What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-03-16 compared with 2025-03-14 · 154 added, 151 removed, 583 unchanged (34% of the section changed)

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

The Company’s wholly owned banking subsidiary, United Business Bank, provides a broad range of financial services primarily to businesses and business owners, as well as individuals, through its branch network.

At December 31, 2024, the Bank had 35 full-service branches, with 16 locations in California, one in Nevada, two in Washington, five in New Mexico and 11 in Colorado.

At December 31, 2025, the Bank had 34 full-service branches, with 16 locations in California, one in Nevada, one in Washington, five in New Mexico and 11 in Colorado.

Our principal objective is to enhance shareholder value and generate consistent earnings growth by expanding our commercial banking franchise through both strategic acquisitions and organic growth.

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

At December 31, 2024, the Company, on a consolidated basis, had assets of $2.7 billion, loans receivable, net of $1.9 billion, deposits of $2.2 billion and shareholders’ equity of $324.4 million.

At December 31, 2025, the Company, on a consolidated basis, had total assets of $2.6 billion, loans receivable, net of $2.0 billion, deposits of $2.2 billion and shareholders’ equity of $338.6 million.

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

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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.

Between March 2022 and July 2023, in response to elevated inflation, the Federal Open Market Committee (“FOMC”) of the Federal Reserve increased interest rates by a total of 525 basis points, bringing the target range to 5.25% to 5.50%.

On September 18, 2024, the FOMC reduced the target range to 4.75% to 5.00%, marking the first rate cut since March 2020.

This was followed by additional reductions of 25 basis points in both November and December 2024, bringing the target range down to 4.25% to 4.50% as of year-end.

These rate cuts were implemented in response to signs of economic softening, including a cooling labor market and moderating inflation.

Net interest margin decreased to 3.74% for the year ended December 31, 2024, compared to 4.05% for the previous year and was negatively impacted by increased funding costs, due to shifts towards higher costing deposits, which outpaced, on a percentage basis, increased yields on interest-earning assets, due to the lagging benefit of variable rate interest-earning assets repricing higher.

We believe our balance sheet is well-positioned to improve our net interest margin if interest rates hold.

Conversely, a decline in interest rates would likely negatively impact our net interest income.

Changes in market interest rates, the slope of the yield curve, and the rates we earn on interest earning assets or pay on interest bearing liabilities have a significant impact on our net interest spread, net interest margin and net interest income.

During 2025, the Federal Open Market Committee of the Federal Reserve (“FOMC”) lowered the target range for the federal funds rate in response to continued moderation in inflation and evolving economic conditions.

The FOMC reduced the target range by 75 basis points, from 4.25%–4.50% at December 31, 2024, to 3.50%–4.25% by year-end 2025.

All reductions occurred between September and December 2025.

Correspondingly, the prime rate, which generally moves in relation to the federal funds rate, was approximately 6.75% at year-end 2025.

These rate levels influenced both asset yields and funding costs during the year.

Net interest margin increased to 3.82% for the year ended December 31, 2025, compared to 3.74% for the previous year and was driven by lower average costs of interest-bearing liabilities, particularly on money market and time deposits, and the redemption of subordinated debt.

Based on the current composition of our balance sheet, we believe net interest margin could improve if interest rates remain at or near current levels;

however, a decline in interest rates would likely negatively impact our net interest income.

The provision for credit losses is dependent on changes in our loan portfolio and management’s assessment of the collectability of our loan portfolio, as well as prevailing economic and market conditions.

We recorded a $1.3 million provision for credit losses for the year ended December 31, 2024, primarily driven by the replenishment of the allowance due to charge-offs and an increase in provision for credit losses for unfunded commitments.

Net charge-offs totaled $5.0 million for the year ended December 31, 2024, of which $3.2 million was specifically reserved for.

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

The reserve for individually evaluated loans decreased during the year primarily due to $3.2 million in charge-offs, as the associated collateral shortfalls were deemed uncollectable.

No changes were made to the qualitative risk factor conclusions during the year ended December 31, 2024.

The increase in the provision for credit loss for unfunded commitments of $375,000 for the year ended December 31, 2024 was primarily due to a new $9.5 million construction commitment and increased quantitative loss rates.

We recorded a $4.1 million provision for credit losses for the year ended December 31, 2025, primarily driven by loan growth and increases in specific reserves.

Net charge-offs totaled $948,000 for the year ended December 31, 2025.

The lower net charge-offs primarily reflect fewer nonaccrual loan charge-offs, as well as payoffs and collections on previously nonaccrual loans.

Our net income is also affected by noninterest income and noninterest expenses.

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and (vii) other general and administrative expenses.

Our noninterest expenses

decreased $545,000 during the year ended December 31, 2024, as compared to 2023.

Noninterest income and noninterest expenses are impacted by the growth of our banking operations and growth in the amounts of loans and deposits.

Our noninterest expenses decreased $278,000 during the year ended December 31, 2025, as compared to 2024.

Noninterest income and noninterest expenses are influenced by growth of our banking operations and loan and deposit volumes.

Business Strategy

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In acquiring United Business Bank, FSB in 2017, we acquired a large deposit base from the local and regional unionized labor community.

As of December 31, 2024, our top ten depositors, which included nine labor unions, accounted for roughly 11.5% of our total deposits.

As of December 31, 2025, our top ten depositors, which included 10 labor unions, accounted for roughly 11.7% of our total deposits.

At that date, nearly 26.1% of our deposit base was comprised of noninterest bearing demand deposit accounts, significantly lowering our aggregate cost of funds.

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We expect to continue to make opportunistic hires of talented and entrepreneurial bankers, to further augment our growth.

Our bankers are incentivized to increase the size of their loan and deposit portfolios and generate fee income while maintaining strong credit quality.

Our bankers are incentivized to

increase the size of their loan and deposit portfolios and generate fee income while maintaining strong credit quality.

We also seek to cross sell our various banking products, including our deposit products, to our commercial loan clients, which provides a basis for expanding our banking relationships as well as a stable, low-cost deposit base.

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The allowance for credit losses represents management’s estimate of current expected credit losses over the life of a financial asset carried at amortized cost at an appropriate level based upon management’s evaluation of the adequacy of collectively and individually evaluated loss reserves.

The Company’s method for assessing the appropriateness of the allowance for credit losses includes specific allowances for individually analyzed loans, pooled loans component which includes both quantitative and qualitative factors, and reserve for unfunded loan commitments.

Under the CECL methodology, expected credit losses reflect expected losses over the remaining contractual life of an asset, considering the effect of prepayments and available information about the collectability of cash flows, including information about relevant historical experience, current conditions, and reasonable and supportable forecasts of future events and circumstances.

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Regardless of the determination that a charge-off is appropriate for financial accounting purposes, the Company manages its loan portfolio by continually monitoring, where possible, a borrower's ability to pay through the collection of financial information, delinquency status, borrower discussion and the encouragement to repay in accordance with the original contract or modified terms, if appropriate.

All loans with an outstanding balance of $100,000 or more greater are individually evaluated for expected credit loss when it is probable that we will be unable to collect all amounts due according to the original contractual terms of the loan agreement.

All loans with an outstanding balance of $250,000 or more are individually evaluated for expected credit loss when it is probable that we will be unable to collect all amounts due according to the original contractual terms of the

loan agreement.

We select loans for individual assessment on an ongoing basis using criteria such as payment performance, borrower reported and forecasted financial results, and other external factors when appropriate.

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In determining the PD for each pooled segment, the Bank utilized regression analyses to identify certain economic drivers that were considered highly correlated to historical Bank or peer loan default experience.

The regression models developed correlate macroeconomic variables to historical credit performance based on call report data over a 64 quarter

(16-year) period which captures a full economic cycle from 2004 to 2019.

We elected to exclude historical data from 2020 - 2021 to assess the quantitative expected credit losses because we believe that period is an outlier and did not represent normal economic behavior considering the COVID-19 pandemic lockdown with changes in macroeconomic variables and the significant levels of government relief programs in place during that period.

For all segments, the Company's actual loss history was not statistically relevant, thus the loss history of peers, defined as commercial financial institutions with asset size of one to five billion dollars, domiciled in California, with similar concentrations of lending were utilized to determine loss rates.

The regression models developed by the Company correlate macroeconomic variables to historical credit performance based on Call Report data over 78 quarters, consisting of the period from the first quarter of 2004 through the fourth quarter of 2019 and the fourth quarter of 2021 through the first quarter of 2025.

We elected to exclude historical data from 2020 first quarter to 2021 third quarter for purposes of estimating expected credit losses because we believe that period is an outlier and did

not represent normal economic behavior considering the COVID-19 pandemic lockdown with changes in macroeconomic variables and the significant levels of government relief programs in place during that period.

For all segments, the Company's actual loss history was not statistically relevant, thus the loss history of peers, defined as commercial financial institutions with asset size of $1.0 billion to $5.0 billion, domiciled in California, with similar concentrations of lending were utilized to determine loss rates.

The peers utilized in the allowance for credit losses are segment specific.

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Management considers whether adjustments to the quantitative portion of the allowance for credit losses are needed for differences in segment-specific risk characteristics or to reflect the extent to which it expects current conditions and reasonable and supportable forecasts of economic conditions to differ from the conditions that existed during the historical period included in the development of PD and LGD.

During 2025, management applied qualitative adjustments primarily related to macroeconomic forecasts and changes in loan composition within the commercial real estate portfolio.

Qualitative internal and external risk factors include, but are not limited to, the following:

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Total assets.

Total assets increased $112.5 million, or 4.4%, to $2.7 billion at December 31, 2024 from $2.6 billion at December 31, 2023.

The increase was primarily due to increases in cash and cash equivalents of $56.5 million or 18.4%, investment securities available-for-sale of $30.2 million or 18.5%, and loans receivable, net of $29.2 million or 1.5%.

Total assets decreased $70.8 million, or 2.7%, to $2.6 billion at December 31, 2025 from $2.7 billion at December 31, 2024.

The decrease was primarily due to decreases in cash and cash equivalents of $157.5 million or 43.3%, and investment securities available-for-sale of $13.6 million or 7.0%, partially offset by an increase in loans receivable, net of $110.1 million or 5.7%.

Cash and cash equivalents.

Cash and cash equivalents increased $56.5 million, or 18.4%, to $364.0 million at December 31, 2024 from $307.5 million at December 31, 2023.

The increase primarily was due to a $51.3 million increase

in federal funds sold and interest-bearing balances in banks, reflecting excess deposit that were not deployed for loan growth and the purchase of investment securities.

Cash and cash equivalents decreased $157.5 million, or 43.3%, to $206.5 million at December 31, 2025 from $364.0 million at December 31, 2024.

The decrease primarily was due to a $161.2 million decrease in federal funds sold and interest-bearing balances in banks, reflecting the use of excess cash to fund the

Company’s early redemption of the remaining $63.7 million of its outstanding Notes due 2030, as well as to support loan growth and deposit withdrawals.

Investment securities.

Investment securities, all of which are classified as available-for-sale, increased $30.2 million, or 18.5%, to $193.3 million at December 31, 2024 from $163.2 million at December 31, 2023.

The increase primarily was due to purchases of $49.9 million of investment securities during the year ended December 31, 2024, partially offset by $21.9 million in routine amortization, principal repayments and maturities or calls of securities A $2.3 million fair value adjustment related to unrealized gains on investment securities available-for-sale also contributed to the increase.

Investment securities decreased $13.6 million, or 7.0%, to $179.7 million at December 31, 2025 from $193.3 million at December 31, 2024.

The decrease primarily was due to $38.1 million in routine amortization, principal repayments and maturities and calls of securities, partially offset by $15.6 million of investment securities purchased during the year ended December 31, 2025.

A $1.8 million fair value adjustment related to unrealized gains on investment securities available-for-sale also contributed to the increase.

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

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(Dollars in thousands)

Government Agencies

Municipal securities

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SBA securities

ABS securities

Corporate bonds

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Equity securities.

Equity securities increased $535,000, or 4.3% to $13.1 million at December 31, 2024 from $12.6 million at December 31, 2023.

The increase was primarily due to a $463,000 gain on equity securities resulting from an adjustment to the fair value of equity securities during the year ended December 31, 2024.

Equity securities decreased $566,000, or 4.3% to $12.6 million at December 31, 2025 from $13.1 million at December 31, 2024, primarily due to mark-to-market adjustments recorded during the year ended December 31, 2025.

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

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(2) Includes loans located in Sacramento and Northern California counties totaling $92.3 million and loans located in Los Angeles and Orange counties totaling $601.5 million.

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

At December 31, 2024, loans in Colorado, New Mexico, Washington and other states totaled $134.9 million, $62.9 million, $84.6 million and $485.8 million, respectively.

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

At December 31, 2025, loans in Colorado, New Mexico, Washington and other states totaled $132.2 million, $44.5 million, $69.6 million, $89.9 million, and $425.3 million, respectively.

The following table provides information about our loan portfolio segregated by legacy and acquired loans with a remaining discount, net of their discounts at the dates presented.

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Loans purchased or acquired through acquisitions

Loans acquired through acquisitions, net

Other loans purchased

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Acquired loans.

Acquired PCD loans are loans acquired through a business combination with evidence of more than insignificant credit deterioration and are accounted for under ASC Topic 326.

Acquired PCD loans are loans acquired through a business combination with evidence of more than insignificant credit deterioration and are accounted for under Accounting Standards Codification (“ASC”) Topic 326.

Acquired non-PCD loans represent loans acquired through a business combination without more than insignificant evidence of credit deterioration and are accounted for under ASC Topic 310-20.

As of December 31, 2024, acquired non-PCD loans totaled $140.6 million with a remaining net premium of $1.8 million, compared to $187.7 million with a remaining net premium of $2.1 million as of December 31, 2023.

premium for acquired non-PCD loans includes both 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 December 31, 2025, acquired non-PCD loans totaled $121.1 million with a remaining net premium of $397,000 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 both 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 December 31, 2025, the unpaid principal balance of acquired PCD loans totaled $16.1 million with a remaining net non-credit discount of $1.2 million, compared to $24.0 million with a remaining net non-credit discount of $1.5 million as of December 31, 2024.

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Nonperforming assets generally consist of nonaccrual loans, accruing loans 90 days or more past due, and other real estate owned (“OREO”).

Nonperforming assets decreased $3.5 million to $9.5 million, or 0.48% of total loans, at December 31, 2024 compared to $13.0 million, or 0.67% of total loans, at December 31, 2023.

There was no OREO at December 31, 2024 and 2023.

The decrease in nonperforming loans was primarily due to the sale of three nonaccrual loans totaling $8.1 million in the third quarter of 2024, the complete charge-off of a $1.0 million nonaccrual loan in the same period, and the payoff of two nonaccrual loans totaling $460,000.

Additionally, a $283,000 nonaccrual loan was paid off in the fourth quarter of 2024.

These reductions were partially offset by two new loans totaling $3.5 million placed on nonaccrual in the third quarter, two additional loans totaling $35,000 placed on nonaccrual in the fourth quarter, and $220,000 in accruing loans that were 90 days or more past due and in the process of collection.

Nonperforming assets increased $3.8 million to $13.4 million, or 0.65% of total loans, at December 31, 2025 compared to $9.7 million, or 0.50% of total loans, at December 31, 2024.

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

The increase in nonperforming loans was primarily due to 13 new commercial real estate loans (secured by various types of real estate) totaling $13.0 million being placed on nonaccrual status during the year ended December 31, 2025, which were in the process of collection.

These increases were partially offset by payoffs of 12 nonaccrual loans totaling $10.1 million, one $3.2 million non-accrual loan returned to accrual status as the loan is current and in the process of collection, and one fully charged off nonaccrual loan of $105,000.

The rise in nonperforming loans reflects elevated credit risk primarily within the commercial real estate portfolio, more specifically, in the hotel and retail segments of the portfolio.

When these loans were placed on non-accrual, updated appraisals were obtained and indicated collateral shortfalls, resulting in a $1.4 million specific reserve at December 31, 2025, of which $1.3 million related to loans placed on nonaccrual during the current year.

Accruing loans past due 30 to 89 days totaled $1.1 million at December 31, 2025, compared to $6.7 million at December 31, 2024.

At December 31, 2024 and 2023, nonaccrual loans included $643,000 and $4.4 million of loans 30-89 days past due, and $4.4 million and $2.1 million of loans less than 30 days past due, respectively.

At December 31, 2025 and 2024, nonaccrual loans included $562,000 and $643,000 of loans 30-89 days past due, and $9.4 million and $4.4 million of loans less than 30 days past due, respectively.

At December 31, 2025, the $9.4 million of loans less than 30 days past due was comprised of 15 loans all of which were placed on nonaccrual due to concerns over the financial condition of the borrowers.

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Modified loans that are accruing and performing according to their modified terms are not considered nonperforming.

The related allowance for credit losses on individually evaluated modified loans totaled $24,000 and $1.3 million at December 31, 2024 and December 31, 2023, respectively.

The following table sets forth the nonperforming loans, nonperforming assets and modified loans to borrowers experiencing financial difficulty as of the dates indicated:

The related allowance for credit losses on individually evaluated modified loans totaled $1,500 and $24,000 at December 31, 2025 and December 31, 2024, respectively.

The following table sets forth the nonperforming loans, nonperforming assets and performing modified loans to borrowers experiencing financial difficulty as of the dates indicated:

(Dollars in thousands)

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Total nonperforming assets (1)

Modified loans to borrowers experiencing financial difficulty – performing

Performing modified loans to borrowers experiencing financial difficulty – performing

Nonperforming assets to total assets (1)

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

Based on the current conditions of the loan portfolio, management believes that the $17.9 million allowance for credit losses at December 31, 2024 is adequate to absorb probable 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.

The Company adopted the CECL standard on January 1, 2023, which resulted in a one-time adjustment to the allowance for credit losses for loans of $1.5 million (which included the reclassification of the net credit discount on acquired PCD loans totaling $845,000) and an allowance for unfunded loan commitments of $45,000, as well as an after-tax decrease to opening retained earnings of $491,000 on January 1, 2023.

At December 31, 2025, the Company’s allowance for credit losses for loans was $21.2 million, or 1.03% of total loans, compared to $17.9 million, or 0.92% of total loans, at December 31, 2024.

A $4.1 million provision for credit losses was recorded for the year ended December 31, 2025.

In addition to the CECL adjustment on January 1, 2023, a $2.2 million provision for credit losses for loans was recorded for the year ended December 31, 2023.

The $1.3 million provision for credit losses for the year ended December 31, 2024 was primarily driven by the replenishment of the allowance due to charge-offs and an increase in provision for credit losses for unfunded commitments.

Net charge-offs totaled $5.0 million for the year ended December 31, 2024, of which $3.2 million was specifically reserved for.

The reserve for individually evaluated loans decreased during the year primarily due to $3.2 million in charge-offs, as the associated collateral shortfalls were deemed uncollectable.

No changes were made to the qualitative risk factor conclusions during the year ended December 31, 2024.

We recorded net charge-offs of $5.0 million for the year ended December 31, 2024 compared to $550,000 for the year ended December 31, 2023.

The following table shows certain credit ratios at and for the periods indicated and each component of the ratio’s calculations.

Based on the current composition of the Company’s loan portfolio, management believes that the $21.2 million allowance for credit losses at December 31, 2025 is adequate to absorb probable losses inherent in the portfolio.

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

For the year ended December 31, 2025, the $4.1 million provision for credit losses was primarily driven by loan growth, charge-offs during the current year, and increased reserves on both pooled loans and individually evaluated loans.

The decrease in the provision for credit loss for unfunded commitments of $190,000 for the year ended December 31, 2025 was primarily due to a reduction in construction commitments being funded, partially offset by increased loss rates.

The increase in the allowance for credit losses on pooled loans primarily reflected higher quantitative reserves resulting from the Company’s annual update to its CECL model methodology.

The update incorporated more recent economic data and revised segment-specific peer group comparisons, which together contributed to a higher modeled reserve level.

To a lesser extent, the increase also reflected updated economic forecasts, including a higher projected national unemployment rate and a weaker outlook for national gross domestic product compared to the assumptions used as of December 31, 2024.

In addition, loan growth during the year and changes in the risk level associated with certain qualitative factors contributed to the increase.

The allowance for credit losses on individually evaluated loans increased during the year primarily due to three commercial real estate loans placed on nonaccrual status for which updated appraisals indicated collateral shortfalls.

Net charge-offs totaled $948,000 for the year ended December 31, 2025 compared to $5.0 million for the year ended December 31, 2024.

Charge-offs in 2024 included a $3.2 million charge-off related to a loan for which a specific reserve was established as of December 31, 2023.

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

Year ended December 31,

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Total nonaccrual loans

Net charge-offs/(recoveries) during period to average loans outstanding:

Net charge-offs during period to average loans outstanding:

Commercial and industrial:

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Commercial real estate:

Net charge-offs/(recoveries)

Net charge-offs

Average loans outstanding

Net (recoveries)/charge-offs

Net charge-offs

Average loans outstanding

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As of December 31, 2024, the Company individually evaluated $14.9 million of loans, inclusive of the $13.4 million of nonaccrual loans as of that date.

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

As of December 31, 2023, the Company individually evaluated $13.0 million in loans, all of which were on nonaccrual status.

Of these individually evaluated loans, $4.5 million had a specific allowance of $1.4 million as of December 31, 2025.

As of December 31, 2024, the Company individually evaluated $17.4 million in loans, all of which were on nonaccrual status.

Of these individually evaluated loans, $9.2 million had a specific allowance of $392,000 as of December 31, 2024.

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

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Premises and equipment decreased $166,000, or 1.2%, to $13.2 million at December 31, 2025 from $13.4 million at December 31, 2024, driven by normal depreciation expenses associated with these assets.

Deposits are our primary source of funding and consist of core deposits from the communities served by our branch and office locations.

Deposits are our primary source of funding and mainly consist of core deposits from the communities served by our branch network.

We offer a variety of deposit accounts with a competitive range of interest rates and terms to both consumers and businesses.

Deposits include interest bearing and noninterest bearing demand accounts,

savings, money market, certificates of deposit and individual retirement accounts.

Deposits include interest bearing and noninterest bearing demand accounts, savings,

money market, certificates of deposit and individual retirement accounts.

These accounts earn interest at rates established by management based on competitive market factors, management’s desire to increase certain product types or maturities, and in keeping with our asset/liability, liquidity and profitability objectives.

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

Total deposits increased $101.3 million, or 4.7%, to $2.2 billion at December 31, 2024 compared to December 31, 2023.

Total deposits decreased $20.4 million, or 0.9%, to $2.2 billion at December 31, 2025 compared to December 31, 2024.

Noninterest bearing deposits totaled $578.1 million, or 26.1% of total deposits, at December 31, 2025, compared to $689.0 million, or 30.8% of total deposits, at December 31, 2024.

During the year ended December 31, 2024, there was a shift in 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 and time deposits.

During the year ended December 31, 2025, some interest rate sensitive clients shifted a portion of their non-operating deposit balances from lower-cost deposits, including noninterest-bearing deposits, into higher-cost money market and time deposits.

The following table sets forth the dollar amount of deposits in the various types of deposit programs offered at the dates indicated.

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At both December 31, 2025 and 2024, there were 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.

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

At December 31, 2025, we had the ability to borrow up to $49.3 million from the FRB of San Francisco, with no FRB of San Francisco advances outstanding at that date.

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

At December 31, 2024, the Company had outstanding subordinated debt, net of costs to issue, totaling $63.7 million compared to $63.9 million at December 31, 2023.

During the third quarter of 2025, the Company redeemed all of the Company’s outstanding subordinated debt.

At December 31, 2025, the Company had no subordinated debt remaining, compared to $63.7 million, net of issuance costs, at December 31, 2024.

For additional information, see “Item 1–Business – Sources of Funds ”, contained in this Form 10-K.

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Shareholders’ equity increased $14.2 million, or 4.4%, to $338.6 million at December 31, 2025 from $324.4 million at December 31, 2024.

The increase was due to $23.6 million of net income, a $1.6 million decrease in accumulated other comprehensive loss, net of taxes, reflecting the increase in market interest rates during the year and $588,000 in stock based compensation related to the grant of equity awards, partially offset by the repurchase of $9.3 million of our common stock and the $5.0 million in cash dividends paid or accrued during 2024.

During the year ended December 31, 2024, the Company repurchased a total of 455,654 shares of its common stock at a total cost of $20.31 per share.

At December 31, 2024, 464,098 shares remain available for future purchases under the current stock repurchase plan.

The increase was due to $23.9 million of net income, a $6.4 million decrease in accumulated other comprehensive loss, net of taxes, reflecting the increase in market interest rates during the year, and $653,000 in stock-based compensation related to the grant of equity awards.

These changes were partially offset by the repurchase of $6.9 million of the Company’s common stock and the $9.9 million in cash dividends paid or accrued during 2025.

During the year ended December 31, 2025, the Company repurchased a total of 261,654 shares of its common stock at an average cost of $26.40 per share.

At December 31, 2025, 202,444 shares remained available for future purchases under the current stock repurchase plan.

For additional information related to our stock repurchases, see “Item 5.

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Earnings summary.

We reported net income of $23.6 million for the year ended December 31, 2024, compared to $27.4 million for the year ended December 31, 2023, a decrease of $3.8 million or 13.9%.

Net income for the year ended December 31, 2024 reflects a $6.7 million decrease in net interest income, a $750,000 decrease in the provision for credit losses and an $600,000 decrease in noninterest income, partially offset by a $545,000 decrease in noninterest expense and a $2.2 million decrease in the provision for income taxes.

Diluted earnings per share were $2.10 for the year ended December 31, 2024, a decrease of $0.17 from diluted earnings per share of $2.27 for the year ended December 31, 2023.

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 65.77% for the year ended December 31, 2024, compared to 61.69% for the year ended December 31, 2023.

The deterioration in the efficiency ratio during the year ended December 31, 2024 was primarily due to lower revenues, partially offset by a slight decrease in total noninterest expenses.

We reported net income of $23.9 million for the year ended December 31, 2025, compared to $23.6 million for the year ended December 31, 2024, an increase of $317,000 or 1.3%.

Net income for the year ended December 31, 2025 reflects a $3.3 million increase in net interest income and a $278,000 decrease in noninterest expense, partially offset by a $2.8 million increase in the provision for credit losses, a $291,000 decrease in noninterest income and a $180,000 increase in the provision for income taxes.

Diluted earnings per share were $2.18 for the year ended December 31, 2025, up $0.08 from diluted earnings per share of $2.10 for the year ended December 31, 2024.

Our efficiency ratio, calculated as noninterest expense divided by the sum of net interest income before provision for credit losses and noninterest income, was 63.51% for the year ended December 31, 2025, compared to 65.77% for the year ended December 31, 2024.

The improvement in the efficiency ratio was primarily due to higher revenues and, to a lesser extent, a modest decrease in total noninterest expenses.

Interest income.

Interest income for the year ended December 31, 2025 was $135.4 million, compared to $131.7 million for the year ended December 31, 2024, an increase of $3.7 million or 2.8%.

Increased average yields on interest-earning assets, along with an increase in the average balance of fed funds sold and interest bearing balances in banks, were the primary drivers for the increase in interest income.

Interest income on loans, including fees, decreased $2.3 million , or 2.1%, to $104.1 million for the year ended December 31, 2024, compared to $106.3 million for the year ended December 31, 2023.

The decrease was primarily due to a $103.0 million decrease in the average balance of loans, partially offset by a 17 basis point increase in the average loan yield.

Increased average yields and balances on interest-earning assets, specifically, loans and investment securities, drove the increase in interest income.

Interest income on loans, including fees, increased $10.1 million , or 9.7%, to $114.1 million for the year ended December 31, 2025, compared to $104.1 million for the year ended December 31, 2024.

The increase was primarily due to a $114.3 million increase in the average balance of loans and a 19 basis point increase in the average loan yield.

The average yield earned on loans, including the accretion of the net discount and deferred loan fees recognized, was 5.68% for the year ended December 31, 2025, compared to 5.49% for the year ended December 31, 2024.

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The remaining net discount on these acquired loans was $87,000 and $326,000 at December 31, 2025 and 2024, respectively.

Interest income on investment securities, excluding FRB and FHLB stock, increased $2.0 million, or 28.4%, to $9.0 million for the year ended December 31, 2024 from $7.0 million for the year ended December 31, 2023.

The increase was due to a 46 basis point increase in the yield on investment securities to 4.51% for the year ended December 31, 2024 from 4.05% for the year ended December 31, 2023, and a $26.6 million increase in the average balance of investment securities.

Interest income on investment securities, excluding FRB and FHLB stock, increased $438,000, or 4.9%, to $9.4 million for the year ended December 31, 2025 from $9.0 million for the year ended December 31, 2024.

The increase was due to a 14 basis point increase in the average yield on investment securities to 4.65% for the year ended December 31, 2025 from 4.51% for the year ended December 31, 2024, and a $3.1 million increase in the average balance of investment securities.

Dividends on FHLB and FRB stock totaled $1.6 million and $1.4 million for the years ended December 31, 2025 and 2024, respectively.

Interest income on fed funds sold and interest-bearing balances in banks increased $5.5 million, or 47.4% to $17.1 million for the year ended December 31, 2024 from $11.6 million for the year ended December 31, 2023.

The increase was primarily due to a $99.6 million increase in the average balance of federal funds sold and interest-bearing balances in banks for the year ended December 31, 2024 compared to the year ended December 31, 2023.

A 10 basis point increase in the yield on fed funds sold and interest-bearing balance in banks to 5.30% for the year ended December 31, 2024 from 1.20% for the year ended December 31, 2023 also contributed to the increase.

Interest income on fed funds sold and interest-bearing balances in banks decreased $6.8 million, or 39.9% to $10.3 million for the year ended December 31, 2025 from $17.1 million for the year ended December 31, 2024.

The decrease was primarily due to a $86.5 million decrease in the average balance of federal funds sold and interest-bearing balances in banks, reflecting the use of excess cash to fund the early redemption of $63.7 million of the Company’s outstanding subordinated notes, as well as loan growth and deposit outflows.

A 95 basis point decrease in the average yield on fed funds sold and interest-bearing balance in banks to 4.35% for the year ended December 31, 2025 from 4.35% for the year ended December 31, 2024 also contributed to the decrease.

Interest expense.

Interest expense increased $12.1 million, or 42.5%, to $40.6 million for the year ended December 31, 2024 from $28.5 million for the year ended December 31, 2023, reflecting higher funding costs primarily related to increased rates of interest payable on our money market and time deposits .

Interest expense increased $366,000, or 0.9%, to $40.9 million for the year ended December 31, 2025 from $40.6 million for the year ended December 31, 2024, reflecting higher funding costs primarily related to increased rates of interest payable on our money market and time deposits .

The average rate paid on interest bearing liabilities for the year ended December 31, 2025 was 2.51% compared to 2.54% for year ended December 31, 2024.

The total average balance of interest-bearing liabilities increased $30.4 million, or 1.90%, to $1.6 billion for the year ended December 31, 2025, from the year ended December 31, 2024, primarily due to an increase in interest-bearing time deposits.

Interest expense on deposits increased $12.1 million, or 50.3%, to $36.1 million for the year ended December 31, 2024 from $24.0 million for the year ended December 31, 2023, primarily due to increases in the average rate paid on money market and accounts and time deposits, and an increase in the average balance of time deposits.

The average rate paid on interest bearing deposits increased to 2.37% for the year ended December 31, 2024, from 1.66% for the year ended December 31, 2023, with the average rate paid on money market deposits increasing 72 basis points to 2.36% during 2024 compared to 1.64% during 2023, and the average rate paid on time deposits increasing 77 basis points to 3.99% during 2024 compared to 3.22% during 2023.

Interest expense on deposits increased $680,000, or 1.9%, to $36.8 million for the year ended December 31, 2025 from $36.1 million for the year ended December 31, 2024, primarily due to increases in the average balances of money market accounts and time deposits, partially offset by decreases in the average rates paid on those accounts.

The average balance of time deposits increased $39.7 million, or 7.73%, to $553.2 million during 2025, compared to $513.5 million during 2024.

The overall average cost of deposits, which includes noninterest-bearing deposits, for the year ended December 31, 2024 increased to 1.68%, compared to 1.13% for the year ended December 31, 2023.

Similarly, the average balance of money market accounts increased $31.5 million, or 4.9%, to $680.7 million during 2025, up from $649.2 million during 2024.

The average rate paid on interest bearing deposits decreased to 2.34% for the year ended December 31, 2025, from 2.37% for the year ended December 31, 2024, with the average rate paid on time deposits decreasing 26 basis points to 3.73% during 2025 compared to 3.99% during 2024, and the average rate paid on money market deposits decreasing three basis points to 2.33% during 2025 compared to 2.36% during 2024.

The overall average cost of deposits, which includes noninterest-bearing deposits, was 1.68% for both the year ended December 31, 2025 and the year ended December 31, 2024.

The average balance of noninterest bearing deposits decreased $15.8 million, or 2.54%, to $608.0 million for the year ended December 31, 2025 compared to $623.8 million for the year ended December 31, 2024.

Interest expense on borrowings, which consisted solely of subordinated debt and junior subordinated debentures, remained relatively unchanged between 2024 and 2023.

The average balance of borrowings outstanding decreased $218,000, or 0.3%, to $72.3 million for the year ended December 31, 202 4, compared to 2023.

At the same time, t he average cost of borrowings increased three basis points to 6.13% for the year ended December 31, 2024, from 6.10% for 2023.

Interest expense on borrowings, which in 2024 consisted primarily of subordinated debt and junior subordinated debentures, decreased in 2025, as the Company redeemed all of its subordinated debt in September 2025.

Accordingly, borrowings outstanding at December 31, 2025 consisted primarily of junior subordinated debentures.

The average balance of borrowings decreased $18.7 million, or 25.8%, to $53.6 million for the year ended December 31, 2025, compared to the year ended December 31, 2024.

At the same time, the average cost of borrowings increased 156 basis points to 7.68% in 2025, up from 6.13% in 2024.

Net interest income and net interest margin.

Net interest income decreased $6.7 million, or 6.9%, to $91.1 million for the year ended December 31, 2024 compared to $97.9 million for the year ended December 31, 2023.

The decrease in net interest income primarily was due to decreases in interest income on loans, and higher funding costs related to our deposits, partially offset by increases in interest income on federal funds sold and interest-bearing balances in banks and, to a lesser extent, investment securities, including dividends on FRB and FHLB stock.

Net interest margin for the year ended December 31, 2024 was 3.74%, a 31 basis point decrease from 4.05% for the year ended December 31, 2023.

The decrease in net interest margin reflects increased funding costs, which outpaced, on a percentage basis, increasing yields on loans and investment securities.

The average yield on interest earning assets for the year ended December 31, 2024 was 5.40%, a 17 basis point increase from 5.23% for the year ended December 31, 2023, primarily due to higher market interest rates, while the average

cost of interest bearing liabilities for the year ended December 31, 2024 was 2.54%, a 67 basis point increase from 1.87% for the year ended December 31, 2023.

Net interest income increased $3.3 million, or 3.6%, to $94.5 million for the year ended December 31, 2025, compared to $91.1 million for the year ended December 31, 2024.

The increase primarily resulted from higher interest income on loans and investment securities and a decrease in interest expense on borrowings, partially offset by lower interest income on federal funds sold and interest-bearing balances in banks, as well as an increase in interest expense on deposits.

Net interest margin for the year ended December 31, 2025 was 3.82%, an eight basis point increase from 3.74% for the year ended December 31, 2024.

The increase in net interest margin primarily reflects higher yields on interest-earning assets, particularly loans and investment securities, driven by both rate and volume increases.

The average yield

on interest-earning assets increased to 5.48% for 2025 from 5.40% in 2024, while the average cost of interest-bearing liabilities slightly decreased to 2.51% in 2025 from 2.54% in 2024.

Overall, net interest income growth and margin expansion were largely attributable to the combination of higher asset balances and rising yields, partially offset by modestly higher interest costs on deposits.

Average Balances, Interest and Average Yields/Cost.

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Junior subordinated debentures, net

Other borrowings

Total interest expense

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Provision for credit losses.

W e recorded a $1.3 million provision for credit losses for the year ended December 31, 2024, compared to a $2.0 million provision for credit losses for the year ended December 31, 2023.

As previously discussed, the provision for credit losses for the year ended December 31, 2024 was primarily driven by the replenishment of the allowance due to charge-offs and an increase in provision for credit losses for unfunded commitments.

Net charge-offs totaled $5.0 million for the year ended December 31, 2024, of which $3.2 million was specifically reserved for, compared to net charge-offs of $550,000 in 2023.

The reserve for individually evaluated loans decreased during the year primarily due to $3.2 million in charge-offs, as the associated collateral shortfalls were deemed uncollectable.

No changes were made to the qualitative risk factor conclusions during the year ended December 31, 2024.

We recorded a $4.1 million provision for credit losses for the year ended December 31, 2025, compared to a $1.3 million provision for credit losses for the year ended December 31, 2024.

The provision for credit losses for the year ended December 31, 2025 was primarily driven by loan growth, charge-offs during the current year, and increased reserves on both pooled loans and individually evaluated loans.

Net charge-offs totaled $948,000 for the year ended December 31, 2025 compared to net charge-offs of $5.0 million in 2024.

The lower level of net charge-offs for 2025 primarily reflect fewer nonaccrual loan charge-offs, as well as payoffs and collections on previously nonaccrual loans.

Approximately $9.4 million of nonaccrual loans were less than 30 days past due as of December 31, 2025, and were placed on nonaccrual primarily due to borrower-specific financial concerns or elevated risk in the underlying collateral rather than payment delinquency.

The Company continues to monitor these loans closely, and certain loans may return to accrual status if the borrowers’ financial positions stabilize and full collection of principal and interest becomes probable.

Noninterest income.

Noninterest income decreased $600,000, or 8.6%, to $6.4 million for the year ended December 31, 2024 compared to $7.0 million for the year ended December 31, 2023.

The decrease was primarily due to a $500,000 loss on investment in a Small Business Investment Company (“SBIC”) fund in 2024 resulting from losses in the underlying fund, compared to a $1.1 million gain reported in 2023.

Additionally, decreases in loan servicing fees and other fees, gain on sale of loans, and service charges and other fees further contributed to the decline.

During the year ended December 31, 2024, the Company sold $3.6 million of SBA loans (the guaranteed portion), which generated a gain on sale of $287,000, compared to the sale of $7.2 million of SBA loans (the guaranteed portion) with a gain on sale of $508,000 for the year ended December 31, 2023 .

Offsetting these decreases was a $1.6 million increase in gain on equity securities resulting from positive fair value adjustments on these securities due to changes in market conditions.

Total noninterest income decreased $291,000, or 4.6%, to $6.1 million for the year ended December 31, 2025 compared to $6.4 million for the year ended December 31, 2024.

The decrease was primarily due to a $693,000 decrease in gain on equity securities as a result of negative fair value adjustments on these securities due to changes in market conditions and a $160,000 decrease in other income and fees, offset by a $222,000 decrease in loss on investment in SBIC fund, a $184,000 increase in service charges and other fees, and a $175,000 increase in loan servicing and other loan fees.

The following table presents the key components of noninterest income for the years ended December 31, 2025 and 2024.

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Gain on sale of loans

Gain (loss) on equity securities

(Loss) gain on equity securities

Service charges and other fees

Loan servicing and other loan fees

(Loss) income on investment in SBIC fund

Loss on investment in SBIC fund

Other income and fees

Total noninterest income

N/M - Not meaningful

Noninterest expense.

Noninterest expense decreased $545,000, or 0.8%, to $64.1 million for the year ended December 31, 2024 compared to $64.7 million for the year ended December 31, 2023 .

The changes in noninterest expense included a $2.1 million decrease in salaries and employee benefits expense due to annual wage increases, partially offset by a $652,000 increase in data processing expense due to newly implemented services in the current year, a $517,000 increase in occupancy and equipment due to higher depreciation and property maintenance expense and $381,000 increase in other expense due to increased legal costs.

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

Total noninterest expense decreased $278,000, or 0.4%, to $63.9 million for the year ended December 31, 2025 compared to $64.1 million for the year ended December 31, 2024.

The decrease was primarily due to a $2.1 million decline in other expense, which included the return of $1.2 million of excess funds to the Bank in 2025 from a loss reserve account previously established under the CalCAP.

The excess funds were returned due to strong loan performance.

No unused CalCAP funds were returned in 2024.

The decrease in other expense also reflected lower legal and professional service costs, reduced FDIC insurance expense and a lower level of fraudulent check losses.

These decreases were partially offset by a $1.3 million increase in salaries and wages resulting from higher incentive compensation and increased base wages, and a $593,000 increase in data processing expense due to newly implemented services in 2025.

The following table presents the key components of noninterest expense for the years ended December 31, 2025 and 2024:

Year ended December 31,

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Income taxes.

Income tax expense decreased $2.2 million, or 20.7%, to $8.5 million for the year ended December 31, 2024 from $10.7 million for the year ended December 31, 2023, reflecting an decrease in pre-tax income for the period ended December 31, 2024.

Income tax expense increased $180,000, or 2.1%, to $8.7 million for the year ended December 31, 2025 from $8.5 million for the year ended December 31, 2024, reflecting an increase in pre-tax income for the year ended December 31, 2025.

The Company’s effective tax rate was 26.6% for the year ended December 31, 2025 compared to 26.5% for 2024.

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We rely on several different sources to meet our potential liquidity demands.

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

During the years ended December 31, 2024, 2023 and 2022, the Bank sold $14.0 million , $9.6 million and

$42.5 million in loans and loan participation interests, and received $299.9 million, $196.7 million and $469.6 million in principal repayments, respectively.

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

During the years ended December 31, 2025, 2024 and 2023, the Bank sold $5.1 million, $14.0 million and $9.6 million in loans and loan participation interests, and received $354.1 million, $299.9 million and $196.7 million in principal repayments, respectively.

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

During the years ended December 31, 2024 and 2023, deposits increased by $101.3 million and $47.3 million, respectively.

Liquid assets in the form of cash and cash equivalents, time deposit in banks and investment securities available-for-sale increased to $557.6 million at December 31, 2024 from $471.9 million at December 31, 2023.

During the years ended December 31, 2025 and 2024, deposits decreased by $20.4 million and increased by $101.3 million, respectively.

Liquid assets in the form of cash and cash equivalents, time deposit in banks and investment securities available-for-sale decreased to $386.2 million at December 31, 2025 from $557.6 million at December 31, 2024.

Further, management believes that our security portfolio is of high quality, helping to ensure marketability.

Securities purchased during the years ended December 31, 2024 and 2023, excluding FHLB and FRB stock, totaled $49.9 million and $25.3 million, while securities repayments, maturities and sales in those periods were $21.9 million, and $11.6 million, respectively.

Securities purchased during the years ended December 31, 2025 and 2024, excluding FHLB and FRB stock, totaled $15.6 million and $49.9 million, while securities repayments, maturities and sales in those years were $38.2 million, and $21.9 million, respectively.

Certificates of deposit scheduled to mature in one year or less at December 31, 2025, totaled $471.2 million.

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

In addition, 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 December 31, 2024, we had the ability to borrow up to $41.9 million from the FRB of San Francisco, with no FRB of San Francisco advances outstanding at that date.

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

At December 31, 2025 and December 31, 2024, we had the ability to borrow up to $49.3 million and $41.9 million, respectively, from the FRB of San Francisco.

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

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, pay maturing deposits and fund withdrawals, and to fund loan commitments.

Loan commitments and letters of credit were $73.4 million and $77.4 million, including $9.6 million and $133,000 of undisbursed construction and development loan commitments, at December 31, 2024 and 2023, respectively.

Loan commitments and letters of credit were $67.5 million and $73.4 million, including $1.5 million and $9.6 million of undisbursed construction and development loan commitments, at December 31, 2025 and 2024, respectively.

For information regarding our commitments, see “Note 15 - Commitments and Contingencies” of the Notes to Consolidated Financial Statements included in “Item 8.

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Net cash provided by operating activities was $31.8 million and $30.4 million for the years ended December 31, 2025 and 2024, respectively.

During the year ended December 31, 2024, net cash used in investing activities, which consisted primarily of net change in loans receivable and purchases, sales and maturities of investment securities, was $62.2 million compared to $80.4 million of net cash provided in investing activities for the year ended December 31, 2023.

Financing activities, comprised primarily of net change in deposits, provided net cash of $87.1 million and $19.5 million for the years ended December 31, 2024 and 2023, respectively.

We incur capital expenditures on an ongoing basis to expand and improve our product offerings, enhance and modernize our technology infrastructure, and to introduce new technology-based products to compete effectively in our markets.

We evaluate capital expenditure projects based on a variety of factors, including expected strategic impacts (such as forecasted impact on revenue growth, productivity, expenses, service levels and customer retention) and our expected return on investment.

Net cash used in investing activities, which consisted primarily of net change in loans receivable and purchases, sales and maturities of investment securities, was $90.8 million and $62.2 million for the years ended December 31, 2025 and 2024, respectively.

During the year ended December 31, 2025, financing activities, comprised primarily of net change in deposits, used net cash of $98.6 million, compared to $88.3 million of net cash provided by financing activities for the year ended December 31, 2024.

We incur capital expenditures on an ongoing basis to expand and improve our product offerings, enhance and modernize our technology infrastructure, and introduce new technology-based products to compete effectively in our markets.

return on investment.

The amount of capital investment is influenced by, among other things, current and projected demand for our services and products, cash flow generated by operating activities, cash required for other purposes and regulatory considerations.

The Bank utilizes funds to acquire, upgrade, and maintain its equipment, IT infrastructure and operating locations, with the investment intended to provide longer-term utility to the Company’s business.

Based on current capital allocation objectives, there are no projects scheduled for capital investments in premises, IT infrastructure and equipment

during the year ending December 31, 2025 that would materially impact liquidity.

We also have purchase obligations, generally with remaining terms of less than three years and contracts with various vendors to provide services, including information processing, for periods generally ranging from one to five years, for which our financial obligations are dependent upon acceptable performance by the vendor.

In addition, at December 31, 2024, we had other future obligations and accrued expenses of $32.4 million.

As of December 31, 2024, we project that our future commitments will include $14.4 million of operating lease payments.

As of December 31, 2024, there were $4.1 million of scheduled interest payments due on subordinated notes and junior subordinated debentures (excluding any other borrowings that may be made after December 31, 2024).

In addition, at December 31, 2024, there were other future obligations and accrued expenses of $14.0 million.

Based on current capital allocation objectives, there are no projects scheduled for capital investments in premises, IT infrastructure and equipment as of December 31, 2025 that would materially impact liquidity.

As of December 31, 2025, we had total other future obligations and accrued expenses of $27.9 million, which includes $13.7 million of projected operating lease payments and $622,000 of scheduled interest payments on junior subordinated debentures, excluding any borrowings made after December 31, 2025.

For information regarding our operating leases, see “Note 6, Leases” of the Notes to Consolidated Financial Statements included in “Item 8.

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At December 31, 2025, the Company, on an unconsolidated basis, had liquid assets of $7.5 million.

In addition to its operating expenses, the Company is responsible for paying any dividends declared to its shareholders, funds paid out for Company stock repurchases, and payments on trust-preferred securities and the subordinated notes issued at the holding company level.

The Company has the ability to receive dividends or capital distributions from the Bank, although there are regulatory restrictions on the ability of the Bank to pay dividends.

During 2024, the Company declared $5.0 million of cash dividends on its common stock, of with $1.7 million remained to be paid subsequent to year-end.

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

The Company can receive dividends or other capital distributions from the Bank, although there are regulatory restrictions on the ability of the Bank to make such payments.

During 2025, the Company declared $9.9 million of cash dividends on its common stock, of which $3.3 million was paid subsequent to year-end.

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

On February 19, 2026, the Company declared a quarterly cash dividend of $0.30 per share on the Company’s outstanding common stock, payable on April 9, 2026 to shareholders of record as of the close of business on March 12, 2026.

Assuming continued payment during 2025 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 current outstanding shares at December 31, 2024.

Assuming continued payment during 2026 at this rate of $0.30 per share, our average total dividend paid each quarter would be approximately $3.3 million based on the number of our outstanding shares at December 31, 2025.

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

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In May 2024, the Company announced that its Board of Directors approved a stock repurchase program authorizing the Company to repurchase up to five percent of BayCom’s common stock, or approximately 560,000 shares.

The repurchase program will expire on April 21, 2025, unless sooner completed.

The repurchase program does not have a set expiration date.

The repurchase program may be suspended, terminated or modified at any time for any reason, including market conditions, the cost of repurchasing shares, the availability of alternative investment opportunities, liquidity, and other factors deemed appropriate.

The repurchase program does not obligate the Company to purchase any particular number of shares.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” of this Form 10-K for additional information relating to stock.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” of this Form 10-K for additional information relating to stock repurchases.

Regulatory capital.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis