BayCom Corp

Previous wording

BayCom is a bank holding company headquartered in Walnut Creek, California. The Company’s wholly owned banking subsidiary, United Business Bank, provides a broad range of financial services primarily to businesses and business owners, as well as individuals, through its network of 35 full-service branches at December 31, 2023, with 16 locations in California, one in Nevada, two in Washington, five in New Mexico and 11 in Colorado.

Current wording

BayCom is a bank holding company headquartered in Walnut Creek, California. The Company’s wholly owned banking subsidiary, United Business Bank, provides a broad range of financial services primarily to businesses and business owners, as well as individuals, through its branch network. At December 31, 2024, the Bank had 35 full-service branches, with 16 locations in California, one in Nevada, two in Washington, five in New Mexico and 11 in Colorado.

Previous wording

Our principal objective is to enhance shareholder value and generate consistent earnings growth by expanding our commercial banking franchise through both strategic acquisitions and organic growth. Since 2010, we have expanded our geographic footprint through ten strategic acquisitions, which includes our most recent acquisition of PEB which closed in February 2022. We believe our strategy of selectively acquiring and integrating community banks has yielded economies of scale and improved our overall franchise efficiency. Looking forward, we expect to continue pursuing strategic acquisitions, believing our targeted market areas present us with many and varied acquisition opportunities. We are also committed to organic growth, leveraging the potential within metropolitan and community markets where we currently operate. These markets offer significant opportunities to expand our commercial client base, increase interest-earning assets, and enhance market share. We believe our geographic footprint, which now includes the San Francisco Bay area, the metropolitan markets of Los Angeles, California, 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 December 31, 2023, the Company, on a consolidated basis, had assets of $2.6 billion, loans receivable, net of $1.9 billion, deposits of $2.1 billion and shareholders’ equity of $312.9 million.

Current wording

currently operate. These markets offer significant opportunities to expand our commercial client base, increase interest-earning assets, and enhance market share. We believe our geographic footprint, which now includes the San Francisco Bay area, the metropolitan markets of Los Angeles, California; 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 that we can use to fund commercial loan growth. We strive to enhance our clients’ banking experience by providing them with a comprehensive suite of sophisticated products and services tailored to meet their needs, while delivering the high-quality, relationship-based service of a community bank. At December 31, 2024, the Company, on a consolidated basis, had assets of $2.7 billion, loans receivable, net of $1.9 billion, deposits of $2.2 billion and shareholders’ equity of $324.4 million.

Previous wording

We continue to focus on growing our commercial loan portfolios through both acquisitions and organic growth. At December 31, 2023, our $1.9 billion total loan portfolio included $397.0 million, or 20.6%, of acquired loans (all of which were recorded to their estimated fair values at the time of acquisition), and the remaining $1.5 billion, or 79.4%, consisted of loans we originated.

Current wording

We continue to focus on growing our commercial loan portfolios through both acquisitions and organic growth. At December 31, 2024, our $1.9 billion total loan portfolio included $299.2 million, or 15.3%, of acquired loans (all of which were recorded to their estimated fair values at the time of acquisition), and the remaining $1.7 billion, or 84.7%, consisted of loans we originated.

Previous wording

The provision for credit losses is dependent on changes in our loan portfolio and management’s assessment of the collectability of our loan portfolio, as well as prevailing economic and market conditions. We recorded a $2.0 million provision for credit losses for the year ended December 31, 2023, primarilydue to a $3.3 million increase in reserves for individually evaluated loans, $550,000 of net loan charge-offs during the year and an additional reserve taken on a loan to a borrower who declared bankruptcy during the year. The increase in specific reserves included one commercial real estate loan and one multifamily loan. Based on updated appraisals received during the fourth quarter of 2023, the underlying collateral values of these loans experienced declines due to property specific factors and conditions. The change in the provision was partially offset by a decrease in the quantitative reserve primarily due to improvements in forecasted economic conditions, specifically, national gross domestic product and national unemployment indicators utilized to

Current wording

The provision for credit losses is dependent on changes in our loan portfolio and management’s assessment of the collectability of our loan portfolio, as well as prevailing economic and market conditions. We recorded a $1.3 million provision for credit losses for the year ended December 31, 2024, primarily driven by the replenishment of the allowance due to charge-offs and an increase in provision for credit losses for unfunded commitments. Net charge-offs totaled $5.0 million for the year ended December 31, 2024, of which $3.2 million was specifically reserved for. The quantitative reserve was impacted by declines in forecasted economic conditions for national gross domestic product and increasing forecasted national unemployment, both key indicators used to estimate credit losses. The reserve for individually evaluated loans decreased during the year primarily due to $3.2 million in charge-offs, as the associated collateral shortfalls were deemed uncollectable. No changes were made to the qualitative risk factor conclusions during the year ended December 31, 2024. The increase in the provision for credit loss for unfunded commitments of $375,000 for the year ended December 31, 2024 was primarily due to a new $9.5 million construction commitment and increased quantitative loss rates.

Previous wording

Our net income is also affected by noninterest income and noninterest expenses. Noninterest income consists of, among other things: (i) service charges on loans and deposits; (ii) gain on sale of loans; and (iii) gain (loss) on equity securities and (iv) other noninterest income. Our noninterest income increased $877,000 during the year ended December 31, 2023, as compared to 2022, primarily attributable to a decrease in loss on equity securities of $3.4 million, partially offset by a decrease in gain on sale of loans of $2.2 million. Noninterest expense includes, among other things: (i) salaries and related benefits; (ii) occupancy and equipment expense; (iii) data processing; (iv) FDIC and state assessments; (v) outside and professional services; (vi) amortization of intangibles; and (vii) other general and administrative expenses. Our noninterest expenses decreased $1.3 million during the year ended December 31, 2023, as compared to 2022. The decrease was primarily attributable to a $1.2 million decrease in other expense as a result of an decrease in professional fees and core deposit premium amortization. Noninterest income and noninterest expenses are impacted by the growth of our banking operations and growth in the number of loan and deposit accounts.

Current wording

Our net income is also affected by noninterest income and noninterest expenses. Noninterest income consists of, among other things: (i) service charges on loans and deposits; (ii) gain on sale of loans; and (iii) gain (loss) on equity securities and (iv) other noninterest income. Our noninterest income decreased $600,000 during the year ended December 31, 2024, as compared to 2023. Noninterest expense consists of, among other things: (i) salaries and related benefits; (ii) occupancy and equipment expense; (iii) data processing; (iv) FDIC and state assessments; (v) outside and professional services; (vi) amortization of intangibles; and (vii) other general and administrative expenses. Our noninterest expenses

Previous wording

All loans with an outstanding balance of $100,000 or more greater are individually evaluated for expected credit loss when it is probable that we will be unable to collect all amounts due according to the original contractual terms of the loan agreement. We select loans for individual assessment on an ongoing basis using certain criteria such as payment performance, borrower reported and forecasted financial results, and other external factors when appropriate. Loans that do not share the same risk characteristics as pooled loans are evaluated individually for credit loss and generally include all nonaccrual loans, collateral dependent loans, and certain modified loans to borrowers experiencing financial difficulties. We measure the current expected credit loss of an individually evaluated loan based upon the fair value of the underlying collateral, adjusted for costs to sell when applicable, or if the loan is not collateral-dependent we utilize the present value of expected future cash flows, discounted at the effective interest rate. A loan for which the terms have been modified resulting in a concession, and where the borrower is experiencing financial difficulties, is considered amodified loan to a borrower experiencing financial difficulty. The allowance for credit losses onmodified loans to borrowers experiencing financial difficulty is measured using the same method as individually evaluated loans. When the value of a concession is measured using the discounted cash flow method, the allowance for credit losses is determined by discounting the expected future cash flows at the original interest rate of the loan. To the extent a loan balance exceeds the estimated collectable value, a reserve or charge-off is recorded depending upon either the certainty of the estimate of loss or the fair value of the loan’s collateral if the loan is collateral-dependent. By definition, any loan that management has placed on non-accrual is required to be individually evaluated, however, not all individually evaluated loans need to be placed on non-accrual.

Current wording

All loans with an outstanding balance of $100,000 or more greater are individually evaluated for expected credit loss when it is probable that we will be unable to collect all amounts due according to the original contractual terms of the loan agreement. We select loans for individual assessment on an ongoing basis using criteria such as payment performance, borrower reported and forecasted financial results, and other external factors when appropriate. Loans that do not share the same risk characteristics as pooled loans are evaluated individually for credit loss and generally include all nonaccrual loans, collateral dependent loans, and certain modified loans to borrowers experiencing financial difficulties. We measure the current expected credit loss of an individually evaluated loan based upon the fair value of the underlying collateral, adjusted for costs to sell when applicable, or if the loan is not collateral-dependent we utilize the present value of expected future cash flows, discounted at the effective interest rate. A loan for which the terms have been modified resulting in a concession, and where the borrower is experiencing financial difficulties, is considered amodified loan to a borrower experiencing financial difficulty. The allowance for credit losses onmodified loans to borrowers experiencing financial difficulty is measured using the same method as individually evaluated loans. When the value of a concession is measured using the discounted cash flow method, the allowance for credit losses is determined by discounting the expected future cash flows at the original interest rate of the loan. To the extent a loan balance exceeds the estimated collectable value, a reserve or charge-off is recorded depending upon either the certainty of the estimate of loss or the fair value of the loan’s collateral if the loan is collateral-dependent. By definition, any loan that management has placed on non-accrual is required to be individually evaluated; however, not all individually evaluated loans need to be placed on non-accrual.

Previous wording

Our CECL methodology for the pooled loans component includes both quantitative and qualitative loss factors which are applied to our population of loans and assessed at a pool level. The quantitative CECL model estimates credit losses by applying pool-specific probability of default ("PD") and loss given default ("LGD") rates to the expected exposure at default ("EAD") over the contractual life of loans. The qualitative component considers internal and external risk factors that may not be adequately assessed in the quantitative model. Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments and curtailments, when appropriate. The pooled loans' contractual loan terms exclude extensions, renewals, and modifications. To estimate future prepayments by loan pool, we use our actual historical loan prepayment experience over a trailing time period, adjusted for forecasted economic conditions, to estimate future prepayments by loan pool. To estimate curtailment by loan pool we use our actual historical loan curtailment experience over a trailing time period, adjusted for forecasted economic conditions. Where

Current wording

Our CECL methodology for the pooled loans component includes both quantitative and qualitative loss factors which are applied to our population of loans and assessed at a pool level. The quantitative CECL model estimates credit losses by applying pool-specific probability of default ("PD") and loss given default ("LGD") rates to the expected exposure at default ("EAD") over the contractual life of loans. The qualitative component considers internal and external risk factors that may not be adequately assessed in the quantitative model. Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments and curtailments, when appropriate. The pooled loans' contractual loan terms exclude extensions, renewals, and modifications. To estimate future prepayments by loan pool, we use our actual historical loan prepayment experience over a trailing time period, adjusted for forecasted economic conditions, to estimate future prepayments by loan pool. To estimate curtailment by loan pool we use our actual historical loan curtailment experience over a trailing time period, adjusted for forecasted economic conditions. Where observations in either case may be insufficient, the global rate, which is simply the aggregate performance of all loan segments of the Bank, is used.

Previous wording

In determining the PD for each pooled segment, the Bank utilized regression analyses to identify certain economic drivers that were considered highly correlated to historical Bank or peer loan default experience. The regression models developed correlate macroeconomic variables to historical credit performance based on call report data over a 64 quarter (16-year) period which captures a full economic cycle from 2004 to 2019. We elected to exclude historical data from 2020 - 2021 to assess the quantitative expected credit losses because we believe that period is an outlier and did not represent normal economic behavior considering the COVID-19 pandemic lockdown with changes in macroeconomic variables and the significant levels of government relief programs in place during that period. For all segments, the Company's actual loss history was not statistically relevant, thus the loss history of peers, defined as commercial financial institutions with asset size of one to five billion, domiciled in California, with similar concentrations of lending were utilized to determine loss rates. The peers utilized in the allowance for credit losses are segment specific. Additionally, management chose the national unemployment rate and U.S. gross domestic product as the primary economic forecast drivers for all segments. A third party provides LGD estimates for each segment based on a banking industry Frye-Jacobs Risk Index approach.

Current wording

(16-year) period which captures a full economic cycle from 2004 to 2019. We elected to exclude historical data from 2020 - 2021 to assess the quantitative expected credit losses because we believe that period is an outlier and did not represent normal economic behavior considering the COVID-19 pandemic lockdown with changes in macroeconomic variables and the significant levels of government relief programs in place during that period. For all segments, the Company's actual loss history was not statistically relevant, thus the loss history of peers, defined as commercial financial institutions with asset size of one to five billion dollars, domiciled in California, with similar concentrations of lending were utilized to determine loss rates. The peers utilized in the allowance for credit losses are segment specific. Additionally, management chose the national unemployment rate and U.S. gross domestic product as the primary economic forecast drivers for all segments. A third party provides LGD estimates for each segment based on a banking industry Frye-Jacobs Risk Index approach.

Previous wording

Cash and cash equivalents. Cash and cash equivalents increased $130.7 million, or 73.9%, to $307.5 million at December 31, 2023 from $176.8 million at December 31, 2022. The increase primarily was due to $139.8 million increase in federal funds sold and interest-bearing balances in banks, due to net change in loans and the managed run-off of higher cost time deposits.

Current wording

Cash and cash equivalents. Cash and cash equivalents increased $56.5 million, or 18.4%, to $364.0 million at December 31, 2024 from $307.5 million at December 31, 2023. The increase primarily was due to a $51.3 million increase

Previous wording

Investment securities. Investment securities, all of which are classified as available-for-sale, increased $9.1 million, or 5.9%, to $163.2 million at December 31, 2023 from $154.0 million at December 31, 2022. The increase primarily was due to purchase of $25.3 million of investment securities during the year ended December 31, 2023, partially offset by $11.6 million in routine amortization and repayment of investment principal balances and securities called and matured, and a $4.3 million fair value adjustment related to unrealized losses on investment securities available-for-sale.

Current wording

Investment securities. Investment securities, all of which are classified as available-for-sale, increased $30.2 million, or 18.5%, to $193.3 million at December 31, 2024 from $163.2 million at December 31, 2023. The increase primarily was due to purchases of $49.9 million of investment securities during the year ended December 31, 2024, partially offset by $21.9 million in routine amortization, principal repayments and maturities or calls of securities A $2.3 million fair value adjustment related to unrealized gains on investment securities available-for-sale also contributed to the increase.

Previous wording

Equity securities. Equity securities decreased $1.2 million, or 8.5% to $12.6 million at December 31, 2023 from $13.8 million at December 31, 2022. The decrease was primarily due to a $1.1 million loss on equity securities resulting from an adjustment to the fair value of equity securities during the year ended December 31, 2023.

Current wording

Equity securities. Equity securities increased $535,000, or 4.3% to $13.1 million at December 31, 2024 from $12.6 million at December 31, 2023. The increase was primarily due to a $463,000 gain on equity securities resulting from an adjustment to the fair value of equity securities during the year ended December 31, 2024.

Previous wording

Loans, net. We originate a wide variety of loans with a focus on commercial real estate (“CRE”) loans and commercial and industrial loans. Loans receivable, net of allowance for credit losses, decreased $96.4 million, or 4.8%, to $1.9 billion at December 31, 2023, from $2.0 billion at December 31, 2022. The decrease was primarily due to $196.7 million of loan repayments, including $7.3 million in PPP loans, and $7.2 million in loan sales, partially offset by $110.6 million of new loan originations and purchases. Loan originations in 2023 were concentrated in California markets, primarily Los Angeles, Irvine/Southern California, San Francisco Bay Area and Sacramento/Northern California with commercial and multifamily real estate secured loans accounting for the majority of the originations.

Current wording

Loans, net. We originate a wide variety of loans with a focus on commercial real estate (“CRE”) loans and commercial and industrial loans. Loans receivable, net of allowance for credit losses, increased $29.2 million, or 1.5%, to $1.9 billion at December 31, 2024, from $1.9 billion at December 31, 2023. The increase was due to $253.8 million of new loan originations and $86.1 million of loan purchases, partially offset by $299.9 million of loan repayments and $12.8 million of loans sold.

Previous wording

(2) Includes loans located in Sacramento and Northern California counties totaling $95.6 million and loans located in Los Angeles and Orange counties totaling $506.6 million.

Current wording

(2) Includes loans located in Sacramento and Northern California counties totaling $86.4 million and loans located in Los Angeles and Orange counties totaling $537.1 million.

Previous wording

(3) Includes loans located in the states of Colorado, New Mexico, Washington and other states. At December 31, 2023, loans in Colorado, New Mexico and Washington totaled $87.1 million, $43.9 million and $103.8 million, respectively.

Current wording

(3) Includes loans located in the states of Colorado, New Mexico, Washington and other states. At December 31, 2024, loans in Colorado, New Mexico, Washington and other states totaled $134.9 million, $62.9 million, $84.6 million and $485.8 million, respectively.

Previous wording

Acquired loans. Acquired PCD loans are loans acquired from a business combination with evidence of more than insignificant credit deterioration and are accounted for under ASC Topic 326. Acquired non-PCD loans represent loans acquired from a business combination without more than insignificant evidence of credit deterioration and are accounted for under ASC Topic 310-20.

Current wording

Acquired loans. Acquired PCD loans are loans acquired through a business combination with evidence of more than insignificant credit deterioration and are accounted for under ASC Topic 326. Acquired non-PCD loans represent loans acquired through a business combination without more than insignificant evidence of credit deterioration and are accounted for under ASC Topic 310-20.

Previous wording

As of December 31, 2023 acquired non-PCD loans totaled $187.7 million with a remaining net premium of $2.1 million, compared to $228.7 million with a remaining net premium of $2.3 million as of December 31, 2022. The net premium for acquired non-PCD loans includes both a credit discount based on estimated losses in the acquired loans partially offset by any premium, based on market interest rates on the date of acquisition.

Current wording

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

Previous wording

As of December 31, 2023 acquired PCD loans totaled $27.5 million with a remaining net non-credit discount of $1.8 million, compared to $31.1 million with a remaining net non-credit discount of $2.0 million as of December 31, 2022.

Current wording

As of December 31, 2024, the unpaid principal balance of acquired PCD loans totaled $24.0 million with a remaining net non-credit discount of $1.5 million, compared to $27.5 million with a remaining net non-credit discount of $1.8 million as of December 31, 2023.

Previous wording

Nonperforming assets and nonaccrual loans. Nonperforming assets generally consist of nonaccrual loans, accruing loans more than 90 days delinquent and other real estate owned (“OREO”). Nonperforming assets decreased $2.3 million to $13.0 million, or 0.67% of total loans, at December 31, 2023 compared to $15.2 million, or 0.75% of total loans, at December 31, 202.

Current wording

Nonperforming assets and nonaccrual loans. Nonperforming assets generally consist of nonaccrual loans, accruing loans 90 days or more past due, and other real estate owned (“OREO”). Nonperforming assets decreased $3.5 million to $9.5 million, or 0.48% of total loans, at December 31, 2024 compared to $13.0 million, or 0.67% of total loans, at December 31, 2023. There was no OREO at December 31, 2024 and 2023.

Previous wording

Accruing loans past due 30 to 89 days totaled $4.8 million at December 31, 2023, compared to $3.9 million at December 31, 2022. At December 31, 2023 and December 31, 2022, nonaccrual loans included $927,000 and $2.5 million of loans 30-89 days past due, and $2.1 million and $4.0 million of loans less than 30 days past due, respectively. At December 31, 2023, the $2.1 million of loans less than 30 days past due was comprised of 16 loans all of which were placed on nonaccrual due to concerns over the financial condition of the borrowers.

Current wording

Accruing loans past due 30 to 89 days totaled $6.7 million at December 31, 2024, compared to $4.8 million at December 31, 2023. At December 31, 2024 and 2023, nonaccrual loans included $643,000 and $4.4 million of loans 30-89 days past due, and $4.4 million and $2.1 million of loans less than 30 days past due, respectively. At December 31, 2024, the $4.4 million of loans less than 30 days past due was comprised of 15 loans all of which were placed on nonaccrual due to concerns over the financial condition of the borrowers.

Previous wording

Loan modifications to borrowers experiencing financial difficulty as of December 31, 2023 totaled $4.3 million, of which none were accruing, compared to $6.3 million, of which $759,000 were accruing and performing according to their modified terms, at December 31, 2022. Modified loans that are accruing and performing according to their modified

Current wording

Loan modifications to borrowers experiencing financial difficulty as of December 31, 2024 totaled $2.7 million compared to $4.3 million at December 31, 2023. All modified loans were classified as nonaccrual at both dates. Modified loans that are accruing and performing according to their modified terms are not considered nonperforming. The related allowance for credit losses on individually evaluated modified loans totaled $24,000 and $1.3 million at December 31, 2024 and December 31, 2023, respectively.

Previous wording

At December 31, 2023 and December 31, 2022, we had no PCD loans that were 90 days past due and still accruing.

Current wording

At December 31, 2024 and 2023, we had no PCD loans that were 90 days or more past due and still accruing.

Previous wording

Allowance for credit losses. The allowance for credit losses is determined by us on a quarterly basis, although we are engaged in monitoring the appropriate level of the allowance on a more frequent basis. We assess the allowance for credit losses based on three categories: (i) originated loans, (ii) acquired non-credit-deteriorated loans, and (iii) acquired or purchased credit deteriorated 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. Based on the current conditions of the loan portfolio, management believes that the $22.0 million allowance for credit losses at December 31, 2023 is adequate to absorb probable losses inherent in the Company’s loan portfolio. No assurance can be given, however, that adverse economic conditions or other circumstances will not result in increased losses in the portfolio.

Current wording

Allowance for credit losses. The allowance for credit losses is determined by us on a quarterly basis, although we are engaged in monitoring the appropriate level of the allowance on a more frequent basis. We assess the allowance for credit losses based on three categories: (i) originated loans, (ii) acquired non-credit-deteriorated loans, and (iii) acquired or purchased credit deteriorated 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. Based on the current conditions of the loan portfolio, management believes that the $17.9 million allowance for credit losses at December 31, 2024 is adequate to absorb probable losses inherent in the Company’s loan portfolio. No assurance can be given, however, that adverse economic conditions or other circumstances will not result in increased losses in the portfolio.

Previous wording

At December 31, 2023, the Company’s allowance for credit losses for loans was $22.0 million under the CECL framework, or 1.14% of total loans, compared to an allowance for loan losses of $18.9 million under the allowance for loan losses incurred loss framework, or 0.94% of total loans, at December 31, 2022. In addition to the CECL adjustment

Current wording

At December 31, 2024, the Company’s allowance for credit losses for loans was $17.9 million, or 0.92% of total loans, compared to $22.0 million, or 1.14% of total loans, at December 31, 2023. A $1.3 million provision for credit losses was recorded for the year ended December 31, 2024. In addition to the CECL adjustment on January 1, 2023, a $2.2 million provision for credit losses for loans was recorded for the year ended December 31, 2023.

Previous wording

We recorded net charge-offs of $550,000 for the year ended December 31, 2023 compared to $3.2 million for the year ended December 31, 2022.

Current wording

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

Previous wording

As of December 31, 2023, the Company individually evaluated $13.0 million of loans, all of which were on nonaccrual status. Of these individually evaluated loans, $9.7 million had a specific allowance of $4.4 million as of

Current wording

As of December 31, 2024, the Company individually evaluated $17.4 million of loans, inclusive of the $9.2 million of nonaccrual loans as of that date. Of these individually evaluated loans, $2.7 million had a specific allowance of $392,000 as of December 31, 2024. As of December 31, 2023, the Company individually evaluated $13.0 million in loans, all of which were on nonaccrual status. Of these individually evaluated loans, $9.7 million had a specific allowance of $4.4 million as of December 31, 2023.

Previous wording

Right-of-use assets and lease liabilities. The Company recognizes operating leases on the Consolidated Balance Sheet as ROU assets and lease liabilities based on the value of the discounted future lease payments. ROU assets decreased $2.6 million, or 15.9%, to $13.9 million at December 31, 2023 from $16.6 million at December 31, 2022. Lease liabilities decreased $2.4 million, or 13.9%, to $14.8 million at December 31, 2023 from $17.2 million at December 31, 2022. The decrease in right-of-use assets and lease liabilities was due to normal amortization and depreciation expenses associated with these assets.

Current wording

Right-of-use assets and lease liabilities. The Company recognizes operating leases on the Consolidated Balance Sheet as ROU assets and lease liabilities based on the value of the discounted future lease payments. ROU assets decreased $556,000, or 4.0%, to $13.4 million at December 31, 2024 from $13.9 million at December 31, 2023. Lease liabilities decreased $369,000, or 2.5%, to $14.4 million at December 31, 2024 from $14.8 million at December 31, 2023. The decrease in right-of-use assets and lease liabilities was due to normal depreciation and amortization, respectively, partially offset by changes in the ROU asset and liabilities resulting from lease extensions.

Previous wording

Premises and Equipment. Premises and equipment increased $456,000, or 3.4%, to $13.7 million at December 31, 2023 from $13.3 million at December 31, 2022. This increase in premises and equipment was driven by purchases of equipment during the year, partially offset by normal amortization and depreciation expenses associated with these assets.

Current wording

Premises and Equipment. Premises and equipment decreased $348,000, or 2.5%, to $13.4 million at December 31, 2024 from $13.7 million at December 31, 2023, driven by normal depreciation expenses associated with these assets.

Previous wording

Deposits. Deposits are our primary source of funding and consists 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, money market, certificates of deposit and individual retirement accounts. These accounts earn interest at rates established by management based on competitive market factors, management’s desire to increase certain product types or maturities, and in keeping with our asset/liability, liquidity and profitability objectives. Competitive products, competitive pricing and high touch client service are important to attracting and retaining these deposits. Total deposits increased $47.3 million, or 2.3%, to $2.1 billion at December 31, 2023 compared to the year ended December 31, 2022. Noninterest bearing deposits totaled $646.3 million, or 30.3% of total deposits, at December 31, 2023 compared to $773.3 million, or 37.1% of total deposits, at December 31, 2022. During the year ended December 31, 2023, there was a shift ininterest rate sensitive clients moving a portion of their non-operating deposit balances from lower costing deposits, including noninterest-bearing deposits, into higher costing money market and time deposits.

Current wording

savings, money market, certificates of deposit and individual retirement accounts. These accounts earn interest at rates established by management based on competitive market factors, management’s desire to increase certain product types or maturities, and in keeping with our asset/liability, liquidity and profitability objectives. Competitive products, competitive pricing and high touch client service are important to attracting and retaining these deposits. Total deposits increased $101.3 million, or 4.7%, to $2.2 billion at December 31, 2024 compared to December 31, 2023. Noninterest bearing deposits totaled $689.0 million, or 30.8% of total deposits, at December 31, 2024 compared to $646.3 million, or 30.3% of total deposits, at December 31, 2023. During the year ended December 31, 2024, there was a shift ininterest rate sensitive clients moving a portion of their non-operating deposit balances from lower costing deposits, including noninterest-bearing deposits, into higher costing money market and time deposits.

Previous wording

As of December 31, 2023 and 2022, approximately $1.0 billion, or 45.4% of total deposits and $1.1 billion, or 53.3% of total deposits respectively, were uninsured. The uninsured amounts are estimates based on the methodologies and assumptions used for United Business Bank’s regulatory reporting requirements.

Current wording

As of December 31, 2024 and 2023, approximately $1.0 billion, or 46.8% of total deposits, and $1.0 billion, or 45.4% of total deposits, respectively, were uninsured. The uninsured amounts are estimates based on the methodologies and assumptions used for United Business Bank’s regulatory reporting requirements.

Previous wording

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 December 31, 2023 and 2022, we had the ability to borrow from the FHLB up to $576.9 million and $473.6 million, respectively. At both December 31, 2023 and 2022, there were no FHLB advances outstanding. In addition, the Bank maintained a short-term borrowing line of credit with the FRB of San Francisco based on PPP loans pledged as collateral. This line was closed during 2023, with no FRB borrowings outstanding at December 31, 2023. The Bank did not participate in the FRB of San Francisco Bank Term Funding Program.

Current wording

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 December 31, 2024 and 2023, we had the ability to borrow from the FHLB up to $540.2 million and $576.9 million, respectively. At both December 31, 2024 and 2023, there were no FHLB advances outstanding.

Previous wording

The Bank also has uncommitted Federal Funds lines with four corresponding banks. Cumulative available commitments totaled $65.0 million at both December 31, 2023 and December 31, 2022. There are no amounts outstanding under these facilities at both December 31, 2023 and 2022.

Current wording

The Bank also has uncommitted Federal Funds lines with four corresponding banks. Cumulative available commitments totaled $65.0 million at both December 31, 2024 and December 31, 2023. There were no amounts outstanding under these facilities at both December 31, 2024 and 2023.

Previous wording

At December 31, 2023 and 2022, the Company had outstanding junior subordinated debt, net of marked-to-market, related to junior subordinated deferrable interest debentures assumed in connection with its previous acquisitions totaling $8.6 million and $8.5 million, respectively. For additional information, see “Note 13 — Junior Subordinated Deferrable Interest Debentures” in the Notes to the Consolidated Financial Statements contained in “Item 8. Financial Statements and Supplementary Data” of this Form 10-K.

Current wording

At December 31, 2024 and 2023, the Company had outstanding junior subordinated debt, net of marked-to-market, related to junior subordinated deferrable interest debentures assumed in connection with its previous acquisitions totaling $8.6 million. For additional information, see “Note 13 — Junior Subordinated Deferrable Interest Debentures”

Previous wording

At December 31, 2023, the Company had outstanding subordinated debt, net of costs to issue, totaling $63.9 million compared to $63.7 million at December 31, 2022. For additional information, see “Item 1–Business – Sources of Funds”, contained in this Form 10-K. See also, “Note 14 — Subordinated Debt” in the Notes to the Consolidated Financial Statements contained in “Item 8. Financial Statements and Supplementary Data” of this Form 10-K.

Current wording

At December 31, 2024, the Company had outstanding subordinated debt, net of costs to issue, totaling $63.7 million compared to $63.9 million at December 31, 2023. For additional information, see “Item 1–Business – Sources of Funds”, contained in this Form 10-K. See also, “Note 14 — Subordinated Debt” in the Notes to the Consolidated Financial Statements contained in “Item 8. Financial Statements and Supplementary Data” of this Form 10-K.

Previous wording

We are required to provide collateral for certain local agency deposits. At both December 31, 2023 and December 31, 2022, the FHLB of San Francisco had issued a letter of credits on behalf of the Bank totaling $40.6 million as collateral for local agency deposits.

Current wording

We are required to provide collateral for certain local agency deposits. At December 31, 2024 and 2023, the FHLB of San Francisco had issued letter of credits on behalf of the Bank totaling $41.1 million and $40.6 million, respectively, as collateral for local agency deposits.

Previous wording

Shareholders’ equity. Shareholders’ equity decreased $4.3 million, or 1.3%, to $312.9 million at December 31, 2023 from $317.1 million at December 31, 2022. The decrease in shareholders’ equity was primarily due to the repurchase of $24.1 million of our common stock during 2023 and cash dividends of $4.8 million, partially offset by $27.4 million of net income. In addition, shareholder’s equity was adversely impacted by increased unrealized losses on available for sale securities reflecting the increase in market interest rates during the year, resulting in a $3.0 million increase in accumulated other comprehensive loss, net of tax for the year ended December 31, 2023.

Current wording

Shareholders’ equity. Shareholders’ equity increased $11.5 million, or 3.7%, to $324.4 million at December 31, 2024 from $312.9 million at December 31, 2023. The increase was due to $23.6 million of net income, a $1.6 million decrease in accumulated other comprehensive loss, net of taxes, reflecting the increase in market interest rates during the year and $588,000 in stock based compensation related to the grant of equity awards, partially offset by the repurchase of $9.3 million of our common stock and the $5.0 million in cash dividends paid or accrued during 2024.

Previous wording

During the year ended December 31, 2023, the Company repurchased a total of 1,329,040 shares of its common stock at a total cost of $18.14 per share. At December 31, 2023, 359,752 shares remain available for future purchases under the current stock repurchase plan. For additional information related to our stock repurchases, see “Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities – Stock Repurchases” contained in this Form 10-K.

Current wording

During the year ended December 31, 2024, the Company repurchased a total of 455,654 shares of its common stock at a total cost of $20.31 per share. At December 31, 2024, 464,098 shares remain available for future purchases under the current stock repurchase plan. For additional information related to our stock repurchases, see “Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities – Stock Repurchases” contained in this Form 10-K.

Previous wording

Earnings summary. We reported net income of $27.4 million for the year ended December 31, 2023, compared to $23.7 million for the year ended December 31, 2022, an increase of $3.7 million, or 15.6%. Net income for the year ended December 31, 2023 reflects a $1.2 million increase in net interest income, a $2.4 million decrease in provision for credit losses, an $876,000 increase in noninterest income and a $1.3 million decrease in noninterest expenses, partially offset by a $2.0 million increase in provision for income taxes. Diluted earnings per share were $2.27 for the year ended December 31, 2023, an increase of $0.46 from diluted earnings per share of $1.81 for the year ended December 31, 2022.

Current wording

Earnings summary. We reported net income of $23.6 million for the year ended December 31, 2024, compared to $27.4 million for the year ended December 31, 2023, a decrease of $3.8 million or 13.9%. Net income for the year ended December 31, 2024 reflects a $6.7 million decrease in net interest income, a $750,000 decrease in the provision for credit losses and an $600,000 decrease in noninterest income, partially offset by a $545,000 decrease in noninterest expense and a $2.2 million decrease in the provision for income taxes. Diluted earnings per share were $2.10 for the year ended December 31, 2024, a decrease of $0.17 from diluted earnings per share of $2.27 for the year ended December 31, 2023.

Previous wording

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 61.69% for the year ended December 31, 2023, compared to 64.13% for the year ended December 31, 2022. The improvement in the efficiency ratio during the year ended December 31, 2023 was primarily due to higher revenues, coupled with a slight decreasein total noninterest expenses.

Current wording

Our efficiency ratio, which is calculated by dividing noninterest expense by the sum of net interest income before provision for credit losses and noninterest income, was 65.77% for the year ended December 31, 2024, compared to 61.69% for the year ended December 31, 2023. The deterioration in the efficiency ratio during the year ended December 31, 2024 was primarily due to lower revenues, partially offset by a slight decreasein total noninterest expenses.

Previous wording

Interest income. Interest income for the year ended December 31, 2023 was $126.3 million, compared to $107.1 million for the year ended December 31, 2022, an increase of $19.3 million or 18.0%. The increase in interest income between periods reflects increases in interest income in all interest-earning asset categories, with the largest increases from loans, and fed funds sold and interest bearing balances in banks. Increased yields earned on interest-earning assets, along with an increase in the average balance of fed funds sold and interest bearing balances in banks, were the primary drivers for the increase in interest income.

Current wording

Interest income. Interest income for the year ended December 31, 2024 was $131.7 million, compared to $126.3 million for the year ended December 31, 2023, an increase of $5.4 million or 4.3%. Increased average yields on interest-earning assets, along with an increase in the average balance of fed funds sold and interest bearing balances in banks, were the primary drivers for the increase in interest income.

Previous wording

Interest income on loans, including fees increased $10.6 million, or 14.6%, to $106.3 million for the year ended December 31, 2023, compared to $95.7 million for the year ended December 31, 2022. The increase was primarily due to a 48 basis point increase in the average loan yield and, to a lesser extent, a $20.7 million increase in the average balance of loans. The average yield earned on loans, including the accretion of the net discount and deferred PPP loan fees recognized for the year ended December 31, 2023 was 5.32%, compared to 4.84% for the year ended December 31, 2022. Interest income included $92,000 in fees earned related to PPP loans during the year ended December 31, 2023, compared to $2.0 million in same period a year ago. As of December 31, 2023, there was a minimal amount of unrecognized PPP deferred fees and costs. Interest income on loans for the year ended December 31, 2023 and 2022, included $486,000 and $1.3 million respectively, in fees related to prepayment penalties. Interest income on loans for the year ended December 31, 2023 and December 31, 2022 included $44,000 in amortization and $2.3 million in accretion respectively, of the net discount on acquired loans and revenue from PCD loans in excess of discounts. The remaining net discount on these acquired loans was $395,000 and $522,000 at December 31, 2023 and 2022, respectively.

Current wording

Interest income on loans, including fees, decreased $2.3 million, or 2.1%, to $104.1 million for the year ended December 31, 2024, compared to $106.3 million for the year ended December 31, 2023. The decrease was primarily due to a $103.0 million decrease in the average balance of loans, partially offset by a 17 basis point increase in the average loan yield. The average yield earned on loans, including the accretion of the net discount and deferred loan fees recognized, was 5.49% for the year ended December 31, 2024, compared to 5.32% for the year ended December 31, 2023. Interest income on loans for the year ended December 31, 2024 and 2023, included $523,000 and $486,000 respectively, in fees related to prepayment penalties. Interest income on loans for the years ended December 31, 2024 and 2023, also included $158,000 and $44,000, respectively, in accretion and amortization of the net discount on acquired loans, as well as revenue from PCD loans in excess of discounts. The remaining net discount on these acquired loans was $326,000 and $395,000 at December 31, 2024 and 2023, respectively.