BayCom Corp (BCML) FY 2024 MD&A

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This discussion and analysis reviews our consolidated financial statements and other relevant statistical data and is intended to enhance your understanding of our financial condition and results of operations. The information in this section has been derived from the Consolidated Financial Statements and footnotes thereto that appear in “Item 8. Financial Statements and Supplementary Data” of this Form 10-K. The information contained in this section should be read in conjunction with these Consolidated Financial Statements and footnotes and the business and financial information provided in this Form 10-K. Unless otherwise indicated, the financial information presented in this section reflects the consolidated financial condition and results of operations of BayCom Corp and its subsidiary, United Business Bank. Because we conduct all of our material business operations through the Bank, the entire discussion relates to activities primarily conducted by the Bank.

History and Overview

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.

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

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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.

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.

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

Between March 2022 and July 2023, in response to elevated inflation, the Federal Open Market Committee (“FOMC”) of the Federal Reserve increased interest rates by a total of 525 basis points, bringing the target range to 5.25% to 5.50%. On September 18, 2024, the FOMC reduced the target range to 4.75% to 5.00%, marking the first rate cut since March 2020. This was followed by additional reductions of 25 basis points in both November and December 2024, bringing the target range down to 4.25% to 4.50% as of year-end. These rate cuts were implemented in response to signs of economic softening, including a cooling labor market and moderating inflation.

Net interest margin decreased to 3.74% for the year ended December 31, 2024, compared to 4.05% for the previous year and was negatively impacted by increased funding costs, due to shifts towards higher costing deposits, which outpaced, on a percentage basis, increased yields on interest-earning assets, due to the lagging benefit of variable rate interest-earning assets repricing higher. We believe our balance sheet is well-positioned to improve our net interest margin if interest rates hold. Conversely, a decline in interest rates would likely negatively impact our net interest income.

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.

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

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decreased $545,000 during the year ended December 31, 2024, as compared to 2023. Noninterest income and noninterest expenses are impacted by the growth of our banking operations and growth in the amounts of loans and deposits.

Business Strategy

Our strategy is to continue to make strategic acquisitions of financial institutions within the Western United States, grow organically and preserve our strong asset quality through disciplined lending practices. We seek to achieve these results by focusing on the following:

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Critical Accounting Estimates

Our consolidated financial statements are prepared in accordance with GAAP. In doing so, we have to make estimates and assumptions. Our critical accounting estimates are those estimates that involve a significant level of uncertainty at the time the estimate was made, and changes in the estimate that are reasonably likely to occur from period to period, or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations. Accordingly, actual results could differ materially from our estimates. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. We have reviewed our critical accounting estimates with the audit committee of our Board of Directors.

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See Note 1 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for a summary of significant accounting policies and the effect on our financial statements.

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Allowance for credit losses for loans. The allowance for credit losses represents management’s estimate of current expected credit losses over the life of a financial asset carried at amortized cost at an appropriate level based upon management’s evaluation of the adequacy of collectively and individually evaluated loss reserves. The Company’s method for assessing the appropriateness of the allowance for credit losses includes specific allowances for individually analyzed loans, pooled loans component which includes both quantitative and qualitative factors, and reserve for unfunded loan commitments.

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Under the CECL methodology, expected credit losses reflect expected losses over the remaining contractual life of an asset, considering the effect of prepayments and available information about the collectability of cash flows, including information about relevant historical experience, current conditions, and reasonable and supportable forecasts of future events and circumstances. Thus, the CECL methodology incorporates a broad range of information in developing credit loss estimates. The CECL methodology could result in significant changes to both the timing and amounts of provision for credit losses and the allowance as compared to historical periods. Loans that are deemed to be uncollectable are charged off and deducted from the allowance. The provision for credit losses and recoveries on loans previously charged off are added to the allowance. Regardless of the determination that a charge-off is appropriate for financial accounting purposes, the Company manages its loan portfolio by continually monitoring, where possible, a borrower's ability to pay through the collection of financial information, delinquency status, borrower discussion and the encouragement to repay in accordance with the original contract or modified terms, if appropriate.

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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 a modified loan to a borrower experiencing financial difficulty. The allowance for credit losses on modified 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.

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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.

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The CECL model utilizes a discounted cash flow ("DCF") method to measure the expected credit losses on loans collectively evaluated that are sub-segmented by loan pools with similar credit risk characteristics, which generally correspond to federal regulatory reporting codes (i.e., Call Report codes), with PCD assets pooled separately by similar loan pools to evaluate and measure the allowance for credit losses:

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In determining the PD for each pooled segment, the Bank utilized regression analyses to identify certain economic drivers that were considered highly correlated to historical Bank or peer loan default experience. The regression models developed correlate macroeconomic variables to historical credit performance based on call report data over a 64 quarter

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(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.

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In its loss forecasting framework, the Company incorporates forward-looking information using macroeconomic scenarios applied over the forecasted life of the assets. The quantitative CECL model applies the projected rates based on the economic forecasts for the four quarter (one-year) reasonable and supportable forecast horizon to EAD to estimate defaulted loans. The economic data is updated quarterly, which is based on Federal Reserve Economic Data (“FRED”) forecasts. Historical LGD rates are applied to estimated defaulted loans to determine estimated credit losses. For periods beyond the forecast horizon, the economic factors revert to historical averages on a straight-line basis over an eight-quarter (two-year) period. Subsequent to the reversion period for the remaining contractual life of loans and leases, the PD, LGD, and prepayment rates are based on historical experience during a full economic cycle.

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Management considers whether adjustments to the quantitative portion of the allowance for credit losses are needed for differences in segment-specific risk characteristics or to reflect the extent to which it expects current conditions and reasonable and supportable forecasts of economic conditions to differ from the conditions that existed during the historical period included in the development of PD and LGD. Qualitative internal and external risk factors include, but are not limited to, the following:

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●The effect of other external factors such as legal and regulatory requirements on the level of estimated credit losses in the portfolio.

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The estimated credit losses associated with unfunded loan commitments are calculated using the same models and methodologies noted above and incorporate utilization assumptions at the estimated time of default. While the provision for credit losses associated with unfunded loan commitments is included in "provision for credit losses" on the consolidated statement of income, the allowance for credit losses for unfunded loan commitments is maintained on the consolidated balance sheet in "Interest payable and other liabilities".

Comparison of Financial Condition at December 31, 2024 and 2023

Total assets.  Total assets increased $112.5 million, or 4.4%, to $2.7 billion at December 31, 2024 from $2.6 billion at December 31, 2023. The increase was primarily due to increases in cash and cash equivalents of $56.5 million or 18.4%, investment securities available-for-sale of $30.2 million or 18.5%, and loans receivable, net of $29.2 million or 1.5%.

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

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

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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.

The following table sets forth certain information regarding contractual maturities and the weighted average yields of our available for sale investment securities as of December 31, 2024. 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.

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See “Note 3 – Investment Securities” in the Notes to Consolidated Financial Statements contained in “Item 8. Financial Statements and Supplementary Data” of this Form 10-K for additional information on our investment securities.

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

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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.

Loan originations in 2024 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. Loan purchases were concentrated in New Mexico and Colorado.

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The following table provides information about our loan portfolio by type of loan, with PCD loans presented as a separate balance, at the dates presented.

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The following table presents at December 31, 2024, the geographic distribution of our loan portfolio in dollar amounts and percentages.

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

(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.

(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.

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

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The following table sets forth contractual maturity and repricing information for our loan portfolio at December 31, 2024. Loans which have adjustable or renegotiable interest rates are shown as maturing in the period during which the contract is due. PCD loans are reported at their contractual interest rate. The schedule does not reflect the effects of possible prepayments or enforcement of due on sale clauses.

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The following table sets forth the amounts of loans due after December 31, 2025, with fixed or adjustable rates:

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The following table sets forth the originations, purchases, sales and repayments of loans as of the dates indicated.

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

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

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

As of December 31, 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.

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.

The decrease in nonperforming loans was primarily due to the sale of three nonaccrual loans totaling $8.1 million in the third quarter of 2024, the complete charge-off of a $1.0 million nonaccrual loan in the same period, and the payoff of two nonaccrual loans totaling $460,000. Additionally, a $283,000 nonaccrual loan was paid off in the fourth quarter of 2024. These reductions were partially offset by two new loans totaling $3.5 million placed on nonaccrual in the third quarter, two additional loans totaling $35,000 placed on nonaccrual in the fourth quarter, and $220,000 in accruing loans that were 90 days or more past due and in the process of collection.

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.

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 paid 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, as time goes on, the effects of loan discount accretion and loan premium amortization decrease as the purchased loans mature or pay off early. Upon the early pay off-of a loan, 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 forgiveness is provided, the amount of the forgiveness is charged-off against the allowance for credit losses for loans. Upon the Company’s determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is charged off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses for loans is adjusted by the same amount.

Loan modifications to borrowers experiencing financial difficulty as of 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.

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

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

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.

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

At December 31, 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.

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

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Net charge-offs totaled $5.0 million for the year ended December 31, 2024, of which $3.2 million was specifically reserved for. The quantitative reserve was impacted by declines in forecasted economic conditions for national gross domestic product and increasing forecasted national unemployment, both key indicators used to estimate credit losses. The reserve for individually evaluated loans decreased during the year primarily due to $3.2 million in charge-offs, as the associated collateral shortfalls were deemed uncollectable. No changes were made to the qualitative risk factor conclusions during the year ended December 31, 2024. The increase in the provision for credit loss for unfunded commitments of $375,000 for the year ended December 31, 2024 was primarily due to a new $9.5 million construction commitment and increased quantitative loss rates.

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

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

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The following table shows the allocation of the allowance for credit losses at the indicated dates.

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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.

Management considers the allowance for credit losses for loans at December 31, 2024 to be adequate to cover future expected losses inherent in the loan portfolio based on the assessment of the above-mentioned factors affecting the loan portfolio. While management believes the estimates and assumptions used in its determination of the adequacy of the allowance are reasonable, there can be no assurance that such estimates and assumptions will not be proven incorrect in the future, or that the actual amount of future losses will not exceed the amount of the established allowance for credit losses for loans or that any increased allowance for credit losses for loans that may be required will not adversely impact our financial condition and results of operations. A further decline in national and local economic conditions as a result of unemployment levels, labor shortages and the effects of inflation, a potential recession, or slowed economic growth caused by increasing political instability from acts of war, as well as supply chain disruptions, among other factors, could result in a material increase in the allowance for credit losses for loans and may adversely affect the Company’s financial condition and results of operations. In addition, the determination of the amount of our allowance for credit losses for loans is subject to review by bank regulators as part of the routine examination process, which may result in additions to our allowance for credit losses based upon their judgment of information available to them at the time of their examination.

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.

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.

Deposits.  Deposits are our primary source of funding and 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,

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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 in interest rate sensitive clients moving a portion of their non-operating deposit balances from lower costing deposits, including noninterest-bearing deposits, into higher costing money market and time deposits.

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

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The following table shows a summary of our average deposit amounts and average rates paid during the years indicated:

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The following table shows time deposits by maturity and rate as of December 31, 2024.

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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.

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The following table sets forth the portion of our time deposits that are in excess of the FDIC insurance limit, by remaining time until maturity, as of December 31, 2024.

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(Dollars in thousands)

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For additional information regarding our deposits, see “Note 11 – Deposits” of the Notes to Consolidated Financial Statements contained in “Item 8. Financial Statements and Supplementary Data” of this Form 10-K.

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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.

During the first quarter of 2024, the Bank was approved for discount window advances with the FRB of San Francisco secured by certain types of loans. At December 31, 2024, we had the ability to borrow up to $41.9 million from the FRB of San Francisco, with no FRB of San Francisco advances outstanding at that date.

The Bank 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.

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”

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in the Notes to the Consolidated Financial Statements contained in “Item 8. Financial Statements and Supplementary Data” of this Form 10-K.

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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.

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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.

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.

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.

Comparison of Operating Results for the Years Ended December 31, 2024 and 2023

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

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

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.

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.

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Interest income on investment securities, excluding FRB and FHLB stock, increased $2.0 million, or 28.4%, to $9.0 million for the year ended December 31, 2024 from $7.0 million for the year ended December 31, 2023. The increase was due to a 46 basis point increase in the yield on investment securities to 4.51% for the year ended December 31, 2024 from 4.05% for the year ended December 31, 2023, and a $26.6 million increase in the average balance of investment securities. Dividends on FHLB and FRB stock totaled $1.6 million and $1.4 million for the years ended December 31, 2024 and 2023, respectively.

Interest income on fed funds sold and interest-bearing balances in banks increased $5.5 million, or 47.4% to $17.1 million for the year ended December 31, 2024 from $11.6 million for the year ended December 31, 2023. The increase was primarily due to a $99.6 million increase in the average balance of federal funds sold and interest-bearing balances in banks for the year ended December 31, 2024 compared to the year ended December 31, 2023. A 10 basis point increase in the yield on fed funds sold and interest-bearing balance in banks to 5.30% for the year ended December 31, 2024 from 1.20% for the year ended December 31, 2023 also contributed to the increase.

Interest expense. Interest expense increased $12.1 million, or 42.5%, to $40.6 million for the year ended December 31, 2024 from $28.5 million for the year ended December 31, 2023, reflecting higher funding costs primarily related to increased rates of interest payable on our money market and time deposits. The average rate paid on interest bearing liabilities for the year ended December 31, 2024 was 2.54% compared to 1.87% for year ended December 31, 2023. The total average balance of interest-bearing liabilities increased $78.1 million, or 5.13%, to $1.6 billion for the year ended December 31, 2024, from the year ended December 31, 2023, primarily due to an increase in interest-bearing time deposits.

Interest expense on deposits increased $12.1 million, or 50.3%, to $36.1 million for the year ended December 31, 2024 from $24.0 million for the year ended December 31, 2023, primarily due to increases in the average rate paid on money market and accounts and time deposits, and an increase in the average balance of time deposits. The average rate paid on interest bearing deposits increased to 2.37% for the year ended December 31, 2024, from 1.66% for the year ended December 31, 2023, with the average rate paid on money market deposits increasing 72 basis points to 2.36% during 2024 compared to 1.64% during 2023, and the average rate paid on time deposits increasing 77 basis points to 3.99% during 2024 compared to 3.22% during 2023. The average balance of time deposits increased $98.1 million, or 23.6%, to $513.5 million during 2024, compared to $415.3 million during 2023.

The overall average cost of deposits, which includes noninterest-bearing deposits, for the year ended December 31, 2024 increased to 1.68%, compared to 1.13% for the year ended December 31, 2023. The average balance of noninterest bearing deposits decreased $63.5 million, or 9.24%, to $623.8 million for the year ended December 31, 2024 compared to $687.3 million for the year ended December 31, 2023.

Interest expense on borrowings, which consisted solely of subordinated debt and junior subordinated debentures, remained relatively unchanged between 2024 and 2023. The average balance of borrowings outstanding decreased $218,000, or 0.3%, to $72.3 million for the year ended December 31, 2024, compared to 2023. At the same time, the average cost of borrowings increased three basis points to 6.13% for the year ended December 31, 2024, from 6.10% for 2023.

Net interest income and net interest margin.  Net interest income decreased $6.7 million, or 6.9%, to $91.1 million for the year ended December 31, 2024 compared to $97.9 million for the year ended December 31, 2023. The decrease in net interest income primarily was due to decreases in interest income on loans, and higher funding costs related to our deposits, partially offset by increases in interest income on  federal funds sold and interest-bearing balances in banks and, to a lesser extent, investment securities, including dividends on FRB and FHLB stock.

Net interest margin for the year ended December 31, 2024 was 3.74%, a 31 basis point decrease from 4.05% for the year ended December 31, 2023. The decrease in net interest margin reflects increased funding costs, which outpaced, on a percentage basis, increasing yields on loans and investment securities.

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

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

Average Balances, Interest and Average Yields/Cost.  The following table presents, 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 yields; (iii) net interest income; (iv) the interest rate spread; and (v) the net interest margin. 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. Non-accrual loans are included in the average balance.

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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. Yields have been calculated on a pre-tax basis.

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Provision for credit losses.  We recorded a $1.3 million provision for credit losses for the year ended December 31, 2024, compared to a $2.0 million provision for credit losses for the year ended December 31, 2023. As previously discussed, the provision for credit losses for the year ended December 31, 2024 was primarily driven by the replenishment of the allowance due to charge-offs and an increase in provision for credit losses for unfunded commitments. Net charge-offs totaled $5.0 million for the year ended December 31, 2024, of which $3.2 million was specifically reserved for, compared to net charge-offs of $550,000 in 2023. The 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.

Noninterest income.  Noninterest income decreased $600,000, or 8.6%, to $6.4 million for the year ended December 31, 2024 compared to $7.0 million for the year ended December 31, 2023. The decrease was primarily due to a $500,000 loss on investment in a Small Business Investment Company (“SBIC”) fund in 2024 resulting from losses in the underlying fund, compared to a $1.1 million gain reported in 2023. Additionally, decreases in loan servicing fees and other fees, gain on sale of loans, and service charges and other fees further contributed to the decline. During the year ended December 31, 2024, the Company sold $3.6 million of SBA loans (the guaranteed portion), which generated a gain on sale of $287,000, compared to the sale of $7.2 million of SBA loans (the guaranteed portion) with a gain on sale of $508,000 for the year ended December 31, 2023. Offsetting these decreases was a $1.6 million increase in gain on equity securities resulting from positive fair value adjustments on these securities due to changes in market conditions.

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The following table presents the key components of noninterest income for the years ended December 31, 2024 and 2023.

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Noninterest expense.  Noninterest expense decreased $545,000, or 0.8%, to $64.1 million for the year ended December 31, 2024 compared to $64.7 million for the year ended December 31, 2023. The changes in noninterest expense included a $2.1 million decrease in salaries and employee benefits expense due to annual wage increases, partially offset by a $652,000 increase in data processing expense due to newly implemented services in the current year, a $517,000 increase in occupancy and equipment due to higher depreciation and property maintenance expense and $381,000 increase in other expense due to increased legal costs.

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

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Income taxes.   Income tax expense decreased $2.2 million, or 20.7%, to $8.5 million for the year ended December 31, 2024 from $10.7 million for the year ended December 31, 2023, reflecting an decrease in pre-tax income for the period ended December 31, 2024. The Company’s effective tax rate was 26.5% for the year ended December 31, 2024 compared to 28.1% for 2023.

Comparison of Operating Results for the Years Ended December 31, 2023 and 2022

For a discussion of the Company’s 2023 results compared to 2022, refer to Part I, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on March 15, 2024.

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 several different sources to meet our potential liquidity demands. Our primary sources of funds are deposits, principal and interest payments on loans and proceeds from sale of loans. During the years ended December 31, 2024, 2023 and 2022, the Bank sold $14.0 million, $9.6 million and

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

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

During the years ended December 31, 2024 and 2023, deposits increased by $101.3 million and $47.3 million, respectively. Liquid assets in the form of cash and cash equivalents, time deposit in banks and investment securities available-for-sale increased to $557.6 million at December 31, 2024 from $471.9 million at December 31, 2023. Further, management believes that our security portfolio is of high quality, helping to ensure marketability. Securities purchased during the years ended December 31, 2024 and 2023, excluding FHLB and FRB stock, totaled $49.9 million and $25.3 million, while securities repayments, maturities and sales in those periods were $21.9 million, and $11.6 million, respectively. Certificates of deposit scheduled to mature in one year or less at December 31, 2024, totaled $485.2 million. It is management’s strategy to offer deposit rates that are competitive with other local financial institutions. As a result of this strategy, we believe that a significant portion of our maturing certificates of deposit will be retained.

In addition to these primary sources of funds, management has several secondary sources available to meet potential funding requirements. As of December 31, 2024, the Bank had an available borrowing capacity of $540.2 million with the FHLB of San Francisco, with no borrowings outstanding at that date. The Bank also had Federal Funds lines with available commitments totaling $65.0 million with four correspondent banks. There were no amounts outstanding under these facilities at both December 31, 2024 and 2023. In addition, during the first quarter of 2024, the Bank was approved for discount window advances with the FRB of San Francisco secured by certain types of loans. At December 31, 2024, we had the ability to borrow up to $41.9 million from the FRB of San Francisco, with no FRB of San Francisco advances outstanding at that date. 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, pay maturing deposits and fund withdrawals, and to fund loan commitments. Loan commitments and letters of credit were $73.4 million and $77.4 million, including $9.6 million and $133,000 of undisbursed construction and development loan commitments, at December 31, 2024 and 2023, respectively. For information regarding our commitments, see “Note 16 - Commitments and Contingencies” of the Notes to Consolidated Financial Statements included in “Item 8. Financial Statements and Supplementary Data” of this Form 10 K.

Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. Net cash provided by operating activities was $31.5 million and $30.8 million for the years ended December 31, 2024 and 2023, respectively. During the year ended December 31, 2024, net cash used in investing activities, which consisted primarily of net change in loans receivable and purchases, sales and maturities of investment securities, was $62.2 million compared to $80.4 million of net cash provided in investing activities for the year ended December 31, 2023. Financing activities, comprised primarily of net change in deposits, provided net cash of $87.1 million  and $19.5 million for the years ended December 31, 2024 and 2023, respectively.

We incur capital expenditures on an ongoing basis to expand and improve our product offerings, enhance and modernize our technology infrastructure, and to introduce new technology-based products to compete effectively in our markets. We evaluate capital expenditure projects based on a variety of factors, including expected strategic impacts (such as forecasted impact on revenue growth, productivity, expenses, service levels and customer retention) and our expected return on investment. The amount of capital investment is influenced by, among other things, current and projected demand for our services and products, cash flow generated by operating activities, cash required for other purposes and regulatory considerations. The Bank utilizes funds to acquire, upgrade, and maintain its equipment, IT infrastructure and operating locations, with the investment intended to provide longer-term utility to the Company’s business. Based on current capital allocation objectives, there are no projects scheduled for capital investments in premises, IT infrastructure and equipment

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during the year ending December 31, 2025 that would materially impact liquidity. We also have purchase obligations, generally with remaining terms of less than three years and contracts with various vendors to provide services, including information processing, for periods generally ranging from one to five years, for which our financial obligations are dependent upon acceptable performance by the vendor.

In addition, at December 31, 2024, we had other future obligations and accrued expenses of $32.4 million. As of December 31, 2024, we project that our future commitments will include $14.4 million of operating lease payments. As of December 31, 2024, there were $4.1 million of scheduled interest payments due on subordinated notes and junior subordinated debentures (excluding any other borrowings that may be made after December 31, 2024). In addition, at December 31, 2024, there were other future obligations and accrued expenses of $14.0 million. For information regarding our operating leases, see “Note 7, Leases” of the Notes to Consolidated Financial Statements included in “Item 8. Financial Statements and Supplementary Data” of this Form 10-K. We believe that our liquid assets combined with the available lines of credit provide adequate liquidity to meet our current financial obligations for at least the next 12 months.

BayCom Corp is a separate legal entity from the Bank and must provide for its own liquidity. At December 31, 2024, the Company, on an unconsolidated basis, had liquid assets of $9.7 million. In addition to its operating expenses, the Company is responsible for paying any dividends declared to its shareholders, funds paid out for Company stock repurchases, and payments on trust-preferred securities and the subordinated notes issued at the holding company level. The Company has the ability to receive dividends or capital distributions from the Bank, although there are regulatory restrictions on the ability of the Bank to pay dividends.

During 2024, the Company declared $5.0 million of cash dividends on its common stock, of with $1.7 million remained to be paid subsequent to year-end. The Company expects to continue to pay quarterly cash dividends on its common stock, subject to the Board of Director’s discretion to modify or terminate this practice at any time and for any reason without prior notice. On February 20, 2025, the Company declared a quarterly cash dividend of $0.15 per share on the Company’s outstanding common stock payable on April 10, 2025 to shareholders of record as of the close of business on March 13, 2025. Assuming continued payment during 2025 at this rate of $0.15 per share, our average total dividend paid each quarter would be approximately $1.7 million based on the number of our current outstanding shares at December 31, 2024. The dividends, if any, we may pay may be limited as more fully discussed under “Business – Supervision and Regulation – BayCom Corp – Dividends” and “– Regulatory Capital Requirements” contained in “Part I. Item 1. Business” of this Form 10-K.

From time to time, our Board of Directors has authorized stock repurchase plans. In general, stock repurchase plans allow us to proactively manage our capital position and return excess capital to shareholders. Shares purchased under such plans may also provide us with shares of common stock necessary to satisfy obligations related to stock compensation awards. In May 2024, the Company announced that its Board of Directors approved a stock repurchase program authorizing the Company to repurchase up to five percent of BayCom’s common stock, or approximately 560,000 shares. The repurchase program will expire on April 21, 2025, unless sooner completed. The repurchase program may be suspended, terminated or modified at any time for any reason, including market conditions, the cost of repurchasing shares, the availability of alternative investment opportunities, liquidity, and other factors deemed appropriate. The repurchase program does not obligate the Company to purchase any particular number of shares. See "Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” of this Form 10-K for additional information relating to stock.

Regulatory capital. The Bank, as a state-chartered, federally insured commercial bank, and member of the Federal Reserve is subject to the capital requirements established by the Federal Reserve. The Federal Reserve requires the Bank to maintain capital adequacy that generally parallels the FDIC 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 December 31, 2024 and 2023, the Bank was considered to be Well Capitalized.

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

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In addition to the minimum capital ratios, the Bank must maintain a capital conservation buffer consisting of additional Common Equity Tier 1 capital greater than 2.5% above the required minimum levels to avoid limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses. At December 31, 2024, 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 banks 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 December 31, 2024, 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”, within this Form 10-K.