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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 fiscal period ended June 30, 2024 |
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. ☐ |
|
|
|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No ☒ |
|
The registrant had outstanding 4,134,219 shares of common stock as of August 5, 2024. |
BayFirst Financial Corp.
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.
| | | | | |
ACL: Allowance for Credit Losses | FFIEC: Federal Financial Institutions Examination Council |
AFS: Available for Sale | FHLB: Federal Home Loan Bank |
AIO: Architecture, Infrastructure, and Operations | FNBB: First National Bankers Bank |
ALCO: Asset-Liability Committee | FOMC: Federal Open Market Committee |
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 | HFI: Held for Investment |
BOLI: Bank Owned Life Insurance | HTM: Held to Maturity |
BSA: Bank Secrecy Act of 1970 | IRA: Individual Retirement Account |
CARES Act: Coronavirus Aid, Relief, and Economic Security Act | ISO: Information Security Officer |
CBLR: Community Bank Leverage Ratio | IT: Information Technology |
CDARS: Certificate of Deposit Account Registry Services | JOBS Act: Jumpstart Our Business Startups Act of 2012 |
CECL: Current Expected Credit Losses | LGD: Loss Given Default |
CEO: Chief Executive Officer | LHFS: Loans Held for Sale |
CET1: Common Equity Tier 1 Capital | MMDA: Money Market Deposit Account |
CFPB: Consumer Financial Protection Bureau | NOW: Negotiable Order of Withdrawal |
C&I: Commercial and Industrial | NSPP: Non-Qualified Stock Purchase Plan |
CRO: Chief Risk Officer | OCC: Office of the Comptroller of the Currency |
CTO: Chief Technology Officer | OREO: Other Real Estate Owned |
DEI: Diversity, Equity, and Inclusion | OTTI: Other-Than-Temporary Impairment |
Dodd-Frank Act: Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 | PCAOB: Public Company Accounting Oversight Board |
DRIP: Dividend Reinvestment Plan | PD: Probability of Default |
EGC: Emerging Growth Company | PPP: Paycheck Protection Program |
EPS: Earnings per Share | PPPLF: Paycheck Protection Program Liquidity Facility |
Equity Plan: The Amended and Restated 2017 Equity Incentive Plan | ROU: Right of Use |
ESG: Environmental, Social, and Governance | SBA: Small Business Administration |
ESOP: Employee Stock Ownership Plan | SEC: U.S. Securities and Exchange Commission |
ESPP: Employee Stock Purchase Plan | SOFR: Secured Overnight Financing Rate |
Exchange Act: Securities Exchange Act of 1934 | U.S.: United States |
FASB: Financial Accounting Standards Board | USDA: United States Department of Agriculture |
FBCA: Florida Business Corporation Act | USDA B&I: United States Department of Agriculture Business and Industry |
FDIA: Federal Deposit Insurance Act | WARM: Weighted Average Remaining Life |
FDIC: Federal Deposit Insurance Corporation | |
BAYFIRST FINANCIAL CORP.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
Part I - Financial Information
Item 8. Financial Statements
| | | | | | | | | | | | | | |
| June 30, 2024 | | December 31, 2023 | (1) |
| | | | |
ASSETS | (Unaudited) | | | |
Cash and due from banks | $ | 4,226 | | | $ | 4,099 | | |
Interest-bearing deposits in banks | 56,546 | | | 54,286 | | |
Cash and cash equivalents | 60,772 | | | 58,385 | | |
Time deposits in banks | 2,261 | | | 4,646 | | |
Investment securities available for sale, at fair value (amortized cost: $42,885 and $43,597 at June 30, 2024 and December 31, 2023, respectively) | 38,685 | | | 39,575 | | |
Investment securities held to maturity, at amortized cost, net of allowance for credit losses of $14 and $17 (fair value: $2,273 and $2,263 at June 30, 2024 and December 31, 2023, respectively) | 2,486 | | | 2,484 | | |
Nonmarketable equity securities | 7,132 | | | 4,770 | | |
| | | | |
| | | | |
Government guaranteed loans HFI, at fair value | 86,142 | | | 91,508 | | |
Loans HFI, at amortized cost, net of allowance for credit losses of $13,843 and $13,497 at June 30, 2024 and December 31, 2023, respectively | 908,329 | | | 810,721 | | |
Accrued interest receivable | 8,000 | | | 7,130 | | |
Premises and equipment, net | 39,088 | | | 38,874 | | |
Loan servicing rights | 15,770 | | | 14,959 | | |
| | | | |
Right-of-use operating lease assets | 2,305 | | | 2,416 | | |
Bank owned life insurance | 26,150 | | | 25,800 | | |
Other real estate owned | 1,633 | | | — | | |
Other assets | 19,080 | | | 16,150 | | |
Assets from discontinued operations | 36 | | | 348 | | |
Total assets | $ | 1,217,869 | | | $ | 1,117,766 | | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | |
Liabilities: | | | | |
Noninterest-bearing deposits | $ | 94,040 | | | $ | 93,708 | | |
Interest-bearing transaction accounts | 236,447 | | | 259,422 | | |
Savings and money market deposits | 420,271 | | | 373,000 | | |
Time deposits | 291,630 | | | 259,008 | | |
Total deposits | 1,042,388 | | | 985,138 | | |
FHLB borrowings | 55,000 | | | 10,000 | | |
Subordinated debentures | 5,952 | | | 5,949 | | |
Notes payable | 2,162 | | | 2,389 | | |
| | | | |
Accrued interest payable | 1,172 | | | 882 | | |
Operating lease liabilities | 2,497 | | | 2,619 | | |
Deferred income tax liabilities | 1,000 | | | 482 | | |
Accrued expenses and other liabilities | 6,565 | | | 8,980 | | |
Liabilities from discontinued operations | 171 | | | 620 | | |
Total liabilities | 1,116,907 | | | 1,017,059 | | |
BAYFIRST FINANCIAL CORP.
CONSOLIDATED BALANCE SHEETS CONTINUED
(Dollars in thousands, except per share data)
| | | | | | | | | | | | | | |
| June 30, 2024 | | December 31, 2023 | (1) |
| | | | |
Shareholders’ equity: | (Unaudited) | | | |
Preferred stock, Series A; no par value, 10,000 shares authorized, 6,395 shares issued and outstanding at June 30, 2024 and December 31, 2023; 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 June 30, 2024 and December 31, 2023; aggregate liquidation preference of $3,210 | 3,123 | | | 3,123 | | |
Preferred stock, Series C; no par value, 10,000 shares authorized, 6,446 shares issued and outstanding at June 30, 2024 and December 31, 2023; aggregate liquidation preference of $6,446 | 6,446 | | | 6,446 | | |
Common stock and additional paid-in capital; no par value, 15,000,000 shares authorized, 4,134,219 and 4,110,470 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively | 54,773 | | | 54,521 | | |
Accumulated other comprehensive loss, net | (3,113) | | | (2,981) | | |
Unearned compensation | (1,081) | | | (958) | | |
Retained earnings | 34,653 | | | 34,395 | | |
Total shareholders’ equity | 100,962 | | | 100,707 | | |
Total liabilities and shareholders’ equity | $ | 1,217,869 | | | $ | 1,117,766 | | |
(1) Derived from audited consolidated financial statements
See accompanying notes.
Table of Contents | | |
BAYFIRST FINANCIAL CORP. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (Dollars in thousands, except per share data) |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
Interest income: | | | | | | | |
Loans, including fees | $ | 19,414 | | | $ | 16,372 | | | $ | 37,642 | | | $ | 29,443 | |
Interest-bearing deposits in banks and other | 1,013 | | | 1,420 | | | 1,972 | | | 2,600 | |
Total interest income | 20,427 | | | 17,792 | | | 39,614 | | | 32,043 | |
Interest expense: | | | | | | | |
Deposits | 10,448 | | | 7,098 | | | 20,663 | | | 12,021 | |
Borrowings | 797 | | | 586 | | | 1,027 | | | 861 | |
Total interest expense | 11,245 | | | 7,684 | | | 21,690 | | | 12,882 | |
Net interest income | 9,182 | | | 10,108 | | | 17,924 | | | 19,161 | |
Provision for credit losses | 3,000 | | | 2,765 | | | 7,058 | | | 4,707 | |
Net interest income after provision for credit losses | 6,182 | | | 7,343 | | | 10,866 | | | 14,454 | |
Noninterest income: | | | | | | | |
| | | | | | | |
Loan servicing income, net | 805 | | | 649 | | | 1,600 | | | 1,389 | |
Gain on sale of government guaranteed loans, net | 5,595 | | | 6,028 | | | 13,684 | | | 10,437 | |
Service charges and fees | 452 | | | 379 | | | 896 | | | 758 | |
Government guaranteed loans fair value gain | 3,202 | | | 2,904 | | | 6,507 | | | 6,478 | |
Government guaranteed loan packaging fees | 1,022 | | | 797 | | | 2,429 | | | 918 | |
Other noninterest income | 577 | | | 180 | | | 805 | | | 405 | |
Total noninterest income | 11,653 | | | 10,937 | | | 25,921 | | | 20,385 | |
Noninterest expense: | | | | | | | |
Salaries and benefits | 7,829 | | | 7,780 | | | 15,834 | | | 15,615 | |
Bonus, commissions, and incentives | 659 | | | 1,305 | | | 2,230 | | | 2,109 | |
| | | | | | | |
Occupancy and equipment | 1,273 | | | 1,183 | | | 2,383 | | | 2,346 | |
Data processing | 1,647 | | | 1,316 | | | 3,207 | | | 2,663 | |
Marketing and business development | 540 | | | 1,102 | | | 1,128 | | | 1,767 | |
Professional services | 877 | | | 874 | | | 2,226 | | | 1,771 | |
Loan origination and collection | 1,958 | | | 1,221 | | | 3,677 | | | 2,716 | |
Employee recruiting and development | 549 | | | 556 | | | 1,146 | | | 1,124 | |
Regulatory assessments | 279 | | | 232 | | | 561 | | | 331 | |
| | | | | | | |
Other noninterest expense | 999 | | | 833 | | | 1,991 | | | 1,372 | |
Total noninterest expense | 16,610 | | | 16,402 | | | 34,383 | | | 31,814 | |
Income from continuing operations before income taxes | 1,225 | | | 1,878 | | | 2,404 | | | 3,025 | |
Income tax expense from continuing operations | 349 | | | 461 | | | 645 | | | 741 | |
Net income from continuing operations | 876 | | | 1,417 | | | 1,759 | | | 2,284 | |
| | | | | | | |
Loss from discontinued operations before income taxes | (14) | | | (43) | | | (92) | | | (213) | |
Income tax benefit from discontinued operations | (4) | | | (11) | | | (23) | | | (53) | |
Net loss from discontinued operations | (10) | | | (32) | | | (69) | | | (160) | |
| | | | | | | |
Net income | 866 | | | 1,385 | | | 1,690 | | | 2,124 | |
Preferred stock dividends | 386 | | | 208 | | | 771 | | | 416 | |
Net income available to common shareholders | $ | 480 | | | $ | 1,177 | | | $ | 919 | | | $ | 1,708 | |
BAYFIRST FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF INCOME CONTINUED (UNAUDITED)
(Dollars in thousands, except per share data)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
| | | | | | | |
Basic earnings (loss) per common share: | | | | | | | |
Continuing operations | $ | 0.12 | | | $ | 0.30 | | | $ | 0.24 | | | $ | 0.46 | |
Discontinued operations | — | | | (0.01) | | | (0.02) | | | (0.04) | |
Total basic earnings per common share | $ | 0.12 | | | $ | 0.29 | | | $ | 0.22 | | | $ | 0.42 | |
| | | | | | | |
Diluted earnings (loss) per common share: | | | | | | | |
Continuing operations | $ | 0.12 | | | $ | 0.30 | | | $ | 0.24 | | | $ | 0.46 | |
Discontinued operations | — | | | (0.01) | | | (0.02) | | | (0.04) | |
Total diluted earnings per common share | $ | 0.12 | | | $ | 0.29 | | | $ | 0.22 | | | $ | 0.42 | |
See accompanying notes.
Table of Contents | | |
BAYFIRST FINANCIAL CORP. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) (Dollars in thousands) |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
Net income | $ | 866 | | | $ | 1,385 | | | $ | 1,690 | | | $ | 2,124 | |
Net unrealized gains (losses) on investment securities available for sale | 102 | | | (77) | | | (172) | | | 655 | |
Deferred income tax (expense) benefit | (27) | | | 20 | | | 40 | | | (170) | |
Other comprehensive income (loss), net | 75 | | | (57) | | | (132) | | | 485 | |
Comprehensive income | $ | 941 | | | $ | 1,328 | | | $ | 1,558 | | | $ | 2,609 | |
See accompanying notes.
Table of Contents | | |
BAYFIRST FINANCIAL CORP. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED) (Dollars in thousands, except per share data) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Preferred Stock, Series A | | Preferred Stock, Series B | | Preferred Stock, Series C | | Common Stock, Additional Paid-in Capital, and Unearned Compensation | | Accumulated Other Comprehensive Income (Loss) | | | | Retained Earnings | | Total |
Balance at April 1, 2023 | | | | | | | $ | 6,161 | | | $ | 3,123 | | | $ | — | | | $ | 53,063 | | | $ | (3,182) | | | | | $ | 31,174 | | | $ | 90,339 | |
Net income | | | | | | | — | | | — | | | — | | | — | | | — | | | | | 1,385 | | | 1,385 | |
| | | | | | | | | | | | | | | | | | | | | |
Issuance of common stock under: | | | | | | | | | | | | | | | | | | | | | |
Non-qualified stock purchase plan | | | | | | | — | | | — | | | — | | | 102 | | | — | | | | | — | | | 102 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Repurchase of common stock | | | | | | | — | | | — | | | — | | | (10) | | | — | | | | | — | | | (10) | |
| | | | | | | | | | | | | | | | | | | | | |
Unearned ESOP shares allocation | | | | | | | — | | | — | | | — | | | (329) | | | — | | | | | — | | | (329) | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Stock-based awards - common stock: | | | | | | | | | | | | | | | | | | | | | |
Restricted stock expense, net of tax impact | | | | | | | — | | | — | | | — | | | 148 | | | — | | | | | — | | | 148 | |
Stock option expense | | | | | | | — | | | — | | | — | | | 24 | | | — | | | | | — | | | 24 | |
| | | | | | | | | | | | | | | | | | | | | |
Other comprehensive income, net | | | | | | | — | | | — | | | — | | | — | | | (57) | | | | | — | | | (57) | |
Dividends declared on: | | | | | | | | | | | | | | | | | | | | | |
Preferred stock | | | | | | | — | | | — | | | — | | | — | | | — | | | | | (208) | | | (208) | |
Common stock ($0.08 per share) | | | | | | | — | | | — | | | — | | | — | | | — | | | | | (329) | | | (329) | |
Balance at June 30, 2023 | | | | | | | $ | 6,161 | | | $ | 3,123 | | | $ | — | | | $ | 52,998 | | | $ | (3,239) | | | | | $ | 32,022 | | | $ | 91,065 | |
| | | | | | | | | | | | | | | | | | | | | |
Balance at April 1, 2024 | | | | | | | $ | 6,161 | | | $ | 3,123 | | | $ | 6,446 | | | $ | 53,584 | | | $ | (3,188) | | | | | $ | 34,503 | | | $ | 100,629 | |
Net income | | | | | | | — | | | — | | | — | | | — | | | — | | | | | 866 | | | 866 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Stock-based awards - common stock: | | | | | | | | | | | | | | | | | | | | | |
Restricted stock expense, net of tax impact | | | | | | | — | | | — | | | — | | | 99 | | | — | | | | | — | | | 99 | |
Stock option expense | | | | | | | — | | | — | | | — | | | 9 | | | — | | | | | — | | | 9 | |
| | | | | | | | | | | | | | | | | | | | | |
Other comprehensive loss, net | | | | | | | — | | | — | | | — | | | — | | | 75 | | | | | — | | | 75 | |
Dividends declared on: | | | | | | | | | | | — | | | | | | | | | | | |
Preferred stock | | | | | | | — | | | — | | | — | | | — | | | — | | | | | (386) | | | (386) | |
Common stock ($0.08 per share) | | | | | | | — | | | — | | | — | | | — | | | — | | | | | (330) | | | (330) | |
Balance at June 30, 2024 | | | | | | | $ | 6,161 | | | $ | 3,123 | | | $ | 6,446 | | | $ | 53,692 | | | $ | (3,113) | | | | | $ | 34,653 | | | $ | 100,962 | |
See accompanying notes.
Table of Contents | | |
BAYFIRST FINANCIAL CORP. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED) (Dollars in thousands, except per share data) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Preferred Stock, Series A | | Preferred Stock, Series B | | Preferred Stock, Series C | | Common Stock, Additional Paid-in Capital, and Unearned Compensation | | Accumulated Other Comprehensive Income (Loss) | | | | Retained Earnings | | Total |
Balance at January 1, 2023 | | | | | | | $ | 6,161 | | | $ | 3,123 | | | $ | — | | | $ | 52,845 | | | $ | (3,724) | | | | | $ | 33,479 | | | $ | 91,884 | |
Net income | | | | | | | — | | | — | | | — | | | — | | | — | | | | | 2,124 | | | 2,124 | |
Impact of ASC 326 Adoption | | | | | | | — | | | — | | | — | | | — | | | — | | | | | (2,508) | | | (2,508) | |
Issuance of common stock under: | | | | | | | | | | | | | | | | | | | | | |
Non-qualified stock purchase plan | | | | | | | — | | | — | | | — | | | 185 | | | — | | | | | — | | | 185 | |
Dividend reinvestment plan | | | | | | | — | | | — | | | — | | | 84 | | | — | | | | | — | | | 84 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Repurchase of common stock | | | | | | | — | | | — | | | — | | | (10) | | | — | | | | | — | | | (10) | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Unearned ESOP shares allocation | | | | | | | — | | | — | | | — | | | (329) | | | — | | | | | — | | | (329) | |
| | | | | | | | | | | | | | | | | | | | | |
Stock-based awards - common stock: | | | | | | | | | | | | | | | | | | | | | |
Restricted stock expense, net of tax impact | | | | | | | — | | | — | | | — | | | 165 | | | — | | | | | — | | | 165 | |
Stock option expense | | | | | | | — | | | — | | | — | | | 58 | | | — | | | | | — | | | 58 | |
| | | | | | | | | | | | | | | | | | | | | |
Other comprehensive loss, net | | | | | | | — | | | — | | | — | | | — | | | 485 | | | | | — | | | 485 | |
Dividends declared on: | | | | | | | | | | | — | | | | | | | | | | | |
Preferred stock | | | | | | | — | | | — | | | — | | | — | | | — | | | | | (416) | | | (416) | |
Common stock ($0.16 per share) | | | | | | | — | | | — | | | — | | | — | | | — | | | | | (657) | | | (657) | |
Balance at June 30, 2023 | | | | | | | $ | 6,161 | | | $ | 3,123 | | | $ | — | | | $ | 52,998 | | | $ | (3,239) | | | | | $ | 32,022 | | | $ | 91,065 | |
| | | | | | | | | | | | | | | | | | | | | |
Balance at January 1, 2024 | | | | | | | $ | 6,161 | | | $ | 3,123 | | | $ | 6,446 | | | $ | 53,563 | | | $ | (2,981) | | | | | $ | 34,395 | | | $ | 100,707 | |
Net income | | | | | | | — | | | — | | | — | | | — | | | — | | | | | 1,690 | | | 1,690 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Unearned ESOP shares allocation | | | | | | | — | | | — | | | — | | | (44) | | | — | | | | | — | | | (44) | |
| | | | | | | | | | | | | | | | | | | | | |
Stock-based awards - common stock: | | | | | | | | | | | | | | | | | | | | | |
Restricted stock expense, net of tax impact | | | | | | | — | | | — | | | — | | | 151 | | | — | | | | | — | | | 151 | |
Stock option expense | | | | | | | — | | | — | | | — | | | 22 | | | — | | | | | — | | | 22 | |
| | | | | | | | | | | | | | | | | | | | | |
Other comprehensive income, net | | | | | | | — | | | — | | | — | | | — | | | (132) | | | | | — | | | (132) | |
Dividends declared on: | | | | | | | | | | | | | | | | | | | | | |
Preferred stock | | | | | | | — | | | — | | | — | | | — | | | — | | | | | (771) | | | (771) | |
Common stock ($0.16 per share) | | | | | | | — | | | — | | | — | | | — | | | — | | | | | (661) | | | (661) | |
Balance at June 30, 2024 | | | | | | | $ | 6,161 | | | $ | 3,123 | | | $ | 6,446 | | | $ | 53,692 | | | $ | (3,113) | | | | | $ | 34,653 | | | $ | 100,962 | |
See accompanying notes.
Table of Contents | | |
BAYFIRST FINANCIAL CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Dollars in thousands) |
| | | | | | | | | | | |
| Six Months Ended June 30, |
| 2024 | | 2023 |
Cash flows from operating activities: | | | |
Net income from continuing operations | $ | 1,759 | | | $ | 2,284 | |
Net loss from discontinued operations | (69) | | | (160) | |
Net income | 1,690 | | | 2,124 | |
Adjustments to reconcile net income to net cash from operating activities: | | | |
Depreciation of fixed assets | 1,180 | | | 1,127 | |
Net securities premium amortization | 56 | | | 41 | |
Amortization of debt issuance costs | 3 | | | 3 | |
Amortization of premium on loans purchased, net | 301 | | | 107 | |
Provision for credit losses | 7,058 | | | 4,707 | |
Accretion of discount on unguaranteed loans | (1,429) | | | (1,794) | |
Deferred tax expense | 563 | | | 717 | |
Origination of government guaranteed loans held for sale | (2,226) | | | (2,421) | |
Proceeds from sales of government guaranteed loans held for sale | 218,446 | | | 208,921 | |
Net gains on sales of government guaranteed loans | (13,684) | | | (10,437) | |
| | | |
| | | |
| | | |
| | | |
Change in fair value of government guaranteed loans HFI, at fair value | (6,507) | | | (6,478) | |
Amortization of loan servicing rights | 2,881 | | | 1,933 | |
| | | |
Non-qualified stock purchase plan expense | 13 | | | 14 | |
Stock based compensation expense | 173 | | | 223 | |
| | | |
Income from bank owned life insurance | (350) | | | (310) | |
| | | |
Changes in: | | | |
Accrued interest receivable | (870) | | | (1,477) | |
Other assets | (2,824) | | | 170 | |
Accrued interest payable | 290 | | | (132) | |
Other liabilities | (2,339) | | | (4,598) | |
Net cash provided by operating activities of continuing operations | 202,494 | | | 192,600 | |
Net cash used in operating activities of discontinued operations | (206) | | | (119) | |
Net cash provided by operating activities | 202,288 | | | 192,481 | |
Cash flows from investing activities: | | | |
Purchase of investment securities available for sale | (4,458) | | | — | |
Principal payments on investment securities available for sale | 5,120 | | | 1,620 | |
| | | |
Principal payments on investment securities held to maturity | 1 | | | 2,500 | |
| | | |
Net purchase of nonmarketable equity securities | (2,362) | | | (1,295) | |
Purchase of time deposits in banks | (11) | | | — | |
Maturity of time deposits in banks | 2,396 | | | — | |
| | | |
Purchase of government guaranteed and consumer loans | (812) | | | (99,551) | |
Loan (originations) and payments, net | (297,686) | | | (205,633) | |
Purchase related to other real estate owned | (1,229) | | | — | |
Purchase of premises and equipment | (1,394) | | | (5,739) | |
| | | |
| | | |
Net cash used in investing activities | (300,435) | | | (308,098) | |
Table of Contents | | |
BAYFIRST FINANCIAL CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS CONTINUED (UNAUDITED) (Dollars in thousands) |
| | | | | | | | | | | |
| Six Months Ended June 30, |
| 2024 | | 2023 |
Cash flows from financing activities: | | | |
Net change in deposits | 57,250 | | | 149,712 | |
Net increase in short-term borrowings | 45,000 | | | 5,000 | |
| | | |
Payments on notes payable | (227) | | | (227) | |
| | | |
| | | |
Repayment of subordinated debt | — | | | (50) | |
Proceeds from issuance of common stock for benefit plans, net | (13) | | | 255 | |
Common share buyback - redeemed stock | — | | | (10) | |
| | | |
Unearned ESOP shares | (44) | | | (329) | |
| | | |
Dividends paid on common stock | (661) | | | (657) | |
Dividends paid on preferred stock | (771) | | | (416) | |
Net cash provided by financing activities | 100,534 | | | 153,278 | |
Net change in cash and cash equivalents | 2,387 | | | 37,661 | |
Cash and cash equivalents, beginning of period | 58,385 | | | 66,046 | |
Cash and cash equivalents, end of period | $ | 60,772 | | | $ | 103,707 | |
Supplemental cash flow information | | | |
Interest paid | $ | 21,400 | | | $ | 13,014 | |
Income taxes paid | 8 | | | 2 | |
Supplemental noncash disclosures | | | |
Impact to retained earnings from adoption of ASC 326, net of tax | — | | | 2,508 | |
Net change in unrealized holding gains (losses) on investment securities available for sale, net of tax effect | (132) | | | 485 | |
| | | |
Transfer of government guaranteed loans HFI to loans HFS | 206,228 | | | 201,157 | |
Transfer of loans HFI to OREO | 404 | | | — | |
| | | |
Recognition of right of use asset and operating lease liability | 263 | | | — | |
| | | |
See accompanying notes.
| | |
BAYFIRST FINANCIAL CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Dollars in thousands, except per share data) |
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include BayFirst Financial Corp. and its wholly owned subsidiary, BayFirst National 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 consolidated balance sheet as of December 31, 2023 has been derived from the audited consolidated financial statements of BayFirst Financial Corp. for that period.
The Company currently operates one business segment. In the third quarter of 2022, the Company discontinued the Bank’s nationwide residential mortgage loan segment. The operations of this segment are reported as discontinued operations.
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 six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. These statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2023.
The Company’s significant accounting policies are described in Note 1 of the Notes to Consolidated Financial Statements for the year ended December 31, 2023 in the Company’s Annual Report filed on Form 10-K. 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.
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 ACL, government guaranteed loan servicing rights, and fair value of government guaranteed loans HFI.
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. The Company has elected to take advantage of this extended transition period, which means these financial statements, as well as financial statements they file in the future for as long as the Company remains 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 June 30, 2024. Although the ultimate outcome of all claims and lawsuits outstanding as of June 30, 2024 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 October 2023, the FASB issued ASU No. 2023-06 “Disclosure Improvements - Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative” (“ASU 2023-06”). ASU 2023-06 amends the ASC to incorporate certain disclosure requirements from SEC Release No. 33-10532 - Disclosure Update and Simplification that was issued in 2018. The effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. The Company does not believe this standard will have a material impact on its Consolidated Financial Statements.
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280) Improvements to Reportable Segment Disclosures ("ASU 2023-07"). This ASU was issued to improve segment reporting disclosures. The amendments
Table of Contents | | |
BAYFIRST FINANCIAL CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Dollars in thousands, except per share data) |
in this ASU improve financial reporting by requiring disclosure of incremental segment information including significant segment expenses regularly provided to the chief operating decision maker as well as the amount and composition of other segment items on an annual and interim basis for all public entities to enable investors to develop more decision-useful financial analyses. Retrospective application is required in all prior periods unless impracticable to do so. The amendments in this standard will be effective for the Company for the fiscal year ended December 31, 2024 and subsequent interim periods. The Company is evaluating the impact of this standard and does not expect it to have a material impact on the Company’s consolidated financial statements.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740) Improvements to Income Tax Disclosures ("ASU 2023-09"). This ASU was issued to enhance the transparency and decision usefulness of income tax disclosures. The ASU addresses investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. Retrospective application in all prior periods is permitted. The amendments in this standard will be effective for the Company on January 1, 2025. The Company is currently assessing the impact of this standard and does not expect it to have a material impact on the Company’s consolidated financial statements.
NOTE 2 – DISCONTINUED OPERATIONS
During the third quarter of 2022, the Company discontinued the Bank’s nationwide residential mortgage loan production operations. The decision was based on a number of strategic priorities and other factors, including the precipitous decline in mortgage volumes and the uncertain outlook for mortgage lending over future periods. As a result of these actions, the Company classified the operations of the residential mortgage lending division as discontinued under ASC 205-20. The Consolidated Balance Sheets, Consolidated Statements of Income, and Consolidated Statements of Cash Flows present discontinued operations for the current periods and retrospectively for prior periods.
The following is a summary of the assets and liabilities of the discontinued operations of the residential mortgage lending division at June 30, 2024 and December 31, 2023:
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| June 30, 2024 | | December 31, 2023 |
Assets | | | |
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Right-of-use operating lease asset | $ | 36 | | | $ | 348 | |
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Total assets | $ | 36 | | | $ | 348 | |
Liabilities | | | |
Operating lease liability | $ | 171 | | | $ | 620 | |
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Total liabilities | $ | 171 | | | $ | 620 | |
The following presents operating results of the discontinued operations of the residential mortgage lending division for the three and six months ended June 30, 2024 and June 30, 2023:
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| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
Interest income | $ | — | | | $ | — | | | $ | — | | | $ | 1 | |
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Noninterest income | 51 | | | (2) | | | 51 | | | (2) | |
Total net revenue | 51 | | | (2) | | | 51 | | | (1) | |
Noninterest expense | 65 | | | 41 | | | 143 | | | 212 | |
Loss from discontinued operations before income taxes | (14) | | | (43) | | | (92) | | | (213) | |
Income tax benefit | (4) | | | (11) | | | (23) | | | (53) | |
Net loss from discontinued operations | $ | (10) | | | $ | (32) | | | $ | (69) | | | $ | (160) | |
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BAYFIRST FINANCIAL CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Dollars in thousands, except per share data) |
NOTE 3 – INVESTMENT SECURITIES
The amortized costs, gross unrealized gains and losses, and estimated fair values of investment securities available for sale and investment securities held to maturity at June 30, 2024 and December 31, 2023 as well as the ACL for investment securities held to maturity at June 30, 2024 and December 31, 2023 are summarized as follows:
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June 30, 2024 | Amortized Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Fair Value |
Investment securities available for sale: | | | | | | | |
Asset-backed securities | $ | 6,351 | | | $ | — | | | $ | (45) | | | $ | 6,306 | |
Mortgage-backed securities: | | | | | | | |
U.S. Government-sponsored enterprises | 8,065 | | | — | | | (705) | | | 7,360 | |
Collateralized mortgage obligations: | | | | | | | |
U.S. Government-sponsored enterprises | 19,638 | | | — | | | (3,520) | | | 16,118 | |
Corporate bonds | 8,831 | | | 70 | | | — | | | 8,901 | |
Total investment securities available for sale | $ | 42,885 | | | $ | 70 | | | $ | (4,270) | | | $ | 38,685 | |
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June 30, 2024 | Amortized Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Fair Value | | ACL |
Investment securities held to maturity: | | | | | | | | | |
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Corporate bonds | $ | 2,500 | | | $ | — | | | $ | (227) | | | $ | 2,273 | | | $ | 14 | |
Total investment securities held to maturity | $ | 2,500 | | | $ | — | | | $ | (227) | | | $ | 2,273 | | | $ | 14 | |
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BAYFIRST FINANCIAL CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Dollars in thousands, except per share data) |
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December 31, 2023 | Amortized Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Fair Value |
Investment securities available for sale: | | | | | | | |
Asset-backed securities | $ | 8,041 | | | $ | 6 | | | $ | (114) | | | $ | 7,933 | |
Mortgage-backed securities: | | | | | | | |
U.S. Government-sponsored enterprises | 3,842 | | | — | | | (606) | | | 3,236 | |
Collateralized mortgage obligations: | | | | | | | |
U.S. Government-sponsored enterprises | 20,382 | | | — | | | (3,284) | | | 17,098 | |
Corporate bonds | 11,332 | | | — | | | (24) | | | 11,308 | |
Total investment securities available for sale | $ | 43,597 | | | $ | 6 | | | $ | (4,028) | | | $ | 39,575 | |
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December 31, 2023 | Amortized Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Fair Value | | ACL |
Investment securities held to maturity: | | | | | | | | | |
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Mortgage-backed securities: | | | | | | | | | |
U.S. Government-sponsored enterprises | $ | 1 | | | $ | — | | | $ | — | | | $ | 1 | | | $ | — | |
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Corporate bonds | 2,500 | | | — | | | (238) | | | 2,262 | | | 17 | |
Total investment securities held to maturity | $ | 2,501 | | | $ | — | | | $ | (238) | | | $ | 2,263 | | | $ | 17 | |
`The amortized cost and fair value of investment securities as of June 30, 2024 are shown in the table below by contractual maturity. Actual timing may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.
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| Available for Sale | | Held to Maturity |
| Amortized Cost | | Fair Value | | Amortized Cost | | Fair Value |
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One to five years | $ | 8,831 | | | $ | 8,901 | | $ | 1,500 | | | $ | 1,445 |
Five to ten years | 7,217 | | | 7,160 | | 1,000 | | | 828 |
Beyond ten years | 26,837 | | | 22,624 | | — | | | — |
Total | $ | 42,885 | | | $ | 38,685 | | $ | 2,500 | | | $ | 2,273 |
No ACL for investment securities AFS was needed at June 30, 2024 or December 31, 2023. Declines in the fair value of the AFS investment portfolio are believed by management to be temporary in nature. When evaluating an investment for credit loss, management considers, among other things, the extent to which the fair value has been in a loss position; the financial condition of the issuer through the review of credit ratings and, if necessary, corporate financial statements; adverse conditions specifically related to the security such as past due principal or interest; underlying assets that collateralize the debt security; other economic conditions and demographics; and the intent and ability of the Company to hold the investment until the loss position is recovered. Any unrealized losses were largely due to increases in market interest rates over the yields available at the time of purchase. The fair value is expected to recover as the bonds approach their maturity date or market yields for the investments decline. Management does not believe any of the securities are impaired due to reasons of credit quality. At June 30, 2024, the Company did not intend to sell and believed it was not likely to be required to sell the available for sale securities that were in a loss position prior to full recovery.
As of June 30, 2024, there were no past due principal and interest payments associated with the HTM securities. The Company monitors the credit quality of debt securities held to maturity quarterly through the use of credit ratings. However, the corporate bonds that are held to maturity have no credit rating and the corporate bonds in an unrealized loss position at June 30, 2024 are not material to the financial statements. There was an ACL of $14 and $17 on corporate bonds HTM at June 30, 2024 and December 31, 2023, respectively, which was calculated based on applying the long-term historical credit loss rate for similarly rated securities.
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BAYFIRST FINANCIAL CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Dollars in thousands, except per share data) |
The following table presents the activity in the ACL for investment securities HTM by major security type for the three and six months ended June 30, 2024 and June 30, 2023:
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| For the Three Months Ended | | For the Six Months Ended | | For the Three Months Ended | | For the Six Months Ended |
Corporate Bonds | June 30, 2024 | | June 30, 2023 |
Balance at beginning of period | $ | 14 | | | $ | 17 | | | $ | 18 | | | $ | — | |
Impact of adopting ASC 326 | — | | | — | | | — | | | 18 | |
Provision for credit losses on HTM investment securities | — | | | (3) | | | 1 | | | 1 | |
Investment securities charge-offs | — | | | — | | | — | | | — | |
Investment securities recoveries | — | | | — | | | — | | | — | |
Balance at end of period | $ | 14 | | | $ | 14 | | | $ | 19 | | | $ | 19 | |
The following table summarizes investment securities with unrealized losses at June 30, 2024 aggregated by security type and length of time in a continuous unrealized loss position:
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| Less than 12 Months | | 12 Months or Longer | | Total | | |
June 30, 2024 | Fair Value | | Unrealized Losses | | Fair Value | | Unrealized Losses | | Fair Value | | Unrealized Losses | | Number of Securities |
Investment securities available for sale: | | | | | | | | | | | | | |
Asset-backed securities | $ | 1,710 | | | $ | (5) | | | $ | 4,596 | | | $ | (40) | | | $ | 6,306 | | | $ | (45) | | | 3 |
Mortgage-backed securities: | | | | | | | | | | | | | |
U.S. Government-sponsored enterprises | 4,416 | | | (43) | | | 2,944 | | | (662) | | | 7,360 | | | (705) | | | 3 |
Collateralized mortgage obligations: | | | | | | | | | | | | | |
U.S. Government-sponsored enterprises | — | | | — | | | 16,118 | | | (3,520) | | | 16,118 | | | (3,520) | | | 7 |
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Total investment securities available for sale | $ | 6,126 | | | $ | (48) | | | $ | 23,658 | | | $ | (4,222) | | | $ | 29,784 | | | $ | (4,270) | | | 13 |
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Investment securities held to maturity: | | | | | | | | | | | | | |
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Corporate bonds | $ | 416 | | | $ | (83) | | | $ | 1,857 | | | $ | (144) | | | $ | 2,273 | | | $ | (227) | | | 3 |
Total investment securities held to maturity | $ | 416 | | | $ | (83) | | | $ | 1,857 | | | $ | (144) | |