BayCom (BCML) risk factors, FY2024 10-K

Risks Related to Macroeconomic Conditions

1. 01Our business may be adversely affected by downturns in the national economy and the regional economies in which we operate
2. 02Monetary policy, inflation, deflation, and other external economic factors could adversely impact our financial performance and operations

Risks Related to Our Lending Activities

1. 03Nonperforming assets take significant time to resolve and adversely affect our results of operations and financial condition and could result in further losses in the future
2. 04Many of our loans are to commercial borrowers, which have a higher degree of risk than other types of loans
3. 05Construction and land development loans totaled $1.5 million, or 0.1% of total loans as of December 31, 2024, nearly all of which were commercial real estate construction loans
4. 06Our business may be adversely affected by credit risk associated with residential property
5. 07Agricultural lending and volatility in government regulations may adversely affect our financial condition and results of operations
6. 08The success of our SBA lending program is dependent upon the continued availability of SBA loan programs, our status as a preferred lender under the SBA loan programs and our ability to comply with applicable SBA lending requirements
7. 09Additionally, changes to the SBA program, such as adjustments to federal guaranty levels or funding allocations, could adversely impact our business, results of operations, and financial condition
8. 10To meet our growth objectives, we may originate or purchase loans outside our market areas, which could affect the level of our net interest margin and nonperforming loans
9. 11Our allowance for credit losses may prove to be insufficient to absorb losses in our loan portfolio
10. 12Wildfires present significant risks to our loan portfolio and the adequacy of our allowance for credit losses

Risks Related to Market and Interest Rate Changes

1. 13Our profitability is vulnerable to interest rate fluctuations
2. 14We principally manage interest rate risk by managing our volume and mix of our earning assets and funding liabilities. If we are unable to manage this risk effectively, our business, financial condition and results of operations could be materially affected
3. 15We may incur losses on our securities portfolio as a result of increases in interest rates

Risks Related to our Merger and Acquisition Strategy

1. 16Our strategy of pursuing acquisitions exposes us to financial, execution, compliance and operational risks that could have a material adverse effect on our business, financial condition, results of operations and growth prospects
2. 17Challenges related to the conversion and integration of financial and client data
3. 18Any expansion into new markets or new lines of business might not be successful

Risks Related to Accounting Matters

1. 19We may experience future goodwill impairment, which could reduce our earnings
2. 20Our reported financial results depend on management’s selection of accounting methods and certain assumptions and estimates, which, if incorrect, could cause unexpected losses in the future
3. 21We are subject to an extensive body of accounting rules and best practices. Periodic changes to such rules may change the treatment and recognition of critical financial line items and affect our profitability

Risks Related to Cybersecurity, Third Parties and Technology

1. 22We are subject to certain risks in connection with our use of technology
2. 23Our current and future uses of Artificial Intelligence (AI) and other emerging technologies may create additional risks
3. 24We are subject to certain risks in connection with our data management or aggregation
4. 25Our business may be adversely affected by an increasing prevalence of fraud and other financial crimes
5. 26The financial services market is undergoing rapid technological changes, and if we are unable to stay current with those changes, we will not be able to effectively compete

Risks Related to Regulatory and Compliance Matters

1. 27The level of our commercial real estate loan portfolio may subject us to additional regulatory scrutiny
2. 28We operate in a highly regulated environment and may be adversely affected by changes in federal and state laws and regulations that could increase our costs of operations
3. 29Non-compliance with the USA PATRIOT Act, Bank Secrecy Act, or other laws and regulations could result in fines or sanctions and limit our ability to get regulatory approval of acquisitions
4. 30If our enterprise risk management framework is not effective at mitigating risk and loss to us, we could suffer unexpected losses
5. 31Climate change and related legislative and regulatory initiatives may materially affect the Company’s business and results of operations

Risks Related to Our Business and Industry Generally

1. 32We rely on other companies to provide key components of our business infrastructure
2. 33Ineffective liquidity management could adversely affect our financial results and condition
3. 34Several of our large depositors have relationships with each other, which creates a higher risk that one client’s withdrawal of its deposit could lead to a loss of other deposits from clients within the relationship, which, in turn, could force us to fund our business through more expensive and less stable sources
4. 35Our growth or future losses may require us to raise additional capital in the future, but that capital may not be available when it is needed, or the cost of that capital may be exceedingly high
5. 36Our liquidity is dependent on dividends from the Bank
6. 37We rely heavily on our management team and could be adversely affected by the unexpected loss of key officers and relationship managers
7. 38Increasing scrutiny and evolving expectations from customers, regulators, investors, and other stakeholders with respect to our environmental, social and governance practices may impose additional costs on us or expose us to new or additional risks