About BayCom Corp

BayCom Corp operates as the bank holding company for United Business Bank that provides various financial services to businesses and business owners, as well as individuals. The company serves its customers through its network of full-service branches located at California, Washington, New Mexico, and Colorado. Its geographic footprint, which includes the San Francisco Bay area, the metropolitan markets of Los Angeles, California Seattle, Washington, and Denver, Colorado; and community markets, including Albuquerque, New Mexico, and Custer, Delta, and Grand counties, Colorado. Markets The company targets its services to small and medium-sized businesses, professional firms, real estate professionals, nonprofit businesses, labor unions and related nonprofit entities and businesses and individual consumers. The company operates full-service banking branches consisting of branch offices in Northern and Southern California; Denver, Colorado, and Custer, Delta, and Grand counties, Colorado; Seattle, Washington and Central New Mexico. The company generally lends in markets where it has a physical presence through its branch offices. A majority of the company’s branches are located in the San Francisco Bay Area which includes the counties of Alameda, Contra Costa, Marin, San Francisco, San Joaquin, San Mateo, Santa Clara, Solano, and Sonoma, California. The company operates primarily in the San Francisco-Oakland-Hayward, and the San Jose-Sunnyvale-Santa Clara, California Metropolitan Statistical Areas (MSA) with additional operations in the Los Angeles-Long Beach-Anaheim, California MSA, with borrowers or properties located in San Francisco Bay Area comprising 34.4%, Northern California comprising 25.1% and Southern California comprising 9.4% of its loan portfolio as of December 31, 2022. In addition, deposits located in California comprised 61.8% of total deposits as of December 31, 2022. The company serves the Seattle-Tacoma-Bellevue MSA, which includes King County (which includes the city of Seattle), through branch offices. The company serves the Albuquerque MSA, in Central New Mexico the most populous city in the state of New Mexico through branch offices it acquired from First ULB Corp (FULB) and Bethlehem Financial Corporation (BFC). The company serves the Denver MSA and the Colorado communities in Custer, Delta, and Grand counties through branch offices. Lending The company provides a comprehensive suite of financial solutions that competes with large, national competitors, but with the personalized attention and nimbleness of a relationship-focused community bank. The company provides its commercial clients with a diverse array of cash management services. A general description of the range of commercial banking products and other services the company offers follows. Lending Activities: The company offers a full range of lending products, including commercial and multifamily real estate loans (including owner-occupied and investor real estate loans), commercial and industrial loans (including equipment loans and working capital lines of credit), SBA loans including income producing real estate loans and small business loans under the SBA 7(a) and 504 loan programs, construction and land loans, agriculture-related loans and consumer loans. The company’s preference is for owner-occupied real estate and commercial and industrial loans. The company also offers consumer loans predominantly as an accommodation to its commercial clients, which include installment loans, unsecured and secured personal lines of credit, and overdraft protection. Lending activities originate from the relationships and efforts of its bankers. The company is a preferred lender under the SBA loan program. The company may periodically purchase whole loans and loan participation interests or participate in syndicates originating new loans, including shared national credits, primarily during periods of reduced loan demand in its primary market areas and at times to support its Community Reinvestment Act lending activities. The company is a business-focused community bank, serving small and medium-sized businesses, trade unions and their related businesses, entrepreneurs and professionals located in its markets. The company focuses on establishing and building strong financial relationships with its clients, using a trusted advisor and relationship approach. The company emphasizes personalized relationship banking, where the relationship is predicated on ongoing client contact, client access to decision makers, and its understanding of the clients’ business, market and competition, which allows it to better meet the needs of its clients. Concentrations of Credit Risk: The largest portion of the company’s loan portfolio represents lending conducted with businesses and individuals in Northern California, including the San Francisco Bay Area and Southern California. The company’s loan portfolio consists primarily of commercial real estate loans (including multifamily) and construction loans. The company’s commercial real estate loans are generally secured by first liens on real property. The commercial and industrial loans are typically secured by general business assets, accounts receivable inventory and/or the corporate guaranty of the borrower and personal guaranty of its principals. The geographic concentration of the company’s loans subjects its business to the general economic conditions within California, Colorado, New Mexico and Washington. Loan Types: The company provides a variety of loans to meet its clients’ needs. The real estate portion of the company’s loan portfolio consists of the following: mortgage loans secured typically by commercial and multifamily properties; construction and land loans; and mortgages and revolving lines of credit secured by equity in residential properties. Commercial Real Estate Loans: The company’s commercial real estate loans include loans secured by office buildings, retail facilities, hotels, gas stations, convalescent facilities, industrial use buildings, restaurants, multifamily properties and agricultural real estate. The company’s commercial real estate loans may be owner-occupied or non-owner occupied. The company requires its commercial real estate loans to be secured by a property with adequate margins and generally obtain a guarantee from responsible parties. The company’s commercial real estate loans generally are collateralized by first liens on real estate, have interest rates which may be fixed for three to five years, or adjust annually. Commercial real estate loan terms generally are limited to 15 years or less, although payments may be structured on a longer amortization basis up to 20 years with balloon payments or rate adjustments due at the end of three to seven years. The company generally charges an origination fee for its services. The company also offers commercial real estate loans as a SBA preferred lender under the SBA’s 504 loan program in conjunction with junior lien financing from a Certified Development Company (CDC). Preferred lender status is the highest designation awarded to lenders by the SBA, and accordingly, grants such lenders full lending authority to approve SBA loans. The SBA 504 loan program is an economic development-financing program providing long-term, low down payment loans to businesses. Typically, a SBA 504 project includes a loan secured from a private-sector lender, such as the bank, with a senior lien, a loan secured from a CDC (funded by a 100% SBA-guaranteed debenture) with a junior lien covering up to 40% of the total cost, and a contribution of at least 10% equity from the borrower. The company generally offers SBA 504 loans within a range of $600,000 to $5.0 million. The company also offers commercial real estate loans under the SBA 7(a) loan program, which is described further under Commercial and Industrial Loans below. The company sells, from time to time, the guaranteed portion its SBA 7(a) loans in the secondary market. The company bases its SBA 7(a) loan sales on the level of its SBA 7(a) loan originations, the premiums available in the secondary market for the sale of such loans, and general liquidity considerations of it. The company generally requires personal guarantees from the principal owners of the property supported by a review by its management of the principal owners’ personal financial statements. The company considers the borrower’s management succession, life insurance and business continuation plan when evaluating agricultural real estate secured loans. The company targets individual commercial real estate loans between $1.0 million and $5.0 million. Construction and Land Loans: The company makes loans to finance the construction of residential and non-residential properties. Construction loans include loans for owner-occupied one-to-four family homes and commercial projects (such as multifamily housing, industrial, office and retail centers). These loans generally are collateralized by first liens on real estate and typically have a term of less than one-year floating interest rates and commitment fees. Construction loans are typically made to builders/developers that have an established record of successful project completion and loan repayment. The company conducts periodic inspections, either directly or through an agent, prior to approval of periodic draws on these loans, based on the percentage of completion. The company’s construction loans have terms that typically range from six months to two years, depending on factors such as the type and size of the development and the financial strength of the borrower/guarantor. Construction loans are typically structured with an interest-only period during the construction phase. Construction loans are underwritten to either mature, or transition to a traditional amortizing loan at the completion of the construction phase. On a more limited basis, the company also makes land loans to developers, builders and individuals, to finance the commercial development of improved lots or unimproved land. In making land loans, it follows underwriting policies and disbursement and monitoring procedures similar to those for construction loans. The initial term on land loans is typically one to three years with monthly interest-only payments. One-to-Four Family Residential Loans: The company’s one-to-four family real estate loans were either acquired through its mergers with other financial institutions or by purchases of whole loan pools with servicing retained. Generally, these loans were originated to meet the requirements of Fannie Mae, Freddie Mac, Federal Housing Administration, U.S. Department of Veterans Affairs and jumbo loans for sale in the secondary market to investors. The company’s one-to-four family loans do not allow for interest-only payments, nor negative amortization of principal, and carry allowable prepayment restrictions. The company originates a limited amount of home equity loans and home equity lines of credit. Home equity loans and home equity lines of credit generally may have a loan-to-value of up 80% at the time origination when combined with the first mortgage. Home equity loans generally have ten-year maturities based on a 30-year amortization. The company retains a valid lien on the real estate, obtain a title insurance policy that insures the property is free from encumbrances and require hazard insurance. Commercial and Industrial Loans: The company makes commercial and industrial loans, including commercial lines of credit, working capital loans, term loans, equipment financing, acquisition, expansion and development loans, SBA loans, letters of credit and other loan products, primarily in its target markets, which are underwritten on the basis of the borrower’s ability to service the debt from operating income. The company takes as collateral, a lien on general business assets, including among other things, real estate, accounts receivable, inventory and equipment, and generally obtain a personal guaranty of the borrower or principal. The company’s operating lines of credit typically are limited to a percentage of the value of the assets securing the line. Lines of credit and term loans are typically reviewed annually. The terms of the company’s commercial and industrial loans vary by purpose and by type of underlying collateral. The company typically makes equipment loans for a term of five years or less at fixed or adjustable rates, with the loan fully amortized over the term. Loans to support working capital typically have terms not exceeding one year and are usually secured by accounts receivable, inventory and personal guarantees of the principals of the business. The interest rates charged on loans vary with the degree of risk and loan amount and are further subject to competitive pressures, money market rates, the availability of funds and government regulations. For loans secured by accounts receivable and inventory, principal is typically repaid as the assets securing the loan are converted into cash (monitored on a monthly or more frequent basis as determined necessary in the underwriting process), and for loans secured with other types of collateral, principal is typically due at maturity. Terms greater than five years may be appropriate in some circumstances, based upon the useful life of the underlying asset being financed or if some form of credit enhancement, such as an SBA guarantee is obtained. The SBA 7(a) program serves as the SBA's primary business loan program to help qualified small businesses obtain financing when they might not be eligible for business loans through normal lending channels. Loans made by the bank under the SBA 7(a) program generally are made to small businesses to provide working capital or to provide funding for the purchase of businesses, real estate, or machinery and equipment. These loans generally are secured by a combination of assets that may include equipment, receivables, inventory, business real property, and sometimes a lien on the personal residence of the borrower. SBA 7(a) loans are all adjustable-rate loans based upon the Wall Street Journal prime lending rate. Loan proceeds under this program can be used for most business purposes including working capital, machinery and equipment, furniture and fixtures, land and building (including purchase, renovation and new construction), leasehold improvements and debt refinancing. Loan maturity is generally up to 10 years for non-real estate collateral and up to 25 years for real estate collateral. In general, the SBA guarantees up to 75% of the loan amount depending on loan size. The company is required by the SBA to service the loan and retain a contractual minimum of 5% on all SBA 7(a) loans, but generally retains 25% (the unguaranteed portion). The loan servicing spread is generally a minimum of 1.00% on all loans. The company generally offers SBA 7(a) loans within a range of $200,000 to $3.0 million. The bank has sold, and may in the future sell, the guaranteed portion of certain of its SBA 7(a) loans in the secondary market. The bank bases its SBA 7(a) loan sales on the level of its SBA 7(a) loan originations, the premiums available in the secondary market for the sale of such loans, and general liquidity considerations of the bank. Commercial and industrial loans also include loans originated under the U.S. Small Business Administration (SBA) Paycheck Protection Program (PPP), which expired on May 31, 2021. The Bank, as a qualified SBA lender, was authorized to originate loans under PPP to provide near-term relief to help small businesses impacted by COVID-19 sustain operations. The SBA guarantees 100% of the PPP loans made to eligible borrowers. The entire principal amount of the borrower's PPP loan, including any accrued interest, is eligible to be forgiven and repaid by the SBA if the borrower meets the PPP conditions. The company also makes agricultural operating loans, including loans to finance the purchase of machinery, equipment and breeding stock; seasonal crop operating loans used to fund the borrower’s crop production operating expenses; and operating and revolving loans used to purchase livestock for resale and related livestock production expense. The company typically originates agricultural operating loans on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s agricultural business. As part of the PEB Merger, the company acquired certain small business loans to borrowers qualified under the California Capital Access Program for Small Business, a state guaranteed loan program sponsored by the California Pollution Control Financing Authority (CalCAP). PEB ceased originating loans under this loan program in 2017. Under this loan program, the borrower, CalCAP and the participating lender contributed funds to a loss reserve account that is held in a demand deposit account at the participating lender. The borrower contributions to the loss reserve account are attributed to the participating lender. Losses on qualified loans are charged to this account after approval by CalCAP. Under the program, if a loan defaults, the participating lender has immediate coverage of 100% of the loss. The participating lender must return recoveries from the borrower, less expenses, to the loan loss reserve account. In addition, as successor to Pacific Enterprise Bancorp (PEB), the company was approved by the CalCAP, in partnership with the California Air Resources Board, to originate loans to California truckers in the On-Road Heavy-Duty Vehicle Air Quality Loan Program. Under this loan program, CalCAP solely contributes funds to a loss reserve account that is held in a demand deposit account at the participating lender. Consumer Loans: The company generally makes consumer loans as an accommodation to its clients on a case-by-case basis. These loans represent a small portion of the company’s overall loan portfolio. However, these loans are important in terms of servicing the company’s client’s needs. The company makes a variety of loans to individuals for personal and household purposes, including secured and unsecured term loans. Consumer loans are underwritten based on the individual borrower’s income, current debt level, past credit history and the value of any available collateral. Deposits The company’s lending and investing activities are primarily funded by deposits. The company offers a variety of deposit accounts with a wide range of interest rates and terms, including demand, savings, money market and time deposits with the goal of attracting a wide variety of clients. The company solicits these accounts from individuals, small to medium sized businesses, trade unions and their related businesses, associations, organizations and government authorities. The company’s transaction accounts and time certificates are tailored to the principal market area at rates competitive with those offered in the area. The company employs client acquisition strategies to generate new account and deposit growth, such as client referral incentives, search engine optimization, targeted direct mail and email campaigns, in addition to conventional marketing initiatives and advertising. The company also participates in the ICS One-Way Sell program, pursuant to which it buys cost effective wholesale funding on customizable terms. The company also offers convenience-related services, including banking by appointment (before or after normal business hours on weekdays and on weekends), online banking services, access to a national automated teller machine network, extended drive-through hours, remote deposit capture, and courier service so that clients’ deposit and other banking needs may be served without the client having to make a trip to the branch. The company’s full suite of online banking solutions including access to account balances, online transfers, online bill payment and electronic delivery of client statements, mobile banking solutions for iPhone and Android phones, including remote check deposit with mobile bill pay. The company offers debit cards with no ATM surcharges or foreign ATM fees for checking clients, plus night depository, direct deposit, cashier’s and travelers checks and letters of credit, as well as treasury management services, wire transfer services and automated clearing house (ACH) services. The company has implemented deposit gathering strategies and tactics, which have enabled it to attract and retain deposits utilizing technology to deliver high quality commercial depository (treasury management) services (e.g., remote deposit capture lock box, electronic bill payments wire transfers, direct deposits and automatic transfers) in addition to the traditional generation of deposit relationships performed in conjunction with its lending activities. The company offers a wide array of commercial treasury management services designed to be competitive with banks of all sizes. Treasury management services include balance reporting (including current day and previous day activity), transfers between accounts, wire transfer initiation, ACH origination and stop payments. Cash management deposit products consist of lockbox, remote deposit capture, positive pay, reverse positive pay, account reconciliation services, zero balance accounts and sweep accounts including loan sweep. The company provides an avenue for large depositors to maintain full insurance coverage by the Federal Deposit Insurance Corporation (FDIC) for all deposits up to $50.0 million. Under an agreement with IntraFi Network, it participates in the CDARS and the ICS money market product. These are deposit-matching programs which distribute excess balances on deposit with the company across other participating banks. In return, those participating financial institutions place their excess client deposits with it in a reciprocal amount. These products are designed to enhance the company’s ability to attract and retain clients and increase deposits by providing additional FDIC insurance for large deposits. The company also participates in the ICS One-Way Sell program, which allows it to buy cost effective wholesale funding on customizable terms. The company previously offered escrow services on commercial transactions and facilitated tax-deferred commercial exchanges through its division, Business Escrow Services (BES). The company discontinued its escrow services in 2021. Investment Portfolio The company’s investment portfolio consists of obligations of the U.S. government agencies or sponsored entities, including mortgage-backed securities, collateralized mortgage obligations, municipal securities, SBA securities and corporate bonds Business Strategy The company’s strategy is to continue to make strategic acquisitions of financial institutions within the Western United States, grow organically and preserve its strong asset quality through disciplined lending practices. The key elements of the company’s strategy include strategic consolidation of community banks; enhance the performance of the banks it acquires; focusing on lending growth in its metropolitan markets while increasing deposits in its community markets; expanding banking relationships with current and potential clients; and preserving its asset quality through disciplined lending practices. Supervision and Regulation As a California chartered bank, the bank is subject to supervision, periodic examination, and regulation by the California Department of Financial Protection and Innovation (DFPI), previously known as the California Department of Business Oversight, and by the Board of Governors of the Federal Reserve System (Federal Reserve) as its primary federal regulator. In addition, the regulations governing the company and the bank may be amended from time to time by the FDIC, the DFPI, the Federal Reserve and the Consumer Financial Protection Bureau (CFPB), an independent bureau of the Federal Reserve. The CFPB is responsible for the implementation of the federal financial consumer protection and fair lending laws and regulations and has authority to impose new requirements. As a state-chartered, federally insured commercial bank, the bank is subject to extensive regulation and must comply with various statutory and regulatory requirements, including prescribed minimum capital standards. The bank is regularly examined by the Federal Reserve and the DFPI and must file periodic reports concerning its activities and financial condition with these banking regulators. The Bank’s relationship with depositors and borrowers also is regulated to a great extent by both federal and state law, especially in such matters as the ownership of deposit accounts and the form and content of mortgage and other loan documents. As a California-chartered commercial bank with branches in the states of California, Colorado, New Mexico and Washington, the bank is subject not only to the applicable provisions of California law and regulations, but is also subject to applicable Colorado, New Mexico and Washington law and regulations. These state laws and regulations govern the bank’s ability to take deposits and pay interest thereon, make loans on or invest in residential and other real estate, make consumer loans, invest in securities, offer various banking services to its clients and establish branch offices. Through the Deposit Insurance Fund (DIF), the FDIC insures deposit accounts in the bank up to $250,000 per separately insured deposit ownership right or category. As insurer, the FDIC imposes deposit insurance premiums and is authorized to conduct examinations of and to require reporting by FDIC-insured institutions. The bank is a member of the Federal Reserve Bank of San Francisco. The Federal Reserve requires all depository institutions to maintain reserves at specified levels against their transaction accounts, primarily checking accounts. In response to the COVID-19 pandemic, the Federal Reserve reduced reserve requirement ratios to zero percent effective on March 26, 2020, to support lending to households and businesses. Transactions deemed to be covered transactions under Section 23A of the Federal Reserve Act between a bank and an affiliate are limited to 10% of the bank’s capital and surplus and, with respect to all affiliates, to an aggregate of 20% of the bank’s capital and surplus. Further, covered transactions that are loans and extensions of credit generally are required to be secured by eligible collateral in specified amounts. Federal law also requires that covered transactions and certain other transactions listed in Section 23B of the Federal Reserve Act between a bank and its affiliates be on terms as favorable to the bank as transactions with non- affiliates. The bank is subject to a broad array of federal and state consumer protection laws and regulations that govern almost every aspect of its business relationships with consumers. While the list set forth below is not exhaustive, these include the Truth-in-Lending Act, Truth in Savings Act, Electronic Fund Transfers Act, Expedited Funds Availability Act, Equal Credit Opportunity Act, Fair Housing Act, Real Estate Settlement Procedures Act, Home Mortgage Disclosure Act, Fair Credit Reporting Act, Right to Financial Privacy Act, Home Ownership and Equity Protection Act, Fair Credit Billing Act, Homeowners Protection Act, Check Clearing for the 21st Century Act, laws governing flood insurance, laws governing consumer protections in connection with the sale of insurance, federal and state laws prohibiting unfair and deceptive business practices, and various regulations that implement some or all of the foregoing. These laws and regulations mandate certain disclosure requirements and regulate the manner in which financial institutions must deal with clients when taking deposits, making loans, collecting loans, and providing other services. The company, as sole shareholder of the bank, is a bank holding company registered with the Federal Reserve. Bank holding companies are subject to comprehensive regulation by the Federal Reserve under the under the Bank Holding Company Act of 1956 (the BHCA), and the regulations of the Federal Reserve. The company is required to file quarterly reports with the Federal Reserve and to provide additional information as the Federal Reserve may require. The company also is required to file certain reports with, and otherwise comply with the rules and regulations of the SEC. Under the BHCA, the company is supervised by the Federal Reserve. In addition, the Dodd-Frank Act provides that a bank holding company must serve as a source of strength to its subsidiary banks by having the ability to provide financial assistance to its subsidiary banks during periods of financial distress. The company and any subsidiaries that it may control are considered affiliates of the bank within the meaning of the Federal Reserve Act, and transactions between the bank and affiliates are subject to numerous restrictions. With some exceptions, the company and its subsidiaries are prohibited from tying the provision of various services, such as extensions of credit, to other services offered by the company or by its affiliates. The company’s common stock is registered with the U.S. Securities and Exchange Commission (the SEC) under Section 12(b) of the Securities Exchange Act of 1934, as amended. The company is subject to information, proxy solicitation, insider trading restrictions and other requirements under the Securities Exchange Act of 1934 (the Exchange Act). History The company was founded in 2004. It was incorporated in the state of California in 2004. The company was formerly known as Bay Commercial Bank and changed its name to BayCom Corp in 2017.