BCML 10-K & 10-Q changes, risk factors and insider trading

An investment in our common stock is subject to risks inherent in our business. Before making an investment decision, you should carefully consider the risks and uncertainties described below together with all of the other information included in this Form 10-K. The risks described below are not the only ones we face. Additional risks and uncertainties not currently known to us or that arewe may currently deemeddeem to be immaterial may also materially and adversely affect our business, financial condition, capital levels, cash flows, liquidity, results of operations and prospects. The market price of our common stock could decline significantly due to any of these identified or other risks, and you could lose some or all of your investment value could diminish.investment. The risks discussed below include forward-looking statements, and our actual results may differ substantially from those discussed in these forward-looking statements. This Form 10-K is qualified in its entirety by these risk factors.

We provide banking and financial services primarily to businesses and individuals in the states of California, Colorado, Nevada, New Mexico, and Washington. All our branches and most of our deposit clients are located in these five states. Adverse economic conditions in our market areas could impact our growth rate, reduce our customers’ ability to repay loans, and adversely impact our business, financial condition, and results of operations. Broader economic factors such as inflation, unemployment and money supply fluctuations also may adversely affect our profitability. Further, trade wars, tariffs, or shifts in trade policies between the United States and other nations could disrupt supply chains, increase costs for businesses, and reduce export opportunities for our customers. These developments may, in turn, negatively impact these businesses and, by extension, our operations and financial performance. In addition, adverse weather conditions as well as decreases in market prices for agricultural products grown in our markets can adversely affect agricultural businesses in our markets.

A downturn in economic conditions in the market areas we serve, in particular the San Francisco Bay Area, Southern California, Denver, Colorado, Seattle, Washington, Central New Mexico and the agricultural region of the California Central Valley, be itwhether due to inflation, recessionary trends, geopolitical instability or conflicts, adverseor weather,environmental and climate-related events such as wildfires, floods, or other factors, could have a material adverse effect on our business, financial condition, liquidity, and results of operations, including but not limited to:

A decline in local or regional economic conditions may have a greater effect on our earnings and capital compared to larger financial institutions with more geographically diverse real estate loan portfolios. Because a significant portion of our loan portfolio is secured by real estate, deterioration in real estate marketsmarkets, including stress in certain commercial real estate sectors, could impair borrowers’ ability to repay loans and reduce the value of the underlying collateral. Real estate values are influenced by a range of factors, including economic conditions, interest rates, government policies, natural disastersdisasters, (e.g., earthquakes, floodingconstruction and tornadoes),material availability, and trade-relatedother pressures affecting construction costsmarket or materialpolicy availability.factors. Liquidating significant collateral during a period of depressed real estate values could negatively impact our financial condition and profitability.

Nonperforming assets adversely affect our earnings and liquidity in various ways. We do not record interest income on nonaccrual loans or foreclosed assets, and nonaccrual loans and foreclosed assets increase our loan administration costs. Upon foreclosure or similar proceedings, we record the repossessed asset at its estimated fair value, less costs to sell, which may result in a write-down or loss. A significant increase in the level of nonperforming assets from current levels would also increase our risk profile and may impact the capital levels and supervisory expectations our regulators believe are appropriate in light of the increased risk profile. While we attempt to reduce problem assets through collection efforts, asset sales and workouts and restructurings, decreases in the value of the underlying collateral, including as a result of valuation uncertainty, reduced market liquidity, or refinancing challenges, or in the borrower’s performance or financial condition, could adversely affect our business, results of operations and financial condition. In addition, the resolution of nonperforming assets can require significant commitments of time from management, diverting their attention from other aspects of our operations.operations, and may be prolonged due to market conditions, interest rate levels, or reduced liquidity for certain asset classes.

Commercial loans typically involve larger principal amounts than other types of loans, and some of our commercial borrowers have more than one loan outstanding with us. Consequently, an adverse development related to a single loan or credit relationship poses a significantly greater risk of loss compared to one-to-four family residential mortgage loans. Repayment of commercial loans often depends on the cash flow generated by the business or property involved, making them more sensitive to adverse conditions in the real estate market, business climate, or economy. For loans secured by non-owner-occupied properties, repayments rely heavily on tenant rent payments, and downturns in the real estate market or economic conditions heighten repayment risks. In addition, many of our commercial real estate loans are not fully amortizing and require large balloon payments upon maturity,maturity. whichThese balloon payments may compelrequire the borrower to either sell or refinance the property, increasingand refinancing may be difficult or unavailable due to elevated interest rates, tighter underwriting standards, declining property values, or reduced lender appetite, heightening the risk of default.default or non-payment. If we foreclose on a commercial or multifamily real estate loan, the holding period for the collateral is typically longer than for one- to four-family residential loans as a result of the smaller pool of potential buyers.

In recent years, the commercial real estate market has experienced substantial growth, with increased competition contributing to historically low capitalization rates and rising property values. However,More recently, the economiccommercial disruptionreal causedestate market has been affected by thehigher COVID-19interest pandemicrates, significantlytighter impactedcredit thisconditions, market.and changing economic and workplace dynamics. The pandemic also accelerated the adoption of remote work,and whichhybrid work models has led many companies to re-evaluate their long-term real estate needs. WhileAlthough somecertain businessesemployers arehave returningincreased toin-office traditional office environments,requirements, others are downsizing or shifting to hybrid models, and demand for office space in certain markets has remained structurally lower than pre-pandemic levels, creating uncertainty in demand for office spacesspace and other commercial properties. This trend could result in prolonged vacancies, declining rental income, refinancing challenges, and reduced property values, particularly for certain property types or markets, adversely affecting the performance of our commercial real estate loan portfolio. Federal banking regulators also have raisedincreased concernstheir aboutfocus weaknesses in theon commercial real estate market.exposures, particularly with respect to refinancing risk, collateral valuation, and borrower equity levels, which may subject us to heightened examination scrutiny, additional risk management expectations, or more conservative supervisory expectations. Failures in our risk management policies and controls could lead to higher delinquencies and losses, adversely affecting our business, financial condition, and results of operations.

These types of loans involve additional risks because funds are advanced based on the project’s uncertain value prior to its completion, and costs may exceed realizable values in declining real estate markets. Because of the uncertainties inherent in estimating construction costs and the realizable market value of the completed project and the effects of governmental regulation of real property, it is relatively difficult to accurately evaluate the total funds required to complete a project and the related loan-to-value ratio. Higher than anticipated construction costs may cause actual results to vary significantly from those estimated. Further, this type of lending often involves larger loan principal amounts and might be concentrated among a limited number of builders. A downturn in the commercial real estate market could increase delinquencies, defaults,defaults foreclosures,and foreclosures and significantly impair the value of our collateral, hindering our ability to sell the collateral upon foreclosure. Builders with multiple loans heighten these risks, as adverse developments in one credit relationship can increase overall exposure. During the termterms of some of our construction loans, borrowers do not make payments, as accumulated interest is added to the principal balance through an interest reserve. Consequently, repayment often depends on the project's success and the borrower's ability to sell or lease the property rather than solely on repayment capacity. Overstating project value, declining market conditions, or falling rental rates could result in insufficient collateral to secure loan repayment post-construction. Additionally, monitoring the building process requires on-site inspections and cost comparisons, adding to administrative costs.

Some construction loans include interest reserves, where accumulated interest is added to the loan principal rather than requiring borrower payments during the loan term. Rising market interest rates can rapidly deplete these reserves before project completion and increase borrowing costs for end-purchasers, potentially reducing their ability to finance the home or diminishing demand for the project. Properties under construction are also generally difficult to sell and often must be completed before a successful sale can occur, complicating the management of problem loans. If we foreclose on a defaulted construction loan during or before project completion, we might not recover the unpaid balance, accrued interest, or foreclosure costs. Further, completing unfinished projects may require additional funding, and we may need to hold properties for extended periods before disposing of them.

At December 31, 2024,2025, agricultural loans, including agricultural real estate and operating loans, were $12.0$10.3 million, or 0.61%0.51% of total loans. Agricultural lending involves a greater degree of risk and typically involves higher principal amounts than other types of loans. Repayment is dependent upon the successful operation of the business, which is greatly dependent on many things outside the control of either us or the borrowers. These factors include adverse weather conditions that prevent the planting of a crops or limit crop yields (such as hail, drought and floods), increasing climate variability and extreme weather events, loss of livestock due to disease or other factors, declines in market prices for agricultural products (both domestically and internationally), supply chain disruptions, and the impact of government regulations (including changes in price supports, subsidies, tariffs and environmental regulationsregulations, water usage restrictions, labor regulations, and environmental compliance requirements). Rising input costs, including fuel, fertilizer, labor, insurance, and equipment, may also adversely affect farm profitability and cash flows. In addition, many farms are dependent on a limited number of key individuals whose injury or death may significantly affect the successful operation of the farm. If the cash flow from a farming operation is diminished, the borrower’s ability to repay the loan may be impaired and the Bank may be unable to collect all principal and interest contractually due. Consequently, agricultural loans may involve a greater degree of risk than other types of loans, particularly in the case of loans that are unsecured or secured by rapidly depreciating assets such as farm equipment (some of which is highly specialized with a limited or no market for resale), or assets such as livestock or crops. In such cases, any repossessed collateral for a defaulted agricultural operating loan may not provide an adequate source of repayment of the outstanding loan balance as a result of the greater likelihood of damage, loss or depreciationdepreciation, or because the assessed value of the collateral exceeds the eventual realization value.

As an SBA Preferred Lender, we streamline the SBA loan process for clients by bypassing the lengthy approval procedures required for non-Preferred Lenders. The SBA periodically reviews participating lenders to evaluate risk management practices.practices and compliance with evolving program requirements. If deficiencies are identified, the SBA may request corrective actions, impose restrictions, or revoke a lender’s Preferred Lender status. Losing this status could impair our ability to compete with other Preferred Lenders and materially affect our financial results.

Additionally, changes to the SBA program, such as adjustments to federal guaranty levelslevels, program eligibility requirements, or funding allocations, including as a result of legislative, budgetary, or policy changes, could adversely impact our business, results of operations, and financial condition.

Historically, we have sold the guaranteed portion of our SBA 7(a) loans in the secondary market. These sales have resulted in gains or premiums on the sale of the loans and have created a stream of future servicing income. For the year ended December 31, 2024,2025, we sold a total of $2.2 million in SBA loans (guaranteed portion) for a net gain of $199,000.$152,000. There can be no assurance that we will be able to continue originating these loans, that a secondary market will continue to exist, that investor demand or market liquidity will remain at current levels, or that we will continue to realize premiums on future sales. Selling the guaranteed portion of SBA loans also exposes us to credit risk on the retained, non-guaranteed portion.portion, as well as interest rate and valuation risk on loans held for sale prior to disposition.

To qualify for an SBA loan, a borrower must demonstrate an inability to secure conventional financing without the SBA guaranty. Accordingly, SBA loans in our portfolio often have weaker credit characteristiccharacteristics compared to other loans, increasing the risk of default during economic downturnsdownturns, periods of elevated interest rates, or borrower financial distress. If a loanborrower defaults and the SBA determines there were deficiencies in how the loan was originated, funded, or serviced, the SBA may deny or reduce its guaranty, require us to repurchase the sold portion, delay payment on the guaranty, or seek recovery of losses. We have established a recourse reserve to cover estimated losses on the outstanding guaranteed portion of SBA loans. Significant increases to this reserve could reduce our net income and adversely affect our business, results of operations, and financial condition.

To the extent that our underlying assumptions prove inaccurate or undergo unexpected changes, such as an unanticipated decline in the real estate market, the purchase price paid for these loans could exceed the actual value, resulting in a lower yield or a loss of some or all of the loan principal. For instance, purchasing loan "pools" at a premium and experiencing earlier-than-expected loan prepayments would yield lower interest income than initially projected. Our success in growing our loan portfolio through loan purchases depends on our ability to price the loans properly and relies on the economic conditions in the geographic areas where the underlying properties or collateral for the acquired loans are located. Inaccurate estimates or declines in economic conditions or real estate values in the markets where we purchase loans could significantly adversely affect the level of our nonperforming loans and our results of operations.

We principally manage interest rate risk by managing our volume and mix of our earning assets and funding liabilities. If we are unable to manage this risk effectively, our business, financial condition and results of operations could be materially affected.

Our net interest margin, the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities, can be adversely affected by interest rate changes. While yields on assets and costs of liabilities tend to move in the same direction, they may do so at different speeds, causing the margin to expand or contract. AsBecause our interest-bearing liabilities often have shorter durations than our interest-earning assets, a rise in interestrising rates may lead toincrease funding costs increasing faster than asset yields, compressing our net interest margin. Periods of volatile, elevated, or declining rates may affect net interest income in multiple ways. For example, floating-rate assets generally reprice more quickly than deposits, potentially reducing net interest income in falling rate environments. Changes in borrower refinancing behavior, including increased loan prepayments and mortgage-backed security redemptions, introduce reinvestment risk, as prepaid amounts may need to be reinvested at lower rates. Additionally, changes in the slopeshape of the yield curve, such as flattening or inversion, can furthercompress pressuremargins, ourparticularly marginsfor asinstitutions fundingwith costssignificant risefixed-rate relative to asset yields. Conversely, falling rates can increase loan prepayments, leading to reinvestment in lower-yielding assets, reducing income.assets.

InRising arates risingcan ratealso environment,increase retainingthe cost of deposits can become costlier. At December 31, 2024, our deposit composition included $485.2 million in certificates of deposit maturing within one year and $1.7other billionfunding in noninterest-bearing, NOW checking, savings, and money market accounts.sources. If deposit and borrowing rates rise faster than loan and investment yields, our net interest income and overall earnings could decline.

A substantial amount of our loans have adjustable interest rates, which may result in a higher incidence of default in a rising interest rate environment. Additionally, a significant portion of our adjustable-rate loans include interest rate floors that prevent the loan’s contractual interest rate from falling below a specified level. While interest rate floors may increase or stabilize interest income during periods of declining interest rates, they may also limit growth in interest income during periods of rising rates and increase the likelihood that borrowers will refinance when market rates decline. At December 31, 2024,2025, approximately $1.3$1.4 billion, or 67.4%67.1% of our loan portfolio consisted of adjustable or floating-rate loans, and approximately $992.5$1.0 million,billion, or 75.4%,51.1%, of those adjustable or floating-rate loans contained interest rate floors. The presence of interest rate floors can increase income during periods of declining interest rates, as the rates on these loans cannot adjust downward below the floor. However, this benefit is subject to the risk that borrowers may refinance these loans to take advantage of lower rates. Furthermore, when loans are at their floor interest rates, our interest income may not rise as quickly as our cost of funds during periods of increasing interest rates, which could compress net interest margin and materially and adversely affect our results of operations.

Our securities portfolio may be impacted by fluctuations in market value, potentially reducing accumulated other comprehensive income and/or earnings. These fluctuations may result from changes in market interest rates, rating agency actions, issuer defaults, issues with underlying securities, lowerchanges in market prices, or limitedchanges in investor demand. Our available-for-sale debt securities in an unrealized loss position are evaluated to determine whether the decline in fair value has resulted from credit losses or other factors. If a credit loss is identified, an allowance for credit losses is recorded, resulting in a charge against earnings. Because available-for-sale securities are reported at estimated fair value, changes in interest rates can adversely affect our financial condition. The fair value of fixed-rate securities generally moves inversely with interest rate changes. Unrealized gains and losses on these securities are reported as a separate component of AOCI, net of tax.

Decreases in the fair value of securities available-for-sale resulting from increases in interest rates could have an adverse effect on shareholders’ equity. Additionally, there is no assurance that the declines in market value will not result in credit losses, which would lead to additional provisions for credit losses that could materiallyhave affecta material adverse effect on our net income and capital levels.

We performed our test for goodwill impairment at December 31, 20242025 and the test concluded that recorded goodwill was not impaired. Our test of goodwill for potential impairment is based on a qualitative assessment by management that takes into consideration macroeconomic conditions, industry and market conditions, cost or margin factors, financial performance and share price. Our evaluation of the fair value of goodwill involves a substantial amount of judgment. If our judgment were incorrect, or if events or circumstances change, and an impairment of goodwill was deemed to exist, we would be required to write down our goodwill, resulting in a charge against operations,earnings, which may materially adversely affect our results of operations.

Our accounting policies and methods are fundamental to how we record and report our financial condition and results of operations. Management must exercise judgment in selecting and applying many of these accounting policies and methods so that they comply with generally accepted accounting principles and reflect management’s judgment regarding the most appropriate manner to report our financial condition and results of operations. In some cases, management must select the accounting policy or method to apply from two or more alternatives, any of which might be reasonable under the circumstances, yet might result in usour reporting materially different results than would have been reported under a different alternative.

Our business operations are significantly influenced by the extensive body of accounting regulations in the United States. Regulatory bodies regularly issue new guidance, altering accounting rules and reporting requirements, which can substantially affect the preparation and presentation of our financial statements. These changes may require enhanced judgments, additional data collection, new internal controls, or retrospective application, potentially leading to restatements of prior period financial statements.statements or increased compliance costs.

One significant change impacting our operations isUnder the Current Expected Credit Loss (“CECL”) model, which we adoptedcurrently on January 1, 2023. Under CECL,apply, financial assets carried at amortized cost, such as loans and held-to-maturity debt securities, are presented at the net amount expected to be collected. This forward-looking approach estimates expected credit losses by considering historical experience, current conditions, and reasonable and supportable forecasts affecting collectability. The modelCECL contrasts with the previousprior "“incurred loss"” methodology under GAAP, which recognized losses only when they were probable. While CECL improves the timeliness of recognizing credit losses, its reliance on macroeconomic assumptions and forecasts introducesmay potentialcontinue to introduce earnings volatilityvolatility, dueparticularly toduring unexpectedperiods changes inof economic indicators.uncertainty, Additionally,interest rate volatility, or changing credit conditions. In addition, CECL creates an accounting asymmetry: loan-related income is recognized periodically using the effective interest method, while expected credit losses are recognized upfrontup at origination.front. This asymmetry may give the impression of reduced profitability during periods of loan growthgrowth, dueparticularly toin thehigher-risk immediateor recognitionrapidly ofchanging expectedeconomic losses,environments, and relatively higher profitability during periods of stable or declining loan volumes, as income continues to accrue foron loans with previously recognized losses.

Our security measures may not be sufficient to mitigate the risk of a cyber-attack. Communications and information systems are essential to the conduct of our business, as we use such systems to manage our client relationships, our general ledger, and virtually all other aspects of our business. Our operations rely on the secure processing, storage, and transmission of confidential and other information in our computer systems and networks. Although we take protective measures and endeavor to modify them as circumstances warrant, theThe security of our computer systems, software, and networks may be vulnerable to breaches, fraudulent or unauthorized access, denial or degradation of service, attacks, misuse, computer viruses, malware, or other malicious code and cyber-attacks that could haveresult ain securitythe impact.loss, misappropriation, or exposure of sensitive information and disruption of operations. If one or more of these events occur, this could jeopardize our or our clients’ confidential and other information processedmay be compromised, and stored in, and transmitted through, our computer systems and networks, or otherwise cause interruptions or malfunctions in our operations orand the operationsthose of our clients orand counterparties.counterparties may be disrupted. We may be required to expend significant additional resources to modify our protective measures or to investigate and remediate vulnerabilities or other exposures, and we may be subject to litigation and financial losses that are either not insured against or not fully covered through any insurance maintained by us.

Security breaches in our internet banking activities could furthermay expose us to possibleliability, liabilityloss of business, and damage to our reputation. Increases in criminal activity levels and sophistication, advances in computer capabilities, new discoveries, vulnerabilities in third party technologies (including browsers and operating systems), or other developments could result in a compromise or breach of the technology, processes and controls that we use to prevent fraudulent transactions, and to protect data about us, our clients, and underlying transactions. Any compromise of our security could deter clients from using our internet banking services that involve the transmission of confidential information. Although we have developed and continue to invest in systems and processes that are designed to detect and prevent security breaches and cyber-attacks and periodically test our security, these precautions may not protect our systems from compromises or breaches of our security measures, and could result in losses to us or our clients, our loss of businessclients and/ business, disruption of operations, financial loss, or clients, damage to our reputation,reputation. theThese incurrence of additional expenses, disruption to our business, our inability to grow our online services, or other businesses, additional regulatory scrutiny or penalties, or our exposure to civil litigation and possible financial liability, any of whichevents could have a material adverse effect on our business, financial condition and results of operations.

Our security measures may not protect us from system failures or interruptions. We have established policies and procedures to prevent or limit the impact of system breaches, failures and interruptions. In addition, we outsource certain aspects of our data processing and other operational functions to certain third-party providers. While we select third-party vendors carefully, we do not control their actions. If our third-party providers encounter difficulties, including those resulting from breakdowns or other disruptions in communication services provided by a vendor,services, failure of a vendor to handle current or higher transaction volumes, cyber-attacks or security breachesbreaches, or if we otherwise have difficulty in communicating with them, our ability to adequately process and account for transactions couldwill be affected, and our ability to deliver products and services to our clients and otherwise conduct business operations couldwill be adversely impacted.disrupted. Replacing these third-party vendors couldmay also entailcause significant delaydelays and expense.expenses. Threats to information security also exist in the processing of client information through various other vendors and their personnel. We cannot assure you thatIf such breaches, failuresfailures, or interruptions will not occur or, if they do occur, thatwe they willmay be adequatelyunable addressedto by usprevent or themitigate thirdtheir parties on which we rely.impact.

Further, while we believe we maintain adequate insurance to cover these risks, our insurance coverage may not cover all losses resulting from breaches, system failuresfailures, or other disruptions. The occurrence of any systemssystem failure or interruption couldmay damage our reputation andreputation, result in a loss of clients and business, could subject us to additional regulatory scrutiny, or couldand expose us to legal liability. Any of these occurrences could have a material adverse effect on our financial condition and results of operations.

The increasing adoption of AI in financial services presents significant opportunities but also introduces a range of risks that could impact our operations, regulatory compliance, and customer trust. AI introduces model risk, where flawed algorithms or biased data could result in inaccurate credit decisions, compliance violations, or discriminatory outcomes in lending or customer service. Cybersecurity threats, such as data breaches, adversarial attacks, and data poisoning, pose significant challenges, particularly as these systems handle large volumes of sensitive customer information. Additionally, the opaque nature of some AI models, often referred to as "black-box" systems, raises regulatory compliance concerns, as regulators increasingly require transparency and explainability in AI-driven decision-making.

We are reliant on our ability to manage data and our ability to aggregate data in an accurate and timely manner to ensure effective risk reporting and management.decision-making. OurDeficiencies ability to manage data and aggregate data may be limited by the effectiveness of our policies, programs, processes and practices that governin how data is acquired, validated, stored, protectedprotected, andor processed.processed, Whileas wewell continuouslyas updatethe ourmanual policies,nature programs, processes and practices,of many of our data management and aggregation processesprocesses, arecould manual and subjectlead to human error or system failure.failures. FailureInaccurate, toincomplete, manageor delayed data effectively and to aggregate data in an accurate and timely manner maycould limit our ability to identify, measure, and manage current and emerging risks, asimpair wellmanagement asdecision-making, and hinder our ability to managerespond to changing business needs.conditions. These shortcomings could also adversely affect our financial reporting, regulatory compliance, operational efficiency, and strategic initiatives. Any of these outcomes could materially and adversely affect our business, financial condition, results of operations, and growth prospects.

The financial services market, including banking services, is undergoing rapid changes with frequent introductions of new technology-driven products and services. Our future success will depend, in part, on our ability to keep pace with technological changes and to use technology to satisfy and growincrease customer demand for our products and services and to create additional efficiencies in our operations. We expect that we will need to make substantial investments in our technology and information systems to compete effectively and to stay current with technological changes. Some of our competitors have substantially greater resources to invest in technological improvements and will be able to invest more heavily in developing and adopting new technologies, which may put us at a competitive disadvantage. We may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to our customers. As a result, our ability to effectively compete to retain or acquire new business may be impaired, and our business, financial condition or results of operations may be adversely affected.

The banking industry is extensively regulated. Federal banking regulations are designed primarily to protect the deposit insurance funds and customers, not to benefit a company’s shareholders. These regulations may sometimes impose significant limitations on our operations. The significant federal and state banking regulations that affect us are described in this Form 10-K under the heading “Item 1. Business — Supervision and Regulation.” These regulations, along with the currently existing tax, accounting, securities, insurance, privacy and monetary laws, regulations, rules, standards, and policies and interpretations, control the methods by which financial institutions conduct business, implement strategic initiatives and tax compliance, and govern financial reporting and disclosures. These laws, regulations, rules, standards, policies, and interpretations are constantly evolving and may change significantly over time. Any new regulation or legislation, or change in existing regulation or oversight, whether a change in regulatory policy or a change in a regulator’s interpretation of a law or regulation, could have a material impact on our operations, increase our costs of regulatory compliance and of doing business and adversely affect our profitability. For example, changes in consumer privacy laws, such as the recently enacted CCPA and CPRA in California, other state privacy statutes, or any future federal privacy legislation, or any non-compliance with such laws, could adversely affect our business, financial condition and results of operations. See “Item 1. Business—Supervision and Regulation—Privacy Standards” for additional information on the CCPA and the CPRA. Compliance with the CCPA, the CPRACPRA, and other state or federal statutes or regulations designed to protect consumer personal data could potentially require us to implement substantive technology infrastructure and process changes. Non-compliance with thethese CCPA, the CPRA or similarprivacy laws andor regulations could lead to substantial regulatory imposed fines and penalties, damages from private causes of action and/or reputational harm. Developments in regulatory interpretations or supervisory guidance may also require operational changes, additional expenditures, or restrictions on certain activities.

The USA PATRIOT and Bank Secrecy Acts require financial institutions to develop programs to prevent themselves from being used for money laundering and terrorist activities. If such activities are detected, financial institutions are obligated to file suspicious activity reports with the U.S. Treasury’s Office of Financial Crimes Enforcement Network. These rules require financial institutions to establish procedures for identifying and verifying the identity of clients seeking to open new financial accounts. Failure to comply with these regulations could result in fines or sanctions and limit our ability to get regulatory approval of acquisitions. While we have developed policies and procedures designed to assist in compliance with these laws and regulations, no assurance can be given that these policies and procedures will be effective. If our policies, procedures and systems are deemed deficient, we would be subject to liability, including fines and regulatory actions, which may include the denial of regulatory approvals to proceed with certain aspects of our business plan, including our acquisition plans. Additionally, any perceived or actual failure to prevent money laundering or terrorist financing activities could significantly damage our reputation. These outcomes could have a material adverse effect on our business, financial condition, results of operations, and growth prospects.

The effects of climate change continue to raise significant concerns about the state of the environment. However,Federal underand the new Trump administration, federalstate policy may shiftapproaches to reduce the emphasis on climate change initiativescontinue to evolve, and environmentalchanges regulations.in Thislegislative or regulatory priorities could include scaling back federal participation in international agreements, such asalter the Paris Agreement,requirements and reducingexpectations regulatory pressures at the federal levelplaced on businesses, including banks, to address climate-related risks. Legislative and regulatory proposals aimed at combating climate change may face greater scrutiny or diminished priority.

The lack of empirical data regarding the financial and credit risks posed by climate change still makes it difficult to predict its specific impact on our financial condition and results of operations. However, the physical effects of climate change, such as more frequent and severe weather disasters, could directly affect us. For instance, such events may damage real property securing loans in our portfolio or reduce the value of that collateral. If our borrowers' insurance is insufficient to cover these losses or if insurance becomes unavailable, the value of the collateral securing our loans could be negatively affected, potentially impacting our financial condition and results of operations. Moreover, climate change may adversely affect regional and local economic activity, harming our customers and the communities in which we operate. Regardless of changes in federal policy, the effects of climate change and their unknown long-term impacts could still have a material adverse effect on our financial condition and results of operations.

We rely on numerous external vendors to provide products and services necessary for our day-to-day operations. Accordingly, our operations are exposed to risks associated with vendor performance under service levelservice-level agreements. If a vendor fails to meet its contractual obligations due to changes in its organizational structure, financial condition, support for existing products and services, strategic focus, or any other reason, our operations could be disrupted, potentially causing a material adverse impact on our financial condition and results of operations.

Maintaining sufficient liquidity is essential for the operation of our business. We require sufficient liquidity to meet customer loan requests, customer deposit maturities/withdrawals, payments on our debt obligations as they come due, and other cash commitments under both normal operating conditions and other unpredictable circumstances causing industry or general financial market stress. Our access to funding sources in amounts adequate to finance our activities on terms that are acceptable to us could be impaired by factors that affect us specifically, or the financial services industry or economy generally. Factors that could detrimentally impact our access to liquidity sources include a downturn in the geographic markets in which our loans and operations are concentrated or difficult credit markets. Our access to deposits may also be affected by the liquidity needs of our depositors. In particular, a majority of our liabilities are checking accounts and other liquid deposits, which are payable on demand or upon several days’ notice, while by comparison, a substantial majority of our assets are loans, which cannot be called or sold in the same time frame. AlthoughWhile in prior periods we have historicallysuccessfully been able to replacereplaced maturing deposits and advancesborrowings, asdeposit necessary,balances weacross mightthe notbanking industry have become more rate-sensitive and responsive to market perceptions, and future replacements may be ablechallenged toby replace such fundsshifts in theour future,financial especiallycondition, if a large numberFHLB of ourSan depositorsFrancisco’s seekstatus, toor withdrawmarket their accounts, regardless of the reason.conditions. A failure to maintain adequate liquidity could materially and adversely affect our business, financial condition and results of operations. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity” of this Form 10-K.

Several of our large depositors have relationships with each other, which creates a higher risk that one client’s withdrawal of its deposit could lead to a loss of other deposits from other clients within the relationship, which, in turn, could force us to fund our business through more expensive and less stable sources.

As of December 31, 2024,2025, our ten largest depositors, none of which include brokered deposits, accounted for $304.5$235.8 million in deposits, or approximately 13.6%11.7% of total deposits. Several of our large depositors are local unions of labor unions or have business, family, or other relationships with each other, which creates a risk that any one client’s withdrawal of its deposits could lead to a loss of other deposits from clients within the relationship. At December 31, 2024,2025, $641.5$590.9 million, or 30.1%,26.7%, of our total deposits were comprised of deposits from labor unions, representing 732785 different local unions with an average deposit balance per local union of approximately $770,000.$753,000. At December 31, 2024,2025, 20 labor unions had aggregate deposits with us of $10.0 million or more, totaling $385.3 million, or 18.1%17.4% of our total deposits.

Given our use of these high average balance deposits as a source of funds, the inability to retain these fundsthem could have an adverse effect on our liquidity. In addition, these deposits are primarily demand deposit accounts or short-term deposits and therefore may be more sensitive to changes in interest rates. If we are forced to pay higher rates on these deposits to retain the funds,them, or if we are unable to retain the fundsthem and are forced to turn to borrowings and other funding sources for our lending and investment activities, the interest expense associated with such borrowings or other funding sources may be higher thanexceed the ratescost we are paying onof these deposits, which could adversely affect our net interest margin and net income. We may also be forced, as a result of any material withdrawal of deposits, to rely more heavily on other, potentially more expensive and less stable funding sources. Consequently, the occurrence of anyAny of these eventsoccurrences could have a material adverse effect on our business, financial conditioncondition, and results of operations.

We are required by regulatory authorities to maintain adequate levels of capital to support our operations. We anticipate that our capital resources will enable us to satisfy our capital requirements for the foreseeable future. Nonetheless, we may at some point need to raise additional capital to support continued growth or be required by our regulators to increase our capital resources. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets at that time, which are outside our control, and on our financial condition and performance.

Accordingly, we may not be able to raise additional capital, if needed, on terms that are acceptable to us. If we cannot raise additional capital when needed, our operations could be materially impairedimpaired, and our financial condition and liquidity could be materially and adversely affected. In addition, if we are unable to raise additional capital when required by our banking regulators, we may be subject to additional adverse regulatory action.

BayCom is a legal entity separate and distinct from the Bank. A substantial portion of BayCom’s cash flow, including cash flow to pay principal and interest on any debt it may incur, including the Notes, comes from dividends BayCom receives from the Bank. Various federal and state laws and regulations limit the amount of dividends that the Bank may pay to BayCom. Because our ability to receive dividends or loans from the Bank is restricted, our ability to pay dividends to our shareholders and repurchase our stock may also effectively be restricted. Also, BayCom’s right to participate in the distribution of assets upon a subsidiary’s liquidation or reorganization is subject to the prior claims of the subsidiary’s creditors. In the event the Bank is unable to pay dividends to BayCom, weBayCom may not be able to service any debt weit may incur, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

Increasing scrutinyScrutiny and evolving expectations from customers, regulators, investors, and other stakeholders with respect to our environmental, social and governance practices may impose additional costs on us or expose us to new or additional risks.

CompaniesIn arerecent facingyears, increasingcompanies have faced scrutiny from customers, regulators, investors, and other stakeholders related to their environmental, social, and governance (“ESG”) practices and disclosure. Investor advocacy groups, investment funds, and influential investors are also increasingly focused on these practices, especially as they relate to the environment, health and safety, diversity, labor conditions, and human rights. Increased ESG-related compliance costs could result in increases to our overall operational costs. Failure to adapt to or comply with regulatory requirements, or investor or stakeholder expectations and standards, could negatively impact our reputation, ability to do business with certain partners, and our stock price.

Recent changes in the regulatory landscape underand theshifting newfederal Trump administrationpriorities have moved toward a reduction in emphasis on certain ESG priorities, particularly around climate change and diversity, equity, and inclusion (“DEI”). This shift ishas leadingled to thea rollback of regulations that mandate specific disclosures and operational practices in these areas. However, some stakeholder groups continue to demand greater transparency and action, resulting in a complex and potentially conflicting environment for companies. If regulatory enforcement of ESG-related policies becomes less stringent, companies may face reputational risks if their practices are seen as insufficient or inconsistent with broader societal expectations, especially related to DEI and environmental stewardship. As a result, navigating this evolving regulatory and public opinion landscape may require us to balance compliance with regulatory requirements against maintaining investor, customer, and stakeholder trust.

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,individual consumers, through its branch network. At December 31, 2024,2025, the Bank had 3534 full-service branches, with 16 locations in California, one in Nevada, twoone 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 PEBPEB, 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 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, 2024,2025, the Company, on a consolidated basis, had total assets of $2.7$2.6 billion, loans receivable, net of $1.9$2.0 billion, deposits of $2.2 billion and shareholders’ equity of $324.4$338.6 million.

Net interest margin decreasedincreased to 3.74%3.82% for the year ended December 31, 2024,2025, compared to 4.05%3.74% for the previous year and was negatively impacteddriven by increasedlower fundingaverage costs,costs dueof tointerest-bearing shiftsliabilities, towardsparticularly higheron costingmoney market and time deposits, whichand outpaced,the redemption of subordinated debt. Based on a percentage basis, increased yields on interest-earning assets, due to the laggingcurrent benefitcomposition of variable rate interest-earning assets repricing higher. We believe our balance sheetsheet, iswe well-positioned to improve ourbelieve net interest margin could improve if interest rates hold.remain Conversely,at or near current levels; however, a decline in interest rates would likely negatively impact our net interest income.

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$291,000 during the year ended December 31, 2024,2025, as compared to 2023.2024. 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 decreased $545,000$278,000 during the year ended December 31, 2024,2025, as compared to 2023.2024. Noninterest income and noninterest expenses are impactedinfluenced by the growth of our banking operations and growth in the amounts of loansloan and deposits.deposit volumes.

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 a reserve for unfunded loan commitments.

All loans with an outstanding balance of $100,000$250,000 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.

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 by the Company correlate macroeconomic variables to historical credit performance based on callCall reportReport data over a78 64quarters, consisting of the period from the first quarter (16-year) period which captures a full economic cycle fromof 2004 tothrough 2019.the fourth quarter of 2019 and the fourth quarter of 2021 through the first quarter of 2025. We elected to exclude historical data from 2020 -first quarter to 2021 tothird assessquarter thefor quantitativepurposes of estimating expected credit losses because we believe that period is an outlier and did not represent normal economic behavior considering the COVID-19 pandemic lockdown with changes in macroeconomic variables and the significant levels of government relief programs in place during that period. For all segments, the Company's actual loss history was not statistically relevant, thus the loss history of peers, defined as commercial financial institutions with asset size of one$1.0 billion to five$5.0 billion dollars,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.

Management considers whether adjustments to the quantitative portion of the allowance for credit losses are needed for differences in segment-specific risk characteristics or to reflect the extent to which it expects current conditions and reasonable and supportable forecasts of economic conditions to differ from the conditions that existed during the historical period included in the development of PD and LGD. During 2025, management applied qualitative adjustments primarily related to macroeconomic forecasts and changes in loan composition within the commercial real estate portfolio. Qualitative internal and external risk factors include, but are not limited to, the following:

Total assets. Total assets increaseddecreased $112.5$70.8 million, or 4.4%,2.7%, to $2.6 billion at December 31, 2025 from $2.7 billion at December 31, 2024 from $2.6 billion at December 31, 2023.2024. The increasedecrease was primarily due to increasesdecreases in cash and cash equivalents of $56.5$157.5 million or 18.4%,43.3%, and investment securities available-for-sale of $30.2$13.6 million or 18.5%,7.0%, andpartially offset by an increase in loans receivable, net of $29.2$110.1 million or 1.5%.5.7%.

Cash and cash equivalents. Cash and cash equivalents increaseddecreased $56.5$157.5 million, or 18.4%,43.3%, to $206.5 million at December 31, 2025 from $364.0 million at December 31, 2024 from $307.5 million at December 31, 2023.2024. The increasedecrease primarily was due to a $51.3$161.2 million increasedecrease in federal funds sold and interest-bearing balances in banks, reflecting the use of excess depositcash thatto werefund notthe deployedCompany’s forearly redemption of the remaining $63.7 million of its outstanding Notes due 2030, as well as to support loan growth and thedeposit purchase of investment securities.withdrawals.

Investment securities. Investment securities,securities alldecreased of which are classified as available-for-sale, increased $30.2$13.6 million, or 18.5%,7.0%, to $179.7 million at December 31, 2025 from $193.3 million at December 31, 2024 from $163.2 million at December 31, 2023.2024. The increasedecrease primarily was due to purchases of $49.9 million of investment securities during the year ended December 31, 2024, partially offset by $21.9$38.1 million in routine amortization, principal repayments and maturities orand calls of securities, partially offset by $15.6 million of investment securities purchased during the year ended December 31, 2025. A $2.3$1.8 million fair value adjustment related to unrealized gains on investment securities available-for-sale also contributed to the increase.

Equity securities. Equity securities increaseddecreased $535,000,$566,000, or 4.3% to $12.6 million at December 31, 2025 from $13.1 million at December 31, 2024 from $12.6 million at December 31, 2023. The increase was2024, primarily due to amark-to-market $463,000adjustments gain on equity securities resulting from an adjustment to the fair value of equity securitiesrecorded during the year ended December 31, 2024.2025.

(3) Includes loans located in the states of Colorado, Nevada, New Mexico, Washington and other states. At December 31, 2024,2025, loans in Colorado, New Mexico, Washington and other states totaled $134.9$132.2 million, $62.9$44.5 million, $84.6$69.6 millionmillion, $89.9 million, and $485.8$425.3 million, respectively.

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 Accounting Standards Codification (“ASC”) Topic 326. Acquired non-PCD loans represent loans acquired through a business combination without more than insignificant evidence of credit deterioration and are accounted for under ASC Topic 310-20.

As of December 31, 2024,2025, acquired non-PCD loans totaled $121.1 million with a remaining net premium of $397,000 compared to $140.6 million with a remaining net premium of $1.8 million, compared to $187.7 million with a remaining net premium of $2.1 million as of December 31, 2023.2024. The net premium for acquired non-PCD loans includes both a credit discount based on estimated losses in the acquired loans partially offset by any premium, based on market interest rates on the date of acquisition.

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 decreasedincreased $3.5$3.8 million to $9.5$13.4 million, or 0.48%0.65% of total loans, at December 31, 20242025 compared to $13.0$9.7 million, or 0.67%0.50% of total loans, at December 31, 2023.2024. There was no OREO at both December 31, 20242025 and 2023.2024.

Accruing loans past due 30 to 89 days totaled $1.1 million at December 31, 2025, compared to $6.7 million at December 31, 2024, compared to $4.8 million at December 31, 2023.2024. At December 31, 20242025 and 2023,2024, nonaccrual loans included $643,000$562,000 and $4.4 million$643,000 of loans 30-89 days past due, and $4.4$9.4 million and $2.1$4.4 million of loans less than 30 days past due, respectively. At December 31, 2024,2025, the $4.4$9.4 million of loans less than 30 days past due was comprised of 15 loans all of which were placed on nonaccrual due to concerns over the financial condition of the borrowers.

Loan modifications to borrowers experiencing financial difficulty as of December 31, 20242025 totaled $2.7$1.4 million compared to $4.3$2.7 million at December 31, 2023.2024. 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$1,500 and $1.3 million$24,000 at December 31, 20242025 and December 31, 2023,2024, respectively.

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

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.

At December 31, 2024,2025, the Company’s allowance for credit losses for loans was $21.2 million, or 1.03% of total loans, compared to $17.9 million, or 0.92% of total loans, compared to $22.0 million, or 1.14% of total loans, at December 31, 2023.2024. A $1.3$4.1 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, 2023.2025.

We recorded netNet charge-offs oftotaled $948,000 for the year ended December 31, 2025 compared to $5.0 million for the year ended December 31, 2024. Charge-offs in 2024 comparedincluded a $3.2 million charge-off related to $550,000a loan for thewhich yeara endedspecific reserve was established as of December 31, 2023.

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

As of December 31, 2024, the Company individually evaluated $17.4$14.9 million of loans, inclusive of the $9.2$13.4 million of nonaccrual loans as of that date. Of these individually evaluated loans, $2.7$4.5 million had a specific allowance of $392,000$1.4 million as of December 31, 2024.2025. As of December 31, 2023,2024, the Company individually evaluated $13.0$17.4 million in loans, all of which were on nonaccrual status. Of these individually evaluated loans, $9.7$9.2 million had a specific allowance of $4.4 million$392,000 as of December 31, 2023.2024.

Deposits. Deposits are our primary source of funding and mainly consist of core deposits from the communities served by our branch and office locations.network. We offer a variety of deposit accounts with a competitive range of interest rates and terms to both consumers and businesses. Deposits include interest bearing and noninterest bearing demand accounts, savings, money market, certificates of deposit and individual retirement accounts. 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 increaseddecreased $101.3$20.4 million, or 4.7%,0.9%, to $2.2 billion at December 31, 20242025 compared to December 31, 2023.2024. Noninterest bearing deposits totaled $578.1 million, or 26.1% of total deposits, at December 31, 2025, compared to $689.0 million, or 30.8% of total deposits, at December 31, 2024 compared to $646.3 million, or 30.3% of total deposits, at December 31, 2023.2024. During the year ended December 31, 2024,2025, there was a shift insome interest rate sensitive clients movingshifted a portion of their non-operating deposit balances from lower costinglower-cost deposits, including noninterest-bearing deposits, into higher costinghigher-cost money market and time deposits.

During the first quarter of 2024, theThe Bank washas been approved for discount window advances withfrom the FRB of San Francisco secured by certain types of loans. At December 31, 2024,2025, we had the ability to borrow up to $41.9$49.3 million from the FRB of San Francisco, with no FRB of San Francisco advances outstanding at that date.

During the third quarter of 2025, the Company redeemed all of the Company’s outstanding subordinated debt. At December 31, 2024,2025, the Company had outstandingno subordinated debt,debt remaining, compared to $63.7 million, net of costsissuance to issue, totaling $63.7 million compared to $63.9 millioncosts, at December 31, 2023.2024. For additional information, see “Item 1–Business – Sources of Funds”, contained in this Form 10-K. See also, “Note 1413 — Subordinated Debt” in the Notes to the Consolidated Financial Statements contained in “Item 8. Financial Statements and Supplementary Data” of this Form 10-K.

Shareholders’ equity. Shareholders’ equity increased $11.5$14.2 million, or 3.7%,4.4%, to $338.6 million at December 31, 2025 from $324.4 million at December 31, 2024 from $312.9 million at December 31, 2023.2024. The increase was due to $23.6$23.9 million of net income, a $1.6$6.4 million decrease in accumulated other comprehensive loss, net of taxes, reflecting the increase in market interest rates during the yearyear, and $588,000$653,000 in stock basedstock-based compensation related to the grant of equity awards,awards. These changes were partially offset by the repurchase of $9.3$6.9 million of ourthe Company’s common stock and the $5.0$9.9 million in cash dividends paid or accrued during 2024.2025.

During the year ended December 31, 2024,2025, the Company repurchased a total of 455,654261,654 shares of its common stock at aan totalaverage cost of $20.31$26.40 per share. At December 31, 2024,2025, 464,098202,444 shares remainremained 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.

Earnings summary. We reported net income of $23.9 million for the year ended December 31, 2025, compared to $23.6 million for the year ended December 31, 2024, comparedan to $27.4 million for the year ended December 31, 2023, a decreaseincrease of $3.8 million$317,000 or 13.9%.1.3%. Net income for the year ended December 31, 20242025 reflects a $6.7$3.3 million decreaseincrease in net interest income,income and a $750,000$278,000 decrease in noninterest expense, partially offset by a $2.8 million increase in the provision for credit losseslosses, anda an $600,000$291,000 decrease in noninterest income, partially offset by a $545,000 decrease in noninterest expenseincome and a $2.2$180,000 million decreaseincrease in the provision for income taxes. Diluted earnings per share were $2.18 for the year ended December 31, 2025, up $0.08 from diluted earnings per share of $2.10 for the year ended December 31, 2024, a decrease of $0.17 from diluted earnings per share of $2.27 for the year ended December 31, 2023.2024.

Our efficiency ratio, which is calculated by dividingas noninterest expense divided by the sum of net interest income before provision for credit losses and noninterest income, was 63.51% for the year ended December 31, 2025, compared to 65.77% for the year ended December 31, 2024, compared to 61.69% for the year ended December 31, 2023.2024. The deteriorationimprovement in the efficiency ratio during the year ended December 31, 2024 was primarily due to lowerhigher revenues,revenues partiallyand, offset byto a slightlesser extent, a modest decrease in total noninterest expenses.

Interest income. Interest income for the year ended December 31, 20242025 was $131.7$135.4 million, compared to $126.3$131.7 million for the year ended December 31, 2023,2024, an increase of $5.4$3.7 million or 4.3%.2.8%. Increased average yields and balances on interest-earning assets, alongspecifically, with an increase in the average balance of fed funds soldloans and interestinvestment bearingsecurities, balances in banks, were the primary drivers fordrove the increase in interest income.

Interest income on loans, including fees, decreasedincreased $2.3$10.1 million, or 2.1%,9.7%, to $114.1 million for the year ended December 31, 2025, compared to $104.1 million for the year ended December 31, 2024, compared to $106.3 million for the year ended December 31, 2023.2024. The decreaseincrease was primarily due to a $103.0$114.3 million decreaseincrease in the average balance of loans,loans partially offset byand a 1719 basis point increase in the average loan yield. The average yield earned on loans, including the accretion of the net discount and deferred loan fees recognized, was 5.68% for the year ended December 31, 2025, compared to 5.49% for the year ended December 31, 2024, compared to 5.32% for the year ended December 31, 2023.2024. Interest income on loans for the year ended December 31, 20242025 and 2023,2024, included $523,000$501,000 and $486,000$523,000 respectively, in fees related to prepayment penalties. Interest income on loans for the years ended December 31, 20242025 and 2023,2024, also included $158,000$638,000 and $44,000,$158,000, 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$87,000 and $395,000$326,000 at December 31, 20242025 and 2023,2024, respectively.

Interest income on investment securities, excluding FRB and FHLB stock, increased $2.0 million,$438,000, or 28.4%,4.9%, to $9.4 million for the year ended December 31, 2025 from $9.0 million for the year ended December 31, 20242024. fromThe $7.0increase millionwas due to a 14 basis point increase in the average yield on investment securities to 4.65% for the year ended December 31, 2023.2025 The increase was due to a 46 basis point increase in the yield on investment securities tofrom 4.51% for the year ended December 31, 2024 from 4.05% for the year ended December 31, 2023,2024, and a $26.6$3.1 million increase in the average balance of investment securities. Dividends on FHLB and FRB stock totaled $1.6 million and $1.4 million for the years ended December 31, 20242025 and 2023,2024, respectively.

Interest income on fed funds sold and interest-bearing balances in banks increaseddecreased $5.5$6.8 million, or 47.4%39.9% to $10.3 million for the year ended December 31, 2025 from $17.1 million for the year ended December 31, 2024 from $11.6 million for the year ended December 31, 2023.2024. The increasedecrease was primarily due to a $99.6$86.5 million increasedecrease in the average balance of federal funds sold and interest-bearing balances in banksbanks, forreflecting the yearuse endedof Decemberexcess 31, 2024 comparedcash to fund the yearearly endedredemption Decemberof 31,$63.7 2023.million of the Company’s outstanding subordinated notes, as well as loan growth and deposit outflows. A 1095 basis point increasedecrease in the average yield on fed funds sold and interest-bearing balance in banks to 5.30%4.35% for the year ended December 31, 2025 from 4.35% for the year ended December 31, 2024 from 1.20% for the year ended December 31, 2023 also contributed to the increase.decrease.

Interest expense. Interest expense increased $12.1 million,$366,000, or 42.5%,0.9%, to $40.9 million for the year ended December 31, 2025 from $40.6 million for the year ended December 31, 2024 from $28.5 million for the year ended December 31, 2023,2024, reflecting higher funding costs primarily related to increased rates of interest payable on our money market and time deposits. The average rate paid on interest bearing liabilities for the year ended December 31, 20242025 was 2.54%2.51% compared to 1.87%2.54% for year ended December 31, 2023.2024. The total average balance of interest-bearing liabilities increased $78.1$30.4 million, or 5.13%,1.90%, to $1.6 billion for the year ended December 31, 2024,2025, from the year ended December 31, 2023,2024, primarily due to an increase in interest-bearing time deposits.

The overall average cost of deposits, which includes noninterest-bearing deposits, was 1.68% for both the year ended December 31, 20242025 increased to 1.68%, compared to 1.13% forand the year ended December 31, 2023.2024. The average balance of noninterest bearing deposits decreased $63.5$15.8 million, or 9.24%,2.54%, to $608.0 million for the year ended December 31, 2025 compared to $623.8 million for the year ended December 31, 2024 compared to $687.3 million for the year ended December 31, 2023.2024.

Interest expense on borrowings, which in 2024 consisted solelyprimarily of subordinated debt and junior subordinated debentures, remaineddecreased relativelyin unchanged2025, betweenas 2024the andCompany 2023.redeemed all of its subordinated debt in September 2025. Accordingly, borrowings outstanding at December 31, 2025 consisted primarily of junior subordinated debentures. The average balance of borrowings outstanding decreased $218,000,$18.7 million, or 0.3%,25.8%, to $72.3$53.6 million for the year ended December 31, 2024,2025, compared to 2023.the year ended December 31, 2024. At the same time, the average cost of borrowings increased three156 basis points to 6.13%7.68% forin the2025, year ended December 31, 2024,up from 6.10%6.13% forin 2023.2024.

Net interest income and net interest margin. Net interest income decreasedincreased $6.7$3.3 million, or 6.9%,3.6%, to $94.5 million for the year ended December 31, 2025, compared to $91.1 million for the year ended December 31, 2024 compared to $97.9 million for the year ended December 31, 2023.2024. The decrease in net interest incomeincrease primarily wasresulted duefrom to decreases inhigher interest income on loans,loans and higherinvestment fundingsecurities costsand relateda todecrease ourin deposits,interest expense on borrowings, partially offset by increases inlower interest income on federal funds sold and interest-bearing balances in banksbanks, and,as towell aas lesseran extent,increase investmentin securities,interest including dividendsexpense on FRB and FHLB stock.deposits.

Net interest margin for the year ended December 31, 20242025 was 3.74%,3.82%, aan 31eight basis point decreaseincrease from 4.05%3.74% for the year ended December 31, 2023.2024. The decreaseincrease in net interest margin primarily reflects increased funding costs, which outpaced, on a percentage basis, increasinghigher yields on interest-earning assets, particularly loans and investment securities.securities, driven by both rate and volume increases. The average yield on interest-earning assets increased to 5.48% for 2025 from 5.40% in 2024, while the average cost of interest-bearing liabilities slightly decreased to 2.51% in 2025 from 2.54% in 2024.

Certain matters discussed in this Form 10-Q may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to our financial condition, results of operations, plans, objectives, future performance or business. Forward-looking statements are not statements of historical fact, are based on certain assumptions and are generally identified by use of the words “believes,” “expects,” “anticipates,” “estimates,” “forecasts,” “intends,” “plans,” “targets,” “potentially,” “probably,” “projects,” “outlook” or similar expressions or future or conditional verbs such as “may,” “will,” “should,” “would” and “could.” Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, assumptions and statements about, among other things, expectations of the business environment in which we operate, projections of future performance or financial items, perceived opportunities in the market, potential future credit experience, and statements regarding our mission and vision. These forward-looking statements are based upon current management expectations and may, therefore, involve risks and uncertainties. Our actual results, performance, or achievements may differ materially from those suggested, expressed, or implied by forward- lookingforward-looking statements as a result of a wide variety or range of factors including, but not limited to:

General. BayCom is a bank holding company headquartered in Walnut Creek, California. BayCom’s wholly owned banking subsidiary, United Business Bank, provides a broad range of financial services to businesses and business owners as well as individuals through its network of 34 full-service branches at MarchJune 31,30, 2026, with 16 locations in California, one in Nevada, one in Washington, five in New Mexico and 11 in Colorado. BayCom’s business activities generally are limited to passive investment activities and oversight of its investment in the Bank. Accordingly, the information set forth in this report, including the consolidated financial statements and related data, relates primarily to the Bank.

Our principal business objective is to enhance shareholder value and generate consistent earnings growth by expanding our commercial banking franchise through organic growth, strategic loan and deposit transactions, and strategic acqusitons.acquisitions. Since its founding in 2010, growth has been predominantly acquisition-driven, and we have expanded our geographic footprint through ten successful strategic acquisitions. We believe that our selective acquisition of community banks has yielded economies of scale and improved our efficiency. We have also achieved organic growth by leveraging opportunities within the metropolitan and community markets in which we operate. These markets provide 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 access to low-cost, stable core deposits in community markets that can be used to fund commercial loan growth. We strive to create an enhanced banking experience for our clients by providing a comprehensive suite of sophisticated banking products and services tailored to meet their needs, while delivering the high-quality, relationship-based client service associated with a community bank. At MarchJune 31,30, 2026, on a consolidated basis, the Company had approximately $2.6 billion in total assets, $2.0$2.1 billion in total loans, $2.3$2.2 billion in total deposits and $344.0$335.4 million in shareholders’ equity.

We continue to focus on growing our commercial loan portfolios through acquisitions as well as organic growth. At MarchJune 31,30, 2026, our $2.0$2.1 billion total loan portfolio included $204.2$188.5 million, or 10.2%,9.1%, of loans acquired through business combinations (all of which were recorded to their estimated fair values at the time of acquisition), and the remaining $1.8$1.9 billion, or 89.8%,90.9%, consisted of loans we originated or purchased not as part of a business combination.

Changes in market interest rates, the slope of the yield curve, and the rates we earn on interest earning assets or pay on interest bearing liabilities have a significant impact on our net interest spread, net interest margin and net interest income. During 2025, the Federal Open Market Committee of the Federal Reserve (“FOMC”) lowered the target range for the federal funds rate in response to continued moderation in inflation and evolving economic conditions. The FOMC reduced the target range by 75 basis points, from 4.25%–4.50% at December 31, 2024, to 3.50%–4.25% by year-end 2025, where it remained as of MarchJune 31,30, 2026. All reductions occurred between September and December 2025. Correspondingly, the prime rate, which generally moves in relation to the federal funds rate, was approximately 6.75% at MarchJune 31,30, 2026. These rate levels influenced both asset yields and funding costs during the firstthree quarterand of 2026. Net interest income increased $2.3 million, or 10.1%, to $25.2 million for the threesix months ended MarchJune 31,30, 2026, compared to the same period in 2025, driven primarily by growth in loan interest income and higher FHLB dividend income, partially offset by a decrease in interest income on investment securities and interest-bearing balances. Total interest expense decreased $412,000, or 4.2%, primarily reflecting the full redemption of the Company’s subordinated notes in the third quarter of 2025, partially offset by higher deposit interest expense and increased junior subordinated debenture expense.2026. Additional details regarding net interest income are discussed below.

Provision for credit losses. We have established an allowance for credit losses by charging amounts to provision for credit losses at a level required to reflect estimated credit losses in the loan and available-for saleavailable-for-sale investment securities portfolios. For loans, management considers many factors, including, among others, historical loss experience, types and amounts of loans in the portfolio and adverse situations that may affect borrowers’ ability to repay. See “Critical Accounting Policies and Estimates - Allowance for Credit Losses” for a description of the manner in which the provision for credit losses is established.

For investments, the Company evaluates available-for-sale debt securities in an unrealized loss position to determine whether the decline in the fair value below the amortized cost basis is due to credit-related factors or noncredit-related factors. Such situations may result from either a decline in the financial condition of the issuing entity or, in the case of fixed interest rate investments, from rising interest rates. In making this assessment, management considers the length of time and the extent to which fair value is less than amortized cost, the nature of the security, the underlying collateral, and the financial condition and prospects of the issuer, among other factors. This assessment also includes a determination of whether the Company intends to sell the security, or if it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis less any current-period credit losses. If the present value of the cash flows expected to be collected from the security is less than the amortized cost basis of the security, a credit loss exists and an allowance for credit losses for available-for-sale securities is recorded for the credit loss, limited by the amount that the fair value is less than the amortized costscost basis. Any impairment that has not been recorded through an allowance for credit losses for available-for-sale securities is recognized in other comprehensive income. Changes in the allowance for credit losses for available-for-sale securities are recorded as provision for (or reversal of) credit loss.losses. Losses are charged against the allowance for credit losses for available-for-sale securities, with a corresponding adjustment to the security's amortized cost basis, when management believes the uncollectibility of an available-for-sale security is confirmed or when either criteria regarding intent or requirement to sell is met.

Our accounting and reporting policies conform to accounting principles generally accepted in the United States of America (“GAAP”) and to general practices within the banking industry. To prepare financial statements and interim financial statements in conformity with GAAP, management makes estimates, assumptions and judgments based on available information. These estimates, assumptions and judgments affect the amounts reported in the financial statements and accompanying notes and are based on information available as of the dates of the financial statements. As this information changes, actual results could differ from the estimates, assumptions and judgments reflected in the financial statements. In particular, management has identified several accounting policies that, due to the estimates, assumptions and judgments inherent in those policies, are critical into understanding our financial statements.

Comparison of Financial Condition at MarchJune 31,30, 2026 and December 31, 2025

Total assets. Total assets increaseddecreased $54.9$13.6 million, or 2.1%,0.5%, to $2.6 billion at MarchJune 31,30, 2026, from December 31, 2025. The increasedecrease primarily was due to a $99.4$29.1 million, or 48.1%,14.1%, increasedecrease in cash and cash equivalentsequivalents, andpartially offset by a $9.7$3.0 million, or 5.4%,1.7%, increase in investment securities available-for-sale,available-for-sale at fair value,value partially offset byand a $55.1$7.2 million, or 2.7%,0.3%, decreaseincrease in loans receivable, net.

Cash and cash equivalents. Cash and cash equivalents increaseddecreased $99.4$29.1 million, or 48.1%,14.1%, to $305.9$177.4 million at MarchJune 31,30, 2026, from $206.5 million at December 31, 2025. The increasedecrease primarily was due to a $107.6$24.1 million increasedecrease in federal funds sold dueresulting repayments on loans outpacing loan growth andfrom an increase in loan originations and purchases, and a decrease in deposits.

Investment securities available-for-sale. Investment securities available-for-sale increased $9.7$3.0 million, or 5.4%,1.7%, to $189.4$182.7 million at MarchJune 31,30, 20262026, from $179.7 million at December 31, 2025. The increase was primarily attributable to purchases of investment securities, partially offset by routine maturities, principal repayments, and calls of investment securities, and to a lesser extent downwardupward fair value adjustments related to unrealized lossesgains on investment securities available-for-sale.

The following table sets forth certain information regarding contractual maturities and the weighted average yields of our available for saleavailable-for-sale investment securities as of MarchJune 31,30, 2026. 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.

Equity securities. Equity securities increaseddecreased $58,000,$847,000, or 0.5%,6.7%, to $12.6$11.7 million at MarchJune 31,30, 2026 from $12.6 million at December 31, 2025, primarily due to the redemption of one equity security for $1.0 million at par in the current quarter, with no gain or loss recognized, partially offset by positive mark-to-market adjustments recorded during the threesix months ended MarchJune 31,30, 2026.

Loans receivable, net. We originate a wide variety of loans with a focus on commercial real estate (“CRE”) loans and commercial and industrial loans. Total loans decreasedincreased $55.1$7.2 million, or 2.7%,0.3%, to $2.0$2.1 billion at MarchJune 31,30, 2026 from $2.1$2.0 billion at December 31, 2025. The decreaseincrease was due to $90.5 million of loan repayments, partially offset by $34.7$114.4 million of new loan originations and $3.2$66.5 million of loan purchases.purchases, Duringwhich thewere currentmore quarter,than theoffset Companyby sold$160.4 million of loan repayments and $11.6 million of loans totaling $2.4 million, of which $919,000 were nonperforming assets.sold.

The following table shows as of MarchJune 31,30, 2026, the geographic distribution of our loan portfolio, by type of loan, in dollar amounts and percentages:

Acquired loans. As of MarchJune 31,30, 2026, our total loan portfolio included $204.2$188.5 million, or 10.2%,9.1%, of loans acquired through business combinations (all of which were recorded at their estimated fair values as of the time of acquisition), of which $108.4$149.1 million had noa remaining net premium or discount.

As of MarchJune 31,30, 2026, acquired non-PCD loans totaled $96.6$39.4 million, with a remaining net premium of $1.3 million,$543,000, compared to $121.1 million with a remaining net premium of $397,000 as of December 31, 2025. The decrease from December 31, 2025 was due to payoffs, paydowns, and migration to the general pool of $58.9 million of acquired loans during the current quarter, as the portfolio continued to season and such acquired loans exhibited risk characteristics indistinguishable from the Company’s originated loans with most of these loans having not been renewed or re-underwritten during the first half of 2026. The net premium for acquired non-PCD loans includes a credit discount based on estimated losses in the acquired loans, partially offset by any premium based on market interest rates on the date of acquisition.

As of MarchJune 31,30, 2026, acquired PCD loans totaled $12.1$2.1 million, with a remaining net non-credit discount of $648,000,$298,000, compared to $16.1 million with a remaining net non-credit discount of $1.2 million as of December 31, 2025.

Nonperforming assets and loans. Nonperforming assets generally consist of nonperforming loans and other real estate owned (“OREO”). Nonperforming loans include nonaccrual loans and accruing loans 90 days or more past due. The Company held no OREO at June 30, 2026 or December 31, 2025. Nonperforming assetsloans increaseddecreased $3.2$3.6 million to $16.7$9.8 million, or 0.83%0.47% of total loans, at MarchJune 31,30, 2026, compared to $13.4 million, or 0.65% of total loans, at December 31, 2025. The Company held no OREO at either date.

NonperformingThe decrease in nonperforming loans totaled $16.7 million, or 0.83% of total loans, at March 31, 2026, compared to $13.4 million, or 0.65% of total loans, at December 31, 2025. The increase from the prior quarter-end was primarily due to onethe $4.9payoff of six nonaccrual loans totaling $2.3 million commercialand realthe estatesale loanof being placed ontwo nonaccrual duringloans thetotaling current$7.7 quarter,million, partially offset by payoffsthree of fivenew nonaccrual CRE loans totaling $1.6$6.4 million. The majority of nonperforming loans remain concentrated in the commercial real estateCRE portfolio, while consumer and other commercial loans continue to exhibit low levels of delinquencies. At MarchJune 31,30, 2026, nonaccrual loans included $7.0$1.4 million of loans 30–89 days past due and $6.3$4.7 million of loans less than 30 days past due. The $7.0$1.4 million of loans 30-89 days past due consisted of fourone loansloan and the $6.3$4.7 million of nonaccrual loans less than 30 days past due consisted of 1513 loans, all of which were placed on nonaccrual due to borrower-specific financial concerns, indicators of credit deterioration,concerns and other creditcredit-related relatedfactors factors,that which providedraised reasonable doubt about the full collectability of principal and interest, rather than delinquency. At December 31, 2025, nonaccrual loans included $562,000 of loans 30–89 days past due and $9.4 million of loans less than 30 days past due. At December 31, 2025, the $9.4 million of loans less than 30 days past due was comprised of 15 loans all of which were placed on nonaccrual due to concerns over the financial condition of the borrowers.

Of the nonperforming loans at MarchJune 31,30, 2026, approximately $932,000$862,000 were guaranteed by governmental agencies, compared to $1.7 million at December 31, 2025. The decrease in government-guaranteed nonaccrual loans during this period reflectsreflected the pay-off of one nonaccrual loan during the current quarter.paydowns.

Loans may be acquired at a premium or discount to par value, in which case the premium is amortized (subtracted from) or accreted (added to) interest income over the remaining life of the loan. Generally, over time, the effects of loan discount accretion and loan premium amortization decrease as the purchased loans mature or pay off before maturity. Upon the payoff of a loan before maturity, any remaining (unaccreted) discount or (unamortized) premium is immediately taken into interest income; as loan payoffs may vary significantly from quarter to quarter, so may the impact of discount accretion and premium amortization on interest income.

Modified loans to borrowers experiencing financial difficulty. Occasionally, the Company offers modifications of loans to borrowers experiencing financial difficulty by providing principal forgiveness, interest rate reductions, other-than-insignificant payment delays, term extensions or any combination of these. When principal is forgiven, the amount of the forgiveness is charged-offcharged off against the allowance for credit losses for loans. Upon the Company’s subsequent determination that a modified loan (or a portion thereof) is uncollectible, the loan (or portion thereof) is charged off. The amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses for loans is adjusted by the same amount.

Modified loans to borrowers experiencing financial difficulty as of MarchJune 31,30, 2026 and December 31, 2025, totaled $1.2$2.0 million and $1.4 million, respectively. All such modified loans were on nonaccrual status as of each respective reporting date. Modified loans that are accruing and performing in accordance with their modified terms are not classified as nonperforming loans because they continue to accrue interest and demonstrate satisfactory payment performance despite their modified terms. There were no such modified loans at MarchJune 31,30, 2026 and December 31, 2025. At both MarchJune 31,30, 2026 and December 31, 2025, individually evaluated modified loans to borrowers experiencing financial difficulty had no related allowance.allowances of $594,000 and none, respectively.

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

Interest foregone on nonaccrual loans was approximately $200,000 and $269,000 for the three months ended March 31, 2026 and 2025, respectively. Interest income recognized on nonaccrual loans was approximately $140,000$338,000 and $35,000$478,000 for the three and six months ended MarchJune 31,30, 2026 and $31,000 and $66,000 for the three and six months ended June 30, 2025, respectively.

At MarchJune 31,30, 2026, the Company’s allowance for credit losses for loans was $20.6$23.0 million, or 1.02%1.11% of total loans, compared to $21.2 million, or 1.03% of total loans, at December 31, 2025. Management currently believes that the allowance for credit losses at MarchJune 31,30, 2026 is adequate to absorb expected credit losses inherent in the Company’s loan portfolio. No assurance can be given, however, that adverse economic conditions or other circumstances will not result in increased losses in the portfolio.

The decreaseincrease in the allowance for credit losses at MarchJune 31,30, 2026 compared to December 31, 2025, was primarily attributable to a decrease$1.5 million increase in thespecific reservereserves for individually evaluated loans, primarily due to one CRE loan, and a $256,000 increase in reserves for pooled loans due to lower loan balances,growth, partially offset by changes in macroeconomic forecasts, including lowerimprovements forecastedin unemployment and an improved national gross domestic product outlook. In addition, there was an $82,000 decrease in the reserve for individually evaluated loans during the current quarter.estimates. Qualitative risk factor classifications remained unchanged during the current quarter.period.

Net charge-offs were $15,000$2.8 million and $2.9 million for the three and six months ended MarchJune 31,30, 2026, compared to net charge-offs of $102,000$13,000 and $115,000 for the three and six months ended MarchJune 31,30, 2025.2025, respectively.

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

As of MarchJune 31,30, 2026, the Company individually evaluated $15.1$9.9 million in loans, of which $4.4$7.8 million had a specific allowance totaling $1.3$2.9 million as of MarchJune 31,30, 2026. As of December 31, 2025, the Company individually evaluated $14.9 million in loans, of which $4.5 million had a specific allowance totaling $1.4 million.

Management considers the allowance for credit losses for loans at MarchJune 31,30, 2026 to be adequate to cover expected credit losses inherent in the loan portfolio based on the assessment of current portfolio performance, historical loss experience, and relevant qualitative and quantitative factors, including current economic conditions and reasonable and supportable forecasts. While management believes the estimates and assumptions used in determining the adequacy of the allowance are reasonable, actual credit losses may differ from those expected. Changes in economic conditions, borrower performance, or other factors could result in actual losses exceeding the current allowance, which could adversely affect the Company’s financial condition and results of operations. In addition, the methodology, assumptions, and judgments used in determining the allowance for credit losses isare subject to review by bank regulators, as part of their routine examination process, which may result in adjustments to the provision for credit losses based upon information available to them at the time of their examination.

Total deposits increaseddecreased $51.8$43.7 million, or 2.3%,2.0%, to $2.3$2.2 billion at MarchJune 31,30, 2026, compared to December 31, 2025. At MarchJune 31,30, 2026, noninterest-bearing demand deposits totaled $609.2$576.5 million, or 26.9%26.6% of total deposits, compared to $578.1 million, or 26.1% of total deposits, at December 31, 2025, representing ana increasedecrease of $31.2$1.5 million. From December 31, 2025 to MarchJune 31,30, 2026, interest-bearing deposits generally increased,decreased, with time deposits increasingdecreasing $19.9$106.2 million and NOW accounts decreasing $9.5 million, partially offset by money market accounts increasing $13.3$73.3 million, and savings accounts increasing $905,000. By contrast, NOW accounts declined $13.6 million during the same period.$207,000. Time deposits included no brokered deposits as of MarchJune 31,30, 2026, and December 31, 2025.

The overall increasedecrease in total deposits from December 31, 2025 primarily reflects noninterest-bearingdeclines demandin deposittime growth,deposits, partially offset by a declineincreases in NOWmoney market accounts and, to a lesser extent, savings accounts. In addition, theThe increase in money market and time deposits was driven by growth, and to a lesser extent a shift in deposit composition reflectingreflects continued customer migration towardwithin interest-bearingthe productsdeposit portfolio in response to the prevailing rate environment. Management continues to monitor deposit mix and pricing strategies in the context of funding costs, liquidity needs, and interest rate risk.

We consider our deposit base to be seasoned, stable and well-diversified, and we do not have any significant industry concentrations among our non-insured deposits. We also offer our customers the ability to place deposits in Certificate of Deposit Account Registry Service (“CDARS”) and Insured Cash Sweep (“ICS”) money market product services via the IntraFi Network, to insureensure deposits above FDIC insurance limits. At MarchJune 31,30, 2026, our average deposit account size (excluding public funds), calculated by dividing period-end deposits by the population of accounts with balances, was approximately $63,000.$62,000. See “Note 17 – Commitments and Contingencies” of the Notes to Condensed Consolidated Financial Statements in this Form 10-Q for information regarding our top ten depositors.

At MarchJune 31,30, 2026 and December 31, 2025, we could borrow up to $599.3$531.0 million and $580.7 million, respectively, from the FHLB of San Francisco. At bothJune March30, 31,2026, 2026the andBank had $25.0 million of overnight advances outstanding from the FHLB, compared to no FHLB borrowings outstanding at December 31, 2025, there were no FHLB advances outstanding.2025.

At MarchJune 31,30, 2026 and December 31, 2025, we could borrow up to $43.4$42.8 million and $49.3 million, respectively, from the FRB of San Francisco. At both MarchJune 31,30, 2026 and December 31, 2025, there were no FRB advances outstanding.

At both MarchJune 31,30, 2026 and December 31, 2025, we had a total of $65.0 million in federal funds lines available from third-party correspondent banks and no balances outstanding at these dates.

At bothJune March 31,30, 2026 and December 31, 2025, the Company had outstanding junior subordinated deferrable interest debentures, net of fair value adjustments, assumed in connection with its previous acquisitions totaling $5.9 million and $8.7 million, respectively. The decrease reflects the redemption of one debenture during the first quarter of 2026.

WeThe areBank is required to provide collateral for certain local agency deposits. At both MarchJune 31,30, 2026 and December 31, 2025, the FHLB of San Francisco had issued letters of credit on behalf of the Bank totaling $42.1 million and $41.6 million, respectively, as collateral for local agency deposits.

Shareholders’ equity. Shareholders’ equity increaseddecreased $5.4$3.2 million, to $344.0$335.4 million at MarchJune 31,30, 2026 from $338.6 million at December 31, 2025. The increasedecrease in shareholders’ equity primarily was due to $8.2$6.5 million of cash dividends paid or accrued during the period. These decreases were partially offset by a $1.4 million increase in common stock due to stock based compensation primarily related to accelerated vesting of shares for departing executives, net income of $1.2 million earned during the first quartersix months of 2026 and $340,000$811,000 ofin other comprehensive income, net of taxes, relatedwhich mainlyprimarily toreflected changes in the unrealized gainsgain on available-for-sale securities. These items were partially offset by $3.3 million of accrued cash dividends. During the threesix months ended MarchJune 31,30, 2026, the Company did not repurchase any shares of common stock, compared to the repurchase of $1.3$5.2 million of common stock during the threesix months ended MarchJune 31,30, 2025. For additional information see Part II, Item 2, “Unregistered Sales of Equity Securities and Use of Proceeds.”

Comparison of Results of Operations for the Three and Six months Ended MarchJune 31,30, 2026 and 2025

Earnings summary. NetThe incomeCompany wasreported $8.2a net loss of $7.0 million for the three months ended MarchJune 31,30, 2026, compared to $5.7net income of $6.4 million for the three months ended MarchJune 31,30, 2025, ana increasedecrease of $2.5$13.3 million or 43.5%.million. The increasedecrease was primarily as a result of an $11.4 million increase in noninterest expense, largely attributable to the one-time recognition of $10.5 million of severance, accelerated equity award vesting and employee benefit costs associated with the previously announced departures of three senior executives, and a $2.3$5.0 million increase in the provision for credit losses. These changes were partially offset by a $568,000 increase in net interest income and a $1.3$2.6 million favorable change in the provision for credit losses, reflecting a net recovery in the current quarter compared to a $642,000 provision in the prior-year quarter, as well as a $105,000 increase in noninterest income. These changes were partially offset by a $517,000 increase in noninterest expense and a $738,000 increasedecrease in the provision for income taxes. Basic and diluted earningsloss per share werewas $0.75$(0.64) for the three months ended MarchJune 31,30, 2026, compared to $0.51basic and diluted earnings per share was $0.58 for the three months ended MarchJune 31,30, 2025.

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 61.73%107.71% and 65.74%84.04% for the three and six months ended MarchJune 31,30, 2026, and 63.85% and 64.79% for the three and six months ended June 30, 2025, respectively. The improvementchange in the efficiency ratio for the current quarter was primarily drivenattributable to the significant increase in noninterest expense due to costs of the previously announced departures of three senior executives, partially offset by higher net interest income.

Interest income. Interest income on loans, including fees, increased $2.4 million,$251,000, or 8.9%,0.9%, to $29.6$28.2 million for the three months ended MarchJune 31,30, 2026 from $27.1$28.0 million for the three months ended MarchJune 31,30, 2025, due to ana $89.2$28.3 million increase in the average balance of loansloans, andpartially offset by a 23three basis point increasedecrease in the average loan yield. The average balance of loans was $2.0 billion for the firstsecond quarter of 2026, up 4.6%1.42% compared to the firstsecond quarter of 2025. The average yield on loans was 5.87%5.60% for the firstsecond quarter of 2026, compared to 5.64%5.63% for the firstsecond quarter of 2025. The increasedecrease in the average yield on loans reflected increasedhigher ratesamortization of net premiums on variable rateacquired loans, aspartially welloffset asby new loans being originated at higher market interest rates.

Interest income on loans for the three months ended MarchJune 31,30, 2026 and 2025 included $600,000$380,000 of amortization of net premiums on acquired loans, primarily due to continued seasoning and $215,000 in accretionrunoff of the net discount on acquired loans. During the current quarter, one $4.0 million acquired commercial real estate loan paidportfolio, off,which resulting in $555,000 of discount accretion and recovery of interest of $610,000. Accretion of the net discount and recovery of interest positivelynegatively impacted the average loan yield by 11 and 12eight basis points,points. respectively duringDuring the currentthree quarter,months comparedended toJune 30, 2025, $110,000 of accretion of the net discount was recognized, with minimal positive impact duringon the firstaverage quarterloan of 2025.yield. Remaining net discountspremiums on these acquired loans totaled $649,000$245,000 and $223,000$319,000 at MarchJune 31,30, 2026 and 2025, respectively. The combined approximately $1.2 million of discount accretion and interest recovery recognized during the current quarter as a result of the $4.0 million single loan payoff is non-recurring in nature. With only $649,000 of remaining net discount available for future accretion, the contribution of acquired loan accretion to loan yields and net interest margin is expected to be minimal in future periods. Additionally, interest income on loans for the three months ended MarchJune 31,30, 2026 and 2025, included $17,000$110,000 and $162,000,$109,000, respectively, in fees related to prepayment penalties.

Interest income on investment securities decreased $322,000,$139,000, or 13.1%,5.8%, to $2.1$2.3 million for the three months ended MarchJune 31,30, 2026, compared to $2.5$2.4 million for the three months ended MarchJune 31,30, 2025, as a result of decreases in the average balance and average yield. The average balance of investment securities totaled $188.2$194.7 million for the three months ended MarchJune 31,30, 2026, compared to $210.2$206.5 million for the three months ended MarchJune 31,30, 2025. The average yield on investment securities was 4.59%4.67% for the three months ended MarchJune 31,30, 2026, compared to 4.73%4.68% for the three months ended MarchJune 31,30, 2025. The decreases in the average balance and the average yield from the same quarter a year ago were due to paydowns and calls on higher variable-rate securities and rate resets on variable rate securities. In addition, during the firstsecond quarter of 2026, we received $709,000$135,000 in cash dividends on our FRB and FHLB stock, including $330,000 in special dividends from the FHLB, compared to $393,000$392,000 during the firstsecond quarter of 2025.2025, Thewith $330,000the indecrease specialdue dividends received fromto the FHLB duringlowering the dividend rate in the current quarter is not expected to recur at a predictable frequency. These special dividends contributed approximately five basis points to the reported net interest margin. Excluding special dividends, FHLB and FRB dividend income would have remained essentially unchanged between periods.quarter.

Interest income on federal funds sold and interest-bearing balances in banks decreased $513,000,$1.1 million, or 19.4%,39.3%, to $2.1$1.6 million for the three months ended MarchJune 31,30, 2026, compared to $2.6$2.7 million for the three months ended MarchJune 31,30, 2025, as a result of decreases in both the average yield and average balance. The average yield decreased 7775 basis points to 3.70% for the three months ended MarchJune 31,30, 2026, compared to 4.47%4.45% for the three months ended MarchJune 31,30, 2025, reflecting decreases in Federal Reserve policy rates. The average balance of federal funds sold and interest-bearing balance in banks totaled $234.2$177.3 million and $240.3$242.8 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively.