BAFN - Earnings call transcript Q1 2024 | BayFirst Financial Corp.

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Operator

Good morning, ladies and gentlemen, and welcome to the BayFirst Financial Corporation Q1 2024 Conference Call and Webcast.

[Operator Instructions]

This call is being recorded on Friday, April 26, 2024.

I would now like to turn the conference over to Mr. Officer. Executive Chief Zernick, Tom Please go sir. ahead,

Thomas Zernick

Chief Thank on our Laura. President Chief Oliver; Good McKim. with morning, participating for and and Robin Officer, you thank Operating Officer, call our Scott and me you, Financial today. have I

statements include forward-looking refer on non-GAAP financial contained investor presentation. on Page Today's to forward-looking measures. cautionary our call and will the statement statements Please X of

not state our our and that net performance, goals to with are I executive first SBA core the discuss I our QX and production I charge-offs quarter clearly Before profitability, first in quarter. of and rest team missed higher results. the content our want lower X(a) driven We by earnings for

continues well. Our to underlying metrics Banking perform stable, credit remained and our division Community

is as of and However, focused to to model. We're are areas staffing that process, close some elevate rightsize business needed. all on to our and working continue our we focus

is that value applied every focus Bank our remain through loan is that We Furthermore, business business and to a high continuing of small key to build we partnership great inflation to operating Tampa a one nation's Bay. interest the the small lender/borrower This many footprint franchise in committed keeping strongest. rates. write in as to operate Community the we consider oftentimes of

X(a) Net quarter-over-quarter, 'XX SBA forecasted million. of of $X.X but $X.X a losses $XXX,XXX, During weaker QX, over coupled loan higher decreased we increase earnings production. provision produced with than net primary income factors: of of earnings credit XX% over XX% $XXX,XXX, this to million represents core QX for a QX X decrease income

near-term market by in the Tampa expansion loans opened million plans. were balances $XXX,XXX by BayFirst center XXth quarter in the completes Coast our successful year-over-year. $XX.X We Our core South Bay quarter. million in our its deposit and location size. Sarasota $XX.X the are growing $X branch banking to million attractive during loans during

and serving individuals, great This with continues families establishing our relationships model focus on community-focused Bay. community client a maintain accounts our strong Tampa to a value here checking in bank businesses marketplace. and business on We savings small across grow franchise we build model as

While to borrowers higher we due bank's consumer rising loan as loan including nonperforming which the the of to to net payments. program, end loans metrics, SBA-guaranteed declined performance significantly exclusive XXXX of asset and monitor first quality of quarter, their when now lower continue these XXXX prior the net were the FlashCap during the purchased charge-offs loans, net The in in of unsecured as particularly quarter. in balances, was charge-offs small increased impact well government-guaranteed from the portfolio rates from increase loans rates of originated charge-offs felt from have last

model will originating few minutes. during product the stopped more metrics on bank quality asset FlashCap share quarter, under Robin and loans details The the in a

Let highlights from now some share me around BayFirst.

$X.XX billion. in the centers retail banking the build of quarter X.X% first real successful to net and quarter XXXX, Our at accounts new value we deposit growing were balances as during franchise X.X% ending continued

decrease of of balances savings quarter, million. in $X.X $X.X increases million, balances market and the balances $XX.X of by and first in a During deposit time million, there balances account account offset were partially noninterest-bearing deposit deposit account money interest-bearing million of transaction $X.X

from XX% being March insured granular of a XX, our and deposits XXXX. at maintained continues has deposit BayFirst base benefit to

held of continues our side, only commercial loans X.X% the to BayFirst for CRE, and the the exposure space On lending end of in at quarter. investments nonowner-occupied with the minimal CRE representing enjoy

the first to $XXX.X past or to of and and quarter conventional by XX.X% $XXX.X increased X.X% Loans million million held for due and million loans community investment or increased in over the $XX.X originations bank year. XXXX during

loans of and During balances. the million quarter, million sold originated of government-guaranteed loan $XXX.X the company $XXX.X

of guaranteed A quarter government-guaranteed XXXX. the million new the loans of of quarter loans The during increase million X.X% of from the $X.X origination CreditBench, and company's a during $XXX.X first in in government loans strong platform, produced previous decrease of over XXXX. Demand million $XXX.X first $XXX.X produced originated loan company's for quarter to launch million an or of originated SBA remains during has totaling loan in originated country. the Bolt X(a) $XX.X company to loans the businesses million XXXX, which the throughout of the less Bolt X,XXX provide loans loan loans $XXX.X program Bolt capital Bolt the totaling working designed product expeditiously $XXX,XXX were quarter. million, XXX Since

Chief Officer, microphone to of McKim, overview an our the provide Scott financial Financial performance. pass will to I our Now

Scott McKim

Tom. you, Thank Good morning, everyone.

income during total the our over for quarter. continuing the the was an or held have and X%. million overall, million X.X% assets $XX.X Year-over-year Balances net total quarter. or X.X% increase investments of million $XX.X by quarter the XXXX. Total grew increased of in As and this Tom of first million million $XX.X loans quarter $XX.X assets during to during year operations or increased $XXX,XXX of increased just mentioned, $X.XX X.X% from the billion deposits increased from first $XX quarter, or

during and by $XX.XX slightly the slight the Total than decreased quarter quarter first quarter, in driven of just value higher equity accumulated $XX.X over increase counts. at tangible at billion. $X end per Shareholders' the was XXXX. fourth to million is $XX.XX end $XXX.X share higher quarter the of comprehensive fourth and at of There quarter deposits per the end of is flat the quarter to the book share our a $XXX,XXX million share was loss other from ended

This in margin during million both and from quarter, by higher higher interest increases $XXX,XXX deposit decreased as net slightly quarter essentially Net about ago. the down interest income expense is offset the interest fourth basis quarter, in points and well as interest year a quarter. $X.X reflecting income flat fourth the higher reflecting the cost first to X the interest income, from again, was

the $X gains noninterest the for $XXX,XXX, million, $XX.X well on gains compared to income first fees loans million quarter which last operations That fourth loans, the higher fewer Loans year. quarter first Noninterest and in the as value was of other provided of lower income first was quarter were packaging as of of down income. quarter care on XXXX. from continuing sold reflecting $X.X to XXXX, sale compared the higher million originated loans gains up was on of premium net quarter during reflecting

fourth Provision the XXXX. quarter losses and $X.X in first million million $X.X for the in to credit million quarter of was quarter first in $X.X compared the

overall remains on SBA unguaranteed While X as (a) XXXX of third did net stable. increase charge-offs portfolio loans party from as higher to balances loans. charge-offs purchased in our Net a quality due consumer of unsecured relatively asset well

loan throughout year. have the As in to volume. commission compared and Noninterest million core of and $XXX,XXX its and exposure loan the of decreased of first quarter, by down, $XXX,XXX costs we fourth primarily charge-offs to unsecured and expense this costs, we a previously incentive expect net mentioned, quarter loan lower consumer both $X pay continues due on reflecting collection origination the to dissipate decrease origination impact M&A SBA to

the in noninterest which to onetime costs income as higher, Offsetting these an the salary increase first production a as expense. as that than as the and expense fees, $X.X as quarter resets origination first well first last as of tax professional XXXX decreases mentioned Compared were incentive included higher I $XX additional year XXXX, million million of quarter quarter for in $X.X of well was just professional loan is $XXX,XXX million costs well. loan costs by the of driven higher

some to Chief this discuss Officer, President our will asset quality turn Robin? and things point, Robin Operating At I Oliver, over in detail. to

Robin Oliver

that noting portfolio originated for you, addition, or is everyone. by performing loan quality well the expectations. Thank remain acceptable I company's organically portfolio, Good at Scott. to first above within morning, commercial and asset in begin metrics conventional consumer want levels the

loss X.X% loan-to-value balances expected. in to Nonperforming investment at a loan ratio a but costs, and of for mostly portfolio remains and no to loan government-guaranteed for elevated, in are periods loans March The the amortized of XX, XX, relatively XXXX, XXXX. stable, ago credit due for all year at losses which allowance with one past total XXXX, flat slightly as ratio due X.XX% X.XX% loans March residential the XX, remained is December at held excluding at low

X.X% first of at million, for million $X.X of $X.X first charge-offs of excluding of as $X.X in the XXXX. fourth quarter government-guaranteed a total XX, million from net March XX, X.XX% from mentioned, the XXXX March million and elevated assets, to quarter quarter $X.X as Nonperforming XXXX. $X.X loans to increase a at at Scott As however, XXXX the XX, to were up assets, increase were compared but for compared X.X% of million December 'XX stable,

was loans program. of discontinued CreditBench Beginning losses. small the changes quality asset XXXX, SBA FlashCap under performance FlashCap We to loan X(a) the working for product make under capital capital continue higher-than-expected to working its improve the January loans provided in lending credit of the due bank's loan program $XXX,XXX. to

anticipated small years. Bolt program than thousands of bank's lower below few risk management even to FlashCap has with And loan performed suspended loans using and loans $XXX,XXX of the product working loan FlashCap Bolt or The loan that, program. lending higher rate with was data The performed program or industries capital from better in historical present quarter standards analyzing a underwriting which developed FlashCap stricter less a the this after than loss originated expectations. the provides prior than have

performance. the Bolt this quarter underwriting enhancements improve credit to Furthermore, additional to future were parameters made

charge-offs anticipated due in higher than past and were the net ratios quarter, Although nonperforming stable. are first

help closely, monitoring several have made and to loan loss improve are We adjustments the we rates. portfolio future

get mentioned workout implemented and portfolios, can whereby and borrowers front addition our reminders the to I In yet also we have enhancements them. to of loan touch text teams Bolt around resources another loss added to point as certain FlashCap loan new to technology mitigation the payment we in and

unsecured given In portfolio, decrease charge-offs the to of Scott the noted, begin purchased this the throughout the remainder of we in as to the loan consumer size year. shrinking expect addition, portfolio

and path meet did QX Management quality, improve forward. see profitability hitting centers we have investments we stronger laser-focused for made results the in overall the our banking asset targets our do on and efficiency. is and a production expectations, not our to maximizing technology While

time, back to will I any this Tom final it for turn At comments.

Thomas Zernick

this And forward of on our to opening you, thank like look say up you we Thank I it just to all and questions. now would morning, for you for Robin. call for participating

Operator

Rlh. of question line first [Operator the from Haberman Instructions] Our from Ross comes

Ross Haberman

tell big portfolio what me -- the loan the you how in dollars? in we call total flash Could Flash

Scott McKim

or of that At million. the quarter, first portion of unguaranteed $XX about our the end exposure was the

Ross Haberman

that I is allowance against the or have what points And what you percentage say? should

Scott McKim

pretty reserved that. on heavily We're

that We APL of are portfolio is about $X.X just million. the -- component on our is

Ross Haberman

to down it or why slowing $X.X and stopping million. that, above -- you're I you're you're that's say. exposure see over began in, right. saying And you All should and

Scott McKim

product As the goes? far as

Robin Oliver

product, to loan restarted small Yes. And to and as just C&I, it it pre-pandemic. really us the our product the when was really this of after driver focus we point for a we some we started really FlashCap wasn't Bolt. PPP at on but continued main do big pandemic,

And the so go portfolio this ahead and and given it time we product. that losses in we at would discontinue just that just was that felt where

It's C&I not going Bolts. not that than do other small loans we're to

will as but thorough part get core of our those, underwriting more We do they'll program. really a loan SBA

Ross Haberman

in tell And in you general, Could number part you me balance portfolio you terms the you're there delinquencies is? you SBA had portion -- doing of joined, that are How your unguaranteed today? kind big before that on unguaranteed seeing was know I your of of what a what of sheet.

Scott McKim

the that balances there unguaranteed well. unguaranteed end delinquencies, And total we're we But was things. loans what of as at the $XXX that overall million. reporting terms in see we slides about we Yes, number is as includes the that of you that as the SBA balances of from quarter the And delinquencies are non-SBA of seeing the predominantly, had coming X in (a) first side have. far the the can

So as talking that here. I this, number move pull just through exact kind of for to you up

Ross Haberman

don't have I'm me. in slides apologize. sorry, the I I front of

Scott McKim

from X.X%. year. the X.X% last that's in it's down And

Ross Haberman

are that banks or you are in on And unguaranteed that I number I've today? of to to because portion. other And specifically pickup seeing ask spoken what delinquencies only a seeing of kind

these it's know, that or X% organizations X% all rates. because of over a say, I Just XX% institutions you lot lent the strike new are groups, now you to, going quite don't pay with might to

Scott McKim

the we rate there's When gotten and loans, higher the what very feedback the we structured that to to them. with dialogue a these ongoing ago, them versus but with Many to creates want stress That's valid months are them loans working of going lot them stress some try properly rates Yes. that of the it many today of are test increases XX of we've are businesses. the We are help working them through comment. default, a want to make of Many lot forward. interest is we sure for underwrite a we it. don't pay. Certainly, of

Ross Haberman

back that $XXX delinquencies going question, are what seeing million? for first kind again, you quarter my in And to of the

Scott McKim

Yes, that's the X.X% that I mentioned.

Operator

the Our ] from next Sycamore comes Analytics. Catarina line Julian of question from [

Unknown Analyst

Can for explain SBA of business? can sale -- the the you and I what just on but margins about sort much sale to seasonality the trends are talk tell gain volume are the and that? on to trends gain if there's maybe Like

Scott McKim

Sure.

of kind X the me break that into pieces Let up there.

it seen that easy Is to there's haven't seasonal, we we seasonal these that when loans. First, believe the any variations I'll answer us one. lead anything would sell

first we any behind that see suggest to did it. the quarter, In going not I'm that's So things. X driver

volume that offered was did fourth the premiums quarter of we sold the sell but fourth had got all, in than what in sold we First paid on higher the the lower quarter. that were than of we loans in first we quarter, the what what and were

think Right depending continue in of increase actual point. neighborhood what don't think to June, moderate somewhere last that. any premiums is priced back at. loan higher July the X% some loans on XX%, now, going did this leveled I vary, the on SBA it And out to will We probably but typically see those we at to of has I year, go see than it

Unknown Analyst

level? Leveled what around out

Scott McKim

end of about range, XX%. higher that The

Unknown Analyst

XX%. Around

is these market selling the wonder is the loans improving, because for if like them, if increasing for you're mortgage-backed is commercial real if for loans securities these wonder demand somewhat You demand I right? Okay. maybe market moderating. as estate,

Robin Oliver

be. could certainly It

the like the does our and market product. homogeneous They think of I that nature like of Bolt product. it granularity really the

up want higher of loan have pools large as garner loans larger to it. a The the there in of tend some Those kind messes does the that that to -- if folks it you don't loans. buy So premium. tend of portion significant one

premiums So way works on lower pushes premium. deals, is are up loans. CRE the sometimes XX-year that's the where that we larger other some and the if there see it then But

to of small loan compared but well selling tend tenure, portfolio banks So guaranteed. -- our other given C&I that pretty that perform are to does SBA maybe

Unknown Analyst

Okay.

asset-backed of securities those? Okay. asset-backed securities. And kind the a securities have What portfolio, lot you are of

Scott McKim

makeup As of as far the the portfolio?

Unknown Analyst

what's the of securities. -- what's ABS asset of the backing kind what kind just those Yes, -- what --

Scott McKim

There's a couple of Yes. ones. different

Some that's real student some are estate are plus private also loan, guaranteed.

Unknown Analyst

Private student loans or government guaranteed student loans.

Scott McKim

by a but government lender, They are private issued they are guaranteed.

Unknown Analyst

Okay.

asset-backed an is example what And Okay. -- what's What's estate? that like of that? of an real example

Robin Oliver

mortgage-backed. Typical

Scott McKim

We've into CRA -- that we program, that's a for it's bought fits exotic, for example, nothing sure. bond mortgage a our Just backed. investment nicely got too

Unknown Analyst

out Just the curiosity mortgage-backed why of security isn't classification. it

Scott McKim

actually be on one. It would that

Unknown Analyst

like the I about talking was ABS.

Scott McKim

no, provides bond No, a CRA that mentioned I actually no. the entity It's an is loan low that housing. to income single

Unknown Analyst

Okay.

Okay. All right.

and if back and/or then from you or case kind have back geographies, pulled from was I And industries, curious increasing profile? certain too. Okay. that's you've I because have And not. wondering, the you're may industries certain mentioned that of just geographies was which risk back you pulled you then which seeing from pulled

Thomas Zernick

exposure Yes. advertising Julian, up limit in our we months the taking we is and defaults restaurants. Tom. and this a transportation, at and exit each last to We look month. marketing decided do also XX And ended over as hotel

performance, continue All to into of and which specific of industries. to we showing those lend signs poor were chose not

not issues specific portfolio changes see we performance did kind in any geographical make We geography. did any not as any of

Unknown Analyst

pretty not geography. industries. Okay. bunch good And It's a Yes. X, like much those the of right? it's it's That's good, that

Thomas Zernick

Correct.

Unknown Analyst

estate about real to local are estate, values, your there one seen family you values, local. if trending real Tampa four the for for Bay commercial what real have And been estate those as Yes. how know as for how well you

Thomas Zernick

Yes.

the country. markets If across to Bay mentioned the other a continues you compared to the Tampa Business Bay market read very MSA Tampa be strong as Journal,

being centers very Tampa in employment be a to the Job banking operate on So that's throughout attractive we're headquartered estate one -- here XX benefits Bay. real side continues and strong in We very very Bay, fortunate of and is and estate Tampa employment real the of here having market. side.

Unknown Analyst

of is kind higher trending what's or the estate Real recent moderating value trend?

Thomas Zernick

Yes.

some because I going many in actually probably Bay. and have to think people up stabilizing so sectors, they're Tampa we moving

and we supply And all But demand. in classify stable it's So to any not have would deterioration. seen think I it I as improving values.

Unknown Analyst

sorry, think, your mentioned to Good. think. And press that kind And that increased start rationalization you FTEs, hold new going noticed -- the employment to the in in went or -- mentioned you just -- of going opened, -- to that that steady? XXX levels, any branch release, maybe Okay. from that you I you're FTEs do you have just focusing rightsizing because expense of comments. that the maybe you're going Is kind about was I to going or on like I curious maybe Good. you the of comp. that the XXX. but up But mentioned plan I to

Robin Oliver

Sure.

banking we So it at this always are production things and environment, on the working and revenue a increase take decreases, expenses. production, timing not at or we that to certainly some we the right, And and with center may more as X -- we we're of have did cost, everything, look But earnings. the a can certainly, the happy little and both. less And more here. impact, we're be in bit looking ultimately, to there's contribute new of

new banking rationalization -- an we we quarter. as center But have certainly But the during as rightsizing also well. the I wouldn't expense But plan. -- we some did so noted, opened say

feel additional Scott, there. to Tom anything add So or free

Unknown Analyst

Okay.

of up past comp-related about quarters. They comp that's with shares any with I'm -- that outstanding. I the the or increase wondering, increasing? assuming more kind Is went -- you chance offset could option-related went up share then than And count. I'm that count Okay. they But at isn't least the share just something was curious just buybacks, from

Scott McKim

grants, Julian, January. to count the increase share compensation typically you based due The is do raised at what the in are correct. that's we those that

And not to increase. the continue see why so It's first quarter. to you going that's in

is which buyback did, company the As of value point at we if with trading goes, the excess is -- have real far below right stock repurchase where capital now, stock is. on this as stock don't in believe Certainly, the time. based would to the we we still we

But we the excess it, get to or for repurchase to so we we to point looking repurchase have exploring where actually won't capital ways be stock.

Unknown Analyst

Yes. have Even that hold so it. the I you know mean just really worth it's cap, getting buyback where wasn't excess yes, TA where I you past the to not level But you a -- big where an ratio or whichever share at? don't have or just is of But and about authorization something, Like Where count cap. mentioned would talking kind wouldn't you're ratio TCE it to sometimes steady. like does probably the excess regulators looking

Robin Oliver

mean depends, I risk our with now, and I to X loan the in Tier leverage. balances. sitting compared unguaranteed always at X.XX% right measuring think we're the right? it particularly that we're And portfolio

that's so the moving sometimes And target.

we'd like your know to don't So to XX%. see question, that answer year easy but over grow to I this all I Tier X it's an think

more gives much us some XX.X% would in -- I XX% could say. I when the think than get that flexibility, -- we if higher we XX% to start getting So that, but range,

Scott McKim

agree. I

Operator

to now There comments. back questions over turn time. the Zernick call further for closing I'd to at seems to be this final no Mr. like

Thomas Zernick

forward to and blocking call. we on listen, Well, you questions. team and right. for bank to a going again, here back and morning, Tampa for can this our you back exec our doing so get high-performing much so becoming participating in tackling the Bay. All looks thank our Thank

and have a Thank day. you, great

Operator

today. that lines. Thank Ladies for your We day. this you, lovely conference for ask and a disconnect participating you sir. gentlemen, Have concludes you and call your please thank

BayFirst Financial (BAFN) 26 Apr 242024 Q1 Earnings call transcript