What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-08-09 compared with 2024-05-10 · 182 added, 143 removed, 671 unchanged (33% of the section changed)

13 unchanged sentences

Time deposits in banks

Investment securities available-for-sale ("AFS"), at fair value, net of allowance for credit losses of $ 0 at both March 31, 2024 and December 31, 2023

Investment securities available-for-sale ("AFS"), at fair value, net of allowance for credit losses of $ 0 at both June 30, 2024 and December 31, 2023

Equity securities

1 unchanged sentence

Federal Reserve Bank ("FRB") stock, at par

Loans held for sale

Loans, net of allowance for credit losses of $ 18,890 at March 31, 2024 and $ 22,000 at December 31, 2023

Loans, net of allowance for credit losses of $ 19,000 at June 30, 2024 and $ 22,000 at December 31, 2023

Premises and equipment, net

15 unchanged sentences

10,000,000 shares authorized;

no shares issued and outstanding at both March 31, 2024 and December 31, 2023

no shares issued and outstanding at both June 30, 2024 and December 31, 2023

Common stock, no par value;

100,000,000 shares authorized;

11,377,117 and 11,551,271 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

11,172,323 and 11,551,271 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively

Additional paid in capital

8 unchanged sentences

Three months ended

(As Restated)

Six months ended

Interest income:

10 unchanged sentences

Net interest income

Provision for credit losses

Net interest income after provision for credit losses

Provision for (reversal of) credit losses

Net interest income after provision for (reversal of) credit losses

Noninterest income:

Gain on sale of loans

Gain (loss) on equity securities

(Loss) gain on equity securities

Service charges and other fees

Loan servicing and other loan fees

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

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

Other income and fees

18 unchanged sentences

Three months ended

(As Restated)

Other comprehensive loss:

Six months ended

Other comprehensive income (loss):

Change in unrealized gain (loss) on AFS securities

9 unchanged sentences

Income/(Loss)

Three months ended March 31, 2024

Balance, December 31, 2023

Three months ended June 30, 2024

Balance, April 1, 2024

Other comprehensive income, net

Cash dividends of $ 0.10 per share

Stock based compensation

Repurchase of shares

Balance, June 30, 2024

Three months ended June 30, 2023

Balance, April 1, 2023 (As Restated)

Other comprehensive loss, net

Cash dividends of $ 0.10 per share

Stock based compensation

Repurchase of shares

Balance, June 30, 2023

Comprehensive

Shareholders’

Income/(Loss)

Six months ended June 30, 2024

Balance, January 1, 2024

Other comprehensive income, net

Restricted stock granted

Forfeiture of restricted stock grants

Forfeiture of restricted stock granted

Cash dividends of $ 0.20 per share

1 unchanged sentence

Repurchase of shares

Balance, March 31, 2024

Three months ended March 31, 2023

Balance, December 31, 2022

(As Restated)

Balance, June 30, 2024

Six months ended June 30, 2023

Balance, January 1, 2023 (As Restated)

Other comprehensive loss, net

4 unchanged sentences

Repurchase of shares

Balance, March 31, 2023

(As Restated)

Balance, June 30, 2023

See Notes to Condensed Consolidated Financial Statements.

2 unchanged sentences

(In thousands)

Three months ended

(As Restated)

Six months ended

Cash flows from operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Provision for credit losses

Deferred tax expense

Provision for (reversal of) credit losses

Deferred tax expense (benefit)

Accretion on acquired loans

2 unchanged sentences

Loans originated for sale

Loss on sale of OREO

Accretion on junior subordinated debentures

15 unchanged sentences

Proceeds from maturities, repayments and calls of investment securities AFS

Purchase of FHLB stock

Purchase of FRB stock

Decrease (increase) in loans, net

Decrease in loans, net

Purchase of equipment and leasehold improvements, net

Net cash provided by (used in) investing activities

Net cash provided by investing activities

BAYCOM CORP AND SUBSIDIARY

1 unchanged sentence

(In thousands)

Three months ended

(As Restated)

Six months ended

Cash flows from financing activities:

14 unchanged sentences

Recognition of lease liability

Non-cash operating activities:

Increase in allowance for credit losses upon adoption of ASU 2016-03

Non-cash investing and financing activities:

10 unchanged sentences

The condensed consolidated financial statements include all adjustments of a normal and recurring nature, which are, in the opinion of management, necessary for a fair presentation of the financial position and results of operations for the periods presented.

Amounts presented in the consolidated financial statements and footnote tables are rounded and presented to the nearest thousands of dollars except per share amounts.

Dollar amounts presented in the consolidated financial statements and footnote tables are rounded and presented to the nearest thousands of dollars except per share amounts.

If the amounts are above $1.0 million, they are rounded one decimal point, and if they are above $1.0 billion, they are rounded two decimal points.

4 unchanged sentences

None of the reclassifications impacted consolidated net income, earnings per share or shareholders’ equity.

On April 5, 2012, the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”) was signed into law.

The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for a public company that qualified as an “emerging growth company,” or EGC.

The Company qualified as an EGC and remained an EGC until December 31, 2023, the last day of the Company’s fiscal year following the fifth anniversary of the completion of the Company’s initial public offering.

As an EGC, we were permitted to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements were made applicable to private companies.

We took advantage of the benefits of this extended transition period;

accordingly, our condensed consolidated financial statements for periods prior to our exit from EGC status may not be comparable to companies that comply with such new or revised accounting standards.

Restatement of Previously Issued Consolidated Financial Statements

31 unchanged sentences

The amendments in this update are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years.

The adoption of ASU 2022-03 did not have a significant impact on the Company's consolidated financial statements and related disclosures.

The adoption of ASU 2022-03 did not have a material impact on the Company's consolidated financial statements and related disclosures.

Recent Accounting Guidance Not Yet Effective

3 unchanged sentences

The new guidance would be applied prospectively and is effective for all newly-formed joint venture entities with a formation date on or after January 1, 2025, with early adoption permitted.

The Company is evaluating the accounting and disclosure requirements of this update and does not expect them to have a material effect on the consolidated financial statements.

Segment Reporting – Improvements to Reportable Segment Disclosures (Topic 280) – In November 2023, the FASB issued ASU 2023-07 to enhance disclosures about significant segment expenses for public entities reporting segment information under Topic 280.

The Company is evaluating the accounting and disclosure requirements of this update and does not expect them to have a material effect on the Company’s consolidated financial statements.

segment information under Topic 280.

It requires that a public entity disclose, on an annual and interim basis, significant expense categories for each reportable segment.

2 unchanged sentences

It requires that a public entity disclose the title and position of the CODM and how the CODM uses the reported measure of profit or loss to assess segment performance and to allocate resources.

Further it clarifies that entities with a single reportable segment must disclose both new and existing segment reporting requirements.

Further it clarifies that entities with a single reportable segment must comply with both new and existing segment reporting requirements.

The amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Entities must adopt the guidance on a retrospective basis.

The Company is evaluating the accounting and disclosure requirements of this update and does not expect them to have a material effect on the consolidated financial statements.

The Company is evaluating the accounting and disclosure requirements of this update and does not expect them to have a material effect on the Company’s consolidated financial statements.

Income Taxes – Improvements to Income Tax Disclosures (Topic 740) – In December 2023, the FASB issued ASU 2023-09 to provide additional transparency into an entity’s income tax disclosures primarily related to the rate reconciliation and income taxes paid information.

3 unchanged sentences

The amendments are effective for public business entities for annual periods beginning after December 15, 2024.

The Company is evaluating the accounting and disclosure requirements of this update and does not expect them to have a material effect on the consolidated financial statements.

The Company is evaluating the accounting and disclosure requirements of this update and does not expect them to have a material effect on the Company’s consolidated financial statements.

NOTE 3 – INVESTMENT SECURITIES

The amortized cost, gross unrealized gains and losses, and estimated fair values of securities AFS at the dates indicated are summarized as follows:

March 31, 2024

June 30, 2024

Municipal securities

9 unchanged sentences

Corporate bonds

Amortized cost and fair values exclude accrued interest receivable of $ 1.5 million and $ 1.2 million at March 31, 2024 and December 31, 2023, respectively, which is included in interest receivable and other assets in the condensed consolidated balance sheets.

During both the three months ended March 31, 2024 and 2023, the Company sold no securities AFS.

Amortized cost and fair values exclude accrued interest receivable of $ 1.5 million and $ 1.2 million at June 30, 2024 and December 31, 2023, respectively, which is included in interest receivable and other assets in the condensed consolidated balance sheets.

During both the three and six months ended June 30, 2024 and 2023, the Company sold no securities AFS.

The amortized cost and estimated fair value of securities AFS at the dates indicated by contractual maturity are shown below.

Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

March 31, 2024

June 30, 2024

December 31, 2023

4 unchanged sentences

Due after ten years

At March 31, 2024, there were $ 12.0 million securities pledged, compared to no securities pledged at December 31, 2023.

At both June 30, 2024 and December 31, 2023, there were no securities pledged.

The estimated fair value and gross unrealized losses for securities AFS aggregated by the length of time that individual securities have been in a continuous unrealized loss position at the dates indicated are as follows:

1 unchanged sentence

12 months or more

March 31, 2024

June 30, 2024

Municipal securities

11 unchanged sentences

Corporate bonds

At March 31, 2024, the Company held 321 securities AFS, of which 301 were in an unrealized loss position for more than twelve months and 17 were in an unrealized loss position for less than twelve months.

At June 30, 2024, the Company held 338 securities AFS, of which 315 were in an unrealized loss position for more than twelve months and 18 were in an unrealized loss position for less than twelve months.

At December 31, 2023, the Company held 334 investment securities, of which 297 were in an unrealized loss position for more than twelve months and 22 were in an unrealized loss position for less than twelve months.

1 unchanged sentence

Allowance for credit losses on investment debt securities available-for-sale

Securities that were in an unrealized loss position as of March 31, 2024 were evaluated to determine whether the decline in fair value below the amortized cost basis resulted from a credit loss or changes in required yields by investors in these types of securities, among other factors.

Securities that were in an unrealized loss position as of June 30, 2024 were evaluated to determine whether the decline in fair value below the amortized cost basis resulted from a credit loss or changes in required yields by investors in these types of securities, among other factors.

This assessment first 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.

In making this assessment, management considers the nature of the security and any related government guarantees, any changes to the rating of the security by a rating agency, creditworthiness of the issuers/guarantors, the underlying collateral, the financial conditions and prospects of the issuer, and any adverse conditions specifically related to the security, among other factors.

As of March 31, 2024, the Company expects to recover the amortized cost basis of its securities, has no present intent to sell any investment securities with unrealized losses and it is not more likely than not that we will not be required to sell securities with unrealized losses before recovery of their amortized cost and the decline in fair value is largely attributed to changes in interest rates and other market conditions.

As of June 30, 2024, the Company expects to recover the amortized cost basis of its securities, has no present intent to sell any investment securities with unrealized losses and it is not more likely than not that we will not be required to sell securities with unrealized losses before recovery of their amortized cost and the decline in fair value is largely attributed to changes in interest rates and other market conditions.

The issuers of these securities continue to make timely principal and interest payments.

No allowances for credit losses have been recognized on investment debt securities AFS in an unrealized loss position, as management does not believe any of the securities are impaired due to reasons of credit quality at March 31, 2024.

Equity Securities

The Company recognized a net gain on equity securities of $ 573,000 and a net loss on equity securities of $ 896,000 for the three months ended March 31, 2024 and 2023, respectively.

Equity securities were $ 13.2 million and $ 12.6 million as of March 31, 2024 and December 31, 2023, respectively.

The Company recognized a net loss on equity securities of $ 321,000 and a net gain on equity securities of $ 252,000 for the three and six months ended June 30, 2024, and recognized a net loss on equity securities of $ 917,000 and $ 1.8 million for the three and six months ended June 30, 2023, respectively.

Equity securities were $ 12.8 million and $ 12.6 million as of June 30, 2024 and December 31, 2023, respectively.

NOTE 4 – LOANS

5 unchanged sentences

Allowance for credit losses

(1) Includes $ 2.9 million and $ 3.8 million of U.S.

Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) loans as of March 31, 2024 and December 31, 2023, respectively.

Net loans exclude accrued interest receivable of $ 6.0 million and $ 6.7 million at March 31, 2024 and December 31, 2023, respectively, which is included in interest receivable and other assets in the condensed consolidated balance sheets.

The Company’s total individually evaluated loans, including nonaccrual loans, modified loans to borrowers experiencing financial difficulty, and accreting purchase credit deteriorated (“PCD”) loans that have experienced post-acquisition declines in cash flows expected to be collected are summarized as follows:

(1) Includ es $ 2.3 million and $ 3.8 million of U.S.

Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) loans as of June 30, 2024 and December 31, 2023, respectively.

Net loans exclude accrued interest receivable of $ 5.8 million and $ 6.7 million at June 30, 2024 and December 31, 2023, respectively, which is included in interest receivable and other assets in the condensed consolidated balance sheets.

The Company’s total individually evaluated loans, including collateral dependent loans, nonaccrual loans, modified loans to borrowers experiencing financial difficulty, and accreting purchase credit deteriorated (“PCD”) loans that have experienced post-acquisition declines in cash flows expected to be collected are summarized as follows:

and industrial

March 31, 2024

June 30, 2024

Recorded investment in loans individually evaluated:

10 unchanged sentences

From time to time, the Company may extend, restructure, or otherwise modify the terms of existing loans, on a case-by-case basis, to remain competitive and retain certain customers, as well as assist other customers who may be experiencing financial difficulties.

At time of restructuring, these loans are generally placed on nonaccrual.

These loans may be returned to accrual status after the borrower demonstrated performance with the modified terms for a sustained period of time (generally six months ) and the capacity to continue to perform in accordance with the modified terms of the restructured debt.

At the time of restructuring, these loans are generally placed on nonaccrual.

These loans may be returned to accrual status after the borrower demonstrates performance with the modified terms for a sustained period of time (generally six months ) and the capacity to continue to perform in accordance with the modified terms of the restructured debt.

The ACL on a modified loan to a borrower experiencing financial difficulty is measured using the same method as individually evaluated loans.

During the three months ended March 31, 2024 and 2023, there were no modifications of loans to borrowers experiencing financial difficulty.

A summary of modified loans to borrowers experiencing financial difficulty by type of concession and type of loan, as of the dates indicated, is set forth below (number of loans not in thousands):

During the three and six months ended June 30, 2024 and 2023, there were no modifications of loans to borrowers experiencing financial difficulty.

A summary of previously modified loans to borrowers experiencing financial difficulty by type of concession and type of loan, as of the dates indicated, is set forth below:

loans outstanding

March 31, 2024

June 30, 2024

Commercial and industrial

2 unchanged sentences

loans outstanding

March 31, 2023

December 31, 2023

Commercial and industrial

1 unchanged sentence

Commercial real estate

For the three months ended March 31, 2024 and 2023, the C ompany recorded $ 1.3 million of charge-offs and no charge-offs for modified loans to borrowers experiencing financial difficulty, respectively.

As of March 31, 2024 and December 31, 2023, individually evaluated modified loans to borrowers experiencing financial difficulty had a related allowance of $ 42,000 and $ 1.3 million, respectively.

As of March 31, 2024 and December 31, 2023, none of modified loans to borrowers experiencing financial difficulty were performing in accordance with their modified terms.

For the three and six months ended June 30, 2024, the C ompany recorded no charge-offs and $ 1.3 million of charge-offs for modified loans to borrowers experiencing financial difficulty, respectively.

During the three and six months ended June 30, 2023, the Company recorded no charge-offs for modified loans to borrowers experiencing financial difficulty.

As of June 30, 2024 and December 31, 2023, individually evaluated modified loans to borrowers experiencing financial difficulty had a related allowance of $ 27,000 and $ 1.3 million , respectively.

As of June 30, 2024 and December 31, 2023, none of the modified loans to borrowers experiencing financial difficulty were performing in accordance with their modified terms.

Accruing modified loans to borrowers experiencing financial difficulty are included in the loans individually evaluated as part of the calculation of the allowance for credit losses for loans.

35 unchanged sentences

Revolving loans that are converted to term loans are treated as new originations in the tables below and are presented by year of initial origination.

During the three months ended March 31, 2024, and the year ended December 31, 2023, $ 129,000 and $ 7.1 million of revolving loans were converted to term loans, respectively.

During the six months ended June 30, 2024, and the year ended December 31, 2023, $ 512,000 and $ 7.1 million of revolving loans were converted to term loans, respectively.

The following tables present the internally assigned risk grade by class of loans at the dates indicated:

1 unchanged sentence

amortized cost

March 31, 2024

June 30, 2024

Commercial and industrial:

46 unchanged sentences

The following tables provide an aging of the Company’s loans receivable as of the dates indicated:

March 31, 2024

June 30, 2024

Commercial and industrial

5 unchanged sentences

Commercial real estate

Nonaccrual loans totaled $ 16.5 million and $ 13.0 million at March 31, 2024 and December 31, 2023, respectively.

Nonaccrual loans guaranteed by a government agency, which reduces the Company’s credit exposure, were $ 2.2 million at March 31, 2024 compared to $ 740,000 at December 31, 2023.

At March 31, 2024, nonaccrual loans included $ 4.0 million of loans 30-89 days past due and $ 1.1 million of loans less than 30 days past due.

Nonaccrual loans totaled $ 16.1 million and $ 13.0 million at June 30, 2024 and December 31, 2023, respectively.

Nonaccrual loans guaranteed by a government agency, which reduces the Company’s credit exposure, were $ 2.1 million at June 30, 2024 compared to $ 740,000 at December 31, 2023.

At June 30, 2024, nonaccrual loans included $ 3.2 million of loans 30-89 days past due and $ 6.3 million of loans less than 30 days past due.

At December 31, 2023, nonaccrual loans included $ 927,000 of loans 30-89 days past due and $ 2.1 million of loans less than 30 days past due.

At March 31, 2024, the $ 4.0 million of nonaccrual loans 30-89 days past due was comprised of seven loans and the $ 1.1 million of loans less than 30 days past due was comprised of 14 loans.

At June 30, 2024, the $ 3.2 million of nonaccrual loans 30-89 days past due was comprised of three loans and the $ 6.3 million of loans less than 30 days past due was comprised of 19 loans.

All these loans were placed on nonaccrual due to concerns over the financial condition of the borrowers.

There were no loans that were 90 days or more past due and still accruing at March 31, 2024 and December 31, 2023.

Interest foregone on nonaccrual loans was approximately $ 483,000 for the three months ended March 31, 2024 compared to $ 235,000 for the three months ended March 31, 2023.

Interest income recognized on nonaccrual loans was approximately $ 7,200 and $ 65,000 for the three months ended March 31, 2024 and 2023, respectively.

There were no loans that were 90 days or more past due and still accruing at June 30, 2024 or December 31, 2023.

Interest foregone on nonaccrual loans was approximately $ 226,000 and $ 709,000 for the three and six months ended June 30, 2024, compared to $ 185,000 and $ 420,000 for the three and six months ended June 30, 2023.

Interest income recognized on nonaccrual loans was approximately $ 79,000 and $ 86,000 for the three and six months ended June 30, 2024, compared to $ 16,000 and $ 81,000 for the three and six months ended June 30, 2023, respectively.

Pledged Loans

Our FHLB line of credit is secured under terms of a blanket collateral agreement by a pledge of certain qualifying loans with unpaid principal balances of $ 1.0 billion and $ 1.14 billion at March 31, 2024 and December 31, 2023, respectively.

Our discount window advance line with the FRB of San Francisco is secured by a pledge of certain qualifying loans with unpaid principal balances of $ 92.1 million at March 31, 2024.

Our FHLB line of credit is secured under terms of a blanket collateral agreement by a pledge of certain qualifying loans with unpaid principal balances of $ 977.9 million and $ 1.14 billion at June 30, 2024 and December 31, 2023, respectively.

Our discount window advance line with the FRB of San Francisco is secured by a pledge of certain qualifying loans with unpaid principal balances of $ 84.2 million at June 30, 2024.

No loans were pledged to the FRB of San Francisco at December 31, 2023.

1 unchanged sentence

NOTE 5 – ALLOWANCE FOR CREDIT LOSSES FOR LOANS

The following tables summarize the Company’s allowance for credit losses for loans, reserve for unfunded commitments, and loan balances individually and collectively evaluated by type of loan as of or for the three months ended March 31, 2024 and 2023:

and industrial

unfunded commitments

Three months ended March 31, 2024

Three months ended June 30, 2024

Allowance for credit losses

Beginning balance

(Reversal of) provision for credit losses

Ending balance

Six months ended June 30, 2024

Allowance for credit losses:

Beginning balance

Provision for (reversal of) credit losses

Ending balance

March 31, 2024

June 30, 2024

Allowance for credit losses:

6 unchanged sentences

unfunded commitments

Three Months Ended March 31, 2023

Three months ended June 30, 2023

Allowance for credit losses

Beginning balance

(Reversal of) provision for credit losses

Ending balance

Six months ended June 30, 2023

Allowance for loan losses

1 unchanged sentence

Impact of CECL adoption

Provision for (reversal of) loan losses

Reversal of credit losses

Ending balance

March 31, 2023

Allowance for loan losses:

June 30, 2023

Allowance for credit losses by methodology:

Loans individually evaluated

Loans collectively evaluated

Loans receivable:

Loans receivable by methodology:

Individually evaluated

Collectively evaluated

For the three months ended March 31, 2024, the provision for credit losses and related change in the allowance for credit losses on loans was mainly driven by a replenishment of the allowance due to net charge-offs during the period, partially offset by decreases in outstanding loan balances, leading to lower quantitative reserves.

Net charges-offs

totaled $ 3.4 million during the first quarter of 2024, of which $ 3.2 million was specifically reserved for at December 31, 2023.

No changes were made to the qualitative risk factor conclusions during the first quarter of 2024.

For the three months ended June 30, 2024, the provision for credit losses and related change in the allowance for credit losses on loans was mainly driven by a replenishment of the allowance, partially offset by decreases in outstanding loan balances, leading to lower quantitative reserves.

Net charges-offs totaled $ 76,000 during the second quarter of 2024, which included a $ 160,000 charge-off for one loan, which was fully specifically reserved for at March 31, 2024.

The quantitative reserve was also impacted by improvement in forecasted economic conditions for national gross domestic product, offset by increasing forecasted national unemployment, both of which are key indicators utilized to estimate credit losses.

For the six months ended June 30, 2024, the provision for credit losses and related change in the allowance for credit losses on loans was mainly driven by decreased reserve for individually evaluated loans and a replenishment of the allowance during the period, partially offset by decreases in outstanding loan balances, leading to lower quantitative reserves.

Net charges-offs totaled $ 3.5 million for the six months ended June 30, 2024, of which $ 3.2 million was specifically reserved for at December 31, 2023.

No changes were made to the qualitative risk factor conclusions during the six months ended June 30, 2024.

The quantitative reserve was impacted by improvement in forecasted economic conditions, specifically, national unemployment levels and national gross domestic product, both of which are key indicators utilized to estimate credit losses.

The reserve for individually evaluated loans decreased during the three months ended March 31, 2024 primarily due to a charge-off of $ 3.2 million of reserve as the collateral shortfalls were deemed uncollectable.

The reserve for individually evaluated loans decreased during the six months ended June 30, 2024 primarily due to a charge-off of $ 3.2 million, as the collateral shortfalls were deemed uncollectable.

The following table summarizes the amortized cost basis of individually evaluated collateral-dependent loans, including nonaccrual loans, modified loans to borrowers experiencing financial difficulty, and accreting purchase credit deteriorated (“PCD”) loans that have experienced post-acquisition declines in cash flows expected to be collected, by loan and collateral type as of the dates indicated.

March 31, 2024

June 30, 2024

Commercial and industrial

6 unchanged sentences

The following table shows the amortized cost and allowance for credit losses for loans on nonaccrual status as of the dates indicated:

As of March 31, 2024

As of June 30, 2024

As of December 31, 2023

10 unchanged sentences

Commercial real estate

As part of the acquisition of Pacific Enterprise Bancorp (“PEB”) in 2022, the Company acquired certain small business loans to borrowers qualified under The California Capital Access Program for Small Business, a state guaranteed loan program sponsored by the California Pollution Control Financing Authority (“CalCAP”).

As part of its acquisition of Pacific Enterprise Bancorp (“PEB”) in 2022, the Company acquired certain small business loans to borrowers qualified under The California Capital Access Program for Small Business, a state guaranteed loan program sponsored by the California Pollution Control Financing Authority (“CalCAP”).

PEB ceased originating loans under this loan program in 2017.

Under this loan program, the borrower, CalCAP and the participating lender contributed funds to a loss reserve account that is held in a demand deposit account at the participating lender.

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

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

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

4 unchanged sentences

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

As of March 31, 2024 and December 31, 2023, the Company had $ 19.2 million and $ 19.4 million, respectively, of loans enrolled in this loan program.

The Company had a loss reserve account of $ 13.7 million as of both March 31, 2024 and December 31, 2023.

As of June 30, 2024 and December 31, 2023, the Company had $ 18.8 million and $ 19.4 million, respectively, of loans enrolled in this loan program.

The Company had a loss reserve account of $ 13.6 million and $ 13.7 million as of June 30, 2024 and December 31, 2023, respectively.

In addition, as successor to PEB, the Company was approved by CalCAP, in partnership with the California Air Resources Board, to originate loans to California truckers in the On-Road Heavy-Duty Vehicle Air Quality Loan Program.

3 unchanged sentences

When the loss reserve account balance exceeds the total associated loan balance, the excess is to be remitted to CalCAP.

The Company originated $ 1.1 million and $ 481,000 of loans under this program during the three months ended March 31, 2024 and 2023, respectively.

As of March 31, 2024, the Company had $ 15.6 million of loans enrolled in this program and a loss reserve account of $ 5.1 million.

The Company originated loans under this

program of $ 1.1 million and $ 4.5 million during the three and six months ended June 30, 2024, and $ 461,000 and $ 2.5 million during the three and six months ended June 30, 2023, respectively.

As of June 30, 2024, the Company had $ 16.2 million of loans enrolled in this program and a loss reserve account of $ 5.2 million.

As of December 31, 2023, the Company had $ 17.7 million of loans enrolled in this program and a loss reserve account of $ 6.2 million.

6 unchanged sentences

Total premises and equipment, net

Depreciation and amortization included in occupancy and equipment expense totaled $ 491,000 and $ 453,000 for the three months ended March 31, 2024 and 2023, respectively.

Depreciation and amortization included in occupancy and equipment expense totaled $ 518,000 and $ 1.0 million for the three and six months ended June 30, 2024 and $ 430,000 and $ 883,000 for the three and six months ended June 30, 2023, respectively.

NOTE 7 – LEASES

The Company leased 20 branches under noncancelable operating leases as of March 31, 2024.

The Company leased 20 branches under noncancelable operating leases as of June 30, 2024.

These leases expire on various dates through 2030.

1 unchanged sentence

If at lease inception, the Company considers the exercising of a renewal option to be reasonably certain, the Company will include the extended term in the calculation of the ROU asset and lease liability.

The Company uses the rate implicit in the lease whenever this rate is readily determinable.

The Company uses the discount rate implicit in the lease whenever this rate is readily determinable.

As this rate is rarely determinable, the Company utilizes its incremental borrowing rate at lease inception, on a collateralized basis, over a similar term.

The below maturity schedule represents the undiscounted lease payments for the five-year period and thereafter as of March 31, 2024:

The below maturity schedule represents the undiscounted lease payments for the five-year period and thereafter as of June 30, 2024:

For remainder of 2024

2 unchanged sentences

The following table presents the weighted average lease term and discount rate at the dates indicated:

March 31, 2024

June 30, 2024

December 31, 2023

1 unchanged sentence

Weighted-average discount rate

Rental expense included in occupancy and equipment expense totaled $ 1.0 million for both the three months ended March 31, 2024 and 2023.

Rental expense included in occupancy and equipment expense totaled $ 1.0 million and $ 2.0 million for both the three and six months ended June 30, 2024 and the three and six months ended June 30, 2023, respectively.

The following table presents certain information related to the operating lease costs included in occupancy and equipment expense on the consolidated statements of income for the periods indicated:

Three months ended

Six months ended

Operating lease cost

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Goodwill and other intangible assets are assessed for impairment annually or whenever events or changes in circumstances indicate the carrying amount may not be recoverable.

Intangible assets with definite useful lives are

amortized over their estimated useful lives to their estimated residual values.

Intangible assets with definite useful lives are amortized over their estimated useful lives to their estimated residual values.

Core deposit intangible represents the estimated future benefit of deposits related to an acquisition and is booked separately from the related deposits and amortized over an estimated useful life of seven to ten years .

1 unchanged sentence

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

Changes in the Company's goodwill during the three months ended March 31, 2024 and year ended December 31, 2023 were as follows:

March 31, 2024

Changes in the Company's goodwill during the periods indicated were as follows:

Six months ended

June 30, 2024

December 31, 2023

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Core Deposit Intangible

Changes in the Company’s core deposit intangible during the three months ended March 31, 2024 and year ended December 31, 2023 were as follows:

March 31, 2024

Changes in the Company’s core deposit intangible during the periods indicated were as follows:

Six months ended

June 30, 2024

December 31, 2023

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Balance at end of period

Estimated annual amortization expense at March 31, 2024 was as follows:

Estimated annual amortization expense at June 30, 2024 was as follows:

For remainder of 2024

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NOTE 10 – DEPOSITS

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

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

Demand deposits

Time deposits

Included in time deposits above are brokered deposits of $ 41.5 million and $ 43.6 million as of March 31, 2024 and December 31, 2023, respectively.

At March 31, 2023, uninsured deposits totaled $ 949.3 million, or 44.3 % of total deposits, compared to $ 969.2 million, or 45.5 % of total deposits at December 31, 2023.

Included in time deposits above are brokered deposits of $ 35.5 million and $ 43.6 million as of June 30, 2024 and December 31, 2023, respectively.

At June 30, 2024, uninsured deposits totaled $ 980.0 million, or 45.1 % of total deposits, compared to $ 969.2 million, or 45.5 % of total deposits at December 31, 2023.

The uninsured amounts are estimates based on the methodologies and assumptions used for United Business Bank’s regulatory reporting requirements.

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Other borrowings – The Bank has an approved secured borrowing facility with the Federal Home Loan Bank of San Francisco (the “FHLB”) for up to 25 % of total assets for a term not to exceed five years under a blanket lien of certain types of loans.

At both March 31, 2024 and December 31, 2023, the Company had no FHLB advances outstanding.

At June 30, 2024 and December 31, 2023, we had the ability to borrow up to $ 514.1 million and $ 576.9 million, respectively, from the FHLB of San Francisco.

At both June 30, 2024 and December 31, 2023, we had no FHLB advances outstanding.

During the first quarter of 2024, the Bank was approved for discount window advances with the FRB of San Francisco secured by certain types of loans.

At March 31, 2024 the Bank had no FRB of San Francisco advances outstanding.

At June 30, 2024, we had the ability to borrow up to $ 43.8 million from the FRB of San Francisco, with no FRB of San Francisco advances outstanding at that date.

The Bank has Federal Funds lines with four corresponding banks.

Cumulative available commitments totaled $ 65.0 million at both March 31, 2024 and December 31, 2023.

There were no amounts outstanding under these facilities at both March 31, 2024 and December 31, 2023.

Junior subordinated deferrable interest debentures – In connection with its previous acquisitions, the Company assumed junior subordinated deferrable interest debentures, totaling $ 8.6 million, net of fair value adjustments, with a weighted average interest rate of 8.17 % at March 31, 2024, compared to $ 8.6 million, net of fair value adjustments, with a weighted average rate of 8.23 % at December 31, 2023 .

The junior subordinated deferrable interest debentures mature in 2034, subject to earlier redemption by the Company.

Cumulative available commitments totaled $ 65.0 million at both June 30, 2024 and December 31, 2023.

There were no amounts outstanding under these facilities at both June 30, 2024 and December 31, 2023.

Junior subordinated deferrable interest debentures – In connection with its previous acquisitions, the Company assumed junior subordinated deferrable interest debentures, totaling $ 8.6 million, net of fair value adjustments, with a weighted average interest rate of 8.18 % at June 30, 2024, compared to $ 8.6 million, net of fair value adjustments, with a weighted average rate of 8.23 % at December 31, 2023 .

The junior subordinated deferrable interest debentures mature in 2034, subject to earlier redemption by the Company at its option.

Subordinated debt – On August 10, 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.

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The Company, at its option, may redeem the Notes, in whole or in part, on any interest payment date on or after September 15, 2025, without a premium.

At March 31, 2024 and December 31, 2023, the Company had outstanding Notes, net of cost to issue, totaling $ 63.6 million and $ 63.9 million, respectively.

At June 30, 2024 and December 31, 2023, the Company had outstanding Notes, net of cost to issue, totaling $ 63.7 million and $ 63.9 million, respectively.

NOTE 12 – INTEREST PAYABLE AND OTHER LIABILITIES

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Three months ended

Six months ended

Professional fees

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

Advertising expense included in marketing and promotions totaled $ 11,000 and $ 5,000 for the three months ended March 31, 2024 and 2023, respectively.

Advertising expense included in marketing and promotions totaled $ 17,000 and $ 28,000 for the three and six months ended June 30, 2024 and $ 15,000 and $ 21,000 for the three and six months ended June 30, 2023, respectively.

NOTE 14 – EQUITY INCENTIVE PLANS

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2024 Omnibus Equity Incentive Plan

The Company’s shareholders approved the Company’s 2024 Omnibus Equity Incentive Plan (“2024 Plan”) in June 2024.

The 2024 Plan provides for the grant of equity incentive awards to employees and directors (including emeritus and advisory directors) of the Company and its subsidiaries.

The 2024 Plan permits the granting of incentive stock options, within the meaning of Section 422 of the Internal Revenue Code, non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance shares and performance units.

Factors generally considered by the Board in awarding equity incentives to officers and employees include the performance of the Company, the employee’s or officer’s job performance, the importance of his or her position, and his or her contribution to the organization’s goals for the award period.

Generally, awards under the 2024 Plan are subject to a minimum vesting period of one year (at least three years for full vesting for the chief executive officer), provided that awards for up to 5 % of the maximum shares available under the 2024 Plan (for any participant other than the chief executive officer) may provide for a shorter vesting period.

Subject to adjustment as provided in the 2024 Plan, the maximum number of shares of common stock available for issuance under the 2024 Plan is 500,000 , and awards granted under the 2024 Plan to any one participant in any one calendar year are subject to the following limitations:

(i) aggregate grants of stock options or stock appreciation rights to any one participant are subject to an annual limit of the lesser of 100,000 shares or $ 2.0 million in fair market value as of the date of grant;

(ii) aggregate grants of restricted stock or restricted stock units to any one participant are subject to an annual limit of the lesser of 50,000 shares or $ 2.0 million in fair market value as of the date of grant;

and (iii) aggregate grants of performance shares or performance units to any one participant are subject to an annual limit of the lesser of 50,000 shares or $ 2.0 million in fair market value as of the date of grant.

In addition, subject to adjustment as provided in the 2024 Plan, the maximum aggregate number of shares that may be covered by awards granted under the 2024 Plan to any non-employee director in any one calendar year is 25,000 shares.

As of June 30, 2024, a total of 500,000 shares were available for future issuance under the 2024 Plan.

2017 Omnibus Equity Incentive Plan

The Company’s shareholders approved the Company’s 2017 Omnibus Equity Incentive Plan (“2017 Plan”) in November 2017.

The 2017 Plan provides for the awarding by the Company’s Board of Directors of equity incentive awards

to employees and non-employee directors.

The 2017 Plan provides for the awarding by the Company’s Board of Directors of equity incentive awards to employees and non-employee directors.

An equity incentive award under the 2017 Plan may be an option, stock appreciation right, restricted stock units, stock award, other stock-based award or performance award.

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Awarded shares of restricted stock vest over (i) a one-year period following the date of grant, in the case of the non-employee directors, and (ii) a three-year or five-year period following the date of grant, with the initial vesting occurring on the one-year anniversary of the date of grant, in the case of the executive officers.

As of March 31, 2024, a total of 19,765 shares were available for future issuance under the 2017 Plan.

As of June 30, 2024, no shares were available for future issuance under the 2017 Plan because the 2024 Plan provides that no further awards may be made under the 2017 Plan upon the approval by the Company’s shareholders of the 2024 Plan.

The following table provides the restricted stock grant activity for the periods indicated:

At and for the three and six months ended June 30,

Weighted-average

2 unchanged sentences

Non-vested, at March 31,

Non-Vested, at June 30,

NOTE 15 – FAIR VALUE MEASUREMENT

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In certain cases, the inputs used to measure fair value may fall into different levels of the hierarchy.

In such cases, the lowest level of inputs that is significant to the measurement is used to determine the hierarchy for the entire asset or

In such cases, the lowest level of inputs that is significant to the measurement is used to determine the hierarchy for the entire asset or liability.

Transfers between levels of the fair value hierarchy are recognized on the actual date of the event or circumstances that caused the transfer, which generally coincides with our quarterly valuation process.

There were no transfers between levels during the three months ended March 31, 2024 and 2023.

There were no transfers between levels during the three and six months ended June 30, 2024 and 2023.

At both June 30, 2024 and December 31, 2024, there were no liabilities measured at fair value on a recurring or non-recurring basis.

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

1 unchanged sentence

Fair Value Measurements

March 31, 2024

June 30, 2024

Municipal securities

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Fair Value Measurements

March 31, 2024

June 30, 2024

Individually evaluated loans

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Those individually evaluated loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans.

fair value of the collateral is based on an observable market price or a current appraised value which uses substantially observable data, the Company records the individually evaluated loan as nonrecurring Level 2.

When the fair value of the collateral is based on an observable market price or a current appraised value which uses substantially observable data, the Company records the individually evaluated loan as nonrecurring Level 2.

When an appraised value is not available or management determines the fair value of the collateral is less than the appraised value or the appraised value contains a significant assumption and there is no observable market price, the Company records the individually evaluated loan as nonrecurring Level 3.

5 unchanged sentences

Such adjustments and assumptions are typically significant and result in a Level 3 classification of the inputs for determining fair value.

The Company had no OREO at both March 31, 2024 and December 31, 2023.

The Company had no OREO at both June 30, 2024 and December 31, 2023.

NOTE 16 – FAIR VALUE OF FINANCIAL INSTRUMENTS

1 unchanged sentence

Fair value measurements

March 31, 2024

June 30, 2024

Financial assets:

46 unchanged sentences

The Company’s outstanding loan commitments are made using the same underwriting standards as comparable outstanding loans.

The reserve associated with these commitments included in interest payable and other liabilities on the consolidated balance sheets was $ 215,000 at March 31, 2024 and $ 225,000 at December 31, 2023.

The reserve associated with these commitments included in interest payable and other liabilities on the consolidated balance sheets was $ 200,000 at June 30, 2024 and $ 225,000 at December 31, 2023.

Commercial Real Estate Concentrations

At March 31, 2024 and December 31, 2023, in management’s judgment, a concentration of loans existed in commercial real estate related loans.

At June 30, 2024 and December 31, 2023, in management’s judgment, a concentration of loans existed in commercial real estate related loans.

The Company’s commercial real estate loans are secured by owner-occupied and non-owner occupied commercial real estate and multifamily properties.

1 unchanged sentence

The Company has commitments to fund investments in LIHTC partnerships and an SBIC fund.

At March 31, 2024, the remaining commitments to the LIHTC partnerships and the SBIC fund were approximately $ 5.4 million and $ 122,000 , respectively.

At June 30, 2024, the remaining commitments to the LIHTC partnerships and the SBIC fund were approximately $ 5.4 million and $ 122,000 , respectively.

At December 31, 2023, the remaining commitments to the LIHTC partnerships and the SBIC fund were approximately $ 5.7 million and $ 122,000 , respectively.

At March 31, 2024, approximately $ 236.1 million, or 11.0 %, of the Company's deposits were derived from its top ten depositors.

At June 30, 2024, approximately $ 245.5 million, or 11.3 %, of the Company's deposits were derived from its top ten depositors.

At December 31, 2023, approximately $ 246.0 million, or 11.5 %, of the Company's deposits were derived from its top ten depositors.

As of March 31, 2024 and December 31, 2023, approximately $ 949.3 million, or 44.3 % and $ 969.2 million, or 45.4 %, of our total deposits were uninsured, respectively.

As of June 30, 2024 and December 31, 2023, approximately $ 980.0 million, or 45.1 % and $ 969.2 million, or 45.4 %, of our total deposits were uninsured, respectively.

The uninsured amounts are estimates based on the methodologies and assumptions used for United Business Bank’s regulatory reporting requirements.

2 unchanged sentences

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

As of both March 31, 2024 and December 31, 2023, the FHLB issued letters of credit on behalf of the Company totaling $ 40.6 million, as collateral for local agency deposits.

At both June 30, 2024 and December 31, 2023, the FHLB issued letters of credit on behalf of the Company totaling $ 40.6 million, as collateral for local agency deposits.

NOTE 18 – SUBSEQUENT EVENTS

1 unchanged sentence

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-Q

Item 1. Financial Statements