BayCom Corp Fair Value Disclosure
23. FAIR VALUE OF FINANCIAL INSTRUMENTS
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, Federal funds sold and interest-bearing balances in banks and are valued at their carrying amounts because of the short-term nature of these instruments.
Time deposits in banks — Interest bearing time deposits in banks are valued based on quoted interest rates for comparable instruments with similar remaining maturities.
Investment securities — The fair values of securities AFS 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.
Equity securities — The fair values of equity 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.
Investment in FHLB and FRB Stock — The carrying value of the FHLB and FRB stock approximates the fair value because the stock is redeemable at par.
Loans held for sale — Since the loans designated by the Company as AFS are typically sold shortly after making the decision to sell them, realized gains and losses are usually recognized within the same period and fluctuations in fair value are thus not relevant for reporting purposes. If the AFS loans stay on our books for an extended period of time, the fair value of those loans is determined using quoted secondary-market prices.
Loans—Loans with variable interest rates are valued at the current carrying value, because these loans are regularly adjusted to market rates. The fair values of fixed rate loans with remaining maturities in excess of one year are determined by discounting the estimated 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 credit losses on loans is considered to be a reasonable estimate of the loan discount related to credit risk.
Interest receivable and payable — The accrued interest receivable and payable balance approximates its fair value.
Deposits — The fair value of noninterest 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 junior subordinated deferrable interest 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 debentures are carried at the current carrying value, because the debentures regularly adjust to market rates.
Subordinated Debt — The fair value of subordinated debt 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 2 classification.
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 funding.
The carrying amounts and fair values of the Company’s financial instruments at the dates indicated are presented below:
Carrying | Fair | Fair value measurements | |||||||||||||
| amount |
| value |
| Level 1 |
| Level 2 |
| Level 3 | ||||||
December 31, 2024 |
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Financial assets: |
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Cash and cash equivalents | $ | 364,032 | $ | 364,032 | $ | 364,032 | $ | — | $ | — | |||||
Time deposits in banks |
| 249 |
| 249 |
| 249 |
| — |
| — | |||||
Investment securities AFS |
| 193,328 |
| 193,328 |
| — |
| 193,328 |
| — | |||||
Equity securities | 13,120 | 13,120 | 13,120 | — | — | ||||||||||
Investment in FHLB and FRB Stock |
| 20,958 |
| 20,958 |
| — |
| 20,958 |
| — | |||||
Loans held for sale |
| 2,216 |
| 2,216 |
| — |
| 2,216 |
| — | |||||
Loans, net |
| 1,934,996 |
| 1,884,134 |
| — |
| — |
| 1,884,134 | |||||
Accrued interest receivable |
| 8,507 |
| 8,507 |
| — |
| 8,507 |
| — | |||||
Financial liabilities: |
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Deposits |
| 2,234,009 |
| 2,236,256 |
| — |
| 2,236,256 |
| — | |||||
Junior subordinated deferrable interest debentures, net | 8,645 | 8,527 | — | — | 8,527 | ||||||||||
Subordinated debt, net | 63,736 |
| 63,736 |
| — | 63,736 | — | ||||||||
Accrued interest payable |
| 3,118 |
| 3,118 |
| — |
| 3,118 |
| — | |||||
Off-balance sheet liabilities: |
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Undisbursed loan commitments, lines of credit, standby letters of credit |
| 73,414 |
| 72,814 |
| — |
| — |
| 72,814 | |||||
Carrying | Fair | Fair value measurements | |||||||||||||
| amount |
| value |
| Level 1 |
| Level 2 |
| Level 3 | ||||||
December 31, 2023 |
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Financial assets: |
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Cash and cash equivalents | $ | 307,539 | $ | 307,539 | $ | 307,539 | $ | — | $ | — | |||||
Time deposits in banks |
| 1,245 |
| 1,245 |
| 1,245 |
| — |
| — | |||||
Investment securities AFS |
| 163,152 |
| 163,152 |
| — |
| 163,152 |
| — | |||||
Equity securities | 12,585 | 12,585 | 12,585 | — | — | ||||||||||
Investment in FHLB and FRB Stock |
| 20,939 |
| 20,939 |
| — |
| 20,939 |
| — | |||||
Loans held for sale |
| — |
| — |
| — |
| — |
| — | |||||
Loans, net |
| 1,905,829 |
| 1,810,426 |
| — |
| — |
| 1,810,426 | |||||
Accrued interest receivable |
| 8,423 |
| 8,423 |
| — |
| 8,423 |
| — | |||||
Financial liabilities: |
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Deposits |
| 2,132,750 |
| 2,135,923 |
| — |
| 2,135,923 |
| — | |||||
Junior subordinated deferrable interest debentures, net |
| 8,565 |
| 8,631 |
| — |
| — |
| 8,631 | |||||
Subordinated debt, net |
| 63,881 |
| 63,881 |
| — |
| 63,881 |
| — | |||||
Accrued interest payable |
| 3,054 |
| 3,054 |
| — |
| 3,054 |
| — | |||||
Off-balance sheet liabilities: |
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Undisbursed loan commitments, lines of credit, standby letters of credit |
| 77,377 |
| 77,152 |
| — |
| — |
| 77,152 | |||||
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About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.