Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2025
or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-38483
BAYCOM CORP
(Exact name of registrant as specified in its charter)
California
37-1849111
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
500 Ygnacio Valley Road, Suite 200, Walnut Creek, California
94596
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code: (925) 476-1800
None
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, no par value per share
BCML
The NASDAQ Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐
Accelerated filer ☒
Non-accelerated filer ☐
Smaller reporting company ☒
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the registrant’s classes of common stock as of the latest practicable date.
As of November 3, 2025, there were 10,897,763 shares of the registrant’s common stock outstanding.
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
PART I — FINANCIAL INFORMATION
2
ITEM 1. FINANCIAL STATEMENTS
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
34
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
59
ITEM 4. CONTROLS AND PROCEDURES
PART II — OTHER INFORMATION
61
ITEM 1. LEGAL PROCEEDINGS
ITEM 1A. RISK FACTORS
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
ITEM 4. MINE SAFETY DISCLOSURES
ITEM 5. OTHER INFORMATION
62
ITEM 6. EXHIBITS
SIGNATURES
63
In this document, “BayCom” refers to BayCom Corp, the “Bank” refers to United Business Bank, BayCom’s wholly-owned subsidiary, and the “Company,” “we,” “us,” and “our” refer to BayCom and the Bank collectively, unless the context otherwise requires.
1
Item 1. Financial Statements
Condensed Consolidated Balance Sheets (unaudited)
3
Condensed Consolidated Statements of Income (unaudited)
4
Condensed Consolidated Statements of Comprehensive Income (unaudited)
5
Condensed Consolidated Statements of Changes in Shareholders’ Equity (unaudited)
6
Condensed Consolidated Statements of Cash Flows (unaudited)
8
Notes to Condensed Consolidated Financial Statements (unaudited)
10
BAYCOM CORP AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except for share data)
(unaudited)
September 30,
December 31,
2025
2024
ASSETS
Cash due from banks
$
21,731
23,138
Federal funds sold and interest-bearing balances in banks
206,715
340,894
Cash and cash equivalents
228,446
364,032
Time deposits in banks
—
249
Investment securities available-for-sale ("AFS"), at fair value, net of allowance for credit losses of $0 at both September 30, 2025 and December 31, 2024
187,774
193,328
Equity securities, at fair value
13,307
13,120
Federal Home Loan Bank ("FHLB") stock, at par
11,524
11,313
Federal Reserve Bank ("FRB") stock, at par
9,657
9,645
Loans held for sale
421
2,216
Loans, net of allowance for credit losses of $20,800 at September 30, 2025 and $17,900 at December 31, 2024
2,021,537
1,934,996
Premises and equipment, net
13,577
13,386
Core deposit intangible, net
1,945
2,693
Cash surrender value of bank owned life insurance ("BOLI") policies, net
24,162
23,591
Right-of-use assets ("ROU"), net
13,476
13,383
Goodwill
38,838
Interest receivable and other assets
39,123
43,718
Total assets
2,603,787
2,664,508
LIABILITIES AND SHAREHOLDERS’ EQUITY
Noninterest and interest bearing deposits
2,228,052
2,234,009
Junior subordinated deferrable interest debentures, net
8,706
8,645
Subordinated debt, net
63,736
Salary continuation plan
4,991
4,737
Lease liabilities
14,494
14,383
Interest payable and other liabilities
13,275
14,632
Total liabilities
2,269,518
2,340,142
Commitments and contingencies (Note 17)
Shareholders' equity
Preferred stock, no par value; 10,000,000 shares authorized; no shares issued and outstanding at both September 30, 2025 and December 31, 2024
Common stock, no par value; 100,000,000 shares authorized; 10,916,792 and 11,121,475 shares issued and outstanding at September 30, 2025 and December 31, 2024, respectively
166,633
172,254
Additional paid in capital
287
Accumulated other comprehensive loss, net of tax
(7,962)
(13,006)
Retained earnings
175,311
164,831
Total shareholders’ equity
334,269
324,366
Total liabilities and shareholders’ equity
See Notes to Condensed Consolidated Financial Statements.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except for share and per share data)
Three months ended
Nine months ended
Interest income:
Loans, including fees
29,220
26,232
84,331
76,503
Investment securities
2,315
2,393
7,175
6,530
Fed funds sold and interest-bearing balances in banks
3,017
4,414
8,359
13,348
FHLB dividends
253
243
750
762
FRB dividends
145
144
434
433
Total interest and dividend income
34,950
33,426
101,049
97,576
Interest expense:
Deposits
9,777
9,448
27,669
26,677
Subordinated debt
1,571
892
3,354
2,676
Junior subordinated deferrable interest debentures
193
221
577
656
Total interest expense
11,541
10,561
31,600
30,009
Net interest income
23,409
22,865
69,449
67,567
Provision for credit losses
2,973
1,245
3,818
1,668
Net interest income after provision for credit losses
20,436
21,620
65,631
65,899
Noninterest income:
Gain on sale of loans
251
Gain on equity securities
771
1,420
523
1,672
Service charges and other fees
825
898
2,683
2,471
Loan servicing and other loan fees
403
324
1,308
1,157
Loss on investment in Small Business Investment Company (“SBIC”) fund
(29)
(253)
(365)
(212)
Other income and fees
278
356
801
915
Total noninterest income
2,248
2,745
5,201
6,290
Noninterest expense:
Salaries and employee benefits
10,168
9,569
29,831
29,247
Occupancy and equipment
2,143
2,209
6,462
6,496
Data processing
2,038
1,973
5,804
5,376
Other expense
1,597
2,323
5,592
7,038
Total noninterest expense
15,946
16,074
47,689
48,157
Income before provision for income taxes
6,738
8,291
23,143
24,032
Provision for income taxes
1,731
2,274
6,070
6,538
Net income
5,007
6,017
17,073
17,494
Earnings per common share:
Basic earnings per common share
0.46
0.54
1.55
Weighted average common shares outstanding
10,929,779
11,148,482
11,022,179
11,308,901
Diluted earnings per common share
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
Other comprehensive income:
Change in unrealized gain on AFS securities
3,296
3,414
7,328
4,820
Deferred tax expense
(1,136)
(980)
(2,284)
(1,396)
Other comprehensive income, net of tax
2,160
2,434
5,044
3,424
Total comprehensive income
7,167
8,451
22,117
20,918
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
Accumulated
Common
Additional
Other
Total
Number of
Stock
Paid in
Comprehensive
Retained
Shareholders’
Shares
Amount
Capital
Income/(Loss)
Earnings
Equity
Three months ended September 30, 2025
Balance, July 1, 2025
10,941,232
167,369
(10,122)
173,028
330,562
Other comprehensive income, net
Restricted stock granted
8,860
Forfeiture of restricted stock grants
Cash dividends of $0.25 per share
(2,724)
Stock based compensation
173
Repurchase of shares
(33,300)
(909)
Balance, September 30, 2025
10,916,792
Three months ended September 30, 2024
Balance, July 1, 2024
11,172,323
173,108
(13,602)
155,472
315,265
9,289
Cash dividends of $0.10 per share
(1,110)
159
(51,240)
(1,084)
Balance, September 30, 2024
11,130,372
172,183
(11,168)
160,379
321,681
Nine months ended September 30, 2025
Balance, January 1, 2025
11,121,475
31,081
Forfeiture of restricted stock granted
(3,221)
Cash dividends of $0.60 per share
(6,593)
475
(232,543)
(6,096)
Nine months ended September 30, 2024
Balance, January 1, 2024
11,551,271
180,913
(14,592)
146,261
312,869
33,760
(505)
Cash dividends of $0.30 per share
(3,376)
483
(454,154)
(9,213)
7
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash flows from operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:
1,495
3,409
Amortization (accretion) on acquired loans
180
(95)
(251)
(287)
Proceeds from sale of loans originated for sale
4,496
4,749
Loans originated for sale
(3,372)
(3,562)
Accretion on junior subordinated debentures
60
Gain on repayment of subordinated debt, net
(34)
Increase in cash surrender value of life insurance policies
(571)
(542)
Amortization/accretion of premiums/discounts on investment securities, net
95
18
(523)
(1,672)
Depreciation and amortization
2,460
1,537
Core deposit intangible amortization
748
916
Stock based compensation expense
Decrease in deferred loan origination fees, net
(128)
Net change in interest receivable and other assets
1,011
(7)
Increase in salary continuation plan, net
254
Net change in interest payable and other liabilities
(3,951)
(1,783)
Net cash provided by operating activities
22,993
22,369
Cash flows from investing activities:
Proceeds from maturities of interest bearing deposits in banks
747
Purchase of investment securities AFS
(11,569)
(39,020)
Proceeds from maturities, repayments and calls of investment securities AFS
24,692
13,140
Purchase of FHLB stock
(211)
Purchase of FRB stock
(12)
(14)
Proceeds from sale of loans
6,837
Purchase of loans
(24,633)
(64,432)
(Increase) decrease in loans, net
(64,479)
65,032
Purchase of equipment and leasehold improvements, net
(2,008)
(1,643)
Net cash used in investing activities
(77,971)
(19,353)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS – (continued)
Cash flows from financing activities:
Decrease in noninterest and interest bearing deposits in banks, net
(16,767)
(8,900)
Increase in time deposits, net
10,810
12,591
Repayment of subordinated debt, net
(64,685)
(315)
Repurchase of common stock
Dividends paid on common stock
(3,870)
(3,434)
Net cash used in financing activities
(80,608)
(9,271)
Decrease in cash and cash equivalents
(135,586)
(6,255)
Cash and cash equivalents at beginning of period
307,539
Cash and cash equivalents at end of period
301,284
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest expense
32,287
30,096
Income taxes paid, net
6,473
5,317
Non-cash investing and financing activities:
Change in unrealized gain on AFS securities, net of tax
Transfer of loans to held-for-sale
697
2,252
Recognition of ROU assets in exchange for lease obligations
2,701
1,629
Cash dividends declared on common stock not yet paid
9
NOTE 1 – BASIS OF PRESENTATION
BayCom Corp (the “Company”) is a bank holding company headquartered in Walnut Creek, California. United Business Bank (the “Bank”), the Company’s wholly owned banking subsidiary, is a California state-chartered bank which provides a broad range of financial services primarily to local small and mid-sized businesses, service professionals and individuals. In its 20 years of operation, the Bank has grown to 34 full-service banking branches at September 30, 2025, with 16 locations in California, one in Nevada, one in Washington, five in New Mexico and 11 in Colorado. The condensed consolidated financial statements include the accounts of the Company and the Bank.
All intercompany transactions and balances have been eliminated in consolidation. The condensed consolidated financial statements include all adjustments of a normal and recurring nature, which are, in the opinion of management, necessary for a fair presentation of the financial position and results of operations for the periods presented. Dollar amounts presented in the consolidated financial statements and footnote tables are rounded and presented to the nearest thousands of dollars except per share amounts. If the amounts are above $1.0 million, they are rounded one decimal point, and if they are above $1.0 billion, they are rounded two decimal points.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information and footnotes normally included in annual financial statements prepared in conformity with accounting principles generally accepted in the United States of America. Accordingly, these condensed consolidated financial statements should be read in conjunction with the consolidated audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. Results of operations for interim periods are not necessarily indicative of results for the full year. Certain prior year information has been reclassified to conform to the current year presentation. None of the reclassifications impacted consolidated net income, earnings per share or shareholders’ equity.
NOTE 2 - ACCOUNTING GUIDANCE NOT YET EFFECTIVE AND ADOPTED ACCOUNTING GUIDANCE
Accounting Guidance Recently Adopted
Segment Reporting – Improvements to Reportable Segment Disclosures (Topic 280) – In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments are intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses, enhanced interim disclosure requirements, clarifying circumstances in which an entity can disclose multiple segment measures of profit or loss, providing new segment disclosure requirements for entities with a single reportable segment, and requiring other disclosures. The amendments are effective for annual reporting periods beginning after December 15, 2023 (i.e., starting with the Company’s 2024 Form 10-K) and interim periods within fiscal years beginning after December 31, 2024, and must be applied retrospectively to all prior periods presented in the financial statements. The disclosure requirements of this update did not have a material effect on the Company’s consolidated financial statements. See Note 18—Segment Information.
Recent Accounting Guidance Not Yet Effective
Income Taxes – Improvements to Income Tax Disclosures (Topic 740) –In December 2023, the FASB issued ASU 2023-09 to provide additional transparency into an entity’s income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The standard requires that public business entities disclose, on an annual basis, specific categories in the rate reconciliation and additional information for reconciling items meeting a certain quantitative threshold. The amendments also require that entities disclose on an annual basis: 1) income taxes paid (net of refunds received) disaggregated by federal (national), state, and foreign taxes and 2) the income taxes paid (net of refunds received) disaggregated by individual jurisdictions exceeding 5% of total income taxes paid (net of refunds received). The amendments are effective for public business entities for annual periods beginning after December 15, 2024. The Company is evaluating the accounting and disclosure requirements of this update and does not expect them to have a material effect on the Company’s consolidated financial statements.
In March 2024, the FASB issued ASU 2024-01 to clarify how entities should determine whether profits interest and similar awards granted in exchanges for services fall within the scope of Topic 718, Compensation – Stock
Compensation, or Topic 710, Compensation – General. The amendments include illustrative examples to assist entities in evaluating the substance of such awards and determining the appropriate accounting treatment. The amendments are effective for public business entities for annual periods beginning after December 15, 2024, and interim periods within those annual periods. For all other entities, the amendments are effective for annual periods beginning after December 15, 2025, and interim periods within those annual periods. Early adoption is permitted. The Company is currently evaluating the accounting and disclosure requirements of this update and does not expect the adoption of this standard to have a material effect on its consolidated financial statements.
In November 2024, the FASB issued ASU 2024-03, Income Statement (Topic 220) – Reporting Comprehensive Income – Expense Disaggregation Disclosures, to address investor requests for more detailed information about certain expense types. The new standard requires public business entities to disclose disaggregated information about specific natural expense categories underlying relevant expense captions presented on the face of the income statement within continuing operations, such as employee compensation, depreciation, and intangible asset amortization. The amendments are effective for public business entities for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Entities are required to adopt the amendments prospectively. In January 2025, the FASB issued ASU 2025-01, Income Statement (Topic 220) – Reporting Comprehensive Income – Expense Disaggregation Disclosures: Clarifying the Effective Date, to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim reporting periods within annual periods beginning after December 15, 2027. The Company is currently evaluating the impact of this update on its consolidated financial statements and related disclosures.
In July 2025, the FASB issued ASU 2025-05 to simplify the estimation of expected credit losses for current accounts receivable and contract assets arising from revenue transaction within the scope of Topic 606, Revenue from Contracts with Customers. The amendments introduce a practical expedient that allows entities to assume that conditions existing as of the balance sheet date remain unchanged over the remaining life of the asset, and for entities other than public business entities, permit the use of subsequent cash collections when estimating credit losses. The amendments are effective for annual reporting periods beginning after December 15, 2025, including interim periods within those annual periods. Early adoption is permitted. The amendments should be applied prospectively. The Company is currently evaluating the accounting and disclosure requirements of this update and does not expect the adoption of this standard to have a material effect on its consolidated financial statements.
NOTE 3 – INVESTMENT SECURITIES
The amortized cost, gross unrealized gains and losses, and estimated fair values of securities AFS at the dates indicated are summarized as follows:
Gross
Amortized
unrealized
Estimated
cost
gains
losses
fair value
September 30, 2025
U.S. Government Agencies
1,738
Municipal securities
25,219
166
(911)
24,474
Mortgage-backed securities
49,541
315
(2,752)
47,104
Collateralized mortgage obligations
47,862
210
(1,480)
46,592
SBA securities
3,177
(53)
3,130
Corporate bonds
71,094
(6,414)
64,743
198,631
760
(11,617)
11
December 31, 2024
1,949
1,937
23,777
82
(1,334)
22,525
51,281
(3,893)
47,483
49,220
147
(2,208)
47,159
4,054
(75)
3,985
81,232
29
(11,022)
70,239
211,513
359
(18,544)
No allowances for credit losses have been recognized on investment debt securities AFS in an unrealized loss position at both September 30, 2025 and December 31, 2024.
Amortized cost and fair values exclude accrued interest receivable of $1.5 million at September 30, 2025 and $1.3 million at December 31, 2024, which is included in interest receivable and other assets in the condensed consolidated balance sheets.
During both the three and nine months ended September 30, 2025 and 2024, the Company sold no securities AFS.
The amortized cost and estimated fair value of securities AFS at the dates indicated by contractual maturity are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
Securities AFS
Due in one year or less
2,059
2,058
2,002
1,993
Due after one through five years
18,242
16,809
37,763
33,467
Due after five years through ten years
88,868
81,798
84,002
74,018
Due after ten years
89,462
87,109
87,746
83,850
At both September 30, 2025 and December 31, 2024, there were no securities pledged.
12
The estimated fair value and gross unrealized losses for securities AFS aggregated by the length of time that individual securities have been in a continuous unrealized loss position at the dates indicated are as follows:
Less than 12 months
12 months or more
Unrealized
loss
911
(3)
820
(4)
2,064
(138)
12,087
(773)
14,151
1,582
(19)
25,336
(2,733)
26,918
12,266
(52)
20,932
(1,428)
33,198
1,734
852
(41)
2,586
1,739
(11)
62,097
(6,403)
63,836
20,296
(235)
122,124
(11,382)
142,420
1,938
5,135
(67)
13,333
(1,267)
18,468
16,514
(321)
22,257
(3,572)
38,771
17,234
(145)
19,012
(2,063)
36,246
2,023
(9)
1,250
(66)
3,273
2,760
(240)
64,118
(10,782)
66,878
45,604
(794)
119,970
(17,750)
165,574
At September 30, 2025, the Company held 337 securities AFS, of which 179 were in an unrealized loss position for more than twelve months and 22 were in an unrealized loss position for less than twelve months. At December 31, 2024, the Company held 352 investment securities, of which 212 were in an unrealized loss position for more than twelve months and 53 were in an unrealized loss position for less than twelve months. The Company anticipates full recovery of amortized cost with respect to these securities at maturity or sooner in the event of a more favorable market interest rate environment.
Allowance for credit losses on investment debt securities available-for-sale
Investment debt securities that were in an unrealized loss position as of September 30, 2025 were evaluated to determine whether the decline in fair value below the amortized cost basis resulted from a credit loss or changes in required yields by investors in these types of securities, among other factors. This assessment first includes a determination of whether the Company intends to sell the security, or it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis less any current-period credit losses. In making this assessment, management considers the nature of the security and any related government guarantees, any changes to the rating of the security by a rating agency, creditworthiness of the issuers/guarantors, the underlying collateral, the financial conditions and prospects of the issuer, and any adverse conditions specifically related to the security, among other factors.
As of September 30, 2025, the Company expects to recover the amortized cost basis of its securities, the Company has no present intent to sell any investment securities with unrealized losses, it is not more likely than not that we will be required to sell securities with unrealized losses before recovery of their amortized cost and the decline in fair value is largely attributed to changes in interest rates and other market conditions. The issuers of these securities continue to make timely principal and interest payments. No allowances for credit losses have been recognized on investment debt securities AFS in an unrealized loss position, as management does not believe any of the securities are impaired due to reasons of credit quality at September 30, 2025.
Equity Securities
13
The Company recognized a net gain on equity securities of $771,000 and $523,000 for the three and nine months ended September 30, 2025, compared to $1.4 million and $1.7 million for the three and nine months ended September 30, 2024, respectively. Equity securities were $13.3 million and $13.1 million as of September 30, 2025 and December 31, 2024, respectively.
NOTE 4 – LOANS
The Company’s loan portfolio at the dates indicated is summarized below:
Commercial and industrial
177,250
173,948
Construction and land
5,124
1,515
Commercial real estate
1,743,268
1,667,231
Residential
115,292
109,662
Consumer
749
391
Total loans
2,041,683
1,952,747
Net deferred loan costs
654
149
Allowance for credit losses
(20,800)
(17,900)
Net loans
Net loans exclude accrued interest receivable of $6.5 million and $6.7 million at September 30, 2025 and December 31, 2024, respectively, which is included in interest receivable and other assets in the condensed consolidated balance sheets.
The Company’s total individually evaluated loans, including collateral dependent loans, nonaccrual loans, modified loans to borrowers experiencing financial difficulty, and accreting purchase credit deteriorated (“PCD”) loans that have experienced post-acquisition declines in cash flows expected to be collected are summarized as follows:
Commercial
Construction
and industrial
and land
real estate
Recorded investment in loans individually evaluated:
With no specific allowance recorded
711
14,044
With a specific allowance recorded
4,711
Total recorded investment in loans individually evaluated
18,044
18,755
Specific allowance on loans individually evaluated
868
13,671
984
14,655
954
1,754
2,708
15,425
17,363
367
25
392
14
The Company may modify the contractual terms of a loan to a borrower experiencing financial difficulty as a part of ongoing loss mitigation strategies. These modifications may result in an interest rate reduction, term extension, an other-than-insignificant payment delay, or a combination thereof. The Company typically does not offer principal forgiveness. An assessment of whether a borrower is experiencing financial difficulty is made on the date of modification. The effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses on loans because of the measurement methodologies used to estimate the allowance.
During the three and nine months ended September 30, 2025 and 2024, there were no modifications of loans to borrowers experiencing financial difficulty.
A summary of previously modified loans to borrowers experiencing financial difficulty by type of concession and type of loan, as of the dates indicated, is set forth below:
Rate
Term
Rate & term
% of Total
loans
modification
loans outstanding
91
0.05
%
632
0.04
710
0.62
1,433
0.07
97
0.06
1,846
0.11
0.68
2,690
0.14
For the three and nine months ended September 30, 2025, the Company recorded no charge-offs for modified loans to borrowers experiencing financial difficulty. During the three and nine months ended September 30, 2024, the Company recorded no charge-offs and $1.3 million of charge-offs related to modified loans to borrowers experiencing financial difficulty, respectively.
As of September 30, 2025 and December 31, 2024, individually evaluated modified loans to borrowers experiencing financial difficulty had no related allowance and an allowance of $24,000, respectively. At both dates, none of the modified loans to borrowers experiencing financial difficulty were performing in accordance with their modified terms. All accruing modified loans to borrowers experiencing financial difficulty, if any, are included in the loans individually evaluated in the calculation of the allowance for credit losses.
Risk Rating System
The Company evaluates and assigns a risk grade to each loan based on certain criteria to assess the credit quality of the loan. The assignment of a risk rating is done for each individual loan. Loans are graded from inception and on a continuing basis until the debt is repaid. Any adverse or beneficial trends will trigger a review of the loan risk rating. Each loan is assigned a risk grade based on its characteristics. Loans with low to average credit risk are assigned a lower risk grade than those with higher credit risk as determined by the individual loan characteristics.
The Company’s Pass loans include loans with acceptable business or individual credit risk where the borrower’s operations, cash flow or financial condition provides evidence of low to average levels of risk.
15
Loans that are assigned higher risk grades are loans that exhibit the following characteristics:
Special Mention loans have potential weaknesses that deserve close attention. If left uncorrected, these potential weaknesses may result in a deterioration of the repayment prospects for the loan or in the Company’s credit position at some future date. Special Mention loans are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification. Special Mention is a temporary rating, pending the occurrence of an event that would cause the risk rating either to improve or to be downgraded.
Loans in this category would be characterized by any of the following situations:
Substandard loans are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged. Loans classified substandard must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. Substandard loans are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. The potential loss does not have to be recognizable in an individual credit for that credit to be risk rated Substandard. A loan can be fully and adequately secured and still be considered Substandard.
Some characteristics of Substandard loans are:
Doubtful loans have all the weaknesses inherent in loans classified as Substandard with the added characteristic that the weaknesses make collection or liquidation in full, based on currently existing facts, conditions, and value, highly questionable and improbable. Doubtful loans have a high probability of loss, yet certain important and reasonably specific pending factors may work toward the strengthening of the credit.
Losses are recognized as charges to the allowance when the loan or portion of the loan is considered uncollectible or at the time of foreclosure. Recoveries on loans previously charged off are credited to the allowance for credit losses.
Revolving loans that are converted to term loans are treated as new originations in the tables below and are presented by year of initial origination. During the nine months ended September 30, 2025, and the year ended December 31, 2024, none and $867,000, respectively, of the Company’s revolving loans were converted to term loans.
16
The following tables present the internally assigned risk grade by class of loans at the dates indicated:
Revolving
Term loans - amortized cost by origination year
2023
2022
2021
Prior
amortized cost
Commercial and industrial:
Pass
29,078
51,084
15,667
17,741
7,973
29,228
23,984
174,755
Special mention
1,122
Substandard
154
55
878
286
1,373
Total commercial and industrial
15,821
8,028
31,228
24,270
YTD gross charge-offs
Construction and land:
4,742
119
263
Total construction and land
Commercial real estate:
247,443
182,898
69,954
323,265
350,993
413,211
1,866
1,589,630
31,570
18,793
51,389
101,752
5,463
14,724
31,699
51,886
Total commercial real estate
75,417
354,835
384,510
496,299
839
Residential:
44,227
26,603
32,089
6,795
114,425
44
746
64
854
Total residential
32,133
7,541
4,788
Consumer:
316
129
28
21
112
133
Total consumer
Total loans outstanding
Risk ratings
321,064
265,456
85,649
341,027
391,184
449,609
30,694
1,884,683
52,511
102,887
5,617
14,823
33,323
350
54,113
91,266
372,597
424,800
535,443
31,057
1,040
17
2020
54,720
20,314
20,759
11,823
13,433
28,708
19,699
169,456
56
1,969
200
2,225
150
1,184
471
308
2,267
54,870
20,468
11,879
14,617
31,148
20,207
1,021
45
1,390
128
1,090
196,303
88,599
371,319
432,629
97,046
370,828
1,510
1,558,234
6,243
10,462
18,250
44,089
79,676
9,063
996
19,262
29,321
89,231
377,562
452,154
116,292
434,179
2,413
1,359
3,772
31,828
36,624
1,452
32,245
5,041
107,190
859
410
80
1,349
30
1,093
1,123
37,513
33,748
5,121
153
54
35
385
134
283,014
108,967
392,113
481,214
113,023
432,196
26,253
1,836,780
11,377
46,470
280
83,252
9,093
2,180
20,830
32,715
283,164
109,753
398,356
501,684
133,453
499,496
26,841
3,434
1,685
5,165
The following tables provide an aging of the Company’s loans receivable as of the dates indicated:
Recorded
90 Days
investments
30–59 Days
60–89 Days
or more
90 days or more past due
past due
Current
PCD loans
receivable
and still accruing
513
965
1,569
175,681
395
77
1,673
3,676
5,426
1,720,840
17,002
729
114,452
111
601
1,771
5,352
7,724
2,016,846
17,113
758
87
399
1,244
172,704
220
1,509
4,794
1,527
3,220
9,541
1,635,499
22,191
123
871
108,538
5,681
1,615
4,366
11,662
1,918,635
22,450
Nonaccrual loans totaled $13.5 million and $9.2 million at September 30, 2025 and December 31, 2024, respectively. Nonaccrual loans guaranteed by a government agency, which reduces the Company’s credit exposure, were $946,000 at September 30, 2025 compared to $2.0 million at December 31, 2024. At September 30, 2025, nonaccrual loans included $8,000 of loans 30-89 days past due and $8.4 million of loans less than 30 days past due. 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. The increase in nonaccrual loans reflects borrower-specific credit deterioration, primarily within the commercial and industrial and commercial real estate portfolios.
At September 30, 2025, the $8,000 nonaccrual loans 30-89 days past due was comprised of two loans and the $8.4 million of loans less than 30 days past due was comprised of 18 loans. All these loans were placed on nonaccrual due to concerns over the financial condition of the borrowers.
At September 30, 2025 and December 31, 2024, there were two loans and one loan 90 days or more past due and still accruing, with balances of $395,000 and $220,000 at those dates, respectively.
Interest foregone on nonaccrual loans was approximately $257,000 and $896,000 for the three and nine months ended September 30, 2025, compared to $397,000 and $1.1 million for the three and nine months ended September 30, 2024. Interest income recognized on nonaccrual loans was approximately $70,000 and $136,000 for the three and nine months ended September 30, 2025, compared to $7,400 and $93,600 for the three and nine months ended September 30, 2024, respectively.
Pledged Loans
Our FHLB line of credit is secured under terms of a blanket collateral agreement by a pledge of certain qualifying loans with unpaid principal balances of $1.06 billion and $1.04 billion at September 30, 2025 and December 31, 2024, respectively. At September 30, 2025 and December 31, 2024, $79.7 million and $76.7 million of loans were pledged to
19
the FRB of San Francisco, respectively. For additional information, see “Note 11 - Borrowings” of the Notes to Condensed Consolidated Financial Statements.
NOTE 5 – ALLOWANCE FOR CREDIT LOSSES FOR LOANS
The following tables summarize the Company’s allowance for credit losses for loans, reserve for unfunded commitments, and loan balances individually and collectively evaluated by type of loan, as of the dates and for the periods indicated:
Reserve for
unfunded commitments
Beginning balance
4,467
141
12,327
1,761
18,700
530
Charge-offs
(839)
Recoveries
Provision for (reversal of) credit losses
(35)
2,541
291
2,933
40
Ending balance
4,438
275
14,029
2,052
20,800
570
Allowance for credit losses:
4,681
72
11,365
1,780
17,900
600
(193)
(1)
(1,040)
69
92
(71)
203
272
3,848
(30)
Loans individually evaluated
Loans collectively evaluated
12,940
2,051
19,710
222
Loans receivable:
Individually evaluated
Collectively evaluated
1,708,222
114,470
2,005,815
20
3,987
105
13,695
1,205
19,000
(1,031)
(566)
(1,598)
53
1,991
(1,670)
(2)
855
390
5,000
118
11,459
1,728
18,310
590
Allowance for loan losses
4,216
298
16,498
979
22,000
225
(1,387)
(3,772)
(5,161)
68
99
168
2,103
(180)
650
1,303
365
September 30, 2024
194
205
443
4,929
10,942
1,519
17,513
27
323
354
1,191
15,582
1,279
18,052
173,116
2,620
1,592,348
101,507
397
1,869,988
23,443
304
23,881
174,430
2,631
1,631,373
103,090
1,911,921
For the three months ended September 30, 2025, the provision for credit losses primarily reflected an increase in the reserve for pooled loans and the replenishment of the allowance due to charge-offs. Net charge-offs were $833,000 for the third quarter of 2025, compared to $1.5 million for the same period in 2024.
For the nine months ended September 30, 2025, the provision for credit losses and the related change in the allowance for credit losses on loans were mainly driven by loan growth, an increase in the reserve for pooled loans, replenishment of the allowance during the period and, to a lesser extent, an increase in specific reserves on individually evaluated loans. 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. This 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 a higher forecasted national unemployment rate, a weaker outlook for national gross domestic product, loan growth during the quarter, and changes in the risk level of one qualitative factor. Net charge-offs totaled $948,000 for the nine months ended September 30, 2025, compared to $5.0 million for the nine months ended September 30, 2024, of which $3.2 million had been specifically reserved for at December 31, 2023.
The following table summarizes the amortized cost basis of individually evaluated collateral-dependent loans, including nonaccrual loans, modified loans to borrowers experiencing financial difficulty, and accreting purchase credit deteriorated (“PCD”) loans that have experienced post-acquisition declines in cash flows expected to be collected, by loan and collateral type as of the dates indicated.
Retail and
Convalescent
A/R and
Office
Multifamily
facility
Hotel
SFR 1-4
Equipment
ACL
3,707
12,747
1,590
466
1,200
7,987
5,695
The following table shows the amortized cost and allowance for credit losses for loans on nonaccrual status as of the dates indicated:
As of September 30, 2025
As of December 31, 2024
Nonaccrual
with no allowance
with allowance
for credit losses
nonaccrual
863
293
6,406
5,455
11,861
6,055
1,792
7,847
42
753
1,103
7,117
6,360
13,477
7,039
2,208
9,247
As part of its acquisition of Pacific Enterprise Bancorp (“PEB”) in 2022, the Company acquired certain small business loans to borrowers qualified under The California Capital Access Program for Small Business, a state guaranteed loan program sponsored by the California Pollution Control Financing Authority (“CalCAP”). PEB ceased originating loans under this loan program in 2017. Under this loan program, the borrower, CalCAP and the participating lender contributed funds to a loss reserve account held in a demand deposit account at the participating lender. The borrower’s contributions to the loss reserve account are attributed to the participating lender. Losses on qualified loans are charged to this account after approval by CalCAP. Under the program, if a loan defaults, the participating lender has immediate coverage of 100% of the loss. The participating lender must return recoveries from the borrower, less expenses, to the credit loss reserve account. The funds in the loss reserve account are the property of CalCAP; however, in the event that the participating lender leaves the program any excess funds, after all loans have been repaid or unenrolled from the program by the participating lender and provided there are no pending claims for reimbursement, the remaining excess funds are distributed to CalCAP and the participating lender based on their respective contributions to the loss reserve account. Funds contributed by the participating lender to the loss reserve account are treated as a receivable from CalCAP and evaluated for impairment quarterly. As of September 30, 2025 and December 31, 2024, the Company had $10.5 million and $17.7 million, respectively, of loans enrolled in this loan program. The Company had a loss reserve account of $7.0 million and $10.4 million as of September 30, 2025 and December 31, 2024, respectively.
In addition, as successor to PEB, the Company was approved by CalCAP, in partnership with the California Air Resources Board, to originate loans to California truckers in the On-Road Heavy-Duty Vehicle Air Quality Loan Program. Under this loan program, CalCAP solely contributes funds to a loss reserve account held in a demand deposit account at the participating lender. Losses are handled in the same manner as described above. The funds are the property of CalCAP and are payable upon termination of the program. When the loss reserve account balance exceeds
22
the total associated loan balance, the excess is to be remitted to CalCAP. The Company originated loans under this program of $3.3 million and $12.1 million during the three and nine months ended September 30, 2025 and $3.9 million and $8.4 million during the three and nine months ended September 30, 2024, respectively. As of September 30, 2025, the Company had $21.7 million of loans enrolled in this program and a loss reserve account of $4.7 million. As of December 31, 2024, the Company had $17.3 million of loans enrolled in this program and a loss reserve account of $3.8 million.
NOTE 6 – PREMISES AND EQUIPMENT
Premises and equipment consisted of the following at the dates indicated:
Premises owned
11,553
11,462
Leasehold improvements
4,251
3,602
Furniture, fixtures and equipment
10,588
9,929
Less accumulated depreciation and amortization
(12,815)
(11,607)
Total premises and equipment, net
Depreciation and amortization included in occupancy and equipment expense totaled $493,000 and $1.4 million for the three and nine months ended September 30, 2025, and $528,000 and $1.5 million for the three and nine months ended September 30, 2024, respectively.
NOTE 7 – LEASES
The Company leased 19 branches under noncancelable operating leases as of September 30, 2025. These leases expire on various dates through 2030. Many of these lease agreements include one or more renewal options, exercisable at the Company’s discretion. When the Company determines at lease commencement that it is reasonably certain to exercise a renewal option, the extended lease term is included in the measurement of the ROU asset and corresponding lease liability.
The Company uses the discount rate implicit in the lease when it is readily determinable. In instances where the implicit rate is not available, which is typically the case, the Company applies its incremental borrowing rate, determined on a collateralized basis and over a term comparable to the lease term, as of the lease commencement date.
The below maturity schedule presents, as of September 30, 2025, the undiscounted lease payments for the next five years and thereafter:
For remainder of 2025
972
2026
3,751
2027
3,507
2028
3,444
2029
2,990
Thereafter
Total undiscounted cash flows
15,757
Less: interest
(1,263)
Present value of lease payments
23
The following table presents the weighted average lease term and discount rate at the dates indicated:
Weighted-average remaining lease term
4.3
years
4.5
Weighted-average discount rate
3.9
3.8
The following table presents certain information related to the operating lease costs included in occupancy and equipment expense on the Condensed Consolidated Statements of Income for the periods indicated:
Operating lease cost
945
8,093
3,028
15,082
Short-term lease cost
Less: Sublease income
(26)
(32)
(72)
Total operating lease cost, net
919
8,061
2,956
15,031
NOTE 8 – GOODWILL AND INTANGIBLE ASSETS
Goodwill is determined as the excess of the fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquiree, over the fair value of the net assets acquired and the liabilities assumed as of the acquisition date. Goodwill and other intangible assets are assessed for impairment annually or whenever events or changes in circumstances indicate the carrying amount may not be recoverable. Intangible assets with definite useful lives are amortized over their estimated useful lives to their estimated residual values. Core deposit intangible represents the estimated future benefit of deposits related to an acquisition and is booked separately from the related deposits and amortized over an estimated useful life of seven to ten years.
The Company’s policy is to assess goodwill for impairment at the reporting unit level on an annual basis or between annual assessments if a triggering event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Impairment exists when a reporting unit’s fair value is less than its carrying amount, including goodwill.
Changes in the Company's goodwill during the periods indicated were as follows:
Nine months Ended
Year ended
Balance at beginning of period
Acquired goodwill
Impairment
Balance at end of period
Core Deposit Intangible
Changes in the Company’s core deposit intangible during the periods indicated were as follows:
3,915
Additions
Less amortization
(748)
(1,222)
24
Estimated annual amortization expense at September 30, 2025 was as follows:
313
455
267
NOTE 9 – INTEREST RECEIVABLE AND OTHER ASSETS
The Company’s interest receivable and other assets at the dates indicated consisted of the following:
Tax assets, net
14,610
16,048
Accrued interest receivable
8,735
8,507
Investment in SBIC fund
2,876
3,241
Investment in Community Reinvestment Act fund
2,000
Prepaid assets
2,528
1,942
Servicing assets
447
673
Investment in Low Income Housing Tax Credit ("LIHTC") partnerships, net
3,417
4,035
Investment in statutory trusts
546
532
CalCAP reserve receivable
1,375
4,023
Other assets
2,589
2,717
Total interest receivable and other assets
NOTE 10 – DEPOSITS
The Company’s deposits at the dates indicated consisted of the following:
Demand deposits (1)
618,055
688,996
NOW accounts
270,650
261,430
Savings
71,431
82,300
Money market
700,703
644,880
Time deposits
567,213
556,403
(1) Noninterest bearing.
Time deposits included no brokered deposits as of September 30, 2025, and $35.5 million of brokered deposits as of December 31, 2024. At September 30, 2025, uninsured deposits totaled $1.1 billion, or 47.2% of total deposits, compared to $1.0 billion, or 46.8% of total deposits at December 31, 2024. The uninsured amounts are estimates based on the methodologies and assumptions used for the Bank’s regulatory reporting requirements.
NOTE 11 – BORROWINGS
Other borrowings – The Bank has an approved secured borrowing facility with the Federal Home Loan Bank of San Francisco (the “FHLB”) for up to 25% of total assets for a term not to exceed five years under a blanket lien of certain types of loans. At September 30, 2025 and December 31, 2024, we had the ability to borrow up to $595.0 million and $540.2 million, respectively, from the FHLB of San Francisco. At both September 30, 2025 and December 31, 2024, we had no FHLB borrowings outstanding.
The Bank has been approved for discount window advances from the FRB of San Francisco secured by certain types of loans. At September 30, 2025 and December 31, 2024, we had the ability to borrow up to $43.4 million and $41.9 million, respectively, from the FRB of San Francisco. At both September 30, 2025 and December 31, 2024, we had no FRB of San Francisco advances outstanding.
The Bank has Federal Funds lines with four correspondent banks. Cumulative available commitments totaled $65.0 million at both September 30, 2025 and December 31, 2024. There were no amounts outstanding under these facilities at both September 30, 2025 and December 31, 2024.
Junior subordinated deferrable interest debentures – In connection with its previous acquisitions, the Company assumed junior subordinated deferrable interest debentures, totaling $8.7 million, net of fair value adjustments, with a weighted average interest rate of 7.16% at September 30, 2025, compared to $8.6 million, net of fair value adjustments, with a weighted average rate of 7.20% at December 31, 2024. The junior subordinated deferrable interest debentures mature in 2034, subject to earlier redemption by the Company at its option.
Subordinated debt – On August 10, 2020, the Company issued and sold $65.0 million aggregate principal amount of 5.25% Fixed-to-Floating Rate Subordinated Notes due 2030 (the “Notes”) at a public offering price equal to 100% of the aggregate principal amount of the Notes. The Notes initially bore a fixed interest rate of 5.25% per year. Commencing on September 15, 2025, the interest rate on the Notes was to reset quarterly to the three-month Secured Overnight Financing rate plus a spread of 521 basis points (5.21%), payable quarterly in arrears. Interest on the Notes was payable semi-annually on March 15 and September 15 of each year through September 15, 2025 and quarterly thereafter on March 15, June 15, September 15 and December 15 of each year through the maturity or earlier redemption date. The Company, at its option, could redeem the Notes, in whole or in part, on any interest payment date on or after September 15, 2025, without a premium. During the current quarter, the Company redeemed all the outstanding Notes. At September 30, 2025, the Company had no outstanding Notes, compared to $63.7 million, net of issuance costs, at December 31, 2024.
NOTE 12 – INTEREST PAYABLE AND OTHER LIABILITIES
The Company’s interest payable and other liabilities at the dates indicated consisted of the following:
Accrued expenses
8,437
7,797
Accounts payable
469
614
Reserve for unfunded commitments
Accrued interest payable
2,386
3,118
Other liabilities
1,413
2,503
26
NOTE 13 – OTHER EXPENSES
The Company’s other expenses for the periods indicated consisted of the following:
Professional fees
474
594
1,522
1,854
Core deposit premium amortization
242
305
917
Marketing and promotions
226
238
634
607
Stationery and supplies
66
57
215
Insurance (including FDIC premiums)
340
361
1,069
1,070
Communication and postage
271
780
785
Loan default related expense
(345)
(495)
Director fees and expenses
79
Bank service charges
50
48
Courier expense
177
482
557
388
449
The Company expenses marketing and promotion costs as they are incurred. Advertising expense included in marketing and promotions totaled $12,000 and $26,000 for the three and nine months ended September 30, 2025, and $10,000 and $38,000 for the three and nine months ended September 30, 2024, respectively.
NOTE 14 – EQUITY INCENTIVE PLANS
Equity Incentive Plans
2024 Omnibus Equity Incentive Plan
The Company’s shareholders approved the Company’s 2024 Omnibus Equity Incentive Plan (“2024 Plan”) in June 2024. The 2024 Plan provides for the grant of equity incentive awards to employees and directors (including emeritus and advisory directors) of the Company and its subsidiaries. The 2024 Plan permits the granting of incentive stock options, within the meaning of Section 422 of the Internal Revenue Code, non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance shares and performance units. Factors generally considered by the Board in awarding equity incentives to employees include the performance of the Company, the employee’s job performance, the importance of his or her position, and his or her contribution to the organization’s goals for the award period.
Generally, awards under the 2024 Plan are subject to a minimum vesting period of one year (at least three years for full vesting for the chief executive officer), provided that awards for up to 5% of the maximum shares available under the 2024 Plan (for any participant other than the chief executive officer) may provide for a shorter vesting period. Subject to adjustment as provided in the 2024 Plan, the maximum number of shares of common stock available for issuance under the 2024 Plan is 500,000, and awards granted under the 2024 Plan to any one participant in any one calendar year are subject to the following limitations: (i) aggregate grants of stock options or stock appreciation rights to any one participant are subject to an annual limit of the lesser of 100,000 shares or $2.0 million in fair market value as of the date of grant; (ii) aggregate grants of restricted stock or restricted stock units to any one participant are subject to an annual limit of the lesser of 50,000 shares or $2.0 million in fair market value as of the date of grant; and (iii) aggregate grants of performance shares or performance units to any one participant are subject to an annual limit of the lesser of 50,000 shares or $2.0 million in fair market value as of the date of grant. In addition, subject to adjustment as provided in the 2024 Plan, the maximum aggregate number of shares that may be covered by awards granted under the 2024 Plan to any non-employee director in any one calendar year is 25,000 shares. As of September 30, 2025, a total of 464,178 shares were available for future issuance under the 2024 Plan.
2017 Omnibus Equity Incentive Plan
The Company’s shareholders approved the Company’s 2017 Omnibus Equity Incentive Plan (“2017 Plan”) in November 2017. The 2017 Plan provides for the awarding by the Company’s Board of Directors of equity incentive awards to employees and non-employee directors. An equity incentive award under the 2017 Plan may be an option, stock appreciation right, restricted stock units, stock award, other stock-based award or performance award. Factors considered by the Board in awarding equity incentives to employees include the performance of the Company, the employee’s job performance, the importance of his or her position, and his or her contribution to the organization’s goals for the award period. Generally, awards have a vesting period of one to five years. Subject to adjustment as provided in the 2017 Plan, the maximum number of shares of common stock that may be delivered pursuant to awards granted under the 2017 Plan is 450,000. The 2017 Plan provides for annual restricted stock grant limits to officers, employees and directors. The annual stock grant limit per person for officers and employees is the lesser of 50,000 shares or a value of $2.0 million, and per person for directors, the maximum is 25,000 shares. All unvested restricted shares outstanding vest in the event of a change in control of the Company. Restricted stock awards granted to non-employee directors generally vest one year from the date of grant. Awards to executive officers typically vest over three- or five-year periods, with initial vesting occurring on the one-year anniversary of the grant date. As of September 30, 2024, no shares remained available for issuance under the 2017 Plan, as the approval of the 2024 Plan by shareholders terminated the ability to grant further awards under the 2017 Plan.
The following table provides the restricted stock grant activity for the periods indicated:
Weighted-average
grant date
Non-vested at January 1,
74,346
20.11
81,365
18.27
Granted
22,221
26.20
24,471
23.30
Vested
(20,568)
20.20
(19,927)
18.99
Forfeited
24.98
16.67
Non-vested, at March 31,
72,778
21.73
85,404
19.55
Non-Vested, at June 30,
28.19
20.35
(11,331)
Non-Vested, at September 30,
73,676
22.66
83,362
20.10
NOTE 15 – FAIR VALUE MEASUREMENT
ASC Topic 820, “Fair Value Measurement,” defines fair value, establishes a framework for measuring fair value including a three-level valuation hierarchy, and expands disclosures about fair value measurements. Fair value is defined as the exchange price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date reflecting assumptions that a market participant would use when pricing an asset or liability. The hierarchy uses three levels of inputs to measure the fair value of assets and liabilities, as follows:
Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the reporting entity has the ability to access at the measurement date.
Level 2 – Observable prices in active markets for similar assets and liabilities; prices for identical or similar assets or liabilities in markets that are not active; directly observable market inputs for substantially the full term of the asset and liability; market inputs that are not directly observable but are derived from or corroborated by observable market data.
Level 3 – Unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability.
We use fair value to measure certain assets and liabilities on a recurring basis, primarily securities AFS. For assets measured at the lower of cost or fair value, the fair value measurement criteria may or may not be met during a reporting period and such measurements are therefore considered “nonrecurring” for purposes of disclosing our fair value measurements. Fair value is used on a nonrecurring basis to adjust carrying values for individually evaluated loans and other real estate owned and to record impairment on certain assets, such as goodwill, core deposit intangible, and other long-lived assets.
In certain cases, the inputs used to measure fair value may fall into different levels of the hierarchy. In such cases, the lowest level of inputs that is significant to the measurement is used to determine the hierarchy for the entire asset or liability. Transfers between levels of the fair value hierarchy are recognized on the actual date of the event or circumstances that caused the transfer, which generally coincides with our quarterly valuation process. There were no transfers between levels during the three and nine months ended September 30, 2025 and 2024.
At both September 30, 2025 and December 31, 2024, there were no liabilities measured at fair value on a recurring or non-recurring basis.
The following assets were measured at fair value on a recurring basis as of the dates indicated:
Total Estimated
Fair Value Measurements
Fair Value
Level 1
Level 2
Level 3
24,475
47,103
Equity securities
201,081
206,448
The following assets were measured at fair value on a nonrecurring basis as of the dates indicated:
Individually evaluated loans
9,490
The Company does not record loans at fair value on a recurring basis. However, from time to time, certain loans have individual risk characteristics not consistent with a pool of loans and are individually evaluated for credit reserves. Loans for which it is probable that payment of interest and principal will not be made in accordance with the original contractual terms of the loan agreement are typically individually evaluated. The fair value of individually evaluated loans is estimated using one of several methods, including collateral value, market value of similar debt, enterprise and liquidation value and discounted cash flows. Those individually evaluated loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. When the fair value of the collateral is based on an observable market price or a current appraised value which uses substantially observable data, the Company records the individually evaluated loan as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is less than the appraised value or the appraised value contains a significant assumption and there is no observable market price, the Company records the individually evaluated loan as nonrecurring Level 3.
The Company records foreclosed assets, or other real estate owned (“OREO”), at fair value on a nonrecurring basis based on the collateral value of the property. When the fair value of the collateral is based on an observable market price or a current appraised value which uses substantially observable data, the Company records the OREO as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is less than the appraised value or the appraised value contains a significant assumption, and there is no observable market price, the Company records the OREO as nonrecurring Level 3. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Management also incorporates assumptions regarding market trends or other relevant factors and selling and commission costs ranging from 5% to 10%. Such adjustments and assumptions are typically significant and result in a Level 3 classification of the inputs for determining fair value. The Company had no OREO at both September 30, 2025 and December 31, 2024.
NOTE 16 – FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts and fair values of the Company’s financial instruments at the dates indicated are presented below:
Carrying
Fair
Fair value measurements
amount
value
Financial assets:
Investment securities AFS
Investment in FHLB and FRB Stock
21,181
Loans, net
1,985,088
Financial liabilities:
2,236,544
8,452
Off-balance sheet liabilities:
Undisbursed loan commitments, lines of credit, standby letters of credit
76,811
76,241
20,958
1,884,134
2,236,256
8,527
73,414
72,814
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NOTE 17 – COMMITMENTS AND CONTINGENCIES
Lending and Letter of Credit Commitments
We operate in a highly regulated environment. From time to time, we are a party to various claims and litigation matters incidental to the conduct of our business. We are not presently party to any legal proceedings where we believe the resolution would have a material adverse effect on our business, financial condition, or results of operations.
Nevertheless, given the nature, scope and complexity of the extensive legal and regulatory landscape applicable to our business (including laws and regulations governing consumer protection, fair lending, fair labor, privacy, information security and anti-money laundering and anti-terrorism laws), we, like all banking organizations, are subject to heightened legal and regulatory compliance and litigation risk.
In the normal course of business, the Company enters into various commitments to extend credit which are not reflected in the financial statements. These commitments consist of the undisbursed balance on home equity and unsecured personal lines of credit and commercial lines of credit, including commercial real estate secured lines of credit, and undisbursed funds on construction and development loans. The Company also issues standby letter of credit commitments, primarily for the third-party performance obligations of clients.
The following table presents a summary of commitments described above as of the dates indicated:
Commitments to extend credit
75,337
72,737
Standby letters of credit
1,474
677
Total commitments
Commitments generally have fixed expiration dates or other termination clauses. The actual liquidity needs or the credit risk that the Company will experience will likely be lower than the contractual amount of commitments to extend credit because a significant portion of these commitments are expected to expire without being drawn upon. The commitments are generally variable rate and include unfunded home equity lines of credit, commercial real estate construction loans where disbursement is made over the course of construction, commercial revolving lines of credit, and unsecured personal lines of credit. The Company’s outstanding loan commitments are made using the same underwriting standards as comparable outstanding loans. The reserve associated with these commitments included in interest payable and other liabilities on the consolidated balance sheets was $570,000 at September 30, 2025 and $600,000 at December 31, 2024.
Commercial Real Estate Concentrations
At September 30, 2025 and December 31, 2024, in management’s judgment, a concentration of loans existed in commercial real estate related loans. The Company’s commercial real estate loans are secured by owner-occupied and non-owner occupied commercial real estate and multifamily properties. Although management believes that loans within these concentrations have no more than the normal risk of collectability, a decline in the performance of the economy in general, or a decline in real estate values in the Company’s primary market areas in particular, could have an adverse impact on collectability.
Other Assets
The Company has commitments to fund investments in LIHTC partnerships and an SBIC fund. At September 30, 2025, the remaining commitments to the LIHTC partnerships and the SBIC fund were approximately $4.8 million and $122,000, respectively. At December 31, 2024, the remaining commitments to the LIHTC partnerships and the SBIC fund were approximately $4.7 million and $122,000, respectively.
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Deposit Concentrations
At September 30, 2025, approximately $234.0 million, or 11.5%, of the Company's deposits were derived from its top ten depositors. At December 31, 2024, approximately $304.5 million, or 13.6%, of the Company's deposits were derived from its top ten depositors.
Local Agency Deposits and Other Advances
In the normal course of business, the Company accepts deposits from local agencies. The Company is required to provide collateral for certain local agency deposits in the states of California, Colorado, New Mexico and Washington. At both September 30, 2025 and December 31, 2024, the FHLB had issued letters of credit on behalf of the Company totaling $41.1 million as collateral for local agency deposits.
NOTE 18 – SEGMENT INFORMATION
The Company operates as one reportable segment: banking operations. The Company’s banking operations generate revenue primarily from loans and securities, deposits, and non-interest income. Loan products generate a significant portion of interest and fee income, while deposit products provide fee and service charge income. The Company also earns interest and dividend income from securities and generates net gains from the sale of loans to third parties. Interest expense, provisions for credit losses, salaries and employee benefits, data processing, and occupancy expense typically represent the significant expenses in banking operations. These expenses align with those reported in the Company’s Condensed Consolidated Statements of Income and Condensed Consolidated Statements of Cash Flows. Noncash items, such as depreciation and amortization, are also reflected in both the Condensed Consolidated Statements of Income and the Condensed Consolidated Statements Cash Flows.
The Company’s Chief Operating Decision Maker (CODM) is identified as the Chief Executive Officer, who is responsible for assessing the financial performance of the Company and allocating resources accordingly. The CODM is provided with consolidated balance sheets, income statements, and net interest margin analyses in order to evaluate revenue streams, significant expenses, and budget-to-actual results in assessing the Company’s segment and determining the allocation of resources, as well as evaluating return on assets. In addition, the CODM utilizes consolidated net income, return on assets, and net interest margin as benchmarks to compare the Company’s performance against competitors. All operations are domestic and align with a single operating segment. Information reported internally for performance assessment by the CODM is identical to that shown in the Condensed Consolidated Statements of Income.
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The following table presents the Company’s one operating segment for the periods indicated:
Three months ended September 30,
Nine months ended September 30,
Interest and dividend income
Reconciliation of revenue:
Other revenues
Total consolidated revenue
37,198
36,171
106,250
103,866
Less:
Segment net interest income and noninterest income
25,657
25,610
74,650
73,857
Other segment items
Segment net income/consolidated net income
Reconciliation of assets:
Total assets for reportable segment
Total consolidated assets
NOTE 19 – SUBSEQUENT EVENTS
The Company has evaluated subsequent events through the filing of this Quarterly Report on Form 10-Q and determined that no events have occurred that would require adjustments to our disclosures in the condensed consolidated financial statements.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain matters discussed in this Form 10-Q may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to our financial condition, results of operations, plans, objectives, future performance or business. 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. 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:
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. 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. These risks could cause our actual results for the remainder of 2025 and beyond to differ materially from those expressed in any forward-looking statements by, or on behalf of, us and could negatively affect our consolidated financial condition and results of operations as well as our stock price performance.
Executive Overview
General. BayCom is a bank holding company headquartered in Walnut Creek, California. BayCom’s wholly owned banking subsidiary, United Business Bank, provides a broad range of financial services to businesses and business owners as well as individuals through its network of 34 full-service branches at September 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. Accordingly, the information set forth in this report, including the consolidated financial statements and related data, relates primarily to the Bank.
Our principal business objective is to enhance shareholder value and generate consistent earnings growth by expanding our commercial banking franchise through both strategic acquisitions and organic growth. Since 2010, we have expanded our geographic footprint through ten strategic acquisitions. We believe that our selective acquisition of community banks has yielded economies of scale and improved our efficiency. We have also grown organically by leveraging the potential within metropolitan and community markets where we operate. These markets offer significant opportunities to expand our commercial client base, increase interest-earning assets, and enhance market share. We believe
36
our geographic footprint, which now includes the San Francisco Bay area, the metropolitan markets of Los Angeles, California; Seattle, Washington; Denver, Colorado; and Las Vegas, Nevada, and community markets including Albuquerque, New Mexico, and Custer, Delta, and Grand Counties, Colorado, provides us access to low cost, stable core deposits in community markets that we can use to fund commercial loan growth. We strive to provide an enhanced banking experience for our clients by providing them with a comprehensive suite of sophisticated banking products and services tailored to meet their needs, while delivering the high-quality, relationship-based client service of a community bank. At September 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 $334.3 million in shareholders’ equity.
We continue to focus on growing our commercial loan portfolios through acquisitions as well as organic growth. At September 30, 2025, our $2.0 billion total loan portfolio included $245.1 million, or 12.0%, 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. Our net income is also affected by other factors, including the provision for credit losses on loans, noninterest income and noninterest expense.
Set forth below is a discussion of the primary factors affecting our results of operations:
Net interest income. Net interest income represents interest income less interest expense. We generate interest income from interest and fees received on interest earning assets, including loans and investment securities and dividends on Federal Home Loan Bank of San Francisco (“FHLB”) and Federal Reserve Bank of San Francisco (“FRB”) stock we own. We incur interest expense from interest paid on interest bearing liabilities, including interest bearing deposits and borrowings. To evaluate net interest income, we measure and monitor: (i) yields on our loans and other interest earning assets; (ii) the costs of our deposits and other funding sources; (iii) our net interest margin; and (iv) the regulatory risk weighting associated with our assets. Net interest margin is calculated as the annualized net interest income divided by average interest earning assets. 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 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. Following a period of monetary easing that began in the second half of 2024, the Federal Open Market Committee (FOMC) of the Federal Reserve reduced the target range for the federal funds rate by a cumulative 125 basis points through September 2025, bringing the target range to 4.00% to 4.25%. On October 29, 2025, subsequent to quarter-end, the FOMC announced a further 25 basis point cut, bringing the target range to 3.75% to 4.00%.
Noninterest income. Noninterest income consists of, among other things: (i) service charges on loans and deposits; (ii) gain on sale of loans; (iii) gain (loss) on equity securities; and (iv) other noninterest income. Gain on sale of loans includes income (or losses) from the sale of the guaranteed portion of Small Business Administration (“SBA”) loans, capitalized loan servicing rights and other related income.
Provision for credit losses. We have established an allowance for credit losses by charging amounts to provision for credit losses at a level required to reflect estimated credit losses in the loan and available-for sale investment securities portfolios. For loans, management considers many factors, including, among others, historical loss experience, types and amounts of loans in the portfolio and adverse situations that may affect borrowers’ ability to repay. See “Critical Accounting Policies and Estimates - Allowance for Credit Losses” for a description of the manner in which the provision for credit losses is established.
For investments, the Company evaluates available-for-sale debt securities in an unrealized loss position to determine whether the decline in the fair value below the amortized cost basis is due to credit-related factors or noncredit-
37
related factors. 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. 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. If the present value of the cash flows expected to be collected from the security is less than the amortized cost basis of the security, a credit loss exists and an allowance for credit losses for available-for-sale securities is recorded for the credit loss, limited by the amount that the fair value is less than the amortized costs basis. Any impairment that has not been recorded through an allowance for credit losses for available-for-sale securities is recognized in other comprehensive income. Changes in the allowance for credit losses for available-for-sale securities are recorded as provision for (or reversal of) credit loss. Losses are charged against the allowance for credit losses for available-for-sale securities, with a corresponding adjustment to the security's amortized cost basis, when management believes the uncollectibility of an available-for-sale security is confirmed or when either criteria regarding intent or requirement to sell is met.
Noninterest expense. Noninterest expense includes, among other things: (i) salaries and related benefits; (ii) occupancy and equipment expense; (iii) data processing expense; (iv) Federal Deposit Insurance Corporation (“FDIC”) and state assessments; (v) outside and professional services; and (vi) other general and administrative expenses, including amortization of intangible assets. Salaries and related benefits include compensation, employee benefits and employment tax expenses for our personnel. Occupancy and equipment expense includes depreciation expense on our owned properties and equipment, lease expense on our leased properties and other occupancy-related expenses. Data processing expense includes fees paid to our third-party data processing system provider and other data service providers. FDIC and state assessments expense represents the assessments that we pay to the FDIC for deposit insurance and other regulatory costs to various states. Outside and professional fees include legal, accounting, consulting and other outsourcing arrangements. Amortization of intangibles represents the amortization of our core deposit intangible from various acquisitions. Other general and administrative expenses include expenses associated with travel, meals, training, supplies and postage. Noninterest expenses generally increase as we grow our business. Noninterest expenses have increased significantly over the past few years as we have grown through acquisitions and organically, and as we have built out our operational infrastructure.
Critical Accounting Policies and Estimates
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. 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. As this information changes, actual results could differ from the estimates, assumptions and judgments reflected in the financial statements. In particular, management has identified several accounting policies that, due to the estimates, assumptions and judgments inherent in those policies, are critical in understanding our financial statements.
These critical accounting policies and estimates include determining the allowance for credit losses and related provision.
There have been no material changes in the Company’s critical accounting policies and estimates as previously disclosed in the Company’s 2024 Annual Report. 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 September 30, 2025 and December 31, 2024
Total assets. Total assets decreased $60.7 million, or 2.3%, to $2.6 billion at September 30, 2025, from December 31, 2024. The decrease primarily was due to a $135.6 million, or 37.2%, decline in cash and cash equivalents
38
and a $1.8 million, or 841.0%, decline in loans held for sale, partially offset by a $89.4 million, or 4.6%, increase in loans receivable, net.
Cash and cash equivalents. Cash and cash equivalents decreased $135.6 million, or 37.2%, to $228.4 million at September 30, 2025, from $364.0 million at December 31, 2024. The decrease primarily was due to a $135.6 million decrease in federal funds sold and interest bearing balances in banks as excess funds were used to fund the Company’s early redemption of the remaining $63.7 million of its outstanding 5.25% Fixed-to-Floating Rate Subordinated Notes due 2030 (“Notes”), as well as to fund loan growth and deposit withdrawals.
Investment securities available-for-sale. Investment securities available-for-sale decreased $5.6 million, or 2.9%, to $187.8 million at September 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 September 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. The weighted average yields were calculated by multiplying each carrying value by its yield and dividing the sum of these results by the total carrying values. Yields on tax-exempt investments are not calculated on a fully tax equivalent basis.
Amount Due or Repricing Within:
One Year
Over One
Over Five
Over
or Less
to Five Years
to Ten Years
Ten Years
Weighted
Average
Cost
Yield
(Dollars in thousands)
9.09
856
2.85
9,372
1.57
7,120
3.37
7,871
4.72
3.11
2.35
1,382
2.54
12,710
35,431
4.73
49,540
4.11
1,181
4.64
1,716
1.85
2,438
2.38
42,527
4.44
4.22
5.11
4.85
2,006
4.43
1,144
6.01
5.00
5,750
6.58
64,594
4.38
4.54
3.88
3.25
3.98
89,461
4.68
198,630
4.23
Equity securities. Equity securities increased $187,000, or 1.4%, to $13.3 million at September 30, 2025 from $13.1 million at December 31, 2024, primarily due to mark-to-market adjustments recorded during the nine months ended September 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 $89.4 million, or 4.6%, to $2.0 billion at September 30, 2025 from $1.9 billion at December 31, 2024. The increase was due to $337.2 million of new loan originations and $24.6 million of loan purchases, partially offset by $271.6 million of loan repayments and $3.4 million of loans sold.
The following table provides information about our loan portfolio by type of loan, with purchase credit deteriorated (“PCD”) loans presented as a separate balance, at the dates presented.
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% Change
1.9
Real estate:
115,181
109,409
5.3
Multifamily residential
279,542
222,932
25.4
Owner occupied CRE
487,896
490,493
(0.5)
Non-owner occupied CRE
958,828
931,615
2.9
239.6
Total real estate
1,846,571
1,755,958
5.2
91.6
(23.8)
Total Loans
4.6
Net deferred loan fees
337.9
16.2
The following table shows as of September 30, 2025, the geographic distribution of our loan portfolio, by type of loan, in dollar amounts and percentages:
San Francisco Bay
Total in State of
Area (1)
Other California (2)
All Other States (3)
% of
Total in
Category
30,011
7.4
69,628
8.1
99,639
7.9
77,611
10.0
8.7
11,834
51,209
6.0
63,043
5.0
52,249
6.8
5.6
58,320
14.3
143,048
16.6
201,368
15.9
79,332
10.3
280,700
13.7
148,734
36.5
289,614
33.7
438,348
34.6
55,782
7.2
494,130
24.2
158,576
38.9
302,236
35.1
460,812
36.3
507,626
65.6
968,438
47.4
382
0.0
377,464
790,849
1,168,313
695,371
1,863,684
46
703
0.1
407,520
860,478
1,267,998
773,685
29,922
7.8
66,163
8.3
96,085
77,863
10.1
8.9
11,140
41,609
52,749
56,913
37,236
9.7
114,806
14.4
152,042
12.8
73,152
9.5
225,194
11.5
158,486
41.1
280,631
439,117
37.1
60,798
499,915
25.6
148,710
38.6
294,779
36.9
443,489
37.4
498,633
64.9
942,122
48.2
425
355,572
732,915
1,088,487
689,921
1,778,408
385,499
799,079
1,184,578
768,169
Acquired loans. As of September 30, 2025, our total loan portfolio included $245.1 million, or 12.0%, of loans acquired through business combinations (all of which were recorded at their estimated fair values as of the time of acquisition), of which $134.4 million had no remaining net premium or discount.
As of September 30, 2025, acquired non-PCD loans totaled $110.7 million, with a remaining net premium of $1.4 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 September 30, 2025, acquired PCD loans totaled $17.7 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 include nonaccrual loans and accruing loans 90 days or more past due. Nonperforming assets increased $4.4 million to $13.9 million, or 0.68% of total loans, at September 30, 2025, compared to $9.5 million, or 0.48% of total loans, at December 31, 2024. The Company held no OREO at either date.
Nonperforming loans totaled $13.9 million, or 0.68% of total loans, at September 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 11 new commercial real estate loans (secured by various types of real estate) totaling $12.2 million being placed on nonaccrual status during the nine months ended September 30, 2025, and to a lesser extent a $175,000 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 nine nonaccrual loans totaling $5.8 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 and industrial and commercial real estate portfolios. At September 30, 2025, nonaccrual loans included $8,000 of loans 30–89 days past due and $8.4 million of loans less than 30 days past due. The $8.4 million of nonaccrual loans less than 30 days past due consisted of 18 loans, all of which were placed on nonaccrual due to borrower-specific financial concerns, indicators of credit deterioration, and other credit related factors, which provided reasonable doubt about the full collectability of principal and interest, 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 September 30, 2025, approximately $939,000 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 nine-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. When a loan is placed on nonaccrual status, all interest accrued but not received is charged against interest income. When the ability to fully collect nonaccrual loan principal is in doubt, cash payments received are applied against the principal balance of the loan until such time as full collection of the remaining recorded balance is expected. Interest received on such loans is recognized as interest income when received. A nonaccrual loan is restored to an accrual basis when principal and interest payments are brought current, and full payment of principal and interest is probable. Loans that are well secured and in the process of collection will remain on accrual status.
Loans may be acquired at a premium or discount to par value, in which case the premium is amortized (subtracted from) or accreted (added to) interest income over the remaining life of the loan. Generally, over time, the effects of loan discount accretion and loan premium amortization decrease as the purchased loans mature or pay off before maturity. Upon the pay-off of a loan before maturity, any remaining (unaccreted) discount or (unamortized) premium is immediately taken into interest income; as loan payoffs may vary significantly from quarter to quarter, so may the impact of discount accretion and premium amortization on interest income.
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Modified loans to borrowers experiencing financial difficulty. Occasionally, the Company offers modifications of loans to borrowers experiencing financial difficulty by providing principal forgiveness, interest rate reductions, other-than-insignificant payment delays, term extensions or any combination of these. When principal is forgiven, the amount of the forgiveness is charged-off against the allowance for credit losses for loans. Upon the Company’s subsequent determination that a modified loan (or a portion thereof) is uncollectible, the loan (or portion thereof) is charged off. 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.
Modified loans to borrowers experiencing financial difficulty as of September 30, 2025 and December 31, 2024, totaled $1.4 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. There were no such modified loans at September 30, 2025 and December 31, 2024. The related allowance for credit losses on individually evaluated modified loans was none and $24,000 at September 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:
Loans accounted for on a nonaccrual basis:
4,127
4,284
7,679
3,486
12,614
8,950
Total nonaccrual loans
Accruing loans 90 days or more past due
Total nonperforming loans
13,872
9,467
Real estate owned
Total nonperforming assets (1)
Modified loans to borrowers experiencing financial difficulty – performing
Nonperforming assets to total assets (1)
0.53
0.36
Nonperforming loans to total loans (1)
0.48
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. There were no performing modified loans at September 30, 2025 or December 31, 2024.
Interest foregone on nonaccrual loans was approximately $257,000 and $896,000 for the three and nine months ended September 30, 2025, compared to $397,000 and $1.1 million for the three and nine months ended September 30, 2024. Interest income recognized on nonaccrual loans was approximately $70,000 and $136,000 for the three and nine months ended September 30, 2025, and $7,400 and $93,600 for the three and nine months ended September 30, 2024, respectively.
Allowance for credit losses for loans. The allowance for credit losses is determined by the Company on a quarterly basis, although management monitors the appropriate level of the allowance more frequently. We assess the allowance for credit losses based on three categories: (i) originated loans, (ii) acquired non-PCD loans, and (iii) acquired PCD loans. The allowance for credit losses reflects management’s estimate of current expected credit losses inherent in the loan portfolios. The computation includes elements of judgment and high levels of subjectivity.
At September 30, 2025, the Company’s allowance for credit losses for loans was $20.8 million, or 1.02% of total loans, compared to $17.9 million, or 0.92% of total loans, at December 31, 2024. Management currently believes that the $20.8 million allowance for credit losses at September 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.
The increase in the allowance for credit losses at September 30, 2025 compared to December 31, 2024, was primarily attributable to growth in the loan portfolio, an increase in the reserve for pooled loans, the replenishment of the allowance during the period, and to a lesser extent, an increase in the reserve for individually evaluated loans. 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 a higher forecasted national unemployment rate, a weaker outlook for national gross domestic product and loan growth during the quarter, as well as changes in the risk level of one qualitative factor. Specifically, the Company incorporated an increase in forecasted national unemployment and a decline in projected national gross domestic product (“GDP”) at September 30, 2025, as compared to December 31, 2024. Both of these are key economic indicators used in estimating expected credit losses under the CECL, model.
Net charge-offs were $833,000 and $948,000 for the three and nine months ended September 30, 2025, compared to net charge-offs of $1.5 million and $5.0 million for the three and nine months ended September 30, 2024, respectively. The lower net charge-offs primarily reflect fewer nonaccrual loan charge-offs, as well as payoffs and collections on previously nonaccrual loans. Approximately $8.4 million of nonaccrual loans were less than 30 days past due as of September 30, 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.
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The following table presents certain credit ratios at the dates and for the periods indicated and each component of the ratio’s calculations:
At and for the nine months ended September 30,
Allowance for credit losses on loans as a percentage of total loans outstanding at period end
1.02
0.96
Allowance for credit losses on loans
2,042,337
1,912,105
Nonaccrual loans as a percentage of total loans outstanding at period end
0.66
0.51
9,707
Allowance for credit losses on loans as a percentage of nonaccrual loans at period end
154.34
188.63
Net charge-offs during period to average loans outstanding:
0.10
0.81
Net charge-offs
172
1,319
Average loans outstanding
181,018
163,178
6,116
8,248
0.23
770
1,697,880
1,622,223
(0.11)
(99)
107,077
91,078
0.97
0.15
621
648
Total loans:
0.26
Total net charge-offs
948
4,993
Total average loans outstanding
1,992,713
1,885,374
As of September 30, 2025, the Company individually evaluated $18.8 million in loans, inclusive of the $13.5 million of nonperforming loans. Of these individually evaluated loans, $4.7 million had a specific allowance totaling $868,000 as of September 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, with $2.7 million having a specific allowance totaling $392,000.
Management considers the allowance for credit losses for loans at September 30, 2025 to be adequate to cover expected credit losses inherent in the loan portfolio based on the assessment of current portfolio performance, historical loss experience, and relevant qualitative and quantitative factors, including current economic conditions and reasonable and supportable forecasts. While management believes the estimates and assumptions used in determining the adequacy of the allowance are reasonable, actual credit losses may differ from those expected. Changes in economic conditions, borrower performance, or other factors could result in actual losses exceeding the current allowance, which could adversely affect the Company’s financial condition and results of operations. In addition, the methodology, assumptions, and judgments used in determining the allowance for credit losses is subject to review by bank regulators, as part of their routine examination process, which may result in adjustments to the provision for credit losses based upon information available to them at the time of their examination.
Deposits. Deposits are our primary source of funding and generally consist of core deposits from the communities served by our branch and office locations. 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 accounts, money market accounts, 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 consistent 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 decreased $5.9 million, or 0.3%, to $2.2 billion at September 30, 2025, compared to December 31, 2024. At September 30, 2025, noninterest-bearing demand deposits totaled $618.1 million, or 27.7% of total deposits, compared to $689.0 million, or 30.8% of total deposits, at December 31, 2024, representing a decrease of $70.9 million. From December 31, 2024 to September 30, 2025, interest-bearing deposits generally increased, with money market accounts increasing $55.8 million, NOW accounts increasing $9.2 million, and time deposits increasing $10.8 million. In contrast, savings accounts declined $10.9 million during the same period. Time deposits included no brokered deposits as of September 30, 2025, compared to $35.5 million of brokered deposits at December 31, 2024.
The overall decline in total deposits primarily reflects the reduction in noninterest-bearing demand deposits, partially offset by growth in interest-bearing deposit 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 net decline in deposit balances. Management continues to monitor deposit mix and pricing strategies in the context of funding costs, 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 September 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 $63,000. 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.
The following table sets forth the dollar amount of deposits in the various types of deposit programs offered at the dates indicated.
(10.3)
3.5
Saving
(13.2)
(0.3)
Borrowings. Although deposits are our primary source of funds, we may from time to time utilize borrowings as a cost-effective source of funds when they can be invested at a positive interest rate spread, for additional capacity to fund loan demand, or to meet our asset/liability management goals. We are a member of and may obtain advances from the FHLB of San Francisco, which is part of the Federal Home Loan Bank System. The eleven regional Federal Home Loan Banks provide a central credit facility for their member institutions. These advances are provided upon the security of certain of our mortgage loans and mortgage-backed securities. 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 September 30, 2025 and December 31, 2024, we could borrow up to $595.0 million and $540.2 million, respectively, from the FHLB of San Francisco. At both September 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 September 30, 2025 and December 31, 2024, we had the ability to borrow up to $43.4 million and
$41.9 million, respectively, from the FRB of San Francisco. At both September 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 September 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 September 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 September 30, 2025, the Company had no outstanding subordinated debt, net of costs to issue compared to $63.7 million at December 31, 2024.
We are required to provide collateral for certain local agency deposits. At both September 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 $9.9 million, to $334.3 million at September 30, 2025 from $324.4 million at December 31, 2024. The increase in shareholders’ equity primarily was due to $17.1 million of net income earned during the first nine months of 2025 and $5.0 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 $6.1 million of Company common stock and $6.6 million of cash dividends paid or accrued during the period. During the nine months ended September 30, 2025, the Company repurchased a total of 232,543 shares of its common stock at a total cost of $6.1 million and an average price of $26.24 per share, leaving 231,555 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 and Nine months Ended September 30, 2025 and 2024
Earnings summary. Net income was $5.0 million for the three months ended September 30, 2025, compared to $6.0 million for the three months ended September 30, 2024, a decrease of $1.0 million or 13.6%. The decrease was primarily as a result of a $1.7 million increase in provision for credit losses and a $496,000 decrease in noninterest income, partially offset by a $543,000 increase in net interest income, a $128,000 decrease in noninterest expense, and a $543,000 decrease in provision for income taxes. Basic and diluted earnings per share were $0.46 for the three months ended September 30, 2025, compared to $0.54 for the three months ended September 30, 2024.
Net income was $17.1 million for the nine months ended September 30, 2025, compared to $17.5 million for the nine months ended September 30, 2024, a decrease of $421,000 or 2.4%. The decrease was primarily a result of a $2.2 million increase in provision for credit losses and a $1.1 million decrease in noninterest income, partially offset by a $1.9 million increase in net interest income, a $468,000 decrease in noninterest expense, and a $468,000 decrease in provision for income taxes. Basic and diluted earnings per share were $1.55 for both the nine months ended September 30, 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 62.15% and 63.88% for the three and nine months ended September 30, 2025, compared to 62.76% and 65.20% for the three and nine months ended September 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 nine-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 September 30, 2025 was $35.0 million, compared to $33.4 million for the three months ended September 30, 2024, an increase of $1.5 million or 4.6%. Increased yields
earned on interest-earning assets, along with an increase in the average balance of loans, were the primary drivers of the increase in interest income, partially offset by decreases in the average balances of investment securities and fed funds sold and interest bearing balances in banks.
Interest income on loans, including fees, increased $3.0 million, or 11.4%, to $29.2 million for the three months ended September 30, 2025 from $26.2 million for the three months ended September 30, 2024, due to a $148.3 million increase in the average balance of loans and a 17 basis point increase in the average loan yield. The average balance of loans was $2.0 billion for the third quarter of 2025, compared to $1.9 billion for the third quarter of 2024. The average yield on loans was 5.70% for the third quarter of 2025, compared to 5.53% for the third quarter of 2024. The increase in the average yield on loans reflected 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 September 30, 2025 and 2024 included $155,000 and $114,000 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 $146,000 and $449,000 at September 30, 2025 and 2024, respectively. Additionally, interest income on loans for the three months ended September 30, 2025 and 2024, included $119,000 and $12,000, respectively, in fees related to prepayment penalties.
Interest income on investment securities decreased $78,000, or 3.3%, to $2.3 million for the three months ended September 30, 2025, compared to $2.4 million for the three months ended September 30, 2024, as a result of decreases in the average balance, with the average yield remaining unchanged at 4.60% for both periods. The average balance of investment securities totaled $199.8 million for the three months ended September 30, 2025, compared to $207.0 million for the three months ended September 30, 2024. In addition, during the third quarter of 2025, we received $401,000 in cash dividends on our FRB and FHLB stock, compared to $393,000 during the third quarter of 2024.
Interest income on federal funds sold and interest-bearing balances in banks decreased $1.4 million, or 31.6%, to $3.0 million for the three months ended September 30, 2025, compared to $4.4 million for the three months ended September 30, 2024, as a result of changes in the average yield and average balance. The average yield decreased 89 basis points to 4.44% for the three months ended September 30, 2025, compared to 5.43% for the three months ended September 30, 2024, reflecting the effects of Federal Reserve rate reductions during the second half of 2024. The average balance of federal funds sold and interest-bearing balance in banks totaled $269.8 million and $323.6 million for the three months ended September30, 2025 and 2024, respectively.
Interest income for the nine months ended September 30, 2025 was $101.0 million, compared to $97.6 million for the nine months ended September 30, 2024, an increase of $3.4 million or 3.6%. The increase reflects increases in interest income on loans and investment securities, partially offset by decreases in federal funds sold and interest-bearing balances in banks. 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 $7.8 million, or 10.2%, to $84.3 million for the nine months ended September 30, 2025 from $76.5 million for nine months ended September 30, 2024, primarily due to a $108.2 million increase in the average balance of loans and a 24 basis point increase in the average loan yield. The average balance of loans was $2.0 billion for the nine months ended September 30 2025, compared to $1.9 billion for the nine months ended September 30, 2024. The average yield on loans was 5.66% for the nine months ended September 30, 2025, compared to 5.42% for the nine months ended September 30, 2024. The increase in the average yield on loans 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 nine months ended September 30, 2025 and 2024 included $579,000 and $107,000 in accretion of the net discount on acquired loans and revenue from PCD loans in excess of discounts, as well as $391,000 and $259,000, respectively, in fees related to prepayment penalties.
Interest income on investment securities increased $645,000, or 9.9%, to $7.2 million for the nine months ended September 30, 2025, compared to $6.5 million for the nine months ended September 30, 2024. The average yield on investment securities increased 22 basis points to 4.67% for the nine months ended September 30, 2025, compared to
47
4.45% for the nine months ended September 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 $205.5 million for the nine months ended September 30, 2025, compared to $196.0 million for the nine months ended September 30, 2024. In addition, during both the nine months ended September 30, 2025 and 2024, we received $1.2 million in cash dividends on our FRB and FHLB stock.
Interest income on federal funds sold and interest-bearing balances in banks decreased $4.9 million, or 37.4%, to $8.4 million for the nine months ended September 30, 2025, compared to $13.3 million for the nine months ended September 30, 2024, as a result of changes in the average yield and average balance. The average yield decreased 101 basis points to 4.45% for the nine months ended September 30, 2025, compared to 5.46% for the nine months ended September 30, 2024, reflecting the effects of Federal Reserve rate reductions during the second half of 2024. The average balance totaled $251.1 million for the nine months ended September 30, 2025, compared to $326.7 million for the nine months ended September 30, 2024.
Interest expense. Interest expense increased $981,000, or 9.3%, to $11.5 million for the three months ended September 30, 2025, compared to $10.6 million for the three months ended September 30, 2024. The increase was primarily due to increased interest expense on subordinated debt, which included $835,000 of amortized debt issuance costs recognized in connection with the Company’s redemption of its subordinated notes during the current quarter, and to a lesser extent, higher deposit rates, reflecting increased market rates and competitive pricing pressures.
Interest expense on deposits increased $330,000, or 3.5%, to $9.8 million for the three months ended September 30, 2025, compared to $9.4 million for the same period in 2024. The increase was due to higher overall average deposit balances, partially offset by lower rates on time deposits. The average rate paid on money market accounts decreased five basis points to 2.42% during the third quarter of 2025, compared to 2.47% in the same period of 2024, and the average rate on time deposits declined 34 basis points to 3.73%, compared to 4.07% for the prior-year period. The average cost of all interest-bearing deposits was 2.41% for the three months ended September 30, 2025, compared to 2.45% for the three months ended September 30, 2024. The overall average cost of deposits was 1.74% for the third quarter of 2025, compared to 1.75% for the third quarter of 2024. The average cost of total interest-bearing liabilities was 2.73% for the third quarter of 2025, compared to 2.54% for the third quarter of 2024.
Total average interest-bearing liabilities increased $67.8 million, or 4.2%, to $1.7 billion for the three months ended September 30, 2025, compared to $1.6 billion for the three months ended September 30, 2024. The average balance of interest-bearing deposits increased to $1.6 billion for the three months ended September 30, 2025, from $1.5 billion for the same period in 2024. Within this category, the average balance of money market accounts rose $21.5 million, or 3.2%, to $685.6 million, while time deposits increased $74.0 million, or 5.1%, to $586.3 million. In contrast, average balances for savings accounts declined over the same period.
The average balance of noninterest-bearing deposits increased $1.6 million, or 0.3%, to $617.5 million for the three months ended September 30, 2025, compared to $615.8 million for the same period in 2024. This shift in deposit composition from noninterest-bearing demand deposits and savings accounts to interest-bearing time, NOW, and money market accounts reflects continued customer migration toward higher-yielding products in response to prevailing market rates and competitive offerings.
Interest expense on borrowings increased $650,000 or 58.4%, to $1.8 million for the three months ended September 30, 2025, compared to $1.1 million for the three months ended September 30, 2024. The increase was primarily due to the acceleration of the amortization of deferred debt issuance costs. The average cost of total borrowings increased to 11.4% for the three months ended September 30, 2025, compared to 6.1% for the three months ended September 30, 2024, and amortization of deferred debt issuance costs negatively impacted the average cost of interest-bearing liabilities by 19 basis points in 2025, compared to minimal impact in 2024. The average balance of borrowings decreased $10.9 million to $61.4 million during the three months ended September 30, 2025, compared to $72.3 million during the three months ended September 30, 2024.
Interest expense increased $1.6 million, or 5.3%, to $31.6 million for the nine months ended September 30, 2025, compared to $30.0 million for the nine months ended September 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, as well as an increase in interest expense on subordinated debt, which included $835,000 of amortized debt issuance costs recognized in connection with the Company’s redemption of all outstanding subordinated debt during the current quarter. The average rate paid on interest-bearing liabilities was 2.59% for the nine months ended September 30, 2025, compared to 2.52% for the nine months ended September 30, 2024. Total average interest-bearing liabilities increased $42.5 million, or 2.7%, to $1.6 billion for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024.
Interest expense on deposits increased $992,000, or 3.87%, to $27.7 million for the nine months ended September 30, 2025, compared to $26.7 million for the nine months ended September 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. Rates on money market accounts increased four basis points during the nine months ended September 30, 2025, compared to the same period in 2024, while rates on time deposits decreased 24 basis points. The average balance of money market accounts increased $25.9 million, or 4.0%, to $668.0 million for the nine months ended September 30, 2025, compared to $642.1 million for the nine months ended September 30, 2024. The average balance of time deposits increased $46.0 million, or 9.1%, to $552.4 million for the nine months ended September 30, 2025, compared to $506.4 million for the same period the prior year.
The overall average cost of deposits for the nine months ended September 30, 2025 and 2024 was 1.70% and 1.66%, respectively. The average rate paid on all interest-bearing deposits increased two basis points to 2.37% for the nine months ended September 30, 2025, compared to 2.35% for the nine months ended September 30, 2024. The average balance of interest-bearing deposits totaled $1.6 billion for the nine months ended September 30, 2025, compared to $1.5 billion for the nine months ended September 30, 2024. Meanwhile, the average balance of noninterest-bearing deposits decreased $16.6 million, or 2.7%, to $608.8 million for the nine months ended September 30, 2025 compared to $625.3 million for the nine months ended September 30, 3024.
Interest expense on borrowings increased $600,000, or 18.0%, to $3.9 million for the nine months ended September 30, 2025, compared to $3.3 million for the nine months ended September 30, 2024. The increase was primarily due to the amortization and acceleration of deferred debt issuance costs, partially offset by a 129 basis point decrease in the average rate paid on junior subordinated debentures. The average cost of total borrowings increased to 7.65% for the nine months ended September 30, 2025, compared to 6.15% for the nine months ended September 30, 2024. The average balance of borrowings decreased $3.5 million to $68.7 million during the nine months ended September 30, 2025, compared to $72.3 million during the nine months ended September 30, 2024.
Net interest income and net interest margin. Net interest income increased $544,000 million, or 2.4%, to $23.4 million for the three months ended September 30, 2025, compared to $22.9 million for the three months ended September 30, 2024. The increase in net interest income primarily reflects increases in interest income on loans, which rose by $3.0 million or 11.4%, due to higher average balances and yields. This was partially offset by decreases in interest income on fed funds sold and interest-bearing balances in banks and investment securities, which declined by $1.5 million or 30.6%, as well as higher interest expense on deposits and subordinated debt, which increased by $1.0 million or 9.3%. Average interest-earning assets increased $87.5 million, or 3.6%, compared to the third quarter of 2024.
The average annualized yield on interest-earning assets was 5.49% for the three months ended September 30, 2025, representing a four basis point increase from 5.45% for the three months ended September 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 annualized cost of interest-bearing liabilities was 2.73% for the three months ended September 30, 2025, representing a 11 basis point increase from 2.62% for the three months ended September 30, 2024. As a result, the annualized net interest margin declined to 3.68% for the three months ended September 30, 2025, compared to 3.73% for the same period in 2024. The decline in the net interest margin was due to the amortization of debt issuance costs and the rate paid on interest-bearing liabilities rising faster than the yield on interest earning assets.
Net interest income increased $1.9 million, or 2.8%, to $69.5 million for the nine months ended September 30, 2025, compared to $67.6 million for the nine months ended September 30, 2024. The increase was primarily driven by a $7.8 million, or 10.2%, increase in interest income on loans, reflecting both higher average balances and yields. Interest income on investment securities also rose by $645,000 or 9.9%. These increases were partially offset by a $5.0 million, or
49
37.4%, decline in interest income on fed funds sold and interest-bearing balances in banks, and a $1.6 million, or 5.3%, increase in interest expense, primarily due to higher rates on subordinated debt and time deposits.
The average annualized yield on interest-earning assets was 5.47% for the nine months ended September 30, 2025, representing a 10 basis point increase from 5.37% for the nine months ended September 30, 2024. The average cost of interest-bearing liabilities increased to 2.59%, up seven basis points from 2.52% in the prior-year period. As a result, the annualized net interest margin improved to 3.76% for the nine months ended September 30, 2025, compared to 3.72% 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 increase in the cost of interest-bearing liabilities.
Average Balances, Interest and Average Yields/Cost. The following tables present, for the periods indicated, information about (i) average balances, the total dollar amount of interest income from interest earning assets and the resultant average yields; (ii) average balances, the total dollar amount of interest expense on interest bearing liabilities and the resultant average costs; (iii) net interest income; (iv) the interest rate spread; and (v) the net interest margin. Nonaccrual loans have been included in the table as loans carrying a zero yield. Yields have been calculated on a pre-tax basis. 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.
Annualized
Balance(4)
Interest
Yield/Cost
Interest earning assets
Fed Funds sold and interest bearing balances in banks
269,795
$ 3,017
323,629
5.43
Investments securities
199,789
4.60
207,033
FHLB Stock
8.70
8.55
FRB Stock
9,655
5.94
9,643
5.92
Total loans (1)
2,034,570
5.70
1,886,231
5.53
Total interest earning assets
2,525,333
5.49
2,437,849
5.45
Noninterest earning assets
132,407
134,801
Total average assets
2,657,740
2,572,650
Interest bearing liabilities
73,657
$ 23
0.12
92,225
0.13
267,115
0.09
265,397
685,625
4,187
2.42
664,114
4,116
2.47
586,265
5,508
3.73
512,229
5,239
4.07
Total interest bearing deposit accounts
1,612,662
2.41
1,533,965
2.45
52,742
11.82
63,667
5.58
Junior subordinated debentures, net
8,694
8.78
8,612
10.22
Other borrowings
Total interest bearing liabilities
1,674,098
2.73
1,606,260
2.62
Noninterest bearing deposits
617,481
615,844
Other noninterest bearing liabilities
31,533
31,203
Noninterest bearing liabilities
649,014
647,047
Total average liabilities
2,323,112
2,253,307
Average equity
334,610
319,343
Total average liabilities and equity
2,657,722
Interest rate spread (2)
2.76
2.83
Net interest margin (3)
3.68
Ratio of average interest earning assets to average interest bearing liabilities
150.85
151.77
51
Balance (4)
Fed Funds sold and interest-bearing balances in banks
251,077
$ 8,359
4.45
326,658
5.46
205,456
4.67
195,998
11,441
8.76
9.00
9,651
9,633
1,993,602
5.66
1,885,402
5.42
2,471,227
5.47
2,429,004
5.37
132,657
133,248
2,603,884
2,562,252
76,790
$ 71
95,246
93
266,281
178
273,732
189
668,043
11,886
642,128
11,238
2.34
552,383
15,534
3.76
506,364
15,157
4.00
1,563,497
2.37
1,517,470
60,056
7.47
63,669
5.61
8,673
8.90
8,593
10.19
1,632,237
2.59
1,589,752
2.52
608,757
625,310
31,172
30,449
639,929
655,759
2,272,166
2,245,511
331,718
316,741
2.88
3.72
151.40
152.79
52
Rate/Volume Analysis. Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest earning assets and interest bearing liabilities, as well as changes in weighted average interest rates. The following table sets forth the effects of changing rates and volumes on our net interest income during the periods shown. Information is provided with respect to (i) effects on interest income attributable to changes in volume (changes in volume multiplied by prior rate) and (ii) effects on interest income attributable to changes in rate (changes in rate multiplied by prior volume). Changes applicable to both volume and rate have been allocated to volume.
2025 compared to 2024
Increase/(Decrease)
Attributable to
Volume
Fed funds sold and interest bearing balances in banks
(661)
(736)
(1,397)
(1,903)
(3,086)
(4,989)
(84)
(78)
330
645
FHLB stock and FRB stock
(20)
2,069
2,988
3,442
4,386
7,828
Total interest income
1,253
1,524
1,849
1,623
3,472
(6)
(18)
(22)
(5)
Money market accounts
(63)
71
195
453
(490)
759
269
(999)
1,376
377
Total deposit accounts
(558)
887
329
(814)
1,806
992
833
(154)
679
830
(152)
678
(28)
(85)
(79)
245
735
980
(69)
1,660
1,591
518
544
1,918
(37)
1,881
Provision for credit losses. We recorded a provision for credit losses of $3.0 million and $3.8 million for the three and nine months ended September 30, 2025, compared to $1.2 million and $1.7 million for the three and nine months ended September 30, 2024. The provision for credit losses during the three and nine months ended September 30, 2025, was primarily driven by loan growth, charge-offs during the current quarter, and increased reserves on pooled loans. Net charge-offs totaled $948,000 for the nine months ended September 30, 2025, compared to $5.0 million for nine months ended September 30, 2024. The lower net charge-offs primarily reflect fewer nonaccrual loan charge-offs, as well as payoffs and collections on previously nonaccrual loans. Approximately $8.4 million of nonaccrual loans were less than 30 days past due as of September 30, 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 $497,000, or 18.1%, to $2.2 million for the third quarter of 2025, compared to $2.7 million for the third quarter of 2024. The decrease was primarily due to a $649,000 decrease in gain on equity securities as a result of positive fair value adjustments on these securities due to changes in market conditions, a $73,000 decrease in service charges and other fees, and a $78,000 decrease in other income and fees. These decreases were partially offset by a $224,000 decrease in loss on investment in SBIC fund and a $79,000 increase in loan servicing and other fees.
Noninterest income decreased $1.1 million or 17.3%, to $5.2 million for the nine months ended September 30, 2025, compared to $6.3 million for the nine months ended September 30, 2024. The decrease in noninterest income was primarily due to a $1.1 million decrease in gain on equity securities as a result of positive fair value adjustments on these securities due to changes in market conditions, a $153,000 increase in loss on investment in SBIC fund, and a $114,000
decrease in other income and fees, partially offset by a $212,000 increase in service charges and other fees and a $151,000 increase in loan servicing and other loan fees.
The following table presents the key components of noninterest income for the periods indicated:
$ Change
100.0
(649)
45.7
(73)
(8.1)
24.4
Loss on investment in SBIC fund
224
(88.5)
(21.9)
(497)
(18.1)
(36)
(12.5)
(1,149)
(68.7)
212
8.6
151
13.1
(153)
72.2
(114)
(1,089)
(17.3)
N/M - Not meaningful
Noninterest expense. Noninterest expense decreased $128,000, or 0.8%, to $16.0 million for the three months ended September 30, 2025, compared to $16.1 million for the three months ended September 30, 2024. The decrease was primarily due to a $726,000 decrease in other expense and a $66,000 decrease in occupancy and equipment expense. The decrease in other expense was due to lower legal and professional service costs, reduced deposit premium amortization, and lower default related expenses. In addition, $400,000 in excess funds were returned to the Bank in the current quarter from a loss reserve account previously established under the California Capital Access Program (CalCAP), which supports 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. No unused CalCAP funds were returned in the same quarter a year ago. These decreases were offset by a $599,000 increase in salaries and wages, resulting from higher incentive compensation and increased base wages, and a $65,000 increase in data processing expense.
Noninterest expense decreased $468,000 million, or 1.0%, to $47.7 million for the nine months September 30, 2025 compared to $48.2 million for the nine months ended September 30, 2024. The decrease in noninterest expense was primarily due to $1.4 million decrease in other expense due to return of unused CalCAP reserve funds, as discussed above, a reduction in legal and professional service costs, a reduction in FDIC insurance costs and a lower level of fraudulent check losses, partially offset by a $584,000 increase in salaries and wages, resulting from higher incentive compensation and increased base wages, and a $428,000 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:
Salaries and related benefits
599
6.3
(3.0)
65
3.3
(726)
(31.3)
(0.8)
584
2.0
428
8.0
(1,446)
(20.5)
(468)
(1.0)
Income taxes. The provision for income taxes decreased $543,000, or 23.9%, to $1.7 million for the three months ended September 30, 2025, compared to $2.3 million for the three months ended September 30, 2024. The provision for income taxes decreased $421,000, or 2.4%, to $6.1 million for the nine months ended September 30, 2025 compared to $6.5 million for the nine months ended September 30, 2024. These decreases primarily were due to lower taxable income.
The Company’s effective tax rate was 25.7% and 26.2% for the three and nine months ended September 30, 2025, compared to 27.4% and 27.2% for the three and nine months ended September 30, 2024, respectively. The effective tax rate decreased for the three and nine months ended September 30, 2025, compared to the same periods in 2024, primarily due to greater low income housing tax credits in the current quarter.
Liquidity and Capital Resources
Planning for our normal business liquidity needs, both expected and unexpected, is done on a daily and short-term basis through the cash management function. On a longer-term basis, it is accomplished through the budget and strategic planning functions, with support from internal asset/liability management software model projections.
Management maintains a liquidity position that it believes will adequately provide funding for loan demand and deposit run off that may occur in the normal course of business. We rely on multiple sources to meet our potential liquidity needs. 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 nine months ended September 30, 2025, the Bank sold $3.4 million in loan participation interests and received $271.6 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 $6.0 million to $2.2 billion and liquid assets, in the form of cash and cash equivalents and time deposit in banks, decreased $135.8 million to $228.4 million at September 30, 2025 from $364.3 million at December 31, 2024. In addition, investment securities available-for-sale decreased $8.6 million to $187.8 million at September 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. Securities purchased during the nine months ended September 30, 2025 were $11.6 million, while securities repayments, maturities and sales during that period were $24.7 million. Certificates of deposit scheduled to mature in one year or less at September 30, 2025, totaled $460.9 million. It is management’s policy to maintain deposit rates that are competitive with other local financial institutions. Based on this management strategy, we believe that most of our maturing certificates of deposit will remain with us.
In addition to these primary sources of funds, management has several secondary sources available to meet potential funding requirements. As of September 30, 2025, the Bank had an available borrowing capacity of $595.0 million with the FHLB of San Francisco, with no borrowings outstanding at that date or at December 31, 2024. At September 30, 2025, we had the ability to borrow up to $43.4 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 September 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.
Liquidity management is both a daily and long-term function of the Company’s management. Excess liquidity is generally invested in short-term investments, such as overnight deposits and federal funds. On a longer-term basis, a strategy is maintained of investing in various lending products and investment securities, including U.S. Government obligations and U.S. agency securities. 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 September 30, 2025, loan commitments and letters of credit totaled $76.8 million, including $5.4 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. Financial Information” of Part I of this report.
Our cash flows are comprised of three primary classifications: cash flows from operating activities, cash flows from investing activities, and cash flows from financing activities. Net cash provided by operating activities for the nine months ended September 30, 2025 and 2024 was $23.0 million and $22.4 million, respectively. During the nine months ended September 30, 2025, net cash used in investing activities was $78.0 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 $19.4 million of net cash used in investing activities for the nine months ended September 30, 2024. Net cash used in financing activities for the nine months ended September 30, 2025 was $80.6 million, which was comprised primarily of the redemption of all of the outstanding Notes, a decrease in noninterest and interest bearing deposits in banks, net, stock repurchases and dividend payments to shareholders, partially offset by an increase in time deposits, net, compared to $9.3 million of net cash used in financing activities during the nine months ended September 30, 2024. Management believes our capital sources are adequate to meet all reasonably foreseeable short-term and long-term cash requirements. There has not been a material change in our liquidity and capital resources since the information disclosed in our 2024 Annual Report other than set forth above. We are not aware of any reasonably likely material changes in the mix and relative cost of such resources.
BayCom Corp is a separate legal entity from the Bank and must provide for its own liquidity. At September 30, 2025, BayCom Corp had liquid assets of $11.1 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. 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 August 21, 2025, the Company announced that its Board of Directors declared a quarterly cash dividend of $0.25 per share on the Company’s outstanding common stock, which was paid on September 11, 2025 to shareholders of record as of the close of business on October 9, 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 the rate of $0.25 per share, our average total dividend paid each quarter would be approximately $2.7 million based on the number of our outstanding shares at September 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. Item 1. Business” of the 2024 Annual Report.
From time to time, our Board of Directors has authorized stock repurchase programs. In general, stock repurchases allow us to proactively manage our capital position and return excess capital to shareholders. Stock repurchases also provide us with shares of common stock necessary to satisfy obligations related to stock compensation awards. As of September 30, 2025, there remained 231,555 shares available for repurchase under the Company’s current
stock repurchase program. For additional information on the Company’s stock repurchases, see “Item 2. Unregistered Sales of Equity Securities and Use of Proceeds” contained in Part II of this report.
Regulatory Capital
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’s requirements. The capital adequacy requirements are quantitative measures established by regulation that require the Bank to maintain minimum amounts and ratios of capital. The FDIC requires the Bank to maintain minimum ratios of Total Capital, Tier 1 Capital, and Common Equity Tier 1 Capital to risk-weighted assets as well as Tier 1 Leverage Capital to average assets. 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 September 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 September 30, 2025
At December 31, 2024
Ratio
Leverage Ratio
BayCom Corp
300,387
11.80
289,525
11.76
Minimum requirement for “Well Capitalized”
127,259
123,063
Minimum regulatory requirement
101,807
98,451
United Business Bank
283,745
10.88
333,965
13.23
130,441
126,213
104,353
100,970
Common Equity Tier 1 Ratio
14.25
14.41
137,053
6.50
130,584
94,883
4.50
90,404
13.54
16.81
136,165
129,125
94,268
89,394
Tier 1 Risk-Based Capital Ratio
309,872
14.70
299,010
14.88
168,680
8.00
160,719
126,510
6.00
120,539
167,588
158,923
125,691
119,192
Total Risk-Based Capital Ratio
331,242
15.71
382,595
19.04
210,850
10.00
200,899
305,115
14.56
352,865
17.76
209,485
198,654
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 September 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 September 30, 2025, the Company would have exceeded all regulatory capital requirements.
For additional information, see “Item 1. Business — Supervision and Regulation — United Business Bank — Capital Requirements” and “Note 19 - Regulatory Matters” in the Notes to the Consolidated Financial Statements, included in “Item 8. Financial Statements and Supplementary Data” in the 2024 Annual Report.
58
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to interest rate risk through our lending and deposit gathering activities. Our results of operations are highly dependent upon our ability to manage interest rate risk. We consider interest rate risk to be a significant market risk that could have a material effect on our financial condition and results of operations. Interest rate risk is measured and assessed on a quarterly basis. For information regarding the Company’s market risk, see “Item 7A Quantitative and Qualitative Disclosures About Market and Interest Rate Risk,” in the Company’s 2024 Annual Report. In our opinion, there has not been a material change in our interest rate risk exposure since the information disclosed in our 2024 Annual Report.
Item 4. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
An evaluation of the Company’s disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), was carried out as of September 30, 2025 under the supervision and with the participation of the Company’s principal executive officer, principal financial officer and several other members of the Company’s senior management. In designing and evaluating the Company’s disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
During this evaluation, management identified a disclosure control deficiency related to the public announcement of the Company’s current stock repurchase program. While the Board of Directors had approved an open-ended repurchase authorization, a prior public announcement incorrectly stated that the program would expire after one year. All repurchases under the program were made in accordance with the Board’s authorization and recorded appropriately in the Company’s financial statements. Management has implemented enhanced procedures to ensure that future public disclosures accurately reflect the terms of Board-approved authorizations.
The Company’s principal executive officer and principal financial officer concluded that as of September 30, 2025, based on their evaluation, the Company’s disclosure controls and procedures were effective in ensuring that information we are required to disclose in the reports we file or submit under the Exchange Act is (1) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and (2) accumulated and communicated to BayCom Corp’s management, including its CEO and CFO, as appropriate to allow timely decisions regarding required disclosure, specified in the SEC’s rules and forms.
(b) Changes in Internal Controls
There were no changes in the Company’s internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act, that occurred during the three months ended September 30, 2025, that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
The Company does not expect that its disclosure controls and procedures and internal control over financial reporting will prevent all error and all fraud. A control procedure, no matter how well conceived and operated, can provide only reasonable, not absolute assurance that the objectives of the control procedure are met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls may be circumvented by the acts of individuals, by collusion of two or more people, or by override of the control. The design of any control procedure is also based in part upon certain assumptions about the likelihood of
future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control procedure, misstatements due to error or fraud may occur and not be detected.
Item 1. Legal Proceedings
Periodically, there have been various claims and lawsuits involving the Company, such as claims to enforce liens, condemnation proceedings on properties in which the Company holds security interests, claims involving the making and servicing of real property loans and other issues incident to the Company’s business. The Company is not a party to any pending legal proceedings that it believes would have a material adverse effect on the financial condition or results of operations of the Company.
Item 1A. Risk Factors
There have been no material changes in the Risk Factors previously disclosed in Item 1A of the 2024 Annual Report.
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities
(a)
Not applicable.
(b)
(c)Stock Repurchases. The following table sets forth information with respect to our repurchases of our outstanding common shares during the three months ended September 30, 2025:
Total number of
shares purchased
Maximum number of
number of
price
as part of
shares that may yet be
shares
paid
publicly announced
purchased under the
purchased
per share
plans or programs
plans or programs (1)
July 1, 2025 - July 31, 2025
1,621
27.01
263,234
August 1, 2025 - August 31, 2025
31,679
27.31
231,555
September 1, 2025 - September 30, 2025
33,300
27.29
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
(c) Trading Plans. During the three months ended September 30, 2025, no director or officer (as defined in Rule 16a-1(f) under the Exchange Act) of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
Item 6. Exhibits
3.1
Articles of Incorporation of BayCom Corp(1)
3.2
Amended and Restated Bylaws of BayCom Corp(2)
31.1
31.2
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101
The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2025 formatted in Extensible Business Reporting Language (XBRL): (1) Condensed Consolidated Balance Sheets; (2) Condensed Consolidated Statements of Income; (3) Condensed Consolidated Statements of Comprehensive Income; (4) Condensed Consolidated Statements of Changes in Stockholders’ Equity; (5) Condensed Consolidated Statements of Cash Flows; and (6) Notes to Condensed Consolidated Financial Statements.
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Cover Page Interactive Data File (embedded within the Inline XBRL document).
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Registrant
Date: November 7, 2025
By:
/s/ George J. Guarini
George J. Guarini
President and Chief Executive Officer
(Principal Executive Officer)
/s/ Keary L. Colwell
Keary L. Colwell
Senior Executive Vice President, Chief Financial Officer and Secretary
(Principal Financial and Accounting Officer)