed all of the liabilities of Pacific Enterprise Bancorp (“PEB”) and its wholly owned subsidiary, Pacific Enterprise Bank , under a Merger and Plan of Reorganization dated September 7, 2021 .

On February 4, 2020 , the Company acquired all of the assets and assumed all of the liabilities of Grand Mountain Bancshares, Inc.

(“GMB”) and its wholly owned subsidiary Grand Mountain Bank , under a Merger and Plan of Reorganization dated November 4, 2019 .

On October 21, 2019 , the Company acquired all of the assets and assumed all of the liabilities of TIG Bancorp (“TIG”) and its subsidiary, First State Bank of Colorado, under a Merger and Plan of Reorganization dated June 28, 2019 .

On May 24, 2019 , the Company acquired all of the assets and assumed all of the liabilities of Uniti Financial Corporation (“UFC”) and its subsidiary, Uniti Bank, under a Merger and Plan of Reorganization dated December 7, 2018 .

The acquired assets and assumed liabilities, both tangible and intangible for all acquisitions were measured at estimated fair values, as required by the acquisition method of accounting for business combinations Financial Accounting Standards Board (“FASB”) ASC 805, Business Combinations.

9 unchanged sentences

The Company places these deposits with major financial institutions and management monitors the financial condition of these institutions and believes the risk of loss to be minimal.

At December 31, 2021, the Company did not hold interest bearing money market accounts in these financial institutions.

At December 31, 2020, the Company held interest bearing money market accounts in these financial institutions totaling $ 20.0 million, with a yield of 0.25 % .

At both December 31, 2022 and December 31, 2021, the Company did not hold interest bearing money market accounts in these financial institutions.

Interest Bearing Deposits in Banks

3 unchanged sentences

Investment Securities Available-for-Sale

Available-for-sale securities include bonds, notes, mortgage-backed securities, and debentures not classified as held-to-maturity securities.

Available-for-sale debt securities include bonds, notes, mortgage-backed securities, and debentures not classified as held-to-maturity securities.

These securities are carried at estimated fair value with unrealized holding gains and losses, net of tax impact, if any, reported as a net amount in a separate component of shareholders’ equity, accumulated other comprehensive income (loss), until realized.

Gains and losses on the sale of available-for-sale securities are determined using the specific identification method.

Gains and losses on the sale of available-for-sale debt securities are determined using the specific identification method.

The amortization of premiums and accretion of discounts are recognized as adjustments to interest income over the period to maturity.

1 unchanged sentence

Impairment may result from either a decline in the financial condition of the issuing entity or in the case of fixed interest rate investments, from rising interest rates.

At each financial statement date management assesses each investment to determine if impaired

At each financial statement date management assesses each investment to determine if impaired investments are temporarily impaired or if the impairment is other than temporary.

This assessment includes a determination of whether the Company intends to sell the security, or it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis less any current-period credit losses.

BAYCOM CORP AND SUBSIDIARY

1 unchanged sentence

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

investments are temporarily impaired or if the impairment is other than temporary.

For debt securities that are considered other than temporarily impaired and that the Company does not intend to sell and will not be required to sell prior to recovery of the amortized cost basis, the amount of impairment is separated into the amount that is credit related (credit loss component) and the amount due to all other factors.

securities that are considered other than temporarily impaired and that the Company does not intend to sell and will not be required to sell prior to recovery of the amortized cost basis, the amount of impairment is separated into the amount that is credit related (credit loss component) and the amount due to all other factors.

The credit loss component is recognized in earnings and is calculated as the difference between the security’s amortized costs basis and the present value of its expected future cash flows.

19 unchanged sentences

Interest on loans is calculated and accrued daily using the simple interest method based on the daily amount of principal outstanding.

Generally, loans with temporarily impaired values and loans to borrowers experiencing financial difficulties are placed on non-accrual even though the borrowers continue to repay the loans as scheduled.

When the ability to fully collect non-accrual loan principal is in doubt, cash payments received are applied first to principal until such time as full collection of the remaining recorded balance is expected.

Generally, loans with temporarily impaired values and loans to borrowers experiencing financial difficulties are placed on nonaccrual even though the borrowers continue to repay the loans as scheduled.

When the ability to fully collect nonaccrual loan principal is in doubt, cash payments received are applied first to principal until such time as full collection of the remaining recorded balance is expected.

Loans are returned to accrual basis when principal and interest payments are being paid currently and full payment of principal and interest is probable.

3 unchanged sentences

PPP loans have a contractual term of two or five years and provide borrowers with an automatic payment deferral of principal and interest.

PPP processing fees are deferred and recognized into interest income on straight line basis over the contractual life of the loans, but may be accelerated upon forgiveness or prepayment.

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

The PPP expired on May 31, 2021.

BAYCOM CORP AND SUBSIDIARY

1 unchanged sentence

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

processing fees are deferred and recognized into interest income on straight line basis over the contractual life of the loans, but may be accelerated upon forgiveness or prepayment.

Loans Purchased

1 unchanged sentence

As of December 31, 2022 and 2021, purchased loans outstanding of collection totaled $ 134.5 million and $ 145.4 million respectively.

Purchase premiums remaining on the purchased loans totaled $ 533,000 and $ 1.8 million at December 31, 2021 and 2020, respectively.

Purchase premiums remaining on the purchased loans totaled $ 10,000 and $ 533,000 at December 31, 2022 and 2021, respectively.

The purchased loans consist of adjustable-rate multi-family residential mortgages on properties within the Company’s markets and adjustable rate commercial and industrial loans both inside and outside the Company’s markets.

11 unchanged sentences

The expected cash flows in excess of the amount paid are recorded as interest income over the life of the loan (“accretable yield”).

The excess of the loan’s or pool’s contractual principal and interest over the expected cash flows is not recorded (“nonaccretable differences”).

The excess of the loan or pool’s contractual principal and interest over the expected cash flows is not recorded (“nonaccretable differences”).

Over the life of the loan or pool, expected cash flows continue to be estimated.

8 unchanged sentences

Periodically, the Company charges current earnings with provisions for estimated probable losses of loans receivable.

The provision or adjustment takes into

The provision or adjustment takes into consideration the adequacy of the total allowance for loan losses giving due consideration to specifically identified problem loans, the financial condition of the borrower, fair value of the underlying collateral, recourse provisions, prevailing economic conditions, and other factors.

Additional consideration is given to the Company’s historical loan loss experience

BAYCOM CORP AND SUBSIDIARY

1 unchanged sentence

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

consideration the adequacy of the total allowance for loan losses giving due consideration to specifically identified problem loans, the financial condition of the borrower, fair value of the underlying collateral, recourse provisions, prevailing economic conditions, and other factors.

Additional consideration is given to the Company’s historical loan loss experience relative to the Company’s loan portfolio concentrations related to industry, collateral and geography.

relative to the Company’s loan portfolio concentrations related to industry, collateral and geography.

The Company considers this concentration of credit risk when assessing and assigning qualitative factors in the allowance for loan losses.

26 unchanged sentences

A loan can be fully and adequately secured and still be considered Substandard.

BAYCOM CORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Some characteristics of Substandard loans are:

2 unchanged sentences

● Reliance upon alternative sources of repayment;

BAYCOM CORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

● Term loans that are granted on liberal terms because the borrower cannot service normal payments for that type of debt;

12 unchanged sentences

Impairment is measured on a loan-by-loan basis for loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent.

The Company did not designate loans with payment deferrals granted due to the novel coronavirus of 2019 (“COVID-19’) pandemic as delinquent in accordance with provisions of CARES Act” and the Consolidated Appropriations Act, 2021 (the “CAA, 2021”) and related regulatory guidance.

Additional analysis was completed on the allowance for loan losses during 2021 based on the significance of loan modifications in accordance with the CARES Act and regulatory guidance and loan risk rating downgrades as well as additional risk factors related to COVID-19.

Loan modifications in accordance with the CARES Act and related regulatory guidance are still subject to an evaluation in regard to determining whether or not a loan is deemed to be impaired.

BAYCOM CORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Troubled Debt Restructuring

1 unchanged sentence

The Company measures any loss on the TDR in accordance with the guidance concerning impaired loans set forth above.

Additionally, loans modified in troubled debt restructurings are generally placed on non-accrual status at the time of restructuring and included in impaired loans.

Additionally, loans modified in troubled debt restructurings 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.

The Company elected to apply the temporary relief under the CARES Act and related bank regulatory guidance to certain eligible short-term modifications and past due loans.

Qualifying loan modifications were not classified as TDR for accounting or disclosure purposes until 180 days following a loan's initial modification under the CARES Act and related bank regulatory guidance at which time those loans were classified as a TDR.

Other Real Estate Owned

6 unchanged sentences

Operating expenses of such properties, net of related income, are included in other expenses.

BAYCOM CORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Premises and Equipment

10 unchanged sentences

Annually at the end of each year, the Company evaluates premises and equipment for impairment as events or changes in circumstances indicate that the carrying amount of such assets may not be fully recoverable.

Operating Lease Right of Use Assets and Liabilities

The Company determines if a lease is present at the inception of an agreement.

Operating leases are capitalized at commencement and are discounted using the Company’s FHLB borrowing rate for a similar term borrowing unless the lease defines an implicit rate within the contract.

The operating lease right of use assets (“ROU”) represent the Company’s right to use an underlying asset for the lease term, and the operating lease liabilities represent the obligation to make lease payments arising from the lease.

Operating lease right of use assets and operating lease liabilities are recognized on the lease commencement date based on the present value of lease payments over the lease term.

Some of the Company's lease agreements include options to renew at the Company's discretion.

The extensions are not reasonably certain to be exercised, therefore it was not considered in the calculation of the ROU asset and lease liability.

No significant judgments or assumptions were involved in developing the estimated operating lease liabilities as the Company’s operating lease liabilities largely represent future rental expenses associated with operating leases and the borrowing rates are based on publicly available interest rates.

Goodwill, Core Deposit Intangible and Long-Lived 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 is determined as the excess of the fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquire, 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.

2 unchanged sentences

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 life of seven to ten years .

BAYCOM CORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Bank Owned Life Insurance

1 unchanged sentence

BOLI is recorded on the consolidated balance sheets at the amount that can be realized based on cash surrender value.

BAYCOM CORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Transfers of Financial Assets

8 unchanged sentences

Servicing assets, included in interest receivable and other assets in the consolidated statements of financial condition, totaled $ 2.1 million and $ 1.9 million as of December 31, 2022 and 2021, respectively.

There were no servicing liabilities, included in interest payable and other liabilities on the consolidated balance sheets, as of December 31, 2021 and $ 26,000 as of December 31, 2020.

There were no servicing liabilities, included in interest payable and other liabilities on the consolidated balance sheets at both December 31, 2022 and December 31, 2021.

In connection with the sale of the Company’s SBA loans, the Company recognizes servicing assets when servicing rights are retained.

9 unchanged sentences

Loans held for sale are recorded at their lower aggregate cost or estimated fair value.

During 2021, the Company sold $ 45.8 million of SBA loans in the secondary market, all of which settled by end of year 2021.

During 2020, the Company sold $ 24.0 million of SBA loans in the secondary market, all of which settled by end of year 2020.

BAYCOM CORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

During 2022, the Company sold $ 34.0 million of SBA loans (guaranteed portion) in the secondary market, all of which settled by end of year 2022.

During 2021, the Company sold $ 45.8 million of SBA loans (guaranteed portion) the secondary market, all of which settled by end of year 2021.

The fair value of SBA loans held for sale is based primarily on prices that secondary markets are currently offering for loans with similar characteristics.

3 unchanged sentences

SBA loans are generally secured by the borrowing entities’ assets such accounts receivable, property and equipment and other business assets.

The Company generally recognizes gains and losses on these loan sales based on the differences between the sales proceeds received and the allocated carrying value of the loans sold (which can include deferred premiums and net origination fees and costs).

The Company generally recognizes gains and losses on these loan sales

BAYCOM CORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

based on the differences between the sales proceeds received and the allocated carrying value of the loans sold (which can include deferred premiums and net origination fees and costs).

The non-guaranteed portion of the SBA loans is not typically sold by the Company and is classified as held for investment.

18 unchanged sentences

The Company’s noninterest revenue streams are largely based on transactional activity, or standard month-end revenue accruals such as asset management fees based on month-end market values.

Consideration is

BAYCOM CORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

often received immediately or shortly after the Company satisfies its performance obligation and revenue is recognized.

Consideration is often received immediately or shortly after the Company satisfies its performance obligation and revenue is recognized.

The Company does not typically enter into long-term revenue contracts with clients, and therefore, does not experience significant contract balances.

1 unchanged sentence

The following are descriptions of revenues within the scope of ASC 606.

BAYCOM CORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Deposit fees and service charges

28 unchanged sentences

The grant-date fair value of the award is amortized on the straight-line basis over the requisite service period, which is generally the vesting period, as compensation expense in salaries and benefits for employees and other noninterest expense for directors.

Earnings per Share

Earnings per common share (“EPS”) is computed based on the weighted average number of common shares outstanding during the period.

Basic EPS excludes dilution and is computed by dividing net earnings available to common

BAYCOM CORP AND SUBSIDIARY

1 unchanged sentence

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

Earnings per Share

Earnings per common share (“EPS”) is computed based on the weighted average number of common shares outstanding during the period.

Basic EPS excludes dilution and is computed by dividing net earnings available to common stockholders by the weighted average of common shares outstanding.

stockholders by the weighted average of common shares outstanding.

Non-vested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents are considered participating securities and are included in the computation of basic earnings per share.

1 unchanged sentence

Repurchase of Common Stock

On December 15, 2021, the Company announced that its Board of Directors approved a stock repurchase program for the repurchase of up to 747,000 shares of its common stock, or approximately 7 % of its outstanding shares, over a one-year period through open market purchases, privately-negotiated transactions, or otherwise in compliance with Rule 10b-18 under the Securities Exchange Act of 1934.

This was the fifth stock repurchase plan since October 2019.

On February 22, 2021, the Company announced that its Board of Directors approved a stock repurchase program for the repurchase of up to 560,000 shares of its common stock, or approximately 5 % of its outstanding shares, over a one-year period through open market purchases, privately-negotiated transactions, or otherwise in compliance with Rule 10b-18 under the Securities Exchange Act of 1934.

This was the fourth stock repurchase plan since October 2019.

During the year ended December 31, 2021, the Company, utilizing the two above referenced plans, repurchased a total of 648,734 shares of the Company’s common stock.

As of December 31, 2021, 742,532 shares of Company common stock remained available for future purchases under the December 2021 stock repurchase plan.

The first three stock repurchase plans, announced by the Company in October 2019, March 2020 and October 2020 authorized the repurchase of a total of 1,854,922 shares.

During the year end December 31, 2020, the Company repurchased a total of 1,276,869 shares under these plans.

In December 2021, the Company’s Board of Directors approved a fifth stock repurchase program for the repurchase up to 747,000 shares, or approximately 7.0 % , of the Company’s outstanding common stock over a one year period.

In October 2022, the Company’s Board of Directors approved a sixth stock repurchase program, to commence following completion of the fifth stock repurchase program, for the repurchase of up to 645,000 shares, or approximately 5.0 % , of the Company’s outstanding common stock over a one year period.

Under the repurchase programs, the Company was authorized to repurchase its common stock through open market purchases, privately-negotiated transactions, or pursuant to any trading plan adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), in compliance with Rule 10b-18 of the Exchange Act.

The stock repurchase program does not obligate the Company to acquire any specific number of shares in any period, and may be expanded, extended, modified or discontinued at any time.

As of December 31, 2022, 481,792 shares of Company common stock remained available for future purchases under the October 2022 stock repurchase plan.

Comprehensive Income (Loss)

5 unchanged sentences

It is the opinion of management that the disposition or ultimate resolution of such claims and lawsuits, if any, will not have a material adverse effect on the financial position of the Company.

Recent Accounting Pronouncements Adopted

In December 2019, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes.

ASU 2019-12 provides that state franchise or similar taxes that are based, at least in part on an entity’s income, be included in an entity’s income tax recognized as income-based taxes.

The ASU further clarifies that the effect of any change in tax laws or rates used in the computation of the annual effective tax rate are required to be reflected in the first interim period that includes the enactment date of the legislation.

Technical changes to eliminate exceptions to Topic 740 related to intra-period tax allocations for entities with losses from continuing operations, deferred tax liabilities related to change in ownership of foreign entities, and interim-period tax allocations for businesses with losses where the losses are expected to be

BAYCOM CORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The Company adopted ASU 2019-12 on December 15, 2020 .

The adoption of ASU 2019-12 did not have a material impact on the Company’s consolidated financial statements.

In October 2020, the FASB issued ASU 2020-08, “Receivables – Nonrefundable Fees and Other Costs” (ASU 2020-08”).

ASU 2020-08 clarifies that the Company should reevaluate whether a callable debt security is within the scope of paragraph 310-20-35-33 for each reporting period.

The Company adopted ASU 2020-08 on December 15, 2020 .

The adoption of ASU 2020-08 did not have a material impact on the Company’s consolidated financial statements.

Recent Accounting Guidance Not Yet Effective

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326) and subsequent amendment to the initial guidance in November 2018, ASU No.

2018-19, Codification Improvements to Topic 326, Financial Instruments — Credit Losses, in April 2019, ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments — Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, and in May 2019, ASU 2019-05 Financial Instruments — Credit Losses, Topic 326, 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 oth er 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.

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.

7 unchanged sentences

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.

BAYCOM CORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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.

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 .

BAYCOM CORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

This accounting pronouncement is applicable to the Company effective 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 forecast methodologies 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.

Internal controls related to CECL have been designed and are being evaluated;

however, all internal controls related to CECL implementation are not operational.

As of the implementation date, following sensitivity analyses and considering changes in economic conditions, credit quality of the loan portfolio and changes in interest rates, management estimates that our adoption of the CECL model will result in a $ 1 million to $ 3 million increase to our allowance for credit losses for loans.

Once finalized, the impact as a result of the adoption of this guidance will be recorded as a cumulative-effect, net of tax, adjustment to retained earnings effective January 1, 2023.

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, other management judgements, and continued refinement and validation of the model and methodologies.

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.

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 basis.

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 statement

Recent Events

On March 22, 2020, the Interagency Statement was issued by our banking regulators that encourages financial institutions to work prudently with borrowers who are or may be unable to meet their contractual payment obligations due to the effects of COVID-19.

Additionally, Section 4013 of the CARES Act further provides that a qualified loan modification is exempt by law from classification as a TDR as defined by GAAP, from the period beginning March 1, 2020 until the earlier of December 31, 2020 or the date that is 60 days after the date on which the national emergency concerning the COVID-19 outbreak declared by the President of the United States under the National Emergencies Act terminates.

The Interagency Statement was subsequently revised in April 2020 to clarify the interaction of the original guidance with Section 4013 of the CARES Act, as well as setting forth the banking regulators’ views on consumer protection considerations.

On December 27, 2020, the CAA, 2021 was signed into law Section 541 of CAA, 2021 extends this relief to the earlier of January 1, 2022 or 60 days after the national emergency termination date.

As of December 31, 2021 and 2020, the amount of portfolio loans remaining under payment/relief agreements totaled $ 2.7 million and $ 66.7 million, respectively.

The majority of these modifications involved short-term (e.g.

less than six months) extensions and/or interest-only periods.

Subsequent Events

Management has evaluated subsequent events for potential recognition and disclosure through March 31, 2022, the date the financial statements were issued.

On September 7, 2021 , the Company announced the execution of a definitive agreement to acquire in an all-stock transaction Pacific Enterprise Bancorp (“PEB”), the holding company for Pacific Enterprise Bank, a California-chartered commercial bank.

Subject to the terms and conditions of the merger agreement, the transaction provided for the PEB shareholders to receive consideration of 1.0292 shares of BayCom common stock in exchange for each share of PEB common stock representing an aggregate transaction value of approximately $ 64.4 million.

The PEB transaction was completed effective February 1, 2022 .

Upon closing of the transaction, PEB merged into the Company and Pacific Enterprise Bank merged into the Bank.

At December 31, 2021, PEB had approximately $ 518.5 million in assets, $ 429.7 million in loans, $ 403.4 million in deposits and $ 64.8 million in stockholders’ equity.

Upon completion of the transaction, the combined company has approximately $ 2.9 billion in total assets, $ 2.1 billion in total loans and $ 2.4 billion in total deposits.

The transaction expands the Company’s presence in Orange County, California.

Pacific Enterprise Bank serves its communities through its one full-service location in Irvine, California.

With this acquisition the United Business Bank has a total of 34 full-service locations, with 16 locations in California, two in Washington, five in New Mexico and 11 in Colorado.

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 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,

BAYCOM CORP AND SUBSIDIARY

1 unchanged sentence

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

upon the Corporation’s adoption of the amendments in ASU 2016-13, which is referred to as the current expected credit loss model.

Subsequent Events

Management has evaluated subsequent events for potential recognition and disclosure through the date the financial statements were issued.

Reclassifications

1 unchanged sentence

None of the reclassifications impact net income or earnings per common share.

On February 4, 2020 , the Company completed its acquisition of GMB.

As of the acquisition date, GMB merged into the Company and Grand Mountain Bank, GMB’s wholly owned bank subsidiary, merged into United Business Bank.

The acquisition expanded the Company’s market share in Colorado with the addition of four branches located in Grand County, Colorado.

In an all-cash transaction, the Company paid GMB shareholders $ 3.40 in cash in exchange for each share of GMB common stock representing an aggregate transaction value of approximately $ 13.9 million .

On February 1, 2022, the Company completed its acquisition of PEB.

As of the acquisition date, PEB merged into the Company and Pacific Enterprise Bank, PEB’s wholly owned bank subsidiary, merged into the Bank.

The acquisition expanded the Company’s market share in California with one branch in Irvine.

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

Noninterest income for the year ended December 31, 2022 included $ 1.7 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.

BAYCOM CORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

6 unchanged sentences

FHLB stock, at par

FRB stock, at par

Premises and equipment, net

6 unchanged sentences

Total Deposits

Junior subordinated debentures, net

Interest payable and other liabilities

Total liabilities assumed

Stock consideration

Cash consideration

Bargain purchase gain

BAYCOM CORP AND SUBSIDIARY

5 unchanged sentences

Fair value adjustments:

Investments available-for-sale

Premises and equipment, net

1 unchanged sentence

Time deposits

Junior subordinated debentures, net

Write-down other (assets) liabilities

Reserve for unfunded commitments

Write-up right-of-use asset

Total purchase accounting adjustments

Total price paid

Tax effect of purchase accounting adjustments at 27.9 %

Fair value of assets acquired

Value of stock issued/cash paid for stock options

Bargain purchase gain

Pro Forma Results of Operations (Unaudited)

The operating results of the Company in the consolidated statements of income include the operating results of GMB, TIG and UFC, since their respective acquisition dates.

The following table represents the net interest income, net income, basic and diluted earnings per share, as if the mergers with GMB, TIG and UFC were effective January 1, 2020 and 2019, for the respective years in which each acquisition was closed.

The operating results of the Company in the consolidated statements of income include the operating results of PEB and GMB, since their respective acquisition dates.

The following table represents the net interest income, net income, basic and diluted earnings per share, as if the mergers with PEB and GMB were effective January 1, 2022 and January 1, 2020, for the respective years in which each acquisition was closed.

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 each respective year.

10 unchanged sentences

Acquisition expenses are recognized as incurred and continue until all systems are converted and operational functions become fully integrated.

No acquisition expenses were incurred in 2021.

The Company incurred third-party acquisition expenses in the consolidated statements of income for the periods indicated are as follows:

1 unchanged sentence

December 31, 2020

Professional fees

Data processing

Severance expense

Occupancy expense

Data processing

Professional fees

Other expenses

INVESTMENT SECURITIES

10 unchanged sentences

Government Agencies

Preferred equity securities

Municipal securities

3 unchanged sentences

Corporate bonds

During year ended December 31, 2021, the Company sold $ 3.0 million in available-for-sale investments for gross realized gains of $ 41,000 and did no t sell any securities available-for-sale for the year ended December 31, 2020.

For the year ended December 31, 2022, the Company sold one available-for-sale investment security for a minimal net realized gain, sold $ 3.0 million in available-for-sale investments for net realized gains of $ 41,000 for the year ended December 31, 2021 and did no t sell any available-for-sale investments for the year ended December 31, 2020.

BAYCOM CORP AND SUBSIDIARY

5 unchanged sentences

December 31, 2022

Preferred Equity Securities

Municipal securities

6 unchanged sentences

December 31, 2021

Government Agencies

Municipal securities

28 unchanged sentences

Allowance for loan losses

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

At December 31, 2021, PPP loans included in commercial and industrial business loans totaled $ 69.6 million, all of which are fully guaranteed by the SBA, compared to $ 136.5 million as of December 31, 2020.

(1) At December 31, 2022, included PPP loans of $ 11.1 million, compared to $ 69.6 million as of December 31, 2021.

The Bank expects that the great majority of PPP borrowers will seek full or partial forgiveness of their loan obligations in accordance with the CARES Act.

1 unchanged sentence

Interest foregone on nonaccrual loans was approximately $ 580,000 and $ 281,000 for the years ended December 31, 2022 and 2021, respectively.

As of December 31, 2021 and 2020, the Company had floating or variable rate loans totaling $ 955.2 million and $ 936.7 million, respectively.

As of December 31, 2022 and 2021, the Company had floating or variable rate loans totaling $ 1.3 billion and $ 955.2 million, respectively.

As of December 31, 2022, a total of $ 965.8 million have interest rate floors, of which $ 854.0 million, were at their floors.

23 unchanged sentences

Interest recognized

In 2021 and 2020, the Company recorded no charge-offs related to restructured loans.

As of December 31, 2021, TDR loans had a related allowance of $ 259,000 and as of December 31, 2020, TDR loans had a related allowance of $ 35,000 .

There are no commitments to lend additional amounts to borrowers with outstanding loans that are classified as TDRs at December 31, 2021.

For the year ended December 31, 2022, the Company recorded TDR loan charge-offs of $ 3.2 million.

For the year ended December 31, 2021 the Company recorded no TDR loan charge-offs.

As of December 31, 2022 and 2021, TDR loans had a related allowance of $ 393,000 and $ 259,000 , respectively.

There were no commitments to lend additional amounts to borrowers with outstanding loans that were classified as TDRs at December 31, 2022.

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

40 unchanged sentences

Commercial real estate

All loans modified due to COVID-19 are separately monitored and any request for continuation of relief beyond the initial modification will be reassessed at that time to determine if a further modification should be granted and if a downgrade in risk rating is appropriate.

The following table provides an aging of the Company’s loans receivable as of the years indicated:

18 unchanged sentences

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.

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.

1 unchanged sentence

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.

At December 31, 2021, the accretable and nonaccretable differences were approximately $ 508,000 and $ 1.5 million, respectively.

At December 31, 2022, the accretable and nonaccretable differences were approximately $ 1.5 million and $ 1.3 million, respectively.

At December 31, 2021, the accretable and nonaccretable differences were approximately $ 508,000 and $ 1.5 million, respectively.

The Company did no t have any allowance for loan losses for PCI loans during the year ended December 31, 2021, compared to $ 107,000 during the year ended December 31, 2020.

The Company had $ 18,000 of allowance for loan losses for PCI loans during the year ended December 31, 2022, compared to no allowance for any loan losses for PCI loans during the year ended December 31, 2021.

The following table reflects the changes in the accretable yield of PCI loans for the years indicated:

11 unchanged sentences

Beginning balance

Provision (reclassification) for loan losses

Provision for (reversal of) loan losses

Ending balance

12 unchanged sentences

Beginning balance

Provision for loan losses

(Reversal of) provision for loan losses

Ending balance

5 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 participating lender contributed funds to a loss reserve account that is held in a demand deposit account at the participating lender.

The borrower contributions to the loss reserve account are attributed to the participating lender.

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

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

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

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

As of December 31, 2022, the Company had $ 26.3 million of loans enrolled in this loan program.

The Company had a loss reserve account of $ 13.7 million as of December 31, 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 participating lender.

Losses are managed 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 $ 5.1 million of loans under this program during the year ended December 31, 2022.

As of December 31, 2022, the Company had $ 26.2 million of loans enrolled in this program.

The Company had a loss reserve account of $ 6.2 million as of December 31, 2022.

BAYCOM CORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

PREMISES AND EQUIPMENT

5 unchanged sentences

Total premises and equipment, net

Depreciation and amortization included in occupancy and equipment expense totaled $ 2.0 million, $ 1.9 million and $ 1.2 million for the years ended December 31, 2021, 2020 and 2019, respectively.

BAYCOM CORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The Company currently owns 15 of our banking branches and lease the remaining 18 branches under noncancelable operating leases.

Depreciation and amortization included in occupancy and equipment expense totaled $ 2.0 million for both years ended December 31, 2022 and December 31, 2021, compared to $ 1.9 million for the year ended December 31, 2020.

The Company owned 15 of its banking branches and leased the remaining 19 branches under noncancelable operating leases as of December 31, 2022.

These leases expire on various dates through 2030.

12 unchanged sentences

Rental expense included in occupancy and equipment on the consolidated statements of income totaled $ 4.1 million, $ 3.4 million and $ 3.3 million for the years ended December 31, 2022, 2021 and 2020, respectively.

OTHER REAL ESTATE OWNED

Other real estate owned as of the dates indicated consisted of the following:

As of December 31, 2021, there were two residential mortgage loans in the process of foreclosure totaling $ 1.0 million, compared to two residential mortgage loans in the process of foreclosure totaling $ 690,000 at December 31, 2020.

BAYCOM CORP AND SUBSIDIARY

1 unchanged sentence

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

OTHER REAL ESTATE OWNED

Other real estate owned as of the dates indicated consisted of the following:

As of December 31, 2022, there were two residential mortgage loans in the process of foreclosure totaling $ 248,000 , compared to two residential mortgage loans in the process of foreclosure totaling $ 1.0 million at December 31, 2021.

GOODWILL AND INTANGIBLE ASSETS

4 unchanged sentences

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

Due to the adverse and unknown economic impacts resulting from the COVID-19 pandemic, the Company performed a goodwill impairment qualitative assessment during each quarter of 2021 to determine if it is not more likely than not that the fair value of the Company’s reporting unit exceeded its carrying value, including goodwill.

Due to the adverse and unknown economic impacts resulting from the COVID-19 pandemic, the Company performed a goodwill impairment qualitative assessment during each quarter of 2022 and 2021 to determine if it is not more likely than not that the fair value of the Company’s reporting unit exceeded its carrying value, including goodwill.

As of December 31, 2022 the Company’s qualitative assessment which considered the Company’s continued profitability, positive equity, average community bank merger deal values realized during 2022, net interest margin, allowance for loan loss, and the continued growth in its core deposit portfolio, the Company concluded that the goodwill of the Company’s reporting unit, the Bank, is not more likely than not to be impaired.

4 unchanged sentences

Balance at end of period

Estimated annual amortization at December 31, 2021 is as follows:

Year ending December 31,

BAYCOM CORP AND SUBSIDIARY

1 unchanged sentence

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

Estimated annual amortization at December 31, 2022 is as follows:

Year ending December 31,

INTEREST RECEIVABLE AND OTHER ASSETS

2 unchanged sentences

Accrued interest receivable

Investment in SBIC Fund

Investment in Small Business Investment Company ("SBIC") fund

Investment in Community Reinvestment Act fund

Prepaid assets

Servicing assets

Low income housing partnerships, net

Investment in Low Income Housing Tax Credit ("LIHTC") partnerships, net

Investment in statutory trusts

CalCAP reserve receivable

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

2 unchanged sentences

Time deposits

The Company accepts deposits related to real estate transactions qualifying under Section 1031, Tax Deferred Exchanges, of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”).

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

The Company also accepts deposits related to business escrow services.

During 2020, the Company started to wind down its escrow services.

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

At December 31, 2021, aggregate annual maturities of time deposits are as follows:

Year ending December 31,

BAYCOM CORP AND SUBSIDIARY

1 unchanged sentence

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

At December 31, 2022, aggregate annual maturities of time deposits are as follows:

Year ending December 31,

Interest expense, net of early withdrawal penalty, recognized on interest bearing deposits at the dates indicated consisted of the following:

3 unchanged sentences

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

At December 31, 2021, the Company had no other borrowings outstanding, compared to $ 5.0 million of FHLB advances outstanding at December 31, 2020.

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

In addition to the availability of liquidity from the FHLB, during 2022 the Bank maintained a short-term borrowing line of credit with the Federal Reserve Bank (“FRB”) of San Francisco based on PPP loans pledged as collateral.

This line was closed in 2022, with no FRB borrowings outstanding at both December 31, 2022 and December 31, 2021.

The Company has Federal Funds lines with four correspondent banks.

Cumulative available commitments totaled $ 65.0 and $ 75.0 million at December 31, 2021 and December 31, 2020, respectively.

There are no amounts outstanding under these facilities at both December 31, 2021 and 2020.

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

There are no amounts outstanding under these facilities at both December 31, 2022 and December 31, 2021.

JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES

7 unchanged sentences

The BFC Trust Preferred Securities are subject to mandatory redemption to the extent of any early redemption of the subordinated debentures or upon its maturity on June 17, 2034.

BAYCOM CORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The Company acquired the FULB Trust in the acquisition of FULB.

6 unchanged sentences

The FULB Trust Preferred Securities are subject to mandatory redemption to the extent of any early redemption of the subordinated debentures or upon its maturity on September 15, 2034.

BAYCOM CORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Holders of the trust preferred securities issued by the Trusts are entitled to a cumulative cash distribution on the liquidation amount of $ 1,000 per security.

18 unchanged sentences

Commencing on September 15, 2025, the interest rate on the Notes resets quarterly to the three-month Secured Overnight Financing rate (“SOFR”) plus a spread of 521 basis points ( 5.21 %), payable quarterly in arrears.

Interest on the Notes is payable semi-annually on June 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.

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.

7 unchanged sentences

Total current tax expense

Deferred income tax (benefit) expense:

Total deferred tax (benefit) expense

Deferred income tax expense (benefit):

Total deferred tax expense (benefit)

Total income tax expense

9 unchanged sentences

Total income tax expense

The Company is subject to federal income tax and state franchise tax.

Federal income tax returns for the years ended on or after December 31, 2018 are open to audit by the federal authorities and California, Colorado and New Mexico returns for the years ended on or after December 31, 2017 are open to audit by state authorities.

The Company is subject to US federal income tax as well as state income tax in multiple states, most notably California, Colorado and New Mexico.

Federal income tax returns for the years ended on or after December 31, 2019 are open to audit by the federal authorities and, with limited exception, state income tax returns for the years ended on or after December 31, 2018 are open to audit by state authorities.

BAYCOM CORP AND SUBSIDIARY

9 unchanged sentences

Other liabilities

Unrealized loss on AFS securities

Total deferred tax assets

10 unchanged sentences

At December 31, 2022, Federal, California and Colorado NOLs included in the deferred tax asset totaled $ 13.1 million, $ 4.5 million and $ 4.0 million, respectively.

The CARES Act, among other things, permits NOL carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021.

In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes.

The Company evaluated the impact of the CARES Act and determined that none of the changes would result in a material income tax benefit to the Company.

On December 27, 2020, the CAA, 2021 was signed into law which extends several provisions of the CARES Act.

As of December 31, 2021, the Company determined that neither the CAA, 2021 nor any other changes to income tax laws or regulations in other jurisdictions had a significant impact on the Company’s effective tax rate.

During the years ended December 31, 2022, 2021 and 2020, the Company did no t recognize any interest and penalties.

16 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 December 31, 2021 and $ 415,000 at December 2020.

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

Commercial Real Estate Concentrations

4 unchanged sentences

At December 31, 2022, the remaining commitments to the LIHTC and SBIC were approximately $ 2.1 million and $ 122,000 , respectively.

At December 31, 2020, the remaining commitment to the LIHTC and SBIC were $ 899,000 and $ 122,000 , respectively.

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

At December 31, 2022, approximately $ 215.1 million, or 11.0 %, of the Company’s deposits are derived from the top ten depositors.

6 unchanged sentences

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

As of December 31, 2021 and 2020, the FHLB issued letters of credit on behalf of the Company totaling $ 42.0 million and $ 30.1 million, respectively, as collateral for local agency deposits.

As of December 31, 2022 and December 31, 2021, the FHLB issued letters of credit on behalf of the Company totaling $ 40.6 million and $ 42.0 million, respectively, as collateral for local agency deposits.

EMPLOYEE BENEFIT PLANS

32 unchanged sentences

For the years ended December 31, 2022, 2021 and 2020, total compensation expense for these plans was $ 1.0 million, $ 1.4 million and $ 1.5 million, respectively.

As of December 31, 2021, there was $ 1.4 million of total unrecognized compensation cost related to non-vested shares granted as restricted stock awards.

As of December 31, 2022, there was $ 959,000 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 two years .

8 unchanged sentences

Dividends from the Bank to the Company are restricted under California law to the lesser of the Bank’s retained earnings or the Bank’s net income for the latest three fiscal years, less dividends previously declared during that period or, with the approval of the DFPI, to the greater of the retained earnings of the Bank, the net income of the Bank for its last fiscal year, or the net income of the Bank for its current fiscal year.

During the years ended December 31, 2021 and 2019, the Bank did no t pay any dividend to the Company.

The Bank paid a dividend to the Company in 2020 totaling $ 11.0 million.

During the years ended December 31, 2022, the Bank paid $ 2.7 million of dividends to the Company.

The Bank did no t pay any dividend to the Company in 2021.

Regulatory Capital

14 unchanged sentences

Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements.

Under capital adequacy guidelines of the regulatory framework for prompt corrective action, the Bank must meet specific capital adequacy guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices and until August 30, 2018, BayCom Corp was subject to similar capital regulations.

Under capital adequacy guidelines of the regulatory framework for prompt corrective action, the Bank must meet specific capital adequacy guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices and until August 30, 2018, the Company was subject to similar capital regulations.

The Bank’s capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

60 unchanged sentences

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

Advertising expense included in marketing and promotions totaled $ 71,000 , $ 194,000 and $ 261,000 for the years ended December 31, 2021, 2020 and 2019, respectively.

Advertising expense included in marketing and promotions totaled $ 71,000 for both the years ended December 31, 2022 and 2021, compared to $ 194,000 for the year ended December 31, 2020.

BAYCOM CORP AND SUBSIDIARY

17 unchanged sentences

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 2021 or 2020.

There were no transfers between levels during 2022 and 2021.

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

12 unchanged sentences

Government Agencies

Preferred equity securities

Municipal securities

56 unchanged sentences

Cash and cash equivalents

Interest bearing deposits in banks

Time deposits in banks

Investment securities available-for-sale

3 unchanged sentences

Financial liabilities:

Other borrowings

Junior subordinated deferrable interest debentures, net

7 unchanged sentences

Cash and cash equivalents

Interest bearing deposits in banks

Time deposits in banks

Investment securities available-for-sale

3 unchanged sentences

Financial liabilities:

Other borrowings

Junior subordinated deferrable interest debentures, net

40 unchanged sentences

Subordinated debt

Other borrowings

Junior subordinate debt

Total Interest expense

12 unchanged sentences

Dividend from bank subsidiary

Depreciation of furniture, fixtures and equipment

Gain on sale of securities

3 unchanged sentences

Stock-based compensation expense

Decrease in interest receivable and other assets

Increase (decrease) in interest payable and other liabilities

Net cash provided by operating activities

Increase in deferred tax asset

Increase (decrease) in interest receivable and other assets

Increase in interest payable and other liabilities

Net cash provided by (used in) operating activities

Cash flows from investing activities:

1 unchanged sentence

Purchase from sale of investment securities

Net cash paid for acquisitions

Net cash provided by (used in) investing activities

Proceeds from the sales of investment securities

Net cash received (paid) for acquisitions

Net cash used in investing activities

Cash flows from financing activities:

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Restricted stock issued

Issuance of shares

Repurchase of common stock

Proceeds from initial public offering, net

Net cash provided by financing activities

Increase (decrease) in cash and cash equivalents

Cash dividends paid on common stock

Net cash (used in) provided by financing activities

(Decrease) increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Supplemental disclosure of cash flow information:

Non-cash investing activities:

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

Cash dividends declared on common stock not yet paid

Common stock issued

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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(a) Evaluation of Disclosure Controls and Procedures:

An evaluation of the disclosure controls and procedures as defined in Rule 13a 15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) was carried out as of December 31, 2021 under the supervision and with the participation of the Company’s Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”) and several other members of the Company’s senior management.

An evaluation of the disclosure controls and procedures as defined in Rule 13a 15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) was conducted as of December 31, 2022 under the supervision and with the participation of the Company’s Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”) and several other members of the Company’s senior management.

In designing and evaluating the Company’s disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met.

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The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

The Company’s CEO and CFO concluded that based on their evaluation at December 31, 2021, the Company’s disclosure controls and procedures were effective in ensuring that information we are required to disclose in the reports we file or submit under the Exchange Act is (1) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and (2) accumulated and communicated to BayCom Corp’s management, including its CEO and CFO, as appropriate to allow timely decisions regarding required disclosure, specified in the SEC’s rules and forms.

The Company’s CEO and CFO concluded that based on their evaluation at December 31, 2022, the Company’s disclosure controls and procedures were effective in ensuring that information we are required to disclose in the reports we file or submit under the Exchange Act is (1) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and (2) accumulated and communicated to the Company’s management, including its CEO and CFO, as appropriate to allow timely decisions regarding required disclosure, specified in the SEC’s rules and forms.

(b) Internal Control over Financial Reporting:

The management of BayCom Corp is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f).

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f).

The Company’s internal control over financial reporting is a process designed to provide reasonable assurance to the Company’s management and board of directors regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

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Directors and Executive Officers

Information concerning the Company’s directors is incorporated herein by reference from the Company's definitive proxy statement for its Annual Meeting of Stockholders to be held in June 2022, a copy of which will be filed with the SEC not later than 120 days after the close of the fiscal year.

Information concerning the executive officers of the Company and the Bank is contained under the heading “Executive Officers” under Part I, Item 1 of this Form 10-K and is incorporated herein by reference.

Information concerning the Company’s directors is incorporated herein by reference from the Proxy Statement, a copy of which will be filed with the SEC not later than 120 days after the close of the fiscal year.

Information concerning the executive officers of the Company is contained under the heading “Executive Officers” under Part I, Item 1 of this Form 10-K and is incorporated herein by reference.

Code of Ethics

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Nomination Procedures .

There have been no material changes to the procedures by which shareholders may recommend nominees to the Company’s Board of Directors.

There have been no material changes to the procedures by which shareholders may recommend nominees to BayCom’s Board of Directors.

Audit Committee Matters and Audit Committee Financial Expert .

The Board of Directors of the Company has a standing Audit Committee, which has been established in accordance with Section 3(a)(58)(A) of the Exchange Act.

The Board of Directors of BayCom has a standing Audit Committee, which has been established in accordance with Section 3(a)(58)(A) of the Exchange Act.

The Audit Committee operates under a formal written charter adopted by the Board of Directors.

The members of that committee currently consist of Directors Kendall, Chaudhary, Hotchkiss and Laverne, each of whom was considered independent under Nasdaq listing standards.

The members of that committee currently consist of Directors Kendall, Chaudhary and Laverne, each of whom was considered independent under Nasdaq listing standards.

The Board of Directors has determined that Mr.

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and (iv) are able to read and understand fundamental financial statements, including our balance sheet, income statement, and cash flow statement.

Additional information concerning the Audit Committee is incorporated herein by reference from the Company's definitive proxy statement for its Annual Meeting of Stockholders to be held in June 2022 (except for information contained under the heading "Report of the Audit Committee"), a copy of which will be filed with the SEC not later than 120 days after the close of the fiscal year.

Additional information concerning the Audit Committee is incorporated herein by reference from the Proxy Statement (except for information contained under the heading "Report of the Audit Committee"), a copy of which will be filed with the SEC not later than 120 days after the close of the fiscal year.

Executive Compensation

Information concerning executive compensation is incorporated herein by reference from the Company's definitive proxy statement for its Annual Meeting of Stockholders to be held in June 2022, a copy of which will be filed with the SEC not later than 120 days after the close of the fiscal year.

Information concerning executive compensation is incorporated herein by reference from the Proxy Statement, a copy of which will be filed with the SEC not later than 120 days after the close of the fiscal year.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Information concerning security ownership of certain beneficial owners and management is incorporated herein by reference from the Company's definitive proxy statement for its Annual Meeting of Stockholders to be held in June 2022, a copy of which will be filed with the SEC not later than 120 days after the close of the fiscal year.

Information concerning security ownership of certain beneficial owners and management is incorporated herein by reference from the Proxy Statement, a copy of which will be filed with the SEC not later than 120 days after the close of the fiscal year.

The Company is not aware of any arrangements, including any pledge by any person of securities of the Company, the operation of which may at a subsequent date result in a change in control of the Company.

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Certain Relationships and Related Transactions, and Director Independence

Information concerning certain relationships and related transactions, our independent directors and our audit and nominating committee charters is incorporated herein by reference from the Company's definitive proxy statement for its Annual Meeting of Stockholders to be held in June 2022, a copy of which will be filed with the SEC not later than 120 days after the close of the fiscal year.

Principal Accounting Fees and Services

Information concerning principal accountant fees and services is incorporated herein by reference from the Company's definitive proxy statement for its Annual Meeting of Stockholders to be held in June 2022, a copy of which will be filed with the SEC not later than 120 days after the close of the fiscal year.

Information concerning certain relationships and related transactions, our independent directors and our audit and nominating committee charters is incorporated herein by reference from the Proxy Statement, a copy of which will be filed with the SEC not later than 120 days after the close of the fiscal year.

Principal Accountant Fees and Services

Information concerning principal accountant fees and services is incorporated herein by reference from the Proxy Statement, a copy of which will be filed with the SEC not later than 120 days after the close of the fiscal year.

Exhibits and Financial Statement Schedules

(a) The following documents are filed as a part of this report:

(a) The following documents are filed as a part of this Form 10-K:

(1) Financial Statements:

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Included in schedule below.

Agreement and Plan of Merger by and between BayCom Corp and Pacific Enterprise Bancorp dated September 7, 2021 (1)

Articles of Incorporation of BayCom Corp (1)

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The following materials from the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 formatted in Extensible Business Reporting Language (XBRL):

(1) Condensed Consolidated Balance Sheets;

(1) Condensed

Consolidated Balance Sheets;

(2) Condensed Consolidated Statements of Income;

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+Indicates management contract or compensatory plan or arrangement.

(1) Incorporated herein by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed on September 8, 2021 (File No.

(1) Incorporated herein by reference to the Registration Statement on Form S-1 filed on April 11, 2018 (File No.

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Rocco Davis, Director

/s/ Malcolm F.

March 31, 2022

Hotchkiss, Director

/s/ Robert G.

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March 30, 2023

Spatz, Director

March 31, 2022

King, Senior Executive Vice President, Chief Operating Officer and Director

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data