BAFN - Earnings call 3 2023 | BayFirst Financial Corp.

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Operator

Good morning, ladies and gentlemen, and welcome to the BayFirst Financial Corp.'s Third Quarter 2023 Conference Call and Webcast. [Operator Instructions] This call is being recorded on Friday, October 27, 2023. I would now like to turn the conference over to Tony Leo. Please go ahead.

Anthony Leo

Thanks, Joel. today and Tom CFO, me Officer, Chief with Oliver; Robin Scott have our Zernick; President, Operating I McKim. I'll December be XX. on retiring as CEO be with a remain the executive team to And director here strong Zernick, turning at built I'll BayFirst. Tom together I over the CEO, while as we've helm a company, of

the one and of a their thank support with SBA the years, in importantly, is believe assets million than XX most past from premier of the in as At team $XX institutions I'd for taken all years BayFirst the total region like Board as well a the what we've bankers I the to one industry. mere of Tampa nation's small $X.X finest in billion largest the over Over same we've community more become our banking in bank the shareholders team of of Bay with executive our assets. to superb lenders. Directors, time,

the confident turn the in Tom's President, time, to like I'm this the I'd leadership. over At forward, to under with hands institution Tom meeting BayFirst team Going of this best be Zernick. will

Thomas Zernick

I Tony. company's performance, Tony of BayFirst the spirit entrepreneurial would growth success overview Thank And amazing and QX the thank pursuit last share of for over Tampa like the to of endless Tony's Bay. you, I his XX building before of an bank fueled years. the

things act chair special strategy. having all weekly a Loan to All Credit executive Tony Board served our valued the team counsel of as forward look and us as Committee, Directors to on member and

too experience. as over culture enjoy I continue the CEO of will special to be the your the a of accomplishments a that be to Tony serve a share all company numerous employees Tony, wisdom from over we're lucky Tony that but to to nurtured council are to initiatives. BayFirst Tony's benefit for BayFirst. of very team from my strategic quarterly sauce secret forever decade has and favorites. to mention, The some focus and hosts group wanted created able small

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and banking calculated of markets. nation's the We demographic focus growth of to on strongest centers retail plan our one

for best shareholders key members, is stakeholders. our and do We will team what always clients, other

QX that confident the performance. we you, not value reflective our to stock company is all telling some of I our for by Now of like of on comments my are company. highlights price start would intrinsic

greatest franchise market. the We we community Bay of in expanding the value the year Tampa have spent the what bank believe is

forward and continued sheet banking we to earnings strong centers look XX strong, balance management. Now improvement

earnings increase we over This represents net and QX a increase income earnings QX $X.X $X.X XXX% During QX, of million. over a $XXX,XXX of XX% million. of produced

to improved ROA was QX X.XX%. Our ROE X.XX% and

cost. adjust that interest came yield a BOLT prime materially despite campaign dollars SBA NIM and a raised basis a result a fueled our recognized BOLT reduction in Our in loan our margin X% program. compression XX.XX% XX net of demand QX is The with CD continued CD earnings of points loans quarterly. These deposits million of at $X.X quarter-over-quarter.

Management not growth decided to fund the deposits. with BOLT broker

asset and is Management closely key additional will during remain asset levels, details the delinquencies show nonperforming Our loan Robin QX quality with ratios metrics higher but to on remarks. provide asset monitoring quality portfolio attention. continue acceptable. our her heightened quality

me Let now BayFirst. around production highlights share some from

real centers Our deposits, the retail of we million banking year. from $XX growing build successful were as checking the continue to franchise account value start in

This X,XXX a over increase. accounts. XX.X% More new net importantly, is this represents checking

impressive we On an and the in net -- grew net savings a up checking XX.X% account an XX year-to-date impressive XX.X% and accounts. savings are basis, side, new new On combined we accounts. savings

credit side lending government-guaranteed came exposure held with from QX bench bank, loans our $XXX BOLT only continues space product. X.X% in of the minimal the for to production QX loan $XXX our our lending CRE Total BayFirst investments. enjoy during our loan million, in from of record the of which $XX On production credit million million was bench. came of commercial platform,

Loans helping capped BOLT SBA carry our assets. earning XXX loans investment $XXX,XXX improve prime to guarantee. are at better adjusting loans are for plus grew BOLT held quarterly. at million $XX an priced and XX% during QX,

introduced BayFirst a platform Lastly, during consumer best-in-class QX. opening account digital

XXX We first $X.X opened days. million totaling during accounts XX the

the transfer ACH keeping front. again, We also us banking on launched digital bank-to-bank capability, relevant

CFO, the to of our financial provide pass Scott performance. to our I'll an microphone Now McKim, overview

Scott McKim

Good Tom. morning, you, Thank everyone.

or quarter. XX% also decreased mentioned, since non sheet our deposit base fully Tom X.X% in and X.X% the quarter XX.X% assets year. operations XX% stability Loan have insured. total increased and and $XX.X income increased have deposits increased balances during total continued by the wholesale $X.XX quarter. is and the million assets from growth net continuing third the the beginning $XX.X of again or overall Year-to-date, the to company's also million grew during Balance As billion

notable offset savings in deposits during in from transaction million, interest-bearing was deposits million. $XXX.X $XX.X money account Total balances and was partially and of account XX.X% third Growth deposit decreases and in noninterest-bearing market at million quarter balances of million of third $XX.X or the quarter $X.XX deposits time of billion. which balances increased by ended X.X% account quarter this $X.X XXXX. of $XX or of million million the year Total the deposit $XXX.X

increased during sale and preferred equity $X.X million million by equity, somewhat the and an Stockholders' dividends added paid in shares higher as other the earnings to stock by of our C $XXX,XXX. and offset the $X.X accumulated of preferred Series common on increase comprehensive loss quarter

year the share of share end or to from share company this was $XX.XX impacted book loss the the quarter CECL, first of value when Although the negatively quarter current increased adopted this expected tangible per QX. model, credit value book per tangible at $XX.XX per in

third margin income as in related quarter, interest higher second of million costs interest quarter. interest decrease and million quarter the the premiums third the form the to of also basis to sale Net in high-yielding unamortized $XXX,XXX of $X.X $X second on decreased of of higher was in of the expense XXXX $XX Higher but basis second loans also quarter. interest margin resulted of points of in on the $X.X deferred quarter higher XX rates to points, compared Net from from balances Net in high-risk quarter. paid second by the deposit million recognition the in of a SBA third was in million XX decrease XXXX. the X.XX% the rate X.XX% quarter from quarter a which compressed third the of unguaranteed

X% ended deposit XX, company's the August on special, XXXX. Specifically, time XX-month which we

which majority Although third quarter of in balances $XX.X of time of to the balance The fourth million increased time the deposit XXXX. are expected renew. balances are in quarter, to existing maturing not

immediately not does Please the adding and net efforts raise quarter. further These which to efficiency the the price significant portfolio rate improvement vast in much consumer a margin are has of deposits, of loan to balance portfolio the management loan portion market majority loans with support of anticipate in repricing after a our variable of the adjustment. above should quarterly, fourth a need sheet, interest rate recall SBA reprices and interest

originated so. providing in the loan third and are increase the in income will interest the continue quarter quarter, the While were costs during do to deposit balances substantial higher also

funds the in allows carry SBA pay of rate customers, to which interest to higher repaid quarter. deposits franchise. asset-sensitive along on company our our amount loans higher all wholesale loans, rate us balance interest of attract the Furthermore, of The a grow sheet, a during with significant conventional a build of and nature typically relationships

a increase sale government quarter. loans. guaranteed loans bank of and in held-for-sale on also a property from sale was continuing operations the of second million gain from third $X.X quarter an government increase to million in income in of XXXX, and third of fair investment on million $X.X $XXX,XXX an $XX.X net due $X.X gains the gain increase value Noninterest in the quarter, from of sold primarily guaranteed The the the recorded million

of Finally, loss of on not sale SBA the the consistently of the in strong quarter the resulted sale balances Premiums of guaranteed $XX loans quarter. $XXX,XXX, which in unguaranteed like in quarter. were repeated million a sale was second second just the third of

for the in compared second credit quarter. provision million million $X losses the Our $X.X in third to was quarter

a did asset on overall in a relatively consumer will due of our stable, third While to elaborate quality Robin just remains increase moment. portfolio unsecured charge-offs loans that party. net from our purchased

third and Finally, fair expenses the loans at compared was improved related impact million as the $X $XX booked it related the sustainable $XXX,XXX origination in quarter the Overall, value. investment results. by second The to increased to fair in originated volume and primarily our to also franchise earnings, loans in nondeferrable relates expense at higher in of quarter. million is quarter, to delivering noninterest of booked our value

of Finally, as $XXX.X the million quarter. we mentioned, during Tom government-guaranteed loans already originated

Our $XXX million, BOLT $XX.X million. loan year-to-date product to accounted production for over bringing

the be We performance by continue excited BOLT. of to

of Slide is after portion, point, The of generate investor At guaranteed remaining it in $X,XXX exposure provides that like this The a can the onetime over to net Robin single months only in loan. With of quality have this guaranteed unsecured detail. loan portion for books. the growth a $XXX,XXX in noninterest on going the selling key asset XX portion our on the is impact driver economics we things $X,XXX the another after XX of illustrated almost discuss BOLT is to sold. income an to see will deck, example a I'd of hand first BOLT impact of origination You an $XX,XXX in our our Robin? initial forward. some

Thomas Zernick

fears of economic future question Recession rise of everyone. levels. unprecedented a rates estate C&I, headwinds real balance performing Scott. accruing. more this economic [ past asset conventional real in acceptable million on or The the balance was as deterioration days adjustment over quality the environment. But X the loans quarters, commercial of ] no non-owner-occupied and Hello, with well an on of Only commercial estate outstanding well. X breadth nonaccrual are due XX mark company's final and credit is owner-occupied be and $X.X in the and in within expected. portfolios $XXX,XXX continue quarter loss conventional of past loan The remains at interest you, of resolution company's to principal stages an BayFirst the Thank end despite C&I

or organically at one increased loan in past have industry-wide slightly, in lending. In primarily performing loan consumer which for loan loans residential above is originated no expected. expectations, due addition, loss to portfolio notwithstanding and our portfolio Nonperforming stress the is consumer due

commercial As limited as we non-owner-occupied and focused loans owner-occupied we commercial real have lending. mentioned, on Tom estate of amount a C&I are

loans. through addition, equity emphasis consumer on and dedicated loan market areas our in open loans In consumer an centers banking with and we end closed officers originate home our

were XX% having total, of This our equity the the bank, charge-offs a XX% new in parameters nearing insured the or the equity home third insured open-end more XX% of and fully priority were of $XXX,XXX third is a that outstanding we There balances end of XXXX. home been Of loan quarter. QX, or home of originated of of insured, have XX loans program. the loan meeting in as program production XX At under included are of totaling consumer end Certain lines the with lines program however, equity for party no insured million days program. the are goal due. past X.X through organic

charge-offs a of portfolio the in lender marketplace we to experience continue consumer However, upgrade purchased from higher-than-projected loan XXXX.

the longer start We of has the balance no are to QX. loans the decreased end from this purchase million year at $XX.X upgrade from million purchasing of the of and portfolio $XX.X at

further anticipated. quickly is and portfolio purchases down the are So no winding

days this company's The delinquencies loans SBA under Unguaranteed in SBA traditional X.XX% loan end of guaranteed past over originated quarter, loans September due decrease XX and quarter. modest the XX loans. call $XXX,XXX larger, X.XX% portfolio on which increased at X.XX% second SBA SBA we compared with June. more on loans nonaccrual while unguaranteed to June X.XX% small on September Historically, program, bulk coming on were the a our XX. have more performed less loans experienced Nonaccrual from SBA the or FlashCap loans XX, well of the up charge-offs from very were

of XXXX originations and then of all were in and with with time reboot XXXX. FlashCap BOLT during government program charge-offs we XXXX, charge-offs in the loans particularly virtually the the mid-XXXX pandemic charge-offs of with throughout support our Pre-pandemic, seen our loans, limited FlashCap and during FlashCap with have declined period loan product, our along increase that

which However, given earlier. Tom unexpected this originated, not and about Scott volume is spoke the loans

as and XX program of X.X rate in while off over performance. program, inception origination these the June average significance All reaches continue loan time and the in seasons the rate the XXXX equals The leveling in annualized all, life the not equaled originated through million. charged-off coming establish levels enough was total the the have quarter over quarters third charge-off $XXX expand portfolio of have to to there's for loans since of normalized BOLT its BOLT third and totaling of before expected history charged these quarter months. X,XXX short the loans tenure loans, we BOLT of end the charge-off charge-off off to from of XX to loans are net of Considering X.XX%, in statistical XXXX the of X.XX%. A the

number we balances majority an the off platform, of date, automation volume terms to underwriting the XX% loan significant bulk our reminder, use team the production, and efficiency, application, have on a and X/X focus unguaranteed further. of the technology throughout continues provides of of these thereby As even loans processes. units, production our investment risk for loans to key BOLT reducing origination remaining producing sold our With the portfolio also management in to carry of a optimize it be particularly to guarantee onboarding which in maximize the of Power

to in is structure We even are expenses enhance as to as product evolution age, set well the At this in the relevant Tony to being to banking continue all competitive and efficiency centers point is for business digital our as an the also this organization, improve hold retail management very efficiency in of we institutions operations any making largest our enhancements cost able we across At scale near our focus and remain current key in with our noninterest automation I'll improve customer experience. to this our units term. increases ensure digital final as turn a and to remarks. minimal time, it back of

Anthony Leo

for confident past profitability it Board the At enjoy for Once I'm opportunity we'd to come. to Thanks, lead our thank open to XX like years. Directors Robin. questions. organization I'd like the this of to up again, our years shareholders the over this and growth point, BayFirst and continued will in

Operator

Instructions] begin now will we gentlemen, at questions the proceed. and There ladies this no time. question-and-answer you, Please are Thank session. [Operator

Robin Oliver

and you we for joining very finishing out to us much very look today, strong. much. you we thank Thank year Well forward the Excellent.

Anthony Leo

Thanks, everyone. Thanks Joel.

Operator

call gentlemen, your You're concludes welcome. thank ask your please and Ladies lines. participating today. for you this you for and We disconnect that conference

BayFirst Financial (BAFN) 27 Oct 232023 Q3 Earnings call transcript