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REGULATORY MATTERS

12 Months Ended

Dec. 31, 2020

REGULATORY MATTERS

REGULATORY MATTERS

19.         REGULATORY MATTERS

Dividends

The Company’s ability to pay cash dividends is dependent on dividends or other capital distributions paid to it by the Bank, and is also limited by state corporation law. Generally, under California law a California corporation may pay dividends to its shareholders if the corporation’s retained earnings equal at least the amount of the proposed distribution plus the preferential dividend arrears amount (if any) of the corporation, or if immediately after the distribution, the value of the corporation’s assets would equal or exceed its total liabilities plus the preferential dividend arrears amount (if any).

Dividends from the Bank to the Company are restricted under California law to the lesser of the Bank’s retained earnings or the Bank’s net income for the latest three fiscal years, less dividends previously declared during that period or, with the approval of the DFPI, to the greater of the retained earnings of the Bank, the net income of the Bank for its last fiscal year, or the net income of the Bank for its current fiscal year. During the years ended December 31, 2020, 2019 and 2018, the Bank did not pay any dividend to the Company.

Regulatory Capital

The Company is a bank holding company subject to capital adequacy requirements of the Federal Reserve under the Bank Holding Company Act of 1956, as amended, and the regulations of the Federal Reserve, except that, pursuant to the Economic Growth, Regulatory Relief and Consumer Protection Act, effective August 30, 2018, a bank holding company with consolidated assets of less than $3 billion is generally not subject to the Federal Reserve’s capital regulations.

Under the capital regulations, the minimum capital ratios are: (1) a common equity Tier 1 capital ratio (“CET1 capital”) of 4.5% of risk-weighted assets; (2) a Tier 1 capital ratio of 6.0% of risk-weighted assets (“Tier 1 capital”); (3) a total risk-based capital ratio of 8.0% of risk-weighted assets; and (4) a leverage ratio (the ratio of Tier 1 capital to average total consolidated assets) of 4.0%. CET1 capital generally consists of common stock, retained earnings, accumulated other comprehensive income (“AOCI”) unless an institution elects to exclude AOCI from regulatory capital, and certain minority interests (all of which are subject to applicable regulatory adjustments and deductions). Tier 1 capital generally consists of CET1 capital and noncumulative perpetual preferred stock. Tier 2 capital generally consists of other preferred stock and subordinated debt which meet certain conditions, plus an amount of the allowance for loan and lease losses up to 1.25% of assets. Total capital is the sum of Tier 1 and Tier 2 capital.

The Bank is subject to various regulatory capital requirements administered by the Federal Reserve. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements. Under capital adequacy guidelines of the regulatory framework for prompt corrective action, the Bank must meet specific capital adequacy guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices and until August 30, 2018, BayCom Corp was subject to similar capital regulations. The Bank’s capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Prompt corrective action provisions are not applicable to bank holding companies.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of Tier 1 capital to total average assets (as defined), and minimum ratios of Tier 1 capital (as defined) and CET1 capital to risk-weighted assets (as defined).

Management reviews capital ratios on a regular basis to ensure that capital exceeds the prescribed regulatory minimums and is adequate to meet our anticipated future needs. As of December 31, 2020, the most recent regulatory notifications from the Federal Reserve categorized the Bank as “Well Capitalized” under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes would have changed the category.

The following is a summary of actual capital amounts and ratios as of the dates indicated, for the Company (assuming it was subject to regulatory capital requirements) and the Bank compared to the requirements for minimum capital adequacy and classification as Well Capitalized:

​

​	​	​	​	​	​	​	​	​	​	​	​
​	​	As of December 31, 2020				​	As of December 31, 2019
​		Amount			Ratio		Amount			Ratio
​	​	(Dollars in thousands)									​
Leverage Ratio		​					​				​
BayCom Corp	​	$	201,519		9.58	%	$	207,575		11.15	%
Minimum requirement for "Well Capitalized"	​		105,225		5.00	%		93,659		5.00	%
Minimum regulatory requirement	​		84,180		4.00	%		74,927		4.00	%
​	​	​	​	​	​	​	​	​	​	​	​
United Business Bank	​		224,169		10.18	%		213,749		10.98	%
Minimum requirement for "Well Capitalized"	​		110,136		5.00	%		97,313		5.00	%
Minimum regulatory requirement	​		88,109		4.00	%		77,850		4.00	%
​	​	​	​	​	​	​	​	​	​	​	​
Common Equity Tier 1 Ratio	​					​					​
BayCom Corp	​		201,519		12.78	%		207,575		13.81	%
Minimum requirement for "Well Capitalized"	​		102,472		6.50	%		97,714		6.50	%
Minimum regulatory requirement	​		70,942		4.50	%		67,648		4.50	%
​	​	​	​	​	​	​	​	​	​	​	​
United Business Bank	​		224,169	​	14.22	%		213,749	​	14.23	%
Minimum requirement for "Well Capitalized"	​		102,440		6.50	%		97,624		6.50	%
Minimum regulatory requirement	​		70,920		4.50	%		67,586		4.50	%
​	​	​	​	​	​	​	​	​	​	​	​
Tier 1 Risk-Based Capital Ratio	​					​					​
BayCom Corp	​		211,004		13.38	%		217,060		14.44	%
Minimum requirement for "Well Capitalized"	​		126,120		8.00	%		120,264		8.00	%
Minimum regulatory requirement	​		94,590		6.00	%		90,198		6.00	%
​	​	​	​	​	​	​	​	​	​	​	​
United Business Bank	​		224,169		14.22	%		213,749		14.23	%
Minimum requirement for "Well Capitalized"	​		126,080		8.00	%		120,153		8.00	%
Minimum regulatory requirement	​		94,560		6.00	%		90,114		6.00	%
​	​	​	​	​	​	​	​	​	​	​	​
Total Risk-Based Capital Ratio	​					​					​
BayCom Corp	​		293,919		18.64	%		224,875		14.96	%
Minimum requirement for “Well Capitalized”	​		157,650		10.00	%		150,330		10.00	%
Minimum regulatory requirement	​		126,120		8.00	%		120,264		8.00	%
​	​	​	​	​	​	​	​	​	​	​	​
United Business Bank	​		242,084		15.36	%		221,564		14.75	%
Minimum requirement for "Well Capitalized"	​		157,600		10.00	%		150,191		10.00	%
Minimum regulatory requirement	​		126,080		8.00	%		120,153		8.00	%

​

In addition to the minimum CET1 capital, Tier 1 capital, leverage ratio and total capital ratios, the Bank must maintain a capital conservation buffer consisting of additional CET1 capital greater than 2.5% of risk-weighted assets above the required minimum risk-based capital levels in order to avoid limitations on paying dividends, repurchasing shares, and paying discretionary bonuses.

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The entire disclosure for regulatory capital requirement for depository and lending institutions. Institutions include, but not are not limited to, finance company, insured depository institution, bank holding company, savings and loan association holding company, bank and savings institution not federally insured, mortgage company, foreign financial institution and credit union.

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