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 (Loss) (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) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ December 31, ​ 2023 2022 ASSETS ​ ​ Cash due from banks ​ $ 28,850 ​ $ 26,980 Federal funds sold and interest-bearing balances in banks ​ 168,688 ​ 149,835 Cash and cash equivalents ​ ​ 197,538 ​ 176,815 Time deposits in banks ​ ​ 2,241 ​ 2,241 Investment securities available-for-sale (AFS), at fair value, net of allowance for credit losses of $ 1,100 at March 31, 2023 and $ 0 at December 31, 2022 ​ ​ 165,261 ​ 167,761 Federal Home Loan Bank ("FHLB") stock, at par ​ ​ 10,679 ​ 10,679 Federal Reserve Bank ("FRB") stock, at par ​ ​ 9,609 ​ 9,602 Loans held for sale ​ ​ — ​ 2,380 Loans, net of allowance for credit losses of $ 20,400 at March 31, 2023 and $ 18,900 at December 31, 2022 ​ ​ 2,024,136 ​ 2,002,224 Premises and equipment, net ​ ​ 13,008 ​ 13,278 Other real estate owned ("OREO") ​ ​ 21 ​ 21 Core deposit intangible, net ​ ​ 4,832 ​ 5,201 Cash surrender value of bank owned life insurance ("BOLI") policies, net ​ ​ 22,359 ​ 22,193 Right-of-use assets ("ROU"), net ​ ​ 15,706 ​ ​ 16,569 Goodwill ​ ​ 38,838 ​ 38,838 Interest receivable and other assets ​ ​ 43,832 ​ 45,532 Total assets ​ $ 2,548,060 ​ $ 2,513,334 LIABILITIES AND SHAREHOLDERS’ EQUITY ​ ​ ​ ​ ​ Noninterest and interest bearing deposits ​ $ 2,127,769 ​ $ 2,085,479 Junior subordinated deferrable interest debentures, net ​ 8,504 ​ 8,484 Subordinated debt, net ​ ​ 63,754 ​ ​ 63,711 Salary continuation plan ​ 4,921 ​ 4,840 Lease liabilities ​ 16,329 ​ 17,138 Interest payable and other liabilities ​ 13,311 ​ 16,533 Total liabilities ​ 2,234,588 ​ 2,196,185 Commitments and contingencies (Note 16) ​ ​ Shareholders' equity ​ ​ Preferred stock, no par value; 10,000,000 shares authorized; no shares issued and outstanding at both March 31, 2023 and December 31, 2022 ​ — ​ — Common stock, no par value; 100,000,000 shares authorized; 12,443,977 and 12,838,462 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively ​ 196,485 ​ 204,301 Additional paid in capital ​ 287 ​ 287 Accumulated other comprehensive loss, net of tax ​ ( 15,970 ) ​ ( 14,818 ) Retained earnings ​ 132,670 ​ 127,379 Total shareholders’ equity ​ 313,472 ​ 317,149 Total liabilities and shareholders’ equity ​ $ 2,548,060 ​ $ 2,513,334 ​ ​ ​ 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 ​ ​ ​ March 31, ​ ​ 2023 2022 ​ Interest income: ​ ​ Loans, including fees ​ $ 26,255 ​ $ 22,927 ​ Investment securities ​ 1,640 ​ 1,397 ​ Fed funds sold and interest-bearing balances in banks ​ ​ 1,829 ​ ​ 211 ​ FHLB dividends ​ 188 ​ 149 ​ FRB dividends ​ 144 ​ 121 ​ Total interest and dividend income ​ 30,056 ​ 24,805 ​ Interest expense: ​ ​ ​ Deposits ​ 3,700 ​ 1,470 ​ Subordinated debt ​ ​ 896 ​ ​ 896 ​ Junior subordinated debt ​ 203 ​ 86 ​ Total interest expense ​ 4,799 ​ 2,452 ​ Net interest income ​ 25,257 ​ 22,353 ​ Provision for credit losses ​ 1,375 ​ 7 ​ Net interest income after provision for credit losses ​ 23,882 ​ 22,346 ​ Noninterest income: ​ ​ ​ Gain on sale of loans ​ 412 ​ 1,137 ​ Service charges and other fees ​ 885 ​ 630 ​ Loan servicing and other loan fees ​ 410 ​ 574 ​ Income on investment in Small Business Investment Company (“SBIC”) fund ​ 489 ​ 197 ​ Bargain purchase gain ​ ​ — ​ ​ 1,665 ​ Other income and fees ​ 261 ​ 196 ​ Total noninterest income ​ 2,457 ​ 4,399 ​ Noninterest expense: ​ ​ ​ Salaries and employee benefits ​ 11,036 ​ 10,310 ​ Occupancy and equipment ​ 2,027 ​ 2,426 ​ Data processing ​ 1,465 ​ 2,273 ​ Other expense ​ 2,001 ​ 3,312 ​ Total noninterest expense ​ 16,529 ​ 18,321 ​ Income before provision for income taxes ​ 9,810 ​ 8,424 ​ Provision for income taxes ​ 2,764 ​ 1,936 ​ Net income ​ $ 7,046 ​ $ 6,488 ​ Earnings per common share: ​ ​ ​ Basic earnings per common share ​ $ 0.55 ​ $ 0.51 ​ Weighted average shares outstanding ​ 12,699,476 ​ 12,646,981 ​ ​ ​ ​ ​ ​ ​ ​ ​ Diluted earnings per common share ​ $ 0.55 ​ $ 0.51 ​ Weighted average shares outstanding ​ 12,699,476 ​ 12,646,981 ​ ​ ​ ​ 4 Table of Contents ​ BAYCOM CORP AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (In thousands) (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended ​ ​ ​ March 31, ​ ​ 2023 2022 Net income ​ $ 7,046 ​ $ 6,488 ​ Other comprehensive loss: ​ ​ ​ ​ Change in unrealized loss on available-for-sale securities ​ ( 1,617 ) ​ ( 9,761 ) ​ Deferred tax benefit ​ 465 ​ 2,809 ​ Other comprehensive loss, net of tax ​ ( 1,152 ) ​ ( 6,952 ) ​ Total comprehensive income (loss) ​ $ 5,894 ​ $ ( 464 ) ​ ​ ​ ​ 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, 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 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance, December 31, 2022 ​ 12,838,462 ​ $ 204,301 ​ $ 287 ​ $ ( 14,818 ) ​ $ 127,379 ​ $ 317,149 Net income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 7,046 ​ ​ 7,046 Other comprehensive loss, net ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 1,152 ) ​ ​ ​ ​ ​ ( 1,152 ) Cumulative change from adoption of ASU 2016-13, net of tax ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 491 ) ​ ​ ( 491 ) Restricted stock granted ​ 28,392 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ — Cash dividends of $ 0.10 per share ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 1,264 ) ​ ​ ( 1,264 ) Stock based compensation ​ ​ ​ ​ 250 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 250 Repurchase of shares ​ ( 422,877 ) ​ ​ ( 8,066 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 8,066 ) Balance, March 31, 2023 ​ 12,443,977 ​ $ 196,485 ​ $ 287 ​ $ ( 15,970 ) ​ $ 132,670 ​ $ 313,472 ​ ​ ​ 6 Table of Contents ​ BAYCOM CORP AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended ​ ​ March 31, ​ 2023 2022 Cash flows from operating activities: ​ ​ Net income ​ $ 7,046 ​ $ 6,488 Adjustments to reconcile net income to net cash provided by operating activities: ​ ​ Provision for credit losses ​ 1,375 ​ 7 Increase in deferred tax assets ​ 1,622 ​ 2,818 Accretion on acquired loans ​ ( 893 ) ​ ( 231 ) Gain on sale of loans ​ ( 412 ) ​ ( 1,137 ) Proceeds from sale of loans ​ 8,497 ​ 10,936 Loans originated for sale ​ ( 6,372 ) ​ ( 7,931 ) Bargain purchase gain ​ — ​ ( 1,665 ) Accretion on junior subordinated debentures ​ 20 ​ 20 Increase in cash surrender value of life insurance policies ​ ( 166 ) ​ ( 146 ) Amortization/accretion of premiums/discounts on investment securities, net ​ 113 ​ 137 Depreciation and amortization ​ 453 ​ 486 Core deposit intangible amortization ​ 369 ​ 495 Stock based compensation expense ​ 250 ​ 325 Decrease in deferred loan origination fees, net ​ ( 66 ) ​ ( 1,362 ) Increase (decrease) in interest receivable and other assets ​ 1,317 ​ ( 432 ) Increase in salary continuation plan, net ​ 81 ​ 124 Decrease in interest payable and other liabilities ​ ( 5,690 ) ​ ( 6,086 ) Net cash provided by operating activities ​ 7,544 ​ 2,846 Cash flows from investing activities: ​ ​ Proceeds from maturities of interest bearing deposits in banks ​ — ​ 249 Purchase of investment securities ​ ( 1,500 ) ​ ( 22,671 ) Proceeds from the maturities, repayments and calls of investment securities ​ 1,170 ​ 2,475 Proceeds from the sales of investment securities ​ — ​ 63 (Redemption) purchase of Federal Reserve Bank stock ​ ( 7 ) ​ 45 (Decrease) increase in loans, net ​ ( 20,560 ) ​ 79,031 Proceeds from sale of OREO ​ — ​ 22 Purchase of equipment and leasehold improvements, net ​ ( 148 ) ​ ( 174 ) Net cash received for acquisitions ​ — ​ 18,423 Net cash (used in) provided by investing activities ​ ( 21,045 ) ​ 77,463 ​ ​ 7 Table of Contents ​ BAYCOM CORP AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS – (continued) (In thousands) (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended ​ ​ March 31, ​ 2023 2022 Cash flows from financing activities: ​ ​ (Decrease) increase in noninterest and interest bearing deposits ​ ( 54,301 ) ​ 293,572 Increase (decrease) in time deposits, net ​ 96,591 ​ ( 325,101 ) Repurchase of common stock ​ ( 8,066 ) ​ ( 1,268 ) Net cash provided by (used in) financing activities ​ 34,224 ​ ( 32,797 ) Increase in cash and cash equivalents ​ 20,723 ​ 47,512 Cash and cash equivalents at beginning of period ​ 176,815 ​ 379,687 Cash and cash equivalents at end of period ​ $ 197,538 ​ $ 427,199 ​ ​ ​ ​ ​ ​ ​ Supplemental disclosure of cash flow information: ​ ​ Cash paid during the year for: ​ ​ Interest expense ​ $ 5,108 ​ $ 3,306 Income taxes paid, net ​ ​ 10 ​ 6,985 ​ ​ ​ ​ ​ ​ ​ Non-cash operating activities: ​ ​ ​ ​ ​ ​ Increase in allowance for credit losses upon adoption of ASU 2016-03 ​ $ 1,545 ​ $ — ​ ​ ​ ​ ​ ​ ​ Non-cash investing and financing activities: ​ ​ Change in unrealized loss on available-for-sale securities, net of tax ​ $ ( 1,152 ) ​ $ ( 6,952 ) Cash dividends declared on common stock not yet paid ​ ​ ( 1,264 ) ​ ​ ( 685 ) ​ ​ ​ ​ ​ ​ ​ Acquisition: ​ ​ Assets acquired, net of cash received ​ $ — ​ $ 440,785 Liabilities assumed ​ — ​ 380,055 Cash consideration ​ — ​ 275 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 its 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, 2022. 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 a public company that qualifies 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 PEB’s wholly owned subsidiary bank, 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 Accounting Guidance Adopted in 2023 On January 1, 2023, the Company adopted Accounting Standards Update (“ASU”) 2016-13 Financial Instruments — Credit Losses (ASC 326): Measurement of Credit Losses on Financial Instruments , which replaces the incurred loss methodology that is referred to as the current expected credit loss (“CECL”) methodology. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized costs, including loan receivables and held-to-maturity debt securities. It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments in certain leases. In addition, ASU 2016-13 made changes to the accounting for available for sale debt securities. One such change requires increases or decreases in credit losses to be presented as an allowance rather than as a write-down on available for sale debt securities, based on management's intent to sell the security or likelihood the Company will be required to sell the security, before recovery of the amortized cost basis. The Company adopted ASU 2016-13 using the modified retrospective method for all financial assets measured at amortized 9 Table of Contents BAYCOM CORP AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (Tables in thousands, except for share and per share data) (unaudited) ​ cost and off-balance sheet credit exposures. Results for the reporting periods beginning after January 1, 2023 are presented under ASU 2016-13 while prior period amounts continue to be reported in accordance with previously applicable generally accepted accounting principles in the United States (“GAAP”). The Company adopted ASU 2016-13 using the prospective transition approach for financial assets purchased with credit deterioration (PCD) that were previously classified as purchase credit impaired (PCI) and accounted for under Accounting Standard Codification (“ASC”) 310-30. In accordance with the Standard, management did not reassess whether PCI assets met the criteria of PCD assets as of the date of adoption. The remaining noncredit discount (based on the adjusted amortized costs basis) will be accreted into interest income at the effective interest rate as of adoption. The Company recognized an increase in the allowance for credit loss on loans totaling $ 1.5 million (which included a reclassification of the net credit discounts on acquired PCI loans to the allowance for credit losses of $ 845,000 ) and an increase to the allowance for credit losses on unfunded commitments of $ 45,000 , as a cumulative effect adjustment from change in accounting policies, with a corresponding after-tax decrease to opening retained earnings of $ 491,000 . ​ On January 1, 2023, the Company adopted ASU 2022-02 Financial Instruments — Credit Losses: Troubled Debt Restructurings and Vintage Disclosures . The amendment eliminates the recognition measurement guidance for troubled debt restructured ("TDR") loans, and instead requires an entity to evaluate whether a modification represents a new loan or a continuation of an existing loan in accordance with ASC Topic 310-20, Receivables - Nonrefundable Fees and Other Costs . On a prospective basis, entities are subject to new disclosure requirements covering modifications of receivables to borrowers experiencing financial difficulty. In addition, the amendment requires that an entity include in its vintage disclosures the current period-gross loan charge-offs by year of origination for financing receivables and net investment in leases within the scope of Subtopic 326-20. The Company adopted these amendments on January 1, 2023 using a prospective transition method, and has thus far observed no material impact to deferred fees and costs and the related timing of net interest income recognition as a result of adoption. ​ See “Critical Accounting Estimates” for additional information on the Company’s allowance for credit losses methodology. ​ Recent Accounting Guidance Not Yet Effective In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2020-04, Reference Rate Reform (Topic 848) . The amendments in this ASU are elective and provide optional guidance for a limited period of time to ease the potential burden of accounting for, or recognizing the effects of, reference rate reform. The amendments in this ASU provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions that reference the London Interbank Offer Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. The amendments in this ASU may be elected through December 31, 2024 (as amended by ASU No. 2022-06 discussed below). An entity may elect the amendments in this update for an interim period with adoption methods varying based on transaction type. We have not elected to apply amendments at this time and will assess the applicability of this ASU to us as we continue to monitor guidance for reference rate reform from FASB and its impact on our financial condition and results of operations. The Company does not expect the adoption of ASU 2020-04 to have a material impact on its consolidated financial statements. ​ In December 2022, the FASB issued ASU No. 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848. The objective of the guidance in Topic 848 was to provide temporary relief during the transition period, as noted in the discussion of ASU 2020-04 above, under which the sunset provision was based on an expectation that the LIBOR would cease being published after December 31, 2021. In March 2021, the UK Financial Conduct Authority announced that the intended cessation date of certain tenors of USD LIBOR would be June 30, 2023, which is beyond the current sunset date of Topic 848. Therefore, this amendment deferred the sunset date of Topic 848 from December 31, 2022 to December 31, 2024. ​ 10 Table of Contents BAYCOM CORP AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (Tables in thousands, except for share and per share data) (unaudited) ​ NOTE 3 – ACQUISITIONS Acquisition of Pacific Enterprise Bancorp (“PEB”) 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 the Company’s common stock and $ 275,000 in cash. Noninterest income for the three months ended March 31, 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 CONSOLIDATED 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 months ended March 31, 2023 and 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, 2022. 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 merger been completed at the beginning of the respective periods. 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 for the three months ended March 31, 2023 and 2022 are presented below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ March 31, ​ ​ ​ 2023 ​ ​ 2022 Net interest income ​ $ 25,257 ​ ​ $ 23,205 ​ Net income ​ 7,046 ​ ​ 3,128 ​ Basic earnings per share ​ $ 0.55 ​ ​ $ 0.23 ​ Diluted earnings per share ​ ​ 0.55 ​ ​ ​ 0.23 ​ ​ 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 CONSOLIDATED FINANCIAL STATEMENTS – (continued) (Tables in thousands, except for share and per share data) (unaudited) ​ income for the three months ended March 31, 2023. The Company recognized third-party acquisition expenses for the three months ended March 31, 2022, as follows: ​ ​ ​ ​ ​ ​ 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 ​ Allowance for ​ Estimated ​ ​ cost ​ gains ​ losses ​ credit losses ​ fair value March 31, 2023 ​ ​ ​ ​ ​ ​ ​ ​ U.S. Government Agencies ​ $ 1,502 ​ $ — ​ $ — ​ $ — ​ $ 1,502 Preferred equity securities ​ ​ 18,303 ​ ​ — ​ ​ ( 4,369 ) ​ ​ ( 1,100 ) ​ ​ 12,834 Municipal securities ​ 21,045 ​ 9 ​ ( 1,192 ) ​ ​ — ​ 19,862 Mortgage-backed securities ​ 34,714 ​ 54 ​ ( 3,647 ) ​ ​ — ​ 31,121 Collateralized mortgage obligations ​ 29,662 ​ — ​ ( 2,428 ) ​ ​ — ​ 27,234 SBA securities ​ 4,158 ​ 16 ​ ( 80 ) ​ ​ — ​ 4,094 Corporate bonds ​ 79,400 ​ — ​ ( 10,786 ) ​ ​ — ​ 68,614 Total ​ $ 188,784 ​ $ 79 ​ $ ( 22,502 ) ​ $ ( 1,100 ) ​ $ 165,261 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross Gross ​ ​ ​ ​ ​ ​ Amortized ​ unrealized ​ unrealized ​ Allowance for ​ Estimated ​ ​ cost ​ gains ​ losses ​ credit losses ​ fair value December 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ U.S. Government Agencies ​ $ 1,505 ​ $ — ​ $ — ​ $ — ​ $ 1,505 Preferred equity securities ​ ​ 18,330 ​ ​ — ​ ​ ( 4,573 ) ​ ​ — ​ ​ 13,757 Municipal securities ​ 21,099 ​ 2 ​ ( 1,544 ) ​ ​ — ​ 19,557 Mortgage-backed securities ​ 37,199 ​ 23 ​ ( 4,212 ) ​ ​ — ​ 33,010 Collateralized mortgage obligations ​ 28,153 ​ — ​ ( 2,729 ) ​ ​ — ​ 25,424 SBA securities ​ 4,381 ​ 19 ​ ( 95 ) ​ ​ — ​ 4,305 Corporate bonds ​ 77,900 ​ 156 ​ ( 7,853 ) ​ ​ — ​ 70,203 Total ​ $ 188,567 ​ $ 200 ​ $ ( 21,006 ) ​ $ — ​ $ 167,761 ​ During the three months ended March 31, 2023, the Company sold no available-for-sale securities and sold one available-for-sale security for a minimal realized gain during the three months ended March 31, 2022. 13 Table of Contents BAYCOM CORP AND SUBSIDIARY NOTES TO CONSOLIDATED 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 March 31, 2023 ​ ​ ​ ​ ​ ​ ​ Preferred Equity Securities ​ $ — ​ $ — ​ $ 13,934 ​ $ ( 4,369 ) ​ $ 13,934 ​ $ ( 4,369 ) Municipal securities ​ ​ 1,147 ​ ​ ( 4 ) ​ ​ 16,568 ​ ​ ( 1,188 ) ​ ​ 17,715 ​ ​ ( 1,192 ) Mortgage-backed securities ​ ​ 8 ​ ​ — ​ ​ 29,475 ​ ​ ( 3,647 ) ​ ​ 29,483 ​ ​ ( 3,647 ) Collateralized mortgage obligations ​ 5,354 ​ ​ ( 68 ) ​ ​ 21,880 ​ ​ ( 2,360 ) ​ 27,234 ​ ( 2,428 ) SBA securities ​ — ​ ​ — ​ ​ 1,547 ​ ​ ( 80 ) ​ 1,547 ​ ( 80 ) Corporate bonds ​ — ​ ​ — ​ ​ 65,613 ​ ​ ( 10,786 ) ​ 65,613 ​ ( 10,786 ) Total ​ $ 6,509 ​ $ ( 72 ) ​ $ 149,017 ​ $ ( 22,430 ) ​ $ 155,526 ​ $ ( 22,502 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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, 2022 ​ ​ ​ ​ ​ ​ ​ Preferred equity securities ​ $ — ​ $ — ​ $ 13,757 ​ $ ( 4,573 ) ​ $ 13,757 ​ $ ( 4,573 ) Municipal securities ​ ​ 1,147 ​ ​ ( 8 ) ​ ​ 16,843 ​ ​ ( 1,536 ) ​ ​ 17,990 ​ ​ ( 1,544 ) Mortgage-backed securities ​ 23 ​ — ​ 31,291 ​ ( 4,212 ) ​ 31,314 ​ ( 4,212 ) Collateralized mortgage obligations ​ 2,284 ​ ( 26 ) ​ 23,140 ​ ( 2,703 ) ​ 25,424 ​ ( 2,729 ) SBA securities ​ — ​ — ​ 1,416 ​ ( 95 ) ​ 1,416 ​ ( 95 ) Corporate bonds ​ — ​ — ​ 64,797 ​ ( 7,853 ) ​ 64,797 ​ ( 7,853 ) Total ​ $ 3,454 ​ $ ( 34 ) ​ $ 151,244 ​ $ ( 20,972 ) ​ $ 154,698 ​ $ ( 21,006 ) ​ At March 31, 2023, the Company held 338 investment securities, of which 209 were in an unrealized loss position for more than twelve months and 78 were in an unrealized loss position for less than twelve months. The securities that were in an unrealized loss position as of March 31, 2023, were evaluated to determine whether the decline in fair value below the amortized cost basis resulted from a credit loss or other factors. In making this assessment, management considers the length of time and the extent to which fair value is less than amortized cost, the nature of the security, the underlying collateral, and the financial condition and prospects of the issuer, among other factors. This assessment also 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. ​ As of March 31, 2023, the Company expects to recover the amortized cost basis of its securities, has no present intent to sell any investment securities with unrealized losses, and it is more likely than not that we will not be required to sell securities with unrealized losses before recovery of their amortized cost and the decline in fair value is largely attributed to changes in interest rates and other market conditions. The issuers of these securities continue to make timely principal and interest payments. No additional allowances for credit losses have been recognized on investment securities available-for-sale in an unrealized loss position, as management does not believe any of the securities are impaired due to reasons of credit quality at March 31, 2023, except that at March 31, 2023 a $ 1.1 million allowance for credit losses on investment securities available-for-sale was recorded to fully reserve for one preferred equity security due to reasons of credit quality. 14 Table of Contents BAYCOM CORP AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (Tables in thousands, except for share and per share data) (unaudited) ​ 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. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2023 ​ December 31, 2022 ​ Amortized Estimated Amortized Estimated ​ ​ cost ​ fair value ​ cost ​ fair value Available-for-sale ​ ​ ​ ​ Due in one year or less ​ $ 8,091 ​ $ 8,019 ​ $ 4,994 ​ $ 4,960 Due after one through five years ​ 33,984 ​ 27,322 ​ 37,222 ​ 31,682 Due after five years through ten years ​ 97,675 ​ 85,769 ​ 95,071 ​ 85,482 Due after ten years ​ 49,034 ​ 44,151 ​ 51,280 ​ 45,637 Total ​ $ 188,784 ​ $ 165,261 ​ $ 188,567 ​ $ 167,761 ​ ​ ​ ​ ​ The table below presents a roll-forward by major security type for the three months ended March 31, 2023 of the allowance for credit losses on debt investment securities available-for-sale at period-end: ​ ​ ​ ​ ​ ​ ​ ​ Preferred Equity Securities ​ ​ ​ (Dollars in thousands) Beginning balance January 1, 2023 ​ $ — Provision for credit losses ​ ​ 1,100 Ending balance March 31, 2023 ​ $ 1,100 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ NOTE 5 – LOANS The Company’s loan portfolio at the dates indicated is summarized below: ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, December 31, ​ ​ 2023 ​ 2022 Commercial and industrial (1) ​ $ 197,573 ​ $ 188,538 Construction and land ​ 10,265 ​ 13,163 Commercial real estate ​ 1,737,927 ​ 1,704,716 Residential ​ 96,591 ​ 110,606 Consumer ​ 2,196 ​ 4,183 Total loans ​ 2,044,552 ​ 2,021,206 Net deferred loan fees ​ ( 16 ) ​ ( 82 ) Allowance for credit losses (2) ​ ( 20,400 ) ​ ( 18,900 ) Net loans ​ $ 2,024,136 ​ $ 2,002,224 ​ (1) During the first quarter of 2023, 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 $ 5.9 million and $ 11.1 million of PPP loans as of March 31, 2023 and December 31, 2022, respectively. (2) Allowance for credit losses at March 31, 2023 is estimated under CECL whereas at December 31, 2022, the allowance for loan losses is estimated under the incurred loss methodology. 15 Table of Contents BAYCOM CORP AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (Tables in thousands, except for share and per share data) (unaudited) ​ ​ The Company’s total individually evaluated loans, including nonaccrual loans, TDR loans, and accreting purchase credit deteriorated (“PCD”) 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 March 31, 2023 ​ ​ ​ ​ ​ ​ ​ Recorded investment in impaired loans: ​ ​ ​ ​ ​ ​ With no specific allowance recorded ​ $ — ​ $ — ​ $ 6,105 ​ $ 2 ​ $ — ​ $ 6,107 With a specific allowance recorded ​ 790 ​ — ​ 5,224 ​ 1,736 ​ — ​ 7,750 Total recorded investment in impaired loans ​ $ 790 ​ $ — ​ $ 11,329 ​ $ 1,738 ​ $ — ​ $ 13,857 Specific allowance on impaired loans ​ $ 561 ​ $ — ​ $ 259 ​ $ 2 ​ $ — ​ $ 822 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ​ ​ ​ ​ ​ ​ Recorded investment in impaired loans: ​ ​ ​ ​ ​ ​ With no specific allowance recorded ​ $ 89 ​ $ — ​ $ 11,706 ​ $ 1,991 ​ $ — ​ $ 13,786 With a specific allowance recorded ​ 789 ​ — ​ 259 ​ 214 ​ — ​ 1,262 Total recorded investment in impaired loans ​ $ 878 ​ $ — ​ $ 11,965 ​ $ 2,205 ​ $ — ​ $ 15,048 Specific allowance on impaired loans ​ $ 687 ​ $ — ​ $ 259 ​ $ 222 ​ $ — ​ $ 1,168 ​ From time to time, the Company may extend, restructure, or otherwise modify the terms of existing loans, on a case-by-case basis, to remain competitive and retain certain customers, as well as assist other customers who may be experiencing financial difficulties. Prior to 2023, a modified loan was classified as a troubled debt restructuring (TDR) if the borrower was experiencing financial difficulties and a concession was made at the time of the modification. TDR loans are generally placed on nonaccrual status at the time of restructuring. 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. Effective January 1, 2023, the Company adopted ASU No. 2022-02, which eliminated the accounting guidance for TDR loans while enhancing disclosure requirements for certain loan modifications by creditors when a borrower is experiencing financial difficulty. The Company adopted ASU No. 2022-02 using the prospective transition method. At the date of adoption, the Company was no longer required to utilize a loan-level discounted cash flow approach for determining the allowance for certain modified loans previously classified as TDR loans. The ACL on a TDR is measured using the same method as individually evaluated loans. There was no material impact upon adopting this standard as the Company elected to not change how it measured credit losses on TDRs. During the three months ended March 31, 2023, there were no modifications of loans to borrowers experiencing financial difficulty. During the three months ended March 31, 2022, there was one commercial and industrial loan modified as a TDR. The type of modification was a suspension of interest payments with principal payments designated payments-in-kind, with no change to the pre-modification and post modification amortized cost balance of $ 4.9 million. ​ The Company closely monitors the performance of modified loans to borrowers experiencing financial difficulty to understand the effectiveness of modification efforts. All loans to borrowers experiencing financial difficulty 16 Table of Contents BAYCOM CORP AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (Tables in thousands, except for share and per share data) (unaudited) ​ that were modified during the three months ended March 31, 2023 were current in their contractual payments as of March 31, 2023. There were no commitments to lend additional amounts to borrowers with outstanding loans that are classified as TDR loans at March 31, 2023. A summary of TDR loans by type of concession and type of loan, as of the periods indicated, is set forth below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of Rate Term Rate & term ​ ​ ​ loans ​ modification ​ modification ​ modification ​ Total March 31, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial and industrial 3 ​ $ — ​ $ 154 ​ $ — ​ $ 154 Construction and land — ​ — ​ — ​ — ​ — Commercial real estate 6 ​ — ​ 5,112 ​ — ​ 5,112 Residential 1 ​ — ​ ​ 829 ​ — ​ 829 Consumer — ​ — ​ — ​ — ​ — Total 10 ​ $ — ​ $ 6,095 ​ $ — ​ $ 6,095 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of Rate Term Rate & term ​ ​ ​ loans ​ modification ​ modification ​ modification ​ Total March 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial and industrial 3 ​ $ — ​ $ 4,881 ​ $ — ​ $ 4,881 Construction and land — ​ — ​ — ​ — ​ — Commercial real estate 4 ​ — ​ 2,191 ​ — ​ 2,191 Residential 1 ​ — ​ 128 ​ — ​ 128 Consumer — ​ — ​ — ​ — ​ — Total 8 ​ $ — ​ $ 7,200 ​ $ — ​ $ 7,200 ​ For the three months ended March 31, 2023 the Company recorded a $ 125,000 charge-off for one TDR loan compared to no charge-offs for TDR loans for the three months ended March 31, 2022. During the three months ended March 31, 2023 and 2022, there were no TDR loans for which there was a payment default within the first 12 months of the modification. As of March 31, 2023 and December 31, 2022, individually evaluated TDR loans had a related allowance of $ 298,000 and $ 393,000 , respectively. As of March 31, 2023 and December 31, 2022, $ 768,000 and $ 759,000 , respectively, of TDR loans were performing in accordance with their modified terms. Accruing TDRs are included in the loans individually evaluated as part of the calculation of the allowance for credit losses for loans. ​ ​ 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 include 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 CONSOLIDATED 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. Substandard 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 credit losses. 18 Table of Contents BAYCOM CORP AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (Tables in thousands, except for share and per share data) (unaudited) ​ The following tables present the internally assigned risk grade by class of loans at the dates indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Revolving ​ ​ ​ ​ ​ Term loans - amortized cost by origination year ​ loans ​ ​ ​ ​ 2023 ​ 2022 ​ 2021 ​ 2020 ​ 2019 ​ Prior ​ amortized cost ​ Total March 31, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial and industrial: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ $ 16,530 ​ $ 32,329 ​ $ 26,913 ​ $ 32,966 ​ $ 29,252 ​ $ 30,545 ​ $ 22,486 ​ $ 191,021 Special mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 1,076 ​ ​ 2,838 ​ ​ 1,467 ​ ​ 5,381 Substandard ​ ​ — ​ ​ — ​ ​ — ​ ​ 40 ​ ​ 191 ​ ​ 932 ​ ​ 8 ​ ​ 1,171 Total commercial and industrial ​ $ 16,530 ​ $ 32,329 ​ $ 26,913 ​ $ 33,006 ​ $ 30,519 ​ $ 34,315 ​ $ 23,961 ​ $ 197,573 Construction and land: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ $ — ​ $ 3,461 ​ $ — ​ $ 1,589 ​ $ 558 ​ $ 4,597 ​ $ — ​ $ 10,205 Special mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 60 ​ ​ — ​ ​ 60 Substandard ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Total construction and land ​ $ — ​ $ 3,461 ​ $ — ​ $ 1,589 ​ $ 558 ​ $ 4,657 ​ $ — ​ $ 10,265 Commercial real estate: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ $ 44,271 ​ $ 413,041 ​ $ 391,089 ​ $ 158,575 ​ $ 198,466 ​ $ 454,587 ​ $ 2,427 ​ $ 1,662,456 Special mention ​ ​ — ​ ​ — ​ ​ 141 ​ ​ 4,080 ​ ​ 17,115 ​ ​ 36,226 ​ ​ — ​ ​ 57,562 Substandard ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 5,184 ​ ​ 12,725 ​ ​ — ​ ​ 17,909 Total commercial real estate ​ $ 44,271 ​ $ 413,041 ​ $ 391,230 ​ $ 162,655 ​ $ 220,765 ​ $ 503,538 ​ $ 2,427 ​ $ 1,737,927 Residential: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ $ — ​ $ — ​ $ 2,902 ​ $ 4,465 ​ $ 9,343 ​ $ 45,484 ​ $ 32,634 ​ $ 94,828 Special mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Substandard ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 1,763 ​ ​ — ​ ​ 1,763 Total residential ​ $ — ​ $ — ​ $ 2,902 ​ $ 4,465 ​ $ 9,343 ​ $ 47,247 ​ $ 32,634 ​ $ 96,591 Consumer: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ $ 160 ​ $ 112 ​ $ — ​ $ 15 ​ $ 53 ​ $ 128 ​ $ 1,708 ​ $ 2,176 Special mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Substandard ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 20 ​ ​ — ​ ​ — ​ ​ 20 Total consumer ​ $ 160 ​ $ 112 ​ $ — ​ $ 15 ​ $ 73 ​ $ 128 ​ $ 1,708 ​ $ 2,196 Gross current period charge-offs ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 333 ​ $ — ​ $ 333 Total loans outstanding ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Risk ratings ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ $ 60,960 ​ $ 448,942 ​ $ 420,904 ​ $ 197,611 ​ $ 237,673 ​ $ 535,341 ​ $ 59,255 ​ $ 1,960,686 Special mention ​ ​ — ​ ​ — ​ ​ 141 ​ ​ 4,080 ​ ​ 18,192 ​ ​ 39,123 ​ ​ 1,467 ​ ​ 63,003 Substandard ​ ​ — ​ ​ — ​ ​ — ​ ​ 39 ​ ​ 5,395 ​ ​ 15,421 ​ ​ 8 ​ ​ 20,863 Doubtful ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Total loans outstanding ​ $ 60,960 ​ $ 448,942 ​ $ 421,045 ​ $ 201,730 ​ $ 261,260 ​ $ 589,885 ​ $ 60,730 ​ $ 2,044,552 Total gross current period charge-offs ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 333 ​ $ — ​ $ 333 ​ ​ 19 Table of Contents BAYCOM CORP AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (Tables in thousands, except for share and per share data) (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Revolving ​ ​ ​ ​ ​ Term loans - amortized cost by origination year ​ loans ​ ​ ​ ​ 2022 ​ 2021 ​ 2020 ​ 2019 ​ 2018 ​ Prior ​ amortized cost ​ Total December 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial and industrial: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ $ 31,599 ​ $ 34,584 ​ $ 35,173 ​ $ 30,632 ​ $ 4,731 ​ $ 25,147 ​ $ 19,962 ​ $ 181,828 Special mention ​ ​ — ​ ​ — ​ ​ — ​ ​ 863 ​ ​ 1,149 ​ ​ 1,866 ​ ​ 1,467 ​ ​ 5,345 Substandard ​ ​ — ​ ​ — ​ ​ 40 ​ ​ 166 ​ ​ 388 ​ ​ 762 ​ ​ 9 ​ ​ 1,365 Total commercial and industrial ​ $ 31,599 ​ $ 34,584 ​ $ 35,213 ​ $ 31,661 ​ $ 6,268 ​ $ 27,775 ​ $ 21,438 ​ $ 188,538 Construction and land: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ $ 1,381 ​ $ 533 ​ $ 1,586 ​ $ 557 ​ $ 4,363 ​ $ 4,681 ​ $ — ​ $ 13,101 Special mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 62 ​ ​ — ​ ​ — ​ ​ 62 Substandard ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Total construction and land ​ $ 1,381 ​ $ 533 ​ $ 1,586 ​ $ 557 ​ $ 4,425 ​ $ 4,681 ​ $ — ​ $ 13,163 Commercial real estate: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ $ 409,014 ​ $ 392,449 ​ $ 159,744 ​ $ 201,561 ​ $ 110,143 ​ $ 355,795 ​ $ 992 ​ $ 1,629,698 Special mention ​ ​ — ​ ​ — ​ ​ 3,591 ​ ​ 17,210 ​ ​ 7,919 ​ ​ 29,561 ​ ​ — ​ ​ 58,281 Substandard ​ ​ — ​ ​ — ​ ​ — ​ ​ 5,184 ​ ​ 241 ​ ​ 11,312 ​ ​ — ​ ​ 16,737 Total commercial real estate ​ $ 409,014 ​ $ 392,449 ​ $ 163,335 ​ $ 223,955 ​ $ 118,303 ​ $ 396,668 ​ $ 992 ​ $ 1,704,716 Residential: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ $ 423 ​ $ 4,536 ​ $ 6,343 ​ $ 10,229 ​ $ 14,537 ​ $ 37,170 ​ $ 34,889 ​ $ 108,127 Special mention ​ ​ — ​ ​ — ​ ​ — ​ ​ 244 ​ ​ — ​ ​ — ​ ​ 3 ​ ​ 247 Substandard ​ ​ — ​ ​ — ​ ​ 203 ​ ​ — ​ ​ 1,184 ​ ​ 845 ​ ​ — ​ ​ 2,232 Total residential ​ $ 423 ​ $ 4,536 ​ $ 6,546 ​ $ 10,473 ​ $ 15,721 ​ $ 38,015 ​ $ 34,892 ​ $ 110,606 Consumer: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ $ 539 ​ $ 10 ​ $ 1,691 ​ $ 61 ​ $ 40 ​ $ 131 ​ $ 1,690 ​ $ 4,162 Special mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Substandard ​ ​ — ​ ​ — ​ ​ — ​ ​ 21 ​ ​ — ​ ​ — ​ ​ — ​ ​ 21 Total consumer ​ $ 539 ​ $ 10 ​ $ 1,691 ​ $ 82 ​ $ 40 ​ $ 131 ​ $ 1,690 ​ $ 4,183 Gross current period charge-offs ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 12 ​ $ 12 ​ $ — ​ ​ 24 Total loans outstanding ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Risk ratings ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ $ 442,956 ​ $ 432,112 ​ $ 204,536 ​ $ 243,040 ​ $ 133,816 ​ $ 422,924 ​ $ 57,532 ​ $ 1,936,916 Special mention ​ ​ — ​ ​ — ​ ​ 3,590 ​ ​ 18,317 ​ ​ 9,130 ​ ​ 31,428 ​ ​ 1,470 ​ ​ 63,935 Substandard ​ ​ — ​ ​ — ​ ​ 243 ​ ​ 5,371 ​ ​ 1,814 ​ ​ 12,918 ​ ​ 9 ​ ​ 20,355 Doubtful ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Total loans outstanding ​ $ 442,956 ​ $ 432,112 ​ $ 208,369 ​ $ 266,728 ​ $ 144,760 ​ $ 467,270 ​ $ 59,011 ​ $ 2,021,206 Total gross current period charge-offs ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 12 ​ $ 12 ​ $ — ​ $ 24 ​ 20 Table of Contents BAYCOM CORP AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (Tables in thousands, except for share and per share data) (unaudited) ​ 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 ​ PCD loans ​ receivable ​ Accruing March 31, 2023 ​ ​ ​ ​ ​ ​ ​ ​ Commercial and industrial ​ $ 632 ​ $ 119 ​ $ — ​ $ 751 ​ $ 192,350 ​ $ 4,472 ​ $ 197,573 ​ $ — Construction and land ​ — ​ — ​ — ​ — ​ 9,964 ​ 301 ​ 10,265 ​ — Commercial real estate ​ 7,821 ​ 133 ​ — ​ 7,954 ​ 1,705,483 ​ 24,490 ​ 1,737,927 ​ — Residential ​ 3,646 ​ — ​ ​ — ​ 3,646 ​ 92,329 ​ 616 ​ 96,591 ​ — Consumer ​ 2 ​ — ​ — ​ 2 ​ 2,194 ​ — ​ 2,196 ​ — Total ​ $ 12,101 ​ $ 252 ​ $ — ​ $ 12,353 ​ $ 2,002,320 ​ $ 29,879 ​ $ 2,044,552 ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 ​ PCD loans ​ receivable ​ accruing December 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ Commercial and industrial ​ $ 471 ​ $ 81 ​ $ — ​ $ 552 ​ $ 183,969 ​ $ 4,017 ​ $ 188,538 ​ $ 934 Construction and land ​ — ​ — ​ — ​ — ​ 9,109 ​ 4,054 ​ 13,163 ​ — Commercial real estate ​ 897 ​ — ​ 934 ​ 1,831 ​ 1,682,848 ​ 20,037 ​ 1,704,716 ​ — Residential ​ 22 ​ 3 ​ — ​ 25 ​ 109,902 ​ 679 ​ 110,606 ​ — Consumer ​ — ​ — ​ — ​ — ​ 4,183 ​ — ​ 4,183 ​ — Total ​ $ 1,390 ​ $ 84 ​ $ 934 ​ $ 2,408 ​ $ 1,990,011 ​ $ 28,787 ​ $ 2,021,206 ​ $ 934 ​ The balance of nonaccrual loans guaranteed by a government agency, which reduces the Company’s credit exposure, was $ 818,000 at March 31, 2023 compared to $ 839,000 at December 31, 2022. At March 31, 2023, nonaccrual loans included $ 483,000 of loans 30-89 days past due and $ 3.9 million of loans less than 30 days past due. At December 31, 2022, nonaccrual loans included $ 2.5 million of loans 30-89 days past due and $ 4.0 million of loans less than 30 days past due. At March 31, 2023, nonaccrual loans 30-89 days past due of $ 483,000 was comprised of six loans and the $ 3.9 million of loans less than 30 days past due was comprised of 14 loans. All of these loans were placed on nonaccrual due to concerns over the financial condition of the borrowers. There were no loans that were 90 days or more past due and still accruing at March 31, 2023 compared to one such loan at December 31, 2022. Interest foregone on nonaccrual loans was approximately $ 235,000 for the three months ended March 31, 2023 compared to $ 846,000 for the three months ended March 31, 2022. ​ Purchased Credit Deteriorated 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 used to estimate the fair value of PCD 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 PCD 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 PCD 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 for credit loss would be recorded as a charge to income and an allowance for credit losses for loans established. ​ ​ ​ 21 Table of Contents BAYCOM CORP AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (Tables in thousands, except for share and per share data) (unaudited) ​ NOTE 6 – ALLOWANCE FOR CREDIT LOSSES FOR LOANS The following tables summarize the Company’s allowance for credit losses for loans, reserve for unfunded commitments, and loan balances individually and collectively evaluated by type of loan as of or for the three months ended March 31, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial ​ Construction ​ Commercial ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Reserve for ​ and industrial and land real estate Residential Consumer Total unfunded commitments Three months ended March 31, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for credit losses ​ ​ ​ ​ ​ ​ ​ Beginning balance ​ $ 2,885 ​ $ 68 ​ $ 14,185 ​ $ 1,742 ​ $ 20 ​ $ 18,900 ​ $ 315 Impact of CECL adoption ​ ​ 1,366 ​ ​ 402 ​ ​ 2 ​ ​ ( 302 ) ​ ​ 32 ​ ​ 1,500 ​ ​ 45 Charge-offs ​ ( 158 ) ​ — ​ ​ — ​ ( 175 ) ​ ​ ( 1 ) ​ ( 334 ) ​ — Recoveries ​ 16 ​ — ​ — ​ — ​ 3 ​ 19 ​ — Provision for (reversal of) credit losses ​ 361 ​ ( 156 ) ​ 343 ​ ( 199 ) ​ ( 34 ) ​ 315 ​ ( 40 ) Ending balance ​ $ 4,470 ​ $ 314 ​ $ 14,530 ​ $ 1,066 ​ $ 20 ​ $ 20,400 ​ $ 320 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for credit losses by methodology: ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans individually evaluated ​ $ 561 ​ $ — ​ $ 259 ​ $ 2 ​ $ — ​ $ 822 ​ ​ ​ Loans collectively evaluated ​ 3,670 ​ 311 ​ 13,796 ​ 1,051 ​ 20 ​ 18,848 ​ ​ ​ PCD loans ​ 239 ​ 3 ​ 475 ​ 13 ​ — ​ 730 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans receivable by methodology: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Individually evaluated ​ $ 790 ​ $ — ​ $ 11,329 ​ $ 1,738 ​ $ — ​ $ 13,857 ​ ​ ​ Collectively evaluated ​ 192,311 ​ 9,964 ​ 1,702,108 ​ 94,237 ​ 2,196 ​ 2,000,816 ​ ​ ​ PCD loans ​ 4,472 ​ 301 ​ 24,490 ​ 616 ​ — ​ 29,879 ​ ​ ​ Total loans ​ $ 197,573 ​ $ 10,265 ​ $ 1,737,927 ​ $ 96,591 ​ $ 2,196 ​ $ 2,044,552 ​ ​ ​ ​ ​ 22 Table of Contents BAYCOM CORP AND SUBSIDIARY NOTES TO CONSOLIDATED 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 March 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for loan losses ​ ​ ​ ​ ​ ​ ​ Beginning balance ​ $ 3,261 ​ $ 175 ​ $ 12,709 ​ $ 1,536 ​ $ 19 ​ $ 17,700 Charge-offs ​ — ​ — ​ ( 1 ) ​ ( 6 ) ​ ( 3 ) ​ ( 10 ) Recoveries ​ 3 ​ — ​ — ​ — ​ — ​ 3 Provision for (reversal of) loan losses ​ 235 ​ ​ ( 37 ) ​ ​ 264 ​ ​ ( 457 ) ​ ​ 2 ​ 7 Ending balance ​ $ 3,499 ​ $ 138 ​ $ 12,972 ​ $ 1,073 ​ $ 18 ​ $ 17,700 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At March 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans individually evaluated ​ $ 1,277 ​ $ — ​ $ 259 ​ $ 128 ​ $ — ​ $ 1,664 Loans collectively evaluated ​ 2,222 ​ 138 ​ 12,713 ​ 945 ​ 18 ​ 16,036 PCI loans ​ — ​ — ​ — ​ — ​ — ​ — Total loans ​ $ 3,499 ​ $ 138 ​ $ 12,972 ​ $ 1,073 ​ $ 18 ​ $ 17,700 Loans receivable by methodology: ​ ​ ​ ​ ​ ​ Individually evaluated ​ $ 5,723 ​ $ 36 ​ $ 5,710 ​ $ 1,759 ​ $ — ​ $ 13,228 Collectively evaluated ​ 303,374 ​ 19,371 ​ 1,535,174 ​ 98,750 ​ 3,675 ​ 1,960,344 PCI loans ​ 4,459 ​ 1,447 ​ 23,421 ​ 1,570 ​ — ​ 30,897 Total loans ​ $ 313,556 ​ $ 20,854 ​ $ 1,564,305 ​ $ 102,079 ​ $ 3,675 ​ $ 2,004,469 ​ ​ ​ The provision for allowance for credit losses for loans during the three months ended March 31, 2023 was primarily due to replenishment of the reserve from charge-offs and a $ 23.3 million increase in loans. These increases were partially offset by a decrease in the quantitative reserve, due to the impact of slight improvements in the national unemployment rate and national gross domestic product forecasts over the next four quarters, as compared to those used in estimating the allowance for credit losses on loans at adoption. There was no change in the determined risk level for each of the qualitative factors since adoption. The reserve for individually evaluated loans decreased from adoption as five non-accrual loans, which were fully reserved for, were charged-off during the current quarter. ​ The following table summarizes the amortized cost basis of individually evaluated collateral-dependent non-accrual loans by loan and collateral type at March 31, 2023 and December 31, 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Convalescent ​ ​ ​ ​ ​ A/R and ​ ​ ​ Allowance for ​ Office Multifamily facility Other ​ SFR 1-4 Equipment Total Credit/loan losses March 31, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial and industrial $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 790 ​ $ 790 ​ $ 561 Construction and land ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Commercial real estate ​ ​ 368 ​ 5,337 ​ 3,426 ​ 1,429 ​ — ​ — ​ 10,560 ​ 259 Residential ​ — ​ — ​ ​ — ​ ​ — ​ ​ 1,739 ​ — ​ ​ 1,739 ​ 2 Consumer ​ — ​ — ​ — ​ — ​ — ​ — ​ — ​ — Total ​ $ 368 ​ $ 5,337 ​ $ 3,426 ​ $ 1,429 ​ $ 1,739 ​ $ 790 ​ $ 13,089 ​ $ 822 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial and industrial $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 878 ​ $ 878 ​ $ 687 Construction and land ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Commercial real estate ​ ​ 389 ​ 5,351 ​ 3,577 ​ 1,889 ​ — ​ — ​ 11,206 ​ 259 Residential ​ — ​ — ​ ​ — ​ ​ — ​ ​ 2,205 ​ — ​ ​ 2,205 ​ 222 Consumer ​ — ​ — ​ — ​ — ​ — ​ — ​ — ​ — Total ​ $ 389 ​ $ 5,351 ​ $ 3,577 ​ $ 1,889 ​ $ 2,205 ​ $ 878 ​ $ 14,289 ​ $ 1,168 ​ 23 Table of Contents BAYCOM CORP AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (Tables in thousands, except for share and per share data) (unaudited) ​ The following table shows the amortized cost and allowance for credit losses for loans on non-accrual status as of March 31, 2023 and the amortized cost and allowance for loan losses for loans on non-accrual status as of December 31, 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of March 31, 2023 ​ As of December 31, 2022 ​ ​ Non-accrual ​ Non-accrual ​ ​ ​ Non-accrual ​ Non-accrual ​ ​ ​ ​ with no allowance ​ with allowance ​ Total ​ with no allowance ​ with allowance ​ Total ​ for credit losses for credit losses non-accrual for loan losses for loan losses non-accrual Commercial and industrial $ — ​ $ 790 ​ $ 790 ​ $ — ​ $ 878 ​ $ 878 Construction and land ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Commercial real estate ​ ​ 10,159 ​ 401 ​ ​ 10,560 ​ 10,734 ​ 472 ​ 11,206 Residential ​ 1,572 ​ 167 ​ ​ 1,739 ​ ​ 1,991 ​ ​ 214 ​ 2,205 Consumer ​ — ​ — ​ ​ — ​ — ​ — ​ — Total ​ $ 11,731 ​ $ 1,358 ​ $ 13,089 ​ $ 12,725 ​ $ 1,564 ​ $ 14,289 ​ ​ Interest income recognized on non-accrual loans was $ 65,000 and $ 15,000 for the three months ended March 31, 2023 and December 31, 2022, respectively. ​ 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 credit 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, the remaining excess funds 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 March 31, 2023, 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 March 31, 2023. ​ 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 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 originated $ 481,000 of loans under this program during the three months ended March 31, 2023. As of March 31, 2023, the Company had $ 22.7 million of loans enrolled in this program and a loss reserve account of $ 6.3 million. ​ ​ ​ ​ ​ ​ ​ ​ 24 Table of Contents BAYCOM CORP AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (Tables in thousands, except for share and per share data) (unaudited) ​ NOTE 7 – PREMISES AND EQUIPMENT Premises and equipment consisted of the following at the dates indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, December 31, ​ ​ 2023 ​ 2022 Premises owned ​ $ 11,154 ​ $ 11,120 Leasehold improvements ​ 2,259 ​ 2,259 Furniture, fixtures and equipment ​ 6,901 ​ 6,760 Less accumulated depreciation and amortization ​ ( 7,306 ) ​ ( 6,861 ) Total premises and equipment, net ​ $ 13,008 ​ $ 13,278 ​ Depreciation and amortization included in occupancy and equipment expense totaled $ 453,000 and $ 507,000 for the three months ended March 31, 2023 and 2022, respectively. ​ NOTE 8 – LEASES The Company leased 19 branches under noncancelable operating leases as of March 31, 2023. 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 March 31, 2023: ​ ​ ​ ​ ​ For remainder of 2023 ​ $ 2,862 2024 ​ ​ 3,997 2025 ​ 3,175 2026 ​ 2,423 2027 ​ ​ 1,936 Thereafter ​ 3,649 Total undiscounted cash flows ​ ​ 18,042 Less: interest ​ ​ ( 1,713 ) Present value of lease payments ​ $ 16,329 ​ The following table presents the weighted average lease term and discount rate at the dates indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2023 ​ March 31, 2022 Weighted-average remaining lease term 5.2 years ​ 5.1 years Weighted-average discount rate 3.1 % ​ 2.4 % ​ Rental expense included in occupancy and equipment expense totaled $ 999,000 and $ 1.3 million for the three months ended March 31, 2023 and 2022, respectively. 25 Table of Contents BAYCOM CORP AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (Tables in thousands, except for share and per share data) (unaudited) ​ ​ ​ 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 life 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 during the three months ended March 31, 2023 and year ended December 31, 2022 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, December 31, ​ ​ 2023 ​ 2022 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 during the three months ended March 31, 2023 and year ended December 31, 2022 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, December 31, ​ ​ 2023 ​ 2022 Balance at beginning of period ​ $ 5,201 ​ $ 6,489 Additions ​ — ​ 756 Less amortization ​ ( 369 ) ​ ( 2,044 ) Balance at end of period ​ $ 4,832 ​ $ 5,201 ​ Estimated annual amortization expense at March 31, 2023 was as follows: ​ ​ ​ ​ ​ For remainder of 2023 ​ $ 917 2024 ​ ​ 1,222 2025 ​ 948 2026 ​ 455 2027 ​ ​ 455 Thereafter ​ 835 Total ​ $ 4,832 ​ ​ ​ 26 Table of Contents BAYCOM CORP AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (Tables in thousands, except for share and per share data) (unaudited) ​ NOTE 10 – INTEREST RECEIVABLE AND OTHER ASSETS The Company’s interest receivable and other assets at the dates indicated consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, December 31, ​ ​ 2023 ​ 2022 Tax assets, net ​ $ 16,568 ​ $ 18,762 Accrued interest receivable ​ 8,101 ​ 7,659 Investment in Small Business Investment Company ("SBIC") fund ​ 4,711 ​ 4,389 Investment in Community Reinvestment Act fund ​ ​ 2,000 ​ ​ 2,000 Prepaid assets ​ 1,611 ​ 1,568 Servicing assets ​ 1,903 ​ 2,092 Investment in Low Income Housing Tax Credit ("LIHTC") partnerships, net ​ 2,523 ​ 2,675 Investment in statutory trusts ​ 497 ​ 493 CalCAP reserve receivable ​ ​ 4,023 ​ ​ 4,023 Other assets ​ 1,895 ​ 1,871 Total ​ $ 43,832 ​ $ 45,532 ​ ​ ​ ​ NOTE 11 – DEPOSITS The Company’s deposits consisted of the following at the dates indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, December 31, ​ ​ 2023 ​ 2022 Demand deposits ​ $ 705,941 ​ $ 773,274 NOW accounts and savings ​ 424,106 ​ 441,064 Money market ​ 607,782 ​ 577,792 Time deposits ​ 389,940 ​ 293,349 Total ​ $ 2,127,769 ​ $ 2,085,479 ​ Included in time deposits are certificates of deposit over $ 250 thousand totaling $ 63.7 million and $ 57.8 million at March 31, 2023 and December 31, 2022, respectively. ​ ​ 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 March 31, 2023 and December 31, 2022, the Company had no FHLB advances outstanding. The Bank has Federal Funds lines with four corresponding banks. Cumulative available commitments totaled $ 65.0 million at both March 31, 2023 and December 31, 2022. There were no amounts outstanding under these facilities at March 31, 2023 or December 31, 2022. Junior subordinated deferrable interest debentures – In connection with its previous acquisitions, the Company assumed junior subordinated deferrable interest debentures, totaling $ 8.5 million net of fair value adjustments at March 31, 2023 with a weighted average interest rate of 7.46 % , compared to $ 8.5 million with a weighted average rate 27 Table of Contents BAYCOM CORP AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (Tables in thousands, except for share and per share data) (unaudited) ​ of 7.34 % at December 31, 2022 . The junior subordinated deferrable interest debentures mature in 2034, subject to earlier redemption by the Company. 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 bear 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 March 31, 2023 and December 31, 2022, the Company had outstanding Notes, net of cost to issue, totaling $ 63.8 million and $ 63.7 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, December 31, ​ ​ 2023 ​ 2022 Accrued expenses ​ $ 5,368 ​ $ 8,598 Accounts payable ​ 633 ​ 452 Reserve for unfunded commitments ​ 320 ​ 315 Accrued interest payable ​ 1,141 ​ 1,413 Other liabilities ​ 5,849 ​ 5,755 Total ​ $ 13,311 ​ $ 16,533 ​ ​ ​ NOTE 14 – OTHER EXPENSES The Company’s other expenses for the periods indicated consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended ​ March 31, ​ ​ 2023 ​ 2022 Professional fees ​ $ 447 ​ $ 1,306 Core deposit premium amortization ​ 369 ​ 495 Marketing and promotions ​ 146 ​ 296 Stationery and supplies ​ 87 ​ 92 Insurance (including FDIC premiums) ​ 201 ​ 231 Communication and postage ​ 229 ​ 224 Loan default related expense ​ 65 ​ 39 Director fees ​ 82 ​ 84 Bank service charges ​ 16 ​ 66 Courier expense ​ 182 ​ 175 Other ​ 177 ​ 304 Total ​ $ 2,001 ​ $ 3,312 ​ The Company expenses marketing and promotions costs as they are incurred. Advertising expense included in marketing and promotions totaled $ 5,000 and $ 21,000 for the three months ended March 31, 2023 and 2022, respectively. ​ ​ 28 Table of Contents BAYCOM CORP AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (Tables in thousands, except for share and per share data) (unaudited) ​ NOTE 15 – EQUITY INCENTIVE PLANS Equity Incentive Plans 2017 Omnibus Equity Incentive Plan The shareholders approved the 2017 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 right, 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 lesser 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 March 31, 2023, a total of 57,693 shares were available for future issuance under the 2017 Plan. 2014 Omnibus Equity Incentive Plan In 2014, the shareholders approved the 2014 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 $ 250,000 and $ 324,000 for the three months ended March 31, 2023 and 2022, respectively. As of March 31, 2023, there was $ 1.3 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended March 31, ​ ​ ​ 2023 ​ 2022 ​ ​ ​ Weighted-average ​ Weighted-average ​ ​ ​ ​ grant date ​ ​ ​ grant date ​ ​ Shares ​ fair value ​ Shares ​ fair value Non-vested at January 1, 97,877 ​ $ 16.80 ​ 139,275 ​ $ 16.29 ​ Granted 28,392 ​ 18.98 ​ 22,473 ​ 18.79 ​ Vested ( 16,979 ) ​ 19.06 ​ ( 15,560 ) ​ 18.34 ​ Forfeited ​ — ​ ​ — ​ ( 532 ) ​ ​ 18.79 ​ Non-Vested, at March 31, 109,290 ​ ​ 17.01 ​ 145,656 ​ ​ 16.45 ​ ​ ​ 29 Table of Contents BAYCOM CORP AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (Tables in thousands, except for share and per share data) (unaudited) ​ 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. 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 individually evaluated 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 the three months ended March 31, 2023 and 2022. The following assets are measured at fair value on a recurring basis as of the dates indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Level 1 Level 2 Level 3 March 31, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. Government Agencies ​ $ 1,502 ​ $ — ​ $ 1,502 ​ $ — Preferred equity securities ​ ​ 12,834 ​ ​ 12,834 ​ ​ — ​ ​ — Municipal securities ​ 19,862 ​ — ​ 19,862 ​ — Mortgage-backed securities ​ 31,121 ​ — ​ 31,121 ​ — Collateralized mortgage obligations ​ 27,234 ​ — ​ 27,234 ​ — SBA securities ​ 4,094 ​ — ​ 4,094 ​ — Corporate bonds ​ 68,614 ​ — ​ 68,614 ​ — Total ​ $ 165,261 ​ $ 12,834 ​ $ 152,427 ​ $ — ​ 30 Table of Contents BAYCOM CORP AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (Tables in thousands, except for share and per share data) (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Level 1 Level 2 Level 3 December 31, 2022 ​ ​ ​ ​ U.S. Government Agencies ​ $ 1,505 ​ $ — ​ $ 1,505 ​ $ — Preferred equity securities ​ ​ 13,757 ​ ​ 13,757 ​ ​ — ​ ​ — Municipal securities ​ 19,557 ​ — ​ 19,557 ​ — Mortgage-backed securities ​ 33,010 ​ — ​ 33,010 ​ — Collateralized mortgage obligations ​ 25,424 ​ — ​ 25,424 ​ — SBA securities ​ 4,305 ​ — ​ 4,305 ​ — Corporate bonds ​ 70,203 ​ — ​ 70,203 ​ — Total ​ $ 167,761 ​ $ 13,757 ​ $ 154,004 ​ $ — ​ ​ ​ ​ The following assets are measured at fair value on a nonrecurring basis as of the dates indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Level 1 Level 2 Level 3 March 31, 2023 ​ ​ ​ ​ Individually evaluated ​ $ 13,090 ​ — ​ — ​ $ 13,090 OREO ​ 21 ​ — ​ — ​ 21 Total ​ $ 13,111 ​ $ — ​ $ — ​ $ 13,111 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Level 1 Level 2 Level 3 December 31, 2022 ​ ​ ​ ​ Performing impaired loans (1) ​ $ 759 ​ $ — ​ $ — ​ $ 759 Nonperforming impaired loans ​ 15,223 ​ — ​ — ​ 15,223 OREO ​ 21 ​ — ​ — ​ 21 Total ​ $ 16,003 ​ $ — ​ $ — ​ $ 16,003 ​ (1) At March, 31, 2023, with the adoption of CECL, the one performing TDR was collectively evaluated in determining the estimated allowance for credit losses. The Company does not record loans at fair value on a recurring basis. However, from time to time, certain loans have individual risk characteristics not consistent with a pool of loans and are individually evaluated for credit reserves. Loans for which it is probable that payment of interest and principal will not be made in accordance with the original contractual terms of the loan agreement are typically individually evaluated. The fair value of individually evaluated 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 individually evaluated 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 individually evaluated loan as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is less than the appraised value or the appraised value contains a significant assumption and there is no observable market price, the Company records the individually evaluated loan as nonrecurring Level 3. 31 Table of Contents BAYCOM CORP AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (Tables in thousands, except for share and per share data) (unaudited) ​ The Company records foreclosed assets, or 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 less than the appraised value or the appraised value contains a significant assumption, and there is no observable market price, the Company records the OREO 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. ​ NOTE 17 – FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amounts and fair values of the Company’s financial instruments at the dates indicated are presented below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Carrying ​ Fair ​ Fair value measurements ​ amount value Level 1 Level 2 Level 3 March 31, 2023 ​ ​ ​ ​ ​ Financial assets: ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 197,538 ​ $ 197,538 ​ $ 197,538 ​ $ — ​ $ — Time deposits in banks ​ 2,241 ​ 2,241 ​ 2,241 ​ — ​ — Investment securities available-for-sale ​ 165,261 ​ 165,261 ​ 12,834 ​ 152,427 ​ — Investment in FHLB and FRB Stock ​ 20,288 ​ 20,288 ​ — ​ 20,288 ​ — Loans held for sale ​ — ​ — ​ — ​ — ​ — Loans, net ​ 2,024,136 ​ 1,970,297 ​ — ​ — ​ 1,970,297 Accrued interest receivable ​ 8,101 ​ 8,101 ​ — ​ 8,101 ​ — Financial liabilities: ​ ​ ​ ​ ​ Deposits ​ 2,127,769 ​ 2,129,654 ​ — ​ 2,129,654 ​ — Junior subordinated deferrable interest debentures, net ​ ​ 8,504 ​ ​ 8,486 ​ ​ — ​ ​ — ​ ​ 8,486 Subordinated debt, net ​ ​ 63,754 ​ 63,754 ​ — ​ ​ 63,754 ​ ​ — Accrued interest payable ​ 1,141 ​ 1,141 ​ — ​ 1,141 ​ — Off-balance sheet liabilities: ​ ​ ​ ​ ​ ​ Undisbursed loan commitments, lines of credit, standby letters of credit ​ 86,393 ​ 86,073 ​ — ​ — ​ 86,073 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 32 Table of Contents BAYCOM CORP AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (Tables in thousands, except for share and per share data) (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Carrying ​ Fair ​ Fair value measurements ​ amount value Level 1 Level 2 Level 3 December 31, 2022 ​ ​ ​ ​ ​ Financial assets: ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 176,815 ​ $ 176,815 ​ $ 176,815 ​ $ — ​ $ — Time deposits in banks ​ 2,241 ​ 2,241 ​ 2,241 ​ — ​ — Investment securities available-for-sale ​ 167,761 ​ 167,761 ​ 13,757 ​ 154,004 ​ — Investment in FHLB and FRB Stock ​ 20,281 ​ 20,281 ​ — ​ 20,281 ​ — Loans held for sale ​ 2,380 ​ 2,380 ​ — ​ 2,380 ​ — Loans, net ​ 2,002,224 ​ 1,940,480 ​ — ​ — ​ 1,940,480 Accrued interest receivable ​ 7,659 ​ 7,659 ​ — ​ 7,659 ​ — Financial liabilities: ​ ​ ​ ​ ​ Deposits ​ 2,085,479 ​ 2,087,265 ​ — ​ 2,087,265 ​ — Junior subordinated deferrable interest debentures, net ​ 8,484 ​ 7,739 ​ — ​ — ​ 7,739 Subordinated debt, net ​ 63,711 ​ 63,711 ​ — ​ 63,711 ​ — Accrued interest payable ​ 1,413 ​ 1,413 ​ — ​ 1,413 ​ — Off-balance sheet liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Undisbursed loan commitments, lines of credit, standby letters of credit ​ 97,542 ​ 97,227 ​ — ​ — ​ 97,227 ​ ​ ​ 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 home equity and unsecured personal lines of credit, commercial lines of credit, 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, December 31, ​ ​ 2023 ​ 2022 Commitments to extend credit ​ $ 85,515 ​ $ 96,774 Standby letters of credit ​ 878 ​ 768 33 Table of Contents BAYCOM CORP AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (Tables in thousands, except for share and per share data) (unaudited) ​ Total commitments ​ $ 86,393 ​ $ 97,542 ​ 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 $ 320,000 at March 31, 2023 and $ 315,000 at December 31, 2022. Commercial Real Estate Concentrations At March 31, 2023 and December 31, 2022, 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 values 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 both March 31, 2023 and December 31, 2022, the remaining commitments to the LIHTC partnerships and the SBIC fund were approximately $ 2.1 million and $ 122,000 , respectively. Deposits At March 31, 2023, approximately $ 200.9 million, or 10.4 %, of the Company's deposits were derived from its top ten depositors. At December 31, 2022, approximately $ 215.1 million, or 11.0 %, of the Company's deposits were derived from its top ten depositors. As of March 31, 2022 and December 31, 2022, approximately $ 1.0 billion, or 48.7 % and $ 1.1 billion, or 53.3 %, of our total deposits were uninsured, respectively. The uninsured amounts are estimates based on the methodologies and assumptions used for United Business Bank’s regulatory reporting requirements. 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 March 31, 2023 and December 31, 2022, the FHLB issued letters of credit on behalf of the Company totaling $ 42.6 million and $ 40.6 million, respectively, as collateral for local agency deposits. ​ ​ ​ 34 Table of Contents ​