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Item 2. Management’s Discussion and Analysis

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
 SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
 Certain matters discussed in this Form 10-Q may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to our financial condition, results of operations, plans, objectives, future performance or business. Forward-looking statements are not statements of historical fact, are based on certain assumptions and are generally identified by use of the words “believes,” “expects,” “anticipates,” “estimates,” “forecasts,” “intends,” “plans,” “targets,” “potentially,” “probably,” “projects,” “outlook” or similar expressions or future or conditional verbs such as “may,” “will,” “should,” “would” and “could.” Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, assumptions and statements about, among other things, expectations of the business environment in which we operate, projections of future performance or financial items, perceived opportunities in the market, potential future credit experience, and statements regarding our mission and vision. These forward-looking statements are based upon current management expectations and may, therefore, involve risks and uncertainties. Our actual results, performance, or achievements may differ materially from those suggested, expressed, or implied by forward- looking statements as a result of a wide variety or range of factors including, but not limited to:
 ​ 
 ● potential adverse impacts to economic conditions in general and in California, Colorado, New Mexico and Washington specifically, other markets where the Company has lending relationships, or other aspects of the Company’s business operations or financial markets, including, without limitation, as a result of employment levels, labor shortages and the effects of inflation, a potential recession, or slowed economic growth caused by increasing political instability from acts of war including Russia’s invasion of Ukraine, as well as supply chain disruptions; 

 ● higher inflation and current and future monetary policies of the Federal Reserve in response thereto; 

 ● expected revenues, cost savings, synergies and other benefits from our recent acquisition of Pacific Enterprise Bancorp (the “PEB Merger”) might not be realized within the expected time frames or at all and costs or difficulties relating to integration matters, including but not limited to client and employee retention, might be greater than expected; 

 ● the credit risks of lending activities, including changes in the level and trend of loan delinquencies and write-offs and changes in our allowance for credit losses and provision for credit losses; 

 ● changes in the levels of general interest rates and the relative differences between short and long-term interest rates and loan and deposit interest rates; 

 ● the possibility that unexpected outflows of uninsured deposits may require us to sell investment securities at a loss; 

 ● the transition from London Interbank Offered Rate (“LIBOR”) to new interest rate benchmarks; 

 ● our net interest margin and funding sources; 

 ● fluctuations in the demand for loans and the number of unsold homes, land and other properties; 

 ● fluctuations in real estate values in our market areas; 

 ● secondary market conditions for loans and our ability to sell loans in the secondary market; 

 ● results of examinations of us by regulatory authorities and the possibility that any such regulatory authority may, among other things, limit our business activities, require us to change our business mix, increase our allowance for credit losses, write-down asset values or increase our capital levels, affect our ability to borrow funds or maintain or increase deposits; 

 ● risks related to our acquisition strategy, including our ability to identify future suitable acquisition candidates, exposure to potential asset and credit quality risks and unknown or contingent liabilities, the need for capital to finance such transactions, our ability to obtain required regulatory approvals and possible failures in realizing the anticipated benefits from acquisitions; 

 ● challenges arising from attempts to expand into new geographic markets, products, or services; 

 ● future goodwill impairment due to changes in our business, market conditions, or other factors; 

 ● the impact of bank failures or adverse developments at other banks and related negative press about the banking industry in general on investor and depositor sentiment; 

 ● review of the Company’s accounting, accounting policies and internal control over financial reporting; 

 ● risks and uncertainties related to the recent restatement of certain of our historical consolidated financial statements; 

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 ● the subsequent discovery of additional adjustments to the Company’s previously issued financial statements; 

 ● legislative or regulatory changes that adversely affect our business, including changes in banking, securities and tax laws, in regulatory policies and principles, or the interpretation of regulatory capital or other rules, and other governmental initiatives affecting the financial services industry; 

 ● our ability to attract and retain deposits; 

 ● our ability to control operating costs and expenses; 

 ● the use of estimates in determining the fair value of certain of our assets and liabilities, which estimates may prove to be incorrect and result in significant changes in valuation; 

 ● difficulties in reducing risk associated with the loans and securities on our balance sheet; 

 ● staffing fluctuations in response to product demand or the implementation of corporate strategies that affect our workforce and potential associated charges; 

 ● the effectiveness of our risk management framework; 

 ● disruptions, security breaches, or other adverse events, failures or interruptions in, or attacks on, our information technology systems or on the third-party vendors who perform several of our critical processing functions, which could expose us to litigation or reputational harm; 

 ● an inability to keep pace with the rate of technological advances; 

 ● risks associated with dependence on our Chief Executive Officer and senior management team and our ability to attract, motivate and retain qualified personnel; 

 ● costs and effects of litigation, including settlements and judgments; 

 ● our ability to implement our business strategies and manage our growth; 

 ● liquidity issues, including our ability to borrow funds or raise additional capital, if necessary or desired; 

 ● the loss of our large loan and deposit relationships; 

 ● increased competitive pressures among financial services companies; 

 ● changes in consumer spending, borrowing and savings habits; 

 ● the availability of resources to address changes in laws, rules, or regulations or to respond to regulatory actions; 

 ● our ability to pay dividends on our common stock; 

 ● the quality and composition of our securities portfolio and the impact of any adverse changes in the securities markets; 

 ● the inability of key third-party providers to perform their obligations to us; 

 ● changes in accounting principles, policies or guidelines and practices, as may be adopted by the financial institution regulatory agencies, the Public Company Accounting Oversight Board or the Financial Accounting Standards Board; 

 ● the effects of climate change, severe weather events, natural disasters, pandemics, epidemics and other public health crises, acts of war or terrorism, and other external events on our business; 

 ● other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services; and 

 ● risks described in other reports filed with or furnished to the Securities and Exchange Commission (“SEC”), including our Annual Report on Form 10-K/A for the year ended December 31, 2022 (“2022 Annual Report”) and this Form 10-Q. 

 ​ 
 In light of these risks, uncertainties and assumptions, the forward-looking statements discussed in this report might not occur, and you should not put undue reliance on any forward-looking statements. Moreover, you should treat these statements as speaking only as of the date they are made and based only on information then actually known to us. We do not undertake and specifically disclaim any obligation to revise any forward-looking statements included in this report or the reasons why actual results could differ from those contained in such statements, whether as a result of new information or to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. These risks could cause our actual results for the remainder of 2023 and beyond to differ materially from those expressed in any forward-looking statements by, or on behalf of us and could negatively affect our consolidated financial condition and consolidated results of operations as well as our stock price performance.
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 Executive Overview
 General. BayCom is a bank holding company headquartered in Walnut Creek, California. BayCom’s wholly owned banking subsidiary, United Business Bank, provides a broad range of financial services to businesses and business owners as well as individuals through its network of 34 full-service branches, with 16 locations in California, two in Washington, five in New Mexico and 11 in Colorado. The Company’s business activities generally are limited to passive investment activities and oversight of its investment in the Bank. Accordingly, the information set forth in this report, including the consolidated financial statements and related data, relate primarily to the Bank.
 Our principal objective is to continue to increase shareholder value and generate consistent earnings growth by expanding our commercial banking franchise through both strategic acquisitions and organic growth. Since 2010, we have expanded our geographic footprint through 10 strategic acquisitions. We believe our strategy of selectively acquiring and integrating community banks has provided us with economies of scale and improved our overall franchise efficiency. Looking forward, we expect to continue to pursue strategic acquisitions and believe our targeted market areas present us with many and varied acquisition opportunities. We are also focused on continuing to grow organically and believe the metropolitan and community markets in which we operate currently provide meaningful opportunities to expand our commercial client base and increase both interest-earning assets and market share. We believe our geographic footprint, which now includes the San Francisco Bay area, the metropolitan markets of Los Angeles, California, Seattle, Washington, and Denver, Colorado, and community markets including Albuquerque, New Mexico, and Custer, Delta, and Grand counties, Colorado, provides us with access to low cost, stable core deposits that we can use to fund commercial loan growth. We strive to provide an enhanced banking experience for our clients by providing them with a comprehensive suite of sophisticated banking products and services tailored to meet their needs, while delivering the high-quality, relationship-based client service of a community bank. At June 30, 2023, on a consolidated basis, the Company had approximately $2.6 billion in total assets, $2.0 billion in total loans, $2.1 billion in total deposits and $307.0 million in shareholders’ equity.
 We continue to focus on growing our commercial loan portfolios through acquisitions as well as organic growth. At June 30, 2023, our $2.0 billion total loan portfolio included $461.5 million, or 22.9 %, of acquired loans (all of which were recorded to their estimated fair values at the time of acquisition), and the remaining $1.6 billion, or 77.1%, consisted of loans we originated. 
 The profitability of our operations depends primarily on our net interest income after provision for credit losses, which is the difference between interest earned on interest earning assets and interest paid on interest bearing liabilities less provision for credit losses. Our net income is also affected by other factors, including the provision for credit losses on loans, noninterest income and noninterest expense.
 On February 1, 2022, the Company completed its acquisition of PEB, which was headquartered in Irvine, California. Under the terms of the merger agreement, PEB merged with and into BayCom (the “Merger”), with BayCom as the surviving corporation in the Merger. Immediately following the Merger, Pacific Enterprise Bank, a wholly-owned subsidiary of PEB, merged with and into United Business Bank, a wholly-owned subsidiary of BayCom (the “Bank Merger”), with the Bank as the surviving bank in the Bank Merger. For additional information, see “Note 3 – Acquisitions” contained in the Notes to Condensed Consolidated Financial Statements included in “Item 1. Financial Information” of Part I of this report.
 ​ 
 Set forth below is a discussion of the primary factors affecting our results of operations:
 Net interest income. Net interest income represents interest income less interest expense. We generate interest income from interest and fees received on interest earning assets, including loans and investment securities and dividends on Federal Home Loan Bank of San Francisco (“FHLB”) and Federal Reserve Bank of San Francisco (“FRB”) stock we own. We incur interest expense from interest paid on interest bearing liabilities, including interest bearing deposits and borrowings. To evaluate net interest income, we measure and monitor: (i) yields on our loans and other interest earning assets; (ii) the costs of our deposits and other funding sources; (iii) our net interest margin; and (iv) the regulatory risk weighting associated with our assets. Net interest margin is calculated as the annualized net interest income divided by average interest earning assets. Because noninterest bearing sources of funds, such as noninterest bearing deposits and 

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 shareholders’ equity, also fund interest earning assets, net interest margin reflects the benefit of these noninterest bearing sources.
 Changes in market interest rates, the slope of the yield curve, and interest we earn on interest earning assets or pay on interest bearing liabilities, as well as the volume and types of interest earning assets, interest bearing and noninterest bearing liabilities and shareholders’ equity, usually have the largest impact on changes in our net interest spread, net interest margin and net interest income during a reporting period. Since March 2022 through the quarter ended June 30, 2023, in response to inflation, the Federal Open Market Committee (“FOMC”) of the Board of Governors of the Federal Reserve System (“Federal Reserve”) has increased the target range for the federal funds rate by 500 basis points, including 75 basis points during the first six months of 2023, to a range of 5.00% to 5.25%. Subsequent to June 30, 2023, the FOMC further increased the target range for the federal funds rate by an additional 25 basis points. The increase in the average yield on interest-earning assets during the three and six months ended June 30, 2023 reflects the lagging benefit of variable rate interest-earning assets beginning to reprice higher. We believe our balance sheet is structured to enhance our net interest margin if the FOMC continues to raise the targeted federal funds rate.
 Noninterest income. Noninterest income consists of, among other things: (i) service charges on loans and deposits; (ii) gain on sale of loans; and (iii) gain (loss) on equity securities; and (iv) other noninterest income. Gain on sale of loans includes income (or losses) from the sale of the guaranteed portion of Small Business Administration (“SBA”) loans, capitalized loan servicing rights and other related income.
 Provision for credit losses. We established an allowance for credit losses by charging amounts to provision for credit losses at a level required to reflect estimated credit losses in the loan and available-for sale investment securities portfolios. For loans, management considers many factors including historical experience, types and amounts of the portfolio and adverse situations that may affect borrowers’ ability to repay, among other factors. See “Critical Accounting Policies and Estimates - Allowance for Credit Losses” for a description of the manner in which the provision for credit losses is established.
 For investments, the Company evaluates investment available-for-sale debt securities in an unrealized loss position to determine whether the decline in the fair value below the amortized cost basis is due to credit-related factors or noncredit-related factors. Such situations 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. 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 if 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. If this assessment indicates a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of the cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses for available-for-sale securities is recorded for the credit loss, limited by the amount that the fair value is less than the amortized costs basis. Any impairment that has not been recorded through an allowance for credit losses for available-for-sale securities is recognized in other comprehensive income. Changes in the allowance for credit losses for available-for-sale securities are recorded as provision for (or reversal of) credit loss. Losses are charged against the allowance for credit losses for available-for-sale securities, with a corresponding adjustment to the security's amortized cost basis, when management believes the uncollectibility of an available-for-sale security is confirmed or when either criteria regarding intent or requirement to sell is met.
 ​ 
 Noninterest expense. Noninterest expense includes, among other things: (i) salaries and related benefits; (ii) occupancy and equipment expense; (iii) data processing; (iv) Federal Deposit Insurance Corporation (“FDIC”) and state assessments; (v) outside and professional services; and (vi) other general and administrative expenses, including amortization of intangible assets. Salaries and related benefits include compensation, employee benefits and employment tax expenses for our personnel. Occupancy and equipment expense includes depreciation expense on our owned properties and equipment, lease expense on our leased properties and other occupancy-related expenses. Data processing expense includes fees paid to our third-party data processing system provider and other data service providers. FDIC and state assessments expense represents the assessments that we pay to the FDIC for deposit insurance and other regulatory costs to various states. Outside and professional fees include legal, accounting, consulting and other outsourcing arrangements. 

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 Amortization of intangibles represents the amortization of our core deposit intangible from various acquisitions. Other general and administrative expenses include expenses associated with travel, meals, training, supplies and postage. Noninterest expenses generally increase as we grow our business. Noninterest expenses have increased significantly over the past few years as we have grown through acquisitions and organically, and as we have built out our operational infrastructure.
 Critical Accounting Policies and Estimates
 Our consolidated financial statements are prepared in accordance with GAAP. In doing so, we have to make estimates and assumptions. Our critical accounting estimates are those estimates that involve a significant level of uncertainty at the time the estimate was made, and changes in the estimate that are reasonably likely to occur from period to period, or use of different estimates that we reasonably could have used in the current period, that would have a material impact on our financial condition or results of operations. Accordingly, actual results could differ materially from our estimates. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. We have reviewed our critical accounting estimates with the audit committee of our Board of Directors. Our critical accounting estimates are described in detail in the Critical Accounting Estimates section of our 2022 Annual Report. There have been no significant changes to our critical accounting estimates since December 31, 2022, except for the following: 
 On January 1, 2023, the Company adopted ASU 2016-03 Financial Instruments — Credit Losses (ASC 326): Measurement of Credit Losses on Financial Instruments , which replaces the incurred loss methodology with 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. 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, ASC 326 made changes to the accounting for available-for-sale debt securities. One such change is to require increases or decreases in credit losses 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.
 ​ 
 Allowance for credit loan losses for investment securities available-for-sale. The Company evaluates investment securities available-for-sale in an unrealized loss position to determine whether the decline in the fair value below the amortized cost basis (impairment) is due to credit-related factors or noncredit-related factors. 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. 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. 
 ​ 
 Any impairment that is not credit related is recognized in other comprehensive income, net of applicable taxes. Credit-related impairment is recognized as an allowance for credit losses on the balance sheet, limited to the amount by which the amortized cost basis exceeds the fair value, with a corresponding adjustment to earnings. Changes in the allowance for available-for-sale securities are recorded as provision for (or reversal of) credit loss. However, if the uncollectibility of an available-for-sale security is confirmed or if the Company intends to sell an impaired available-for-sale debt security or more likely than not will be required to sell such a security before recovering its amortized cost basis, the entire impairment amount is recognized in earnings with a corresponding adjustment to the security's amortized cost basis. 
 ​ 
 Allowance for credit losses for loans . The allowance for credit losses (“ACL”) for loans is the combination of the allowance for credit losses for loans and the reserve for unfunded loan commitments. The allowance for credit losses for loans is reported as a reduction of the amortized cost basis of loans, while the reserve for unfunded loan commitments is included within &quot;Interest payable and other liabilities&quot; on the consolidated balance sheets. The amortized cost basis of loans does not include accrued interest receivable, which is included in &quot;Interest receivable and other assets&quot; on the consolidated balance sheets. The &quot;Provision for credit losses&quot; on the consolidated statements of 

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 income (loss) is a combination of the provision for credit losses for loans, the provision for unfunded loan commitments, and the provision for investment securities available-for-sale.
 ​ 
 Under the CECL methodology, expected credit losses reflect expected losses over the remaining contractual life of an asset, considering the effect of prepayments and available information about the collectability of cash flows, including information about relevant historical experience, current conditions, and reasonable and supportable forecasts of future events and circumstances. Thus, the CECL methodology incorporates a broad range of information in developing credit loss estimates. The CECL methodology could result in significant changes to both the timing and amounts of provision for credit losses and the allowance as compared to historical periods. Loans that are deemed to be uncollectable are charged off and deducted from the allowance. The provision for credit losses and recoveries on loans previously charged off are added to the allowance. Regardless of the determination that a charge-off is appropriate for financial accounting purposes, the Company manages its loan portfolio by continually monitoring, where possible, a borrower's ability to pay through the collection of financial information, delinquency status, borrower discussion and the encouragement to repay in accordance with the original contract or modified terms, if appropriate. 
 ​ 
 The allowance for credit losses for loans is comprised of an individually evaluated component for loans that no longer share similar risk characteristics with other loans and a pooled loans component for loans that share similar risk characteristics. 
 ​ 
 A loan with an outstanding balance greater than $100,000 is individually evaluated for expected credit loss when it is probable that we will be unable to collect all amounts due according to the original contractual terms of the loan agreement. We select loans for individual assessment on an ongoing basis using certain criteria such as payment performance, borrower reported and forecasted financial results, and other external factors when appropriate. Loans that do not share the same risk characteristics as pooled loans are evaluated individually for credit loss and generally include all non-accrual loans, collateral dependent loans, and certain troubled debt restructured loans. We measure the current expected credit loss of an individually evaluated loan based upon the fair value of the underlying collateral, adjusted for costs to sell when applicable, or if the loan is not collateral-dependent we utilize the present value of expected future cash flows, discounted at the effective interest rate. A loan for which the terms have been modified resulting in a concession, and where the borrower is experiencing financial difficulties, is considered a modified loan to a borrower experiencing financial difficulty. The ACL on modified loans to borrowers experiencing financial difficulty is measured using the same method as individually evaluated loans. When the value of a concession is measured using the discounted cash flow method, the ACL is determined by discounting the expected future cash flows at the original interest rate of the loan. To the extent a loan balance exceeds the estimated collectable value, a reserve or charge-off is recorded depending upon either the certainty of the estimate of loss or the fair value of the loan’s collateral if the loan is collateral-dependent. 
 ​ 
 Our CECL methodology for the pooled loans component includes both quantitative and qualitative loss factors which are applied to our population of loans and assessed at a pool level. The quantitative CECL model estimates credit losses by applying pool-specific probability of default (&quot;PD&quot;) and loss given default (&quot;LGD&quot;) rates to the expected exposure at default (&quot;EAD&quot;) over the contractual life of loans. The qualitative component considers internal and external risk factors that may not be adequately assessed in the quantitative model. Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments and curtailments, when appropriate. The pooled loans' contractual loan terms exclude extensions, renewals, and modifications. To estimate future prepayments by loan pool, we use our actual historical loan prepayment experience over a trailing time period, adjusted for forecasted economic conditions, to estimate future prepayments by loan pool. To estimate curtailment by loan pool we use our actual historical loan curtailment experience over a trailing time period, adjusted for forecasted economic conditions. Where observations in either case may be insufficient, the global rate, which is simply the aggregate performance of all loan segments of the Bank, is used.
 ​ 
 The ACL model utilizes a discounted cash flow (&quot;DCF&quot;) method to measure the expected credit losses on loans collectively evaluated that are sub-segmented by loan pools with similar credit risk characteristics, which generally correspond to federal regulatory reporting codes (i.e, Call codes), with PCD assets pooled separately by similar loan pools to evaluate and measure the allowance for credit loss:
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 ● Loans secured by real estate: 

 o 1-4 family residential construction loans and other construction loans and all land development and other land loans 

 o Secured by farmland and finance agricultural production and other loans to farmers 

 o Revolving, open-end loans secured by 1-4 family residential properties extended under lines of credit and closed-end loans secured by 1-4 family residential properties, secured by junior liens 

 o Closed-end loans secured by 1-4 family residential properties, secured by first liens 

 o Commercial real estate loans secured by owner-occupied non-farm nonresidential properties 

 o Commercial real estate loans secured by other non-farm nonresidential properties and 

 o Secured by multifamily (5 or more units) residential properties 

 ● Commercial and industrial loans 

 ● Loans to individuals for household, family and other personal expenditures (i.e., consumer loans) 

 ● Paycheck Protection Program loans (which are fully government guaranteed) 

 ​ 
 In determining the PD for each pooled segment, the Bank utilized regression analyses to identify certain economic drivers that were considered highly correlated to historical Bank or peer loan default experience. The regression models developed correlate macroeconomic variables to historical credit performance based on call report data over a 64 quarter (16-year) period which captures a full economic cycle from 2004 to 2019. We elected to exclude historical data from 2020 - 2021 to assess the quantitative expected credit losses because we believe that period is an outlier and did not represent normal economic behavior considering the Covid-19 pandemic lockdown with changes in macroeconomic variables and the significant levels of government relief programs in place during that period. For all segments, the Company's actual loss history was not statistically relevant, thus the loss history of peers, defined as commercial financial institutions with asset size of one to five billion, domiciled in California, with similar concentrations of lending were utilized to determine loss rates. The peers utilized in the ACL are segment specific. Additionally, management chose the national unemployment rate and U.S. gross domestic product as the primary economic forecast drivers for all segments. A third party provides LGD estimates for each segment based on a banking industry Frye-Jacobs Risk Index approach. 
 ​ 
 In its loss forecasting framework, the Company incorporates forward-looking information through the use of macroeconomic scenarios applied over the forecasted life of the assets. The quantitative CECL model applies the projected rates based on the economic forecasts for the four quarter (one-year) reasonable and supportable forecast horizon to EAD to estimate defaulted loans. The economic data is updated quarterly, which is based on Federal Reserve Economic Data (“FRED”) forecasts. Historical LGD rates are applied to estimated defaulted loans to determine estimated credit losses. For periods beyond the forecast horizon, the economic factors revert to historical averages on a straight-line basis over an eight-quarter (two-year) period. Subsequent to the reversion period for the remaining contractual life of loans and leases, the PD, LGD, and prepayment rates are based on historical experience during a full economic cycle. 
 ​ 
 Management considers whether adjustments to the quantitative portion of the ACL are needed for differences in segment-specific risk characteristics or to reflect the extent to which it expects current conditions and reasonable and supportable forecasts of economic conditions to differ from the conditions that existed during the historical period included in the development of PD and LGD. Qualitative internal and external risk factors include, but are not limited to, the following:
 ​ 
 ● Changes in the nature and volume of the loan portfolio 

 ● Changes in the volume and severity of past due loans, the volume of non-accrual loans, and the volume and severity of adversely classified or graded loans 

 ● Changes in lending policies and procedures, including changes in underwriting standards and collection 

 ● Changes in economic and business conditions, and developments that affect the collectability of the portfolio 

 ● Changes in the experience, ability, and depth of credit management and lending staff 

 ● Changes in the quality of our systematic loan review processes 

 ● Changes in the value of underlying collateral, where applicable 

 ● Changes in concentration of credit 

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 ● The effect of other external factors such as legal and regulatory requirements on the level of estimated credit losses in the portfolio
 ​ 
 PCD assets are assets acquired at a discount that is due, in part, to credit quality deterioration since origination which may be determined through observation of missed payments, downgrade in risk rating, deterioration of a borrower's financial trends or other observable factors including subjectivity utilized by management. PCD assets are initially recorded at fair value, by taking the sum of the present value of expected future cash flows and an allowance for credit losses, at acquisition. The allowance for credit losses for PCD assets is recorded through a gross-up of reserves on the consolidated balance sheets, while the allowance for acquired non-PCD assets, such as loans, is recorded through the provision for credit losses on the consolidated statements of income, consistent with originated loans. Subsequent to acquisition, the allowance for credit losses for PCD loans will generally follow the same forward-looking estimation, provision, and charge-off process as non-PCD acquired and originated loans. 
 ​ 
 The estimated credit losses associated with unfunded lending commitments are calculated using the same models and methodologies noted above and incorporate utilization assumptions at the estimated time of default. While the provision for credit losses associated with unfunded commitments is included in &quot;provision for credit losses&quot; on the consolidated statement of income, the reserve for unfunded commitments is maintained on the consolidated balance sheet in &quot;Interest payable and other liabilities&quot;.
 ​ 
 ​ 
 Comparison of Financial Condition at June 30, 2023 and December 31, 2022 
 Total assets. Total assets increased $54.2 million, or 2.2%, to $2.6 billion at June 30, 2023, from December 31, 2022. The increase primarily was due to cash and cash equivalents, increasing $73.4 million, or 41.5%, partially offset by decreases in loans receivable, net, of $8.0 million or 0.4% and investment securities available for sale of $7.5 million or 4.9%. In addition, interest receivable and other assets increased $2.0 million or 2.2%, equity securities decreased $1.8 million or 13.4%, and loan held for sale decreased $2.4 million or 100.0%. 
 Cash and cash equivalents. Cash and cash equivalents increased $73.4 million, or 41.5%, to $250.2 million, at June 30, 2023, from $176.8 million at December 31, 2022. The increase primarily was due to a $63.7 million increase in federal funds sold and interest bearing balances in banks during six months ended June 30, 2023, consistent with management’s strategy to increase liquidity following the recent turmoil in the banking industry resulting from several recent high profile bank failures. 
 Investment securities available-for-sale. Investment securities available-for-sale, decreased $7.5 million, or 4.9%, to $146.5 million at June 30, 2023 from $154.0 million at December 31, 2022. The decrease primarily was due to unrealized losses on investment securities available-for-sale of $6.8 million as a result of fair value adjustments and the routine amortization and repayment of investment principal balances and securities called and matured of $2.9 million, partially offset by the purchase of $2.5 million of investment securities during the six months ended June 30, 2023. 
 Equity securities. Equity securities decreased $1.8 million, or 13.4% to $11.9 million at June 30, 2023 from $13.8 million at December 31, 2022, primarily due to a $1.8 million mark-to-market downward adjustment recorded during the six months ended June 30, 2023. 
 Loans receivable, net. We originate a wide variety of loans with a focus on commercial real estate (“CRE”) loans and commercial and industrial loans. Loans receivable, net decreased $8.0 million, or 0.4%, to $2.0 billion at June 30, 2023 from December 31, 2022. The decrease was due to $65.1 million of loan repayments, including $997,000 in Paycheck Protection Program (“PPP”) loans, and $6.9 million in loan sales, partially offset by $34.3 million of new loan originations. 
 The following table provides information about our loan portfolio by type of loan, with purchase credit deteriorated (“PCD”) loans presented as a separate balance, at the dates presented . 

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 ​ 
 ​ 
 June 30, 
 ​ 
 December 31, 
 ​ 
 ​ 
 
 
 ​ 
 ​ 
 2023
 ​ 
 2022
 ​ 
 % Change
 
 
 
 ​ 
 ​ 
 (Dollars in thousands)
 ​ 
 ​ 
 
 
 Commercial and industrial (1)
 
 $
 180,633 
 
 $
 184,521 
 
 (2.1)
 %
 
 Real estate:
 ​ 
 
 
 ​ 
 
 
 ​ 
 ​ 
 ​ 
 
 Residential
 ​ 
 
 89,465 
 ​ 
 
 109,927 
 
 (18.6)
 ​ 
 
 Multifamily residential
 ​ 
 
 249,232 
 ​ 
 
 234,868 
 
 6.1
 ​ 
 
 Owner occupied CRE
 ​ 
 
 739,854 
 ​ 
 
 641,815 
 
 15.3 
 ​ 
 
 Non-owner occupied CRE
 ​ 
 
 715,237 
 ​ 
 
 807,996 
 
 (11.5)
 ​ 
 
 Construction and land
 ​ 
 
 9,999 
 ​ 
 
 9,109 
 
 9.8
 ​ 
 
 Total real estate
 ​ 
 
 1,803,787 
 ​ 
 
 1,803,715 
 ​ 
 0.0
 ​ 
 
 Consumer
 ​ 
 
 916 
 ​ 
 
 4,183 
 ​ 
 (78.1)
 ​ 
 
 PCD loans
 ​ 
 
 27,961 
 ​ 
 
 28,787 
 ​ 
 (2.9)
 ​ 
 
 Total Loans
 ​ 
 
 2,013,297 
 ​ 
 
 2,021,206 
 ​ 
 (0.4)
 ​ 
 
 Net deferred loan fees
 ​ 
 
 10 
 ​ 
 
 (82) 
 ​ 
 (112.0)
 ​ 
 
 Allowance for credit losses (2)
 ​ 
 
 (19,100) 
 ​ 
 
 (18,900) 
 ​ 
 1.1
 ​ 
 
 Loans, net
 ​ 
 $
 1,994,207 
 ​ 
 $
 2,002,224 
 ​ 
 (0.4)
 %
 

 ​ 
 (1) Includes $4.9 million and $11.1 million of PPP loans as of June 30, 2023 and December 31, 2022, respectively. 

 (2) Allowance for credit losses at June 30, 2023 is estimated under CECL whereas at December 31, 2022, the allowance for loan losses is estimated under the incurred loss methodology. 

 ​ 
 The following table shows as of June 30, 2023, the geographic distribution of our loan portfolio by type of loan in dollar amounts and percentages:
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 
 ​ 
 ​ 
 San Francisco Bay 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 Total in State of 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 
 
 ​ 
 ​ 
 Area (1) 
 ​ 
 Other California (2) 
 ​ 
 California 
 ​ 
 ​ 
 All Other States (3) 
 ​ 
 Total 
 
 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 % of 
 ​ 
 ​ 
 ​ 
 ​ 
 % of 
 ​ 
 ​ 
 ​ 
 ​ 
 % of 
 ​ 
 ​ 
 ​ 
 ​ 
 % of 
 ​ 
 ​ 
 ​ 
 ​ 
 % of 
 
 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 Total in 
 ​ 
 ​ 
 ​ 
 ​ 
 Total in 
 ​ 
 ​ 
 ​ 
 ​ 
 Total in 
 ​ 
 ​ 
 ​ 
 ​ 
 Total in 
 ​ 
 ​ 
 ​ 
 ​ 
 Total in 
 
 
 ​ 
 ​ 
 Amount 
 ​ 
 Category 
 ​ 
 Amount 
 ​ 
 Category 
 ​ 
 Amount 
 ​ 
 Category 
 ​ 
 Amount 
 ​ 
 Category 
 ​ 
 Amount 
 ​ 
 Category 
 
 
 
 ​ 
 
 (Dollars in thousands) 
 ​ 
 
 June 30, 2023 
 
 ​ 
 
 
 ​ 
 
 
 ​ 
 
 
 ​ 
 
 
 ​ 
 
 
 
 
 ​ 
 
 
 
 
 ​ 
 
 
 
 ​ 
 
 Commercial and industrial
 ​ 
 $
 41,037 
 
 ​ 
 9.2 
 % 
 $
 81,561 
 
 ​ 
 9.4 
 % 
 $
 122,598 
 
 9.3 
 % 
 $
 58,254 
 
 8.3 
 % 
 $
 180,852 
 
 9.0 
 %
 
 Real estate:
 ​ 
 
 ​ 
 
 ​ 
 
 ​ 
 
 ​ 
 
 ​ 
 
 ​ 
 
 
 
 
 ​ 
 
 ​ 
 
 
 ​ 
 
 
 
 
 ​ 
 
 Residential
 ​ 
 
 14,568 
 
 ​ 
 3.3 
 ​ 
 
 42,707 
 
 ​ 
 4.9 
 ​ 
 
 57,275 
 
 4.4 
 ​ 
 
 32,740 
 
 4.7 
 ​ 
 
 90,015 
 
 4.5 
 ​ 
 
 Multifamily residential
 ​ 
 
 50,452 
 
 ​ 
 11.3 
 ​ 
 
 100,685 
 
 ​ 
 11.6 
 ​ 
 
 151,137 
 
 11.5 
 ​ 
 
 100,859 
 
 14.4 
 ​ 
 
 251,996 
 
 12.5 
 ​ 
 
 Owner occupied CRE
 ​ 
 
 244,192 
 
 ​ 
 54.8 
 ​ 
 
 415,768 
 
 ​ 
 47.9 
 ​ 
 
 659,960 
 
 50.3 
 ​ 
 
 100,840 
 
 14.4 
 ​ 
 
 760,800 
 
 37.8 
 ​ 
 
 Non-owner occupied CRE
 ​ 
 
 95,128 
 
 ​ 
 21.4 
 ​ 
 
 219,162 
 
 ​ 
 25.3 
 ​ 
 
 314,290 
 
 23.9 
 ​ 
 
 404,429 
 
 57.8 
 ​ 
 
 718,719 
 
 35.7 
 ​ 
 
 Construction and land
 ​ 
 
 — 
 
 ​ 
 — 
 ​ 
 
 7,909 
 
 ​ 
 0.9 
 ​ 
 
 7,909 
 
 0.6 
 ​ 
 
 2,090 
 
 0.3 
 ​ 
 
 9,999 
 
 0.5 
 ​ 
 
 Total real estate
 ​ 
 
 404,340 
 
 ​ 
 ​ 
 ​ 
 
 786,231 
 
 ​ 
 ​ 
 ​ 
 
 1,190,571 
 
 ​ 
 ​ 
 
 640,958 
 
 ​ 
 ​ 
 
 1,831,529 
 
 ​ 
 ​ 
 
 Consumer
 ​ 
 
 3 
 
 ​ 
 0.0 
 % 
 
 1 
 
 ​ 
 — 
 % 
 
 4 
 
 — 
 % 
 
 912 
 
 0.1 
 % 
 
 916 
 
 0.0 
 %
 
 Total loans
 ​ 
 $
 445,380 
 ​ 
 ​ 
 ​ 
 ​ 
 $
 867,793 
 ​ 
 ​ 
 ​ 
 ​ 
 $
 1,313,173 
 
 
 ​ 
 $
 700,124 
 
 
 ​ 
 $
 2,013,297 
 
 
 ​ 
 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 
 December 31, 2022 
 ​ 
 
 
 ​ 
 
 
 ​ 
 
 
 ​ 
 
 
 ​ 
 
 
 
 
 ​ 
 
 
 
 
 ​ 
 
 
 
 
 ​ 
 
 Commercial and industrial
 ​ 
 $
 54,056 
 ​ 
 ​ 
 7.8 
 %
 $
 92,546 
 ​ 
 ​ 
 10.1 
 %
 $
 146,602 
 ​ 
 9.1 
 %
 $
 41,936 
 ​ 
 10.2 
 %
 $
 188,538 
 ​ 
 9.3 
 %
 
 Real estate:
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 
 Residential
 ​ 
 ​ 
 17,112 
 ​ 
 ​ 
 2.5 
 ​ 
 ​ 
 52,081 
 ​ 
 ​ 
 5.7 
 ​ 
 $
 69,193 
 ​ 
 4.3 
 ​ 
 ​ 
 41,413 
 ​ 
 10.1 
 ​ 
 ​ 
 110,606 
 ​ 
 5.5 
 ​ 
 
 Multifamily residential
 ​ 
 ​ 
 58,533 
 ​ 
 ​ 
 8.4 
 ​ 
 ​ 
 108,198 
 ​ 
 ​ 
 11.8 
 ​ 
 ​ 
 166,731 
 ​ 
 10.4 
 ​ 
 ​ 
 70,974 
 ​ 
 17.3 
 ​ 
 ​ 
 237,705 
 ​ 
 11.8 
 ​ 
 
 Owner occupied CRE
 ​ 
 ​ 
 242,755 
 ​ 
 ​ 
 35.0 
 ​ 
 ​ 
 363,210 
 ​ 
 ​ 
 39.7 
 ​ 
 ​ 
 605,965 
 ​ 
 37.6 
 ​ 
 ​ 
 52,191 
 ​ 
 12.7 
 ​ 
 ​ 
 658,156 
 ​ 
 32.6 
 ​ 
 
 Non-owner occupied CRE
 ​ 
 ​ 
 321,523 
 ​ 
 ​ 
 46.3 
 ​ 
 ​ 
 289,528 
 ​ 
 ​ 
 31.6 
 ​ 
 ​ 
 611,051 
 ​ 
 37.9 
 ​ 
 ​ 
 197,804 
 ​ 
 48.1 
 ​ 
 ​ 
 808,855 
 ​ 
 40.0 
 ​ 
 
 Construction and land
 ​ 
 ​ 
 — 
 ​ 
 ​ 
 — 
 ​ 
 ​ 
 8,678 
 ​ 
 ​ 
 0.9 
 ​ 
 ​ 
 8,678 
 ​ 
 0.5 
 ​ 
 ​ 
 4,485 
 ​ 
 1.1 
 ​ 
 ​ 
 13,163 
 ​ 
 0.7 
 ​ 
 
 Total real estate
 ​ 
 ​ 
 639,923 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 821,695 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 1,461,618 
 ​ 
 ​ 
 ​ 
 ​ 
 366,867 
 ​ 
 ​ 
 ​ 
 ​ 
 1,828,485 
 ​ 
 ​ 
 ​ 
 
 Consumer
 ​ 
 ​ 
 391 
 ​ 
 ​ 
 0.1 
 %
 ​ 
 1,672 
 ​ 
 ​ 
 0.2 
 %
 
 2,063 
 ​ 
 0.1 
 %
 ​ 
 2,120 
 ​ 
 0.5 
 %
 ​ 
 4,183 
 ​ 
 0.2 
 %
 
 Total loans
 ​ 
 $
 694,370 
 ​ 
 ​ 
 ​ 
 ​ 
 $
 915,913 
 ​ 
 ​ 
 ​ 
 ​ 
 $
 1,610,283 
 
 
 ​ 
 $
 410,923 
 
 
 ​ 
 $
 2,021,206 
 
 
 ​ 
 

 ​ 
 (1) Includes Alameda, Contra Costa, Solano, Sonoma, Marin, San Francisco, San Mateo and Santa Clara counties. 

 (2) Includes loans located in Sacramento and Northern California counties totaling $99.9 million at June 30, 2023, and loans located in Los Angeles and Orange counties totaling $531.9 million at June 30, 2023. At December 31, 2022, loans in Sacramento and Northern California counties and loans in Los Angeles and Orange counties totaled $507.7 million and $189.6 million, respectively. 

 47

 
 Table of Contents 

 (3) Includes loans located primarily in the states of Colorado, New Mexico and Washington. At June 30, 2023, loans in Colorado, New Mexico and Washington totaled $93.6 million, $47.7 million and $111.7 million, respectively. At December 31, 2022, loans in Colorado, New Mexico and Washington totaled $97.2 million, $51.3 million and $87.4 million, respectively. 

 
 Nonperforming assets and loans. Nonperforming assets generally consists of nonaccrual loans, accruing loans that are 90 days or more past due and other real estate owned (“OREO”). Nonperforming loans generally consist of nonaccrual loans and accruing loans that are 90 days or more past due. Nonperforming assets decreased $2.4 million, or 15.8%, to $12.8 million, or 0.50% of total assets at June 30, 2023 from $15.2 million, or 0.61% of total assets at December 31, 2022. The decrease in nonperforming assets from December 31, 2022 was primarily due to the renewal of one accruing loan 90 days or more past due and in the process of collection totaling $934,000 at December 31, 2022, and the charge-off of five nonaccrual loans totaling $330,000 during the current quarter. There were no accruing loans 90 days or more past due or OREO at June 30, 2023, compared to $934,000 of accruing loans 90 days or more past due and $21,000 of OREO at December 31, 2022. 
 Nonperforming loans totaled $12.8 million, or 0.64% of total loans, at June 30, 2023, of which $801,000 were guaranteed by governmental agencies, compared to $15.2 million, or 0.75% of total loans, at December 31, 2022, of which $839,000 were guaranteed by governmental agencies. Not included in nonperforming loans at June 30, 2023 and December 31, 2022, were $774,000 and $759,000 of performing (accruing) modified loans to borrowers experiencing financial difficulty, respectively. 
 At June 30, 2023 and December 31, 2022, nonaccrual loans included $1.1 million and $2.5 million of loans 30-89 days past due, and $2.8 million and $4.0 million of loans less than 30 days past due, respectively. At June 30, 2023, the $2.8 million of loans less than 30 days past due was comprised of 15 loans, all of which were placed on nonaccrual due to concerns over the financial condition of the borrowers. See Note 19 Subsequent Events in the Notes to the Condensed Consolidated Financial Statements. 
 Subsequent to June 30, 2023, the Company determined that a certificate of deposit-secured line of credit loan made to the Borrower with an outstanding balance of approximately $5.0 million as of June 30, 2023 was impaired as a result of the sole trustee and beneficiary of the Trust filing for bankruptcy in July 2023. After utilizing the $4.0 million certificate of deposit held at the Bank to offset amounts owed on the loan, the Company expects to place the $1.0 million outstanding balance on nonaccrual and record a $1.0 million reserve for the unsecured portion of the loan during the third quarter of 2023. For additional information on, see Note 19 Subsequent Events in the Notes to the Condensed Consolidated Financial Statements. 
 ​ 
 In general, loans are placed on nonaccrual status after being contractually delinquent for more than 90 days, or earlier, if management believes full collection of future principal and interest on a timely basis is unlikely. When a loan is placed on nonaccrual status, all interest accrued but not received is charged against interest income. When the ability to fully collect nonaccrual loan principal is in doubt, cash payments received are applied against the principal balance of the loan until such time as full collection of the remaining recorded balance is expected. Interest received on such loans is recognized as interest income when received. A nonaccrual loan is restored to an accrual basis when principal and interest payments are paid current, and full payment of principal and interest is probable. Loans that are well secured and in the process of collection will remain on accrual status .
 Loans may be acquired at a premium or discount to par value, in which case the premium is amortized (subtracted from) or accreted (added to) interest income over the remaining life of the loan. Generally, as time goes on, the effects of loan discount accretion and loan premium amortization decrease as the purchased loans mature or pay off early. Upon the early pay off of a loan, any remaining (unaccreted) discount or (unamortized) premium is immediately taken into interest income; as loan payoffs may vary significantly from quarter to quarter, so may the impact of discount accretion and premium amortization on interest income. 

 48

 
 Table of Contents 

 Troubled Loan Modifications. Occasionally, the Company offers modifications of loans to borrowers experiencing financial difficulty by providing principal forgiveness, interest rate reductions, other-than-insignificant payment delays, term extensions or any combination of these. When principal forgiveness is provided, the amount of the forgiveness is charged-off against the allowance for credit losses for loans. Upon the Company’s determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is charged off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses for loans is adjusted by the same amount. 
 Loan modifications to borrowers experiencing financial difficulty as of June 30, 2023 totaled $6.0 million, of which $774,000 were accruing and performing according to their modified terms, compared to $6.3 million, of which $759,000 were accruing and performing according to their modified terms, at December 31, 2022. Modified loans that are accruing and performing according to their modified terms are not considered nonperforming loans as they continue to accrue interest despite their modified status. The related allowance for credit losses on individually evaluated modified loans totaled $296,000 and $393,000 at June 30, 2023 and December 31, 2022, respectively. 
 The following table provides information regarding nonperforming loans, nonperforming assets and modified loans as of the dates indicated: 
 ​ 
 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 
 ​ 
 ​ 
 June 30, 
 ​ 
 December 31, 
 ​ 
 
 ​ 
 
 2023
 
 2022
 
 
 
 ​ 
 ​ 
 (Dollars in thousands) 
 ​ 
 
 Loans accounted for on a nonaccrual basis:
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 
 Commercial and industrial
 ​ 
 $
 658 
 ​ 
 $
 869 
 ​ 
 
 Real estate:
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 
 Residential
 ​ 
 ​ 
 1,695 
 ​ 
 ​ 
 2,213 
 ​ 
 
 Multifamily residential
 ​ 
 ​ 
 5,328 
 ​ 
 ​ 
 5,351 
 ​ 
 
 Owner occupied CRE
 ​ 
 ​ 
 5,107 
 ​ 
 ​ 
 5,491 
 ​ 
 
 Non-owner occupied CRE
 ​ 
 ​ 
 43 
 ​ 
 ​ 
 365 
 ​ 
 
 Construction and land
 ​ 
 ​ 
 — 
 ​ 
 ​ 
 — 
 ​ 
 
 Total real estate
 ​ 
 ​ 
 12,173 
 ​ 
 ​ 
 13,420 
 ​ 
 
 Consumer
 ​ 
 ​ 
 — 
 ​ 
 ​ 
 — 
 ​ 
 
 Total nonaccrual loans
 ​ 
 ​ 
 12,831 
 ​ 
 ​ 
 14,289 
 ​ 
 
 Accruing loans 90 days or more past due
 ​ 
 ​ 
 — 
 ​ 
 ​ 
 934 
 ​ 
 
 Total nonperforming loans 
 ​ 
 ​ 
 12,831 
 ​ 
 ​ 
 15,223 
 ​ 
 
 Real estate owned
 ​ 
 ​ 
 — 
 ​ 
 ​ 
 21 
 ​ 
 
 Total nonperforming assets (1)
 ​ 
 $
 12,831 
 ​ 
 $
 15,244 
 ​ 
 
 Modified loans to borrowers experiencing financial difficulty – performing
 ​ 
 ​ 
 774 
 ​ 
 ​ 
 759 
 ​ 
 
 PCD loans
 ​ 
 $
 27,961 
 ​ 
 $
 28,787 
 ​ 
 
 Nonperforming assets to total assets (1)
 ​ 
 ​ 
 0.50 
 %
 ​ 
 0.61 
 %
 
 Nonperforming loans to total loans (1)
 ​ 
 ​ 
 0.64 
 %
 ​ 
 0.75 
 %
 

 ​ 
 (1) 
 Performing modified loans to borrowers experiencing financial difficulty are neither included in nonperforming loans above nor are they included in the numerators used to calculate these ratios. 
 

 ​ 
 Interest foregone on nonaccrual loans was approximately $185,000 and $631,000 for the three and six months ended June 30, 2023 and $72,700 and $157,000 for the three and six month ended June 30, 2022, respectively, none of which was included in interest income.
 Allowance for credit losses for loans and unfunded commitments. The allowance for credit losses for loans is maintained to cover losses that are estimated in accordance with GAAP. It is our estimate of credit losses inherent in our loan portfolio at each balance sheet date. Our methodology for analyzing the allowance for credit losses for loans consists of general and specific components. For the general component, we stratify the loan portfolio into homogeneous groups of loans that possess similar loss potential characteristics and apply a loss ratio to these groups of loans to estimate the credit losses in the loan portfolio. We use both historical loss ratios and qualitative loss factors assigned to major loan collateral types to establish general component loss allocations. Qualitative loss factors are based on management’s 

 49

 
 Table of Contents 

 judgment of company, market, industry or business specific data and external economic indicators, which may not yet be reflected in the historical loss ratios, and that could impact our loan portfolio. Management and the Board of Directors set and adjust qualitative loss factors by regularly reviewing changes in underlying loan composition and the seasonality of specific portfolios. Management and the Board of Directors also consider credit quality and trends relating to delinquency, nonperforming and classified loans within our loan portfolio when evaluating qualitative loss factors. Additionally, management and the Board of Directors adjust qualitative factors to account for the potential impact of external economic factors, including the unemployment rate, vacancy rates, capitalization rates, commodity prices and other pertinent economic data specific to our primary market area and lending portfolios.
 For the specific component, the allowance for credit losses for loans is established for individually evaluated loans. Management evaluates current information and events regarding a borrower’s ability to repay its obligations and considers a loan to be impaired when the ultimate collectability of amounts due, according to the contractual terms of the loan agreement, is in doubt. If an individually evaluated loan is collateral-dependent, the fair value of the collateral, less the estimated cost to sell, is used to determine the amount of impairment. If an individually evaluated loan is not collateral-dependent, the impairment amount is determined using the negative difference, if any, between the estimated discounted cash flows and the loan amount due. For individually evaluated loans, the amount of the impairment can be adjusted, based on current data, until such time as the actual basis is established by acquisition of the collateral or until the basis is collected. Impairment losses are reflected in the allowance for credit losses for loans through a charge to the provision for credit losses. Subsequent recoveries are credited to the allowance for credit losses for loans. Cash receipts for accruing loans are applied to principal and interest under the contractual terms of the loan agreement. Cash receipts on non-accrual loans for which the accrual of interest has been discontinued are applied first to principal.
 Estimated credit losses for unfunded loan commitments are calculated using the same models and methodologies noted above and incorporate utilization assumptions at the estimated time of default. While the provision for credit losses for unfunded loan commitments is included in &quot;provision for (reversal of) credit losses&quot; on the consolidated statement of income, the reserve for unfunded loan commitments is maintained on the consolidated balance sheet in interest payable and other liabilities.
 ​ 
 The Company adopted the CECL standard as of December 15, 2022, which resulted in a one-time day one 2023 adjustment to the allowance for credit losses for loans of $1.5 million (which included the reclassification of the net credit discount on acquired PCD loans totaling $845,000) and an allowance for unfunded credit commitments of $45,000, as well as an after-tax decrease to opening retained earnings of $491,000.
 At June 30, 2023, the Company’s allowance for credit losses for loans was $19.1 million under the CECL framework, or 0.95% of total loans, compared to an allowance for loan losses of $18.9 million under the allowance for loan losses incurred loss framework, or 0.94% of total loans, at December 31, 2022. In addition to the CECL adjustment on January 1, 2023, a $985,000 reversal of the allowance for credit losses for loans was recorded for the six months ended June 30, 2023, compared to $2.6 million provision for loan losses for the six months ended June 30, 2022. The reversal of the allowance for credit losses for loans primarily resulted from $375,000 in net charge-offs for the six months ended June 30, 2023, coupled with improvements in forecasted economic conditions, specifically, national gross domestic product and national unemployment, indicators utilized to estimate credit losses and, to a lesser extent, a decrease in outstanding loan balances. We recorded net charge-offs of $60,000 and $375,000 for the three and six months ended June 30, 2023, and $2.5 million and $2.5 million for the three and six months ended June 30, 2022, respectively. The calculation of the allowance for credit losses for loans at June 30, 2023 and the allowance for loan losses at December 31, 2022, excludes the balance of PPP loans held in portfolio as of those dates as PPP loans are fully guaranteed by the SBA. 
 In accordance with acquisition accounting, loans acquired from acquisitions were recorded at their estimated fair value, which resulted in a net discount to the loans’ contractual amounts. Credit discounts are included in the determination of fair value and as a result, no allowance for credit losses for loans is recorded for acquired loans at the acquisition date. However, the allowance for credit loss includes an estimate for credit deterioration of acquired loans that occurs after the date of acquisition, which is included in the credit loss provision in the period that the deterioration occurred. The discount recorded on the acquired loans is not reflected in the allowance for credit losses for loans or related allowance coverage ratios. As of June 30, 2023 , acquired loans net of their discount totaled $234.7 million and the remaining net discount on these acquired loans was $331,000, compared to $257.4 million of acquired loans and $522,000 of net discounts at 

 50

 
 Table of Contents 

 December 31 , 2022 . The net discount includes a credit discount based on estimated losses in the acquired loans partially offset by a premium, if any, based market interest rates on the date of acquisition. 
 The following table presents certain credit ratios at the dates and for the periods indicated and each component of the ratio’s calculations:
 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 
 ​ 
 ​ 
 At and for the six months ended June 30,
 
 ​ 
 
 2023 
 
 2022 
 ​ 
 
 
 ​ 
 ​ 
 (Dollars in thousands) 
 
 Allowance for credit losses on loans as a percentage of total loans outstanding at period end 
 ​ 
 ​ 
 0.95 
 % 
 ​ 
 0.89 
 % 
 
 Allowance for credit losses on loans 
 ​ 
 $ 
 19,100 
 ​ 
 $ 
 17,800 
 ​ 
 
 Total loans outstanding 
 ​ 
 ​ 
 2,013,307 
 ​ 
 ​ 
 2,005,004 
 ​ 
 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 
 Nonaccrual loans as a percentage of total loans outstanding at period end 
 ​ 
 ​ 
 0.64 
 % 
 ​ 
 0.52 
 % 
 
 Total nonaccrual loans 
 ​ 
 $ 
 12,831 
 ​ 
 $ 
 10,405 
 ​ 
 
 Total loans outstanding 
 ​ 
 ​ 
 2,013,307 
 ​ 
 ​ 
 2,005,004 
 ​ 
 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 
 Allowance for credit losses on loans as a percentage of nonaccrual loans at period end 
 ​ 
 ​ 
 148.86 
 % 
 ​ 
 171.07 
 % 
 
 Allowance for credit losses on loans 
 ​ 
 $ 
 19,100 
 ​ 
 $ 
 17,800 
 ​ 
 
 Total nonaccrual loans 
 ​ 
 ​ 
 12,831 
 ​ 
 ​ 
 10,405 
 ​ 
 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 
 Net charge-offs/(recoveries) during period to average loans outstanding: 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 
 Commercial and industrial: 
 ​ 
 ​ 
 0.10 
 % 
 ​ 
 0.82 
 % 
 
 Net charge-offs 
 ​ 
 $ 
 203 
 ​ 
 $ 
 2,517 
 ​ 
 
 Average loans outstanding 
 ​ 
 ​ 
 195,743 
 ​ 
 ​ 
 305,235 
 ​ 
 
 Construction and land: 
 ​ 
 ​ 
 — 
 % 
 ​ 
 — 
 % 
 
 Net charge-offs 
 ​ 
 $ 
 — 
 ​ 
 $ 
 — 
 ​ 
 
 Average loans outstanding 
 ​ 
 ​ 
 13,609 
 ​ 
 ​ 
 19,426 
 ​ 
 
 Commercial estate: 
 ​ 
 ​ 
 — 
 % 
 ​ 
 — 
 % 
 
 Net (recoveries)/charge-offs 
 ​ 
 $ 
 (2) 
 ​ 
 $ 
 1 
 ​ 
 
 Average loans outstanding 
 ​ 
 ​ 
 1,723,505 
 ​ 
 ​ 
 1,530,947 
 ​ 
 
 Residential: 
 ​ 
 ​ 
 0.18 
 % 
 ​ 
 0.01 
 % 
 
 Net charge-offs 
 ​ 
 $ 
 175 
 ​ 
 $ 
 6 
 ​ 
 
 Average loans outstanding 
 ​ 
 ​ 
 95,383 
 ​ 
 ​ 
 93,075 
 ​ 
 
 Consumer: 
 ​ 
 ​ 
 (0.05) 
 % 
 ​ 
 0.29 
 % 
 
 Net (recoveries)/charge-offs 
 ​ 
 $ 
 (1) 
 ​ 
 $ 
 6 
 ​ 
 
 Average loans outstanding 
 ​ 
 ​ 
 2,185 
 ​ 
 ​ 
 2,086 
 ​ 
 
 Total loans: 
 ​ 
 ​ 
 0.02 
 % 
 ​ 
 0.13 
 % 
 
 Total net charge-offs 
 ​ 
 $ 
 375 
 ​ 
 $ 
 2,530 
 ​ 
 
 Total average loans outstanding 
 ​ 
 ​ 
 2,030,425 
 ​ 
 ​ 
 1,950,769 
 ​ 
 

 As of June 30, 2023, the Company individually evaluated $13.6 million in loans, inclusive of $12.8 million of nonperforming loans and $774,000 of performing (accruing) modified loans to borrowers experiencing financial difficulty . Of the individually evaluated loans, only $1.2 million had a specific allowance, of $694,000, as of June 30, 2023. As of December 31, 2022, the Company individually evaluated $15.0 million in loans, inclusive of $14.3 million of nonperforming loans and $759,000 of performing (accruing) modified loans to borrowers experiencing financial difficulty . Of the nonperforming loans, only $1.4 million had a specific allowance, of $1.2 million, as of December 31, 2022. 
 Management considers the allowance for credit losses for loans at June 30, 2023 to be adequate to cover losses inherent in the loan portfolio based on the assessment of the above-mentioned factors affecting the loan portfolio. While management believes the estimates and assumptions used in its determination of the adequacy of the allowance are reasonable, there can be no assurance that such estimates and assumptions will not be proven incorrect in the future, or that the actual amount of future losses will not exceed the amount of the established allowance for credit losses for loans or that any increased allowance for credit losses for loans that may be required will not adversely impact our financial condition and results of operations. A further decline in national and local economic conditions as a result of unemployment levels, labor shortages and the effects of inflation, a potential recession, or slowed economic growth caused by increasing political instability from acts of war including Russia’s invasion of Ukraine, as well as supply chain disruptions, among other factors, could result in a material increase in the allowance for credit losses for loans and may adversely affect the Company’s financial condition and results of operations. In addition, the determination of the amount 

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 Table of Contents 

 of our allowance for credit losses for loans is subject to review by bank regulators, as part of the routine examination process, which may result in additions to our provision for credit losses based upon their judgment of information available to them at the time of their examination. 
 Deposits. Deposits are our primary source of funding and consist of core deposits from the communities served by our branch and office locations. We offer a variety of deposit accounts with a competitive range of interest rates and terms to both consumers and businesses. Deposits include interest bearing and noninterest bearing demand accounts, savings, money market, certificates of deposit and individual retirement accounts. These accounts earn interest at rates established by management based on competitive market factors, management’s desire to increase certain product types or maturities, and in keeping with our asset/liability, liquidity and profitability objectives. Competitive products, competitive pricing and high touch client service are important to attracting and retaining these deposits. 
 Total deposits increased $61.6 million, or 3.0%, to $2.1 billion at June 30, 2023 from December 31, 2022. At June 30, 2023, noninterest bearing demand deposits totaled $664.1 million, or 30.9% of total deposits, compared to $773.3 million, or 37.1% of total deposits, at December 31, 2022 . At June 30, 2023, uninsured deposits totaled $992.2 million, compared to $1.1 billion at December 31, 2022. The uninsured amounts are estimates based on the methodologies and assumptions used for United Business Bank’s regulatory reporting requirements. 
 The following table sets forth the dollar amount of deposits in the various types of deposit programs offered at the dates indicated.
 ​ 
 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 
 ​ 
 ​ 
 June 30, 
 ​ 
 December 31, 
 ​ 
 ​ 
 
 
 ​ 
 ​ 
 2023
 ​ 
 2022
 ​ 
 % Change
 
 
 
 ​ 
 ​ 
 (Dollars in thousands)
 ​ 
 ​ 
 
 
 Noninterest bearing demand deposits
 
 $
 664,096 
 
 $
 773,274 
 
 (14.1) 
 %
 
 NOW accounts and savings
 ​ 
 
 404,146 
 ​ 
 
 441,064 
 
 (8.4) 
 ​ 
 
 Money market
 ​ 
 
 619,701 
 ​ 
 
 577,792 
 
 7.3 
 ​ 
 
 Time deposits
 ​ 
 
 459,123 
 ​ 
 
 293,349 
 
 56.5 
 ​ 
 
 Total
 ​ 
 $
 2,147,066 
 ​ 
 $
 2,085,479 
 
 3.0 
 %
 

 ​ 
 Borrowings. Although deposits are our primary source of funds, we may from time to time utilize borrowings as a cost-effective source of funds when they can be invested at a positive interest rate spread, for additional capacity to fund loan demand, or to meet our asset/liability management goals. We are a member of and may obtain advances from the FHLB of San Francisco, which is part of the Federal Home Loan Bank System. The eleven regional Federal Home Loan Banks provide a central credit facility for their member institutions. These advances are provided upon the security of certain of our mortgage loans and mortgage-backed securities. These advances may be made pursuant to several different credit programs, each of which has its own interest rate, range of maturities and call features. 
 At June 30, 2023 and December 31, 2022, we had the ability to borrow up to $499.1 million and $473.6 million, respectively, from the FHLB of San Francisco. At both June 30, 2023 and December 31, 2022, there were no FHLB advances or FRB borrowings outstanding. 
 ​ 
 We may also utilize Fed Funds purchased from correspondent banks as a source of short-term funding. At both June 30, 2023 and December 31, 2022, we had a total of $65.0 million in federal funds line available from third-party financial institutions and no balances outstanding at these dates.
 ​ 
 At both June 30, 2023 and December 31, 2022, the Company had outstanding junior subordinated deferrable interest debentures, net of fair value adjustments, assumed in connection with its previous acquisitions totaling $8.5 million.
 ​ 
 At June 30, 2023, the Company had outstanding subordinated debt, net of costs to issue, totaling $63.8 million compared to $63.7 million at December 31, 2022.
 ​ 

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 Table of Contents 

 We are required to provide collateral for certain local agency deposits. At June 30, 2023 and December 31, 2022, the FHLB of San Francisco had issued a letters of credit on behalf of the Bank totaling $42.6 million and $40.6 million, respectively, as collateral for local agency deposits.
 ​ 
 Shareholders’ equity. Shareholders’ equity decreased $10.1 million, to $307.0 million at June 30, 2023 from $317.1 million at December 31, 2022. The decrease in shareholders’ equity primarily was due to the repurchase of $17.2 million of Company common stock, accrued cash dividends payable of $2.5 million, and a $4.9 million increase in accumulated other comprehensive loss, net of taxes, partially offset by $14.4 million of net income earned during the first six months of 2023. In addition, shareholder’s equity was negatively impacted by the adoption of CECL in the first quarter of 2023, which as of January 1, 2023, resulted in an after-tax decrease to opening retained earnings of $491,000. During the six months ended June 30, 2023, the Company repurchased a total of 543,955 shares of its common stock at a total cost of $9.1 million, or $16.71 per share, leaving 133,960 shares available for future purchases under the current stock repurchase plan. During the six months ended June 30, 2022, the Company repurchased a total of 262,221 shares of its common stock at a total cost of $5.7 million, or $21.69 per share. For additional information see Part II, Item 2, “Unregistered Sales of Equity Securities and Use of Proceeds”. 
 ​ 
 Comparison of Results of Operations for the Three and Six Months Ended June 30, 2023 and 2022
 ​ 
 Earnings summary. Net income was $7.2 million for the three months ended June 30, 2023, compared to $3.9 million for the three months ended June 30, 2022, an increase of $3.3 million or 84.4%. The increase was the result of a $1.1 million increase in net interest income, a $3.9 million decrease in provision for credit losses and a $906,000 increase in noninterest income, partially offset by a $1.3 million increase in noninterest expense and a $1.3 million increase in provision for income taxes. Diluted earnings per share were $0.59 for the three months ended June 30, 2023, compared to $0.29 for the three months ended June 30, 2022. 
 Net income was $14.4 million for the six months ended June 30, 2023, compared to $9.1 million for the six months ended June 30, 2022, an increase of $5.3 million, or 57.6%, The increase was primarily the result of a $4.0 million increase in net interest income, a $3.6 million decrease in provision for credit losses, reflecting a $985,000 reversal of the allowance for credit losses for the six months ended June 30, 2023, compared to a $2.6 million provision for credit losses for the same period in 2022, and a $445,000 decrease in noninterest expense, partially offset by a $164,000 decrease in noninterest income and a $2.7 million increase in provision for income taxes. 
 Our efficiency ratio, which is calculated by dividing noninterest expense by the sum of net interest income before provision for credit losses and noninterest income, was 65.27% and 63.40% for the three and six months ended June 30, 2023, compared to 65.15% and 69.38% for the three and six months ended June 30, 2022, respectively. The efficiency ratio for the three months ended June 30, 2023 remained relatively unchanged as compared to the same period in 2022. The improvement in the efficiency ratio during the six months ended June 30, 2023 compared to the same period in 2022 primarily was due to higher revenues and, to a lesser extent, lower noninterest expenses. 
 Interest income. Interest income for the three months ended June 30, 2023 was $31.3 million, compared to $25.6 million for the three months ended June 30, 2022, an increase of $5.6 million or 22.0%. The increase in interest income between periods reflects increases in interest income in all interest-earning asset categories, with the largest increases from loans and fed funds sold and interest bearing balances in banks. Increased yields earned on interest-earning assets, along with an increase in the average balance of loans, were the primary drivers for the increase in interest income. The increase in interest income was partially offset by lower recognition of deferred loan fee income on the repayment of PPP loans.
 Interest income on loans, including fees, increased $3.7 million, or 16.0%, to $26.7 million for the three months ended June 30, 2023, compared to $23.0 million for the three months ended June 30, 2022, primarily due to a 66 basis point increase in the average loan yield and, to a lesser extent, a $31.7 million increase in the average balance of loans. The average yield on loans, including the accretion of the net discount and deferred PPP loan fees recognized for the three months ended June 30, 2023 was 5.28%, compared to 4.62% for the same period in 2022. Interest income on loans for three months ended June 30, 2023 and 2022 included $5,000 and $198,000, respectively, in accretion of the net discount on acquired loans and revenue from PCD loans in excess of discounts. The remaining net discount on acquired loans was $331,000 and $481,000 at June 30, 2023 and June 30, 2022, respectively. Interest income on loans for three months ended June 30, 2023, included $0 fees earned related to PPP loans, compared to $351,000 in fees earned related to PPP loans 

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 during the three months ended June 30, 2022. As of June 30, 2023, there was a minimal amount of unrecognized deferred fees and costs. Interest income on loans for the three months ended June 30, 2023 and 2022, included $48,000 and $269,000, respectively, in fees related to prepayment penalties.
 Interest income on investment securities increased $162,000, or 10.6%, to $1.7 million for the three months ended June 30, 2023, compared to $1.5 million for the three months ended June 30, 2022, due to a 78 basis point increase in the average yield earned on, partially offset by a $21.6 million decrease in the average balance of, investment securities. The average yield on investment securities was 3.99% for the three months ended June 30, 2023 compared to 3.21% for the three months ended June 30, 2022. 
 Interest income on federal funds sold and interest-bearing balances in banks increased $1.8 million, or 217.7%, to $2.6 million for the three months ended June 30, 2023, compared to $806,000 for the three months ended June 30, 2022, due to a 430 basis point increase in the average yield earned on federal funds sold and interest-bearing balances in banks, partially offset by a $183.9 million decrease in the average balance of federal funds sold and interest-bearing balances in banks. The average yield on federal funds sold and interest-bearing balances in banks was 5.14% for the three months ended June 30, 2023 compared to 0.84% for the three months ended June 30, 2022. In addition, during the second quarter of 2023, we received $340,000 in cash dividends on our FRB and FHLB stock, up 25.9% from $270,000 in the second quarter of 2022. 
 Interest income for the six months ended June 30, 2023 was $61.3 million, compared to $50.4 million for the six months ended June 30, 2022, an increase of $10.9 million or 21.6%. The increase in interest income between periods reflects increases in interest income in all interest-earning asset categories, with the largest increases from loans and fed funds sold and interest bearing balances in banks. Increased yields earned on interest-earning assets, along with an increase in the average balance of loans, were the primary drivers for the increase in interest income. The increase in interest income was partially offset by lower recognition of deferred loan fee income on the repayment of PPP loans.
 Interest income on loans, including fees, increased $7.0 million, or 15.3%, to $52.9 million for the six months ended June 30, 2023, compared to $45.9 million for the six months ended June 30, 2022, primarily due to a 51 basis point increase in the average loan yield and, to a lesser extent, an $82.0 million increase in the average balance of loans. The average yield on loans, including the accretion of the net discount and deferred PPP loan fees recognized for the six months ended June 30, 2023 was 5.26%, compared to 4.75% for the same period in 2022. Interest income on loans for six months ended June 30, 2023 and 2022 included $102,000 and $1.5 million, respectively, in accretion of the net discount on acquired loans and revenue from PCD loans in excess of discounts. Interest income on loans for six months ended June 30, 2023 and 2022 included $92,000 and $1.7 million in fees earned related to PPP loans, respectively. Interest income on loans for the six months ended June 30, 2023 and 2022, included $317,000 and $722,000, respectively, in fees related to prepayment penalties.
 Interest income on investment securities increased $405,000, or 13.8%, to $3.3 million for the six months ended June 30, 2023, compared to $2.9 million for the six months ended June 30, 2022, due to a 76 basis point increase in the average yield earned on, partially offset by a $15.4 million decrease in the average balance of investment securities. The average yield on investment securities available-for-sale was 3.94% for the six months ended June 30, 2023 compared to 3.18% for the six months ended June 30, 2022. 
 Interest income on federal funds sold and interest-bearing balances in banks increased $3.4 million, or 331.6%, to $4.4 million for the six months ended June 30, 2023, compared to $1.0 million for the six months ended June 30, 2022, due to a 436 basis point increase in the average yield earned on federal funds sold and interest-bearing balances in banks, partially offset by a $208.6 million decrease in the average balance of federal funds sold and interest-bearing balances in banks. The average yield on federal funds sold and interest-bearing balances in banks was 4.88% for the six months ended June 30, 2023 compared to 0.52% for the six months ended June 30, 2022. 
 Interest expense. Interest expense increased $4.5 million, or 184.6%, to $7.0 million for the three months ended June 30, 2023, compared to $2.5 million for the three months ended June 30, 2022, reflecting higher funding costs related to increased rates of interest payable on our deposits and junior subordinated debentures. Total average interest-bearing liabilities decreased $56.4 million, or 3.7%, to $1.4 billion for the three months ended June 30, 2023, compared to $1.5 

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 billion for the three months ended June 30, 2022. The average rate paid on interest-bearing liabilities for three months ended June 30, 2023 was 1.82% compared to 0.62% for three months ended June 30, 2022. 
 Interest expense on deposits increased $4.4 million, or 304.7%, to $5.9 million for the three months ended June 30, 2023 compared to $1.5 million for the three months ended June 30, 2022. The increase primarily was due to an increase in the average cost of deposits, specifically, money market accounts and certificates of deposit. The average rate paid on interest bearing deposits increased by 123 basis points to 1.61% for the three months ended June 30, 2023, compared to 0.38% for the three months ended June 30, 2022. The overall average cost of deposits for the three months ended June 30, 2023 and 2022 was 1.10% and 0.25%, respectively. The average balance of deposits totaled $1.5 billion for both the three months ended June 30, 2023 and the three months ended June 30, 2022, with decreases in the average balances of savings, NOW and money market accounts being offset by an increase in the average balance of certificates of deposit. The average balance of noninterest bearing deposits decreased $111.4 million, or 14.13%, to $677.5 million for the three months ended June 30, 2023 compared to $816.9 million for the same period in 2022. 
 Interest expense on borrowings increased $100,000, or 9.96%, to $1.1 million for the three months ended June 30, 2023, compared to $999,000 for the three months ended June 30, 2022. The average balance of borrowings increased $251,000 to $72.3 million during the three months ended June 30, 2023, compared to $72.0 million during the three months ended June 30, 2022. The average cost of borrowings increased to 6.09% for the three months ended June 30, 2023, compared to 5.56% for the three months ended June 30, 2022. 
 Interest expense increased $6.9 million, or 140.2%, to $11.8 million for the six months ended June 30, 2023 compared to $4.9 million for the six months ended June 30, 2022, reflecting higher funding costs related to increased rates of interest payable on our deposits and junior subordinated debentures. Total average interest-bearing liabilities decreased $81.6 million, or 5.5%, to $1.5 billion for the six months ended June 30, 2023, compared to $1.6 billion for the six months ended June 30, 2022. The average rate paid on interest-bearing liabilities for six months ended June 30, 2023 was 1.60% compared to 0.63% for six months ended June 30, 2022.
 Interest expense on deposits increased $6.7 million, or 227.8%, to $9.6 million for the six months ended June 30, 2023 compared to $2.9 million for the six months ended June 30, 2022. The increase primarily was due to an increase in the average cost of deposits, specifically, money market accounts and certificates of deposit. The average rate paid on interest bearing deposits increased by 98 basis points to 1.37% for the six months ended June 30, 2023, compared to 0.39% for the six months ended June 30, 2022. The overall average cost of deposits for the six months ended June 30, 2023 and 2022 was 0.91% and 0.26%, respectively. The average balance of deposits totaled $1.4 billion for the six months ended June 30, 2023, compared to $1.5 billion for the same period in 2022, with decreases in the average balances of savings, NOW and money market accounts being offset by an increase in the average balance of certificates of deposit. The average balance of noninterest bearing deposits decreased $64.3 million, or 8.30%, to $709.6 million for the six months ended June 30, 2023 compared to $773.9 million for the same period in 2022. 
 Interest expense on borrowings increased $216,000, or 10.90%, to $2.2 million for the six months ended June 30, 2023, compared to $2.0 million for the six months ended June 30, 2022. The average balance of borrowings increased $609,000 to $72.6 million during the six months ended June 30, 2023, compared to $72.0 million during the six months ended June 30, 2022. The average cost of borrowings increased to 6.11% for the six months ended June 30, 2023, compared to 5.55% for the six months ended June 30, 2022.
 Net interest income and net interest margin. Net interest income increased $1.1 million, or 4.8%, to $24.3 million for the three months ended June 30, 2023, compared to $23.2 million for the three months ended June 30, 2022. The increase in net interest income primarily was due to increases in interest income on loans, cash and cash equivalents and, to a lesser extent, investment securities, including dividends on FRB and FHLB stock, partially offset by higher funding costs related to increased rates of interest payable on our deposits and junior subordinated debentures. 
 ​ 
 The average yield (annualized) on interest earning assets for the three months ended June 30, 2023 increased to 5.18%, a 121 basis point increase from 3.97% for the three months ended June 30, 2022, while the average cost of interest bearing liabilities was 1.82% and 0.62% for the three months ended June 30, 2023 and 2022, respectively. The average yield (annualized) on interest earning assets for the six months ended June 30, 2023 increased to 5.15%, a 115 basis point increase from 4.00% for the six months ended June 30, 2022, while the average cost of interest bearing 

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 liabilities for the six months ended June 30, 2023 increased to 1.60%, or three basis points, from 0.63% for the six months ended June 30, 2022. The increases in average yields on interest-earning assets and average rates paid on interest-bearing liabilities during the three and six months ended June 30, 2023, compare to the same periods in 2022, was due to increases in the target range for federal funds since March 2022, including a 75 basis point increase during the first six months of 2023, to a range of 5.00% to 5.25%.
 ​ 
 The annualized net interest margin for the three and six months ended June 30, 2023 was 4.02% and 4.16%, compared to 3.59% and 3.61% for the three and six months ended June 30, 2022, respectively. The increase in net interest margin reflects the increased net interest income resulting from an improved mix of interest-earning assets, including increased balances of higher yielding loans and investment securities available for sale, and a lower average balance of interest earning assets. The average yield on PPP loans for the three and six months ended June 30, 2023 was 1.00% and 3.89%, including the recognition of deferred fees, resulting in no impact and a positive impact of four basis points to the net interest margin during the three and six months ended June 30 2023, respectively, compared to an average yield of 2.55% and 4.35%, including the recognition of deferred fees, resulting in a positive impact of seven basis points and 10 basis points during three and six months ended June 30, 2022, respectively. The impact of PPP loans on net interest margin will change during any period based on the volume of prepayments or amounts forgiven by the SBA as certain criteria are met but will cease completely after the maturity of the loans. Accretion of acquisition accounting discounts on loans and the recognition of revenue from acquired loans in excess of discounts did not affect the net interest margin for the three months ended June 30, 2023 and increased our net interest margin by three basis points during the six months ended June 30, 2023 compared to six and 16 basis points during the three and six months ended June 30, 2022, respectively. 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
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 ​ 
 ​ 
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 Average Balances, Interest and Average Yields/Cost. The following table presents, for the periods indicated, information about (i) average balances, the total dollar amount of interest income from interest earning assets and the resultant average yields; (ii) average balances, the total dollar amount of interest expense on interest bearing liabilities and the resultant average costs; (iii) net interest income; (iv) the interest rate spread; and (v) the net interest margin. Nonaccrual loans have been included in the table as loans carrying a zero yield. Yields have been calculated on a pre-tax basis. Loan yields include the effect of amortization or accretion of deferred loan fees/costs and purchase accounting premiums/discounts to interest and fees on loans. 
 ​ 
 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 
 ​ 
 ​ 
 Three months ended June 30, 
 ​ 
 
 ​ 
 ​ 
 2023
 ​ 
 2022
 ​ 
 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 Annualized
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 Annualized
 ​ 
 
 ​ 
 ​ 
 Average
 ​ 
 ​ 
 ​ 
 ​ 
 Average
 ​ 
 Average
 ​ 
 ​ 
 ​ 
 ​ 
 Average
 ​ 
 
 ​ 
 
 Balance(1)
 
 Interest
 
 Yield/Cost
 
 Balance(1)
 
 Interest
 
 Yield/Cost
 ​ 
 
 
 ​ 
 ​ 
 (Dollars in thousands)
 ​ 
 
 Interest earning assets
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 
 Fed Funds sold and interest bearing balances in banks
 ​ 
 $
 199,905
 ​ 
 $
 2,560 
 
 5.14 
 % 
 $
 383,849 
 ​ 
 $
 806 
 
 0.84 
 % 
 
 Investments securities
 ​ 
 ​ 
 170,141
 ​ 
 
 1,693 
 
 3.99 
 %
 
 191,707 
 ​ 
 
 1,531 
 
 3.21 
 % 
 
 FHLB Stock
 ​ 
 ​ 
 13,189
 ​ 
 
 196
 
 5.96 
 %
 
 10,679 
 ​ 
 
 158 
 
 5.93 
 % 
 
 FRB Stock
 ​ 
 ​ 
 9,641
 ​ 
 
 144
 
 5.99 
 %
 
 9,153 
 ​ 
 
 140 
 
 6.15 
 % 
 
 Total loans
 ​ 
 ​ 
 2,027,505
 ​ 
 
 26,667
 
 5.28 
 %
 
 1,995,803 
 ​ 
 
 22,984 
 
 4.62 
 % 
 
 Total interest earning assets
 ​ 
 ​ 
 2,420,381 
 ​ 
 
 31,260
 
 5.18 
 % 
 
 2,591,191 
 ​ 
 
 25,619
 
 3.97 
 %
 
 Noninterest earning assets
 ​ 
 ​ 
 140,770 
 ​ 
 
 ​ 
 
 ​ 
 ​ 
 
 141,604 
 ​ 
 
 ​ 
 
 ​ 
 ​ 
 
 Total average assets
 ​ 
 $
 2,561,151 
 ​ 
 
 ​ 
 
 ​ 
 ​ 
 $
 2,732,795 
 ​ 
 
 ​ 
 
 ​ 
 ​ 
 
 Interest bearing liabilities
 ​ 
 ​ 
 ​ 
 ​ 
 
 ​ 
 
 ​ 
 ​ 
 
 ​ 
 ​ 
 
 ​ 
 
 ​ 
 ​ 
 
 Savings
 ​ 
 $
 112,378 
 ​ 
 ​ 
 37 
 ​ 
 0.13 
 % 
 $
 124,850 
 ​ 
 ​ 
 43 
 
 0.14 
 %
 
 NOW accounts
 ​ 
 ​ 
 298,339 
 ​ 
 
 68 
 
 0.09 
 % 
 
 349,467 
 ​ 
 
 83 
 
 0.10 
 %
 
 Money market
 ​ 
 ​ 
 616,426 
 ​ 
 
 2,380 
 
 1.55 
 % 
 
 739,160 
 ​ 
 
 768 
 
 0.42 
 %
 
 Time deposits
 ​ 
 ​ 
 435,405 
 ​ 
 
 3,396 
 
 3.13 
 % 
 
 305,478 
 ​ 
 
 559 
 
 0.73 
 %
 
 Total interest bearing deposit accounts
 ​ 
 ​ 
 1,462,548 
 ​ 
 
 5,881 
 
 1.61 
 % 
 
 1,518,955 
 ​ 
 
 1,453 
 
 0.38 
 %
 
 Subordinated debt, net
 ​ 
 ​ 
 63,770 
 ​ 
 ​ 
 895 
 ​ 
 5.63 
 % 
 ​ 
 63,601 
 ​ 
 ​ 
 895 
 ​ 
 5.64 
 %
 
 Junior subordinated debentures, net
 ​ 
 ​ 
 8,512 
 ​ 
 ​ 
 203 
 ​ 
 9.57 
 % 
 ​ 
 8,431 
 ​ 
 ​ 
 104 
 ​ 
 4.97 
 %
 
 Total interest bearing liabilities
 ​ 
 ​ 
 1,534,830 
 ​ 
 
 6,979 
 
 1.82 
 % 
 
 1,590,987 
 ​ 
 
 2,452 
 
 0.62 
 %
 
 Noninterest bearing deposits
 ​ 
 ​ 
 677,500 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 788,938 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 
 Other noninterest bearing liabilities
 ​ 
 ​ 
 36,003 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 27,912 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 
 Noninterest bearing liabilities
 ​ 
 ​ 
 713,503 
 ​ 
 
 ​ 
 
 ​ 
 ​ 
 
 816,850 
 ​ 
 
 ​ 
 
 ​ 
 ​ 
 
 Total average liabilities
 ​ 
 ​ 
 2,248,333 
 ​ 
 
 ​ 
 
 ​ 
 ​ 
 
 2,407,837 
 ​ 
 
 ​ 
 
 ​ 
 ​ 
 
 Average equity
 ​ 
 ​ 
 312,818 
 ​ 
 
 ​ 
 
 ​ 
 ​ 
 
 324,958 
 ​ 
 
 ​ 
 
 ​ 
 ​ 
 
 Total average liabilities and equity
 ​ 
 $
 2,561,151 
 ​ 
 
 ​ 
 
 ​ 
 ​ 
 $
 2,732,795 
 ​ 
 
 ​ 
 
 ​ 
 ​ 
 
 Net interest income
 ​ 
 
 ​ 
 ​ 
 $
 24,281 
 
 ​
 ​ 
 
 ​ 
 ​ 
 $
 23,167 
 
 ​
 ​ 
 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 
 Interest rate spread (2)
 ​ 
 
 ​ 
 ​ 
 
 ​ 
 
 3.36 
 % 
 
 ​ 
 ​ 
 
 ​ 
 
 3.35 
 %
 
 Net interest margin (3)
 ​ 
 
 ​ 
 ​ 
 
 ​ 
 
 4.02 
 % 
 
 ​ 
 ​ 
 
 ​ 
 
 3.59 
 %
 
 Ratio of average interest earning assets to average interest bearing liabilities
 ​ 
 
 ​ 
 ​ 
 
 ​ 
 
 157.70 
 % 
 
 ​ 
 ​ 
 
 ​ 
 
 162.87 
 %
 

 ​ 
 (1) Average balances are computed using average daily balances. 

 (2) Interest rate spread is calculated as the average rate earned on interest earning assets minus the average rate paid on interest bearing liabilities. 

 (3) Net interest margin is calculated as net interest income divided by total average interest earning assets. 

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 57

 
 Table of Contents 

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 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

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 ​ 

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 ​ 

 
 ​ 
 ​ 
 Six months ended June 30, 
 
 ​ 
 ​ 
 2023
 ​ 
 2022
 ​ 
 
 
 ​ 
 ​ 
 (Dollars in thousands)
 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 Annualized
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 Annualized
 ​ 
 
 ​ 
 ​ 
 Average
 ​ 
 ​ 
 ​ 
 ​ 
 Average
 ​ 
 Average
 ​ 
 ​ 
 ​ 
 ​ 
 Average
 ​ 
 
 ​ 
 
 Balance (1)
 
 Interest
 
 Yield/Cost
 
 Balance(1)
 
 Interest
 
 Yield/Cost
 ​ 
 
 
 ​ 
 ​ 
 (Dollars in thousands)
 ​ 
 
 Interest earning assets
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 
 Fed Funds sold and interest-bearing balances in banks
 ​ 
 $
 181,455 
 ​ 
 $
 4,389 
 
 4.88 
 % 
 $
 390,047 
 ​ 
 $
 1,015 
 
 0.52 
 % 
 
 Investments securities 
 ​ 
 ​ 
 170,409 
 ​ 
 
 3,333 
 
 3.94 
 %
 
 185,814 
 ​ 
 
 2,930 
 
 3.18 
 %
 
 FHLB Stock
 ​ 
 ​ 
 10,931 
 ​ 
 
 384 
 
 7.09 
 %
 
 10,286 
 ​ 
 
 307 
 
 6.03 
 %
 
 FRB Stock
 ​ 
 ​ 
 9,609 
 ​ 
 
 288 
 
 6.04 
 %
 
 8,697 
 ​ 
 
 261 
 
 6.06 
 %
 
 Total loans
 ​ 
 ​ 
 2,029,959 
 ​ 
 
 52,922 
 
 5.26 
 %
 
 1,948,007 
 ​ 
 
 45,911 
 
 4.75 
 %
 
 Total interest earning assets
 ​ 
 ​ 
 2,402,363 
 ​ 
 
 61,316 
 
 5.15 
 % 
 
 2,542,851 
 ​ 
 
 50,424 
 
 4.00 
 %
 
 Noninterest earning assets
 ​ 
 ​ 
 144,767 
 ​ 
 
 ​ 
 
 ​ 
 ​ 
 
 143,046 
 ​ 
 
 ​ 
 
 ​ 
 ​ 
 
 Total average assets
 ​ 
 $
 2,547,130 
 ​ 
 
 ​ 
 
 ​ 
 ​ 
 $
 2,685,897 
 ​ 
 
 ​ 
 
 ​ 
 ​ 
 
 Interest bearing liabilities
 ​ 
 ​ 
 ​ 
 ​ 
 
 ​ 
 
 ​ 
 ​ 
 
 ​ 
 ​ 
 
 ​ 
 
 ​ 
 ​ 
 
 Savings
 ​ 
 $
 115,968 
 ​ 
 ​ 
 77 
 ​ 
 0.13 
 % 
 $
 125,273 
 ​ 
 ​ 
 86 
 
 0.14 
 %
 
 NOW accounts
 ​ 
 ​ 
 307,273 
 ​ 
 
 142 
 
 0.09 
 %
 
 351,919 
 ​ 
 
 166 
 
 0.09 
 %
 
 Money market
 ​ 
 ​ 
 610,140 
 ​ 
 
 4,117 
 
 1.36 
 %
 
 719,636 
 ​ 
 
 1,571 
 
 0.44 
 %
 
 Time deposits
 ​ 
 ​ 
 380,650 
 ​ 
 
 5,245 
 
 2.78 
 %
 
 298,834 
 ​ 
 
 1,100 
 
 0.74 
 %
 
 Total interest bearing deposit accounts
 ​ 
 ​ 
 1,414,031 
 ​ 
 
 9,581 
 
 1.37 
 %
 
 1,495,662 
 ​ 
 
 2,923 
 
 0.39 
 %
 
 Subordinated debt, net
 ​ 
 ​ 
 63,749 
 ​ 
 ​ 
 1,791 
 ​ 
 5.67 
 %
 ​ 
 63,579 
 ​ 
 ​ 
 1,791 
 ​ 
 5.68 
 %
 
 Junior subordinated debentures, net
 ​ 
 ​ 
 8,502 
 ​ 
 ​ 
 406 
 ​ 
 9.63 
 %
 ​ 
 8,421 
 ​ 
 ​ 
 190 
 ​ 
 4.55 
 %
 
 Other borrowings
 ​ 
 ​ 
 359 
 ​ 
 
 — 
 
 — 
 %
 
 — 
 ​ 
 ​ 
 — 
 
 — 
 %
 
 Total interest bearing liabilities
 ​ 
 ​ 
 1,486,641 
 ​ 
 
 11,778 
 
 1.60 
 % 
 
 1,567,662 
 ​ 
 
 4,904 
 
 0.63 
 %
 
 Noninterest bearing deposits
 ​ 
 ​ 
 709,590 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 773,852 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 
 Other noninterest bearing liabilities
 ​ 
 ​ 
 35,071 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 29,268 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 
 Noninterest bearing liabilities
 ​ 
 ​ 
 744,661 
 ​ 
 
 ​ 
 
 ​ 
 ​ 
 
 803,120 
 ​ 
 
 ​ 
 
 ​ 
 ​ 
 
 Total average liabilities
 ​ 
 ​ 
 2,231,302 
 ​ 
 
 ​ 
 
 ​ 
 ​ 
 
 2,370,782 
 ​ 
 
 ​ 
 
 ​ 
 ​ 
 
 Average equity
 ​ 
 ​ 
 315,827 
 ​ 
 
 ​ 
 
 ​ 
 ​ 
 
 315,115 
 ​ 
 
 ​ 
 
 ​ 
 ​ 
 
 Total average liabilities and equity
 ​ 
 $
 2,547,129 
 ​ 
 
 ​ 
 
 ​ 
 ​ 
 $
 2,685,897 
 ​ 
 
 ​ 
 
 ​ 
 ​ 
 
 Net interest income
 ​ 
 
 ​ 
 ​ 
 $
 49,538 
 
 ​ 
 ​ 
 
 ​ 
 ​ 
 $
 45,520 
 
 ​
 ​ 
 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 
 Interest rate spread (2)
 ​ 
 
 ​ 
 ​ 
 
 ​ 
 
 3.55 
 % 
 
 ​ 
 ​ 
 
 ​ 
 
 3.37 
 %
 
 Net interest margin (3)
 ​ 
 
 ​ 
 ​ 
 
 ​ 
 
 4.16 
 % 
 
 ​ 
 ​ 
 
 ​ 
 
 3.61 
 %
 
 Ratio of average interest earning assets to average interest bearing liabilities
 ​ 
 
 ​ 
 ​ 
 
 ​ 
 
 161.60 
 % 
 
 ​ 
 ​ 
 
 ​ 
 
 162.21 
 %
 

 ​ 
 (1) Average balances are computed using average daily balances. 

 (2) Interest rate spread is calculated as the average rate earned on interest earning assets minus the average rate paid on interest bearing liabilities. 

 (3) Net interest margin is calculated as net interest income divided by total average interest earning assets. 

 ​ 

 58

 
 Table of Contents 

 Rate/Volume Analysis. Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest earning assets and interest bearing liabilities, as well as changes in weighted average interest rates. The following table sets forth the effects of changing rates and volumes on our net interest income during the periods shown. Information is provided with respect to (i) effects on interest income attributable to changes in volume (changes in volume multiplied by prior rate) and (ii) effects on interest income attributable to changes in rate (changes in rate multiplied by prior volume). Changes applicable to both volume and rate have been allocated to volume. 
 ​ 
 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 
 ​ 
 ​ 
 Three months ended June 30, 
 
 ​ 
 Six months ended June 30, 
 
 ​ 
 ​ 
 2023 compared to 2022
 
 ​ 
 2023 compared to 2022
 
 ​ 
 ​ 
 Increase/(Decrease)
 
 ​ 
 Increase/(Decrease)
 
 ​ 
 ​ 
 Attributable to
 
 ​ 
 Attributable to
 
 ​ 
 
 Rate
 
 Volume
 
 Total
 
 ​ 
 Rate
 
 Volume
 
 Total
 
 
 ​ 
 ​ 
 (Dollars in thousands)
 
 ​ 
 (Dollars in thousands)
 
 Interest earning assets
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 
 Fed funds sold and interest bearing balances in banks
 ​ 
 $
 2,140 
 ​ 
 $
 (386) 
 ​ 
 $
 1,754 
 ​ 
 ​ 
 $
 3,917 
 ​ 
 $
 (543) 
 ​ 
 $
 3,374 
 
 Investments securities
 ​ 
 
 334 
 ​ 
 
 (172) 
 ​ 
 
 162 
 ​ 
 ​ 
 
 646 
 ​ 
 
 (243) 
 ​ 
 
 403 
 
 FHLB stock and FRB stock
 ​ 
 
 (3) 
 ​ 
 
 45 
 ​ 
 
 42 
 ​ 
 ​ 
 
 57 
 ​ 
 
 47 
 ​ 
 
 104 
 
 Total loans
 ​ 
 
 3,318 
 ​ 
 
 365 
 ​ 
 
 3,683 
 ​ 
 ​ 
 
 5,080 
 ​ 
 
 1,931 
 ​ 
 
 7,011 
 
 Total interest income
 ​ 
 
 5,789 
 ​ 
 
 (148) 
 ​ 
 
 5,641 
 ​ 
 ​ 
 
 9,700 
 ​ 
 
 1,192 
 ​ 
 
 10,892 
 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 
 Interest bearing liabilities
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 
 Savings
 ​ 
 
 (2) 
 ​ 
 
 (4) 
 ​ 
 
 (6) 
 ​ 
 ​ 
 
 (3) 
 ​ 
 
 (6) 
 ​ 
 
 (9) 
 
 NOW accounts
 ​ 
 
 (3) 
 ​ 
 
 (12) 
 ​ 
 
 (15) 
 ​ 
 ​ 
 
 (3) 
 ​ 
 
 (21) 
 ​ 
 
 (24) 
 
 Money market accounts
 ​ 
 
 1,739 
 ​ 
 
 (127) 
 ​ 
 
 1,612 
 ​ 
 ​ 
 
 2,785 
 ​ 
 
 (239) 
 ​ 
 
 2,546 
 
 Time deposits
 ​ 
 
 2,599 
 ​ 
 
 238 
 ​ 
 
 2,837 
 ​ 
 ​ 
 
 3,844 
 ​ 
 
 301 
 ​ 
 
 4,145 
 
 Total deposit accounts
 ​ 
 
 4,333 
 ​ 
 
 95 
 ​ 
 
 4,428 
 ​ 
 ​ 
 
 6,623 
 ​ 
 
 35 
 ​ 
 
 6,658 
 
 Subordinated debt, net
 ​ 
 
 — 
 ​ 
 
 — 
 ​ 
 
 — 
 ​ 
 ​ 
 
 — 
 ​ 
 
 — 
 ​ 
 
 — 
 
 Junior subordinated debentures, net
 ​ 
 
 98 
 ​ 
 
 1 
 ​ 
 
 99 
 ​ 
 ​ 
 
 214 
 ​ 
 
 2 
 ​ 
 
 216 
 
 Other borrowings
 ​ 
 
 — 
 ​ 
 
 — 
 ​ 
 
 — 
 ​ 
 ​ 
 
 — 
 ​ 
 
 — 
 ​ 
 
 — 
 
 Total interest expense
 ​ 
 
 4,431 
 ​ 
 
 96 
 ​ 
 
 4,527 
 ​ 
 ​ 
 
 6,837 
 ​ 
 
 37 
 ​ 
 
 6,874 
 
 Net interest income
 ​ 
 $
 1,358 
 ​ 
 $
 (244) 
 ​ 
 $
 1,114 
 ​ 
 ​ 
 $
 2,863 
 ​ 
 $
 1,155 
 ​ 
 $
 4,018 
 

 ​ 
 Provision for credit losses. We recorded a $1.3 million and $985,000 reversal of the allowance for credit losses for loans for the three and six months ended June 30, 2023, compared to a $2.6 million provision for loan losses for both the three and six months ended June 30, 2022. The reversal of the allowance for credit losses during the three and six months ended June 30, 2023 was primarily due to improvements in forecasted economic conditions, specifically, national gross domestic product and national unemployment, indicators utilized to estimate credit losses and, to a lesser extent, a decrease in outstanding loan balances and $60,000 and $375,000 in net charge-offs during the three and six months ended June 30, 2023, respectively. 
 Noninterest income. Noninterest income increased $906,000, or 503.3%, to $1.1 million for the three months ended June 30, 2023 compared to $180,000 for the three months ended June 30, 2022. The increase in noninterest income was primarily due to a $924,000 improvement in fair value adjustments on equity securities, a $204,000 increase in loan servicing fees and other fees and a $164,000 increase in service charges and other fees, partially offset by a $231,000 decrease in gain on sale of loans due to a decrease in the volume of premiums observed on SBA loans (guaranteed portion) sold and a $141,000 decrease in other income and fees. 
 ​ 
 Noninterest income decreased $164,000, or 5.8%, to $2.6 million for the six months ended June 30, 2023 compared to $2.8 million for the six months ended June 30, 2022. The decrease in noninterest income was primarily due to a $1.7 million bargain purchase gain in 2022 with no similar activity in 2023, a $956,000 decrease in gain on sale of loans due to a decrease in the volume of premiums observed on SBA loans (guaranteed portion) sold and a $178,000 decrease in loan servicing fees and other fees, partially offset by a $1.8 million improvement in fair value adjustments on equity securities, a $496,000 increase in income on investment in a Small Business Investment Company (“SBIC”) fund and a $419,000 increase in service charges and other fees. 
 ​ 
 ​ 

 59

 
 Table of Contents 

 The following table presents the key components of noninterest income for the periods indicated:
 ​ 
 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 
 ​ 
 ​ 
 Three months ended June 30, 
 ​ 
 ​ 
 ​ 
 ​ 
 
 
 ​ 
 
 2023
 
 2022 (As Restated)
 
 $ Change
 
 % Change
 
 
 ​ 
 ​ 
 (Dollars in thousands)
 ​ 
 ​ 
 
 
 Gain on sale of loans
 ​ 
 $
 68 
 ​ 
 $
 299 
 ​ 
 $
 (231) 
 ​ 
 (77.3) 
 %
 
 Loss on equity securities
 ​ 
 ​ 
 (917) 
 ​ 
 ​ 
 (1,841) 
 ​ 
 ​ 
 924 
 ​ 
 (50.2) 
 %
 
 Service charges and other fees
 ​ 
 
 882 
 ​ 
 
 718 
 ​ 
 
 164 
 
 22.8 
 %
 
 Loan servicing and other loan fees
 ​ 
 
 593 
 ​ 
 
 607 
 ​ 
 
 (14) 
 
 (2.3) 
 %
 
 Income on investment in SBIC fund
 ​ 
 
 225 
 ​ 
 
 21 
 ​ 
 
 204 
 
 (971.4) 
 %
 
 Other income and fees
 ​ 
 
 235 
 ​ 
 
 376 
 ​ 
 
 (141) 
 
 (37.5) 
 %
 
 Total noninterest income
 ​ 
 $
 1,086 
 ​ 
 $
 180 
 ​ 
 $
 906 
 
 503.3 
 %
 

 ​ 
 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 
 ​ 
 ​ 
 Six months ended June 30, 
 ​ 
 ​ 
 ​ 
 ​ 
 
 ​ 
 
 ​ 
 
 2023
 
 2022 (As Restated)
 
 $ Change
 
 % Change
 ​ 
 
 
 ​ 
 ​ 
 (Dollars in thousands)
 ​ 
 ​ 
 
 ​ 
 
 Gain on sale of loans
 ​ 
 $
 480 
 ​ 
 $
 1,436 
 ​ 
 $
 (956) 
 ​ 
 (66.6) 
 %
 ​ 
 
 Loss on equity securities
 ​ 
 ​ 
 (1,813) 
 ​ 
 ​ 
 (3,609) 
 ​ 
 ​ 
 1,796 
 ​ 
 (49.8) 
 %
 ​ 
 
 Service charges and other fees
 ​ 
 
 1,767 
 ​ 
 
 1,348 
 ​ 
 
 419 
 
 31.1 
 %
 ​ 
 
 Loan servicing and other loan fees
 ​ 
 
 1,003 
 ​ 
 
 1,181 
 ​ 
 
 (178) 
 
 (15.1) 
 %
 ​ 
 
 Income on investment in SBIC fund
 ​ 
 
 714 
 ​ 
 
 218 
 ​ 
 
 496 
 
 227.5 
 %
 ​ 
 
 Bargain purchase gain
 ​ 
 ​ 
 — 
 ​ 
 ​ 
 1,665 
 ​ 
 ​ 
 (1,665) 
 ​ 
 N/M
 %
 ​ 
 
 Other income and fees
 ​ 
 
 496 
 ​ 
 
 572 
 ​ 
 
 (76) 
 
 (13.3) 
 %
 ​ 
 
 Total noninterest income
 ​ 
 $
 2,647 
 ​ 
 $
 2,811 
 ​ 
 $
 (164) 
 
 (5.8) 
 %
 ​ 
 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 
 N/M - Not meaningful 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 

 ​ 
 Noninterest expense. Noninterest expense increased $1.4 million, or 8.9%, to $16.6 million for the three months ended June 30, 2023 compared to $15.2 million for the three months ended June 30, 2022. The increase primarily was due to a $1.5 million increase in salary and employee benefits expense due to a reduction in deferred loan origination expenses and higher salary expenses due to wage increases and increases in full-time equivalent employees and a $54,000 increase in occupancy and equipment expense, partially offset by a $125,000 decrease in other noninterest expense due to lower deposit intangible amortization and a $50,000 decrease in data processing expense due to lower core systems costs. 
 ​ 
 Noninterest expense for the six months ended June 30, 2023 decreased $445,000, or 1.3%, to $33.1 million compared to $33.5 million in the same period in 2022, primarily due to nonrecurring acquisition-related expenses incurred in the first quarter of 2022 in connection with the PEB Merger with no similar expenses recorded during the first half of 2023 and a decrease in other expenses, partially offset by an increase in salary and employee benefits. During the first half of 2023, compared to the same period in 2022, data processing expenses decreased $858,000, occupancy and equipment expense decreased $345,000, and other expense decreased $1.4 million, partially offset by a $2.2 million increase in salaries and employment benefits expense. Noninterest expense for the six months ended June 30, 2022 included $3.1 million of nonrecurring acquisition-related expenses related to the PEB Merger recorded in the first quarter of 2022, which were comprised of $555,000 in salary and employee benefits, $1.1 million in data processing expenses, $375,000 in occupancy and equipment expense and $1.1 million in other expenses, including $725,000 in professional and legal fees. 
 ​ 
 The following table details the components of noninterest expense for the periods indicated:
 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 
 ​ 
 ​ 
 Three months ended June 30, 
 ​ 
 ​ 
 ​ 
 ​ 
 
 
 ​ 
 
 2023
 
 2022
 
 $ Change
 
 % Change
 
 
 ​ 
 ​ 
 (Dollars in thousands)
 ​ 
 ​ 
 
 
 Salaries and related benefits
 ​ 
 $
 10,745 
 ​ 
 $
 9,277 
 ​ 
 $
 1,468 
 ​ 
 15.8 
 %
 
 Occupancy and equipment
 ​ 
 
 1,974 
 ​ 
 
 1,920 
 ​ 
 
 54 
 
 2.8 
 %
 
 Data processing
 ​ 
 
 1,616 
 ​ 
 
 1,666 
 ​ 
 
 (50) 
 
 (3.0) 
 %
 
 Other
 ​ 
 
 2,222 
 ​ 
 
 2,347 
 ​ 
 
 (125) 
 
 (5.3) 
 %
 
 Total noninterest expense
 ​ 
 $
 16,557 
 ​ 
 $
 15,210 
 ​ 
 $
 1,347 
 
 8.9 
 %
 

 60

 
 Table of Contents 

 ​ 
 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 
 ​ 
 ​ 
 Six months ended June 30, 
 ​ 
 ​ 
 ​ 
 ​ 
 
 ​ 
 
 ​ 
 
 2023
 
 2022
 
 $ Change
 
 % Change
 ​ 
 
 
 ​ 
 ​ 
 (Dollars in thousands)
 ​ 
 ​ 
 
 ​ 
 
 Salaries and employee benefits
 ​ 
 $
 21,781 
 ​ 
 $
 19,587 
 ​ 
 $
 2,194 
 ​ 
 11.2 
 %
 ​ 
 
 Occupancy and equipment
 ​ 
 
 4,001 
 ​ 
 
 4,346 
 ​ 
 
 (345) 
 
 (7.9) 
 %
 ​ 
 
 Data processing
 ​ 
 
 3,081 
 ​ 
 
 3,939 
 ​ 
 
 (858) 
 
 (21.8) 
 %
 ​ 
 
 Other
 ​ 
 
 4,223 
 ​ 
 
 5,659 
 ​ 
 
 (1,436) 
 
 (25.4) 
 %
 ​ 
 
 Total noninterest expense
 ​ 
 $
 33,086 
 ​ 
 $
 33,531 
 ​ 
 $
 (445) 
 
 (1.3) 
 %
 ​ 
 

 ​ 
 Income taxes. The provision for income taxes increased $1.3 million, or 78.2%, to $2.9 million the three months ended June 30, 2023 compared to $1.6 million for the three months ended June 30, 2022. For the six months ended June 30, 2022, the provision for income taxes increased $2.7 million, or 87.4%, to $5.7 million, compared to $3.0 million for the six months ended June 30, 2022. The Company’s effective tax rate was 28.4% and 28.3% for three and six months ended June 30, 2023 compared to 29.1% and 24.9% for the three and six months ended June 30, 2022. The effective tax rate was lower for the three months ended June 30, 2023, compared to the same period in 2022, due to slightly lower permanent differences. The effective tax rate was higher for the six months ended June 30, 2023, compared to the same period in 2022, due to a non-taxable bargain purchase gain in the first quarter of 2022. 
 Liquidity and Capital Resources
 Planning for our normal business liquidity needs, both expected and unexpected, is done on a daily and short-term basis through the cash management function. On a longer-term basis, it is accomplished through the budget and strategic planning functions, with support from internal asset/liability management software model projections. 
 Management maintains a liquidity position that it believes will adequately provide funding for loan demand and deposit run off that may occur in the normal course of business. We rely on a number of different sources in order to meet our potential liquidity demands. Our primary sources of funds are deposits, escrow and custodial deposits, principal and interest payments on loans and proceeds from sale of loans. During the three months ended June 30, 2023, the Bank sold $6.9 million in loans and loan participation interests and received $65.1 million in principal loan repayments. While maturities and scheduled amortization of loans are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by market interest rates, economic conditions, and competition. 
 Deposits increased $61.6 million to $2.1 billion and liquid assets, in the form of cash and cash equivalents, time deposit in banks and investment securities, increased $65.6 million to $398.7 million at June 30, 2023 from December 31, 2022. Management believes that our securities portfolio is of high quality and the securities would therefore be marketable. Securities purchased during the three and six months ended June 30, 2023, totaled $1.0 million and $2.5 million, respectively, and securities repayments, maturities and sales in those periods were $1.7 million and $2.9 million, respectively. Certificates of deposit scheduled to mature in one year or less at June 30, 2023, totaled $380.0 million. It is management’s policy to manage deposit rates that are competitive with other local financial institutions. Based on this management strategy, we believe that most of our maturing certificates of deposit will remain with us.
 In addition to these primary sources of funds, management has several secondary sources available to meet potential funding requirements. As of June 30, 2023, the Bank had an available borrowing capacity of $499.1 million with the FHLB of San Francisco, with no borrowings outstanding at that date. The Bank also had, as of that date, federal funds lines with available commitments totaling $65.0 million with four correspondent banks. There were no amounts outstanding under these facilities at June 30, 2023 and December 31, 2022. Subject to market conditions, we expect to utilize these borrowing facilities from time to time in the future to fund loan originations and deposit withdrawals, to satisfy other financial commitments, repay maturing debt and to take advantage of investment opportunities to the extent feasible. 
 Liquidity management is both a daily and long-term function of the Company’s management. Excess liquidity is generally invested in short-term investments, such as overnight deposits and federal funds. On a longer-term basis, a strategy is maintained of investing in various lending products and investment securities, including U.S. Government obligations and U.S. agency securities. We use our sources of funds primarily to meet our ongoing commitments, pay 

 61

 
 Table of Contents 

 maturing deposits and fund withdrawals, and to fund loan commitments. Loan commitments and letters of credit were $87.1 million, including $3.4 million of undisbursed construction and development loan commitments, at June 30, 2023. For information regarding our commitments, see “Note 18 – Commitments and Contingencies” of the Notes to Condensed Consolidated Financial Statements included in “Item 1. Financial Information” of Part I of this report.
 Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. Net cash provided by operating activities for the six months ended June 30, 2023 was $18.5 million, compared to $10.8 million provided by operating activities for the six months ended June 30, 2022. During the six months ended June 30, 2023, net cash provided by investing activities was $10.4 million, which consisted primarily of net change in loans receivable, compared to $76.8 million of cash provided by investing activities for the six months ended June 30, 2022. Net cash provided by financing activities for the six months ended June 30, 2023 was $44.4 million, which was comprised primarily of net change in deposits, compared to $112.8 million used in financing activities during the six months ended June 30, 2022. Management believes the capital sources are adequate to meet all reasonably foreseeable short-term and long-term cash requirements. There has not been a material change in our liquidity and capital resources since the information disclosed in our 2022 Annual Report other than set forth above. We are not aware of any reasonably likely material changes in the mix and relative cost of such resources.
 BayCom Corp is a separate legal entity from the Bank and must provide for its own liquidity. At June 30, 2023, BayCom Corp had liquid assets of $21.7 million. In addition to its operating expenses, BayCom Corp is responsible for paying to its shareholders any dividends that have been declared, funding stock repurchases, and making payments on its junior subordinated debentures and subordinated notes. BayCom Corp can receive dividends and other capital distributions from the Bank, although there are regulatory restrictions on the ability of the Bank to pay dividends and make other capital distributions. 
 On May 18, 2023, the Company announced that its Board of Directors declared a quarterly cash dividend of $0.10 per share on the Company’s outstanding common stock, payable on July 14, 2023 to shareholders of record as of the close of business on June 16, 2023. The Company expects to continue to pay quarterly cash dividends on its common stock, subject to the Board of Directors’ discretion to modify or terminate this practice at any time and for any reason without prior notice. Assuming continued payment of the cash dividend at this rate of $0.10 per share, our average total dividend paid each quarter would be approximately $1.2 million based on the number of our outstanding shares at June 30, 2023. The dividends we pay if any, may be limited as more fully discussed under “Business – Supervision and Regulation – BayCom Corp – Dividends” and “– Regulatory Capital Requirements” contained in “Part I. Item 1. Business” of the 2022 Annual Report.
 From time to time, our Board of Directors has authorized stock repurchase programs. In general, stock repurchases allow us to proactively manage our capital position and return excess capital to shareholders. Stock repurchases also provide us with shares of common stock necessary to satisfy obligations related to stock compensation awards. In April 2023, our Board of Directors announced a new stock repurchase program, to commence following completion of the existing stock repurchase program, for the repurchase of up to 619,000 shares, or approximately 5.0% of the Company’s outstanding common stock, over a one year period. Purchases under the Company’s stock repurchase programs may be made through open market purchases, privately negotiated transactions, or otherwise in compliance with Rule 10b-18 under the Securities Exchange Act of 1934. The repurchase programs may be suspended, terminated, or modified at any time for any reason, including market conditions, the cost of repurchasing shares, the availability of alternative investment opportunities, liquidity, and other factors deemed appropriate. The Company’s stock repurchase programs do not obligate the Company to purchase any particular number of shares. As of June 30, 2023, there remained 133,960 shares available for repurchase under the Company’s existing stock repurchase program. For additional information on the Company’s stock repurchases, see “Item 2. Unregistered Sales of Equity Securities and Use of Proceeds” contained in Part II of this report. 
 Regulatory Capital
 The Bank, as a state-chartered, federally insured commercial bank, and member of the Board of Governors of the Federal Reserve System, is subject to capital requirements established by the Federal Reserve. The Federal Reserve requires the Bank to maintain capital adequacy that generally parallels the FDIC requirements. The capital adequacy requirements are quantitative measures established by regulation that require the Bank to maintain minimum amounts and 

 62

 
 Table of Contents 

 ratios of capital. The FDIC requires the Bank to maintain minimum ratios of Total Capital, Tier 1 Capital, and Common Equity Tier 1 Capital to risk-weighted assets as well as Tier 1 Leverage Capital to average assets. Consistent with our goal to operate a sound and profitable organization, our policy is for the Bank to maintain “Well Capitalized” status under the Federal Reserve regulations. Based on capital levels at June 30, 2023 and December 31, 2022, the Bank was considered Well Capitalized. 
 ​ 
 ​ 

 63

 
 Table of Contents 

 The table below shows the capital ratios under the Basel III capital framework as of the dates indicated: 
 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 ​ 

 
 ​ 
 ​ 
 At June 30, 2023
 ​ 
 At December 31, 2022
 
 
 ​ 
 ​ 
 Amount
 ​ 
 Ratio
 ​ 
 Amount
 ​ 
 Ratio
 
 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 ​ 
 (As Restated)
 ​ 
 (As Restated)
 ​ 
 
 ​ 
 ​ 
 (Dollars in thousands)
 
 
 Leverage Ratio 
 
 ​ 
 
 
 
 
 ​ 
 
 
 
 ​ 
 
 BayCom Corp
 ​ 
 $
 278,165 
 
 11.36 
 % 
 $
 283,431 
 
 11.79 
 %
 
 Minimum requirement for “Well Capitalized”
 ​ 
 
 122,479 
 
 5.00 
 % 
 
 120,193 
 
 5.00 
 %
 
 Minimum regulatory requirement
 ​ 
 
 97,983 
 
 4.00 
 % 
 
 96,154 
 
 4.00 
 %
 
 ​ 
 ​ 
 
 ​ 
 ​ 
 ​ 
 ​ 
 
 ​ 
 ​ 
 ​ 
 ​ 
 
 United Business Bank
 ​ 
 
 328,276 
 
 13.05 
 % 
 
 336,667 
 
 13.64 
 %
 
 Minimum requirement for “Well Capitalized”
 ​ 
 
 125,729 
 
 5.00 
 % 
 
 123,402 
 
 5.00 
 %
 
 Minimum regulatory requirement
 ​ 
 
 100,583 
 
 4.00 
 % 
 
 98,722 
 
 4.00 
 %
 
 ​ 
 ​ 
 
 ​ 
 ​ 
 ​ 
 ​ 
 
 ​ 
 ​ 
 ​ 
 ​ 
 
 Common Equity Tier 1 Ratio 
 ​ 
 
 
 
 
 ​ 
 
 
 
 
 ​ 
 
 BayCom Corp
 ​ 
 
 278,165 
 
 13.92 
 % 
 
 283,431 
 
 13.68 
 %
 
 Minimum requirement for “Well Capitalized”
 ​ 
 
 129,918 
 
 6.50 
 % 
 
 134,648 
 
 6.50 
 %
 
 Minimum regulatory requirement
 ​ 
 
 89,943 
 
 4.50 
 % 
 
 93,218 
 
 4.50 
 %
 
 ​ 
 ​ 
 
 ​ 
 ​ 
 ​ 
 ​ 
 
 ​ 
 ​ 
 ​ 
 ​ 
 
 United Business Bank
 ​ 
 
 328,276 
 ​ 
 16.60 
 % 
 
 336,667 
 ​ 
 16.42 
 %
 
 Minimum requirement for “Well Capitalized”
 ​ 
 
 128,507 
 
 6.50 
 % 
 
 133,242 
 
 6.50 
 %
 
 Minimum regulatory requirement
 ​ 
 
 88,967 
 
 4.50 
 % 
 
 92,245 
 
 4.50 
 %
 
 ​ 
 ​ 
 
 ​ 
 ​ 
 ​ 
 ​ 
 
 ​ 
 ​ 
 ​ 
 ​ 
 
 Tier 1 Risk-Based Capital Ratio 
 ​ 
 
 
 
 
 ​ 
 
 
 
 
 ​ 
 
 BayCom Corp
 ​ 
 
 287,650 
 
 14.39 
 % 
 
 292,916 
 
 14.14 
 %
 
 Minimum requirement for “Well Capitalized”
 ​ 
 
 159,899 
 
 8.00 
 % 
 
 165,721 
 
 8.00 
 %
 
 Minimum regulatory requirement
 ​ 
 
 119,924 
 
 6.00 
 % 
 
 124,291 
 
 6.00 
 %
 
 ​ 
 ​ 
 
 ​ 
 ​ 
 ​ 
 ​ 
 
 ​ 
 ​ 
 ​ 
 ​ 
 
 United Business Bank
 ​ 
 
 328,276 
 
 16.60 
 % 
 
 336,667 
 
 16.42 
 %
 
 Minimum requirement for “Well Capitalized”
 ​ 
 
 158,163 
 
 8.00 
 % 
 
 163,991 
 
 8.00 
 %
 
 Minimum regulatory requirement
 ​ 
 
 118,622 
 
 6.00 
 % 
 
 122,993 
 
 6.00 
 %
 
 ​ 
 ​ 
 
 ​ 
 ​ 
 ​ 
 ​ 
 
 ​ 
 ​ 
 ​ 
 ​ 
 
 Total Risk-Based Capital Ratio 
 ​ 
 
 
 
 
 ​ 
 
 
 
 
 ​ 
 
 BayCom Corp
 ​ 
 
 372,050 
 
 18.61 
 % 
 
 377,131 
 
 18.21 
 %
 
 Minimum requirement for “Well Capitalized”
 ​ 
 
 199,874 
 
 10.00 
 % 
 
 207,151 
 
 10.00 
 %
 
 Minimum regulatory requirement
 ​ 
 
 159,899 
 
 8.00 
 % 
 
 165,721 
 
 8.00 
 %
 
 ​ 
 ​ 
 
 ​ 
 ​ 
 ​ 
 ​ 
 
 ​ 
 ​ 
 ​ 
 ​ 
 
 United Business Bank
 ​ 
 
 347,676 
 
 17.59 
 % 
 
 355,882 
 
 17.36 
 %
 
 Minimum requirement for “Well Capitalized”
 ​ 
 
 197,704 
 
 10.00 
 % 
 
 204,988 
 
 10.00 
 %
 
 Minimum regulatory requirement
 ​ 
 
 158,163 
 
 8.00 
 % 
 
 163,991 
 
 8.00 
 %
 

 ​ 
 In addition to the minimum capital ratios, the Bank must maintain a capital conservation buffer consisting of additional Common Equity Tier 1 capital greater than 2.5% above the required minimum levels in order to avoid limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses based on percentages of eligible retained income that could be utilized for such actions. At June 30, 2023, the Bank’s Common Equity Tier 1 capital exceeded the required capital conservation buffer.
 For a bank holding company with less than $3.0 billion in assets, the capital guidelines apply on a bank only basis and the Federal Reserve expects the holding company’s subsidiary banks to be Well Capitalized under the prompt corrective action regulations. If the Company was subject to regulatory guidelines for bank holding companies with $3.0 billion or more in assets, at June 30, 2023, the Company would have exceeded all regulatory capital requirements.

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 Table of Contents 

 For additional information, see “Item 1. Business — Supervision and Regulation — United Business Bank — Capital Requirements” and Note 19, “Regulatory Matters” in the Notes to the Consolidated Financial Statements, included in “Item 8. Financial Statements and Supplementary Data” in the 2022 Annual Report.

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 Table of Contents
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.
BayCom Corp 10-Q

Item 2. Management’s Discussion and Analysis
