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BayFirst Financial Corp. Revises Its Second Quarter 2022 Results; Highlighted by Strong SBA 7(a) and Conventional Loan Production, Improved Operating Efficiencies, and Net Interest Margin Expansion
Source: Nasdaq GlobeNewswire / 03 Aug 2022 08:00:03 America/New_York
ST. PETERSBURG, Fla., Aug. 03, 2022 (GLOBE NEWSWIRE) -- BayFirst Financial Corp. (NASDAQ: BAFN) (“BayFirst” or the “Company”), parent company of BayFirst National Bank (f/k/a First Home Bank) (the “Bank”) revised its second quarter earnings report to correct the accounting treatment of deferred loan costs on loans on which the Company elected the fair value option. The timing of recognition of fees and costs on such financial instruments differs for loans carried at amortized cost, with costs and fees recognized when incurred, rather than deferred and recognized over the life of the loan. Much of these costs would have been recognized in the third quarter of 2022 assuming the guaranteed and a portion of the unguaranteed components of these loans would be sold at that time. As of June 30, 2022, $806 thousand of costs related to the loans were charged to expense. A significant portion of these costs was previously included in loans held for investment at amortized cost. Due to this adjustment, the Company incurred a $282 thousand loss, or $(0.12) per diluted common share for the second quarter of 2022, instead of net income of $328 thousand, or $0.03 per diluted common share previously reported. This compares to net income of $13 thousand, or $(0.05) per diluted common share in the first quarter of 2022, and $13.0 million, or $2.98 per diluted common share, in the second quarter of 2021. Financial results for the second quarter of 2022 were highlighted by robust loan production in community banking, up more than 200% year to date over last year, as well as one of the best quarters of SBA 7(a) loan production in the Company’s history.
The decrease in earnings during the second quarter of 2022, compared to the first quarter of 2022, is due to a restructuring charge of $630 thousand related to the discontinuation of the direct-to-consumer mortgage business, a reduction in residential loan fee income of $3.0 million, and a $2.7 million increase in loan loss provision, as the Company made a modest provision of $250 thousand in the second quarter compared to a $2.4 million negative provision in the prior quarter, partially offset by a $2.3 million decrease in salaries and benefits, a $2.9 million increase in SBA loan fair value gains, resulting primarily from election of the fair value option on $41.7 million of loans originated in the quarter, and a $1.0 million increase in net interest income.
Compared to the year ago quarter, the decrease in net income for the second quarter of 2022 included the $13.8 million one-time gain on sale of PPP loans in 2021, a $6.0 million decrease in PPP origination fee income and a decrease of $13.1 million in residential loan fee income. These items were partially offset by a decrease in noninterest expense of $8.0 million.
“The second quarter represents a significant turnaround for the Company,” stated Anthony N. Leo, Chief Executive Officer. “We produced excellent core loan growth, improved operating expenses, and expanded our net interest margin by 48 basis points compared to the prior quarter. The investments we made to expand our nationwide SBA production team earlier in the year are paying off, with SBA 7(a) loan production of $90 million during the quarter. This production represents one of the highest performing quarters of SBA loan production in our Company’s history, with record monthly SBA loan production in June. Our SBA business acceleration was in part due to a new lending product, BOLT, that we launched during the quarter to originate SBA loans of $150 thousand or less, which is in high demand and carries an 85% government guaranty. Conventional community bank loan production was also strong, with production up more than 200% year to date over last year, as our lending teams have done an excellent job of bringing in new customer relationships. Our net interest margin benefited from the recent interest rate increases enacted by the Federal Reserve, and we are well positioned to benefit even further in future periods as our SBA loan portfolio rates are tied to prime, with the majority of them resetting quarterly.”
“Our organization is focused on building our community banking franchise in Tampa Bay, supported by national business lines to provide the revenue engine to build out and support our community bank,” Leo continued. “During the quarter and simultaneous with converting to a national banking charter, we rebranded our community bank to the name BayFirst National Bank, which reinforces our commitment to our Tampa Bay communities. We are also continuing our expansion efforts, with plans to open two additional branches in our current markets later this year. While we will continue to support small business owners and homebuyers across the country through our SBA and residential mortgage divisions, we remain a St. Petersburg-based, independent bank focused on making a difference in our own community and in the lives of those we serve.”
Recent Significant Initiatives
- 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. In its first month since inception, the Company originated 57 BOLT loans totaling $7.5 million, with an additional 296 loans, representing $39 million, closed or in process through July 21, 2022. Over the balance of the third quarter, the Company plans to deploy new automation to the BOLT loan program through its proprietary loan origination system, PowerLOS and open API integration with marketplace lending partners to increase volume and speed of delivery while limiting additional staffing.
- During the second quarter, the Company completed a restructuring of its Residential Mortgage Division, and discontinued its primary consumer direct residential mortgage business line. The restructuring was undertaken in response to reduced volume due to a lack of refinance demand in the current rising rate environment which directly impacted the consumer direct business line. As a result of this restructuring the Bank will focus resources on its traditional retail mortgage business supported by loan production offices across the nation.
- A large residential loan production team located in Las Vegas was onboarded after the end of the second quarter during July and, as previously reported, two large residential loan production teams were added in April, one in Branford, CT and the other in Miami, FL. The addition of these offices is expected to increase residential loan production volume once the teams are fully integrated.
- On May 16th, the Bank converted its charter from a Florida state chartered banking institution to that of a national association and simultaneously changed its name to BayFirst National Bank.
Second Quarter 2022 Performance Review
- The Company’s SBA loan origination platform, CreditBench, had one of the best quarters of SBA 7(a) loan production in the Company's history. CreditBench originated $90.0 million in new SBA loans during the second quarter of 2022, a 90.2% increase compared to $47.3 million originated in the first quarter of 2022, and an 89.9% increase over the $47.4 million of loans produced during the second quarter of 2021. Additionally, the pipeline continues to remain strong at $179.4 million at June 30, 2022.
- Loans held for investment, excluding PPP loans, increased by $93.1 million or 18.0% to $610.5 million during the second quarter of 2022 and $145.1 million, or 31.2% over the past year. Production during the quarter was partially offset by $46.8 million in sales of the guaranteed balances of SBA loans.
- The Residential Mortgage Division originated $305.6 million in loans during the second quarter of 2022, a reduction of 8.9% compared to $335.6 million originated during the first quarter of 2022, and a 48.2% reduction compared to $522.1 million of loans produced during the second quarter of 2021.
- Deposits decreased by $4.7 million, or 0.6% during the second quarter of 2022 and increased by $133.1 million, or 21.0% over the past year to $765.4 million at June 30, 2022. During the second quarter of 2022, there were increases in transaction accounts and time deposit balances partially offset by decreases in money market and savings account balances. Although the balances decreased slightly as customers utilized more of their existing cash, the number of transaction, savings, and money market accounts increased by 5.5% over the prior quarter.
- Tangible book value at June 30, 2022 was $20.80 per common share, down from $21.22 at March 31, 2022, primarily due to a reduction in equity as accumulated other comprehensive loss increased in the rising rate environment. Over the course of the past year, tangible book value decreased $0.34 per common share, or 1.6%, from $21.14 at June 30, 2021.
- Net interest margin expanded 48 bps quarter-over-quarter to 3.73% in the second quarter of 2022, from 3.25% in the first quarter of 2022.
Results of Operations
Net Income (Loss)
The Company incurred a net loss of $282 thousand for the second quarter of 2022 compared to net income of $13 thousand in the first quarter of 2022, and net income of $13.0 million in the second quarter of 2021. The decrease for the second quarter of 2022 from the preceding quarter was primarily due to $3.0 million lower residential loan fee income, and a $2.7 million increase in loan loss provision, as the Company recorded a modest $250 thousand provision for loan loss in the second quarter compared to the $2.4 million negative provision in the prior quarter, partially offset by a $2.9 million increase related to held for investment SBA loan fair value gains, resulting primarily from election of the fair value option on $41.7 million of loans originated in the quarter, and a $2.0 million, or 7.1%, reduction in noninterest expense. The decrease from the second quarter of 2021 was the result of the $13.8 million one-time gain on sale of PPP loans in 2021, lower PPP origination fee and interest income, and lower residential loan fee income, partially offset by higher income from the sale of non-PPP SBA guaranteed loans, and lower noninterest expense.
In the first six months of 2022, the Company incurred a net loss of $269 thousand, a decrease of $20.8 million from net income of $20.5 million in the first six months of 2021, reflecting $32.0 million in lower residential loan fee income, a $13.8 million gain on sale of PPP loan in 2021, and lower PPP income origination fee and interest. These items were partially offset by a $2.4 million increase related to held for investment SBA loan fair value gains, higher gains on non-PPP SBA guaranteed loan sales, a $14.1 million reduction, or 20.9%, in noninterest expense and a $4.2 million lower provision for loan losses.
Net Interest Income and Net Interest Margin
Net interest income was $7.5 million in the second quarter of 2022, an increase of $1.1 million or 16.4% from $6.4 million in the first quarter of 2022, and a decrease of $5.4 million or 42.2% from $12.9 million in the second quarter of 2021. The increase during the second quarter of 2022 as compared to the prior quarter was mainly due to the increase in non-PPP loan interest income and a reduction in deposit interest expense. The decrease during the second quarter of 2022 as compared to the year ago quarter was mainly due to the decrease in net PPP loan interest and origination fee income.
Net interest income was $13.9 million in the first six months of 2022, a decrease of $11.6 million or 45.7% from $25.5 million in the first six months of 2021. The decrease during the first six months of 2022 as compared to the prior year was mainly due to the decrease in net PPP loan interest and origination fee income.
Net interest margin improved to 3.73% for the second quarter of 2022, an expansion of 48 bps, compared to 3.25% for the first quarter of 2022 and an expansion of 27 bps over 3.46% for the second quarter of 2021. Net interest margin improved to 3.49% for the first six months of 2022, compared to 3.34% for the first six months of 2021. With the recent rate increase enacted by the Federal Reserve, the Company anticipates further improvement in its net interest margin as its SBA loan portfolio rates are tied to prime with the vast majority resetting at the beginning of each quarter.
Noninterest Income
Noninterest income was $17.9 million for the second quarter of 2022, a decrease of $1.0 million or 5.1% from $18.9 million in the first quarter of 2022, and a decrease of $20.3 million or 53.2% from $38.2 million in the second quarter of 2021. The decrease in the second quarter of 2022, as compared to the prior quarter was primarily the result of lower residential loan fee income and gain on sale of SBA loans, partially offset by an increase related to held for investment SBA loan fair value gains, resulting primarily from election of the fair value option on $41.7 million of loans originated in the quarter. The decrease from a year ago quarter was primarily the result of the one-time $13.8 million gain on sale of PPP loans in 2021 and a decrease in residential loan fee income, partially offset by an increase in gains on SBA loan sales and the resulting gain in SBA loan servicing income.
Noninterest income was $36.8 million for the first six months of 2022, a decrease of $34.6 million or 48.5% from $71.4 million in the first six months of 2021. The decrease was primarily due to a $32.0 million reduction in residential loan income and the $13.8 million gain on sale of PPP loans in 2021. These items were partially offset by higher gains on the sale of non-PPP SBA loans and a $2.4 million increase related to held for investment SBA loan fair value gains.
Noninterest Expense
Noninterest expense was $25.7 million in the second quarter of 2022, which was a $1.9 million or 7.1% decrease from $27.6 million in the first quarter of 2022 and an $8.0 million or 23.7% decrease compared to $33.7 million in the second quarter of 2021. The decrease from the prior quarter was primarily the result of $2.3 million lower salaries and benefits, partially offset by the $630 thousand residential mortgage division restructuring expense. The decrease from a year ago quarter was primarily due to lower residential mortgage commissions, salaries and benefits, and data processing expense, partially offset by residential mortgage division restructuring expense.
Noninterest expense was $53.3 million in the first six months of 2022, which was a $14.1 million or 20.9% decrease from $67.4 million in the first six months of 2021. The decrease was primarily the result of lower residential mortgage commissions.
Balance Sheet
Assets
Total assets increased by $32.8 million or 3.7% during the second quarter of 2022 to $921.4 million, mainly due to new loan production and an increase in in both held to maturity and available for sale securities, partially offset by a decrease in cash and cash equivalents and the sale of SBA guaranteed loans.
Loans
Loans held for investment, excluding PPP loans, increased by $93.1 million or 18.0% during the second quarter of 2022 and by $145.1 million or 31.2%, over the past year to $610.5 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 $13.2 million in the second quarter of 2022 to $31.2 million, due primarily to PPP forgiveness payments.
Deposits
Deposits decreased by $4.7 million or 0.6% during the second quarter of 2022 and increased $133.1 million or 21.0% compared to June 30, 2021, ending the second quarter of 2022 at $765.4 million. During the quarter, transaction account and time deposit balances increased, partially offset by a decrease in savings and money market account balances. Over the year, savings and money market accounts and transaction account balances increased and time deposit balances decreased.
Asset Quality
Asset quality remained stable in the second quarter of 2022. As the financial impact of the COVID-19 pandemic became more predictable throughout 2021, 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 second quarter of $250 thousand. This compared to a $2.4 million negative provision for the first quarter of 2022, and no provision for loan losses during the second 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 2.14% at June 30, 2022, 2.73% as of March 31, 2022, and 6.67% as of June 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 second quarter of 2022 were $856 thousand, a $26 thousand decrease from $882 thousand for the first quarter of 2022 and a $364 thousand decrease compared to $1.2 million in the second quarter of 2021. Annualized net charge-offs as a percentage of average loans, excluding PPP loans, were 0.61% for the second quarter of 2022, down from 0.7% in the first quarter of 2022 and 1.1% in the second quarter of 2021. Nonperforming assets, excluding government guaranteed loans, to total assets was 0.46% as of June 30, 2022, compared to 0.30% as of March 31, 2022, and 0.30% as of June 30, 2021.
Capital
The Bank’s Tier 1 leverage ratio was 11.37% as of June 30, 2022, a decrease from 11.75% as of March 31, 2022, and from 12.06% at June 30, 2021. The CET 1 and Tier 1 capital ratio to risk-weighted assets were 15.12% as of June 30, 2022, a decrease from 18.19% as of March 31, 2022, and from 21.27% as of June 30, 2021. The total capital to risk-weighted assets ratio was 16.37% as of June 30, 2022, a decrease from 19.45% as of March 31, 2022, and from 22.57% as of June 30, 2021.
Recent Events
Conversion to a National Bank: On May 16, 2022, BayFirst Financial Corp.’s wholly-owned subsidiary completed its conversion to a national bank. As part of this process, the Bank, formerly known as First Home Bank, changed its name to BayFirst National Bank.
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 seven full-service office locations, 21 mortgage loan production offices, and was the top 15 by dollar volume and by number of units originated nationwide through the third quarter ended June 30, 2022, of SBA's 2022 fiscal year.
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 June 30, 2022, BayFirst Financial Corp. had $921.4 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 5our 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) 6/30/2022 3/31/2022 12/31/2021 9/30/2021 6/30/2021 Balance sheet data: Average loans held for investment, excluding PPP loans $ 562,120 $ 520,559 $ 518,697 $ 467,283 $ 445,893 Average total assets 879,868 872,311 923,485 1,086,377 1,541,230 Average common shareholders’ equity 83,235 83,990 83,056 81,989 68,525 Total loans held for investment 641,737 561,797 583,948 656,294 895,194 Total loans held for investment, excluding PPP loans 610,527 517,434 504,525 500,647 465,470 Total loans held for investment, excl gov’t gtd loan balances 458,624 374,353 332,977 316,528 314,438 Allowance for loan losses 9,564 10,170 13,452 16,616 20,797 Total assets 921,377 888,541 917,095 943,743 1,198,229 Common shareholders’ equity 83,690 85,274 86,685 83,593 81,838 Share data: Basic earnings per common share $ (0.12 ) $ (0.05 ) $ 0.66 $ 0.27 $ 3.34 Diluted earnings per common share (0.12 ) (0.05 ) 0.61 0.26 2.98 Dividends per common share 0.08 0.08 0.07 0.07 0.07 Book value per common share 20.82 21.25 21.77 21.32 21.16 Tangible book value per common share (1) 20.80 21.22 21.75 21.30 21.14 Performance and capital ratios: Return on average assets (0.13 )% 0.01 % 1.22 % 0.47 % 3.38 % Return on average common equity (2.35 )% (0.93 )% 12.54 % 5.12 % 74.61 % Net interest margin 3.73 % 3.25 % 3.07 % 3.04 % 3.46 % Dividend payout ratio (65.54 )% (164.25 )% 10.65 % 26.09 % 2.09 % Asset quality ratios: Net charge-offs $ 856 $ 882 $ 664 $ 1,181 $ 1,220 Net charge-offs/avg loans held for investment excl PPP 0.61 % 0.68 % 0.51 % 1.01 % 1.09 % Nonperforming loans $ 10,437 $ 8,834 $ 11,909 $ 10,495 $ 9,884 Nonperforming loans (excluding gov't gtd balance) $ 4,245 $ 2,660 $ 3,967 $ 3,756 $ 3,577 Nonperforming loans/total loans held for investment 1.63 % 1.57 % 2.04 % 1.60 % 1.10 % Nonperforming loans (excl gov’t gtd balance)/total loans held for investment 0.66 % 0.47 % 0.68 % 0.57 % 0.40 % ALLL/Total loans held for investment at amortized cost 1.62 % 1.84 % 2.34 % 2.57 % 2.35 % ALLL/Total loans held for investment at amortized cost, excl PPP loans 1.71 % 2.00 % 2.72 % 3.39 % 4.57 % Other Data: Full-time equivalent employees 485 575 637 651 671 Banking center offices 7 7 7 6 6 Loan production offices 19 20 17 22 26 (1) See section entitled "GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures" below for a reconciliation to most comparable GAAP equivalent. 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) June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 June 30, 2021 (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) Total shareholders’ equity $ 93,295 $ 94,879 $ 96,290 $ 94,298 $ 92,813 Less: Preferred stock liquidation preference (9,605 ) (9,605 ) (9,605 ) (10,705 ) (10,975 ) Total equity available to common shareholders 83,690 85,274 86,685 83,593 81,838 Less: Goodwill (100 ) (100 ) (100 ) (100 ) (100 ) Tangible common shareholders' equity $ 83,590 $ 85,174 $ 86,585 $ 83,493 $ 81,738 Common shares outstanding 4,019,023 4,013,173 3,981,117 3,919,977 3,867,414 Tangible book value per common share $ 20.80 $ 21.22 $ 21.75 $ 21.30 $ 21.14 BAYFIRST FINANCIAL CORP.
CONSOLIDATED BALANCE SHEETS(Dollars in thousands) 6/30/2022 3/31/2022 6/30/2021 Assets Unaudited Unaudited Unaudited Cash and due from banks $ 2,944 $ 3,141 $ 2,896 Interest-bearing deposits in banks 64,992 118,960 102,441 Cash and cash equivalents 67,936 122,101 105,337 Time deposits in banks 4,881 3,881 2,381 Investment securities available for sale 45,283 41,656 22,674 Investment securities held to maturity 5,016 2 6 Restricted equity securities, at cost 3,274 2,520 2,820 Residential loans held for sale 74,708 75,022 126,479 SBA loans held for sale — 1,445 — SBA loans held for investment, at fair value 52,209 8,769 10,070 Loans held for investment, at amortized cost net of allowance for loan losses of $9,564, $10,170, and $20,797 579,964 542,858 864,327 Accrued interest receivable 3,190 3,150 7,039 Premises and equipment, net 31,368 31,037 21,076 Loan servicing rights 7,952 7,601 6,614 Deferred income tax assets 1,345 490 2,594 Right-of-use operating lease assets 3,547 4,166 3,722 Bank owned life insurance 24,850 24,698 12,351 Other assets 15,854 19,145 10,739 Total assets $ 921,377 $ 888,541 $ 1,198,229 Liabilities: Noninterest-bearing deposits $ 103,613 $ 92,680 $ 81,150 Interest-bearing transaction accounts 195,386 180,815 143,046 Savings and money market deposits 432,369 464,847 355,045 Time deposits 34,038 31,787 53,081 Total deposits 765,406 770,129 632,322 FHLB and FRB borrowings 40,000 — — Subordinated debentures 5,989 5,987 5,982 Notes payable 3,072 3,186 3,527 PPP Liquidity Facility — — 443,906 Accrued interest payable 31 86 928 Operating lease liabilities 4,014 4,377 3,923 Accrued expenses and other liabilities 9,570 9,897 14,828 Total liabilities 828,082 793,662 1,105,416 Shareholders’ equity: Preferred stock, Series A; no par value, 10,000 shares authorized, 6,395 shares issued and outstanding at June 30, 2022, March 31, 2022, and June 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 4,580 shares issued and outstanding at June 30, 2022, March 31, 2022, and June 30, 2021; aggregate liquidation preference of $3,210, $3,210, and $4,580, respectively 3,123 3,123 4,456 Common stock and additional paid-in capital; no par value, 15,000,000 shares authorized, 4,019,023, 4,013,173, and 3,867,414 shares issued and outstanding at June 30, 2022, March 31, 2022, and June 30, 2021, respectively 52,432 52,252 49,501 Accumulated other comprehensive (loss), net (2,574 ) (1,458 ) (122 ) Unearned compensation (467 ) (630 ) (29 ) Retained earnings 34,620 35,431 32,846 Total shareholders’ equity 93,295 94,879 92,813 Total liabilities and shareholders’ equity $ 921,377 $ 888,541 $ 1,198,229 BAYFIRST FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)For the Quarter Ended Year-to-Date (Dollars in thousands, except per share data) 6/30/2022 3/31/2022 6/30/2021 6/30/2022 6/30/2021 Interest income: Loans, other than PPP $ 7,924 $ 7,115 $ 5,282 $ 15,039 $ 11,881 PPP loan interest income 87 140 3,330 227 5,529 PPP origination fee income 200 300 6,234 500 12,247 Interest-bearing deposits in banks and other 415 185 151 600 232 Total interest income 8,626 7,740 14,997 16,366 29,889 Interest expense: Deposits 1,060 1,217 1,194 2,277 2,514 PPPLF borrowings — 20 655 20 1,421 Other 112 97 244 209 420 Total interest expense 1,172 1,334 2,093 2,506 4,355 Net interest income 7,454 6,406 12,904 13,860 25,534 Provision for loan losses 250 (2,400 ) — (2,150 ) 2,000 Net interest income after provision for loan losses 7,204 8,806 12,904 16,010 23,534 Noninterest income: Residential loan fee income 10,212 13,191 23,352 23,403 55,381 Loan servicing income, net 438 461 325 899 1,029 Gain (loss) on sale of SBA loans, net 3,848 4,621 13,798 8,469 13,798 Service charges and fees 322 282 364 604 586 SBA loan fair value (loss) gain 2,708 (197 ) 7 2,511 79 Other noninterest income 371 510 366 881 498 Total noninterest income 17,899 18,868 38,212 36,767 71,371 Noninterest Expense: Salaries and benefits 11,416 13,697 12,948 25,113 26,115 Bonus, commissions, and incentives 4,995 4,606 9,218 9,601 21,091 Mortgage banking 677 1,002 1,572 1,679 3,267 Occupancy and equipment 1,382 1,421 1,297 2,803 2,629 Data processing 1,367 1,467 2,593 2,834 3,862 Marketing and business development 1,659 1,742 1,878 3,401 3,520 Professional services 1,075 1,307 843 2,382 1,767 Loan origination and collection 748 670 1,105 1,418 1,601 Employee recruiting and development 474 871 1,008 1,345 1,622 Regulatory assessments 120 69 100 189 202 Residential mortgage division restructuring expense 630 — — 630 — Other noninterest expense 1,133 795 1,106 1,928 1,713 Total noninterest expense 25,676 27,647 33,668 53,323 67,389 Income (loss) before taxes (573 ) 27 17,448 (546 ) 27,516 Income tax expense (benefit) (291 ) 14 4,432 (277 ) 6,989 Net income (loss) (282 ) 13 13,016 (269 ) 20,527 Preferred dividends 208 208 235 416 567 Net income (loss) available to common shareholders $ (490 ) $ (195 ) $ 12,781 $ (685 ) $ 19,960 Basic earnings per common share $ (0.12 ) $ (0.05 ) $ 3.34 $ (0.17 ) $ 5.44 Diluted earnings per common share $ (0.12 ) $ (0.05 ) $ 2.98 $ (0.17 ) $ 4.87 Loan Composition
(Dollars in thousands) 6/30/2022 3/31/2022 12/31/2021 9/30/2021 6/30/2021 Real estate: (Unaudited) (Unaudited) (Unaudited) (Unaudited) Residential $ 122,403 $ 102,897 $ 87,235 $ 79,889 $ 75,618 Commercial 216,067 189,684 163,477 151,122 143,388 Construction and land 9,686 18,038 18,632 17,848 14,293 Commercial and industrial 168,990 180,163 217,155 232,416 215,359 Commercial and industrial - PPP 31,430 44,792 80,158 156,783 432,469 Consumer and other 35,845 13,502 3,581 4,910 3,489 Loans held for investment, at amortized cost, gross 584,421 549,076 570,238 642,968 884,616 Deferred loan costs (fees), net 7,629 7,297 7,975 7,298 4,968 Discount on SBA 7(a) loans sold (2,521 ) (3,335 ) (3,866 ) (3,753 ) (4,420 ) Discount on PPP loans purchased (1 ) (10 ) (13 ) (24 ) (40 ) Allowance for loan losses (9,564 ) (10,170 ) (13,452 ) (16,616 ) (20,797 ) Loans held for investment, at amortized cost $ 579,964 $ 542,858 $ 560,882 $ 629,873 $ 864,327 Nonperforming Assets (Unaudited)
(Dollars in thousands) 6/30/2022 3/31/2022 12/31/2021 9/30/2021 6/30/2021 Nonperforming loans (government guaranteed balances) $ 6,192 $ 6,174 $ 7,942 $ 6,739 $ 6,307 Nonperforming loans (unguaranteed balances) 4,245 2,660 3,967 3,756 3,577 Total nonperforming loans 10,437 8,834 11,909 10,495 9,884 OREO 56 3 3 3 — Total nonperforming assets $ 10,493 $ 8,837 $ 11,912 $ 10,498 $ 9,884 Nonperforming loans as a percentage of total loans held for investment 1.63 % 1.57 % 2.04 % 1.60 % 1.10 % Nonperforming loans (excluding government guaranteed balances) to total loans held for investment 0.66 % 0.47 % 0.68 % 0.57 % 0.40 % Nonperforming assets as a percentage of total assets 1.14 % 0.99 % 1.30 % 1.11 % 0.82 % Nonperforming assets (excluding government guaranteed balances) to total assets 0.46 % 0.30 % 0.43 % 0.40 % 0.30 % ALLL to nonperforming loans 91.64 % 115.12 % 112.96 % 158.32 % 210.41 % ALLL to nonperforming loans (excluding government guaranteed balances) 225.30 % 382.33 % 339.10 % 442.39 % 581.41 % Contacts: Anthony N. Leo Robin L. Oliver Chief Executive Officer Chief Financial Officer 727.399.5678 727.685.2082 
