See accompanying notes to unaudited condensed
consolidated financial statements.
See accompanying notes to unaudited condensed
consolidated financial statements.
See accompanying notes to unaudited condensed
consolidated financial statements.
See accompanying notes to unaudited condensed
consolidated financial statements.
See accompanying notes to unaudited condensed
consolidated financial statements.
See accompanying notes to unaudited condensed consolidated financial
statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in thousands, except for per
share data)
NOTE 1 – BASIS OF PRESENTATION
BayCom Corp (the “Company”)
is a bank holding company headquartered in Walnut Creek, California. United Business Bank (the “Bank”), the wholly
owned banking subsidiary, is a California state-chartered bank which provides a broad range of financial services primarily to
local small and mid-sized businesses, service professionals and individuals. In the 14 years of operation, the Bank has grown to
17 full service banking branches. The main office is located in Walnut Creek, California and branch offices are located in Oakland,
Castro Valley, Mountain View, Napa, Stockton (2), Pleasanton, Livermore, San Jose, Long Beach, Sacramento, San Francisco and Glendale,
California, and Seattle, Washington (2) and Albuquerque, New Mexico. In addition, the Bank has one loan production office in Los
Angeles, California. The condensed consolidated financial statements include the accounts of the Company and the Bank.
All intercompany transactions and balances
have been eliminated in consolidation. The condensed consolidated financial statements include all adjustments of a normal and
recurring nature, which are, in the opinion of management, necessary for a fair presentation of the financial position and results
of operations for the periods presented.
The accompanying unaudited condensed consolidated
financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information
and footnotes normally included in annual financial statements prepared in conformity with accounting principles generally accepted
in the United States of America. Accordingly, these condensed consolidated financial statements should be read in conjunction with
the consolidated audited financial statements and notes thereto for the year ended December 31, 2017. Results of operations for
interim periods are not necessarily indicative of results for the full year. Certain prior year information has been reclassified
to conform to current year presentation. The reclassifications had no impact on consolidated net income or shareholders’
equity.
On August 13, 2018, the Company announced
the signing of a definitive merger agreement whereby the Company will acquire Bethlehem Financial Corporation, (“BFC”),
in a cash transaction valued at approximately $23.5 million. For more information, see Note 3 of the Notes to Consolidated Financial
Statements contained in this Form 10-Q.
Revenue Recognition
In accordance with Topic 606, revenues
are recognized when control of promised goods or services is transferred to customers in an amount that reflects the consideration
the Company expects to be entitled to in exchange for those goods or services. To determine revenue recognition for arrangements
that an entity determines are within the scope of Topic 606, the Company performs the following five steps: (i) identify the contract(s)
with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate
the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies
a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect
the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception,
once the contract is determined to be within the scope of Topic 606, the Company assesses the goods or services that are promised
within each contract and identifies those that contain performance obligations; and assesses whether each promised good or service
is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance
obligation when (or as) the performance obligation is satisfied.
BAYCOM CORP AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in thousands, except for per
share data)
All of the Company’s revenue from
contracts with customers in scope of ASC 606 is recognized in noninterest income and included in our commercial and consumer banking
segment. For the nine months ended September 30, 2018, the Company recognized $238,000 in deposit fees, and $131,000 in debit card
interchange fees considered in scope of ASC 606. There was a total of $5.1 million of noninterest income considered not in scope
of ASC 606.
On April 5, 2012, the JOBS Act was signed
into law. The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for qualifying public
companies. As an “emerging growth company” we may delay adoption of new or revised accounting pronouncements applicable
to public companies until such pronouncements are made applicable to private companies. We intend to take advantage of the benefits
of this extended transition period. Accordingly, our condensed consolidated financial statements may not be comparable to companies
that comply with such new or revised accounting standards.
NOTE 2 - ACCOUNTING STANDARDS RECENTLY
ISSUED OR ADOPTED
In May 2014, the Financial Accounting Standards
Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09,
Revenue from Contracts with Customers
(Topic 606). This ASU requires an entity to recognize revenue as performance obligations are met, in order to reflect the transfer
of promised goods or services to customers in an amount that reflects the consideration the entity is entitled to receive for those
goods or services. The following steps are applied in the updated guidance: (1) identify the contract(s) with a customer; (2) identify
the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance
obligations in the contract; and (5) recognize revenue when, or as, the entity satisfies a performance obligation. This ASU was
effective for interim and annual periods beginning after December 15, 2017. The Company adopted ASU No. 2014-09 on January 1, 2018.
The Company has analyzed its revenue sources of noninterest income to determine when the satisfaction of the performance obligation
occurs and the appropriate recognition of revenue. The adoption of ASU No. 2014-09 did not have a material impact on the Company’s
condensed consolidated financial statements.
In January 2016, the FASB issued ASU 2016-01,
Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities (Subtopic 825-10)
.
Changes made to the current measurement model primarily affect the accounting for equity securities and readily determinable fair
values, where changes in fair value will impact earnings instead of other comprehensive income. The accounting for other financial
instruments, such as loans, investments in debt securities, and financial liabilities is largely unchanged. The ASU also changes
the presentation and disclosure requirements for financial instruments including a requirement that public business entities use
exit price when measuring the fair value of financial instruments measured at amortized cost for disclosure purposes. The amendments
in this ASU were effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.
The Company has used the exit price notion in the fair value disclosure of financial instruments in Note 17 of the Selected Notes
to the Consolidated Financial Statements in this Form 10-Q. The adoption of ASU 2016-01 did not have a material impact on the Company’s
condensed consolidated financial statements.
BAYCOM CORP AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in thousands, except for per
share data)
In February 2016, the FASB issued ASU 2016-02,
Leases (Topic 842). The most significant change for lessees is the requirement under the new guidance to recognize right-of-use
assets and lease liabilities for all leases not considered short-term leases, which is generally defined as a lease term of less
than 12 months. This change will result in lessees recognizing right-of-use assets and lease liabilities for most leases currently
accounted for as operating leases under current lease accounting guidance. The amendments in this ASU are effective for interim
and annual periods beginning after December 15, 2018 for public business entities and one year later for all other entities. Early
application of the amendments in the ASU is permitted. In July 2018, the FASB issued ASU No. 2018-10, Codification Improvements
to Topic 842, Leases and ASU No. 2018-11, Leases (Topic 842): Targeted Improvements. ASU No. 2018-10 contains clarifications to
ASU 2016-02 by providing a new transition method in addition to the existing transition method contained in ASU No. 2016-02 to
allow entities to initially apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to
the opening balance of retained earnings in the period of adoption. This amendment has the same effective date as ASU 2016-02.
The effect of the adoption of these ASUs will depend on leases at time of adoption. Once adopted, we expect to report higher assets
and liabilities as a result of including right-of-use assets and lease liabilities related to certain banking offices and certain
equipment under noncancelable operating lease agreements, however, based on currents lease the adoption of these ASUs is not expected
to have a material impact on the Company’s consolidated financial statements.
In September 2016, the FASB issued ASU
No. 2016-13,
Measurement of Credit Losses on Financial Instruments (Topic 326)
. This ASU significantly changes how entities
will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through
net income. In issuing the standard, the FASB is responding to criticism that today’s guidance delays recognition of credit
losses. The standard will replace today’s “incurred loss” approach with an “expected loss” model.
The new model, referred to as the current expected credit loss (“CECL”) model, will apply to: (1) financial assets
subject to credit losses and measured at amortized cost, and (2) certain off-balance sheet credit exposures. This includes, but
is not limited to, loans, leases, held-to-maturity securities, loan commitments, and financial guarantees. The CECL model does
not apply to available-for-sale (“AFS”) debt securities. For AFS debt securities with unrealized losses, entities will
measure credit losses in a manner similar to what they do today, except that the losses will be recognized as allowances rather
than reductions in the amortized cost of the securities. As a result, entities will recognize improvements to estimated credit
losses immediately in earnings rather than as interest income over time, as they do today. The ASU also simplifies the accounting
model for purchased credit-impaired debt securities and loans. ASU 2016-13 also expands the disclosure requirements regarding an
entity’s assumptions, models, and methods for estimating the allowance for loan and lease losses. In addition, public business
entities will need to disclose the amortized cost balance for each class of financial asset by credit quality indicator, disaggregated
by the year of origination. ASU No. 2016-13 is effective for interim and annual reporting periods beginning after December 15,
2019 for SEC filers, one year later for non SEC filing public business entities and annual reporting periods beginning after December
15, 2020 for nonpublic business entities and interim periods within the reporting periods beginning after December 15, 2021. Early
adoption is permitted for interim and annual reporting periods beginning after December 15, 2018. Entities will apply the standard’s
provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the
guidance is effective (i.e., modified retrospective approach). The Company is reviewing the requirements of ASU 2016-13 and expects
to begin developing and implementing processes and procedures to ensure it is fully compliant with the amendments at the adoption
date. Upon adoption, the Company expects changes in the processes and procedures used to calculate the allowance for loan losses,
including changes in assumptions and estimates to consider expected credit losses over the life of the loan versus the current
accounting practice that utilizes the incurred loss model. The new guidance may result in an increase in the allowance for loan
losses which will also reflect the new requirement to include the nonaccretable principal differences on purchased credit-impaired
loans; however, the Company is still in the process of determining the magnitude of the change and its impact on the Company's consolidated financial statements.
BAYCOM CORP AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in thousands, except for per
share data)
In January 2017, the FASB issued ASU No.
2017-04,
Intangibles — Goodwill and Other (Topic 350)
: Simplifying the Accounting for Goodwill Impairment. This guidance
removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation, and goodwill impairment
will simply be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount
of goodwill. All other goodwill impairment guidance will remain largely unchanged. Entities will continue to have the option to
perform a qualitative assessment to determine if a quantitative impairment test is necessary. The amendments in this ASU are required
for public business entities and other entities that have goodwill reported in their financial statements and have not elected
the private company alternative for the subsequent measurement of goodwill. ASU No. 2017-04 is effective for interim and annual
reporting periods beginning after December 15, 2021 for public business entities who are not SEC filers and one year later for
all other entities. The adoption of ASU 2017-04 is not expected to have a material impact on the Company's consolidated financial
statements.
In February 2018, FASB issued ASU 2018-02,
Income Statement - Reporting Comprehensive Income (Topic 220)
. This ASU was issued to allow a reclassification from accumulated
other comprehensive income to retained earnings from stranded tax effects resulting from the revaluation of the net deferred tax
asset ("DTA") to the new corporate tax rate of 21% as a result of the Tax Cuts and Jobs Act of 2017 (“Tax Act”).
The ASU is effective for reporting periods beginning after December 15, 2018 with early adoption permitted. The Company elected
to early adopt this ASU and to reclassify $36,000 of stranded tax effects from accumulated other comprehensive income to retained
earnings in the fourth quarter of 2017.
In March 2018, FASB issued ASU No. 2018-05,
Income Taxes (Topic 740)
. This ASU was issued to provide guidance on the income tax accounting implications of the Tax Act
and allows for entities to report provisional amounts for specific income tax effects of the Tax Act for which the accounting under
Topic 740 was not yet complete, but a reasonable estimate could be determined. A measurement period of one-year is allowed to complete
the accounting effects under Topic 740 and revise any previous estimates reported. Any provisional amounts or subsequent adjustments
included in an entity’s financial statements during the measurement period should be included in income from continuing operations
as an adjustment to tax expense in the reporting period the amounts are determined. The Company adopted this ASU with the provisional
adjustments as reported in the consolidated financial statements as of December 31, 2017. As of September 30, 2018, the Company
did not incur any adjustments to the provisional recognition.
In June 2018, the FASB issued ASU NO. 2018-07,
Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.
This new
guidance simplifies the accounting for share-based payment transactions for acquiring goods and services from nonemployees, applying
some of the same requirements as employee share-based payment transactions. This ASU will not affect the accounting for share-based
payment awards to nonemployee directors, which will continue to be treated as employee share-based transactions under the current
standards. ASU 2018-07 is effective for fiscal years beginning after December 15, 2018, including interim period within those fiscal
years. Early adoption is permitted. As of September 30, 2018, the Company does not expect this ASU to have a material impact on
the Company’s consolidated financial statement, as it is not the Company’s practice to issue stock-based awards to
pay for goods and services from nonemployees, other than nonemployee directors.
BAYCOM CORP AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in thousands, except for per
share data)
August, 2018, the FASB issued ASU No. 2018-13,
Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement
.
This ASU contains some technical adjustments related to the fair value disclosure requirements of public companies. Included in
this ASU is the additional disclosure requirement of unrealized gains and losses for the period in recurring level 3 fair value
disclosures and the range and weighted average of significant unobservable inputs, among other technical changes. ASU 2018-13 is
effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is
permitted for any removed or modified disclosures. The adoption of ASU 2018-13 is not expected to have a material impact on the
Company’s consolidated financial statements.
NOTE 3 – ACQUISITION
On April 28, 2017, to increase its market
area, reduce net funding costs, and improve operating efficiency, the Company acquired all the assets and assumed all the liabilities
of First ULB Corp. (“FULB”) and its subsidiary, United Business Bank, FSB. The Company added eight locations including
seven full service branches and one loan production office. The branch offices are located in Oakland, San Jose, Sacramento, San
Francisco, Glendale, California and Albuquerque, New Mexico and Tukwila, Washington. The loan production office is located in Los
Angeles, California. The Company paid a total of $41.9 million comprised of cash of $19.0 million and 1,371,579 shares of its common
stock at a price of $16.66 per share in exchange for all of the common shares outstanding of FULB. Each share of FULB common stock
was converted into .9733 share of the Company’s common stock. As of the merger date, the fair value of FULB’s consolidated
assets totaled approximately $473.1 million and deposits totaled approximately $428.0 million. The fair value of estimates are
subject to change during the measurement period, after the acquisition date as additional information relative to the acquisition
date fair values becomes available. The merger transaction is accounted for using the acquisition method of accounting for business
combinations FASB ASC 805, Business Combinations. The net assets acquired and the liabilities assumed totaled approximately $32.8
million at the date of merger. The Company also assumed the Floating Rate Junior Subordinated Deferrable Interest Debentures issued
by FULB (the “Subordinated Debentures”) which are held by the First ULB Statutory Trust 1 (the “Trust”)
and the lease obligation related to each facility.
On
November 3, 2017, to enhance its market share in the state of Washington, the Company acquired Plaza Bank (“Plaza Bank”)
adding one branch office located in Seattle, Washington. The Company issued 626,381 shares of its common stock at a price of $19.10
per share in exchange for the all of the common shares outstanding of Plaza Bank. Each share of Plaza Bank’s common stock
outstanding was converted into .084795 share of the Company’s common stock. As of the merger date, the fair value of Plaza
Bank’s assets totaled approximately $75.8 million and deposits totaled approximately $54.2 million. The fair value of estimates
are subject to change during the measurement period, after the acquisition date as additional information relative to the acquisition
date fair values becomes available. The merger transaction is accounted for using the acquisition method of accounting for business
combinations FASB ASC 805, Business Combinations. The net assets acquired and the liabilities assumed totaled approximately $10.8
million at the date of merger. The Company assumed the lease obligation related to the branch facility.
The
acquisitions resulted in $10.4 million in goodwill which represents the excess of the total purchase price paid over the fair value
of the assets acquired, net of the fair values of liabilities assumed. Goodwill mainly reflects expected value created through
the combined operations of the acquisitions which we evaluate for impairment annually.
BAYCOM CORP AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in thousands, except for per
share data)
Pro Forma Results of Operations
The operating results of the Company for
the nine months ended September 30, 2018 and 2017 include the operating results of FULB and Plaza Bank since their respective acquisition
dates. The following table represents the net interest and net income, basic earnings per share and diluted earning per share
as if the acquisition with FULB and Plaza Bank were effective as of January 1, 2018 and 2017 for the respective year in which each
acquisition was closed. The unaudited pro forma information in the following table is intended for informational purposes
only and is not necessarily indicative of our future operating results that would have occurred had the mergers been completed
at the beginning of each respective period. No assumptions have been applied to the pro forma results of operation regarding
possible revenue enhancements, expense efficiencies or asset dispositions.
The contributions of the FULB and Plaza
Bank are fully accounted for in the Condensed Consolidated Statements of Income for the three and nine months ended September 30,
2018. The contribution of the acquired operations from FULB and Plaza Bank to our proforma results of operations for the nine months
ended September 30, 2018 and 2017 is as follows:
|
|
Actual
|
|
|
Proforma
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
2018
|
|
|
2017
|
|
Net interest income
|
|
$
|
38,029
|
|
|
$
|
33,851
|
|
Net income
|
|
|
11,875
|
|
|
|
7,689
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
1.30
|
|
|
$
|
1.23
|
|
Diluted earnings per share
|
|
$
|
1.30
|
|
|
$
|
1.23
|
|
The
core deposit intangible represents the estimated future benefits of acquired deposits and is recorded separately from the related
deposits. The transactions resulted in a core deposit intangible asset of $4.8 million from the acquisitions. The amortized core
deposit intangible expense during the first nine months of 2018 and 2017 totaled $868,000 and $573,000, respectively. The core
deposit intangible is amortized on an accelerated basis over an estimated ten-year life. The amortization is higher in the early
years and then declines in the later years. The asset is evaluated periodically for impairment. No impairment loss was recognized
as of September 30, 2018.
BAYCOM CORP AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in thousands, except for per
share data)
Acquisition-related
expenses are recognized as incurred and continue until all systems have been converted and operational functions become fully integrated.
We incurred acquisition-related expenses in the consolidated statements of income in 2017 as follows:
|
|
Period Recognized
|
|
|
|
|
|
|
September 30, 2017
|
|
|
December 31, 2017
|
|
|
|
|
|
|
FULB
|
|
|
Plaza
|
|
|
Total
|
|
Acquisition related expenses in 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Professional fees
|
|
$
|
349
|
|
|
$
|
225
|
|
|
$
|
574
|
|
Data processing
|
|
|
1,586
|
|
|
|
855
|
|
|
|
2,441
|
|
Salaries and employee benefits
|
|
|
212
|
|
|
|
75
|
|
|
|
287
|
|
Other
|
|
|
120
|
|
|
|
54
|
|
|
|
174
|
|
Total year-to-date
|
|
$
|
2,267
|
|
|
$
|
1,209
|
|
|
$
|
3,476
|
|
Pending Acquisition
On August 10, 2018, the Company entered
into a definitive agreement (the "Agreement") with Bethlehem Financial Corporation, headquartered in Belin, New Mexico,
pursuant to which BFC will be merged with and into BayCom Corp, and immediately thereafter BFC’s bank subsidiary, MyBank,
will be merged with and into United Business Bank. MyBank serves central New Mexico through five branches operating in Belen, Rio
Communities, Los Lunas, Albuquerque, and Mountainair, New Mexico. Under the terms of the Agreement, BFC shareholders will receive
$62.00 in cash for each share of BFC common stock or approximately $23.5 million in aggregate.
In the event the Agreement is terminated
under certain specified circumstances in connection with a competing transaction, BFC will be required to pay the Company a termination
fee of $1.5 million in cash. The proposed transaction has been approved by regulatory authorities and by the shareholders of BFC.
It is expected to be completed on November 30, 2018, subject to the remaining customary closing conditions.
At September 30, 2018, BFC reported
total assets of $157.2 million, total loans of $77.2 million and total deposits of $136.3 million.
The foregoing description
of the Agreement does not purport to be complete and is qualified in its entirety by reference to the Agreement, attached as Exhibit
2.1 to BayCom Corp’s Current Report on Form 8-K which was filed with the SEC on August 13, 2018.
BAYCOM CORP AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in thousands, except for per
share data)
NOTE 4 – INVESTMENTS AVAILABLE
FOR SALE
The amortized cost, gross unrealized gains
and losses and estimated fair values of securities at the dates indicated are summarized as follows:
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
Amortized
|
|
|
unrealized
|
|
|
unrealized
|
|
|
Estimated
|
|
|
|
cost
|
|
|
gains
|
|
|
losses
|
|
|
fair value
|
|
September 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal securities
|
|
$
|
16,235
|
|
|
$
|
23
|
|
|
$
|
(310
|
)
|
|
$
|
15,948
|
|
Mortgage-backed securities
|
|
|
31,649
|
|
|
|
25
|
|
|
|
(394
|
)
|
|
|
31,280
|
|
Collateralized mortgage obligations
|
|
|
928
|
|
|
|
-
|
|
|
|
(20
|
)
|
|
|
908
|
|
Corporate bonds
|
|
|
7,014
|
|
|
|
-
|
|
|
|
(21
|
)
|
|
|
6,993
|
|
U.S. Government Agencies
|
|
|
10,070
|
|
|
|
-
|
|
|
|
(36
|
)
|
|
|
10,034
|
|
SBA securities
|
|
|
4,589
|
|
|
|
-
|
|
|
|
(70
|
)
|
|
|
4,519
|
|
Total
|
|
$
|
70,485
|
|
|
$
|
48
|
|
|
$
|
(851
|
)
|
|
$
|
69,682
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
Amortized
|
|
|
unrealized
|
|
|
unrealized
|
|
|
Estimated
|
|
|
|
cost
|
|
|
gains
|
|
|
losses
|
|
|
fair value
|
|
December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal securities
|
|
$
|
15,910
|
|
|
$
|
182
|
|
|
$
|
(45
|
)
|
|
$
|
16,047
|
|
Mortgage-backed securities
|
|
|
9,621
|
|
|
|
143
|
|
|
|
(24
|
)
|
|
|
9,740
|
|
Collateralized mortgage obligations
|
|
|
1,758
|
|
|
|
1
|
|
|
|
(9
|
)
|
|
|
1,750
|
|
Corporate bonds
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
U.S. Government Agencies
|
|
|
6,984
|
|
|
|
-
|
|
|
|
(13
|
)
|
|
|
6,971
|
|
SBA securities
|
|
|
5,929
|
|
|
|
78
|
|
|
|
(10
|
)
|
|
|
5,997
|
|
Total
|
|
$
|
40,202
|
|
|
$
|
404
|
|
|
$
|
(101
|
)
|
|
$
|
40,505
|
|
The gross unrealized losses and the estimated
fair value for securities available-for-sale aggregated by the length of time that individual securities have been in a continuous
unrealized loss position was at September 30, 2018 follows:
|
|
Less than 12 months
|
|
|
12 months or more
|
|
|
Total
|
|
|
|
Estimated
|
|
|
Unrealized
|
|
|
Estimated
|
|
|
Unrealized
|
|
|
Estimated
|
|
|
Unrealized
|
|
|
|
Fair Value
|
|
|
Loss
|
|
|
Fair Value
|
|
|
Loss
|
|
|
Fair Value
|
|
|
Loss
|
|
Municipal securities
|
|
$
|
10,857
|
|
|
$
|
(231
|
)
|
|
$
|
2,855
|
|
|
$
|
(79
|
)
|
|
$
|
13,712
|
|
|
$
|
(310
|
)
|
Mortgage-backed securities
|
|
|
29,290
|
|
|
|
(375
|
)
|
|
|
988
|
|
|
|
(19
|
)
|
|
|
30,278
|
|
|
|
(394
|
)
|
Collateralized mortgage obligations
|
|
|
405
|
|
|
|
(6
|
)
|
|
|
503
|
|
|
|
(14
|
)
|
|
|
908
|
|
|
|
(20
|
)
|
Corporate Bonds
|
|
|
6,993
|
|
|
|
(21
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
6,993
|
|
|
|
(21
|
)
|
U.S. Government Agencies
|
|
|
9,289
|
|
|
|
(30
|
)
|
|
|
745
|
|
|
|
(6
|
)
|
|
|
10,034
|
|
|
|
(36
|
)
|
SBA securities
|
|
|
3,694
|
|
|
|
(67
|
)
|
|
|
825
|
|
|
|
(3
|
)#
|
|
|
4,519
|
|
|
|
(70
|
)
|
Total
|
|
$
|
60,528
|
|
|
$
|
(730
|
)
|
|
$
|
5,916
|
|
|
$
|
(121
|
)
|
|
$
|
66,444
|
|
|
$
|
(851
|
)
|
BAYCOM CORP AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in thousands, except for per
share data)
The gross unrealized losses and the fair
value for securities available-for-sale and held-to-maturity aggregated by the length of time that individual securities have been
in a continuous unrealized loss position was at December 31, 2017 follows:
|
|
Less than 12 months
|
|
|
12 months or more
|
|
|
Total
|
|
|
|
Estimated
|
|
|
Unrealized
|
|
|
Estimated
|
|
|
Unrealized
|
|
|
Estimated
|
|
|
Unrealized
|
|
|
|
Fair Value
|
|
|
Loss
|
|
|
Fair Value
|
|
|
Loss
|
|
|
Fair Value
|
|
|
Loss
|
|
Municipal securities
|
|
$
|
4,011
|
|
|
$
|
(39
|
)
|
|
$
|
267
|
|
|
$
|
(6
|
)
|
|
$
|
4,278
|
|
|
$
|
(45
|
)
|
Mortgage-backed securities
|
|
|
4,075
|
|
|
|
(24
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
4,075
|
|
|
|
(24
|
)
|
Collateralized mortgage obligations
|
|
|
1,201
|
|
|
|
(9
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
1,201
|
|
|
|
(9
|
)
|
Corporate Bonds
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
U.S. Government Agencies
|
|
|
6,981
|
|
|
|
(13
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
6,981
|
|
|
|
(13
|
)
|
SBA securities
|
|
|
1,245
|
|
|
|
(10
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
1,245
|
|
|
|
(10
|
)
|
Total
|
|
$
|
17,513
|
|
|
$
|
(95
|
)
|
|
$
|
267
|
|
|
$
|
(6
|
)
|
|
$
|
17,780
|
|
|
$
|
(101
|
)
|
At September 30, 2018, there were 20 securities
in an unrealized loss position for greater than twelve consecutive months. At the same time, there were 87 securities in an unrealized
loss position for less than twelve consecutive months. At December 31, 2017, there was one security in an unrealized loss position
for greater than twelve consecutive months, and there were 45 securities in an unrealized loss position for less than twelve consecutive
months. Management periodically evaluates each security in an unrealized loss position to determine if the impairment is temporary
or other-than-temporary. The unrealized losses are due solely to interest rate changes and the Company does not intend to sell
nor expects it will be required to sell investment securities identified with unrealized losses prior to the earliest of forecasted
recovery or the maturity of the underlying investment security. Management has determined that no investment security was other-than-temporarily
impaired at September 30, 2018 and December 31, 2017.
The amortized cost and estimated fair value
of available-for-sale securities at the dates indicated by contractual maturity are shown below. Expected maturities may differ
from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment
penalties.
|
|
September 30, 2018
|
|
|
December 31, 2017
|
|
|
|
Amortized
|
|
|
Estimated
|
|
|
Amortized
|
|
|
Estimated
|
|
|
|
Cost
|
|
|
Fair Value
|
|
|
Cost
|
|
|
Fair Value
|
|
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due in one year or less
|
|
$
|
8,172
|
|
|
$
|
8,146
|
|
|
$
|
5,248
|
|
|
$
|
5,243
|
|
Due after one through five years
|
|
|
12,510
|
|
|
|
12,416
|
|
|
|
4,987
|
|
|
|
4,959
|
|
Due after five years through ten years
|
|
|
19,561
|
|
|
|
19,278
|
|
|
|
14,619
|
|
|
|
14,737
|
|
Due after ten years
|
|
|
30,242
|
|
|
|
29,842
|
|
|
|
15,348
|
|
|
|
15,566
|
|
Total
|
|
$
|
70,485
|
|
|
$
|
69,682
|
|
|
$
|
40,202
|
|
|
$
|
40,505
|
|
For the nine months ended September 30,
2018, pretax recognized gains of $3,000 were recorded and no losses were recorded. No realized gains or losses were recorded for
the nine months ended September 30, 2017.
BAYCOM CORP AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in thousands, except for per
share data)
NOTE 5 - LOANS
Loans are summarized as follows at the
dates indicated:
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Commercial and industrial
|
|
$
|
113,229
|
|
|
$
|
113,801
|
|
Construction and land
|
|
|
33,038
|
|
|
|
22,720
|
|
Commercial real estate
|
|
|
671,515
|
|
|
|
669,150
|
|
Residential
|
|
|
83,838
|
|
|
|
84,781
|
|
Consumer
|
|
|
630
|
|
|
|
1,096
|
|
Total loans
|
|
|
902,250
|
|
|
|
891,548
|
|
Net deferred loan fees
|
|
|
(381
|
)
|
|
|
(469
|
)
|
Allowance for loan losses
|
|
|
(5,500
|
)
|
|
|
(4,215
|
)
|
Net loans
|
|
$
|
896,369
|
|
|
$
|
886,864
|
|
BAYCOM CORP AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in thousands, except for per
share data)
As of and for the periods noted, the Company’s
total impaired loans including non-accrual loans, accruing TDR loans and accreting purchased credit impaired (“PCI”)
loans that have experienced post-acquisition declines in cash flows expected to be collected are as follows:
|
|
Commercial
and
industrial
|
|
|
Construction
and land
|
|
|
Commercial
real estate
|
|
|
Residential
|
|
|
Consumer
|
|
|
Total
|
|
September 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded investment in impaired loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With no specific allowance recorded
|
|
$
|
506
|
|
|
$
|
-
|
|
|
$
|
2,008
|
|
|
$
|
127
|
|
|
$
|
-
|
|
|
$
|
2,641
|
|
With a specific allowance
recorded
|
|
|
2,565
|
|
|
|
-
|
|
|
|
773
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,338
|
|
Total recorded investment
in impaired loans
|
|
$
|
3,071
|
|
|
$
|
-
|
|
|
$
|
2,781
|
|
|
$
|
127
|
|
|
$
|
-
|
|
|
$
|
5,979
|
|
Specific allowance on impaired loans
|
|
|
685
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
685
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded investment in impaired loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With no specific allowance recorded
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,120
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,120
|
|
With a specific allowance
recorded
|
|
|
13
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
13
|
|
Total recorded investment
in impaired loans
|
|
$
|
13
|
|
|
$
|
-
|
|
|
$
|
1,120
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,133
|
|
Specific allowance on impaired loans
|
|
|
13
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ending September 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average recorded investment in impaired loans
|
|
|
1,387
|
|
|
|
-
|
|
|
|
1,829
|
|
|
|
192
|
|
|
|
-
|
|
|
|
3,408
|
|
Interest recognized
|
|
|
5
|
|
|
|
-
|
|
|
|
41
|
|
|
|
-
|
|
|
|
-
|
|
|
|
46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ending September 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average recorded investment in impaired loans
|
|
|
1,261
|
|
|
|
-
|
|
|
|
1,508
|
|
|
|
300
|
|
|
|
-
|
|
|
|
3,069
|
|
Interest recognized
|
|
|
5
|
|
|
|
-
|
|
|
|
47
|
|
|
|
-
|
|
|
|
-
|
|
|
|
52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ending September 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average recorded investment in impaired loans
|
|
|
121
|
|
|
|
-
|
|
|
|
1,033
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,154
|
|
Interest recognized
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ending September 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average recorded investment in impaired loans
|
|
|
305
|
|
|
|
-
|
|
|
|
793
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,098
|
|
Interest recognized
|
|
|
-
|
|
|
|
-
|
|
|
|
58
|
|
|
|
-
|
|
|
|
-
|
|
|
|
58
|
|
Impaired loans on accrual are loans that
have been restructured and are performing under modified loan agreements, and principal and interest is determined to be collectible.
Nonaccrual loans are loans where principal and interest have been determined to not be fully collectible.
The following table presents nonaccrual
loans at the dates indicated:
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Commercial and industrial
|
|
$
|
3,071
|
|
|
$
|
13
|
|
Construction and land
|
|
|
-
|
|
|
|
-
|
|
Commercial real estate
|
|
|
2,008
|
|
|
|
166
|
|
Residential
|
|
|
127
|
|
|
|
-
|
|
Consumer
|
|
|
-
|
|
|
|
-
|
|
Total nonaccrual loans
|
|
$
|
5,206
|
|
|
$
|
179
|
|
The government guaranteed portion of nonaccrual loans was $2.3
million as of September 30, 2018. There was no government guaranteed portion of nonaccrual loans as of December 31, 2017.
BAYCOM CORP AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in thousands, except for per
share data)
The following table presents loans by class
modified as troubled debt restructuring (“TDR”) including any subsequent defaults at the dates indicated:
September 30, 2018
|
|
Number of
Loans
|
|
|
Rate
Modification
|
|
|
Term
Modification
|
|
|
Interest Only
Modification
|
|
|
Rate & Term
Modification
|
|
|
Total
|
|
Troubled Debt Restructurings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
|
1
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
10
|
|
|
$
|
10
|
|
Construction and land
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial real estate
|
|
|
1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
773
|
|
|
|
773
|
|
Residential
|
|
|
1
|
|
|
|
-
|
|
|
|
127
|
|
|
|
-
|
|
|
|
-
|
|
|
|
127
|
|
Consumer
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
|
3
|
|
|
$
|
-
|
|
|
$
|
127
|
|
|
$
|
-
|
|
|
$
|
783
|
|
|
$
|
910
|
|
December 31, 2017
|
|
Number of
Loans
|
|
|
Rate
Modification
|
|
|
Term
Modification
|
|
|
Interest Only
Modification
|
|
|
Rate & Term
Modification
|
|
|
Total
|
|
Troubled Debt Restructurings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
|
1
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
13
|
|
|
$
|
13
|
|
Construction and land
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial real estate
|
|
|
3
|
|
|
|
-
|
|
|
|
238
|
|
|
|
-
|
|
|
|
794
|
|
|
|
1,032
|
|
Residential
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Consumer
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
|
4
|
|
|
$
|
-
|
|
|
$
|
238
|
|
|
$
|
-
|
|
|
$
|
807
|
|
|
$
|
1,045
|
|
There were no commitments for
additional funding of TDR loans at September 30, 2018. There was one loan that was modified as a TDR during the nine months
ended September 30, 2018. There were no loans modified within the previous twelve months for which there was a payment
default.
BAYCOM CORP AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in thousands, except for per
share data)
Risk rating system
Each loan is assigned a risk grade based
on its characteristics. Loans with low to average credit risk are assigned a lower risk grade than those with higher credit risk
as determined by the individual loan characteristics.
The Company’s “Pass”
loans includes loans with acceptable business or individual credit risk where the borrower’s operations, cash flow or financial
condition provides evidence of low to average levels of risk.
A “Special Mention” asset has
potential weaknesses that deserve close attention. If left uncorrected, these potential weaknesses may result in a deterioration
of the repayment prospects for the asset or in the Company’s credit position at some future date. Special Mention assets
are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification. A Special Mention
rating should be a temporary rating, pending the occurrence of an event that would cause the risk rating to either improve or to
be downgraded.
A “Substandard” asset is inadequately
protected by the current net worth and paying capacity of the obligor or of the collateral pledged. Assets so classified must have
a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. Assets are characterized by the distinct possibility
that the Company will sustain some loss if the deficiencies are not corrected. The potential loss does not have to be recognizable
in an individual credit for that credit to be risk rated substandard.
Any asset classified “Doubtful”
has all the weaknesses inherent in one classified substandard with the added characteristic that the weaknesses make collection
or liquidation in full, on the basis of currently existing facts, conditions, and value, highly questionable and improbable. Doubtful
assets have a high probability of loss, yet certain important and reasonably specific pending factors may work toward the strengthening
of the asset.
Losses are recognized as charges to the
allowance when the loan or portion of the loan is considered uncollectible or at the time of foreclosure. Recoveries on loans receivable
previously charged off are credited to the allowance for loan losses.
BAYCOM CORP AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in thousands, except for per
share data)
The following tables represent the internally assigned grade
by class of loans at the dates indicated:
|
|
|
|
|
Special
|
|
|
|
|
|
|
|
|
|
|
September 30, 2018
|
|
Pass
|
|
|
Mention
|
|
|
Substandard
|
|
|
Doubtful
|
|
|
Total
|
|
Commercial and industrial
|
|
$
|
109,316
|
|
|
$
|
244
|
|
|
$
|
3,669
|
|
|
$
|
-
|
|
|
$
|
113,229
|
|
Construction and land
|
|
|
30,106
|
|
|
|
120
|
|
|
|
2,812
|
|
|
|
-
|
|
|
|
33,038
|
|
Commercial real estate
|
|
|
661,390
|
|
|
|
4,502
|
|
|
|
5,623
|
|
|
|
-
|
|
|
|
671,515
|
|
Residential
|
|
|
83,563
|
|
|
|
148
|
|
|
|
127
|
|
|
|
-
|
|
|
|
83,838
|
|
Consumer
|
|
|
630
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
630
|
|
Totals
|
|
$
|
885,005
|
|
|
$
|
5,014
|
|
|
$
|
12,231
|
|
|
$
|
-
|
|
|
$
|
902,250
|
|
|
|
|
|
|
Special
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
Pass
|
|
|
Mention
|
|
|
Substandard
|
|
|
Doubtful
|
|
|
Total
|
|
Commercial and industrial
|
|
$
|
112,078
|
|
|
$
|
807
|
|
|
$
|
916
|
|
|
$
|
-
|
|
|
$
|
113,801
|
|
Construction and land
|
|
|
19,833
|
|
|
|
-
|
|
|
|
2,887
|
|
|
|
-
|
|
|
|
22,720
|
|
Commercial real estate
|
|
|
661,878
|
|
|
|
4,058
|
|
|
|
3,214
|
|
|
|
-
|
|
|
|
669,150
|
|
Residential
|
|
|
84,781
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
84,781
|
|
Consumer
|
|
|
1,096
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,096
|
|
Total
|
|
$
|
879,666
|
|
|
$
|
4,865
|
|
|
$
|
7,017
|
|
|
$
|
-
|
|
|
$
|
891,548
|
|
The following tables provide an aging of
the Company's loan receivable at the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded
|
|
|
|
|
|
|
|
|
|
90 Days
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment >
|
|
|
|
30-59 Days
|
|
|
60-89 Days
|
|
|
or More
|
|
|
Total Past
|
|
|
|
|
|
|
|
|
Total Loans
|
|
|
90 Days and
|
|
|
|
Past
Due
|
|
|
Past
Due
|
|
|
Past
Due
|
|
|
Due
|
|
|
Current
|
|
|
PCI
Loans
|
|
|
Receivable
|
|
|
Accruing
|
|
September 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
$
|
195
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
195
|
|
|
$
|
113,032
|
|
|
$
|
2
|
|
|
$
|
113,229
|
|
|
$
|
-
|
|
Construction and land
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
33,038
|
|
|
|
-
|
|
|
|
33,038
|
|
|
|
-
|
|
Commercial real estate
|
|
|
316
|
|
|
|
645
|
|
|
|
1,424
|
|
|
|
2,385
|
|
|
|
658,578
|
|
|
|
10,552
|
|
|
|
671,515
|
|
|
|
1,424
|
|
Residential
|
|
|
296
|
|
|
|
-
|
|
|
|
-
|
|
|
|
296
|
|
|
|
82,163
|
|
|
|
1,379
|
|
|
|
83,838
|
|
|
|
-
|
|
Consumer
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
630
|
|
|
|
-
|
|
|
|
630
|
|
|
|
-
|
|
Total
|
|
$
|
807
|
|
|
$
|
645
|
|
|
$
|
1,424
|
|
|
$
|
2,876
|
|
|
$
|
887,441
|
|
|
$
|
11,933
|
|
|
$
|
902,250
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded
|
|
|
|
|
|
|
|
|
|
90 Days
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment >
|
|
|
|
30-59 Days
|
|
|
60-89 Days
|
|
|
or More
|
|
|
Total Past
|
|
|
|
|
|
|
|
|
Total Loans
|
|
|
90 Days and
|
|
|
|
Past
Due
|
|
|
Past
Due
|
|
|
Past
Due
|
|
|
Due
|
|
|
Current
|
|
|
PCI
Loans
|
|
|
Receivable
|
|
|
Accruing
|
|
December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
$
|
96
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
96
|
|
|
$
|
113,702
|
|
|
$
|
3
|
|
|
$
|
113,801
|
|
|
$
|
-
|
|
Construction and land
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
22,720
|
|
|
|
-
|
|
|
|
22,720
|
|
|
|
-
|
|
Commercial real estate
|
|
|
1,446
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,446
|
|
|
|
654,687
|
|
|
|
13,017
|
|
|
|
669,150
|
|
|
|
-
|
|
Residential
|
|
|
349
|
|
|
|
-
|
|
|
|
-
|
|
|
|
349
|
|
|
|
83,137
|
|
|
|
1,295
|
|
|
|
84,781
|
|
|
|
-
|
|
Consumer
|
|
|
3
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3
|
|
|
|
1,093
|
|
|
|
-
|
|
|
|
1,096
|
|
|
|
-
|
|
Total
|
|
$
|
1,894
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,894
|
|
|
$
|
875,339
|
|
|
$
|
14,315
|
|
|
$
|
891,548
|
|
|
$
|
-
|
|
BAYCOM CORP AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in thousands, except for per
share data)
Purchase Credit Impaired Loans (“PCI”)
As part of acquisitions, the Company has
purchased loans, some of which have shown evidence of credit deterioration since origination and it is probable at the acquisition
that all contractually requirement payments would not be collected.
The carrying amount and unpaid balance
of PCI loans at the dates indicated:
|
|
September 30, 2018
|
|
|
December 31, 2017
|
|
|
|
Unpaid
|
|
|
|
|
|
Unpaid
|
|
|
|
|
|
|
Principal
|
|
|
Carrying
|
|
|
Principal
|
|
|
Carrying
|
|
|
|
Balance
|
|
|
Value
|
|
|
Balance
|
|
|
Value
|
|
Commercial and industrial
|
|
$
|
107
|
|
|
$
|
2
|
|
|
$
|
149
|
|
|
$
|
2
|
|
Construction and land
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial real estate
|
|
|
12,279
|
|
|
|
10,552
|
|
|
|
15,536
|
|
|
|
13,018
|
|
Residential
|
|
|
1,774
|
|
|
|
1,379
|
|
|
|
1,732
|
|
|
|
1,295
|
|
Consumer
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total purchased credit impaired loans
|
|
$
|
14,160
|
|
|
$
|
11,933
|
|
|
$
|
17,417
|
|
|
$
|
14,315
|
|
BAYCOM CORP AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in thousands, except for per
share data)
NOTE 6 – ALLOWANCE FOR LOAN LOSSES
The following tables summarize the Company’s
allowance for loan losses and loan balances individually and collectively evaluated for impairment as of or for the periods ending
as indicated:
|
|
Commercial
|
|
|
Construction
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ending September
30, 2018
|
|
and
Industrial
|
|
|
and
Land
|
|
|
Real
Estate
|
|
|
Residential
|
|
|
Consumer
|
|
|
Unallocated
|
|
|
Total
|
|
Allowance for loan losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
1,005
|
|
|
$
|
251
|
|
|
$
|
2,782
|
|
|
$
|
160
|
|
|
$
|
-
|
|
|
$
|
402
|
|
|
$
|
4,600
|
|
Charge-offs
|
|
|
(186
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(186
|
)
|
Recoveries
|
|
|
5
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5
|
|
Provision (reclassification)
for loan losses
|
|
|
672
|
|
|
|
25
|
|
|
|
245
|
|
|
|
41
|
|
|
|
2
|
|
|
|
96
|
|
|
|
1,081
|
|
Ending balance
|
|
$
|
1,496
|
|
|
$
|
276
|
|
|
$
|
3,027
|
|
|
$
|
201
|
|
|
$
|
2
|
|
|
$
|
498
|
|
|
$
|
5,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses related to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment
|
|
$
|
685
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
685
|
|
Loans collectively evaluated for impairment
|
|
|
811
|
|
|
|
276
|
|
|
|
3,027
|
|
|
|
201
|
|
|
|
2
|
|
|
|
498
|
|
|
|
4,815
|
|
PCI loans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
Commercial
|
|
|
Construction
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ending September
30, 2018
|
|
and
Industrial
|
|
|
and
Land
|
|
|
Real
Estate
|
|
|
Residential
|
|
|
Consumer
|
|
|
Unallocated
|
|
|
Total
|
|
Allowance for loan losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
841
|
|
|
$
|
199
|
|
|
$
|
2,695
|
|
|
$
|
150
|
|
|
$
|
3
|
|
|
$
|
327
|
|
|
$
|
4,215
|
|
Charge-offs
|
|
|
(437
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(437
|
)
|
Recoveries
|
|
|
144
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
144
|
|
Provision (reclassification)
for loan losses
|
|
|
948
|
|
|
|
77
|
|
|
|
332
|
|
|
|
51
|
|
|
|
(1
|
)
|
|
|
171
|
|
|
|
1,578
|
|
Ending balance
|
|
$
|
1,496
|
|
|
$
|
276
|
|
|
$
|
3,027
|
|
|
$
|
201
|
|
|
$
|
2
|
|
|
$
|
498
|
|
|
$
|
5,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses related to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment
|
|
$
|
685
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
685
|
|
Loans collectively evaluated for impairment
|
|
|
811
|
|
|
|
276
|
|
|
|
3,027
|
|
|
|
201
|
|
|
|
2
|
|
|
|
498
|
|
|
|
4,815
|
|
PCI loans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
BAYCOM CORP AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in thousands, except for per
share data)
The following tables summarize the Company’s
allowance for loan losses and loan balances individually and collectively evaluated for impairment as of or for the periods ending
as indicated:
|
|
Commercial
|
|
|
Construction
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ending September
30, 2017
|
|
and
Industrial
|
|
|
and
Land
|
|
|
Real
Estate
|
|
|
Residential
|
|
|
Consumer
|
|
|
Unallocated
|
|
|
Total
|
|
Allowance for loan losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
1,045
|
|
|
$
|
285
|
|
|
$
|
2,553
|
|
|
$
|
152
|
|
|
$
|
2
|
|
|
$
|
38
|
|
|
$
|
4,075
|
|
Charge-offs
|
|
|
(63
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1
|
)
|
|
|
-
|
|
|
|
(64
|
)
|
Recoveries
|
|
|
6
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6
|
|
Provision (reclassification)
for loan losses
|
|
|
(68
|
)
|
|
|
(110
|
)
|
|
|
50
|
|
|
|
(18
|
)
|
|
|
2
|
|
|
|
202
|
|
|
|
58
|
|
Ending balance
|
|
$
|
920
|
|
|
$
|
175
|
|
|
$
|
2,603
|
|
|
$
|
134
|
|
|
$
|
3
|
|
|
$
|
240
|
|
|
$
|
4,075
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses related to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment
|
|
$
|
13
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
13
|
|
Loans collectively evaluated for impairment
|
|
|
907
|
|
|
|
175
|
|
|
|
2,603
|
|
|
|
134
|
|
|
|
3
|
|
|
|
240
|
|
|
|
4,062
|
|
PCI loans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
Commercial
|
|
|
Construction
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ending September
30, 2017
|
|
and
Industrial
|
|
|
and
Land
|
|
|
Real
Estate
|
|
|
Residential
|
|
|
Consumer
|
|
|
Unallocated
|
|
|
Total
|
|
Allowance for loan losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
1,011
|
|
|
$
|
287
|
|
|
$
|
2,105
|
|
|
$
|
151
|
|
|
$
|
4
|
|
|
$
|
217
|
|
|
$
|
3,775
|
|
Charge-offs
|
|
|
(63
|
)
|
|
|
-
|
|
|
|
(3
|
)
|
|
|
-
|
|
|
|
(1
|
)
|
|
|
-
|
|
|
|
(67
|
)
|
Recoveries
|
|
|
22
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
22
|
|
Provision (reclassification)
for loan losses
|
|
|
(50
|
)
|
|
|
(112
|
)
|
|
|
501
|
|
|
|
(17
|
)
|
|
|
-
|
|
|
|
23
|
|
|
|
345
|
|
Ending balance
|
|
$
|
920
|
|
|
$
|
175
|
|
|
$
|
2,603
|
|
|
$
|
134
|
|
|
$
|
3
|
|
|
$
|
240
|
|
|
$
|
4,075
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses related to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment
|
|
$
|
13
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
13
|
|
Loans collectively evaluated for impairment
|
|
|
907
|
|
|
|
175
|
|
|
|
2,603
|
|
|
|
134
|
|
|
|
3
|
|
|
|
240
|
|
|
|
4,062
|
|
PCI loans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
At September 30, 2018 a loan totaling $1.4
million was 90 days or more past due and accruing interest. This loan is well secured and in the process of being renewed. At December
31, 2017 there were no loans that were 90 days or more past due where interest was still accruing.
BAYCOM CORP AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in thousands, except for per
share data)
NOTE 7 – PREMISES AND EQUIPMENT
Premises and equipment consisted of the
following at the dates indicated:
|
|
September 30,
2018
|
|
|
December 31,
2017
|
|
|
|
|
|
|
|
|
Premises owned
|
|
$
|
7,286
|
|
|
$
|
7,276
|
|
Write-down on premises owned
|
|
|
(600
|
)
|
|
|
-
|
|
Net premises owned
|
|
|
6,686
|
|
|
|
7,276
|
|
Leasehold improvements
|
|
|
1,600
|
|
|
|
1,271
|
|
Furniture, fixtures and equipment
|
|
|
3,212
|
|
|
|
2,939
|
|
Less accumulated depreciation and amortization
|
|
|
(3,754
|
)
|
|
|
(3,087
|
)
|
Total premises and equipment, net
|
|
$
|
7,744
|
|
|
$
|
8,399
|
|
Depreciation and amortization included
in occupancy and equipment expense for the three and nine months ended September 30, 2018 was $227,000 and $693,000 compared to $225,000
and $532,000 for the three and nine months ended September 30, 2017, respectively.
The Company leases its branches and administrative
offices under noncanceable operating leases. The leases expire on various dates through 2025. All leases have an option to renew
with renewal periods between three to twelve years. Future minimum lease payments as of September 30, 2018 are as follows:
Year ending December 31,
|
|
|
|
2018
|
|
$
|
557
|
|
2019
|
|
|
2,177
|
|
2020
|
|
|
1,898
|
|
2021
|
|
|
1,575
|
|
2022
|
|
|
1,442
|
|
Thereafter
|
|
|
1,424
|
|
Total
|
|
$
|
9,073
|
|
BAYCOM CORP AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in thousands, except for per
share data)
NOTE 8 - CASH SURRENDER VALUE OF LIFE INSURANCE
Activity on the Bank owned life insurance policies is as follows
for the periods indicated:
|
|
September 30,
2018
|
|
|
December 31,
2017
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
17,132
|
|
|
$
|
6,470
|
|
Increase in cash value of life insurance
|
|
|
231
|
|
|
|
232
|
|
Additional policies purchased
|
|
|
-
|
|
|
|
10,430
|
|
Death benefit carrying value payout
|
|
|
(777
|
)
|
|
|
-
|
|
Ending balance
|
|
$
|
16,586
|
|
|
$
|
17,132
|
|
End of period death benefit
|
|
$
|
37,105
|
|
|
$
|
38,581
|
|
Number of policies owned
|
|
|
42
|
|
|
|
44
|
|
Insurance companies used
|
|
|
5
|
|
|
|
5
|
|
Current and former directors and officers covered
|
|
|
25
|
|
|
|
26
|
|
The Bank owned life insurance policies
are recorded on the Company’s financial statements at their reported cash (surrender) values. As a result of current tax
law and the nature of these policies, the Company records any increase, less any applicable surrender charges, in cash value of
these policies as nontaxable noninterest income. If the Company decided to surrender any of the policies prior the death of
the insured, such surrender may result in a tax expense related to the life-to-date cumulative increase in the cash surrender value
of the policy. If the Company retains such policies until the death of the insured, the Company would receive nontaxable proceeds
from the insurance company equal to the death benefit of the policies.
NOTE 9 – GOODWILL AND INTANGIBLE
ASSETS
Goodwill
The goodwill at September 30, 2018 and
December 31, 2017 was $10.4 million.
Impairment exists when a reporting unit’s
carrying value of goodwill exceeds its fair value. As of September 30, 2018 and September 30, 2017, the Company had positive equity
and the Company elected to perform a qualitative assessment to determine if it was more likely than not that the fair value of
the Company exceeded its carrying value, including goodwill. The quantitative assessment indicated it was more than likely than
not that its fair value exceeded its carrying value, resulting in no impairment.
BAYCOM CORP AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in thousands, except for per
share data)
Core Deposit Intangible
Acquired intangible assets at the dates
indicated were as follows:
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Beginning core deposit intangible
|
|
$
|
4,772
|
|
|
$
|
802
|
|
Additions
|
|
|
-
|
|
|
|
4,820
|
|
Less accumulated amortization
|
|
|
(868
|
)
|
|
|
(850
|
)
|
Ending net core deposit intangible
|
|
$
|
3,904
|
|
|
$
|
4,772
|
|
The Company recorded total amortization
expense of $868,000 for the nine months ended September 30, 2018, $850,000 for the year ended December 31, 2017 and $573,000 for
the nine months ended September 30, 2017. Estimated annual amortization is as follows as of September 30, 2018:
Year ending December 31,
|
|
|
|
2018
|
|
$
|
289
|
|
2019
|
|
|
1,145
|
|
2020
|
|
|
991
|
|
2021
|
|
|
977
|
|
2022
|
|
|
325
|
|
Thereafter
|
|
|
177
|
|
Total
|
|
$
|
3,904
|
|
NOTE 10 – OTHER ASSETS
At the dates indicated, the Company’s
other assets consisted of the following:
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Deferred tax assets, net
|
|
$
|
7,429
|
|
|
$
|
6,519
|
|
Accrued interest receivable
|
|
|
3,337
|
|
|
|
3,002
|
|
Investment in SBIC Fund
|
|
|
1,532
|
|
|
|
799
|
|
Prepaid assets
|
|
|
1,238
|
|
|
|
2,391
|
|
Servicing asset
|
|
|
967
|
|
|
|
1,270
|
|
Investment in statuatory trust
|
|
|
301
|
|
|
|
296
|
|
All other
|
|
|
1,125
|
|
|
|
880
|
|
Total
|
|
$
|
15,929
|
|
|
$
|
15,157
|
|
BAYCOM CORP AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in thousands, except for per
share data)
NOTE 11 – DEPOSITS
Deposits consisted of the following at the dates indicated:
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Demand deposits
|
|
$
|
349,346
|
|
|
$
|
327,309
|
|
NOW accounts and Savings
|
|
|
211,629
|
|
|
|
191,550
|
|
Money market
|
|
|
366,417
|
|
|
|
356,640
|
|
Time under $250,000
|
|
|
104,367
|
|
|
|
126,271
|
|
Time $250,000 and over
|
|
|
98,962
|
|
|
|
102,535
|
|
Total deposits
|
|
$
|
1,130,721
|
|
|
$
|
1,104,305
|
|
NOTE 12 - BORROWINGS
At September 30, 2018 the Company had no
borrowings. At December 31, 2017 the Company had a secured term borrowing totaling $6.0 million and a line totaling $9.0 million
with a correspondent bank secured by the Bank’s common stock.
The Company has an approved secured borrowing
facility with the FHLB for up to 25% of total assets for a term not to exceed five years under a blanket lien of certain types
of loans. There were no outstanding borrowings under this facility at September 30, 2018 and December 31, 2017.
As of September 30, 2018, the FHLB had
issued a letter of credit on behalf of the Bank totaling $7.5 million as collateral for local agency deposits. No amounts have
been drawn under this letter of credit.
The Company has four Federal Funds lines
with available commitments totaling $55.0 million with four correspondent banks. There were no amounts outstanding under these
facilities at September 30, 2018 and December 31, 2017.
NOTE 13– JUNIOR SUBORDINATED DEFERRABLE
INTEREST DEBENTURES
The Company has an investment in the First
ULB Statutory Trust I that is accounted for under the equity method. The Company acquired the Trust in the acquisition of FULB.
The Trust is a Delaware business formed with capital of $192,000 for the sole purpose of issuing trust preferred securities fully
and unconditionally guaranteed by the Company. The Trust issued 6,200 Floating Rate Capital Trust Pass-Through Securities (“Trust
Preferred Securities”), with a liquidation value of $1,000 per security, for gross proceeds of $6.2 million. The entire proceeds
of the issuance were invested by the Trust in $6.4 million of Subordinated Debentures issued by FULB and assumed by the Company
in the FULB acquisition, with identical maturities, repricing and payment terms as the Trust Preferred Securities. The Subordinated
Debentures mature on September 15, 2034, bear a current interest rate of 4.90% (based on 3-months Libor plus 2.5%), with quarterly
repricing. The Subordinated Debentures are redeemable by the Company subject to prior approval from the Federal Reserve Board of
Governors (“Federal Reserve”), on any March 15, September 15, September 15, or December 15. The redemption price is
par plus accrued and unpaid interest, except in the case of redemption under special event which is defined in the debenture. The
Trust Preferred Securities are subject to mandatory redemption to the extent of any early redemption of the Subordinated Debentures
and upon maturity of the Subordinated Debentures on September 15, 2034. As of September 30, 2018 and December 31, 2017, the Trust
Preferred Securities had an outstanding net book value of $5.4 million.
BAYCOM CORP AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in thousands, except for per
share data)
Holders of the Trust Preferred Securities
are entitled to a cumulative cash distribution on the liquidation amount of $1,000 per security for each successive period beginning
on March 15, June 15, September 15, and December 15, of each year. The Company also has the right to defer the payment of interest
on each of the Subordinated Debentures for a period not to exceed 20 consecutive quarters, provided that the deferral period does
not extend beyond the stated maturity date. During such deferral period, distributions on the corresponding Trust Preferred Securities
will also be deferred and the Company may not pay cash dividends to the holders of shares of the Company’s common stock.
The Company has guaranteed, on a subordinated basis, distributions and other payments due on the Trust Preferred Securities.
NOTE 14 – OTHER LIABILITIES
Other liabilities were comprised of the
following at the dates indicated:
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Accrued expenses
|
|
$
|
3,001
|
|
|
$
|
3,716
|
|
Participant’s portion payable
|
|
|
1,591
|
|
|
|
-
|
|
Deferred rents
|
|
|
546
|
|
|
|
287
|
|
CDARS deferred fees
|
|
|
501
|
|
|
|
487
|
|
Contingent liability
|
|
|
435
|
|
|
|
878
|
|
Accounts payable
|
|
|
311
|
|
|
|
240
|
|
Reserve for unfunded commitments
|
|
|
310
|
|
|
|
310
|
|
Accrued interest
|
|
|
175
|
|
|
|
141
|
|
Miscellaneous other liabilities
|
|
|
612
|
|
|
|
1,362
|
|
Total
|
|
$
|
7,482
|
|
|
$
|
7,421
|
|
NOTE 15 – EQUITY INCENTIVE PLANS
2017 Omnibus Equity Incentive Plan
The shareholders approved the Omnibus Equity
Incentive Plan (“2017 Plan”) in November 2017. The 2017 Plan provides for the awarding by the Company’s Board
of Directors of equity incentive awards to employees and non-employee directors. An equity incentive award may be an option, stock
appreciation rights, restricted stock units, stock award, other stock-based award or performance award granted under the 2017 Plan.
Factors considered by the Board in awarding equity incentives to officers and employees include the performance of the Company,
the employee’s or officer’s job performance, the importance of his or her position, and his or her contribution to
the organization’s goals for the award period. Generally, awards are restricted and have a vesting period of no longer than
ten years. Subject to adjustment as provided in the 2017 Plan, the maximum number of shares of common stock that may be delivered
pursuant to awards granted under the 2017 Plan is 450,000. The 2017 Plan provides for an annual restricted stock grant limits to
officers, employees and directors. The annual stock grant limit per person for officers and employees is the lessor of 50,000 shares
or a value of $2.0 million, and per person for directors the maximum is 25,000 shares. All unvested restricted shares outstanding
vest in the event of a change in control of the Company. There were no equity incentive awards granted during the three months
ended September 30, 2018. During the nine months ended September 30, 2018, 93,380 shares of restricted stock were awarded and no
other equity incentive awards were granted. During the three months ended September 30, 2017, 28,500 shares of restricted stock
were awarded and no other equity incentive awards were granted. Awarded shares of restricted stock vest over (i) a one-year period
following the date of grant, in the case of the non-employee directors, and (ii) a three-year or five-year period following the
date of grant, with the initial vesting occurring on the one-year anniversary of the date of grant, in the case of the executive
officers.
BAYCOM CORP AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in thousands, except for per
share data)
2014 Omnibus Equity Incentive Plan
In 2014, the shareholders approved the
Omnibus Equity Incentive Plan (the “2014 Plan”). A total of 148,962 equity incentive awards have been granted under
the 2014 Plan. The awards are shares of restricted stock and have a vesting period of one to five years. No future equity awards
will be made from the 2014 Plan.
The Company recognizes compensation expense
for the restricted stock awards based on the fair value of the shares at the award date. For the nine months ended September 30,
2018 and 2017, total compensation expense for these plans was $818,000 and $318,000, respectively.
As of September 30, 2018, there was $2.5
million of total unrecognized compensation cost related to non-vested shares granted as restricted stock awards. The cost is expected
to be recognized over the remaining weighted-average vesting period of approximately two years.
The following table provides a summary
of changes in non-vested restricted stock awards for the nine months ended September 30, 2018 and 2017:
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
Weighted-Average
|
|
|
|
|
|
Weighted-Average
|
|
|
|
|
|
|
Grant Date
|
|
|
|
|
|
Grant Date
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Shares
|
|
|
Fair Value
|
|
Non-vested at January 1,
|
|
|
67,481
|
|
|
$
|
13.51
|
|
|
|
68,605
|
|
|
$
|
11.51
|
|
Granted
|
|
|
15,232
|
|
|
|
19.45
|
|
|
|
14,133
|
|
|
|
14.86
|
|
Vested
|
|
|
(8,706
|
)
|
|
|
13.40
|
|
|
|
(5,333
|
)
|
|
|
12.47
|
|
Non-vested at March 31,
|
|
|
74,007
|
|
|
|
14.75
|
|
|
|
77,405
|
|
|
|
12.06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
78,148
|
|
|
|
22.00
|
|
|
|
-
|
|
|
|
-
|
|
Vested
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Non-vested at June 30,
|
|
|
152,155
|
|
|
|
18.47
|
|
|
|
77,405
|
|
|
|
12.06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
14,367
|
|
|
|
17.00
|
|
Vested
|
|
|
(21,155
|
)
|
|
|
14.08
|
|
|
|
(24,291
|
)
|
|
|
10.96
|
|
Non-vested at September 30,
|
|
|
131,000
|
|
|
|
19.18
|
|
|
|
67,481
|
|
|
|
13.51
|
|
BAYCOM CORP AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in thousands, except for per
share data)
NOTE 16 – EARNINGS PER SHARE CALCULATION
Earnings per common share (“EPS”)
are computed based on the weighted average number of common shares outstanding during the period. Basic EPS excludes dilution and
is computed by dividing net earnings available to common stockholders by the weighted average of common shares outstanding. Diluted
EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted
into common stock. The number of potential common shares included in the quarterly diluted EPS is computed using the average market
price during the three months included in the reporting period under the treasury stock method. The number of potential common
shares included in year-to-date diluted EPS is a year-to-date weighted average of potential shares included in each quarterly diluted
EPS computation. Dilutive income per share includes the effect of stock options and other potentially dilutive securities using
the treasury stock method. Nonvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents
are considered participating securities and are included in the computation of earnings per share. All of the Company's nonvested
restricted stock awards qualify as participating securities. There were no dilutive shares at September 30, 2018 or 2017.
Earnings per share have been computed as
follows for the periods shown:
|
|
Three months ended
|
|
|
Nine months ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
3,518
|
|
|
$
|
3,181
|
|
|
$
|
11,875
|
|
|
$
|
6,099
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average number of shares outstanding
|
|
|
10,869,275
|
|
|
|
6,870,614
|
|
|
|
9,295,274
|
|
|
|
6,270,991
|
|
Average number of shares outstanding used to
calculate diluted earngs per share
|
|
|
10,869,275
|
|
|
|
6,870,614
|
|
|
|
9,295,274
|
|
|
|
6,270,991
|
|
Basic and diluted earnings per share
|
|
$
|
0.31
|
|
|
$
|
0.46
|
|
|
$
|
1.30
|
|
|
$
|
0.97
|
|
NOTE 17 – FAIR VALUE MEASUREMENT
On January 1, 2018, the Company adopted
ASU 2016-01, Financial Instruments - Overall (Subtopic 825 10), Recognition and Measurement of Financial Assets and Financial Liabilities,
which requires the Company to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes.
The Company determines the fair values
of its financial instruments based on the requirements established in Accounting Standards Codification (“ASC”) 820,
Fair Value Measurements, which provides a framework for measuring fair value in accordance with U.S. GAAP and requires an entity
to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 defines
fair values for financial instruments as the exit price, the price that would be received for an asset or paid to transfer a liability,
in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on
the measurement date under current market conditions. The Company’s fair values for financial instruments at September 30,
2018 were determined based on these requirements.
BAYCOM CORP AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in thousands, except for per
share data)
The following definitions describe the
levels of inputs that may be used to measure fair value:
Level 1
- Inputs are unadjusted
quoted prices in active markets (as defined) for identical assets or liabilities that the reporting entity has the ability to access
at the measurement date.
Level 2
- Inputs are inputs other
than quoted prices include quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices
that are observable for the asset or liability such as interest rates and yield curves that are observable at commonly quoted intervals.
Level 3
- Inputs are unobservable
inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability.
In certain cases, the inputs used to measure fair value may fall into different levels of the hierarchy. In such cases, the lowest
level of inputs that is significant to the measurement is used to determine the hierarchy for the entire asset or liability. Transfers
between levels of the fair value hierarchy are recognized on the actual date of the event or circumstances that caused the transfer,
which generally coincides with our quarterly valuation process.
There were no transfers between levels
during 2018 or 2017.
The following financial instruments are
measured at fair value on a recurring basis at the dates indicated:
September 30, 2018
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Municipal securities
|
|
$
|
15,948
|
|
|
$
|
-
|
|
|
$
|
15,948
|
|
|
$
|
-
|
|
Mortgage-backed securities
|
|
|
31,280
|
|
|
|
-
|
|
|
|
31,280
|
|
|
|
-
|
|
Corporate Bonds
|
|
|
908
|
|
|
|
-
|
|
|
|
908
|
|
|
|
-
|
|
Collateralized mortgage obligations
|
|
|
6,993
|
|
|
|
-
|
|
|
|
6,993
|
|
|
|
-
|
|
U.S. Government Agencies
|
|
|
10,034
|
|
|
|
-
|
|
|
|
10,034
|
|
|
|
-
|
|
SBA securities
|
|
|
4,519
|
|
|
|
-
|
|
|
|
4,519
|
|
|
|
-
|
|
Total assets measured at fair value
|
|
$
|
69,682
|
|
|
$
|
-
|
|
|
$
|
69,682
|
|
|
$
|
-
|
|
December 31, 2017
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Municipal securities
|
|
$
|
16,047
|
|
|
$
|
-
|
|
|
$
|
16,047
|
|
|
$
|
-
|
|
Mortgage-backed securities
|
|
|
9,740
|
|
|
|
-
|
|
|
|
9,740
|
|
|
|
-
|
|
Collateralized mortgage obligations
|
|
|
1,750
|
|
|
|
-
|
|
|
|
1,750
|
|
|
|
-
|
|
Corporate Bonds
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
U.S. Government Agencies
|
|
|
6,971
|
|
|
|
-
|
|
|
|
6,971
|
|
|
|
-
|
|
SBA securities
|
|
|
5,997
|
|
|
|
-
|
|
|
|
5,997
|
|
|
|
-
|
|
Total assets measured at fair value
|
|
$
|
40,505
|
|
|
$
|
-
|
|
|
$
|
40,505
|
|
|
$
|
-
|
|
Fair values for investment securities are
based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market
prices of comparable instruments.
BAYCOM CORP AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in thousands, except for per
share data)
The following tables present the recorded
amounts of impaired loans measured at fair value on a non-recurring basis at the dates indicated:
September 30, 2018
|
|
Fair Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Commercial and industrial
|
|
$
|
2,386
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
2,386
|
|
Construction and land
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial real estate
|
|
|
2,781
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,781
|
|
Residential
|
|
|
127
|
|
|
|
-
|
|
|
|
-
|
|
|
|
127
|
|
Consumer
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total impaired assets measured at fair value
|
|
$
|
5,294
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
5,294
|
|
December 31, 2017
|
|
Fair Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Commercial and industrial
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Construction and land
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial real estate
|
|
|
1,120
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,120
|
|
Residential
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Consumer
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total impaired assets measured at fair value
|
|
$
|
1,120
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,120
|
|
The Bank does not record loans at fair
value. However, from time to time, if a loan is considered impaired, a specific allocation within the allowance for loan losses
may be required. Loans for which it is probable that payment of interest and principal will not be made in accordance with the
contractual terms of the loan agreement are considered impaired. The fair value of impaired loans is estimated using one of several
methods, including collateral value, market value of similar debt, enterprise value, liquidation value and cash flows. Those impaired
loans not requiring an allowance represent loans for which the value of the expected repayments or collateral equals or exceeds
the recorded investments in such loans.
Impaired loans where an allowance is established
based on the fair value of collateral or when the impaired loan has been written down to fair value require classification in the
fair value hierarchy. If the fair value of the collateral is based on a non-observable market price or a current appraised value,
the Bank records the impaired loans as nonrecurring Level 3. When an appraised value is not available, or management determines
the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Bank
also records the impaired loans as nonrecurring Level 3.
Fair Values of Financial Instruments.
There have been no significant changes
in valuation techniques during the periods reported. The following methods and assumptions were used to estimate the fair value
disclosure for financial instruments:
Cash and cash equivalents
- Cash and cash equivalents include cash and due from banks and Fed funds sold, and are valued at their carrying amounts because
of the short-term nature of these instruments.
BAYCOM CORP AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in thousands, except for per
share data)
Interest bearing deposits in financial
institutions
- Interest bearing deposits in financial institutions are valued based on quoted interest rates for comparable
instruments with similar remaining maturities.
Investment Securities
- The
fair value of available of sale securities are based on quoted market prices,
where available. If quoted market prices
are not available, fair values are estimated using quoted market prices for similar securities and indications of value provides
by brokers.
Other equity securities
-
The carrying value of the FHLB and FRB stock approximates the fair value because the stock is redeemable at par.
Loans
– Loans with
variable interest rates are valued at their exit price value, because these loans are regularly adjusted to market rates. The
fair value of fixed rate loans with remaining maturities in excess of one year is estimated by discounting the future cash flows
using current rates at which similar loans would be made to borrowers with similar credit ratings for the same remaining maturities.
The allowance for loan losses is considered to be a reasonable estimate of the loan discount related to credit risk.
Loans held for sale
- Loans
held for sale are carried at the lower of cost or fair value. The fair value of loans held for sale is based on what the secondary
markets are currently offering for loans with similar characteristics. As such, the Bank classifies those loans subjected to nonrecurring
fair value adjustments as Level 2.
Accrued interest receivable and payable
- The accrued interest receivable and payable balance approximates its fair value.
Deposits
- The fair value
of non-interest bearing deposits, interest bearing transaction accounts and savings accounts is the amount payable on demand at
the reporting date. The fair value of time deposits is estimated by discounting the future cash flows using current
rates offered for deposits of similar remaining maturities.
Other borrowings
- The fair
value is estimated by discounting the future cash flows using current rates offered for similar borrowings. The discount rate is
equal to the market rate of currently offered similar products. This is an adjustable rate borrowing and adjusts to market on a
quarterly basis.
Junior Subordinated Deferrable Interest
Debentures
- The fair value of the Subordinated Debentures is determined based on rates and/or discounted cash flow analysis
using interest rates offered in inactive markets for instruments of a similar maturity and structure resulting in a Level 3 classification.
The Subordinated Debentures are carried at their current carrying value, because the Subordinated Debentures regularly adjust to
market rates
Undisbursed loan commitments and
standby letters of credit
- The fair value of the off-balance sheet items is based on discounted cash flows of expected
fundings.
Non-financial assets and liabilities defined
by the FASB ASC 820, Fair Value measurements, such as Bank premises and equipment, deferred taxes, and other liabilities are excluded
from the table. In addition, we have not disclosed the fair value of financial instruments specifically.
BAYCOM CORP AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in thousands, except for per
share data)
The following table provides summary information
on the estimated fair value of financial instruments at September 30, 2018:
|
|
Carrying
|
|
|
Fair
|
|
|
Fair value measurements
|
|
|
|
amount
|
|
|
value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
313,217
|
|
|
$
|
313,217
|
|
|
$
|
313,217
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Interest bearing deposits with financial institutions
|
|
|
1,000
|
|
|
|
1,000
|
|
|
|
1,000
|
|
|
|
-
|
|
|
|
-
|
|
Securities available for sale
|
|
|
69,682
|
|
|
|
69,682
|
|
|
|
-
|
|
|
|
69,682
|
|
|
|
-
|
|
Other equity securities
|
|
|
7,364
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,364
|
|
|
|
-
|
|
Loans, net
|
|
|
896,369
|
|
|
|
893,727
|
|
|
|
-
|
|
|
|
-
|
|
|
|
893,727
|
|
Loans held for sale
|
|
|
585
|
|
|
|
-
|
|
|
|
-
|
|
|
|
585
|
|
|
|
-
|
|
Accrued interest receivable
|
|
|
3,337
|
|
|
|
3,337
|
|
|
|
-
|
|
|
|
3,337
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
1,130,721
|
|
|
|
1,132,097
|
|
|
|
927,392
|
|
|
|
204,705
|
|
|
|
|
|
Subordinated Debentures
|
|
|
5,428
|
|
|
|
5,447
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,447
|
|
Accrued interest payable
|
|
|
163
|
|
|
|
163
|
|
|
|
-
|
|
|
|
163
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Off-balance sheet liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Undisbursed loan commitments, lines of credit, standby letters of credit
|
|
|
310
|
|
|
|
310
|
|
|
|
-
|
|
|
|
-
|
|
|
|
310
|
|
The carrying amount of loans includes $5.2
million of nonaccrual loans (loans that are not accruing interest) as of September 30, 2018. The fair value of nonaccrual loans
is based on the collateral values that secure the loans or the cash flows expected to be received.
The following table provides summary information
on the estimated fair value of financial instruments at December 31, 2017:
|
|
Carrying
|
|
|
Fair
|
|
|
Fair value measurements
|
|
|
|
amount
|
|
|
value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
249,853
|
|
|
$
|
249,853
|
|
|
$
|
249,853
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Interest bearing deposits with financial institutions
|
|
|
1,743
|
|
|
|
1,743
|
|
|
|
1,743
|
|
|
|
-
|
|
|
|
-
|
|
Securities available for sale
|
|
|
40,505
|
|
|
|
40,505
|
|
|
|
-
|
|
|
|
40,505
|
|
|
|
-
|
|
Other equity securities
|
|
|
7,759
|
|
|
|
7,759
|
|
|
|
-
|
|
|
|
7,759
|
|
|
|
-
|
|
Loans, net
|
|
|
886,864
|
|
|
|
883,361
|
|
|
|
-
|
|
|
|
-
|
|
|
|
883,361
|
|
Loans held for sale
|
|
|
3,245
|
|
|
|
3,245
|
|
|
|
-
|
|
|
|
3,245
|
|
|
|
-
|
|
Accrued interest receivable
|
|
|
3,002
|
|
|
|
3,002
|
|
|
|
-
|
|
|
|
3,002
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
1,104,305
|
|
|
|
1,104,665
|
|
|
|
875,506
|
|
|
|
229,159
|
|
|
|
-
|
|
Subordinated Debentures
|
|
|
5,387
|
|
|
|
5,387
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,387
|
|
Other borrowings
|
|
|
6,000
|
|
|
|
6,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,000
|
|
Accrued interest payable
|
|
|
141
|
|
|
|
141
|
|
|
|
-
|
|
|
|
141
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Off-balance sheet liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Undisbursed loan commitments, lines of credit, standby letters of credit
|
|
|
310
|
|
|
|
310
|
|
|
|
-
|
|
|
|
-
|
|
|
|
310
|
|
The carrying amounts of loans include $179,000
of nonaccrual loans (loans that are not accruing interest) as of December 31, 2017. The fair value of nonaccrual loans is based
on the collateral values that secure the loans or the cash flows expected to be received.
BAYCOM CORP AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in thousands, except for per
share data)
NOTE 18 – COMMITMENTS AND CONTINGENCIES
Lending and Letter of Credit Commitments
In the normal course
of business, the Company enters into various commitments to extend credit which are not reflected in the financial statements.
These commitments consist of the undisbursed balance on personal and commercial lines of credit and of undisbursed funds on construction
and development loans. At September 30, 2018 and December 31, 2017, undisbursed commitments total $73.4 million and $98.7 million,
respectively. In addition, at September 30, 2018 and December 31, 2017, the Company has issued standby letter of credit commitments,
primarily issued for the third party performance obligations of Company clients totaling $402,000 and $213,000, respectively, of
which none was outstanding at both September 30, 2018 and December 31, 2017.
The actual liquidity
needs or the credit risk that the Company will experience will be lower than the contractual amount of commitments to extend credit
because a significant portion of these commitments are expected to expire without being drawn upon. The Company’s outstanding
loan commitments are made using the same underwriting standards as comparable outstanding loans. As of September 30, 2018 and December
31, 2017, the reserve associated with these commitments was $310,000.
Local Agency Deposits
In the normal course
of business, the Company accepts deposits from local agencies. The Company is required to provide collateral for certain local
agency deposits in the states of California and Washington. As of September 30, 2018 and December 31, 2017 the FHLB issued a letter
of credit on behalf of the Company totaling $7.5 million and $9.9 million, respectively, as collateral for local agency deposits.