UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended March 31, 2022
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from to

Commission file number 001-41068

BAYFIRST FINANCIAL CORP.

(Exact name of registrant as specified in its charter)

Florida	59-3665079
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
700 Central Avenue St. Petersburg, Florida	33701
(Address of Principal Executive Offices)	(Zip Code)

(727) 440-6848

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock	BAFN	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes  x   No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	x	Smaller reporting company	x
		Emerging growth company	x

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).     Yes   o     No  x

The registrant had outstanding 4,013,036 shares of common stock as of May 11, 2022.

		Page
Part I - Financial Information
Item 1.	Financial Statements	3
	Consolidated Balance Sheets at March 31, 2022 (Unaudited) and December 31, 2021	3
	Consolidated Statements of Income (Unaudited) for the three months ended March 31, 2022 and 2021	4
	Consolidated Statements of Comprehensive Income (Loss) (Unaudited) for the three months ended March 31, 2022 and 2021	5
	Consolidated Statements of Changes in Shareholders’ Equity (Unaudited) for the three months ended March 31, 2022 and 2021	6
	Consolidated Statements of Cash Flows (Unaudited) for the three months ended March 31, 2022 and 2021	7
	Notes to the Consolidated Financial Statements (Unaudited)	9
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	49
Item 4.	Controls and Procedures	49
Part II - Other Information
Item 1.	Legal Proceedings	51
Item 1A.	Risk Factors	51
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	51
Item 3.	Defaults Upon Senior Securities	52
Item 4.	Mine Safety Disclosures	52
Item 5.	Other Information	52
Item 6.	Exhibits	53
Signatures		54

Glossary of Acronyms and Abbreviations

The acronyms and abbreviations identified below may be used throughout this Quarterly Report on Form 10-Q or in our other SEC filings. You may find it helpful to refer back to this page while reading this report.

AFS: Available for Sale	FDIC: Federal Deposit Insurance Corporation
ALCO: Asset-Liability Committee	FHLB: Federal Home Loan Bank
ALLL: Allowance for Loan Losses	FNBB: First National Bankers Bank
AOCI: Accumulated Other Comprehensive Income	FRB: Federal Reserve Bank
ASC: FASB Accounting Standards Codification	FVO: Fair Value Option
ASU: FASB Accounting Standards Update	GAAP: Generally Accepted Accounting Principles
BHCA: Bank Holding Company Act of 1956, as amended	IRA: Individual Retirement Account
BOLI: Bank Owned Life Insurance	JOBS Act: Jumpstart Our Business Startups Act of 2012
BSA: Bank Secrecy Act of 1970	LHFS: Loans Held for Sale
CAA: Consolidated Appropriations Act	MMDA: Money Market Deposit Account
CARES Act: Coronavirus Aid, Relief, and Economic Security Act	NOW: Negotiable Order of Withdrawal
CBLR: Community Bank Leverage Ratio	NSPP: Non-Qualified Stock Purchase Plan
CECL: Current Expected Credit Losses	OFR: Florida Office of Financial Regulation
CET1: Common Equity Tier 1 Capital	OLC: Officer Loan Commitee
C&I: Commercial and Industrial	OREO: Other Real Estate Owned
CIK: Central Index Key	OTTI: Other-Than-Temporary Impairment
COVID-19: Coronavirus Disease 2019	PCAOB: Public Company Accounting Oversight Board
DCLC: Directors’ Credit and Loan Committee	PPP: Paycheck Protection Program
DODD-Frank Act: Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010	PPPLF: Paycheck Protection Program Liquidity Facility
DRIP: Dividend Reinvestment Plan	QIB: Qualified Institutional Buyer
EGC: Emerging Growth Company	SBA: Small Business Administration
Equity Plan: The Amended and Restated 2017 Equity Inventive Plan	SEC: U.S. Securities and Exchange Commission
ESG: Environmental, Social, and Governance	SOFR: Secured Overnight Financing Rate
ESOP: Employee Stock Ownership Plan	U.S.: United States
ESPP: Employee Stock Purchase Plan	USDA: United States Department of Agriculture
Exchange Act: Securities Exchange Act of 1934	USDA B&I: United States Department of Agriculture Buiness and Industry
FASB: Financial Accounting Standards Board	TDR: Troubled Debt Restructure
FBCA: Florida Business Corporation Act	iXBRL: Inline eXtensible Business Reporting Language

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BAYFIRST FINANCIAL CORP.

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share data)

Part I - Financial Information

Item 1. Financial Statements

ASSETS
	March 31, 2022		December 31, 2021
	(Unaudited)
Cash and due from banks	$	3,141	$	2,869
Interest-bearing deposits in banks	118,960		106,858
Cash and cash equivalents	122,101		109,727
Time deposits in banks	3,881		2,381
Investment securities available for sale	41,656		30,893
Investment securities held to maturity	2		2
Restricted equity securities, at cost	2,520		2,827
Residential loans held for sale	75,022		114,131
Government guaranteed loans held for sale	1,445		1,460
SBA loans held for investment, at fair value	8,769		9,614
Loans held for investment, at amortized cost net of allowance for loan losses of $10,170 and $13,452	542,858		560,882
Accrued interest receivable	3,150		3,564
Premises and equipment, net	31,037		29,671
Loan servicing rights	7,601		6,619
Deferred income taxes	490		454
Right-of-use operating lease assets	4,166		4,543
Bank owned life insurance	24,698		24,547
Other assets	19,145		15,780
Total assets	$	888,541	$	917,095
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Noninterest-bearing deposits	$	92,680	$	83,638
Interest-bearing transaction accounts	180,815		163,495
Savings and money market deposits	464,847		423,864
Time deposits	31,787		50,688
Total deposits	770,129		721,685
Subordinated debentures	5,987		5,985
Notes payable	3,186		3,299
PPP Liquidity Facility	—		69,654
Accrued interest payable	86		326
Operating lease liabilities	4,377		4,747
Accrued expenses and other liabilities	9,897		15,109
Total liabilities	793,662		820,805
Shareholders’ equity:
Preferred stock, Series A; no par value, 10,000 shares authorized, 6,395 shares issued and outstanding at March 31, 2022 and December 31, 2021; aggregate liquidation preference of $6,395	6,161		6,161
Preferred stock, Series B; no par value, 20,000 shares authorized, 3,210 shares issued and outstanding at March 31, 2022 and December 31, 2021; aggregate liquidation preference of $3,210	3,123		3,123
Common stock and additional paid-in capital; no par value, 15,000,000 shares authorized, 4,013,173 and 3,981,117 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively	52,252		51,496
Accumulated other comprehensive loss, net	(1,458)		(420)
Unearned compensation	(630)		(17)
Retained earnings	35,431		35,947
Total shareholders’ equity	94,879		96,290
Total liabilities and shareholders’ equity	$	888,541	$	917,095

See accompanying notes.

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BAYFIRST FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(Dollars in thousands, except per share data)

	Three Months Ended March 31,
	2022		2021
Interest income:
Loans, including fees	$	7,555	$	14,811
Interest-bearing deposits in banks and other	185		81
Total interest income	7,740		14,892
Interest expense:
Deposits	1,217		1,320
Borrowings	117		942
Total interest expense	1,334		2,262
Net interest income	6,406		12,630
Provision for loan losses	(2,400)		2,000
Net interest income after provision for loan losses	8,806		10,630
Noninterest income:
Residential loan fee income	13,191		32,029
Loan servicing income, net	461		704
Gain on sale of government guaranteed loans, net	4,621		—
Service charges and fees	282		222
SBA loan fair value gain (loss)	(197)		72
Other noninterest income	510		132
Total noninterest income	18,868		33,159
Noninterest expense:
Salaries and benefits	13,697		13,167
Bonus, commissions, and incentives	4,606		11,873
Mortgage banking	1,002		1,695
Occupancy and equipment	1,421		1,332
Data processing	1,467		1,269
Marketing and business development	1,742		1,642
Professional services	1,307		924
Loan origination and collection	670		496
Employee recruiting and development	871		614
Regulatory assessments	69		102
Other noninterest expense	795		607
Total noninterest expense	27,647		33,721
Income before income taxes	27		10,068
Income tax expense	14		2,557
Net income	13		7,511
Preferred stock dividends	208		332
Net income (loss attributable to) available to common shareholders	$	(195)	$	7,179
Basic earnings (loss) per common share	$	(0.05)	$	2.05
Diluted earnings (loss) per common share	$	(0.05)	$	1.82

See accompanying notes.

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BAYFIRST FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(Dollars in thousands)

	Three Months Ended March 31,
	2022		2021
Net income	$	13	$	7,511
Net unrealized (losses) on investment securities available for sale	(1,377)		—
Deferred income tax benefit	339		—
Other comprehensive (loss), net	(1,038)		—
Comprehensive income (loss)	$	(1,025)	$	7,511

See accompanying notes.

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BAYFIRST FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)

(Dollars in thousands, except per share data)

	Preferred Shares, Series A	Preferred Shares, Series B	Common Shares(1)	Preferred Stock, Series A		Preferred Stock, Series B		Common Stock and Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Unearned Compensation		Retained Earnings		Total
Balance at January  1, 2021	6,395	8,760	3,485,018	$	6,161	$	8,516	$	43,043	$	—	$	(41)	$	13,390	$	71,069
Net income	—	—	—	—		—		—		—		—		7,511		7,511
Issuance of common stock under:
Non-qualified stock purchase plan	—	—	13,142	—		—		207		—		—		—		207
Dividend reinvestment plan	—	—	6,339	—		—		107		—		—		—		107
Issuance of common stock, net	—	—	14,471	—		—		224		—		—		—		224
Issuance of preferred stock, net	—	740	—	—		727		—		—		—		—		727
Stock-based awards - common stock:
Restricted stock expense, net of tax impact	—	—	2,227	—		—		29		—		6		—		35
Stock option expense	—	—	—	—		—		106		—		—		—		106
Conversion of Series B preferred stock to common stock	—	(2,520)	157,369	—		(2,452)		2,452		—		—		—		—
Dividends declared on:
Preferred stock	—	—	—	—		—		—		—		—		(331)		(331)
Common stock ($0.067 per share)	—	—	—	—		—		—		—		—		(234)		(234)
Balance at March 31, 2021	6,395	6,980	3,678,566	$	6,161	$	6,791	$	46,168	$	—	$	(35)	$	20,336	$	79,421
Balance at January  1, 2022	6,395	3,210	3,981,117	$	6,161	$	3,123	$	51,496	$	(420)	$	(17)	$	35,947	$	96,290
Net income	—	—	—	—		—		—		—		—		13		13
Exercise of stock warrants	—	—	750	—		—		13		—		—		—		13
Repurchase of common stock	—	—	(2,212)	—		—		(49)		—		—		—		(49)
Exercise of stock options, net	—	—	401	—		—		—		—		—		—		—
Stock-based awards - common stock:
Restricted stock expense, net of tax impact	—	—	33,117	—		—		713		—		(613)		—		100
Stock option expense	—	—	—	—		—		79		—		—		—		79
Other comprehensive income (loss), net	—	—	—	—		—		—		(1,038)		—		—		(1,038)
Dividends declared on:
Preferred stock	—	—	—	—		—		—		—		—		(208)		(208)
Common stock ($0.08 per share)	—	—	—	—		—		—		—		—		(321)		(321)
Balance at March 31, 2022	6,395	3,210	4,013,173	$	6,161	$	3,123	$	52,252	$	(1,458)	$	(630)	$	35,431	$	94,879

(1) Common shares for all periods shown herein reflect the three-for-two stock split, effective on May 10, 2021.

See accompanying notes.

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BAYFIRST FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Dollars in thousands)

	Three Months Ended March 31,
	2022		2021
Cash flows from operating activities:
Net income	$	13	$	7,511
Adjustments to reconcile net income to net cash from operating activities:
Depreciation of fixed assets	495		414
Net securities premium amortization	40		—
Amortization of debt issuance costs	—		3
Amortization of discount on PPP loans purchased	(2)		(14)
Provision for loan losses	(2,400)		2,000
Accretion of discount on unguaranteed loans	(411)		(457)
Deferred tax expense (benefit)	303		(1,904)
Origination of SBA loans held for sale	(1,445)		—
Proceeds from sales of SBA loans held for sale	81,880		—
Net gains on sales of SBA loans	(4,621)		—
Origination of residential loans held for sale	(335,560)		(715,856)
Proceeds from sales of residential loans held for sale	380,999		739,409
Net gains on sales of residential loans held for sale	(9,070)		(28,944)
Change in fair value of residential loans held for sale	2,999		5,333
Change in fair value of SBA loans held for investment, at fair value	197		(72)
Amortization of loan servicing rights	707		716
Non-qualified stock purchase plan expense	25		19
Stock based compensation expense	154		141
Income from bank owned life insurance	(151)		(85)
Changes in:
Accrued interest receivable	414		(1,284)
Other assets	(2,988)		(4,016)
Accrued interest payable	(240)		(1,105)
Other liabilities	(5,582)		372
Net cash from operating activities	105,756		2,181
Cash flows from investing activities:
Purchase of investment securities available for sale	(12,820)		—
Principal payments on investment securities available for sale	640		—
Principal payments on investment securities held to maturity	—		10
Purchase (sale) of restricted equity securities	307		(357)
Purchase of time deposits from banks	(1,500)		—
Loan (originations) and payments, net	(56,260)		(160,813)
Purchase of premises and equipment	(1,861)		(602)
Net cash (used in) investing activities	(71,494)		(161,762)
Cash flows from financing activities:
Net change in deposits	48,444		48,480
Net increase of short-term fed funds purchased	—		40,000
Payments on notes payable	(113)		(113)
Net proceeds (repayments) of PPP Liquidity Facility borrowings	(69,654)		76,151
Proceeds from issuance of preferred stock, net	—		727
Proceeds from sale of common stock, net	13		519

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BAYFIRST FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Dollars in thousands)

	Three Months Ended March 31,
	2022		2021
Share buyback - redeemed stock	(49)		—
Dividends paid on common stock	(321)		(234)
Dividends paid on preferred stock	(208)		(331)
Net cash from (used in) financing activities	(21,888)		165,199
Net change in cash and cash equivalents	12,374		5,618
Cash and cash equivalents, beginning of period	109,727		55,379
Cash and cash equivalents, end of period	$	122,101	$	60,997
Supplemental cash flow information
Interest paid	$	1,574	$	3,367
Income taxes paid	$	22	$	2
Supplemental noncash disclosures
Net change in unrealized holding gain on investment securities available for sale	$	(1,038)	$	—
Transfer of loans and leases held for investment to loans held for sale	$	77,747	$	—
Recognition of right of use asset and operating lease liability	$	—	$	136
Conversion of Series B preferred stock to common stock	$	—	$	2,452

See accompanying notes.

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BAYFIRST FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data) (Unaudited)

NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements include BayFirst Financial Corp. and its wholly owned subsidiary, First Home Bank d/b/a BayFirst Bank, together referred to as “the Company”.

These unaudited consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles followed within the financial services industry for interim financial information and Article 8 of Regulation S-X. Accordingly, they do not include all of the information or notes required for complete financial statements. The condensed consolidated balance sheet as of December 31, 2021 has been derived from the audited consolidated financial statements of BayFirst Financial Corp. for that period.

The Company principally operates in two business segments, Banking and Residential Mortgage Lending.

In the opinion of management, all adjustments, consisting of normal and recurring items, considered necessary for a fair presentation of the consolidated financial statements for the interim periods have been included. All significant intercompany accounts and transactions have been eliminated in consolidation. Certain amounts reported in prior periods have been reclassified to conform to current year presentation. These reclassifications did not have a material effect on previously reported net income, shareholders’ equity or cash flows.

Operating results for the three month period ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. These statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2021.

The Company’s significant accounting policies are described in Note 1 of the Notes to Consolidated Financial Statements for the year ended December 31, 2021 in the Company’s Annual Report filed on Form 10-K. There were no new accounting policies or changes to existing policies adopted during the first three months of 2022 which had a significant effect on the Company’s results of operations or statement of financial condition. For interim reporting purposes, the Company follows the same basic accounting policies and considers each interim period as an integral part of an annual period.

Effective May 10, 2021, the Company effected a three-for-two stock split. All share amounts and per share financial data contained in these financial statements related to periods prior and subsequent to this stock split have been adjusted to reflect the split.

Use of Estimates: To prepare financial statements in conformity with GAAP, management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ. The most significant estimates relate to the allowance for loan losses, SBA loan servicing rights, and fair value of residential loans held for sale and residential mortgage derivatives.

Emerging Growth Company Status: The Company is expected to remain an "emerging growth company," as defined in the JOBS Act, through December 31, 2026. Section 107 of the JOBS Act provides that an emerging growth company can take advantage of an extended transition period when complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of this extended transition period, which means these financial statements, as well as financial statements we file in the future for as long as we remain an emerging growth company, will be subject to all new or revised accounting standards generally applicable to private companies.

Contingencies:  Due to the nature of their activities, the Company and its subsidiary are at times engaged in various legal proceedings that arise in the course of normal business, some of which were outstanding as of March 31, 2022. Although the ultimate outcome of all claims and lawsuits outstanding as of March 31, 2022 cannot be ascertained at this time, it is the opinion of management that these matters, when resolved, will not have a material adverse effect on the Company’s results of operations or financial condition.

New Accounting Standards Not Yet Adopted:

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). This new guidance was issued to replace the incurred loss model for loans and other financial assets with an expected loss model, which is referred to as the CECL model. The CECL model is applicable to the measurement of credit losses on financial assets measured at amortized cost, including loan receivables and debt securities held to maturity. It also applies to off-balance sheet credit exposures not accounted for as insurance (i.e., loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net

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BAYFIRST FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data) (Unaudited)

investments in certain leases recognized by a lessor. In addition, the amendments in ASU 2016-13 require credit losses on securities available for sale to be presented as a valuation allowance rather than as a direct write-down thereon. The amendments in this ASU are effective for the Company for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. Early adoption is permitted; however, the Company has elected to adopt new or revised accounting standards using the delayed effective dates applicable to Emerging Growth Companies. Management is in the process of evaluating the impact of adoption of this ASU on its Consolidated Financial Statements, processes, and controls and is not currently able to reasonably estimate the impact of adoption on the Company’s consolidated financial position, results of operations; however, adoption is likely to lead to significant changes in accounting policies related to, and the methods employed in estimating, the allowance for credit losses. It is possible that the impact will be material to the Company’s consolidated financial position and results of operations. To date, the Company has established a CECL steering committee and has an implementation plan. The Company is reviewing potential methodologies for estimating expected credit losses using reasonable and supportable forecast information to use in the CECL model.

ASU 2022-02, “Financial Instruments - Credit Losses (Topic 326)” (“ASU 2022-02”) eliminates the guidance on troubled debt restructurings and requires entities to evaluate all loan modifications to determine if they result in a new loan or a continuation of the existing loan. ASU 2022-02 also requires that entities disclose current-period gross charge-offs by year of origination for loans and leases. ASU 2022-02 is effective January 1, 2023 and is not expected to have a significant impact on our financial statement disclosures.

NOTE 2 – INVESTMENT SECURITIES

The amortized costs, gross unrealized gains and losses, and estimated fair values of securities available for sale at March 31, 2022 and December 31, 2021 are summarized as follows:

March 31, 2022	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Investment securities available for sale:
Asset-backed securities	$	7,621	$	—	$	(50)	$	7,571
Mortgage-backed securities:
U.S. Government-sponsored enterprises	4,388		—		(323)		4,065
Collateralized mortgage obligations:
U.S. Government-sponsored enterprises	23,721		—		(1,575)		22,146
Corporate bonds	7,874		—		—		7,874
Total investment securities available for sale	$	43,604	$	—	$	(1,948)	$	41,656

December 31, 2021	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Investment securities available for sale:
Asset-backed securities	$	7,624	$	—	$	(89)	$	7,535
Mortgage-backed securities:
U.S. Government-sponsored enterprises	4,470		—		(76)		4,394
Collateralized mortgage obligations:
U.S. Government-sponsored enterprises	19,370		—		(406)		18,964
Total investment securities available for sale	$	31,464	$	—	$	(571)	$	30,893

The amortized cost and fair value of securities are shown in the table below by contractual maturity. Actual timing may

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BAYFIRST FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data) (Unaudited)

differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

	March 31, 2022
	Amortized Cost		Fair Value
One to five years	5,018		5,018
Five to ten years	2,856		2,856
Beyond ten years	35,730		33,782
Total	$	43,604	$	41,656

As of March 31, 2022, the Company's investment portfolio consisted of 14 securities, 9 of which were in an unrealized loss position. The investment securities available for sale were purchased after March 31, 2021 and, therefore, had been in an unrealized loss position for less than 12 months at March 31, 2022. The Company expects full recovery of the carrying amount of these securities and does not intend to sell the securities in an unrealized loss position nor does it believe it will be required to sell securities in an unrealized loss position before the value is recovered. The Company does not consider these securities to be other-than-temporarily impaired at March 31, 2022.

The following table summarizes securities with unrealized losses at March 31, 2022 and December 31, 2021 aggregated by security type and length of time in a continuous unrealized loss position:

	Less than 12 Months				12 Months or Longer				Total
March 31, 2022	Far Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Asset-backed securities	$	7,571	$	(50)	$	—	$	—	$	7,571	$	(50)
Mortgage-backed securities:
U.S. Government-sponsored enterprises	4,065		(323)						4,065		(323)
Collateralized mortgage obligations:
U.S. Government-sponsored enterprises	17,215		(1,575)		—		—		17,215		(1,575)
Total securities available for sale	$	28,851	$	(1,948)	$	—	$	—	$	28,851	$	(1,948)
December 31, 2021
Asset-backed securities	$	7,535	$	(89)	$	—	$	—	$	7,535	$	(89)
Mortgage-backed securities:
U.S. Government-sponsored enterprises	4,394		(76)		—		—		4,394		(76)
Collateralized mortgage obligations:
U.S. Government-sponsored enterprises	18,964		(406)		—		—		18,964		(406)
Total securities available for sale	$	30,893	$	(571)	$	—	$	—	$	30,893	$	(571)

The Company held one security classified as held to maturity at March 31, 2022 and December 31, 2021, which matures in August 2039. The security is a debt security to a government-sponsored enterprise and its amortized cost was $2 and the fair value was $2 at March 31, 2022 and December 31, 2021.

No securities were pledged as of March 31, 2022 or December 31, 2021, and there were no sales of investment securities during the three months ended March 31, 2022 or December 31, 2021.

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Table of Contents

BAYFIRST FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data) (Unaudited)

NOTE 3 – LOANS

Loans held for investment, at amortized cost, at March 31, 2022 and December 31, 2021 were as follows:

	March 31, 2022		December 31, 2021
Real estate:
Residential	$	102,897	$	87,235
Commercial	189,684		163,477
Construction and land	18,038		18,632
Commercial and industrial	180,163		217,155
Commercial and industrial - PPP	44,792		80,158
Consumer and other	13,502		3,581
Loans held for investment, at amortized cost, gross	549,076		570,238
Deferred loan costs, net	7,297		7,975
Discount on SBA 7(a) loans sold(1)	(3,335)		(3,866)
Discount on PPP loans purchased	(10)		(13)
Allowance for loan losses	(10,170)		(13,452)
Loans held for investment, at amortized cost	$	542,858	$	560,882

(1) The Company allocates the retained portion of loans sold based on relative fair value of the retained portion and the sold portion, which results in a discount on the retained portion.

NOTE 4 - ALLOWANCE FOR LOAN LOSSES

The following schedule presents the activity in the allowance for loan losses by loan segment for the three months ended March 31, 2022 and March 31, 2021:

	Three Months Ended March 31,
	2022		2021
Balance, beginning of period	$	13,452	$	21,162
Charge-offs:
Commercial and industrial	(1,031)		(1,137)
Consumer and other	(15)		(16)
Total charge-offs	(1,046)		(1,153)
Recoveries:
Real estate - commercial	8		—
Commercial and industrial	153		5
Consumer and other	3		3
Total recoveries	164		8
Net (charge-offs)	(882)		(1,145)