UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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Item 4.02. Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review.
On July 18, 2023, the audit committee of the board of directors of BayCom Corp (the “Company,” “we” or “our”) concluded that the Company’s previously issued consolidated financial statements for the interim period ended March 31, 2023 and year ended December 31, 2022, as well as for the interim periods included in that fiscal year (the “Restated Periods”), should no longer be relied upon because of errors related to the accounting for unrealized losses on preferred equity securities that resulted in material misstatements of noninterest income and accumulated other comprehensive income. Additionally, the Company’s earnings releases and other public communications should no longer be relied upon to the extent that they relate to our consolidated financial statements for the Restated Periods.
At the time of its purchase of the preferred equity securities for investment purposes, the Company inappropriately accounted for them as available-for-sale debt securities under Accounting Standards Codification (“ASC”) Topic 320 – Investments-Debt Securities. As such, the changes in the fair value of these securities were not recorded as part of net income but rather as a component of shareholders’ equity (in accumulated other comprehensive income, net of tax). However, as a result of subsequent research and third-party consultation, the Company determined that the securities should instead have been accounted for under ASC Topic 321 – Investments-Equity Securities. The result of this change in classification of the preferred equity securities is that the change in the fair value of the securities each quarter should have been recorded in noninterest income in the consolidated statements of income.
As soon as practicable, we intend to amend our Form 10-Qs for the quarterly periods ended March 31, 2023, September 30, 2022, June 30, 2022, and March 31, 2022, and our Form 10-K for the year ended December 31, 2022 (the “Original Filings”), to reflect the restatement of our consolidated financial statements for the Restated Periods (the “Amended Form 10-Qs” and the “Amended Form 10-K”). We expect to file the Amended Form 10-Qs and the Amended Form 10-K before we file our Form 10-Q for the quarterly period ended June 30, 2023 (the “Form 10-Q”).
We expect our restated financial statements for the Restated Periods to differ from the amounts reported in the Original Filings. The restated amounts for the quarter ended March 31, 2023 and the year ended December 31, 2022 are expected to be approximately as follows:
| As Restated |
| As Restated |
| As Previously Reported |
| As Previously Reported |
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March 31, | December 31, | March 31, | December 31, | ||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||
Consolidated Balance Sheets | |||||||||||||
Investment securities available-for-sale | $ | 152,427 | $ | 154,004 | $ | 165,261 | $ | 167,761 | |||||
Equity securities | 12,834 | 13,757 | — | — | |||||||||
Accumulated other comprehensive loss, net of tax | (12,858) | (11,561) | (15,970) | (14,818) | |||||||||
Retained earnings | 129,558 | 124,122 | 132,670 | 127,379 | |||||||||
| As Restated |
| As Restated |
| As Previously Reported |
| As Previously Reported |
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Three months ended | Year ended | Three months ended | Year ended | ||||||||||
March 31, | December 31, | March 31, | December 31, | ||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||
(In thousands, except for per share data) | (In thousands, except for per share data) | ||||||||||||
Consolidated Statements of Income | |||||||||||||
Total noninterest income | $ | 1,561 | $ | 6,100 | $ | 2,457 | $ | 10,673 | |||||
Net income before taxes | 10,014 | 32,438 | 9,810 | 37,011 | |||||||||
Provision for income taxes | 2,823 | 8,708 | 2,764 | 10,024 | |||||||||
Net income | 7,191 | 23,730 | 7,046 | 26,987 | |||||||||
Basic earnings per common share | $ | 0.57 | $ | 1.81 | $ | 0.55 | $ | 2.06 | |||||
Diluted earnings per common share | 0.57 | 1.81 | 0.55 | 2.06 | |||||||||
Consolidated Statements of Comprehensive Income (Loss) | |||||||||||||
Change in unrealized loss on available-for-sale securities | $ | (1,821) | $ | (19,275) | $ | (1,617) | $ | (23,848) | |||||
Deferred tax benefit | 524 | 5,548 | 465 | 6,864 | |||||||||
Other comprehensive loss, net of tax | (1,297) | (13,727) | (1,152) | (16,984) | |||||||||
The audit committee of the Company’s board of directors has discussed the matters disclosed herein with Moss Adams LLP, the Company’s independent registered public accounting firm.
Caution Regarding Forward-Looking Statements
This Form 8-K includes information that constitutes forward-looking statements. Forward-looking statements may address our expected future business and financial performance, and often contain words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” or “will.” By their nature, any such forward-looking statements may involve risk and uncertainties that could cause actual results to differ materially from any expected future results encompassed within the forward-looking statements. Examples of such forward-looking statements include, but are not limited to, statements regarding our expectations with regard to changes in noninterest income, net income, earnings per share and shareholders’ equity or our expectations with respect to any restated amount in our financial statements for the Restated Periods. Factors that could cause or contribute to such differences include: the review of the Company’s accounting, accounting policies and internal control over financial reporting; the preparation of and the audit or review, as applicable, of the financial statements contained in the Form 10-Q, the Amended Form 10-Qs, and the Amended Form 10-K; and the subsequent discovery of additional adjustments to the Company’s previously issued financial statements. Actual events or results may differ materially from the Company’s expectations. In addition, our financial results and stock price may suffer as a result of this review and any subsequent determinations from this process. We do not undertake to update our forward-looking statements, except as required by applicable securities laws.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.
BAYCOM CORP | ||
Date: July 21, 2023 | By: | /s/ Keary L. Colwell |
Keary L. Colwell, Senior Executive | ||
Vice President, Chief Financial Officer and Corporate Secretary | ||