-
BayFirst Financial Corp. Reports Fourth Quarter 2023 Results; Highlighted by Net Interest Margin Expansion and Strong SBA Loan Originations
Source: Nasdaq GlobeNewswire / 25 Jan 2024 16:00:01 America/New_York
ST. PETERSBURG, Fla., Jan. 25, 2024 (GLOBE NEWSWIRE) -- BayFirst Financial Corp. (NASDAQ: BAFN) (“BayFirst” or the “Company”), parent company of BayFirst National Bank (the “Bank”) today reported net income of $1.7 million, or $0.32 per diluted common share, for the fourth quarter of 2023 compared to $1.9 million, or $0.41 per diluted common share, in the third quarter of 2023. Net income from continuing operations was $1.7 million for the fourth quarter of 2023, compared to net income from continuing operations of $2.0 million in the third quarter of 2023 and $2.1 million in the fourth quarter of 2022.
Earnings benefited from higher net interest income and lower provision for credit losses during the fourth quarter, as compared to the third quarter of 2023. This was offset by higher noninterest expense and a gain recorded in the third quarter for the sale of other real estate owned that did not recur in the fourth quarter.
“BayFirst reported solid fourth quarter results, highlighted by net interest margin expansion and supported by the strength of our community bank and our CreditBench government guaranteed lending division,” stated Thomas G. Zernick, Chief Executive Officer. “Our fourth quarter progress is the result of our continued focus on expanding our footprint and becoming the premier community bank in the Tampa Bay market. During the fourth quarter, we opened a new banking center in North Sarasota, representing our eleventh banking center and our fourth banking center in the Sarasota Bradenton area of the Tampa Bay region. Our retail banking centers continue to build franchise value, and we were successful in growing net new number of checking accounts by 4% during the quarter, and by 27% since the start of the year. We maintain a community focused business model serving individuals, families, and small businesses, with a focus on checking and savings accounts which are not only less rate sensitive than time or money market deposits, they are also far less volatile in times of economic disruptions."
“Another highlight of the quarter was originating the 5th highest in dollar volume of SBA 7(a) loans nationwide, as compared to the 7th highest during the SBA's 2023 fiscal year ended September 30, 2023,” Zernick continued. “CreditBench produced $144.9 million in new loans during the fourth quarter, with $102.3 million of that production coming from the SBA Bolt small loan program, which are loans of $150 thousand or less that carry an 85% government guaranty as well as a higher yield than other SBA loans. In addition, loans originated through our community bank had solid growth during the quarter, with total loans, excluding PPP loans, increasing $49.3 million from the prior quarter. Despite economic headwinds and the unprecedented rise in interest rates, our asset quality remains well within acceptable levels, with our conventional C&I, owner occupied commercial real estate, and non owner-occupied commercial real estate portfolios all performing well. Further, we continue to have minimal exposure to non owner-occupied CRE loans, with only 5.5% of our loans held for investment in that category at year end.”
Fourth Quarter 2023 Performance Review
- The Company’s government guaranteed loan origination platform, CreditBench, originated $144.9 million in new government guaranteed loans during the fourth quarter of 2023, a decrease of 7.0% from $155.9 million of loans produced in the previous quarter, and a 32.8% increase over $109.2 million of loans produced during the fourth quarter of 2022. Demand remains strong for the Company's Bolt loan program, an SBA 7(a) loan product designed to expeditiously provide working capital loans of $150 thousand or less to businesses throughout the country. Since the launch in late second quarter of 2022, the Company has originated 3,408 Bolt loans totaling $441.8 million, of which 779 Bolt loans totaling $102.3 million were originated during the quarter.
- Loans held for investment, excluding PPP loans of $3.2 million, increased by $49.3 million, or 5.7%, during the fourth quarter of 2023 to $912.5 million and increased $203.0 million, or 28.6%, over the past year. During the quarter, the Company originated $202.1 million of loans, purchased $5.4 million of government guaranteed loans, and sold $124.3 million of government guaranteed loan balances.
- Deposits decreased $32.7 million, or 3.2%, during the fourth quarter of 2023 and increased $190.1 million, or 23.9%, over the past year to $985.1 million. A $43.3 million decrease in time deposits was partially due to the maturity of $70.7 million of time deposits in the fourth quarter of 2023, of which the majority were not expected to renew.
- Balance sheet liquidity remains strong, with $63.0 million in cash balances and time deposits with other banks as of December 31, 2023. Additionally, the Company maintains significant borrowing capacity through the FHLB and Federal Reserve discount window. Approximately 84% of the Company's deposits were insured at the end of 2023.
- Book value and tangible book value at December 31, 2023 were $20.60 per common share, an increase from $20.12 at September 30, 2023.
- Net interest margin including discontinued operations increased by 12 bps to 3.48% in the fourth quarter of 2023, from 3.36% in the third quarter of 2023, primarily due to increases in loan yields.
Results of Operations
Net Income (Loss)
Net income was $1.7 million for the fourth quarter of 2023, compared to $1.9 million in the third quarter of 2023 and $1.3 million in the fourth quarter of 2022. The decrease in net income for the fourth quarter of 2023 from the preceding quarter was primarily the result of increases in deposit interest expense of $0.7 million and noninterest expense of $1.0 million. This was partially offset by an increase in total interest income of $1.2 million and a decrease in provision for credit losses of $0.3 million. The increase in net income from the fourth quarter of 2022 was due to increases in gain on sale of government guaranteed loans of $1.2 million, government guaranteed loan fair value gains of $3.5 million, and other noninterest income of $1.3 million, and a decrease in net loss from discontinued operation of $0.8 million. This was partially offset by increases in provision for credit losses of $2.0 million and noninterest expense of $5.0 million. In the third quarter of 2022, the Company made the strategic decision to discontinue the Bank’s nationwide residential mortgage operations which resulted in the net loss from discontinued operations.
For the year ended 2023, net income was $5.7 million, an increase of $6.0 million from the net loss of $0.3 million for the year ended 2022. The increase was primarily the result of a $5.8 million net loss from discontinued operations in 2022, as well as an increase in net income from continuing operations of $0.4 million primarily as a result of increased loan origination volume.
Net Interest Income and Net Interest Margin
Net interest income from continuing operations was $8.9 million in the fourth quarter of 2023, an increase of $0.5 million, or 5.8%, from the third quarter of 2023, and an increase of $0.3 million, or 3.5%, from the fourth quarter of 2022. The net interest margin expanded by 12 bps to 3.48% in the fourth quarter of 2023, from 3.36% in the third quarter of 2023.
The increase during the fourth quarter of 2023 as compared to the third quarter of 2023 was mainly due to an increase in loan interest income, including fees, of $1.7 million, partially offset by higher interest expense on deposits of $0.7 million and lower interest income on interest bearing deposits in banks and other of $0.4 million.
The increase during the fourth quarter of 2023 as compared to the year ago quarter was mainly due to an increase in interest income of $6.3 million, partially offset by higher interest expense on deposits of $6.0 million.
Net interest income from continuing operations was $36.4 million for the year ended 2023, an increase of $6.4 million or 21.4%, from $30.0 million for the year ended 2022. The increase was mainly due to an increase in loan interest income, including fees, of $26.7 million, partially offset by an increase in deposit interest expense of $23.0 million.
Noninterest Income
Noninterest income from continuing operations was $14.7 million for the fourth quarter of 2023, which was unchanged from the third quarter of 2023 and an increase of $6.3 million, or 74.8%, from $8.4 million in the fourth quarter of 2022. The increase in the fourth quarter of 2023, as compared to the fourth quarter of 2022, was the result of increases in gain on sale of government guaranteed loans of $1.2 million, fair value gains related to held for investment government guaranteed loans of $3.5 million, and other noninterest income of $1.3 million. The increase in other noninterest income was primarily attributable to an increase in government guaranteed loan packaging fees.
Noninterest income from continuing operations was $49.8 million for the year ended 2023, an increase of $18.2 million, or 57.7%, from $31.6 million for the year ended 2022. The increase was primarily due to higher gains on the sale of government guaranteed loans of $2.8 million, an $11.0 million increase in fair value gains related to held for investment government guaranteed loans, and an increase in other noninterest income of $3.2 million. The increase in other noninterest income was primarily due to higher government guaranteed loan packaging fees of $2.9 million.
Noninterest Expense
Noninterest expense from continuing operations was $18.5 million in the fourth quarter of 2023, which was a $1.0 million, or 6.0%, increase from $17.4 million in the third quarter of 2023 and a $5.0 million, or 36.9%, increase compared to $13.5 million in the fourth quarter of 2022. The increase in the fourth quarter of 2023, as compared to the prior quarter, was primarily due to increases in incentive costs related to loan production. The increase in the fourth quarter of 2023, as compared to the fourth quarter of 2022 was primarily due to higher compensation costs of $2.9 million and higher loan origination expense of $1.5 million.
Noninterest expense from continuing operations was $67.7 million for the year ended 2023, which was a $12.5 million, or 22.6%, increase from $55.2 million for the year ended 2022. The increase was primarily the result of higher compensation costs and loan origination expense.
Discontinued Operations
Net loss on discontinued operations was $6 thousand in the fourth quarter of 2023, compared to the net loss of $47 thousand in the third quarter of 2023. The Company recorded a net loss on discontinued operations of $791 thousand in the fourth quarter of 2022. The losses in the third and fourth quarters of 2023 were partially due to lagging facilities costs as we seek to sublease vacant space. The $785 thousand decrease in the net loss from the year-ago quarter was primarily due to a decrease in noninterest expense of $2.2 million, partially offset by decreases in each of residential loan fee income of $883 thousand, interest income of $281 thousand, and income tax benefit of $260 thousand.
Net loss from discontinued operations was $213 thousand for the year ended 2023, which was a $5.6 million reduction from a net loss of $5.8 million for the year ended 2022. The majority of the discontinued loss in 2022 was recorded in the third quarter of 2022. As such, the net loss from discontinued operations for the year ended 2022 included restructuring charges of $4.3 million and the discontinued loss in the year ended 2023 represented a modest amount of trailing expenses from the discontinuation.
Balance Sheet
Assets
Total assets decreased $16.2 million, or 1.4%, during the fourth quarter of 2023 to $1.12 billion, mainly due to a decrease of $54.2 million in cash and cash equivalents and the sale of $124.3 million in government guaranteed loans, partially offset by new loan production. The reduction in cash and cash equivalents reflects lower liquidity needs compared to early 2023 when the Bank retained additional liquidity after the bank failures generated uncertainty for all banks. The result is a more efficient balance sheet.
Loans
Loans held for investment, excluding PPP loans, increased $49.3 million, or 5.7%, during the fourth quarter of 2023 and $203.0 million, or 28.6%, over the past year to $912.5 million, due to originations in both conventional community bank loans and government guaranteed loans, partially offset by government guaranteed loan sales. PPP loans, net of deferred origination fees, decreased $12.0 million in the fourth quarter of 2023 to $3.2 million.
Deposits
Deposits decreased $32.7 million, or 3.2%, during the fourth quarter of 2023 and increased $190.1 million, or 23.9%, from December 31, 2022, ending the fourth quarter of 2023 at $985.1 million. During the fourth quarter, there were decreases in noninterest-bearing deposit account balances of $4.3 million, interest-bearing transaction account balances of $8.0 million and time deposit balances of $43.3 million, partially offset by an increase in savings and money market deposit account balances of $22.9 million.
Asset Quality
In accordance with changes in generally accepted accounting principles, the Company adopted the new credit loss accounting standard known as CECL on January 1, 2023. At the time of adoption, the allowance for credit losses ("ACL") for loans increased by $3.1 million to 1.73% of loans, the reserve on unfunded commitments increased $213 thousand, and an $18 thousand reserve was established for held to maturity investment securities. These one-time increases resulted in an after-tax decrease to capital of $2.5 million, with no impact to earnings. Under CECL, the ACL is based on projected credit losses rather than on incurred losses.
The Company recorded a provision for credit losses in the fourth quarter of $2.7 million, compared to a $3.0 million provision for the third quarter of 2023. The Company recorded a $0.7 million provision for loan losses under the incurred loss methodology during the fourth quarter of 2022. The Company recorded a provision for credit losses in the year ended 2023 of $10.4 million, compared to a $0.7 million negative provision under the incurred loss methodology for the year ended 2022.
The ratio of ACL to total loans held for investment at amortized cost was 1.64% at December 31, 2023, 1.68% as of September 30, 2023, and 1.29% as of December 31, 2022. The ratio of ACL to total loans held for investment at amortized cost, excluding government guaranteed loans, was 2.03% at December 31, 2023, 2.03% as of September 30, 2023, and 1.62% as of December 31, 2022.
Net charge-offs for the fourth quarter of 2023 were $2.6 million, a $0.4 million increase from $2.2 million for the third quarter of 2023 and a $1.2 million increase compared to $1.4 million in the fourth quarter of 2022. Annualized net charge-offs as a percentage of average loans held for investment at amortized cost, excluding PPP loans, were 1.29% for the fourth quarter of 2023, up from 1.15% in the third quarter of 2023 and 0.82% in the fourth quarter of 2022. Net charge-offs for the year ended 2023 were elevated by $2.8 million due to the performance from a purchased portfolio of unsecured consumer loans. The Company stopped purchasing these loans at the end of 2022 and the portfolio balances decreased from $30.9 million to $17.0 million during 2023. Nonperforming assets to total assets was 0.94% as of December 31, 2023, compared to 0.92% as of September 30, 2023, and 1.12% as of December 31, 2022. Nonperforming assets, excluding government guaranteed loans, to total assets was 0.81% as of December 31, 2023, compared to 0.77% as of September 30, 2023, and 0.40% as of December 31, 2022.
Capital
The Bank’s Tier 1 leverage ratio was 9.38% as of December 31, 2023, compared to 9.16% as of September 30, 2023, and 10.79% at December 31, 2022. The CET 1 and Tier 1 capital ratio to risk-weighted assets were 11.77% as of December 31, 2023, compared to 12.21% as of September 30, 2023, and 13.75% as of December 31, 2022. The total capital to risk-weighted assets ratio was 13.02% as of December 31, 2023, compared to 13.47% as of September 30, 2023, and 15.00% as of December 31, 2022.
Liquidity
The Bank has liquidity well in excess of Bank’s internal minimums and those required to be categorized as well-capitalized by our bank regulators. The Bank’s overall liquidity position remains strong and stable. The on-balance sheet liquidity ratio at December 31, 2023 was 9.33%, as compared to 12.58% at December 31, 2022. The Bank retained additional liquidity after the bank failures generated uncertainty for all banks in early 2023. The Bank has robust liquidity resources. These resources include secured borrowings available from the Federal Home Loan Bank, the Federal Reserve, and lines of credit with other financial institutions. As of December 31, 2023, the Bank had $10.0 million of borrowings from the FHLB and no borrowings from the FRB or other financial institutions. This compares to $25.0 million of borrowings from the FRB and no borrowings from the FHLB or other financial institutions at December 31, 2022.
Recent Events
Preferred Stock Offering. On September 30, 2023, the Company issued 1,835 shares of 11.0% Series C Cumulative Convertible Preferred Stock. These shares have no par value and a liquidation preference of $1,000 per share plus an amount equal to all accumulated dividends thereon (whether or not earned or declared but without interest) to the date payment of such distribution is made in full. An additional 1,995 shares, 1,760 shares, 731 shares, and 125 shares were issued on October 18, 2023, October 31, 2023, November 30, 2023, and December 28, 2023, respectively. Total gross proceeds from the preferred stock offering totaled $6.45 million, which will be used for operating expenses or to contribute capital to BayFirst National Bank to support its growth and operations.
First Quarter Common Stock Dividend. On January 23, 2024, BayFirst’s Board of Directors declared a first quarter 2024 cash dividend of $0.08 per common share. The dividend will be payable March 15, 2024 to common shareholders of record as of March 1, 2024. This dividend marks the 31st consecutive quarterly cash dividend paid since BayFirst initiated cash dividends in 2016.
Conference Call
BayFirst’s management team will host a conference call on Friday, January 26, 2024 at 9:00 a.m. ET to discuss its fourth quarter results. Interested investors may listen to the call live under the Investor Relations tab at www.bayfirstfinancial.com. Investment professionals are invited to dial (888) 259-6580 to participate in the call using Conference ID 44206141. A replay will be available for one week at (877) 674-7070 using playback access code 206141# or at www.bayfirstfinancial.com.
About BayFirst Financial Corp.
BayFirst Financial Corp. is a registered bank holding company based in St. Petersburg, Florida which commenced operations on September 1, 2000. Its primary source of income is derived from its wholly owned subsidiary, BayFirst National Bank, a national banking association which commenced business operations on February 12, 1999. The Bank currently operates eleven full-service banking offices throughout the Tampa Bay region and offers a broad range of commercial and consumer banking services to businesses and individuals. The Bank was the 5th largest SBA 7(a) lender by dollar volume and 2nd by number of units originated nationwide through the first quarter ended December 31, 2023, of SBA's 2024 fiscal year. Additionally, it was the number one SBA 7(a) lender in dollar volume in the 5 county Tampa Bay market for the SBA's 2023 fiscal year. As of December 31, 2023, BayFirst Financial Corp. had $1.12 billion in total assets.
Forward-Looking Statements
In addition to the historical information contained herein, this presentation includes "forward-looking statements" within the meaning of such term in the Private Securities Litigation Reform Act of 1995. These statements are subject to many risks and uncertainties, including, but not limited to, the effects of health crises, global military hostilities, or climate change, including their effects on the economic environment, our customers and our operations, as well as any changes to federal, state or local government laws, regulations or orders in connection with them; the ability of the Company to implement its strategy and expand its banking operations; changes in interest rates and other general economic, business and political conditions, including changes in the financial markets; changes in business plans as circumstances warrant; risks related to mergers and acquisitions; changes in benchmark interest rates used to price loans and deposits, changes in tax laws, regulations and guidance; and other risks detailed from time to time in filings made by the Company with the SEC, including, but not limited to those “Risk Factors” described in our most recent Form 10-K and Form 10-Q. Readers should note that the forward-looking statements included herein are not a guarantee of future events, and that actual events may differ materially from those made in or suggested by the forward-looking statements.
BAYFIRST FINANCIAL CORP.
SELECTED FINANCIAL DATA (Unaudited)At or for the three months ended (Dollars in thousands, except for share data) 12/31/2023 9/30/2023 6/30/2023 3/31/2023 12/31/2022 Balance sheet data: Average loans held for investment at amortized cost, excluding PPP loans $ 812,446 $ 773,749 $ 763,854 $ 699,355 $ 677,172 Average total assets 1,108,550 1,088,517 1,064,068 969,489 925,194 Average common shareholders’ equity 82,574 81,067 80,310 78,835 80,158 Total loans held for investment 915,726 878,447 836,704 792,777 728,652 Total loans held for investment, excluding PPP loans 912,524 863,203 821,016 774,467 709,479 Total loans held for investment, excl gov’t gtd loan balances 698,106 687,141 638,148 596,505 569,892 Allowance for credit losses (1) 13,497 13,365 12,598 12,208 9,046 Total assets 1,117,766 1,133,979 1,087,399 1,069,839 938,895 Common shareholders’ equity 84,656 82,725 81,460 80,734 82,279 Share data: Basic earnings per common share $ 0.32 $ 0.42 $ 0.29 $ 0.13 $ 0.28 Diluted earnings per common share 0.32 0.41 0.29 0.13 0.28 Dividends per common share 0.08 0.08 0.08 0.08 0.08 Book value per common share 20.60 20.12 19.85 19.70 20.35 Tangible book value per common share (2) 20.60 20.12 19.85 19.70 20.35 Performance and capital ratios: Return on average assets(3) 0.60 % 0.71 % 0.52 % 0.30 % 0.57 % Return on average common equity(3) 6.37 % 8.46 % 5.86 % 2.69 % 5.56 % Net interest margin 3.48 % 3.36 % 4.18 % 4.17 % 4.19 % Dividend payout ratio 25.03 % 19.15 % 27.89 % 61.48 % 28.99 % Asset quality ratios: Net charge-offs(3) $ 2,612 $ 2,234 $ 2,253 $ 1,887 $ 1,393 Net charge-offs/avg loans held for investment at amortized cost, excl PPP(3) 1.29 % 1.15 % 1.18 % 1.08 % 0.82 % Nonperforming loans $ 10,456 $ 10,393 $ 8,606 $ 5,890 $ 10,468 Nonperforming loans (excluding gov't gtd balance) $ 9,032 $ 8,776 $ 6,590 $ 2,095 $ 3,671 Nonperforming loans/total loans held for investment 1.14 % 1.18 % 1.03 % 0.74 % 1.44 % Nonperforming loans (excl gov’t gtd balance)/total loans held for investment 0.99 % 1.00 % 0.79 % 0.26 % 0.50 % ACL/Total loans held for investment at amortized cost (1) 1.64 % 1.68 % 1.61 % 1.69 % 1.29 % ACL/Total loans held for investment at amortized cost, excl PPP loans (1) 1.64 % 1.72 % 1.64 % 1.73 % 1.33 % ACL/Total loans held for investment at amortized cost, excl government guaranteed loans (1) 2.03 % 2.03 % 2.03 % 2.10 % 1.62 % Other Data: Full-time equivalent employees 305 307 302 300 291 Banking center offices 11 10 9 9 8 (1) Prior to January 1, 2023, the incurred loss methodology was used to estimate credit losses. Beginning with that date, credit losses are estimated using the CECL methodology. (2) See section entitled "GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures" below for a reconciliation to most comparable GAAP equivalent. (3) Annualized GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures
Some of the financial measures included in this report are not measures of financial condition or performance recognized by GAAP. These non-GAAP financial measures include tangible common shareholders' equity and tangible book value per common share. Our management uses these non-GAAP financial measures in its analysis of our performance, and we believe that providing this information to financial analysts and investors allows them to evaluate capital adequacy.
The following presents these non-GAAP financial measures along with their most directly comparable financial measures calculated in accordance with GAAP:
Tangible Common Shareholders' Equity and Tangible Book Value Per Common Share (Unaudited) As of (Dollars in thousands, except for share data) December 31, 2023 September 30, 2023 June 30, 2023 March 31, 2023 December 31, 2022 Total shareholders’ equity $ 100,707 $ 94,165 $ 91,065 $ 90,339 $ 91,884 Less: Preferred stock liquidation preference (16,051 ) (11,440 ) (9,605 ) (9,605 ) (9,605 ) Total equity available to common shareholders 84,656 82,725 81,460 80,734 82,279 Less: Goodwill — — — — — Tangible common shareholders' equity $ 84,656 $ 82,725 $ 81,460 $ 80,734 $ 82,279 Common shares outstanding 4,110,470 4,110,650 4,103,834 4,098,805 4,042,474 Tangible book value per common share $ 20.60 $ 20.12 $ 19.85 $ 19.70 $ 20.35 BAYFIRST FINANCIAL CORP. CONSOLIDATED BALANCE SHEETS (Dollars in thousands) 12/31/2023 9/30/2023 12/31/2022 Assets Unaudited Unaudited Cash and due from banks $ 4,099 $ 4,501 $ 3,649 Interest-bearing deposits in banks 54,286 108,052 62,397 Cash and cash equivalents 58,385 112,553 66,046 Time deposits in banks 4,646 4,631 4,881 Investment securities available for sale, at fair value (amortized cost $43,597, $44,569, and $47,374 at December 31, 2023, September 30, 2023, and December 31, 2022, respectively) 39,575 39,683 42,349 Investment securities held to maturity, at amortized cost, net of allowance for credit losses of $17, $19, and $0 (fair value: $2,347, $2,282, and $4,755 at December 31, 2023, September 30, 2023, and December 31, 2022, respectively) 2,484 2,482 5,002 Nonmarketable equity securities 4,770 4,250 4,037 Government guaranteed loans held for sale — 1,855 — Government guaranteed loans held for investment, at fair value 91,508 84,178 27,078 Loans held for investment, at amortized cost net of allowance for credit losses of $13,497, $13,365, and $9,046 at December 31, 2023, September 30, 2023, and December 31, 2022, respectively) 810,721 780,904 692,528 Accrued interest receivable 7,130 6,907 4,452 Premises and equipment, net 38,874 37,992 35,440 Loan servicing rights 14,959 14,216 10,906 Deferred income tax assets — 414 980 Right-of-use operating lease assets 2,416 2,594 3,177 Bank owned life insurance 25,800 25,630 25,159 Other assets 16,150 15,292 15,649 Assets from discontinued operations 348 398 1,211 Total assets $ 1,117,766 $ 1,133,979 $ 938,895 Liabilities: Noninterest-bearing deposits $ 93,708 $ 98,008 $ 93,235 Interest-bearing transaction accounts 259,422 267,404 202,656 Savings and money market deposits 373,000 350,110 363,053 Time deposits 259,008 302,274 136,126 Total deposits 985,138 1,017,796 795,070 FHLB and FRB borrowings 10,000 — 25,000 Subordinated debentures 5,949 5,947 5,992 Notes payable 2,389 2,503 2,844 Accrued interest payable 882 632 704 Operating lease liabilities 2,619 2,812 3,538 Deferred income tax liabilities 482 — — Accrued expenses and other liabilities 8,980 9,409 12,205 Liabilities from discontinued operations 620 715 1,658 Total liabilities 1,017,059 1,039,814 847,011 Shareholders’ equity: Unaudited Unaudited Preferred stock, Series A; no par value, 10,000 shares authorized, 6,395 shares issued and outstanding at December 31, 2023, September 30, 2023, and December 31, 2022; aggregate liquidation preference of $6,395 each period 6,161 6,161 6,161 Preferred stock, Series B; no par value, 20,000 shares authorized, 3,210 shares issued and outstanding at December 31, 2023, September 30, 2023, and December 31, 2022; aggregate liquidation preference of $3,210 each period 3,123 3,123 3,123 Preferred stock, Series C; no par value, 10,000 shares authorized, 6,446 and 1,835 shares issued and outstanding at December 31, 2023 and September 30, 2023, respectively, and no shares issued and outstanding as of December 31, 2022; aggregate liquidation preference of $6,446 and $1,835 at December 31, 2023 and September 30, 2023, respectively 6,446 1,835 — Common stock and additional paid-in capital; no par value, 15,000,000 shares authorized, 4,110,470, 4,110,650, and 4,042,474 shares issued and outstanding at December 31, 2023, September 30, 2023, and December 31, 2022, respectively 54,521 54,500 53,023 Accumulated other comprehensive loss, net (2,981 ) (3,621 ) (3,724 ) Unearned compensation (958 ) (1,242 ) (178 ) Retained earnings 34,395 33,409 33,479 Total shareholders’ equity 100,707 94,165 91,884 Total liabilities and shareholders’ equity $ 1,117,766 $ 1,133,979 $ 938,895 BAYFIRST FINANCIAL CORP. CONSOLIDATED STATEMENTS OF INCOME For the Quarter Ended Year-to-Date (Dollars in thousands, except per share data) 12/31/2023 9/30/2023 12/31/2022 12/31/2023 12/31/2022 Interest income: Unaudited Unaudited Unaudited Unaudited Loans, including fees $ 17,714 $ 16,032 $ 11,680 $ 63,189 $ 36,492 Interest-bearing deposits in banks and other 1,140 1,588 840 5,328 2,074 Total interest income 18,854 17,620 12,520 68,517 38,566 Interest expense: Deposits 9,719 9,055 3,711 30,795 7,844 Other 258 172 235 1,291 722 Total interest expense 9,977 9,227 3,946 32,086 8,566 Net interest income 8,877 8,393 8,574 36,431 30,000 Provision for credit losses 2,737 3,001 700 10,445 (700 ) Net interest income after provision for credit losses 6,140 5,392 7,874 25,986 30,700 Noninterest income: Loan servicing income, net 677 760 532 2,826 2,040 Gain on sale of government guaranteed loans, net 6,977 7,139 5,805 24,553 21,720 Service charges and fees 555 408 355 1,721 1,306 Government guaranteed loans fair value gain, net 4,697 4,543 1,246 15,718 4,756 Other noninterest income 1,785 1,829 466 4,937 1,728 Total noninterest income 14,691 14,679 8,404 49,755 31,550 Noninterest Expense: Salaries and benefits 7,446 7,912 6,245 30,973 27,422 Bonus, commissions, and incentives 2,211 1,406 561 5,726 2,394 Occupancy and equipment 1,150 1,262 985 4,758 3,995 Data processing 1,422 1,526 1,342 5,611 4,828 Marketing and business development 640 929 560 3,336 2,660 Professional services 1,070 816 994 3,657 4,083 Loan origination and collection 2,728 1,981 1,225 7,425 3,711 Employee recruiting and development 510 543 577 2,177 2,230 Regulatory assessments 266 284 158 881 457 Other noninterest expense 1,023 768 846 3,163 3,432 Total noninterest expense 18,466 17,427 13,493 67,707 55,212 Income before taxes from continuing operations 2,365 2,644 2,785 8,034 7,038 Income tax expense from continuing operations 704 674 672 2,119 1,560 Net income from continuing operations 1,661 1,970 2,113 5,915 5,478 Loss from discontinued operations before income taxes (8 ) (62 ) (1,053 ) (283 ) (7,759 ) Income tax benefit from discontinued operations (2 ) (15 ) (262 ) (70 ) (1,932 ) Net loss from discontinued operations (6 ) (47 ) (791 ) (213 ) (5,827 ) Net income (loss) 1,655 1,923 1,322 5,702 (349 ) Preferred dividends 341 208 208 965 832 Net income available to (loss attributable to) common shareholders $ 1,314 $ 1,715 $ 1,114 $ 4,737 $ (1,181 ) Basic earnings (loss) per common share: Unaudited Unaudited Unaudited Unaudited Continuing operations $ 0.32 $ 0.43 $ 0.47 $ 1.21 $ 1.16 Discontinued operations — (0.01 ) (0.19 ) (0.05 ) (1.45 ) Basic earnings (loss) per common share $ 0.32 $ 0.42 $ 0.28 $ 1.16 $ (0.29 ) Diluted earnings (loss) per common share: Continuing operations $ 0.32 $ 0.42 $ 0.47 $ 1.17 $ 1.16 Discontinued operations — (0.01 ) (0.19 ) (0.05 ) (1.38 ) Diluted earnings (loss) per common share $ 0.32 $ 0.41 $ 0.28 $ 1.12 $ (0.22 ) Loan Composition (Dollars in thousands) 12/31/2023 9/30/2023 6/30/2023 3/31/2023 12/31/2022 (Unaudited) (Unaudited) (Unaudited) (Unaudited) Government guaranteed loans held for investment, at fair value $ 91,508 $ 84,178 $ 52,165 $ 69,047 $ 27,078 Real estate: Residential 264,126 248,973 235,339 214,638 202,329 Commercial 293,595 280,620 272,200 239,720 231,281 Construction and land 26,272 25,339 15,575 11,069 9,320 Commercial and industrial 177,566 174,238 198,639 199,721 194,643 Commercial and industrial - PPP 3,202 15,364 15,808 18,430 19,293 Consumer and other 47,287 39,024 38,103 32,697 37,288 Loans held for investment, at amortized cost, gross 812,048 783,558 775,664 716,275 694,154 Deferred loan costs, net 14,707 12,928 11,506 10,678 10,740 Discount on government guaranteed loans sold (7,040 ) (6,623 ) (5,937 ) (6,046 ) (5,621 ) Premium on loans purchased, net 4,503 4,406 3,306 2,823 2,301 Allowance for credit losses (1) (13,497 ) (13,365 ) (12,598 ) (12,208 ) (9,046 ) Loans held for investment, at amortized cost, net 810,721 780,904 771,941 711,522 692,528 Total loans held for investment, net $ 902,229 $ 865,082 $ 824,106 $ 780,569 $ 719,606 Nonperforming Assets (Unaudited) (Dollars in thousands) 12/31/2023 9/30/2023 6/30/2023 3/31/2023 12/31/2022 Nonperforming loans (government guaranteed balances) $ 1,424 $ 1,617 $ 2,016 $ 3,795 $ 6,797 Nonperforming loans (unguaranteed balances) 9,032 8,776 6,590 2,095 3,671 Total nonperforming loans 10,456 10,393 8,606 5,890 10,468 OREO — — 3 3 56 Total nonperforming assets $ 10,456 $ 10,393 $ 8,609 $ 5,893 $ 10,524 Nonperforming loans as a percentage of total loans held for investment 1.14 % 1.18 % 1.03 % 0.74 % 1.44 % Nonperforming loans (excluding government guaranteed balances) to total loans held for investment 0.99 % 1.00 % 0.79 % 0.26 % 0.50 % Nonperforming assets as a percentage of total assets 0.94 % 0.92 % 0.79 % 0.55 % 1.12 % Nonperforming assets (excluding government guaranteed balances) to total assets 0.81 % 0.77 % 0.61 % 0.20 % 0.40 % ACL to nonperforming loans (1) 129.08 % 128.60 % 146.39 % 207.27 % 86.42 % ACL to nonperforming loans (excluding government guaranteed balances) (1) 149.44 % 152.29 % 191.17 % 582.72 % 246.42 % (1) Prior to January 1, 2023, the incurred loss methodology was used to estimate credit losses. Beginning with that date, credit losses are estimated using the CECL methodology.
Contacts: Thomas G. Zernick Scott J. McKim Chief Executive Officer Chief Financial Officer 727.399.5680 727.521.7085 
