What changed in this filing

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Item 1. Business

2024-03-15 compared with 2023-03-31 · 160 added, 154 removed, 638 unchanged (33% of the section changed)

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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.

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 35 full-service branches, with 16 locations in California, one in Nevada, 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 Form 10-K, including 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.

Our principal objective is to enhance 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 ten 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 in community markets that we can use to fund commercial loan growth.

We believe our strategy of selectively acquiring and integrating community banks has yielded economies of scale and improved our overall franchise efficiency.

Looking forward, we expect to continue pursuing strategic acquisitions, believing our targeted market areas present us with many and varied acquisition opportunities.

We are also committed to organic growth, leveraging the potential within metropolitan and community markets where we currently operate.

These markets offer significant opportunities to expand our commercial client base, increase interest-earning assets, and enhance 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, Las Vegas, Nevada and community markets including Albuquerque, New Mexico, and Custer, Delta, and Grand counties, Colorado, provides us access to low cost, stable core deposits in community markets 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.

As of December 31, 2022, we had, on a consolidated basis, total assets of $2.5 billion, total deposits of $2.1 billion, total loans of $2.0 billion (net of allowances) and total shareholders’ equity of $317.1 million.

We continue to focus on growing our commercial loan portfolios through acquisitions as well as organic growth.

As of December 31, 2023, we had, on a consolidated basis, assets of $2.6 billion, loans of $1.9 billion (net of allowances), deposits of $2.1 billion and shareholders’ equity of $312.9 million.

We continue to focus on growing our commercial loan portfolios through both acquisitions and organic growth.

At December 31, 2023, our $1.9 billion total loan portfolio included $397.0 million, or 20.6%, of acquired loans (all of which were recorded to their estimated fair values at the time of acquisition), and the remaining $1.5 billion, or 79.4%, consisted of loans we originated.

The profitability of our operations depends primarily on our net interest income after provision for loan losses, which is the difference between interest earned on interest earning assets and interest paid on interest bearing liabilities less provision for loan losses.

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 noninterest income and noninterest expense.

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The severe economic recession beginning in 2008 and the ongoing consolidation in the banking industry created an opportunity for our management team and board to build an attractive commercial banking franchise and create long-term value for our shareholders by employing an acquisition strategy that focuses on opportunities that grow our product portfolio and expand the business geographically.

Since 2010, we have implemented our vision of becoming a strategic consolidator of community banks and a destination for seasoned bankers and businesspersons who share our entrepreneurial spirit.

While not without risk, we believe there are certain advantages resulting from mergers and acquisitions.

Since 2010, we have implemented our vision of becoming a strategic consolidator of community banks, attracting seasoned bankers and businesspersons who share our entrepreneurial spirit.

While not without risk, we believe there are certain advantages arising from mergers and acquisitions.

These advantages include, among others, the diversification of our loan portfolio with seasoned loans, the expansion of our market areas and an effective method to augment our growth and risk management infrastructure through the retention of local lending personnel and credit administration personnel to manage the client relationships of the banks being acquired.

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Since 2010, we have completed 10 acquisitions with aggregate total assets of approximately $2.3 billion and total deposits of approximately $1.9 billion.

We have sought to integrate the banks we acquire into our existing operational platform and enhance shareholder value through the creation of efficiencies within the combined operations.

We have sought to integrate the acquired banks into our existing operational platform to create operational efficiencies within the combined operations, all geared towards enhancing shareholder value.

Continuing our vision, in August 2023, we opened a de novo branch in Las Vegas, Nevada to expand our geographic footprint and market areas and augment our deposit and loan growth.

In April 2017, we completed our largest acquisition to date when we acquired First ULB Corp (“FULB”), the holding company for United Business Bank, FSB, headquartered in Oakland, California.

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At the time of acquisition, GMB had approximately $130.9 million in total assets and $118.1 million in deposits.

In February 2022, we acquired Pacific Enterprise Bancorp (“PEB”), the holding company for Pacific Enterprise Bank, which had one branch location located in Irvine, California.

In February 2022, we acquired PEB, the holding company for Pacific Enterprise Bank, which had one branch location located in Irvine, California.

At the time of acquisition, PEB had approximately $446.1 million in total assets and $376.7 million in deposits.

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As of December 31, 2023, including our principal executive offices, we operate a total of 35 full-service banking branches consisting of branch offices in Northern and Southern California;

Denver, Colorado, and Custer, Delta, and Grand counties, Colorado;

Nevada, Las Vegas;

Denver, Colorado, and Custer, Delta, and Grand

counties, Colorado;

Seattle, Washington and Central New Mexico.

We believe this diverse geographic footprint provides us with access to low

cost, stable core deposits in community markets that we can use to fund commercial loan growth in our metropolitan markets.

We believe this diverse geographic footprint provides us with access to low cost, stable core deposits in community markets that we can use to fund commercial loan growth in our metropolitan markets.

We generally lend in markets where we have a physical presence through our branch offices.

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We serve the Denver MSA and the Colorado communities in Custer, Delta, and Grand counties through eleven branch offices.

As of December 31, 2022, borrowers or properties located outside of California in the states of Colorado, New Mexico and Washington composed 4.8%, 2.5% and 4.3% of our loan portfolio, respectively.

In August 2023, we opened a branch in Las Vegas, Nevada to expand our geographic footprint and market areas and augment our deposit and loan growth.

As of December 31, 2023, borrowers or properties located outside of California in the states of Colorado, New Mexico and Washington comprised 4.5%, 2.3% and 5.4% of our loan portfolio, respectively.

As of December 31, 2023, deposits located outside of California in the states of Colorado, New Mexico and Washington comprised 15.6%, 9.6% and 7.7% of total deposits, respectively.

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Our preference is for owner-occupied real estate and commercial and industrial loans.

We also offer consumer loans predominantly as an accommodation to our commercial clients, which include installment loans, unsecured and secured personal lines of credit, and overdraft protection.

We also offer consumer loans predominantly as an accommodation to our commercial clients, which include installment loans, unsecured and secured

personal lines of credit, and overdraft protection.

Lending activities originate from the relationships and efforts of our bankers.

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The commercial and industrial loans are typically secured by general business assets, accounts receivable inventory and/or the corporate guaranty of the borrower and personal guaranty of its principals.

The geographic concentration of our loans subjects our business to the general economic conditions within California, Colorado, New Mexico and Washington.

The risks created by such concentrations have been considered by management in the determination of the adequacy of the allowance for loan losses.

Management believes the allowance for loan losses is adequate to cover probable incurred losses in our loan portfolio as of December 31, 2022.

The geographic concentration of our loans subjects our business to the general economic conditions within California, Colorado, Nevada, New Mexico, and Washington.

The risks created by such concentrations have been considered by management in the determination of the adequacy of the allowance for credit losses.

Comprehensive risk management practices and appropriate capital levels are essential elements of a sound commercial real estate lending program.

A concentration in commercial real estate adds a dimension of risk that compounds the risk inherent in individual loans.

Interagency bank guidance on commercial real estate concentrations describes sound risk management practices which include board and management oversight, portfolio management, management information systems, market analysis, portfolio stress testing and sensitivity analysis, credit underwriting standards and credit risk review functions.

Management believes it has implemented these practices in order to monitor the commercial real estate concentrations in our loan portfolio.

In line with Interagency bank guidance on commercial real estate concentrations, our approach underscores sound risk management practices.

These practices encompass diligent oversight by both the board and management, effective portfolio management, the utilization of advanced management information systems, thorough market analysis, portfolio stress testing, and sensitivity analysis.

Furthermore, we adhere to stringent credit underwriting standards and credit risk review functions.

Large Credit Relationships.

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The Bank’s lending and credit policies require management to regularly review the Bank’s loan portfolio so that the Bank can monitor the quality of its assets.

If during the ordinary course of business, management becomes aware that a borrower may not be able to meet the contractual payment obligations under a loan, then such policies require that the loan be supervised more closely with consideration given to, among other things, placing the loan on nonaccrual status, requiring additional allowance for loan losses, and (if appropriate) charging-off a part or all of the loan.

Potential problem loans are those loans that are currently accruing interest and are not considered impaired, but which we are monitoring because the financial information of the borrower causes us concern as to their ability to comply with their loan repayment terms.

If during the ordinary course of business, management becomes aware that a borrower may not be able to meet the contractual payment obligations under a loan, then such policies require that the loan be supervised more closely with consideration given to, among other things, placing the loan on nonaccrual status, requiring additional allowance for credit losses, and (if appropriate) charging-off all or a part of the loan.

Potential problem loans are those loans that are currently accruing interest, but which we are monitoring because the financial information of the borrower causes us concern as to their ability to comply with their loan repayment terms.

We attempt to identify potential problem loans early in an effort to seek aggressive resolution of these situations before the loans become a loss, record any necessary charge-offs promptly and maintain adequate allowance levels for probable loan losses inherent in the loan portfolio.

Results of loan reviews by consultants as well as examination of the loan portfolio by state and federal regulators are also considered by management and the board in determining the level of the allowance for loan losses.

General economic factors affecting a borrower’s ability to repay include interest, inflation and unemployment rates, as well as other factors affecting a borrower’s clients, suppliers and employees.

The well-established financial institutions in our primary markets make proportionately more loans to medium-to-large-sized businesses than we

The well-established financial institutions in our primary markets make proportionately more loans to medium-to-large-sized businesses than we originate.

Many of our commercial loans are, or will likely be, made to small- to-medium-sized businesses that may be less able to withstand competitive, economic and financial pressures than larger borrowers.

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The dollar amounts of our lending limit increases or decreases as the Bank’s capital increases or decreases.

We are able to sell participations in its larger loans to other financial institutions, which allows us to manage the risk involved in these loans and to meet the lending needs of its clients’ requiring extensions of credit in excess of these limits.

We can sell participations in larger loans to other financial institutions, which allows us to manage the risk involved in these loans and to meet the lending needs of our clients’ requiring extensions of credit in excess of these limits.

We have strict policies and procedures in place for the establishment of limits with respect to specific products and businesses and evaluating exceptions to the internal limits for individual relationships.

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Currently, we maintain an in-house limit of $11.6 million for unsecured loans and $19.3 million for secured loans.

At December 31, 2022, there were seven loans to an aggregate of seven individuals or entities or related interests that exceeded these internal limits.

At December 31, 2023, there were six loans to an aggregate of six individuals or entities or related interests that exceeded these internal limits.

We provide a variety of loans to meet our clients’ needs.

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At December 31, 2023, we held $1.8 billion in loans secured by real estate, representing 91.5% of total loans receivable, and a total of $33.2 million in undisbursed real estate related commitments.

The types of our loans are described below:

The types of loans contained in our portfolio are, as follows:

Commercial Real Estate Loans.

Our commercial real estate loans include loans secured by office buildings, retail facilities, hotels, gas stations, convalescent facilities, industrial use buildings, restaurants, multifamily properties and agricultural real estate.

At December 31, 2022, our commercial and multifamily real estate loan portfolio totaled $1.7 billion, or 84.3% of total loans.

At December 31, 2023, our commercial real estate loan portfolio totaled $1.7 billion, or 86.6% of total loans.

Our commercial real estate loans may be owner-occupied or non-owner occupied.

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We generally charge an origination fee for our services.

The Company also offers commercial real estate loans as a SBA “preferred lender” under the SBA’s 504 loan program in conjunction with junior lien financing from a Certified Development Company ("CDC").

Preferred lender status is the highest designation awarded to lenders by the SBA, and accordingly, grants such lenders full lending authority to approve SBA loans.

The SBA 504 loan program is an economic development-financing program providing long-term,

low down payment loans to businesses.

Typically, a SBA 504 project includes a loan secured from a private-sector lender, such as the Bank, with a senior lien, a loan secured from a CDC (funded by a 100% SBA-guaranteed debenture) with a junior lien covering up to 40% of the total cost, and a contribution of at least 10% equity from the borrower.

The SBA 504 loan program is an economic development-financing program providing long-term, low down payment loans to businesses.

Typically, a SBA 504 project includes a loan secured from a private-sector lender, such as the Bank, with a senior lien, a loan secured from a CDC (funded by a 100% SBA-guaranteed debenture) with a

junior lien covering up to 40% of the total cost, and a contribution of at least 10% equity from the borrower.

The CDC is a non-profit corporation established to contribute to the economic development of its community by working together with the SBA and private sector lenders such as the Bank, to provide financing to small businesses.

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During 2023, the Bank originated $13.3 million in commercial real estate SBA 7(a) loans.

During 2022, the Bank sold $28.4 million of the guaranteed portion of its commercial real estate SBA 7(a) loans, for which it recognized a gain of $2.2 million.

During 2023, the Bank sold $4.6 million of the guaranteed portion of its commercial real estate SBA 7(a) loans, for which it recognized a gain of $313,000.

At December 31, 2023, the Bank had $83.3 million of commercial real estate SBA 7(a) loans where the guaranteed portion totaling $62.5 million has not been sold.

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Commercial real estate loans are underwritten primarily using a cash flow analysis and secondarily as loans secured by real estate.

In underwriting commercial real estate loans, we seek to minimize risks in a variety of ways, including giving careful consideration to the property’s age, condition, operating history, future operating projections, current and projected market rental rates, vacancy rates, location and physical condition.

In underwriting commercial real estate loans, we seek to minimize risks in a variety of ways, including considering the property’s age, condition, operating history, future operating projections, current and projected market rental rates, vacancy rates, location and physical condition.

The underwriting analysis also may include credit verification, reviews of appraisals, environmental hazards or reports, the borrower’s liquidity and leverage, management experience of the owners or principals, economic condition, industry trends and any guarantees, including SBA loan guarantees.

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Among the more common risks involved in agricultural lending, are weather conditions, disease, water availability and water distribution rights, which can be mitigated through multi-peril crop insurance.

Commodity prices also present a risk, which may be managed by the use of set price contracts.

Commodity prices also present a risk, which may be managed by using set price contracts.

As part of our underwriting, the borrower is required to obtain multi-peril crop insurance.

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We currently target individual commercial real estate loans between $1.0 million and $5.0 million.

As of December 31, 2022, the largest commercial real estate loan had a net outstanding balance of $26.8 million and was secured by a church located in San Diego, California.

The second largest commercial real estate loan had a net outstanding balance of $23.5 million and was secured by retail shopping center located in Sacramento, California.

As of December 31, 2023, our largest commercial real estate loan had a net outstanding balance of $26.8 million and was secured by a church located in San Diego, California.

Our second largest commercial real estate loan had a net outstanding balance of $23.3 million and was secured by retail shopping center located in Sacramento, California.

Both of these loans were performing according to their respective loan repayment terms as of December 31, 2023.

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The loan-to-value ratio on our construction loans, as established by independent appraisal, typically will not exceed 80% at loan origination, and is lower in most cases.

At December 31, 2022, we had $13.2 million in construction and land loans outstanding, representing 0.7% of total loans, with $5.3 million in undisbursed commitments.

At December 31, 2023, we had $9.6 million in construction and land loans outstanding, representing 0.5% of total loans, with $133,000 in undisbursed commitments.

The average loan size in our construction and land loan portfolio was approximately $319,000 at December 31, 2023, with an estimated weighted average loan-to-value ratio of 60.8%.

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This loan was performing in accordance to their loan repayment terms as of December 31, 2023.

We do originate a limited amount of home equity loans and home equity lines of credit.

Home equity loans and home equity lines of credit generally may have a loan-to-value of up 80% at the time origination when combined with the first mortgage.

We originate a limited amount of home equity loans and home equity lines of credit.

Home equity loans and home equity lines of credit generally have a loan-to-value ratio of up 80% at the time origination when combined with the first mortgage.

The majority of these loans are secured by a first or second mortgage on residential property.

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We retain a valid lien on the real estate, obtain a title insurance policy that insures the property is free from encumbrances and require hazard insurance.

At December 31, 2022, home equity loans and lines of credit totaled $7.7 million, or 0.4% of total loans, of which $3.8 million were secured by junior liens.

At December 31, 2023, home equity loans and lines of credit totaled $5.9 million, or 0.4% of total loans, of which $96,000 were secured by junior liens.

Unfunded commitments on home equity lines of credit at December 31, 2023, totaled $6.9 million.

Commercial and Industrial Loans.

We make commercial and industrial loans, including commercial lines of credit, working capital loans, term loans, equipment financing, acquisition, expansion and development loans, SBA loans, letters of credit and other loan products, primarily in our target markets, which are underwritten on the basis of the borrower’s ability to service the debt from operating income.

We make commercial and industrial loans, including commercial lines of credit, working capital loans, term loans, equipment financing, acquisition, expansion and development loans, SBA loans, letters of credit and other loan products, primarily in our target markets, which are underwritten based on the borrower’s ability to service the debt from operating income.

We take as collateral, a lien on general business assets, including, among other things, real estate, accounts receivable, inventory and equipment, and generally obtain a personal guaranty of the borrower or principal.

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and operating and revolving loans used to purchase livestock for resale and related livestock production expense.

We typically originate agricultural operating loans on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s agricultural business.

We typically originate agricultural operating loans based on the borrower’s ability to make repayment from the cash flow of the borrower’s agricultural business.

As a result, the availability of funds for the repayment of agricultural operating loans may be substantially dependent on the success of the business itself and the general economic environment.

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Consumer Loans.

We generally make consumer loans as an accommodation to our clients on a case-by-case basis.

These loans represent a small portion of our overall loan portfolio.

However, these loans are important in terms of servicing our client’s needs.

We make a variety of loans to individuals for personal and household purposes, including secured and unsecured term loans.

We make consumer loans as an accommodation to our clients on a case-by-case basis acknowledging their importance in meeting individual needs, even though they constitute a minor portion of our overall loan portfolio.

These loans cater to personal and household purposes, and include both secured and unsecured term loans.

Consumer loans are underwritten based on the individual borrower’s income, current debt level, past credit history and the value of any available collateral.

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The remaining deficiency often will not warrant further substantial collection efforts against the borrower beyond obtaining a deficiency judgment.

In addition, consumer loan collections are dependent on the borrower’s continuing financial stability, and thus are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy.

Consumer loan collections are dependent on the borrower’s continuing financial stability, and thus are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy.

Furthermore, the application of various federal and state laws may limit the amount which can be recovered on such loans.

As of December 31, 2022, consumer loans totaled $4.2 million or 0.2% of total loans.

As of December 31, 2023, consumer loans totaled $738,000 or 0.04% of total loans.

For additional information concerning our loan portfolio, see “Item 7.

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Sources of Funds

Our lending and investing activities are primarily funded by deposits.

We offer a variety of deposit accounts with a wide range of interest rates and terms including demand, savings, money market and time deposits with the goal of attracting a wide variety of clients.

Our lending and investing activities are primarily funded by deposits, and we offer a variety of deposit accounts with a wide range of interest rates and terms including demand, savings, money market and time deposits with the goal of attracting a wide variety of clients.

We solicit these accounts from individuals, small to medium sized businesses, trade unions and their related businesses, associations, organizations and government authorities.

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We also offer convenience-related services, including banking by appointment (before or after normal business hours on weekdays and on weekends), online banking services, access to a national automated teller machine network, extended drive-through hours, remote deposit capture, and courier service so that clients’ deposit and other banking needs may be served without the client having to make a trip to the branch.

Our full suite of online banking solutions including access to account balances, online transfers, online bill payment and electronic delivery of client statements, mobile banking solutions for iPhone and Android phones, including remote check deposit with mobile bill pay.

We offer debit cards with no ATM surcharges or foreign ATM fees for checking clients, plus night depository, direct deposit, cashier’s

and travelers checks and letters of credit, as well as treasury management services, wire transfer services and automated clearing house (“ACH”) services.

Our full suite of online banking solutions including

access to account balances, online transfers, online bill payment and electronic delivery of client statements, mobile banking solutions for iPhone and Android phones, including remote check deposit with mobile bill pay.

We offer debit cards with no ATM surcharges or foreign ATM fees for checking clients, plus night depository, direct deposit, cashier’s and travelers checks and letters of credit, as well as treasury management services, wire transfer services and automated clearing house (“ACH”) services.

We have implemented deposit gathering strategies and tactics which have enabled us to attract and retain deposits utilizing technology to deliver high quality commercial depository (treasury management) services (e.g., remote deposit capture lock box, electronic bill payments wire transfers, direct deposits and automatic transfers) in addition to the traditional generation of deposit relationships performed in conjunction with our lending activities.

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Cash management deposit products consist of lockbox, remote deposit capture, positive pay, reverse positive pay, account reconciliation services, zero balance accounts and sweep accounts including loan sweep.

We provide an avenue for large depositors to maintain full insurance coverage by the Federal Deposit Insurance Corporation (“FDIC”) for all deposits up to $50.0 million.

Under an agreement with IntraFi Network, we participate in the CDARS and the ICS money market product.

These are deposit-matching programs which distribute excess balances on deposit with us across other participating banks.

To facilitate full Federal Deposit Insurance Corporation (“FDIC”) insurance coverage for large depositors up to $50.0 million, we participate in CDARS and ICS programs, distributing excess balances across participating banks.

In return, those participating financial institutions place their excess client deposits with us in a reciprocal amount.

These products are designed to enhance our ability to attract and retain clients and increase deposits by providing additional FDIC insurance for large deposits.

We also participate in the ICS One-Way Sell program, which allows us to buy cost effective wholesale funding on customizable terms.

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Financial Statements and Supplementary Data” of this Form 10-K.

While deposits are the primary source of funds for our lending and investment activities and for general business purposes, we also use borrowings to supplement our supply of lendable funds, to meet deposit withdrawal requirements and to more efficiently leverage our capital position.

The Federal Home Loan Bank of San Francisco (the “FHLB”) serves as our primary borrowing source.

The FHLB provides credit for member financial institutions such as the Bank.

As a member, the Bank is required to own capital stock in the FHLB and is authorized to apply for advances on the security of that stock and certain of its mortgage loans and securities, provided that certain credit worthiness standards have been met.

While deposits serve as the primary source of funds for our lending, investment activities, and general business needs, we also use borrowings to supplement our supply of lendable funds, meet deposit withdrawal requirements, and to leverage our capital position more efficiently.

The Federal Home Loan Bank of San Francisco (the “FHLB”) is our primary borrowing source, providing credit to member financial institutions like ours.

As a FHLB member, the Bank is required to own capital stock in the FHLB and is authorized to apply for advances on the security of that stock and certain of its mortgage loans and securities, provided that certain credit worthiness standards have been met.

Limitations on the amount of advances are based on the financial condition of the member institution, the adequacy of collateral pledged to secure the credit, and FHLB stock ownership requirements.

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

At December 31, 2022, there were no FHLB advances outstanding, and based on pledged collateral, the Bank had $473.6 million of available credit capacity with the FHLB.

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

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

At December 31, 2023, there were no FHLB advances outstanding, and the Bank had $576.9 million of available credit capacity with the FHLB based on pledged collateral.

In addition, the Bank maintained a short-term borrowing line of credit with the Federal Reserve Bank (“FRB”) of San Francisco secured by loans originated under the SBA PPP as collateral.

This line was closed during 2023, with no FRB borrowings outstanding at December 31, 2023.

The Bank also has uncommitted Federal Funds lines with four corresponding banks.

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

The Bank also has uncommitted Federal Funds lines with four corresponding banks, with aggregate available commitments totaling $65.0 million at December 31, 2023.

There are no amounts outstanding under these facilities at December 31, 2023.

On August 6, 2020, the Company issued and sold $65.0 million aggregate principal amount of 5.25% Fixed-to-Floating Rate Subordinated Notes due 2030 (the “Notes”) at a public offering price equal to 100% of the aggregate

principal amount of the Notes.

The Bank did not participate in the Federal Reserve Bank of San Francisco Bank Term Funding Program.

The offering of the Notes closed on August 10, 2020.

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As of December 31, 2023, our investment portfolio totaled $163.2 million, with an average yield of 3.9% and an estimated duration of approximately 6.9 years.

Our investment policy is established by the Board of Directors.

The investment policy is reviewed annually by the Bank’s Board of Directors and Asset/Liability Management Committee, who ensure compliance to the policy and also approve any change to the policy.

All securities transactions are reported to the Board of Directors on a monthly basis.

The overall objectives of the investment policy are to maintain a portfolio of high-quality investments to provide liquidity when loan demand is high, to assist in maintaining earnings when loan demand is low, and to maximize earnings while satisfactorily managing risk, including credit risk, reinvestment risk, liquidity risk and interest rate risk.

Our investment policy is established by the Board of Directors, subject to an annual review by both the Bank’s Board of Directors and Asset/Liability Management Committee.

This review is intended to ensure ongoing compliance to the policy and allows for approval of any needed policy changes.

All securities transactions are reported to the Board of Directors monthly.

The overall objectives of the investment policy are to maintain a portfolio of high-quality investments, provide liquidity when loan demand is high, support earnings when loan demand is low, and maximize earnings while effectively managing risk, including credit risk, reinvestment risk, liquidity risk and interest rate risk.

The policy dictates the criteria for classifying securities as either available for sale or held to maturity.

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Treasury obligations, U.S.

Government agency obligations, some certificates of deposit of insured banks, mortgage backed and mortgage related securities, corporate notes and municipal bonds.

Government agency obligations, some certificates of deposit of insured banks, mortgage backed and mortgage related securities, corporate notes, municipal bonds, and equity securities.

Investment in non-investment grade bonds and stripped mortgage-backed securities is not permitted under the policy.

This investment policy serves as a guideline to ensure prudent investment decisions that align with the Bank’s overall financial objectives and risk management principles.

For additional information concerning our investments, see “Item 7.

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BayCom and United Business Bank are subject to significant regulation by federal and state laws and regulations, and the policies of applicable federal and state banking agencies.

As a bank holding company registered with the Federal Reserve, we are subject to comprehensive regulation and supervision by the Federal Reserve under the Bank Holding Company Act of 1956, as amended, and the regulations of the Federal Reserve.

As a California chartered bank, the Bank is subject to supervision, periodic examination, and regulation by the California Department of Financial Protection and Innovation (“DFPI”), previously known as the California Department of Business Oversight, and by the Federal Reserve

as its primary federal regulator.

As a bank holding company registered with the Federal

Reserve, we are subject to comprehensive regulation and supervision by the Federal Reserve under the Bank Holding Company Act of 1956, as amended, and the regulations of the Federal Reserve.

The following discussion of particular statutes and regulations affecting BayCom and United Business Bank is only a brief summary and does not purport to be complete.

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The Bank is regularly examined by the Federal Reserve and the DFPI and must file periodic reports concerning its activities and financial condition with these banking regulators.

The Bank’s relationship with depositors and borrowers also is regulated to a great extent by both federal and state law, especially in such matters as the ownership of deposit accounts and the form and content of mortgage and other loan documents.

The Bank’s relationship with depositors and borrowers is also regulated to a great extent by both federal and state law, especially in such matters as the ownership of deposit accounts and the form and content of mortgage and other loan documents.

Federal and state banking laws and regulations govern all areas of the operation of the Bank, including reserves, loans, investments, deposits, capital, issuance of securities, payment of dividends and establishment of branches.

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State Regulation and Supervision.

As a California-chartered commercial bank with branches in the States of California, Colorado, New Mexico and Washington, the Bank is subject not only to the applicable provisions of California law and regulations, but is also subject to applicable Colorado, New Mexico and Washington law and regulations.

As a California-chartered commercial bank with branches in the States of California, Nevada, Colorado, New Mexico and Washington, the Bank is subject not only to the applicable provisions of California law and regulations, but is also subject to applicable Colorado, Nevada, New Mexico and Washington law and regulations.

These state laws and regulations govern the Bank’s ability to take deposits and pay interest thereon, make loans on or invest in residential and other real estate, make consumer loans, invest in securities, offer various banking services to its clients and establish branch offices.

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Extraordinary growth in insured deposits during the first and second quarters of 2020 caused the DIF reserve ratio to decline below the statutory minimum of 1.35 percent as of June 30, 2020.

In September 2020, the FDIC Board of Directors adopted a Restoration Plan to restore the reserve ratio to at least 1.35 percent within eight years, absent extraordinary circumstances, as required by the Federal Deposit Insurance Act.

In September 2020, the FDIC Board of Directors adopted a Restoration Plan to restore the reserve ratio to at least 1.35 percent within eight years, absent

extraordinary circumstances, as required by the Federal Deposit Insurance Act.

The Restoration Plan maintained the assessment rate schedules in place at the time and required the FDIC to update its analysis and projections for the DIF balance and reserve ratio at least semiannually.

In the semiannual update for the Restoration Plan in June 2022, the FDIC projected that the reserve ratio was at risk of not reaching the statutory minimum of 1.35 percent by September 30, 2028,

the statutory deadline to restore the reserve ratio.

In the semiannual update for the Restoration Plan in June 2022, the FDIC projected that the reserve ratio was at risk of not reaching the statutory minimum of 1.35 percent by September 30, 2028, the statutory deadline to restore the reserve ratio.

Based on this update, the FDIC Board approved an Amended Restoration Plan, and concurrently proposed an increase in initial base deposit insurance assessment rate schedules uniformly by 2 basis points, applicable to all insured depository institutions.

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Any significant increases in insurance assessments may have an adverse effect on the operating expenses and results of operations of the Company.

The Bank paid $680,000 in FDIC assessments for the year ended December 31, 2022.

The Bank paid $1.1 million and $680,000 in FDIC assessments for the year ended December 31, 2023 and 2022, respectively.

The FDIC also may prohibit any insured institution from engaging in any activity determined by regulation or order to pose a serious risk to the DIF.

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Federally insured financial institutions, such as the Bank, are required to maintain a minimum level of regulatory capital.

Consolidated regulatory capital requirements identical to those applicable to subsidiary banks are generally apply to bank holding companies.

Consolidated regulatory capital requirements identical to those applicable to subsidiary banks generally apply to bank holding companies.

However, the Federal Reserve Board has provided a “Small Bank Holding Company” exception to its consolidated capital requirements, and bank holding companies with less than $3.0 billion of consolidated assets are not subject to the consolidated holding company capital requirements unless otherwise directed by the Federal Reserve Board.

The Federal Reserve expects a holding company’s subsidiary banks to be Well Capitalized under the prompt corrective action regulations, discussed below.

The Federal Reserve expects holding company subsidiary banks to be Well Capitalized under the prompt corrective action regulations, discussed below.

Under the capital regulations, the minimum capital ratios are:

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and (4) a leverage ratio (the ratio of Tier 1 capital to average total consolidated assets) of 4.0%.

CET1 generally consists of common stock, retained earnings, accumulated other comprehensive income (“AOCI”) unless an institution elects to exclude AOCI from regulatory capital, and certain minority interests (all of which are subject to applicable regulatory adjustments and deductions).

CET1 generally consists of common stock, retained earnings, accumulated other comprehensive income (“AOCI”)

unless an institution elects to exclude AOCI from regulatory capital, and certain minority interests (all of which are subject to applicable regulatory adjustments and deductions).

Tier 1 capital generally consists of CET1 and noncumulative perpetual preferred stock.

Tier 2 capital generally consists of other preferred stock and subordinated debt, which meet

certain conditions, plus an amount of the allowance for loan and lease losses up to 1.25% of assets.

Tier 2 capital generally consists of other preferred stock and subordinated debt, which meet certain conditions, plus an amount of the allowance for loan and lease losses up to 1.25% of assets.

Total capital is the sum of Tier 1 and Tier 2 capital.

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Subordinated Notes, such as the ones the Company issued in 2020, are also included in Tier 2 Capital.

In addition to the minimum CET1, Tier 1, leverage ratio and total capital ratios, the capital regulations require a capital conservation buffer consisting of additional CET1 capital greater than 2.5% of risk-weighted assets above the required minimum risk-based capital levels in order to avoid limitations on paying dividends, repurchasing shares, and paying discretionary bonuses.

In addition to the minimum CET1, Tier 1, leverage ratio and total capital ratios, the capital regulations require a capital conservation buffer consisting of additional CET1 capital greater than 2.5% of risk-weighted assets above the required minimum risk-based capital levels to avoid limitations on paying dividends, repurchasing shares, and paying discretionary bonuses.

To be considered “well capitalized,” a depository institution must have a Tier 1 risk-based capital ratio of at least 8%, a total risk-based capital ratio of at least 10%, a CET1 capital ratio of at least 6.5% and a leverage ratio of at least 5%, and not be subject to an individualized order, directive or agreement under which its primary federal banking regulator requires it to maintain a specific capital level.

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The Economic Growth, Regulatory Relief and Consumer Protection Act (“EGRRCPA”), enacted in May 2018, required the federal banking agencies to establish for institutions with assets of less than $10 billion a “community bank leverage ratio” of between 8 to 10%.

In September 2019, the federal banking agencies adopted a final rule, effective January 1, 2020, creating a community bank leverage ratio ("CBLR") for institutions with total consolidated assets of less than $10 billion, and that meet other qualifying criteria related to off-balance sheet exposures and trading assets and liabilities.

The CBLR provides for a simple measure of capital adequacy for qualifying institutions.

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Our management decided not to adopt the CBLR as it would reduce the Bank’s excess capital.

The Financial Accounting Standards Board has adopted a new accounting standard for U.S.

Generally Accepted Accounting Principles referred to as Current Expected Credit Loss (“CECL”) that requires FDIC-insured institutions and their holding companies (banking organizations) to recognize credit losses expected over the life of certain financial assets.

CECL covers a broader range of assets than the current method of recognizing credit losses and generally results in earlier recognition of credit losses.

This accounting standards is applicable to us effective January 1, 2023.

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

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

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

The federal banking regulators, including the Federal Reserve and FDIC, have adopted a rule that gives a banking organization the option to phase in over a three-year period the day-one adverse effects of CECL on its regulatory capital.

For additional information, see “Note 1 — Organization and Summary of Significant Accounting Policies – Recent Accounting Guidance Not Yet Effective” in the Notes to the Consolidated Financial Statements contained in “Item 8.

Financial Statements and Supplementary Data” of this Form 10-K.

Prompt Corrective Action.

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An institution that is not well capitalized is subject to certain restrictions on brokered deposits, including restrictions on the rates it can offer on its deposits generally.

considered adequately capitalized, an institution must have the minimum capital ratios described above.

To be considered adequately capitalized, an institution must have the minimum capital ratios described above.

Any institution which is neither well capitalized nor adequately capitalized is considered undercapitalized.

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For additional information, see “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” and Note 19 of the Notes to Consolidated Financial Statements in “Item 8.

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” and “Note 19 — Regulatory Matters” of the

Notes to Consolidated Financial Statements in “Item 8.

Financial Statements and Supplementary Schedules” contained in this report.

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● Total reported loans for construction, land development and other land represent 100% or more of the bank’s total regulatory capital;

● Total commercial real estate loans (as defined in the guidance) represent 300% or more of the bank’s total regulatory capital or the outstanding balance of the bank’s commercial real estate loan portfolio has increased 50% or more during the prior 36 months.

● Total commercial real estate loans (as defined in the guidance) represent 300% or more of the bank’s total regulatory capital, and the outstanding balance of the bank’s commercial real estate loan portfolio has increased by 50% or more during the prior 36 months.

The guidance provides that the strength of an institution’s lending and risk management practices with respect to such concentrations will be taken into account in supervisory guidance on evaluation of capital adequacy.

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Federal law generally limits the activities and FDIC-insured equity investments of state-chartered banks to those that are permissible for national banks.

An insured state bank is not prohibited from, among other things, (1) acquiring or retaining a majority interest in a subsidiary, (2) investing as a limited partner in a partnership the sole purpose of which is direct or indirect investment in the acquisition, rehabilitation or new construction of a qualified housing project, provided that such limited partnership investments may not exceed 2% of the bank’s total assets, (3) acquiring up to 10% of the voting stock of a company that solely provides or re-insures directors’, trustees’ and officers’ liability insurance coverage or bankers’ blanket bond group insurance coverage for insured

depository institutions, and (4) acquiring or retaining the voting shares of a depository institution if certain requirements are met.

In addition, the FDIC is authorized to permit a state bank to engage in state-authorized activities or investments not permissible for national banks (other than non-subsidiary equity investments) if it meets all applicable capital requirements and it is determined that such activities or investments do not pose a significant risk to the DIF.

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Since the enactment of the CERCLA, this “secured creditor exemption” has been the subject of judicial interpretations which have left open the possibility that lenders could be liable for cleanup costs on contaminated property that they hold as collateral for a loan.

To the extent that legal uncertainty exists in this area, all creditors, including the Bank, that have made loans secured by properties with potentially hazardous waste contamination (such as petroleum contamination) could be subject to liability for cleanup costs, which costs often substantially exceed the value of the collateral property.

contamination) could be subject to liability for cleanup costs, which costs often substantially exceed the value of the collateral property.

Federal Reserve System.

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The Federal Reserve requires all depository institutions to maintain reserves at specified levels against their transaction accounts, primarily checking accounts.

In response to the COVID-19 pandemic, the Federal Reserve reduced reserve requirement ratios to zero percent effective on March 26, 2020, to support lending to households and businesses.

At December 31, 2022, the Bank was in compliance with the reserve requirements in place at that time.

The Federal Reserve reduced reserve requirement ratios to zero percent effective on March 26, 2020.

Affiliate Transactions.

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The Bank received a “satisfactory” rating during its most recently completed CRA examination.

On October 24, 2023, the federal banking agencies, including the Federal Reserve issued a final rule designed to strengthen and modernize regulations implementing the CRA.

The changes are designed to encourage banks to expand access to credit, investment and banking services in low- and moderate-income communities, adapt to changes in the banking industry including mobile and internet banking, provide greater clarity and consistency in the application of the CRA regulations and tailor CRA evaluations and data collection to bank size and type.

The Bank cannot predict the impact the changes to the CRA will have on its operations at this time.

Dividends from the Bank constitute the major source of funds available for dividends which may be paid to the Company’s shareholders.

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Federal law further provides that no insured depository institution may make any capital distribution (which includes a cash dividend) if, after making the distribution, the institution would be “undercapitalized,” as defined in the prompt corrective action regulations.

In addition, under federal law, a Federal Reserve member bank, such as the Bank, may not declare or pay a

dividend if the total of all dividends declared during the calendar year, including a proposed dividend, exceeds the sum of the Bank’s net income during the calendar year and the retained net income of the prior two calendar years, unless the dividend has been approved by the Federal Reserve.

In addition, under federal law, a Federal Reserve member bank, such as the Bank, may not declare or pay a dividend if the total of all dividends declared during the calendar year, including a proposed dividend, exceeds the sum of the Bank’s net income during the calendar year and the retained net income of the prior two calendar years, unless the dividend has been approved by the Federal Reserve.

Moreover, the federal bank regulatory agencies also have the general authority to limit the dividends paid by insured banks if such payments should be deemed to constitute an unsafe and unsound practice and failure to meet the capital conservation buffer requirement will result in restrictions on dividends.

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Compliance with the new rule was required by May 1, 2022.

Further, state cybersecurity and data privacy laws and regulations may expose the Bank to risk and result in certain risk management costs.

Notably, the California Consumer Privacy Act of 2018 (the "CCPA"), which became effective on January 1, 2020, gives California residents the right to request disclosure of information collected about them, and whether that information has been sold or shared with others, the right to request deletion of personal information (subject to certain exceptions), the right to opt out of the sale of personal information, and the right not to be discriminated against for exercising these rights.

The CCPA also created a private right of action with statutory damages for data security breaches, thereby increasing potential liability associated with a data breach, which has triggered a number of class actions against other companies since January 1, 2020.

Although the Bank may enjoy several fairly broad exemptions from the CCPA's privacy requirements, those exemptions do not extend to the private right of action for a data security breach.

The CCPA, including any amendments thereto or regulations implemented thereunder, as well as other similar state data privacy laws and regulations, may require the establishment by the Bank of certain regulatory compliance and risk management controls.

In August 2020, the California Office of Administrative Law approved the California Attorney General’s regulations to implement the CCPA.

These regulations went to effect immediately.

In November 2020, voters in the State of California approved the California Privacy Rights Act (“CPRA”), a ballot measure that amends and supplements the CCPA by creating the California Privacy Protection Agency, a watchdog privacy agency to be appointed shortly after the CPRA’s enactment.

The CPRA also modifies the CCPA by expanding both the scope of businesses covered by the law and certain rights relating to personal information and its use, collection, and disclosure by covered businesses.

Compliance with the CCPA, the CPRA and other state statutes or regulations designed to protect consumer personal data could potentially require us to implement substantive technology infrastructure and process changes.

Further, cybersecurity and data privacy laws and regulations pose potential risks to and may lead to increased risk management costs for the Bank.

Specifically, the California Consumer Privacy Act of 2018 (the “CCPA”), effective since January 1, 2020, grants California residents certain rights including the ability to request information disclosure, deletion of personal information, opt-out from the sale of personal information, and protection against discriminatory practices for exercising these rights.

Significantly, the CCPA introduces a private right of action for data security breaches, exposing the Bank to potential statutory damages and the likelihood of class actions.

While the Bank enjoys certain exemptions under the CCPA, these exemptions do not provide immunity from the private right of action concerning data security breaches.

The CCPA, including any amendments thereto or regulations implemented thereunder, as well as other similar state data privacy laws and regulations, may require the implementation of [additional] regulatory compliance and risk management controls by the Bank.

Noteworthy is the approval of the CCPA regulations by the California Office of Administrative Law in August 2020, with immediate effect.

Furthermore, the California Privacy Rights Act (the “CPRA”), endorsed by California voters in November 2020, introduces substantial amendments to the CCPA.

These include the establishment of the California Privacy Protection Agency, an augmentation of the law's coverage, and an expansion of individual rights concerning personal information, its use, collection, and disclosure by covered businesses.

To comply with the CCPA, CPRA, and other state data privacy laws, the Bank may need to implement significant changes in technology infrastructure and processes.

These developments may impact our operations and require ongoing vigilance to ensure compliance with evolving privacy requirements.

Non-compliance with federal, or similar state privacy and cybersecurity laws and regulations could lead to substantial regulatory imposed fines and penalties, damages from private causes of action and/or reputational harm.

In July 2023, the SEC adopted rules requiring registrants to disclose material cybersecurity incidents they experience and to disclose on an annual basis material information regarding their cybersecurity risk management, strategy, and governance.

The new rules require registrants to disclose on in a Current Report on Form 8-K any cybersecurity incident they determine to be material and to describe the material aspects of the incident's nature, scope, and timing, as well as its material impact or reasonably likely material impact on the registrant.

For information regarding the Company’s cybersecurity risk management, strategy, and governance, see “Item 1C.

Cybersecurity” in Part I this Form 10-K.

Anti-Money Laundering and Client Identification.

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Failure to comply with these laws and regulations can subject the Bank to various penalties including, but not limited to, enforcement actions, injunctions, fines, civil liability, criminal penalties, punitive damages, and the loss of certain contractual rights.

Incentive Compensation .

The Dodd-Frank Act required federal bank regulators and the SEC to establish joint regulations or guidelines prohibiting incentive-based payment arrangements that encourage inappropriate risks by providing an executive officer, employee, director or principal stockholder with excessive compensation, fees, or benefits or that could lead to material financial loss to the entity.

These regulations apply to institutions having at least $1 billion in total assets.

In addition, regulators must establish regulations or guidelines requiring enhanced disclosure to regulators of incentive-based compensation arrangements.

The agencies have not finalized regulations proposed in April 2016.

If adopted, the proposed regulations could place limits on the manner in which we structure our executive compensation.

The Federal Reserve reviews, as part of the regular, risk-focused examination process, the incentive compensation arrangements of banking organizations.

The Federal Reserve tailors its reviews for each organization based on the scope and complexity of the organization’s activities and the prevalence of incentive compensation arrangements.

The findings of the supervisory initiatives are included in reports of examination.

Deficiencies, if any, are incorporated into the organization’s supervisory ratings, which can affect the organization’s ability to make acquisitions and take other actions.

Enforcement actions may be taken against a banking organization if its incentive compensation arrangements, or related risk management control or governance processes, pose a risk to the organization’s safety and soundness and the organization is not taking prompt and effective measures to correct the deficiencies.

The Company, as sole shareholder of the Bank, is a bank holding company registered with the Federal Reserve.

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The Federal Reserve may examine us or any of our subsidiaries, and charge us for the cost of the examination.

The Federal Reserve also has extensive enforcement authority over bank holding companies, including, among other things, the ability to assess civil money penalties, to issue cease and desist or removal orders and to require that a holding company divest subsidiaries (including its bank subsidiaries).

The Federal Reserve also has extensive enforcement authority

over bank holding companies, including, among other things, the ability to assess civil money penalties, to issue cease and desist or removal orders and to require that a holding company divest subsidiaries (including its bank subsidiaries).

In general, enforcement actions may be initiated for violations of law and regulations and unsafe or unsound practices.

The Company also is required to file certain reports with, and otherwise comply with the rules and regulations of the SEC.

The Company is also required to file certain reports with, and otherwise comply with the rules and regulations of the SEC.

The Bank Holding Company Act.

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In addition, among other changes, the Dodd-Frank Act requires public companies to (i) provide their shareholders with a non-binding vote (a) at least once every three years on the compensation paid to executive officers and (b) at least once every six years on whether they should have a “say on pay” vote every one, two or three years;

(ii) have a separate, non-binding shareholder vote regarding golden parachutes for named executive officers when a shareholder vote takes place on mergers, acquisitions, dispositions or other transactions that would trigger the parachute payments;

(ii) have a separate,

non-binding shareholder vote regarding golden parachutes for named executive officers when a shareholder vote takes place on mergers, acquisitions, dispositions or other transactions that would trigger the parachute payments;

(iii) provide disclosure in annual proxy materials concerning the relationship between the executive compensation paid and the financial performance of the issuer;

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The regulations to implement the provisions of Section 619 of the Dodd-Frank Act, commonly referred to as the Volcker Rule, contain prohibitions and restrictions on the ability of financial institutions holding companies and their affiliates to engage in proprietary trading and to hold certain interests in, or to have certain relationships with, various types of investment funds, including hedge funds and private equity funds.

The Company is continuously reviewing its

investment portfolio to determine if changes in its investment strategies are in compliance with the various provisions of the Volcker Rule regulations.

The Company is continuously reviewing its investment portfolio to determine if changes in its investment strategies are in compliance with the various provisions of the Volcker Rule regulations.

Interstate Banking and Branching.

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The Federal Reserve may disapprove such a purchase or redemption if it determines that the proposal would constitute an unsafe or unsound practice, or violate any law or regulation, Federal Reserve order, or any condition imposed by or written agreement with, the Federal Reserve.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities – Stock Repurchases” contained in this Form 10-K.

The Company maintains its commitment to supporting its community and clients during the COVID-19 pandemic and remains focused on keeping its employees safe and the Bank running effectively to serve its clients.

As of December 31, 2022, all Bank branches were open with normal hours.

The Bank will continue to monitor branch access and occupancy levels in relation to cases and close contact scenarios and follow governmental restrictions and public health authority guidelines.

Market for Registrant’s Common

Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities – Stock Repurchases” contained in this Form 10-K.

The financial services industry is highly competitive as we compete for loans, deposits and client relationships in our market.

We compete for loans, deposits, and financial services in all of our principal markets.

We compete directly with other bank and nonbank institutions, including credit unions, located within our markets, internet-based banks, and “FinTech” companies that rely on technology to provide financial services, out of market banks, and bank holding companies that advertise in or otherwise serve our markets, along with money market and mutual funds, brokerage houses, mortgage companies, and insurance companies or other commercial entities that offer financial services products.

We compete for loans, deposits, and financial services in all our principal markets.

We compete directly with other bank and nonbank institutions, including credit unions located within our markets, internet-based banks and “FinTech” companies that rely on technology to provide financial services, out of market banks and bank holding companies that advertise in or otherwise serve our markets, along with money market and mutual funds, brokerage houses, mortgage companies, insurance companies and other commercial entities that offer financial services products.

Competition involves efforts to retain current clients, make new loans and obtain new deposits, increase the scope and sophistication of services offered and offer competitive interest rates paid on deposits and charged on loans.

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Some of our competitors have been in business for a long time and have an established client base and name recognition.

We believe that our competitive pricing, personalized service, and community involvement enable us to effectively compete in the communities in which we operate.

Despite these challenges, we believe that our competitive pricing, emphasis on personalized service, and active community involvement enable us to effectively compete in the communities in which we operate.

Legal Proceedings

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Employees and Human Capital

As of December 31, 2022, we had approximately 374 full-time equivalent employees.

At that date, approximately 72% of our workforce identified as female and 28% as male, and women held 68% of the Company’s management roles.

The average tenure of employees was 5.0 years.

As of December 31, 2023, we had approximately 358 full-time equivalent employees, with approximately 71% identifying as female and 29% as male, and women holding 66% of the Company’s management roles:

reflecting our commitment to gender diversity in leadership.

The average tenure of employees was 5.5 years as of December 31, 2023,

signifying a stable and experienced team.

The ethnicity of our workforce was 36% White, 32% Asian, 24% Hispanic/Latino, 4% Black, 2% Two or More Races, and 2% Other.

The following chart depicts the percentage of self-identified females and minorities in our workforce at December 31, 2023, by job classification as defined by the Equal Employment Opportunity Commission (“EEOC”):

Distribution by EEOC

Job Classification

Distribution by EEOC Job Classification

Minority ⁽ ¹ ⁾

Job Classification

Executive / Senior level officers

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Administrative support

____________________

(1) Includes employees self-disclosed as Asian, Black, Native Hawaiian or Other Pacific Islander, or Two or More Races.

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We believe our ability to attract and retain employees is a key to the Bank’s success.

Accordingly, as part of our compensation philosophy we offer and maintain market competitive total rewards programs for our employees in order to attract and retain superior talent.

In addition to healthy base wages, additional programs include annual bonus opportunities, a Company matched 401(k) Plan, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, family care resources, flexible work schedules, and employee assistance programs.

We encourage and support the growth and development of our employees.

Continual learning and career development is advanced through ongoing performance and development conversations with employees, internally developed training programs, customized corporate training engagements and educational reimbursement programs.

The success of our business is fundamentally connected to the well-being of our people.

Accordingly, we are committed to the health, safety and wellness of our employees.

We provide our employees and their families with access to a variety of flexible and convenient health and welfare programs, including benefits that support their physical and mental health by providing tools and resources to help them improve or maintain their health status;

and that offer choice where possible so they can customize their benefits to meet their needs and the needs of their families.

A core tenet of our talent system is to both develop talent from within and supplement with external hires.

This approach has yielded loyalty and commitment in our employee base which in turn grows our business, our products, and our clients, while adding new employees and external ideas supports a continuous improvement mindset.

Information about Executive Officers

Reflecting our commitment, our compensation philosophy includes market-competitive total rewards programs.

Alongside competitive base wages, these programs encompass annual bonus opportunities, a Company-matched 401(k) Plan, comprehensive healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, family care resources, flexible work schedules, and employee assistance programs.

Our dedication to employee growth and development is evident through ongoing performance discussions, internally developed training initiatives, tailored corporate training engagements, and educational reimbursement programs.

Further, recognizing that the success of our business is intricately linked to the well-being of our people, we prioritize their health, safety, and wellness.

Our flexible health and welfare programs provide employees and their families with tools and resources to enhance or maintain their physical and mental well-being.

We emphasize choice, enabling customization of benefits to meet individual and family needs.

Central to our talent strategy is a dual approach—developing talent internally while supplementing with external hires.

This strategy fosters loyalty and commitment within our existing employee base, contributing to business growth, product innovation, and enhanced client relationships.

Simultaneously, incorporating external perspectives supports a continuous improvement mindset, ensuring our workforce remains dynamic and innovative.

Information About our Executive Officers

Officers are elected annually to serve for a one-year term.

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King was employed by Circle Bank in Novato, California from 1999 – 2004 where she served as the Chief Branch Administrative Officer and was a member of the executive management team.

She was responsible for all aspects of operations, including Branch Development, Human Resources, Information Technology

and Compliance.

She was responsible for all aspects of operations, including Branch Development, Human Resources, Information Technology and Compliance.

Prior to this, Ms.

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Curley, age 66, joined the Bank as Executive Vice President, and Director of Labor Service Division in April 2017, in connection with our acquisition of First ULB Corp and its wholly owned subsidiary, United Business Bank, FSB.

In 2022 she was also appointed as Chief Credit Officer of the Bank, at her prior bank, Ms.

Curley served as EVP/ Chief Credit Officer (2012 – 2017), SVP/Credit Administrator (2009 – 2012), Credit Card Administrator (2008 – 2009), SVP/Regional Sales Manager (2005 – 2009), VP/Branch Manager (2000 – 2005) and Business Development Officer (1995 – 2000).

In 2022 she assumed the additional role of Chief Credit Officer of the Bank.

Curley’s extensive banking career includes servings as EVP/ Chief Credit Officer (2012 – 2017), SVP/Credit Administrator (2009 – 2012), Credit Card Administrator (2008 – 2009), SVP/Regional Sales Manager (2005 – 2009), VP/Branch Manager (2000 – 2005) and Business Development Officer (1995 – 2000) at her previous bank.

Curley received a B.A.

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

What changed 10-K

Item 1. Business