What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-11 compared with 2025-05-09 · 287 added, 181 removed, 424 unchanged (52% of the section changed)

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Forward-looking statements are not statements of historical fact, are based on certain assumptions and are generally identified by use of the words “believes,” “expects,” “anticipates,” “estimates,” “forecasts,” “intends,” “plans,” “targets,” “potentially,” “probably,” “projects,” “outlook” or similar expressions or future or conditional verbs such as “may,” “will,” “should,” “would” and “could.” Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, assumptions and statements about, among other things, expectations of the business environment in which we operate, projections of future performance or financial items, perceived opportunities in the market, potential future credit experience, and statements regarding our mission and vision.

These forward-looking statements are based upon current management expectations and may, therefore, involve risks and uncertainties.

These forward-looking statements are based upon current management expectations and may, therefore, involve risks and

uncertainties.

Our actual results, performance, or achievements may differ materially from those suggested, expressed, or implied by forward- looking statements as a result of a wide variety or range of factors including, but not limited to:

● adverse impacts to economic conditions in general and in California, Nevada, Colorado, New Mexico and Washington specifically, as well as other markets where the Company has lending relationships;

● effects of employment levels, labor shortages, inflation, a recession, or slowed economic growth;

● changes in the interest rate environment, including increases and decreases in the Board of Governors of the Federal Reserve System (“Federal Reserve”) benchmark rate and the duration of such rates, which could adversely affect our revenues and expenses, the values of our assets and obligations, and the availability and cost of capital and liquidity;

● the impact of inflation and the Federal Reserve’s monetary policy decisions;

● the effects of any federal government shutdown;

● effects of employment levels, labor shortages, persistent inflation, ongoing or renewed recessionary pressures, political instability or uncertainty, and rising debt levels;

● changes in interest rate levels and the duration of such changes, including actions by the Board of Governors of the Federal Reserve System (“Federal Reserve”), which could adversely affect our revenues and expenses, the values of our assets and obligations, and the availability and cost of capital and liquidity;

● the impact of inflation and monetary and fiscal policy responses thereto, and their impact on consumer and business behavior;

● fiscal policy disputes or disruptions, including the effects of any federal government shutdown, or delays in federal budget approvals;

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

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

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

● legislation or regulatory changes, including but not limited to shifts in capital requirements, banking regulations, tax laws, or consumer protection laws;

● our ability to attract and retain deposits;

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● the effectiveness of our risk management framework;

● disruptions, security breaches, or other adverse events, failures or interruptions in, or attacks on, our information technology systems or on those of our third-party vendors;

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

● vulnerabilities in information systems or third-party service providers, including disruptions, breaches, or attacks;

● our ability to adapt to rapid technological changes, including advancements in artificial intelligence, digital banking, and cybersecurity;

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

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● environmental, social and governance goals;

● the potential for new or increased tariffs, trade restrictions or geopolitical tensions that could affect economic activity or specific industry sectors;

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

● geopolitical developments and international conflicts, including but not limited to tensions or instability in Eastern Europe, the Middle East, and Asia, or the imposition of new or increased tariffs and trade restrictions, which may disrupt financial markets, global supply chains, energy prices, or economic activity in specific industry sectors;

● effects of climate change, severe weather events, natural disasters, pandemics, epidemics and other public health crises, acts of war or terrorism, domestic political unrest and other external events;

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

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In light of these risks, uncertainties and assumptions, the forward-looking statements discussed in this report might not occur, and you should not put undue reliance on any forward-looking statements.

Moreover, you should treat

these statements as speaking only as of the date they are made and based only on information then actually known to us.

Moreover, you should treat these statements as speaking only as of the date they are made and based only on information then actually known to us.

We do not undertake and specifically disclaim any obligation to revise any forward-looking statements included in this report or the reasons why actual results could differ from those contained in such statements, whether as a result of new information or to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.

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BayCom is a bank holding company headquartered in Walnut Creek, California.

BayCom’s wholly owned banking subsidiary, United Business Bank, provides a broad range of financial services to businesses and business owners as well as individuals through its network of 35 full-service branches, with 16 locations in California, one in Nevada, two in Washington, five in New Mexico and 11 in Colorado.

BayCom’s wholly owned banking subsidiary, United Business Bank, provides a broad range of financial services to businesses and business owners as well as individuals through its network of 34 full-service branches at June 30, 2025, with 16 locations in California, one in Nevada, one in Washington, five in New Mexico and 11 in Colorado.

BayCom’s business activities generally are limited to passive investment activities and oversight of its investment in the Bank.

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These markets offer significant opportunities to expand our commercial client base, increase interest-earning assets, and enhance market share.

We believe our geographic footprint, which now includes the San Francisco Bay area, the metropolitan markets of Los Angeles, California;

our geographic footprint, which now includes the San Francisco Bay area, the metropolitan markets of Los Angeles, California;

Seattle, Washington;

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We strive to provide an enhanced banking experience for our clients by providing them with a comprehensive suite of sophisticated banking products and services tailored to meet their needs, while delivering the high-quality, relationship-based client service of a community bank.

At March 31, 2025, on a consolidated basis, the Company had approximately $2.6 billion in total assets, $1.9 billion in total loans, $2.1 billion in total deposits and $329.3 million in shareholders’ equity.

At June 30, 2025, on a consolidated basis, the Company had approximately $2.6 billion in total assets, $2.0 billion in total loans, $2.2 billion in total deposits and $330.6 million in shareholders’ equity.

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

At March 31, 2025, our $1.9 billion total loan portfolio included $279.4 million, or 14.2 %, of loans acquired through business combinations (all of which were recorded to their estimated fair values at the time of acquisition), and the remaining $1.7 billion, or 85.8%, consisted of loans we originated or purchased not as part of a business combination.

At June 30, 2025, our $2.0 billion total loan portfolio included $261.5 million, or 13.1 %, of loans acquired through business combinations (all of which were recorded to their estimated fair values at the time of acquisition), and the remaining $1.7 billion, or 86.9%, consisted of loans we originated or purchased not as part of a business combination.

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

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Because noninterest bearing sources of funds, such as noninterest bearing deposits and shareholders’ equity, also fund interest earning assets, net interest margin reflects the benefit of these noninterest bearing sources.

Changes in market interest rates, the slope of the yield curve, and interest we earn on interest earning assets or pay on interest bearing liabilities, as well as the volume and types of interest earning assets, interest bearing and noninterest bearing liabilities and shareholders’ equity, usually have the largest impact on changes in our net interest spread, net interest margin and net interest income during a reporting period.

In 2024, the Federal Open Market Committee (“FOMC”) of the Federal Reserve lowered the target range for the federal funds rate three times, resulting in a target range of 4.25% to 4.50% at March 31, 2025.

Changes in market interest rates, the slope of the yield curve, and interest we earn on interest earning assets or pay on interest bearing liabilities, as well as the volume and composition of interest earning assets, interest bearing and noninterest bearing liabilities, and shareholders’ equity, usually have the most significant impact on our net interest spread, net interest margin and net interest income during a reporting period.

During the second half of 2024, the Federal Open Market Committee (“FOMC”) of the Federal Reserve lowered the target range for the federal funds rate three times, resulting in a target range of 4.25% to 4.50%, which is where it remained at June 30, 2025.

Noninterest income.

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Such situations may result from either a decline in the financial condition of the issuing entity or, in the case of fixed interest rate investments, from rising interest rates.

In making this assessment, management considers the length of time and the extent to which fair value is less than amortized cost, the nature of the security, the underlying collateral, and the financial condition and prospects of the issuer, among other factors.

In making this assessment, management considers the

length of time and the extent to which fair value is less than amortized cost, the nature of the security, the underlying collateral, and the financial condition and prospects of the issuer, among other factors.

This assessment also includes a determination of whether the Company intends to sell the security, or if it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis less any current-period credit losses.

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Our accounting and reporting policies conform to accounting principles generally accepted in the United States of America (“GAAP”) and to general practices within the banking industry.

To prepare financial statements and interim

financial statements in conformity with GAAP, management makes estimates, assumptions and judgments based on available information.

To prepare financial statements and interim financial statements in conformity with GAAP, management makes estimates, assumptions and judgments based on available information.

These estimates, assumptions and judgments affect the amounts reported in the financial statements and accompanying notes and are based on information available as of the dates of the financial statements.

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For a detailed discussion, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” in the Company’s 2024 Annual Report, which was filed with the SEC on March 14, 2025.

Comparison of Financial Condition at March 31, 2025 and December 31, 2024

Comparison of Financial Condition at June 30, 2025 and December 31, 2024

Total assets.

Total assets decreased $100.7 million, or 3.8%, to $2.6 billion at March 31, 2025, from December 31, 2024.

Total assets decreased $42.1 million, or 1.6%, to $2.6 billion at June 30, 2025, from December 31, 2024.

The decrease primarily was due to a $72.4 million, or 19.9%, decline in cash and cash equivalents and a $2.2 million, or 100%, decline in loans held for sale, partially offset by a $47.4 million, or 2.4%, increase in loans receivable, net.

Cash and cash equivalents.

Cash and cash equivalents decreased $107.5 million, or 29.5%, to $256.5 million, at March 31, 2025, from $364.0 million at December 31, 2024.

The decrease primarily was due to a $105.4 million decrease in federal funds sold and interest bearing balances in banks, as excess funds were used to fund loan growth.

Cash and cash equivalents decreased $72.4 million, or 19.9%, to $291.6 million at June 30, 2025, from $364.0 million at December 31, 2024.

The decrease primarily was due to a $71.0 million decrease in federal funds sold and interest bearing balances in banks, as excess funds were used to fund loan growth and deposit withdrawals.

Investment securities available-for-sale.

Investment securities available-for-sale decreased $928,000, or 0.5%, to $192.4 million at March 31, 2025 from $193.3 million at December 31, 2024.

The decrease was primarily attributable to routine maturities, principal repayments, and calls of investment securities.

These reductions were partially offset by an upward fair value adjustment related to unrealized gains on investment securities available-for-sale.

There were no purchases of investment securities during the three months ended March 31, 2025.

The following table sets forth certain information regarding contractual maturities and the weighted average yields of our available for sale investment securities as of March 31, 2025.

Investment securities available-for-sale decreased $8.6 million, or 4.5%, to $184.7 million at June 30, 2025 from $193.3 million at December 31, 2024.

The decrease was primarily attributable to routine maturities, principal repayments, and calls of investment securities, partially offset by purchases of investment securities and an upward fair value adjustment related to unrealized gains on investment securities available-for-sale.

The following table sets forth certain information regarding contractual maturities and the weighted average yields of our available for sale investment securities as of June 30, 2025.

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

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Equity securities.

Equity securities decreased $255,000, or 1.9%, to $12.9 million at March 31, 2025 from $13.1 million at December 31, 2024, primarily due to mark-to-market downward adjustments recorded during the three months ended March 31, 2025.

Equity securities decreased $255,000, or 1.9%, to $12.9 million at June 30, 2025 from $13.1 million at December 31, 2024, primarily due to mark-to-market downward adjustments recorded during the six months ended June 30, 2025.

Loans receivable , net.

We originate a wide variety of loans with a focus on commercial real estate (“CRE”) loans and commercial and industrial loans.

Total loans increased $13.2 million, or 0.7%, to $1.9 billion at March 31, 2025 from $1.9 billion at December 31, 2024.

Total loans increased $47.4 million, or 2.4%, to $2.0 billion at June 30, 2025 from $1.9 billion at December 31, 2024.

The increase was due to $227.2 million of new loan originations and $20.6 million of loan purchases, partially offset by $199.8 million of loan repayments and $3.4 million of loans sold.

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Allowance for credit losses

The following table shows as of March 31, 2025, the geographic distribution of our loan portfolio by type of loan in dollar amounts and percentages:

The following table shows as of June 30, 2025, the geographic distribution of our loan portfolio, by type of loan, in dollar amounts and percentages:

San Francisco Bay

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(Dollars in thousands)

March 31, 2025

June 30, 2025

Commercial and industrial

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

(2) Includes loans in Sacramento and Northern California counties totaling $89.8 million and loans in Los Angeles and Orange counties totaling $541.5 million at March 31, 2025.

(2) Includes loans in Sacramento and Northern California counties totaling $98.9 million and loans in Los Angeles and Orange counties totaling $541.2 million at June 30, 2025.

At December 31, 2024, loans in Sacramento and Northern California counties and loans in Los Angeles and Orange counties totaled $86.4 million and $537.1 million, respectively.

(3) Includes loans primarily in the states of Colorado, New Mexico and Washington.

At March 31, 2025, loans in Colorado, New Mexico and Washington totaled $135.6 million, $63.8 million and $83.4 million, respectively.

At June 30, 2025, loans in Colorado, New Mexico and Washington totaled $133.0 million, $74.4 million and $84.1 million, respectively.

At December 31, 2024, loans in Colorado, New Mexico and Washington totaled $134.9 million, $84.6 million and $83.4 million, respectively.

Acquired loans.

As of March 31, 2025, our total loan portfolio included $279.4 million, or 14.2%, of loans acquired through business combinations (all of which were recorded at their estimated fair values as of time of acquisition), of which $128.3 million had no remaining net premium or discount.

As of March 31, 2025, acquired non-PCD loans totaled $129.7 million, with a remaining net premium of $1.6 million, compared to $140.6 million with a remaining net premium of $1.8 million as of December 31, 2024.

As of June 30, 2025, our total loan portfolio included $261.5 million, or 13.1%, of loans acquired through business combinations (all of which were recorded at their estimated fair values as of the time of acquisition), of which $128.3 million had no remaining net premium or discount.

As of June 30, 2025, acquired non-PCD loans totaled $123.5 million, with a remaining net premium of $1.6 million, compared to $140.6 million with a remaining net premium of $1.8 million as of December 31, 2024.

The net premium for acquired non-PCD loans includes a credit discount based on estimated losses in the acquired loans, partially offset by any premium based on market interest rates on the date of acquisition.

As of March 31, 2025, acquired PCD loans totaled $21.4 million, with a remaining net non-credit discount of $1.4 million, compared to $24.0 million with a remaining net non-credit discount of $1.5 million as of December 31, 2024.

As of June 30, 2025, acquired PCD loans totaled $18.0 million, with a remaining net non-credit discount of $1.3 million, compared to $24.0 million with a remaining net non-credit discount of $1.5 million as of December 31, 2024.

Nonperforming assets and loans.

Nonperforming assets generally consist of nonperforming loans and other real estate owned (“OREO”).

Nonperforming loans generally consist of nonaccrual loans and accruing loans 90 days or more past due.

Nonperforming assets increased $517,000 to $10.0 million, or 0.51% of total loans, at March 31, 2025 compared to $9.5 million, or 0.48% of total loans, at December 31, 2024.

There was no OREO at March 31, 2025 and December 31, 2024.

Nonperforming loans totaled $10.0 million, or 0.51% of total loans, at March 31, 2025, compared to $9.5 million, or 0.48% of total loans, at December 31, 2024.

The increase in nonperforming loans was primarily due to two new loans totaling $713,000 being placed on nonaccrual during the current quarter, due to financial condition of the borrowers, partially offset by paydowns on nonaccrual loans.

At March 31, 2025, nonperforming loans totaling $618,000 were guaranteed by governmental agencies, compared to $2.0 million at December 31, 2024.

At March 31, 2025 and December 31, 2024, there were no performing (accruing) modified loans to borrowers experiencing financial difficulty.

At March 31, 2025 and December 31, 2024, nonaccrual loans included $610,000 and $643,000 of loans 30-89 days past due, respectively, and $4.4 million of loans less than 30 days past due at both March 31, 2025 and December 31, 2024.

At March 31, 2025, the $4.4 million of nonaccrual loans less than 30 days past due was comprised of 19 loans, all of which were placed on nonaccrual due to concerns over the financial condition of the borrowers.

Nonperforming loans include nonaccrual loans and accruing loans 90 days or more past due.

Nonperforming assets increased $6.9 million to $16.4 million, or 0.82% of total loans, at June 30, 2025, compared to $9.5 million, or 0.48% of total loans, at December 31, 2024.

The Company also held no OREO at either date.

Nonperforming loans totaled $16.4 million, or 0.82% of total loans, at June 30, 2025, compared to $9.5 million, or 0.48% of total loans, at December 31, 2024.

The increase in nonperforming loans was primarily due to seven new commercial real estate loans (secured by various types of real estate) totaling $5.2 million being placed on nonaccrual status during the six months ended June 30, 2025, and a $2.8 million increase in loans 90 days or more past due and still accruing, which were in the process of collection.

These increases were partially offset by payoffs of four nonaccrual loans totaling $1.9 million and one fully charged off nonaccrual loan of $105,000.

The rise in nonperforming loans reflects elevated credit risk primarily within the commercial and industrial and commercial real estate portfolios.

At June 30, 2025, nonaccrual loans included $599,000 of loans 30–89 days past due and $5.3 million of loans less than 30 days past due.

The $5.3 million of nonaccrual loans less than 30 days past due consisted of 16 loans, all of which were placed on nonaccrual due to borrower-specific financial concerns rather than delinquency.

At December 31, 2024, nonaccrual loans included $643,000 of loans 30–89 days past due and no loans less than 30 days past due.

Of the nonperforming loans at June 30, 2025, approximately $610,000 were guaranteed by governmental agencies, compared to $2.0 million at December 31, 2024.

The decrease in government-guaranteed nonaccrual loans reflects the runoff of previously guaranteed balances without comparable additions during the current six-month period.

In general, loans are placed on nonaccrual status after being contractually delinquent for more than 90 days, or earlier, if management believes full collection of future principal and interest on a timely basis is unlikely.

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The amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses for loans is adjusted by the same amount.

Loan modifications to borrowers experiencing financial difficulty as of both March 31, 2025 and December 31, 2024, totaled $2.7 million.

Modified loans to borrowers experiencing financial difficulty as of June 30, 2025 and December 31, 2024, totaled $2.4 million and $2.7 million, respectively.

All such modified loans were on nonaccrual status as of each respective reporting date.

Modified loans that are accruing and performing in accordance with their modified terms are not classified as nonperforming loans, as they continue to accrue interest and demonstrate satisfactory payment performance despite their modified terms.

The related allowance for credit losses on individually evaluated modified loans totaled $22,000 and $24,000 at March 31, 2025 and December 31, 2024, respectively.

There were no such modified loans at June 30, 2025 and December 31, 2024.

The related allowance for credit losses on individually evaluated modified loans was none and $24,000 at June 30, 2025 and December 31, 2024, respectively.

The following table provides information regarding nonperforming loans, nonperforming assets and modified loans as of the dates indicated:

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

Interest foregone on nonaccrual loans was approximately $269,000 and $483,000 for the three months ended March 31, 2025 and 2024.

Interest income recognized on nonaccrual loans was approximately $35,000 and $7,200 for the three months ended March 31, 2025 and 2024.

There were no performing modified loans at June 30, 2025 or December 31, 2024.

Interest foregone on nonaccrual loans was approximately $370,000 and $639,000 for the three and six months ended June 30, 2025, compared to $226,000 and $709,000 for the three and six months ended June 30, 2024.

Interest income recognized on nonaccrual loans was approximately $31,000 and $66,000 for the three and six months ended June 30, 2025, and $79,000 and $86,000 for the three and six months ended June 30, 2024, respectively.

Allowance for credit losses for loans.

The allowance for credit losses is determined by us on a quarterly basis, although we are engaged in monitoring the appropriate level of the allowance on a more frequent basis.

We assess the allowance for credit losses based on three categories:

The allowance for credit losses is determined by us on a quarterly basis, although we monitor the appropriate level of the allowance on a more frequent basis.

We assess the allowance for credit

losses based on three categories:

(i) originated loans, (ii) acquired non-PCD loans, and (iii) acquired PCD loans.

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The computation includes elements of judgment and high levels of subjectivity.

At March 31, 2025, the Company’s allowance for credit losses for loans was $18.5 million, or 0.94% of total loans, compared to $17.9 million, or 0.92% of total loans, at December 31, 2024.

Management currently believes that the $18.5 million allowance for credit losses at March 31, 2025 is adequate to absorb expected credit losses inherent in the Company’s loan portfolio.

At June 30, 2025, the Company’s allowance for credit losses for loans was $18.7 million, or 0.94% of total loans, compared to $17.9 million, or 0.92% of total loans, at December 31, 2024.

Management currently believes that the $18.7 million allowance for credit losses at June 30, 2025 is adequate to absorb expected credit losses inherent in the Company’s loan portfolio.

No assurance can be given, however, that adverse economic conditions or other circumstances will not result in increased losses in the portfolio.

We recorded net charge-offs of $102,000 and $3.4 million for the three months ended March 31, 2025 and 2024, respectively.

The significantly lower level of net charge-offs in the current quarter reflects fewer non-accrual loan charge-offs, compared to the first quarter in 2024.

In addition to changes in individually evaluated reserves, the allowance for credit losses on loans collectively evaluated (the pooled reserve) also changed during the period.

The decrease in the pooled reserve during the first quarter of 2025 was primarily attributable to reduction in qualitative adjustments, reflecting stable credit trends and improvements in certain internal risk factors.

This was partially offset by an increase in the quantitative reserve, driven by updates to forecasted macroeconomic conditions.

Specifically, the Company incorporated a decline in projected national gross domestic product (“GDP”) and an increase in forecasted national unemployment, both

of which are key economic indicators used in the estimation of expected credit losses under the current expected credit loss, or CECL model.

The increase in the allowance for credit losses at June 30, 2025 as compared to December 31, 2024, was primarily attributable to growth in the loan portfolio, an increase in the reserve for pooled loans, an increase in the reserve for individually evaluated loans, and the replenishment of the allowance during the period.

The increase in the reserve for pooled loans reflected changes in portfolio mix, including growth in higher-risk loan categories, changes in the risk level of one qualitative factor, as well as updated historical loss rates and modest changes in forecasted economic conditions.

Specifically, the Company incorporated an increase in forecasted national unemployment, partially offset by improvement in projected national gross domestic product (“GDP”) at June 30, 2025, as compared to December 31, 2024.

Both of these are key economic indicators used in estimating expected credit losses under the current expected credit loss, or CECL, model.

Net charge-offs were $13,000 and $115,000 for the three and six months ended June 30, 2025, compared to net charge-offs of $76,000 and $3.5 million for the three and six months ended June 30, 2024, respectively.

The significantly lower levels of net charge-offs in the current periods reflects fewer non-accrual loan charge-offs, compared to the same periods in 2024.

The following table presents certain credit ratios at the dates and for the periods indicated and each component of the ratio’s calculations:

Three months ended March 31,

At and for the six months ended June 30,

(Dollars in thousands)

Allowance for credit losses on loans as a percentage of total loans outstanding at period end

Allowance for credit losses on loans

Allowance for credit losses for loans as a percentage of total loans outstanding at period end

Allowance for credit losses for loans

Total loans outstanding

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Total loans outstanding

Allowance for credit losses on loans as a percentage of nonaccrual loans at period end

Allowance for credit losses on loans

Allowance for credit losses for loans as a percentage of nonaccrual loans at period end

Allowance for credit losses for loans

Total nonaccrual loans

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Total average loans outstanding

As of March 31, 2025, the Company individually evaluated $18.0 million in loans, inclusive of the $9.8 million of nonperforming loans as of that date.

Of these individually evaluated loans, $3.3 million had a specific allowance totaling $1.3 million as of March 31, 2025.

As of June 30, 2025, the Company individually evaluated $18.2 million in loans, inclusive of the $13.5 million of nonperforming loans as of that date.

Of these individually evaluated loans, $2.3 million had a specific allowance totaling $839,000 million as of June 30, 2025.

As of December 31, 2024, the Company individually evaluated $17.4 million in loans, inclusive of the $9.2 million of nonperforming loans as of that date.

Of these individually evaluated loans, $2.7 million had a specific allowance totaling $392,000 as of December 31, 2024.

Management considers the allowance for credit losses for loans at March 31, 2025 to be adequate to cover losses inherent in the loan portfolio based on the assessment of the above-mentioned factors affecting the loan portfolio.

Management considers the allowance for credit losses for loans at June 30, 2025 to be adequate to cover losses inherent in the loan portfolio based on the assessment of the above-mentioned factors affecting the loan portfolio.

While management believes the estimates and assumptions used in its determination of the adequacy of the allowance are reasonable, there can be no assurance that such estimates and assumptions will not be proven incorrect in the future, or that the actual amount of future losses will not exceed the amount of the established allowance for credit losses for loans or that any increased allowance for credit losses for loans that may be required will not adversely impact our financial condition and results of operations.

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Competitive products, competitive pricing and high touch client service are important to attracting and retaining these deposits.

Total deposits decreased $105.2 million, or 4.7%, to $2.1 billion at March 31, 2025 compared to $2.2 billion at December 31, 2024.

At March 31, 2025, noninterest bearing demand deposits totaled $589.5 million, or 27.7% of total deposits, compared to $689.0 million, or 30.8% of total deposits, at December 31, 2024, a decrease of $99.5 million .

Additionally, demand deposits and time deposits decreased $99.5 million and $31.0 million, respectively, while higher-costing money market and lower-costing NOW accounts increased $27.2 million and $1.1 million, respectively, from December 31, 2024 to March 31, 2025.

During the first quarter of 2025, the overall deposit mix shifted, in part, due to interest rate sensitive clients moving a portion of their non-operating deposit balances from lower costing deposits, including noninterest bearing deposits, into higher costing money market accounts and time deposits.

Total deposits decreased $47.4 million, or 2.1%, to $2.2 billion at June 30, 2025, compared to $2.2 billion at December 31, 2024.

At June 30, 2025, noninterest-bearing demand deposits totaled $616.1 million, or 28.2% of total deposits, compared to $689.0 million, or 30.8% of total deposits, at December 31, 2024, representing a decrease of $72.9 million.

Time deposits increased $432,000, while higher-costing money market accounts and lower-costing NOW and savings accounts increased $13.5 million and $11.6 million, respectively, from December 31, 2024 to June 30, 2025.

Time deposits included no brokered deposits as of June 30, 2025, compared to $35.5 million of brokered deposits at December 31, 2024.

The decline in total deposits compared to December 31, 2024, primarily reflects a reduction in noninterest-bearing demand deposits, partially offset by growth in interest-bearing NOW and money market accounts.

The shift in deposit composition reflects continued customer migration toward interest-bearing products in response to the prevailing rate environment.

The decrease in brokered time deposits also contributed to the overall decline in deposit balances.

Management continues to monitor deposit mix and pricing strategies in the context of funding cost, liquidity needs, and interest rate risk.

We consider our deposit base to be seasoned, stable and well-diversified, and we do not have any significant industry concentrations among our non-insured deposits.

We also offer an insured cash sweep product (ICS) that allows customers to insure deposits above FDIC insurance limits.

At March 31, 2025, our average deposit account size (excluding public funds), calculated by dividing period-end deposits by the population of accounts with balances, was approximately $60,000.

At June 30, 2025, our average deposit account size (excluding public funds), calculated by dividing period-end deposits by the population of accounts with balances, was approximately $61,000.

See “Note 17 – Commitments and Contingencies” of the Notes to Condensed Consolidated Financial Statements in this Form 10-Q for information regarding our top ten depositors.

9 unchanged sentences

These advances may be made pursuant to several different credit programs, each of which has its own interest rate, range of maturities and call features.

At March 31, 2025 and December 31, 2024, we had the ability to borrow up to $535.0 million and $540.2 million, respectively, from the FHLB of San Francisco.

At both March 31, 2025 and December 31, 2024, there were no FHLB advances outstanding.

At June 30, 2025 and December 31, 2024, we had the ability to borrow up to $581.6 million and $540.2 million, respectively, from the FHLB of San Francisco.

At both June 30, 2025 and December 31, 2024, there were no FHLB advances outstanding.

The Bank has been approved for discount window advances from the FRB of San Francisco secured by certain types of loans.

At March 31, 2025 and December 31, 2024, we had the ability to borrow up to $41.5 million and $41.9 million, respectively, from the FRB of San Francisco.

At both March 31, 2025 and December 31, 2024, we had no FRB of San Francisco advances outstanding.

At June 30, 2025 and December 31, 2024, we had the ability to borrow up to $440.3 million and $41.9 million, respectively, from the FRB of San Francisco.

At both June 30, 2025 and December 31, 2024, we had no FRB of San Francisco advances outstanding.

We may also utilize Fed Funds purchased from correspondent banks as a source of short-term funding.

At both March 31, 2025 and December 31, 2024, we had a total of $65.0 million in federal funds lines available from third-party financial institutions and no balances outstanding at these dates.

At both March 31, 2025 and December 31, 2024, the Company had outstanding junior subordinated deferrable interest debentures, net of fair value adjustments, assumed in connection with its previous acquisitions totaling $8.7 million and $8.6 million, respectively.

At March 31, 2025, the Company had outstanding subordinated debt, net of costs to issue, totaling $63.8 million compared to $63.7 million at December 31, 2024 .

At both June 30, 2025 and December 31, 2024, we had a total of $65.0 million in federal funds lines available from third-party financial institutions and no balances outstanding at these dates.

At both June 30, 2025 and December 31, 2024, the Company had outstanding junior subordinated deferrable interest debentures, net of fair value adjustments, assumed in connection with its previous acquisitions totaling $8.7 million and $8.6 million, respectively.

At June 30, 2025, the Company had outstanding subordinated debt, net of costs to issue, totaling $63.8 million compared to $63.7 million at December 31, 2024.

We are required to provide collateral for certain local agency deposits.

At both March 31, 2025 and December 31, 2024, the FHLB of San Francisco had issued letters of credit on behalf of the Bank totaling $41.1 million, as collateral for local agency deposits.

At both June 30, 2025 and December 31, 2024, the FHLB of San Francisco had issued letters of credit on behalf of the Bank totaling $41.1 million, as collateral for local agency deposits.

Shareholders’ equity.

Shareholders’ equity increased $5.0 million, to $329.3 million at March 31, 2025 from $324.4 million at December 31, 2024.

The increase in shareholders’ equity primarily was due to $5.7 million of net income earned and a $2.1 million decrease in accumulated other comprehensive loss, net of taxes, partially offset by the repurchase of $1.3 million of Company common stock and cash dividends paid or accrued and payable totaling $1.7 million, during the first three months of 2025.

During the three months ended March 31, 2025, the Company repurchased a total of 50,793 shares of its common stock at a total cost of $1.3 million and an average price of $25.82 per share, leaving 413,305 shares available for future purchases under the current stock repurchase plan.

Shareholders’ equity increased $6.2 million, to $330.6 million at June 30, 2025 from $324.4 million at December 31, 2024.

The increase in shareholders’ equity primarily was due to $12.1 million of net income earned during the first six months of 2025 and $2.9 million in other comprehensive income, net of taxes, which primarily reflected changs in the unrealized gain on available-for-sale securities.

These increases were partially offset by the repurchase of $5.2 million of Company common stock and $3.9 million of cash dividends paid or accrued during the period.

During the six months ended June 30, 2025, the Company repurchased a total of 199,243 shares of its common stock at a total cost of $5.2 million and an average price of $25.06 per share, leaving 264,855 shares available for future

purchases under the current stock repurchase plan.

For additional information see Part II, Item 2, “Unregistered Sales of Equity Securities and Use of Proceeds.”

Comparison of Results of Operations for the Three Months Ended March 31, 2025 and 2024

Comparison of Results of Operations for the Three and Six Months Ended June 30, 2025 and 2024

Earnings summary.

Net income was $5.7 million for the three months ended March 31, 2025, compared to $5.9 million for the three months ended March 31, 2024, a decrease of $175,000 or 3.0%.

The decrease was the result of a $622,000 decrease in noninterest income and $390,000 increase in provision for credit losses, partially offset by a $473,000 increase in net interest income, $282,000 decrease in provision for income taxes and $82,000 decrease in noninterest expense.

Basic and diluted earnings per share were $0.51 for both the three months ended March 31, 2025 and 2024.

Our efficiency ratio, which is calculated by dividing noninterest expense by the sum of net interest income before provision for credit losses and noninterest income, was 65.74% and 65.68% for the three months ended March 31, 2025 and 2024, respectively.

The deterioration in the efficiency ratio during the three months ended March 31, 2025 as compared to the same period in 2024 was primarily due to lower overall revenues, partially offset by lower noninterest expenses.

Net income was $6.4 million for the three months ended June 30, 2025, compared to $5.6 million for the three months ended June 30, 2024, an increase of $764,000 or 13.6%.

The increase was the result of a $865,000 increase in net interest income, a $258,000 decrease in noninterest expense, and a $30,000 increase in noninterest income, partially offset by a $357,000 increase in provision for income taxes and a $32,000 increase in provision for credit losses.

Basic and diluted earnings per share were $0.58 for the three months ended June 30, 2025, compared to $0.50 for the three months ended June 30, 2024.

Net income was $12.1 million for the six months ended June 30, 2025, compared to $11.5 million for the six months ended June 30, 2024, an increase of $589,000 or 5.1%.

The increase was the result of a $1.4 million increase in net interest income and a $340,000 decrease in noninterest expense, partially offset by a $592,000 decrease in noninterest income, a $422,000 increase in provision for credit losses, and a $75,000 increase in provision for income taxes.

Basic and diluted earnings per share were $1.09 for the six months ended June 30, 2025, compared to $1.01 for the six months ended June 30, 2024.

Our efficiency ratio, which is calculated by dividing noninterest expense by the sum of net interest income before provision for credit losses and noninterest income, was 63.85% and 64.79% for the three and six months ended June 30, 2025, compared to 67.34% and 66.49% for the three and six months ended June 30, 2024, respectively.

The improvement in the efficiency ratio for the three-month period was primarily driven by higher net interest income and a modest reduction in noninterest expense.

For the six-month period, the improvement was due to a decrease in noninterest expense and a slight increase in total revenue, as higher net interest income more than offset a decline in noninterest income.

Interest income.

Interest income for the three months ended March 31, 2025 was $32.6 million, compared to $31.7 million for the three months ended March 31, 2024, an increase of $902,000 or 2.8%.

Interest income for the three months ended June 30, 2025 was $33.5 million, compared to $32.4 million for the three months ended June 30, 2024, an increase of $1.1 million or 3.2%.

Increased yields earned on interest-earning assets, along with an increase in the average balances of investment securities and loans, were the primary drivers of the increase in interest income, partially offset by a decrease in the average balance of and yield on fed funds sold and interest bearing balances in banks.

Interest income on loans, including fees, increased $1.9 million, or 7.5%, to $27.1 million for the three months ended March 31, 2025 from $25.3 million for the three months ended March 31, 2024, due to a $41.9 million increase in the average balance of loans and a 32 basis point increase in the average loan yield.

The average balance of loans was $2.0 billion for the first quarter of 2025, compared to $1.9 billion for first quarter of 2024.

The average yield on loans was 5.64% for the three months ended March 31, 2025, compared to 5.32% for the first quarter of 2024.

The increase in the average yield on loans during the current quarter, compared to the first quarter of 2024 was due to the impact of increased rates on variable rate loans, as well as new loans being originated at higher market interest rates.

Interest income on loans for the three months ended March 31, 2025 and 2024 included $215,000 and $98,000 in accretion of the net discount on acquired loans and revenue from PCD loans in excess of discounts.

The balance of the remaining net discounts on these acquired loans totaled $223,000 and $392,000 at March 31, 2025 and 2024, respectively.

Interest income on loans for the three months ended March 31, 2025 and 2024, included $162,000 and $176,000, respectively, in fees related to prepayment penalties.

Interest income on investment securities increased $498,000, or 25.5%, to $2.5 million for the three months ended March 31, 2025, compared to $2.0 million for the three months ended March 31, 2024, as a result of increases in the average yield and average balance.

The average yield on investment securities increased 49 basis points to 4.73% for the three months ended March 31, 2025, compared to 4.24% for the three months ended March 31, 2024.

Interest income on loans, including fees, increased $2.9 million, or 11.8%, to $28.0 million for the three months ended June 30, 2025 from $25.0 million for the three months ended June 30, 2024, due to a $133.4 million increase in the average balance of loans and a 22 basis point increase in the average loan yield.

The average balance of loans was $2.0 billion for the second quarter of 2025, compared to $1.9 billion for second quarter of 2024.

The average yield on loans was 5.63% for the three months ended June 30, 2025, compared to 5.41% for the second quarter of 2024.

The increase in the average yield on loans during the current quarter, compared to the second quarter of 2024 was due to the impact of increased rates on variable rate loans, as well as new loans being originated at higher market interest rates.

Interest income on loans for the three months ended June 30, 2025 and 2024 included $110,000 and $124,000 in accretion of the net discount on acquired loans and revenue from PCD loans in excess of discounts.

Remaining net discounts on these acquired loans totaled $319,000 and $540,000 at June 30, 2025 and 2024, respectively.

Interest income on loans for the three months ended June 30, 2025 and 2024, included $109,000 and $70,000, respectively, in fees related to prepayment penalties.

Interest income on investment securities increased $225,000, or 10.3%, to $2.4 million for the three months ended June 30, 2025, compared to $2.2 million for the three months ended June 30, 2024, as a result of increases in the average yield and average balance.

The average yield on investment securities increased 18 basis points to 4.68% for the three months ended June 30, 2025, compared to 4.50% for the three months ended June 30, 2024.

The increase in average yield was due to higher market interest rates on newly purchased securities and rate resets on variable rate investment securities.

The average balance of investment securities totaled $210.2 million for the three months ended March 31, 2025, compared to $185.7 million for the three months ended March 31, 2024.

In addition, during the first quarter of 2025, we received $393,000 in cash dividends on our FRB and FHLB stock, compared to $416,000 in the first quarter of 2024.

Interest income on federal funds sold and interest-bearing balances in banks decreased $1.5 million, or 35.6%, to $2.6 million for the three months ended March 31, 2025, compared to $4.1 million for the three months ended March 31, 2024, as a result of changes in the average yield and average balance.

The average yield decreased 101 basis points to 4.79% for the three months ended March 31, 2025, compared to 5.48% for the three months ended March 31, 2024, reflecting a lowering of the Federal Reserve rates.

The average balance of federal funds sold and interest-bearing balance in banks totaled $240.3 million and $302.1 million for the three months ended March 31, 2025 and 2024, respectively.

The average balance of investment securities totaled $206.5 million for the three months ended June 30, 2025, compared to $195.1 million for the three months ended June 30, 2024.

In addition, during the second quarter of 2025, we received $392,000 in cash dividends on our FRB and FHLB stock, unchanged from the second quarter of 2024.

Interest income on federal funds sold and interest-bearing balances in banks decreased $2.1 million, or 44.1%, to $2.7 million for the three months ended June 30, 2025, compared to $4.8 million for the three months ended June 30, 2024, as a result of changes in the average yield and average balance.

The average yield decreased 102 basis points to 4.45% for the three months ended June 30, 2025, compared to 5.47% for the three months ended June 30, 2024, reflecting the Federal Reserve’s rate reductions during the second half of 2024.

The average balance of federal funds sold and interest-bearing balance in banks totaled $242.8 million and $354.3 million for the three months ended June 30, 2025 and 2024, respectively.

Interest income for the six months ended June 30, 2025 was $66.1 million, compared to $64.2 million for the six months ended June 30, 2024, an increase of $1.9 million or 3.0%.

The increase in interest income between periods reflects increases in interest income in all interest-earning asset categories, except FHLB and FRB dividends.

Increased yields earned on interest-earning assets, along with an increase in the average balances of loans and investment securities, were the primary drivers for the increase in interest income, partially offset by a decrease in the average balance of and yield on fed funds sold and interest bearing balances in banks.

Interest income on loans, including fees, increased $4.8 million, or 9.6%, to $55.1 million for the six months ended June 30, 2025 from $50.3 million for six months ended June 30, 2024, primarily due to a $87.8 million increase in the average balance of loans and a 27 basis point increase in the average loan yield.

The average balance of loans was $2.0 billion for the six months ended June 30 2025, compared to $1.9 billion for the six months ended June 30, 2024.

The average yield on loans was 5.63% for the six months ended June 30, 2025, compared to 5.36% for the six months ended June 30, 2024.

The increase in the average yield on loans from the same period 2024 was due to the impact of increased rates on variable rate loans as well as new loans being originated at higher market interest rates.

Interest income on loans for the six months ended June 30, 2025 and 2024 included $315,000 and $222,000 in accretion of the net discount on acquired loans and revenue from PCD loans in excess of discounts.

Interest income on loans for the six months ended June 30, 2025 and 2024, included $271,000 and $246,000, respectively, in fees related to prepayment penalties.

Interest income on investment securities increased $723,000, or 17.5%, to $4.9 million for the six months ended June 30, 2025, compared to $4.1 million for the six months ended June 30, 2024.

The average yield on investment securities increased 33 basis points to 4.70% for the six months ended June 30, 2025, compared to 4.37% for the six months ended June 30, 2024.

The increase in average yield was due to higher market interest rates on newly purchased securities.

The average balance of investment securities totaled $208.3 million for the six months ended June 30, 2025, compared to $190.4 million for the six months ended June 30, 2024.

In addition, during the six months ended June 30, 2025, we received $786,000 in cash dividends on our FRB and FHLB stock, down 2.8% from $808,000 received during the six months ended June 30, 2024.

Interest income on federal funds sold and interest-bearing balances in banks decreased $3.6 million, or 40.2%, to $5.3 million for the six months ended June 30, 2025, compared to $8.9 million for the six months ended June 30, 2024, as a result of changes in the average yield and average balance.

The average yield decreased 101 basis points to 4.46% for the six months ended June 30, 2025, compared to 5.47% for the six months ended June 30, 2024, reflecting the Federal Reserve’s rate reductions during the second half of 2024.

The average balance totaled $241.6 million for the six months ended June 30, 2025, compared to $328.2 million for the six months ended June 30, 2024.

Interest expense.

Interest expense increased $429,000, or 4.6%, to $9.8 million for the three months ended March 31, 2025, compared to $9.3 million for the three months ended March 31, 2024.

The increase was primarily driven by higher average balances of money market accounts and time deposits, as well as an increase in rates paid on money market accounts, partially offset by a lower rate on time deposits.

The average cost of interest-bearing liabilities for the first quarter

of 2025 was 2.49%, compared to 2.40% for the first quarter of 2024.

Total average interest-bearing liabilities increased $29.2 million, or 1.87%, to $1.6 billion for the three months ended March 31, 2025, compared to the three months ended March 31, 2024.

Interest expense on deposits increased $456,000, or 5.5%, to $8.7 million for the three months ended March 31, 2025, compared to $8.2 million for the same period in 2024.

The increase was primarily driven by higher rates paid on money market accounts and, to a lesser extent, by increases in the average balances of both money market accounts and time deposits.

These increases were partially offset by a decline in rates paid on time deposits.

The average rate paid on money market accounts rose by 11 basis points during the first quarter of 2025 compared to the same period in 2024, while the average rate on time deposits declined by 12 basis points over the same period.

The average balance of money market accounts increased $33.3 million, or 5.4%, to $654.8 million, compared to $621.5 million for the three months ended March 31, 2024.

The average balance of time deposits increased $33.6 million, or 6.9%, to $522.4 million during the first quarter of 2025, compared to $488.7 million for the same period in the prior year.

The average rate paid on all interest-bearing deposits increased by 10 basis points to 2.32% for the three months ended March 31, 2025, compared to 2.22% for the three months ended March 31, 2024.

The average balance of interest-bearing deposits totaled $1.5 billion for both the three months ended March 31, 2025 and 2024, though there were shifts in the deposit mix, with average balances for money market and time deposits increasing and those for savings and NOW accounts decreasing.

Additionally, t he average balance of noninterest-bearing deposits decreased $36.0 million, or 5.6%, to $603.7 million for the three months ended March 31, 2025, compared to $639.7 million for the three months ended March 31, 3024.

These shifts were due to customers seeking to place excess funds in higher yielding deposit accounts.

The overall average cost of deposits for the three months ended March 31, 2025 and 2024 was 1.66% and 1.55%, respectively.

Interest expense on borrowings decreased $27,000, or 2.40%, to $1.1 million for the three months ended March 31, 2025, compared to the three months ended March 31, 2024.

The average cost of total borrowings increased to 6.07% for the three months ended March 31, 2025, compared to 6.18% for the three months ended March 31, 2024.

The average balance of borrowings increased $118,000 to $72.4 million during the three months ended March 31, 2025, compared to the three months ended March 31, 2024.

Interest expense increased $611,000, or 3.1%, to $10.3 million for the three months ended June 30, 2025, compared to $10.1 million for the three months ended June 30, 2024.

The increase was primarily due to higher rates paid on money market deposits, as well as an increase in the average balances of money market and time deposit accounts.

Interest expense on deposits increased $207,000, or 6.1%, to $9.2 million for the three months ended June 30, 2025, compared to $9.0 million for the same period in 2024.

The increase was due to higher deposit rates, reflecting increased market rates and competitive pricing pressures.

The average rate paid on money market accounts increased six basis points during the second quarter of 2025 compared to the same period in 2024, while the average rate on time deposits declined 24 basis points compared to the prior-year period.

The average cost of all interest-bearing deposits was 2.37% for the three months ended June 30, 2025, unchanged from the same period in 2024.

The overall average cost of deposits

was 1.71% for the second quarter of 2025, compared to 1.69% for the second quarter of 2024.

The average cost of total interest-bearing liabilities was 2.54% for both the three months ended June 30, 2025 and 2024.

Total average interest-bearing liabilities increased $29.7 million, or 1.86%, to $1.6 billion for the three months ended June 30, 2025, compared to the three months ended June 30, 2024.

The average balance of interest-bearing deposits also increased to $1.6 billion for the three months ended June 30, 2025, from $1.5 billion for the same period in 2024.

Within this category, the average balance of money market accounts rose $22.8 million, or 3.6%, to $663.3 million, while time deposits increased $29.7 million, or 5.7%, to $547.8 million.

In contrast, average balances for savings and NOW accounts declined over the same period.

The average balance of noninterest-bearing deposits decreased $15.5 million, or 2.5%, to $604.9 million for the three months ended June 30, 2025, compared to $620.5 million for the same period in 2024.

These shift in deposit composition reflected customer preferences to allocate excess funds into higher-yielding deposit accounts.

Interest expense on borrowings decreased $25,000, or 2.2%, to $1.1 million for the three months ended June 30, 2025, compared to the three months ended June 30, 2024.

The average cost of total borrowings decreased to 6.00% for the three months ended June 30, 2025, compared to 6.18% for the three months ended June 30, 2024.

The average balance of borrowings increased $251,000 to $72.4 million during the three months ended June 30, 2025, compared to $72.3 million during the three months ended June 30, 2024.

Interest expense increased $611,000, or 3.1%, to $20.1 million for the six months ended June 30, 2025, compared to $19.4 million for the six months ended June 30, 2024.

The increase reflects higher funding costs, primarily due to increased market rates on money market accounts and a higher average balance of money market and time deposit accounts, partially offset by a decline in the average rate paid on time deposits.

The average rate paid on interest-bearing liabilities was 2.51% for the six months ended June 30, 2025, compared to 2.47% for the six months ended June 30, 2024.

Total average interest-bearing liabilities increased $29.6 million, or 1.9%, to $1.6 billion for the six months ended June 30, 2025, compared to the six months ended June 30, 2024.

Interest expense on deposits increased $663,000, or 3.8%, to $17.9 million for the six months ended June 30, 2025, compared to $17.2 million for the six months ended June 30, 2024.

The increase was driven by higher rates paid on money market accounts and, to a lesser extent, an increase in the average balance of time deposits and money market accounts, partially offset by a decrease in the rate paid on time deposits.

Specifically, rates on money market accounts increased nine basis points during the six months ended June 30, 2025, compared to the same period in 2024, while rates on time deposits decreased 18 basis points .

The average balance of money market accounts increased $28.1 million, or 4.45%, to $659.1 million for the six months ended June 30, 2025, compared to $631.0 million for the six months ended June 30, 2024.

The average balance of time deposits increased $31.8 million, or 6.3%, to $535.2 million for the six months ended June 30, 2025, compared to $503.4 million for the same period the prior year.

The overall average cost of deposits for the six months ended June 30, 2025 and 2024 was 1.68% and 1.62%, respectively.

The average rate paid on all interest-bearing deposits increased five basis points to 2.35% for the six months ended June 30, 2025, compared to 2.30% for the six months ended June 30, 2024.

The average balance of interest-bearing deposits totaled $1.5 billion for both periods.

Meanwhile, t he average balance of noninterest-bearing deposits decreased $25.7 million, or 4.1%, to $604.3 million for the six months ended June 30, 2025 compared to $630.1 million for the six months ended June 30, 3024.

Interest expense on borrowings decreased $52,000, or 1.00%, to $2.2 million for the six months ended June 30, 2025, compared to the six months ended June 30, 2024, due to a 131 basis point decrease in the average rate paid on junior subordinated debentures.

The average cost of total borrowings decreased to 6.03% for the six months ended June 30, 2025, compared to 6.18% for the six months ended June 30, 2024.

The average balance of borrowings increased $180,000 to $72.4 million during the six months ended June 30, 2025, compared to $72.3 million during the six months ended June 30, 2024.

Net interest income and net interest margin.

Net interest income increased $473,000, or 2.1%, to $22.9 million for the three months ended March 31, 2025, compared to $22.4 million for the three months ended March 31, 2024.

The increase was primarily driven by higher in interest income on loans and investment securities, partially offset by a decrease in interest income on fed funds sold and interest-bearing balances in banks, as well as higher interest expense on deposits.

The average annualized yield on interest-earning assets was 5.46% for the three months ended March 31, 2025, representing an 18 basis point increase from 5.28% for the three months ended March 31, 2024.

This increase was primarily attributable to the repricing of adjustable-rate loans and securities to higher market rates and the origination of new loans at higher yields.

The average cost of interest-bearing liabilities increased to 2.49%, up 9 basis points from 2.40% in the prior-year period.

As a result, the annualized net interest margin improved to 3.83% for the three months ended March 31, 2025, compared to 3.72% for the same period in 2024.

Net interest income increased $865,000, or 3.9%, to $23.2 million for the three months ended June 30, 2025, compared to $22.3 million for the three months ended June 30, 2024.

The increase in net interest income primarily reflects increases in interest income on loans and investment securities.

increases were partially offset by a decrease in interest income on fed funds sold and interest-bearing balances in banks, as well as higher interest expense on deposits.

Average interest-earning assets increased $33.7 million, or 1.4%, compared to the second quarter of 2024.

The average annualized yield on interest-earning assets was 5.45% for the three months ended June 30, 2025, representing an eight basis point increase from 5.37% for the three months ended June 30, 2024.

This increase reflects the repricing of adjustable-rate loans and securities to higher rates, as well as the origination of new loans and the purchase of new securities at higher rates.

The average cost of interest-bearing liabilities remained unchanged at 2.54% for both periods.

As a result, the annualized net interest margin improved to 3.77% for the three months ended June 30, 2025, compared to 3.69% for the same period in 2024.

The expansion in net interest margin was primarily due to the increase in yields on interest-earning assets.

Net interest income increased $1.3 million, or 3.0%, to $46.0 million for the six months ended June 30, 2025, compared to $44.7 million for the six months ended June 30, 2024.

The increase was primarily driven by higher interest income on loans and investment securities, partially offset by a decrease in interest income on fed funds sold and interest-bearing balances in banks, as well as higher interest expense on deposits.

The average annualized yield on interest-earning assets was 5.45% for the six months ended June 30, 2025, representing a 13 basis point increase from 5.32% for the six months ended June 30, 2024.

The average cost of interest-bearing liabilities increased to 2.51%, up four basis points from 2.47% in the prior-year period.

As a result, the annualized net interest margin improved to 3.80% for the six months ended June 30, 2025, compared to 3.71% for the same period in 2024.

The expansion in net interest margin was primarily due to the increase in yields on interest-earning assets, which outpaced the rise in the cost of interest-bearing liabilities.

8 unchanged sentences

Loan yields include the effect of amortization or accretion of deferred loan fees/costs and purchase accounting premiums/discounts to interest and fees on loans.

Three months ended March 31,

Three months ended June 30,

(Dollars in thousands)

29 unchanged sentences

(4) Average balances are computed using average daily balances.

Six months ended June 30,

(Dollars in thousands)

Interest earning assets

Fed Funds sold and interest-bearing balances in banks

Investments securities

Total loans (1)

Total interest earning assets

Noninterest earning assets

Total average assets

Interest bearing liabilities

Time deposits

Total interest bearing deposit accounts

Subordinated debt, net

Junior subordinated debentures, net

Other borrowings

Total interest bearing liabilities

Noninterest bearing deposits

Other noninterest bearing liabilities

Noninterest bearing liabilities

Total average liabilities

Average equity

Total average liabilities and equity

Net interest income

Interest rate spread (2)

Net interest margin (3)

Ratio of average interest earning assets to average interest bearing liabilities

(1) Loan average balances are net of deferred origination fees and costs.

Non-accrual loans are included in the average balances.

Interest income on non-accruing loans is reflected in the period that it is collected, to the extent it is not applied to principal.

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

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

(4) Average balances are computed using average daily balances.

Rate/Volume Analysis.

3 unchanged sentences

Changes applicable to both volume and rate have been allocated to volume.

Three months ended March 31,

2025 compared to Three months ended March 31, 2024

Three months ended June 30,

Six months ended June 30,

2025 compared to 2024

Increase/(Decrease)

Attributable to

(Dollars in thousands)

Interest earning assets

13 unchanged sentences

Provision for credit losses.

We recorded a provision for credit losses of $642,000 for the three months ended March 31, 2025, compared to a $252,000 provision for credit losses for the three months ended March 31, 2024.

The provision for credit losses during the three months ended March 31, 2025 was primarily driven by loan growth, charge-offs during the quarter, and an increase in specific reserves on individually evaluated loans.

Net charge-offs totaled $102,000 during the first quarter of 2025, compared to net charge-offs of $3.4 million in the first quarter of 2024.

The significantly lower level of net charge-offs in the current quarter reflects fewer non-accrual loan charge-offs as compared to the comparable quarter in 2024.

In addition to changes in individually evaluated reserves, the pooled reserve also changed during the period.

The decrease in the pooled reserve during the first quarter of 2025 was primarily attributable to a reduction in qualitative adjustments, reflecting stable credit trends and improvements in certain internal risk factors.

This was partially offset by an increase in the quantitative reserve, driven by updates to forecasted macroeconomic conditions.

Specifically, the Company incorporated a decline in projected national GDP and an increase in forecasted national unemployment.

During the first quarter of 2025, the decrease in the pooled reserved was attributable to decrease in qualitative reserve, partially offset by increase in quantitative reserve as a result of the impact of forecasted economic conditions for national gross domestic product decreasing and increasing forecasted national unemployment, both of which are key indicators utilized to estimate credit losses.

We recorded a provision for credit losses of $203,000 and $845,000 for the three and six months ended June 30, 2025, compared to a $171,000 and $423,000 provision for credit losses for the three and six months ended June 30, 2024.

The provision for credit losses during the three and six months ended June 30, 2025 was primarily driven by loan growth, charge-offs during the quarter, and increased reserve on pooled loans.

Net charge-offs totaled $115,000 for the six months ended June 30, 2025, compared to net charge-offs of $3.2 million for six months ended June 30, 2024.

The significantly lower level of net charge-offs in the current year reflects fewer non-accrual loan charge-offs as compared to the comparable period in 2024.

Noninterest income.

Noninterest income decreased $622,000, or 30.2%, to $1.4 million for the first quarter of 2025, compared to $2.1 million for the first quarter of 2024.

The decrease was primarily due to a $255,000 loss on equity securities recognized in the first quarter of 2025, compared to a $573,000 gain on equity securities in the prior-year period, as well as a $79,000 increase in loss on investment in SBIC fund.

These decreases were partially offset by a $198,000 increase in gain on sale of loans, primarily due to an increase in the volume of loans sold, and a $106,000 increase in service charges and other fees.

The increase in service charges and other fees was primarily due to higher customer deposits

placed in Certificates of Deposit Account Registry Service (“CDARS”) and Insured Cash Sweep (“ICS”) money market product services via the IntraFi Network.

Noninterest income increased $30,000, or 2.0%, to $1.5 million for the second quarter of 2025, compared to the same period in 2024.

The increase in noninterest income was primarily due to a $328,000 decrease in loss on equity securities as a result of positive fair value adjustments on these securities due to changes in market conditions and a $179,000 increase in loan servicing and other fees due to higher loan origination volumes, partially offset by a $233,000 decrease in gain on sale of loans resulting from lower loan sale volumes and a $298,000 increase in loss on investment in SBIC fund due to losses in the underlying SBIC fund’s investments.

Noninterest income decreased $592,000, or 16.7%, to $3.0 million for the six months ended June 30, 2025, compared to $3.5 million for the six months ended June 30, 2024.

The decrease in noninterest income was due to $500,000 increase in loss on equity securities as a result of negative fair value adjustments on these securities due to changes in market conditions and a $377,000 increase in loss on investment in SBIC fund due to losses in the underlying SBIC fund’s investments, partially offset by a $285,000 increase in service charges and other fees due to more customer deposits placed in CDARS and ICS money market product services via the IntraFi Network.

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

Three months ended March 31,

Three months ended June 30,

(Dollars in thousands)

Gain on sale of loans

Gain (loss) on equity securities

Service charges and other fees

Loan servicing and other loan fees

(Loss) income on investment in SBIC fund

Other income and fees

Total noninterest income

Six months ended June 30,

(Dollars in thousands)

Gain on sale of loans

(Loss) gain on equity securities

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Loan servicing and other loan fees

Loss on investment in SBIC fund

(Loss) income on investment in SBIC fund

Other income and fees

Total noninterest income

N/M - Not meaningful

Noninterest expense.

Noninterest expense decreased $82,000, or 0.5%, to $16.0 million for the three months ended March 31, 2025, compared to $16.1 million for the three months ended March 31, 2024.

The decrease was primarily due to a $101,000 decrease in salaries and employees benefits due to a lower overall headcount, partially offset by higher wages due to market-based salary adjustments and annual merit increases, and a $63,000 decrease in other expense due to reduction in legal and other professional costs.

These decreases were partially offset by a $100,000 increase in data processing expense due to implementation of new banking and fraud prevention services aimed at enhancing the customer experience and strengthening operational security.

Noninterest expense decreased $258,000, or 1.6%, to $15.8 million for the three months ended June 30, 2025, compared to $16.0 million for the three months ended June 30, 2024.

The decrease in noninterest expense was primarily due to a $657,000 decrease in other expense due to a reduction in legal and professional service costs as well as the return of unused California Capital Access Program (CalCap) reserve funds.

Excess CalCap funds returned to the Bank from a loss reserve account previously established in connection with the CalCap program, which is designed to support small business lending by requiring contributions to a reserve fund that covers potential loan losses.

These funds were no longer needed due to strong loan performance and were returned to the Bank.

The decrease in other expense was partially offset by a $263,000 increase in data processing expense due to newly implemented services in 2025, and an $86,000 increase in salaries and wages.

Noninterest expense decreased $340,000 million, or 1.1%, to $31.7 million for the six months June 30, 2025 compared to $32.1 million for the six months ended June 30, 2024.

The decrease in noninterest expense was primarily due to $720,000 decrease in other expense due to a reduction in legal and professional service costs, a reduction in FDIC insurance costs and a lower level of fraudulent check losses, as well as the return of unused CalCap reserve funds, partially offset by a $363,000 increase in data processing expense due to newly implemented services in 2025.

The following table details the components of noninterest expense for the periods indicated:

Three months ended March 31,

Three months ended June 30,

(Dollars in thousands)

Salaries and related benefits

Occupancy and equipment

Data processing

Total noninterest expense

Six months ended June 30,

(Dollars in thousands)

Salaries and employee benefits

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Income taxes.

The provision for income taxes decreased $282,000, or 12.4%, to $2.0 million for the three months ended March 31, 2025, compared to $2.3 million for the three months ended March 31, 2024, due to lower taxable income.

The Company’s effective tax rate was 25.8% and 27.9% for the three months ended March 31, 2025 and 2024, respectively.

The effective tax rate was lower for the three months ended March 31, 2025, compared to the same period in 2024, due to higher low income housing tax credits .

The provision for income taxes increased $357,000, or 17.9%, to $2.4 million for the three months ended June 30, 2025, compared to $2.0 million for the three months ended June 30, 2024, due to higher taxable income.

The provision for income taxes increased $75,000, or 1.8%, to $4.3 million for the six months ended June 30, 2025 compared to the six months ended June 30, 2024.

The Company’s effective tax rate was 27.0% and 26.5% for the three and six months ended June 30, 2025 and 26.3% and 27.09% for the three and six months ended June 30, 2024, respectively.

The effective tax rate was lower for the six months ended June 30, 2025, compared to the same period in 2024, due to higher low income housing tax credits .

Liquidity and Capital Resources

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Our primary sources of funds are deposits, escrow and custodial deposits, principal and interest payments on loans and proceeds from sales of loans.

During the three months ended March 31, 2025, the Bank sold $2.8 million in loan participation interests and received $65.4 million in principal loan repayments.

During the six months ended June 30, 2025, the Bank sold $3.4 million in loan participation interests and received $199.8 million in principal loan repayments.

While maturities and scheduled amortizations of loans are generally predictable sources of funds, deposit flows and loan prepayments are greatly influenced by market interest rates, economic conditions, and competition.

Deposits decreased $105.2 million to $2.1 billion and liquid assets, in the form of cash and cash equivalents, time deposit in banks and investment securities, decreased $108.7 million to $448.9 million at March 31, 2025 from December 31, 2024.

Deposits decreased $47.4 million to $2.2 billion and liquid assets, in the form of cash and cash equivalents and time deposit in banks, decreased $72.4 million to $291.6 million at June 30, 2025 from $364.3 million at December 31, 2024.

In addition, investment securities available-for-sale decreased $8.6 million to $184.7 million at June 30, 2025 from $193.3 million at December 31, 2024.

Management believes that our securities portfolio is of high quality and that the securities would therefore be marketable.

No securities were purchased during the three months ended March 31, 2025, while securities repayments, maturities and sales during that period were $3.8 mil lion.

Certificates of deposit scheduled to mature in one year or less at March 31, 2025, totaled $442.2 million.

Securities purchased during the six months ended June 30, 2025 were $3.6 million, while securities repayments, maturities and sales during that period were $ 16.2 million.

Certificates of deposit scheduled to mature in one year or less at June 30, 2025, totaled $464.4 million.

It is management’s policy to maintain deposit rates that are competitive with other local financial institutions.

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In addition to these primary sources of funds, management has several secondary sources available to meet potential funding requirements.

As of March 31, 2025, the Bank had an available borrowing capacity of $535.0 million with the FHLB of San Francisco, with no borrowings outstanding at that date or at December 31, 2024.

At March 31, 2025, we had the ability to borrow up to $41.5 million from the FRB of San Francisco, with no borrowings outstanding at that date.

As of June 30, 2025, the Bank had an available borrowing capacity of $581.6 million with the FHLB of San Francisco, with no borrowings outstanding at that date or at December 31, 2024.

At June 30, 2025, we had the ability to borrow up to $40.3 million from the FRB of San Francisco, with no borrowings outstanding at that date.

The Bank also had, as of that date, federal funds lines with four correspondent banks, with available commitments totaling $65.0 million.

There were no amounts outstanding under these facilities at March 31, 2025 and December 31, 2024.

There were no amounts outstanding under these facilities at June 30, 2025 and December 31, 2024.

Subject to market conditions, we expect to utilize these borrowing facilities from time to time in the future to fund loan originations and deposit withdrawals, to satisfy other financial commitments, repay maturing debt and to take advantage of investment opportunities to the extent feasible.

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We use our sources of funds primarily to meet our ongoing commitments, to pay maturing deposits and fund withdrawals, and to fund loan commitments.

At March 31, 2025, loan commitments and letters of credit totaled $67.3 million, including $9.6 million of undisbursed construction and development loan commitments.

At June 30, 2025, loan commitments and letters of credit totaled $65.9 million, including $7.5 million of undisbursed construction and development loan commitments.

For information regarding our commitments, see “Note 17 – Commitments and Contingencies” of the Notes to Condensed Consolidated Financial Statements included in “Item 1.

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cash flows from operating activities, cash flows from investing activities, and cash flows from financing activities.

Net cash provided by operating activities for the three months ended March 31, 2025 and 2024 was $9.6 million and $5.1 million, respectively.

During the three months ended March 31, 2025, net cash used in investing activities was $8.6 million, which consisted primarily of purchases of loans, partially offset by a proceeds from maturities, repayments and calls of investment securities AFS, compared to $31.0 million of net cash provided by investing activities for the three months ended March 31, 2024.

Net cash used in financing activities for the three months ended March 31, 2025 was $108.5 million, which was comprised primarily of decrease in noninterest and interest bearing deposits in banks, net, compared to $4.7 million of net cash provided by financing activities during the three months ended March 31, 2024.

Net cash provided by operating activities for the six months ended June 30, 2025 and 2024 was $15.6 million and $12.8 million, respectively.

During the six months ended June 30, 2025, net cash used in investing activities was $33.8 million, which consisted primarily of loan fundings and purchases of loans and investment securities, partially offset by proceeds from maturities, repayments and calls of investment securities AFS and normal recuring loan payments and maturities, compared to $39.4 million of net cash provided by investing activities for the six months ended June 30, 2024.

Net cash used in financing activities for the six months ended June 30, 2025 was $54.2 million, which was comprised primarily of decrease in noninterest and interest bearing deposits in banks, net, stock repurchases and dividend payments to shareholders, compared to $31.5 million of net cash provided by financing activities during the six months ended June 30, 2024.

Management believes our capital sources are adequate to meet all reasonably foreseeable short-term and long-term cash requirements.

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BayCom Corp is a separate legal entity from the Bank and must provide for its own liquidity.

At March 31, 2025, BayCom Corp had liquid assets of $19.9 million.

At June 30, 2025, BayCom Corp had liquid assets of $12.9 million.

In addition to its operating expenses, BayCom Corp is responsible for paying to its shareholders any dividends that have been declared, funding stock repurchases, and making payments on its junior subordinated debentures and subordinated notes.

BayCom Corp can receive dividends and other capital distributions from the Bank, although there are regulatory restrictions on the ability of the Bank to pay dividends and make other capital distributions.

On February 20, 2025, the Company announced that its Board of Directors declared a quarterly cash dividend of $0.15 per share on the Company’s outstanding common stock, which was paid on April 10, 2025 to shareholders of record as of the close of business on March 13, 2025.

On May 31, 2025, the Company announced that its Board of Directors declared a quarterly cash dividend of $0.20 per share on the Company’s outstanding common stock, which was paid on July 10, 2025 to shareholders of record as of the close of business on June 12, 2025.

The Company expects to continue to pay quarterly cash dividends on its common stock, subject to the Board of Directors’ discretion to modify or terminate this practice at any time and for any reason without prior notice.

Assuming continued payment of the cash dividend at this rate of $0.15 per share, our average total dividend paid each quarter would be approximately $1.7 million based on the number of our outstanding shares at March 31, 2025.

The dividends we pay may be limited as more fully discussed under “Business – Supervision and

Regulation – BayCom Corp – Dividends” and “– Regulatory Capital Requirements” contained in “Part I.

Assuming continued payment of the cash dividend at this rate of $0.20 per share, our average total dividend paid each quarter would be approximately $2.2 million based on the number of our outstanding shares at June 30, 2025.

The dividends we pay may be limited as more fully discussed under “Business – Supervision and Regulation – BayCom Corp – Dividends” and “– Regulatory Capital Requirements” contained in “Part I.

Business” of the 2024 Annual Report.

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The Company’s stock repurchase programs do not obligate the Company to purchase any particular number of shares.

As of March 31, 2025, there remained 413,305 shares available for repurchase under the Company’s current stock repurchase program.

As of June 30, 2025, there remained 264,855 shares available for repurchase under the Company’s current stock repurchase program.

For additional information on the Company’s stock repurchases, see “Item 2.

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The Bank, as a state-chartered, federally insured commercial bank and member of the Board of Governors of the Federal Reserve System, is subject to capital requirements established by the Federal Reserve.

The Federal Reserve requires the Bank to maintain levels of capital adequacy that generally parallel the FDIC requirements.

The Federal Reserve requires the Bank to maintain levels of capital adequacy that generally parallel the FDIC’s requirements.

The capital adequacy requirements are quantitative measures established by regulation that require the Bank to maintain minimum amounts and ratios of capital.

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Consistent with our goal to operate a sound and profitable organization, our policy is for the Bank to maintain “Well Capitalized” status under the Federal Reserve regulations.

Based on capital levels at March 31, 2025 and December 31, 2024, the Bank was considered Well Capitalized at both of those dates.

Based on capital levels at June 30, 2025 and December 31, 2024, the Bank was considered Well Capitalized at both of those dates.

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

At March 31, 2025

At June 30, 2025

At December 31, 2024

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In addition to the minimum capital ratios, the Bank must maintain a capital conservation buffer consisting of additional Common Equity Tier 1 capital greater than 2.5% above the required minimum levels in order to avoid limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses based on percentages of eligible retained income that could be utilized for such actions.

At March 31, 2025, the Bank’s Common Equity Tier 1 capital exceeded the required capital conservation buffer.

At June 30, 2025, the Bank’s Common Equity Tier 1 capital exceeded the required capital conservation buffer.

For a bank holding company with less than $3.0 billion in assets, the capital guidelines apply on a bank-only basis and the Federal Reserve expects the holding company’s subsidiary bank(s) to be Well Capitalized under the prompt corrective action regulations.

If the Company were subject to regulatory guidelines for bank holding companies with $3.0 billion or more in assets, at March 31, 2025, the Company would have exceeded all regulatory capital requirements.

If the Company were subject to regulatory guidelines for bank holding companies with $3.0 billion or more in assets, at June 30, 2025, the Company would have exceeded all regulatory capital requirements.

For additional information, see “Item 1.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis