What changed in this filing

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Item 1. Financial Statements

2024-11-12 compared with 2024-08-09 · 159 added, 134 removed, 719 unchanged (29% of the section changed)

9 unchanged sentences

(In thousands, except for share data)

September 30,

Cash due from banks

2 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 June 30, 2024 and December 31, 2023

Equity securities

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

Equity securities, at fair value

Federal Home Loan Bank ("FHLB") stock, at par

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

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

Loans held for sale

Loans, net of allowance for credit losses of $ 18,310 at September 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 June 30, 2024 and December 31, 2023

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

Common stock, no par value;

100,000,000 shares authorized;

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

11,130,372 and 11,551,271 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively

Additional paid in capital

8 unchanged sentences

Three months ended

Six months ended

Nine months ended

September 30,

Interest income:

14 unchanged sentences

Gain on sale of loans

(Loss) gain on equity securities

Gain (loss) on equity securities

Service charges and other fees

Loan servicing and other loan fees

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

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

Other income and fees

18 unchanged sentences

Three months ended

Six months ended

Nine months ended

September 30,

Other comprehensive income (loss):

10 unchanged sentences

Income/(Loss)

Three months ended June 30, 2024

Balance, April 1, 2024

Three months ended September 30, 2024

Balance, July 1, 2024

Other comprehensive income, net

Restricted stock granted

Cash dividends of $ 0.10 per share

1 unchanged sentence

Repurchase of shares

Balance, June 30, 2024

Three months ended June 30, 2023

Balance, April 1, 2023 (As Restated)

Balance, September 30, 2024

Three months ended September 30, 2023

Balance, July 1, 2023

Other comprehensive loss, net

Restricted stock granted

Cash dividends of $ 0.10 per share

1 unchanged sentence

Repurchase of shares

Balance, June 30, 2023

Balance, September 30, 2023

Comprehensive

1 unchanged sentence

Income/(Loss)

Six months ended June 30, 2024

Nine months ended September 30, 2024

Balance, January 1, 2024

5 unchanged sentences

Repurchase of shares

Balance, June 30, 2024

Six months ended June 30, 2023

Balance, September 30, 2024

Nine months ended September 30, 2023

Balance, January 1, 2023 (As Restated)

5 unchanged sentences

Repurchase of shares

Balance, June 30, 2023

( 1,206,481 )

Balance, September 30, 2023

See Notes to Condensed Consolidated Financial Statements.

2 unchanged sentences

(In thousands)

Six months ended

Nine months ended

September 30,

Cash flows from operating activities:

4 unchanged sentences

Gain on sale of loans

Proceeds from sale of loans

Proceeds from sale of loans originated for sale

Loans originated for sale

8 unchanged sentences

Stock based compensation expense

Increase (decrease) in deferred loan origination fees, net

Decrease in deferred loan origination fees, net

Net change in interest receivable and other assets

8 unchanged sentences

Purchase of FRB stock

Proceeds from sale of loans

Decrease in loans, net

Purchase of equipment and leasehold improvements, net

Net cash provided by investing activities

Net cash (used in) provided by investing activities

BAYCOM CORP AND SUBSIDIARY

1 unchanged sentence

(In thousands)

Six months ended

Nine months ended

September 30,

Cash flows from financing activities:

4 unchanged sentences

Dividends paid on common stock

Net cash provided by financing activities

Increase in cash and cash equivalents

Net cash (used in) provided by financing activities

(Decrease) increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

4 unchanged sentences

Income taxes paid, net

Recognition of ROU assets

Recognition of lease liability

Non-cash investing and financing activities:

1 unchanged sentence

Transfer of loans to held-for-sale

Recognition of ROU assets in exchange for lease obligations

Cash dividends declared on common stock not yet paid

23 unchanged sentences

In addition, various footnotes in the Amended Reports reflect the effects of these restatements.

For additional information on the effects of the restatement, see Note 2 Restatement of Consolidated Financial Statements in the Notes to Consolidated Financial Statements contained in the Amended Form 10-K and Note 3.

For additional information on the effects of the restatement, see Note 2.

Restatement of Consolidated Financial Statements in the Notes to Consolidated Financial Statements contained in the Amended Form 10-K and Note 3.

Restatement of the Consolidated Financial Statements in the Notes to Condensed Consolidated Financial Statements contained in each of the Amended Form 10-Qs.

28 unchanged sentences

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 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.

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

14 unchanged sentences

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

June 30, 2024

September 30, 2024

Government Agencies

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 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.

Amortized cost and fair values exclude accrued interest receivable of $ 1.6 million and $ 1.2 million at September 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 nine months ended September 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.

June 30, 2024

September 30, 2024

December 31, 2023

4 unchanged sentences

Due after ten years

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

At both September 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

June 30, 2024

September 30, 2024

Government Agencies

Municipal securities

11 unchanged sentences

Corporate bonds

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 September 30, 2024, the Company held 349 securities AFS, of which 212 were in an unrealized loss position for more than twelve months and 16 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 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.

Securities that were in an unrealized loss position as of September 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 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.

As of September 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 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 June 30, 2024.

Equity Securities

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.

The Company recognized a net gain on equity securities of $ 1.4 million and $ 1.7 million for the three and nine months ended September 30, 2024, and recognized a net loss on equity securities of $ 274,000 and $ 2.1 million for the three and nine months ended September 30, 2023, respectively.

Equity securities were $ 14.3 million and $ 12.6 million as of September 30, 2024 and December 31, 2023, respectively.

NOTE 4 – LOANS

The Company’s loan portfolio at the dates indicated is summarized below:

September 30,

Commercial and industrial (1)

1 unchanged sentence

Commercial real estate

Net deferred loan (fees) costs

Net deferred loan costs

Allowance for credit losses

(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.

(1) Includes $ 1.7 million and $ 3.8 million of U.S.

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

Net loans exclude accrued interest receivable of $ 6.1 million and $ 6.7 million at September 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

June 30, 2024

September 30, 2024

Recorded investment in loans individually evaluated:

13 unchanged sentences

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

During the three and nine months ended September 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

June 30, 2024

September 30, 2024

Commercial and industrial

6 unchanged sentences

Commercial real estate

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.

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

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

As of September 30, 2024 and December 31, 2023, individually evaluated modified loans to borrowers experiencing financial difficulty had a related allowance of $ 26,000 and $ 1.3 million, respectively.

As of September 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 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.

During the nine months ended September 30, 2024, and the year ended December 31, 2023, $ 867,000 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

June 30, 2024

September 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:

June 30, 2024

September 30, 2024

Commercial and industrial

5 unchanged sentences

Commercial real estate

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.

Nonaccrual loans totaled $ 9.7 million and $ 13.0 million at September 30, 2024 and December 31, 2023, respectively.

Nonaccrual loans guaranteed by a government agency, which reduces the Company’s credit exposure, were $ 2.0 million at September 30, 2024 compared to $ 740,000 at December 31, 2023.

At September 30, 2024, nonaccrual loans included $ 2.4 million of loans 30-89 days past due and $ 4.6 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 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.

At September 30, 2024, the $ 2.4 million of nonaccrual loans 30-89 days past due was comprised of two loans and the $ 4.6 million of loans less than 30 days past due was comprised of 18 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 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.

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

Interest foregone on nonaccrual loans was approximately $ 397,000 and $ 1.1 million for the three and nine months ended September 30, 2024, compared to $ 173,000 and $ 593,000 for the three and nine months ended September 30, 2023.

Interest income recognized on nonaccrual loans was approximately $ 7,400 and $ 93,600 for the three and nine months ended September 30, 2024, compared to $ 39,000 and $ 120,000 for the three and nine months ended September 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 $ 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.

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 $ 1.01 billion and $ 1.14 billion at September 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 $ 78.4 million at September 30, 2024.

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

For additional information, see Note 11, Other Borrowings.

For additional information, see “Note 11 - Borrowings” of the Notes to Condensed Consolidated Financial Statements.

NOTE 5 – ALLOWANCE FOR CREDIT LOSSES FOR LOANS

2 unchanged sentences

unfunded commitments

Three months ended June 30, 2024

Three months ended September 30, 2024

Allowance for credit losses

Beginning balance

(Reversal of) provision for credit losses

Provision for (reversal of) credit losses

Ending balance

Six months ended June 30, 2024

Nine months ended September 30, 2024

Allowance for credit losses:

2 unchanged sentences

Ending balance

June 30, 2024

September 30, 2024

Allowance for credit losses:

6 unchanged sentences

unfunded commitments

Three months ended June 30, 2023

Three months ended September 30, 2023

Allowance for credit losses

Beginning balance

(Reversal of) provision for credit losses

Provision for (reversal of) credit losses

Ending balance

Six months ended June 30, 2023

Nine months ended September 30, 2023

Allowance for loan losses

3 unchanged sentences

Ending balance

June 30, 2023

September 30, 2023

Allowance for credit losses by methodology:

4 unchanged sentences

Collectively evaluated

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 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.

June 30, 2024

For the three months ended September 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.

Net charge-offs totaled $ 1.5 million during the third quarter of 2024, which included a $ 1.0 million complete charge-off on a commercial non-accrual loan, which was fully reserved for at June 30, 2024, a $ 480,000 complete charge-off of a non-accrual commercial real estate loan, which was sold during the current quarter, and a complete write-down of one non-accrual farmland loan for $ 88,000 , partially offset by two recoveries totaling $ 50,000 during the current quarter.

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

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

Net charges-offs totaled $ 5.0 million for the nine months ended September 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 nine months ended September 30, 2024.

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

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.

September 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 June 30, 2024

As of September 30, 2024

As of December 31, 2023

20 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 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.

As of September 30, 2024 and December 31, 2023, the Company had $ 18.6 million and $ 19.4 million, respectively, of loans enrolled in this loan program.

The Company had a loss reserve account of $ 10.4 million and $ 13.7 million as of September 30, 2024 and December 31, 2023, respectively.

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

2 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 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.

The Company originated loans under this program of $ 3.9 million and $ 8.4 million during the three and nine months ended September 30, 2024, and $ 1.7 million and $ 4.2 million during the three and nine months ended September 30, 2023, respectively.

As of September 30, 2024, the Company had $ 17.8 million of loans enrolled in this program and a loss reserve account of $ 4.0 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.

1 unchanged sentence

Premises and equipment consisted of the following at the dates indicated:

September 30,

Premises owned

3 unchanged sentences

Total premises and equipment, net

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.

Depreciation and amortization included in occupancy and equipment expense totaled $ 528,000 and $ 1.5 million for the three and nine months ended September 30, 2024, and $ 390,000 and $ 1.3 million for the three and nine months ended September 30, 2023, respectively.

NOTE 7 – LEASES

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

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

These leases expire on various dates through 2030.

3 unchanged sentences

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 June 30, 2024:

The below maturity schedule represents the undiscounted lease payments for the five-year period and thereafter as of September 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:

June 30, 2024

September 30, 2024

December 31, 2023

1 unchanged sentence

Weighted-average discount rate

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.

Rental expense included in occupancy and equipment expense totaled $ 1.0 million and $ 3.0 million for both the three and nine months ended September 30, 2024 and the three and nine months ended September 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

Nine months ended

September 30,

Operating lease cost

10 unchanged sentences

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

Six months ended

June 30, 2024

Nine months ended

September 30, 2024

December 31, 2023

4 unchanged sentences

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

Six months ended

June 30, 2024

Nine months ended

September 30, 2024

December 31, 2023

2 unchanged sentences

Balance at end of period

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

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

For remainder of 2024

1 unchanged sentence

The Company’s interest receivable and other assets at the dates indicated consisted of the following:

September 30,

Tax assets, net

9 unchanged sentences

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

September 30,

Demand deposits

Time deposits

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.

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

At September 30, 2024, uninsured deposits totaled $ 995.1 million, or 46.6 % 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.

1 unchanged sentence

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 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.

At September 30, 2024 and December 31, 2023, we had the ability to borrow up to $ 512.7 million and $ 576.9 million, respectively, from the FHLB of San Francisco.

At both September 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 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 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 .

At September 30, 2024, we had the ability to borrow up to $ 42.3 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 correspondent banks.

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

There were no amounts outstanding under these facilities at both September 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 7.79 % at September 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.

4 unchanged sentences

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 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.

At September 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

The Company’s interest payable and other liabilities at the dates indicated consisted of the following:

September 30,

Accrued expenses

6 unchanged sentences

Three months ended

Six months ended

Nine months ended

September 30,

Professional fees

9 unchanged sentences

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

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.

Advertising expense included in marketing and promotions totaled $ 10,000 and $ 38,000 for the three and nine months ended September 30, 2024 and $ 15,000 and $ 36,000 for the three and nine months ended September 30, 2023, respectively.

NOTE 14 – EQUITY INCENTIVE PLANS

11 unchanged sentences

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.

As of September 30, 2024, a total of 490,711 shares were available for future issuance under the 2024 Plan.

2017 Omnibus Equity Incentive Plan

9 unchanged sentences

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 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.

As of September 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,

At and for the three and nine months ended September 30,

Weighted-average

3 unchanged sentences

Non-Vested, at June 30,

Non-Vested, at September 30,

NOTE 15 – FAIR VALUE MEASUREMENT

14 unchanged sentences

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

There were no transfers between levels during 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.

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

At both September 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

June 30, 2024

September 30, 2024

Government Agencies

Municipal securities

16 unchanged sentences

Fair Value Measurements

June 30, 2024

September 30, 2024

Individually evaluated loans

17 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 June 30, 2024 and December 31, 2023.

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

NOTE 16 – FAIR VALUE OF FINANCIAL INSTRUMENTS

1 unchanged sentence

Fair value measurements

June 30, 2024

September 30, 2024

Financial assets:

38 unchanged sentences

The following table presents a summary of commitments described above as of the dates indicated:

September 30,

Commitments to extend credit

3 unchanged sentences

The actual liquidity needs or the credit risk that the Company will experience will likely be lower than the contractual amount of commitments to extend credit because a significant portion of these commitments are expected to expire without being drawn upon.

The commitments are generally variable rate and include unfunded home equity lines of credit, commercial real estate construction loans where disbursement is made over the course of construction, commercial revolving lines of credit, and

unsecured personal lines of credit.

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

The reserve associated with these commitments included in interest payable and other liabilities on the consolidated balance sheets was $ 200,000 at June 30, 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 $ 590,000 at September 30, 2024 and $ 225,000 at December 31, 2023.

Commercial Real Estate Concentrations

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

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

At September 30, 2024, the remaining commitments to the LIHTC partnerships and the SBIC fund were approximately $ 5.0 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 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 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.

At September 30, 2024, approximately $ 245.6 million, or 11.4 %, 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 September 30, 2024 and December 31, 2023, approximately $ 995.1 million, or 46.6 % 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.

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.

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

NOTE 18 – SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the filing of this Quarterly Report on Form 10-Q and determined that there have been no events that have occurred that would require adjustments to our disclosures in the condensed consolidated financial statements.

The Company has evaluated subsequent events through the filing of this Quarterly Report on Form 10-Q and determined that no events have occurred that would require adjustments to our disclosures in the condensed consolidated financial statements.

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