• BayFirst Financial Corp. Reports Third Quarter 2022 Results; Highlighted by Strong SBA 7(a) and Conventional Loan Production and Net Interest Margin Expansion

    Source: Nasdaq GlobeNewswire / 28 Oct 2022 08:30:01   America/New_York

    ST. PETERSBURG, Fla., Oct. 28, 2022 (GLOBE NEWSWIRE) -- BayFirst Financial Corp. (NASDAQ: BAFN) (“BayFirst” or the “Company”), parent company of BayFirst National Bank (the “Bank”) today reported net income from continuing operations of $3.1 million for the third quarter of 2022 compared to $391 thousand in the second quarter of 2022. Following the strategic decision to discontinue the Bank’s nationwide residential mortgage operations, BayFirst recognized a one-time charge of $3.7 million in the third quarter of 2022. Net loss inclusive of discontinued operations was $1.4 million, or $0.35 per diluted share, for the third quarter of 2022, compared to a net loss of $282 thousand, or $0.10 per diluted share, in the second quarter of 2022. In the third quarter of 2021, net income inclusive of discontinued operations was $1.3 million, or $0.26 per diluted share. Quarterly financial results were highlighted by robust loan production in community banking, up 172% year over year, as well as the best quarter of SBA 7(a) loan production in the Company’s history.

    The increase in earnings from continuing operations during the third quarter of 2022, compared to the second quarter of 2022, included an increase in interest income of $3.5 million driven primarily from rising interest rates on variable rate loans and a $39.1 million increase in loans held for investment. Results for the third quarter of 2022 included a $750 thousand provision for loan losses, compared to a $250 thousand provision for loan losses in the preceding quarter and a negative provision for loan losses of $3.0 million in the third quarter of 2021.

    “The third quarter represented a significant transition for BayFirst as we exited our national mortgage lending business to focus our efforts on building the premier bank of Tampa Bay,” stated Anthony N. Leo, Chief Executive Officer. “Supported by our top 10 SBA lending division CreditBench, and the investments we’ve made in an advanced technology platform, BayFirst is now poised to enter a new era of growth and profitability. Notwithstanding the significant charges associated with discontinuation of the mortgage lending division, we are extremely pleased with third quarter results, as net income from continuing operations was $3.1 million.”

    “In addition to improved core operating results from continuing operations, we benefited from strong loan production from community banking and SBA lending. Loans held for investment excluding PPP loans were up 7.9% during the quarter, and 31.6% compared to a year ago, with the growth well diversified across all of our loan categories. SBA lending through our CreditBench division has grown substantially, surpassing last quarter’s record levels, with SBA loan production of $139.2 million. Additionally, our net interest margin improved 90 basis points on a linked quarter basis, as we benefited from recent interest rate increases. With the one-time expenses for exiting the national residential mortgage business behind us, we remain well positioned for growth throughout the rest of the year and into 2023.”

    “While other financial institutions in our markets are closing banking centers, we continue to grow our community bank, opening our eighth banking center in West Bradenton last month. We plan to open a second Tampa banking center in early 2023 with two additional branches in Sarasota currently under construction and expected to be open late 2023 or early 2024, expanding our network of bank offices throughout the Tampa Bay region. We were fortunate that Hurricane Ian had minimal impact on our branch locations and overall organization. Our bankers are working to help all businesses and residents that were impacted throughout the broader region,” concluded Leo.

    Third Quarter 2022 Performance Review

    • The Company’s SBA loan origination platform, CreditBench, originated $139.2 million in new SBA loans during the third quarter of 2022, a 54.7% increase compared to $90.0 million originated in the second quarter of 2022, and a 194.6% increase over $47.3 million of loans produced during the third quarter of 2021. Late in the second quarter, the Company launched BOLT, an SBA 7(a) loan product designed to expeditiously provide working capital loans of $150 thousand or less to businesses throughout the country. During the third quarter, the Company originated 425 BOLT loans totaling $55.9 million.
    • Loans held for investment, excluding PPP loans, increased by $48.1 million or 7.9% to $658.7 million during the third quarter of 2022 and $158.0 million, or 31.6% over the past year. Production during the quarter was partially offset by $124.4 million in sales of principal balances of SBA loans.
    • The Residential Mortgage Division originated $245.4 million in loans during the third quarter of 2022, a reduction of 19.7% compared to $305.6 million originated during the second quarter of 2022, and a 49.2% reduction compared to $506.7 million of loans produced during the third quarter of 2021.
    • Deposits increased by $20.3 million, or 2.7% during the third quarter of 2022 and increased by $110.7 million, or 16.4% over the past year to $785.7 million at September 30, 2022. During the third quarter of 2022, there were increases in time deposit balances of $75.9 million partially offset by decreases in money market and savings account balances of $51.8 million.
    • Tangible book value at September 30, 2022 was $20.10 per common share, down from $20.80 at June 30, 2022, primarily due to the net loss and the increase in accumulated other comprehensive loss. Over the course of the past year, tangible book value decreased $1.20 per common share, or 5.6%, from $21.30 at September 30, 2021.
    • Net interest margin including discontinued operations expanded 90 bps to 4.63% in the third quarter of 2022, from 3.73% in the second quarter of 2022.

    Results of Operations

    Net Income (Loss)

    Net loss was $1.4 million for the third quarter of 2022 compared to a net loss of $282 thousand in the second quarter of 2022, and net income of $1.3 million in the third quarter of 2021. The increase in net loss for the third quarter of 2022 from the preceding quarter was primarily due to an increase of $3.1 million in charges to discontinue residential operations and a $1.7 million decrease in SBA loan fair value gains, which resulted primarily from election of the fair value option on significantly less principal balance in the third quarter of 2022, compared to second quarter of 2022. This was partially offset by an increase of $2.6 million in net interest income and an increase of $3.6 million in gain on sale of SBA loans. The decrease in net income from the third quarter of 2021 was partially due to a $7.1 million unfavorable change from discontinued operations. Additionally, loan loss provision changed unfavorably by $3.8 million from the third quarter of 2021. This was partially offset by an increase of $1.9 million in net interest income and an increase of $7.8 million in gain on sale of SBA loans.

    In the first nine months of 2022, the net loss was $1.7 million, a decrease of $23.5 million from the net income of $21.8 million in the first nine months of 2021. The decrease in net income was the result of an increase in the net loss from discontinued operations of $18.7 million, a $13.8 million gain on sale of PPP loans in 2021 which did not recur in 2022, an increase in non-interest expense on continuing operations of $4.7 million, and lower PPP income. These items were partially offset by a $3.4 million increase related to held for investment SBA loan fair value gains and higher gains on non-PPP SBA guaranteed loan sales of $16.3 million. The increase in the net loss from discontinued operations was primarily the result of a decrease in gain on sale of residential mortgage loans of $46.4 million and the recognition of restructuring charges of $4.3 million for the discontinuation of the nationwide residential mortgage division, partially offset by lower non-interest expense of $26.1 million.

    Net Interest Income and Net Interest Margin

    Net interest income from continuing operations was $9.2 million in the third quarter of 2022, an increase of $2.6 million or 39.2% from $6.6 million in the second quarter of 2022, and an increase of $1.9 million or 26.0% from $7.3 million in the third quarter of 2021. The increase during the third quarter of 2022 as compared to the prior quarter was mainly due to the increase in non-PPP loan interest income partially offset by an increase in deposit interest expense. The increase during the third quarter of 2022 as compared to the year ago quarter was mainly due to the increase in loan interest income, including fees, of $2.0 million.

    Net interest income from continuing operations was $21.4 million in the first nine months of 2022, a decrease of $9.4 million or 30.4% from $30.8 million in the first nine months of 2021. The decrease was mainly due to a decline in net PPP income of $17.8 million.

    Net interest margin including discontinued operations improved to 4.63% for the third quarter of 2022, which represented increases of 90 basis points, compared to 3.73% from the preceding quarter and 159 basis points compared to 3.04% from the same quarter last year. Net interest margin including discontinued operations improved to 3.90% for the first nine months of 2022, compared to 3.26% for the first nine months of 2021. With recent rate increases, the Company anticipates further improvement in its net interest margin as its SBA loan portfolio rates are tied to the prime lending rate with the vast majority resetting at the beginning of each calendar quarter.

    Noninterest Income

    Noninterest income from continuing operations was $9.8 million for the third quarter of 2022, an increase of $2.1 million or 27.7% from $7.7 million in the second quarter of 2022, and an increase of $9.2 million from $610 thousand in the third quarter of 2021. The increase in the third quarter of 2022, as compared to the prior quarter, was primarily due to $3.6 million of additional gain on sale of SBA loans, partially offset by a $1.7 million decrease related to held for investment SBA loan fair value gains. The increase from a year ago quarter was primarily the result of an increase of $7.8 million in gains on SBA loan sales.

    Noninterest income from continuing operations was $23.1 million for the first nine months of 2022, an increase of $6.8 million or 41.3% from $16.4 million in the first nine months of 2021. The increase was primarily due to higher gains on the sale of non-PPP SBA loans of $16.3 million and an increase related to held for investment SBA loan fair value gains of $3.4 million, partially offset by the $13.8 million gain on sale of PPP loans in 2021 which did not recur in 2022.

    Noninterest Expense

    Noninterest expense from continuing operations was $14.2 million in the third quarter of 2022, which was a $466 thousand or 3.4% increase from $13.7 million in the second quarter of 2022 and a $1.6 million or 12.7% increase compared to $12.6 million in the third quarter of 2021. The increase from a year ago quarter was primarily due to higher compensation expense, occupancy expense, data processing expense and loan origination expense, partially offset by lower professional services expense.

    Noninterest expense from continuing operations was $41.7 million in the first nine months of 2022, which was a $4.7 million or 12.7% increase from $37.0 million in the first nine months of 2021. The increase was primarily the result of higher salaries and benefits and occupancy expense.

    Discontinued Operations

    Net loss on discontinued operations was $4.5 million in the third quarter of 2022, which was a $3.8 million increase from a loss of $673 thousand in the second quarter of 2022. The company recorded net income on discontinued operations of $2.6 million in the third quarter of 2021. The increase in the net loss from the previous quarter was the result of a decrease in gains on sale of residential mortgage loans of $3.1 million and an increase in restructuring charges of $3.1 million for the discontinuation of the nationwide residential mortgage division, partially offset by a decrease in noninterest expense, excluding restructuring charges, of $1.2 million and a decrease in income tax benefit of $1.3 million. The $7.1 million decrease in income from the year ago quarter was primarily due to a decrease in residential loan fee income of $14.3 million and the restructuring charges for the discontinuation of residential mortgage division of $3.7 million recorded in the third quarter of 2022. This was partially offset by a decrease in noninterest expense, excluding the restructuring charges, of $8.4 million and a decrease in income tax expense of $2.3 million.

    Net loss from discontinued operations was $5.0 million in the first nine months of 2022, which was an $18.6 million reduction from net income of $13.6 million in the first nine months of 2021. The reduction in net income was primarily the result of a decrease in residential loan fee income of $46.4 million and the restructuring charges for the discontinuation of residential mortgage division of $4.3 million recorded in the second and third quarters of 2022. This was partially offset by a $26.1 million decrease in noninterest expense excluding the restructuring charge and a decrease in income tax expense of $6.2 million.

    Balance Sheet

    Assets

    Total assets increased $8.9 million or 1.0% during the third quarter of 2022 to $930.3 million, mainly due to new loan production, partially offset by a decrease in cash and cash equivalents and the sale of $124.4 million in SBA loans.

    Loans

    Loans held for investment, excluding PPP loans, increased $48.1 million or 7.9% during the third quarter of 2022 and $158.0 million or 31.6%, over the past year to $658.7 million, due to increases in both conventional community bank loans and SBA loans, partially offset by SBA loan sales. PPP loans, net of deferred origination fees, decreased $9.1 million in the third quarter of 2022 to $22.1 million, due primarily to PPP forgiveness payments.

    Deposits

    Deposits increased $20.3 million or 2.7% during the third quarter of 2022 and increased $110.7 million or 16.4% compared to September 30, 2021, ending the third quarter of 2022 at $785.7 million. During the third quarter, time deposit balances increased, partially offset by a decrease in interest-bearing transaction, savings, and money market account balances. Over the past year, all types of deposit account balances increased.

    Asset Quality

    Asset quality remained stable in the third quarter of 2022. As the financial impact of the COVID-19 pandemic became more predictable throughout 2021 and 2022, the Company began adjusting downward its allowance for loan losses from the historic high levels reached in 2020 at the onset of the pandemic. The Company recorded a provision for loan losses in the third quarter of $750 thousand, which compared to a $250 thousand provision for the second quarter of 2022, and a $3.0 million negative provision for loan losses during the third quarter of 2021.

    The ratio of the allowance for loan losses to total loans held for investment at amortized cost, excluding government guaranteed loans, was 1.90% at September 30, 2022, 2.14% as of June 30, 2022, and 5.29% as of September 30, 2021.

    Over the past five years, the Company’s loan losses have been incurred primarily in its SBA unguaranteed loan portfolio, particularly loans originated under the SBA 7(a) Small Loan Program. The Small Loan Program represents loans of $350 thousand or less and carry an SBA guaranty of 75% to 85% of the loan, depending on the original principal balance. The default rate on loans originated in the SBA 7(a) Small Loan Program has been higher than the Bank’s other loans.

    Net charge-offs for the third quarter of 2022 were $575 thousand, a $281 thousand decrease from $856 thousand for the second quarter of 2022 and a $606 thousand decrease compared to $1.2 million in the third quarter of 2021. Annualized net charge-offs as a percentage of average loans, excluding PPP loans, were 0.35% for the third quarter of 2022, down from 0.61% in the second quarter of 2022 and 1.01% in the third quarter of 2021. Nonperforming assets, excluding government guaranteed loans, to total assets was 0.44% as of September 30, 2022, compared to 0.47% as of June 30, 2022, and 0.40% as of September 30, 2021.

    Capital

    The Bank’s Tier 1 leverage ratio was 10.48% as of September 30, 2022, a decrease from 11.37% as of June 30, 2022, and from 12.64% at September 30, 2021. The CET 1 and Tier 1 capital ratio to risk-weighted assets were 13.77% as of September 30, 2022, a decrease from 15.12% as of June 30, 2022, and from 21.21% as of September 30, 2021. The total capital to risk-weighted assets ratio was 15.02% as of September 30, 2022, a decrease from 16.37% as of June 30, 2022, and from 22.50% as of September 30, 2021.

    Recent Events

    Fourth Quarter Common Stock Dividend. On October 25, 2022, BayFirst’s Board of Directors declared a fourth quarter 2022 cash dividend of $0.08 per common share. The dividend will be payable December 15, 2022 to common shareholders of record as of December 1, 2022. This dividend marks the 26th consecutive quarterly cash dividend paid since BayFirst initiated cash dividends in 2016.

    About BayFirst Financial Corp.

    BayFirst Financial Corp. is a registered bank holding company which commenced operations on September 1, 2000. Its primary source of income is from its wholly owned subsidiary, BayFirst National Bank (f/k/a First Home Bank), which commenced business operations on February 12, 1999. BayFirst National Bank is a national banking association. The Bank currently operates eight full-service office locations and was in the top 8 by dollar volume and number of units originated nationwide through the fourth quarter ended September 30, 2022, of SBA's 2022 fiscal year. In the 5 county Tampa Bay market, BayFirst was proud to rank number one by both dollar volume and number of units originated during the same period.

    BayFirst Financial Corp., through the Bank, offers a broad range of commercial and consumer banking services including various types of deposit accounts and loans for businesses and individuals. As of September 30, 2022, BayFirst Financial Corp. had $930.3 million 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 the COVID-19 pandemic, 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)9/30/2022 6/30/2022 3/31/2022 12/31/2021 9/30/2021
    Balance sheet data:         
    Average loans held for investment, excluding PPP loans$663,716  $561,455  $520,559  $518,697  $467,283 
    Average total assets 939,847   879,868   872,311   923,485   1,086,377 
    Average common shareholders’ equity 83,014   83,235   83,990   83,056   81,989 
    Total loans held for investment 680,805   641,737   561,797   583,948   656,294 
    Total loans held for investment, excluding PPP loans 658,669   610,527   517,434   504,525   500,647 
    Total loans held for investment, excl gov’t gtd loan balances 520,408   458,624   374,353   332,977   316,528 
    Allowance for loan losses 9,739   9,564   10,170   13,452   16,616 
    Total assets 930,275   921,377   888,541   917,095   943,743 
    Common shareholders’ equity 81,032   83,690   85,274   86,685   83,593 
    Share data:          
    Basic earnings per common share$(0.40) $(0.12) $(0.05) $0.66  $0.26 
    Diluted earnings per common share (0.35)  (0.10)  (0.05)  0.61   0.26 
    Dividends per common share 0.08   0.08   0.08   0.07   0.07 
    Book value per common share 20.10   20.82   21.25   21.77   21.32 
    Tangible book value per common share (1) 20.10   20.80   21.22   21.75   21.30 
    Performance and capital ratios:         
    Return on average assets (0.60   (0.13   0.01%  1.22%  0.47%
    Return on average common equity (7.76)%  (2.35)%  (0.93)%  12.54%  5.12%
    Net interest margin 4.63%  3.73%  3.25%  3.07%  3.04%
    Dividend payout ratio (20.02)%  (65.54)%  (164.25)%  10.65%  26.09%
    Asset quality ratios:         
    Net charge-offs$575  $856  $882  $664  $1,181 
    Net charge-offs/avg loans held for investment excl PPP 0.35%  0.61%  0.68%  0.51%  1.01%
    Nonperforming loans$10,267  $10,437  $8,834  $11,909  $10,495 
    Nonperforming loans (excluding gov't gtd balance)$4,015  $4,245  $2,660  $3,967  $3,756 
    Nonperforming loans/total loans held for investment 1.51%  1.63%  1.57%  2.04%  1.60%
    Nonperforming loans (excl gov’t gtd balance)/total loans held for investment 0.59%  0.66%  0.47%  0.68%  0.57%
    ALLL/Total loans held for investment at amortized cost 1.48%  1.62%  1.84%  2.34%  2.57%
    ALLL/Total loans held for investment at amortized cost, excl PPP loans 1.54%  1.71%  2.00%  2.72%  3.39%
    Other Data:         
    Full-time equivalent employees(2) 524   485   575   637   651 
    Banking center offices 8   7   7   7   6 
    Loan production offices(3) 20   19   20   17   22 
    (1) See section entitled "GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures" below for a reconciliation to most comparable GAAP equivalent.
    (2) Included 254 FTE from discontinued operations as of September 30, 2022.
    (3) As of October 2, 2022, three loan production offices remained open.


    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
      As of
    (Dollars in thousands, except per share data) September 30,
    2022    		 June 30,
    2022    		 March 31,
    2022    		 December 31,
    2021    		 September 30,
    2021
      (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
    Total shareholders’ equity $90,637  $93,295  $94,879  $96,290  $94,298 
    Less: Preferred stock liquidation preference  (9,605)  (9,605)  (9,605)  (9,605)  (10,705)
    Total equity available to common shareholders  81,032   83,690   85,274   86,685   83,593 
    Less: Goodwill  —   (100)  (100)  (100)  (100)
    Tangible common shareholders' equity $81,032  $83,590  $85,174  $86,585  $83,493 
               
    Common shares outstanding  4,031,937   4,019,023   4,013,173   3,981,117   3,919,977 
    Tangible book value per common share $20.10  $20.80  $21.22  $21.75  $21.30 


    BAYFIRST FINANCIAL CORP.
    CONSOLIDATED BALANCE SHEETS

    (Dollars in thousands)9/30/20226/30/20229/30/2021
    AssetsUnauditedUnauditedUnaudited
    Cash and due from banks$3,131 $2,944 $2,715 
    Interest-bearing deposits in banks 33,365  64,992  104,382 
    Cash and cash equivalents 36,496  67,936  107,097 
    Time deposits in banks 4,881  4,881  2,381 
    Investment securities available for sale 42,915  45,283  32,535 
    Investment securities held to maturity 5,008  5,016  3 
    Restricted equity securities, at cost 2,531  3,274  2,827 
    SBA loans held for sale 573  —  — 
    SBA loans held for investment, at fair value 24,965  52,209  9,805 
    Loans held for investment, at amortized cost net of allowance for loan losses of $9,739, $9,564, and $16,616 646,101  579,964  629,873 
    Accrued interest receivable 3,789  3,172  4,275 
    Premises and equipment, net 32,779  31,058  23,988 
    Loan servicing rights 9,932  7,760  5,933 
    Deferred income tax assets 1,937  1,345  1,263 
    Right-of-use operating lease assets 2,985  2,975  3,387 
    Bank owned life insurance 25,004  24,850  12,434 
    Other assets 13,632  13,472  11,774 
    Assets from discontinued operations 76,747  78,182  96,168 
    Total assets$930,275 $921,377 $943,743 
    Liabilities:   
    Noninterest-bearing deposits$104,215 $103,613 $87,625 
    Interest-bearing transaction accounts 190,985  195,386  157,304 
    Savings and money market deposits 380,576  432,369  377,452 
    Time deposits 109,960  34,038  52,653 
    Total deposits 785,736  765,406  675,034 
    FHLB and FRB borrowings 28,000  40,000  — 
    Subordinated debentures 5,990  5,989  5,983 
    Notes payable 2,958  3,072  3,413 
    PPP Liquidity Facility —  —  144,601 
    Accrued interest payable 236  31  562 
    Operating lease liabilities 3,355  3,116  3,551 
    Accrued expenses and other liabilities 9,374  7,290  9,643 
    Liabilities from discontinued operations 3,989  3,178  6,658 
    Total liabilities 839,638  828,082  849,445 
    Shareholders’ equity:   
    Preferred stock, Series A; no par value, 10,000 shares authorized, 6,395 shares issued and outstanding at September 30, 2022, June 30, 2022, and September 30, 2021, respectively; 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, 3,210, and 4,310 shares issued and outstanding at September 30, 2022, June 30, 2022, and September 30, 2021; aggregate liquidation preference of $3,210, $3,210, and $4,580, respectively 3,123  3,123  4,193 
    Common stock and additional paid-in capital; no par value, 15,000,000 shares authorized, 4,031,937, 4,019,023, and 3,919,977 shares issued and outstanding at September 30, 2022, June 30, 2022, and September 30, 2021, respectively 52,770  52,432  50,546 
    Accumulated other comprehensive (loss), net (3,780) (2,574) (201)
    Unearned compensation (323) (467) (23)
    Retained earnings 32,686  34,620  33,622 
    Total shareholders’ equity 90,637  93,295  94,298 
    Total liabilities and shareholders’ equity$930,275 $921,377 $943,743 


    BAYFIRST FINANCIAL CORP.
    CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

     For the Quarter Ended Year-to-Date
    (Dollars in thousands, except per share data)9/30/2022 6/30/2022 9/30/2021 9/30/2022 9/30/2021
    Interest income:         
    Loans, other than PPP$10,510  $7,057  $6,263  $23,945  $17,584 
    PPP loan interest income 70   87   692   297   4,751 
    PPP origination fee income 70   200   1,662   570   13,909 
    Interest-bearing deposits in banks and other 634   415   188   1,234   420 
    Total interest income 11,284   7,759   8,805   26,046   36,664 
    Interest expense:         
    Deposits 1,856   1,060   1,152   4,133   3,666 
    PPPLF borrowings —   —   278   20   1,699 
    Other 258   112   99   467   519 
    Total interest expense 2,114   1,172   1,529   4,620   5,884 
    Net interest income 9,170   6,587   7,276   21,426   30,780 
    Provision for loan losses 750   250   (3,000)  (1,400)  (1,000)
    Net interest income after provision for loan losses 8,420   6,337   10,276   22,826   31,780 
    Noninterest income:         
    Loan servicing income, net 620   433   412   1,508   1,441 
    Gain (loss) on sale of SBA loans, net 7,446   3,848   (338)  15,915   13,460 
    Service charges and fees 347   322   261   951   730 
    SBA loan fair value (loss) gain 999   2,708   72   3,510   151 
    Other noninterest income 392   367   203   1,262   595 
    Total noninterest income 9,804   7,678   610   23,146   16,377 
    Noninterest Expense:         
    Salaries and benefits 6,758   6,870   6,481   21,177   18,047 
    Bonus, commissions, and incentives 883   573   414   1,833   2,376 
    Occupancy and equipment 1,070   973   790   3,010   2,362 
    Data processing 1,247   1,083   1,047   3,486   4,266 
    Marketing and business development 662   750   693   2,100   1,727 
    Professional services 956   979   1,267   3,089   2,554 
    Loan origination and collection 1,068   748   683   2,486   2,284 
    Employee recruiting and development 518   532   441   1,653   1,213 
    Regulatory assessments 110   121   138   299   340 
    Other noninterest expense 886   1,063   612   2,586   1,847 
    Total noninterest expense 14,158   13,692   12,566   41,719   37,016 
    Income/(loss) before taxes from continuing operations 4,066   323   (1,680)  4,253   11,141 
    Income tax expense/(benefit) from continuing operations 983   (68)  (362)  888   2,968 
    Net income/(loss) from continuing operations 3,083   391   (1,318)  3,365   8,173 
    (Loss)/income from discontinued operations before income taxes (5,973)  (896)  3,459   (6,706)  18,154 
    Income tax (benefit)/expense from discontinued operations (1,488)  (223)  861   (1,670)  4,520 
    Net (loss)/income from discontinued operations (4,485)  (673)  2,598   (5,036)  13,634 
              
    Net income/(loss) (1,402)  (282)  1,280   (1,671)  21,807 
    Preferred dividends 208   208   230   624   797 
    Net income available to/(loss attributable to) common shareholders$(1,610) $(490) $1,050  $(2,295) $21,010 
              
    Basic earnings (loss) per common share:         
    Continuing operations$0.71  $0.05  $(0.40) $0.68  $1.97 
    Discontinued operations (1.11)  (0.17)  0.66   (1.25)  3.63 
    Basic earnings per common share$(0.40) $(0.12) $0.26  $(0.57) $5.60 
              
    Diluted earnings (loss) per common share:         
    Continuing operations$0.68  $0.06  $(0.40) $0.67  $1.86 
    Discontinued operations (1.03)  (0.16)  0.66   (1.15)  3.27 
    Diluted earnings per common share$(0.35) $(0.10) $0.26  $(0.48) $5.13 


    Loan Composition

    (Dollars in thousands)9/30/2022 6/30/2022 3/31/2022 12/31/2021 9/30/2021
    Real estate:(Unaudited) (Unaudited) (Unaudited)   (Unaudited)
    Residential$176,574  $122,403  $102,897  $87,235  $79,889 
    Commercial 220,210   216,067   189,684   163,477   151,122 
    Construction and land 9,259   9,686   18,038   18,632   17,848 
    Commercial and industrial 183,631   168,990   180,163   217,155   232,416 
    Commercial and industrial - PPP 22,286   31,430   44,792   80,158   156,783 
    Consumer and other 37,595   35,845   13,502   3,581   4,910 
    Loans held for investment, at amortized cost, gross 649,555   584,421   549,076   570,238   642,968 
    Deferred loan costs (fees), net 9,047   7,629   7,297   7,975   7,298 
    Discount on SBA 7(a) loans sold (5,068)  (4,743)  (4,624)  (3,866)  (3,753)
    Premium/(discount) on loans purchased 2,306   2,221   1,279   (13)  (24)
    Allowance for loan losses (9,739)  (9,564)  (10,170)  (13,452)  (16,616)
    Loans held for investment, at amortized cost$646,101  $579,964  $542,858  $560,882  $629,873 


    Nonperforming Assets (Unaudited)

    (Dollars in thousands)9/30/2022 6/30/2022 3/31/2022 12/31/2021 9/30/2021
    Nonperforming loans (government guaranteed balances)$6,252  $6,192  $6,174  $7,942  $6,739 
    Nonperforming loans (unguaranteed balances) 4,015   4,245   2,660   3,967   3,756 
    Total nonperforming loans 10,267   10,437   8,834   11,909   10,495 
    OREO 56   56   3   3   3 
    Total nonperforming assets$10,323  $10,493  $8,837  $11,912  $10,498 
    Nonperforming loans as a percentage of total loans held for investment 1.51%  1.63%  1.57%  2.04%  1.60%
    Nonperforming loans (excluding government guaranteed balances) to total loans held for investment 0.59%  0.66%  0.47%  0.68%  0.57%
    Nonperforming assets as a percentage of total assets 1.11%  1.14%  0.99%  1.30%  1.11%
    Nonperforming assets (excluding government guaranteed balances) to total assets 0.44%  0.47%  0.30%  0.43%  0.40%
    ALLL to nonperforming loans 94.86%  91.64%  115.12%  112.96%  158.32%
    ALLL to nonperforming loans (excluding government guaranteed balances) 242.57%  225.30%  382.33%  339.10%  442.39%


    Contacts:
    Anthony N. Leo
    Chief Executive Officer 
    727.399.5678 
    		Robin L. Oliver
    Chief Financial Officer
    727.685.2082


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