BAFN - Earnings call transcript Q4 2024 | BayFirst Financial Corp.

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Operator

Good morning, ladies and gentlemen, and welcome to the BayFirst Financial Corporation Q4 2024 Conference Call and Webcast. [Operator Instructions]. Also note that this call is being recorded on Friday, January 31, 2025. And I would like to turn the conference over to Mr. Tom Zernick, Chief Executive Officer. sir. ahead, go Please

Thomas Zernick

Scott Good to today. thank the Robin I Chief statements financial Page our President Sylvie. forward-looking on will on and contained cautionary statements Oliver, for deck. statement our investor and non-GAAP CFO, and Officer; call have Please Operating of Today's morning, you, call you include refer and measures. participating our McKim. our Thank X with forward-looking me on

returned quarter It after BayFirst for to was business normal autumn our busy hurricanes. a the as

leveraged We success also which a offices, We for deploy X growth and gain to also and some bank completed repurchase with that loans initiatives to banking performance. share future in improvement grow the generated position improve bank's a completed capital to be and transaction of with More our the shortly. in details continue a sale-leaseback program. on position, XXXX will and of earnings which

net BayFirst. share now me Let quarter some $X.X from around million. Fourth income highlights was

Excluding the the this earnings of were third quarter from flat year. leaseback, million, essentially $X.X to the gain sale

margin and interest to basis XX fourth quarter. net Our X.X% in points the improved

is held cost and value. sale the We loans investment fair newly measure originated costs of and Instead, origination timing, which when amortized for loans loan we sold. to originated practice at at the will align will on government-guaranteed measuring also suspended gain expense provision

the due the our industry took with to While this sale-leaseback we quarter and be our resulted gain in adjust strategy will forward. financial more timing, fourth income lower opportunity the to from net going the reporting during consistent the from

continues Tampa ending has benefit XX, XX.X% net attractive from December of quarter $X.XX the network being new granular and of accounts deposits XX% to BayFirst across Bay, deposit grew balances year-to-date, on and and a base billion. Our insured fourth XXXX. at deposit X% maintained XX banking convenient centers

interface loan On significant operating major the application decisioning. commercial PowerLOS to upgrade user system improvements a lending and deployed with our side, faster we

company's loans continues X% quarter space investment in origination commercial enjoy of million $X.XX during during investment produced the loans the guaranteed XXXX of XXXX. XXXX representing the platform The CRE million quarter loan increased only from our of of guaranteed new million produced an to previous for government fourth of held the Loans government billion. end $XXX.X quarter from $XX.X minimal in fourth decrease by for CRE X.X% quarter during originated million and BayFirst or held quarter. the the exposure to loans the fourth of $XX.X loans with nonowner-occupied $XXX.X a increase of in at

The provide company's which $XXX,XXX in fourth totaling to $XX.X the million loan throughout the an the expeditiously or Bolt for working designed loans X,XXX has which originated originated Bolt $XXX.X totaling capital company were quarter. the Bolt is loan product of million, less XXXX, businesses X(a) SBA country. during Since loans of XXX launch program, loans

total, balances the and of of quarter. $XXX.X sold loan million company guaranteed government loans $XX.X during In million originated the

Bank Community million first year, loans. originated lines owner-occupied loans mortgage equity C&I, our CRE, of government consumer home the the loans, full $XXX.X -- $XXX.X originated guaranteed For and company and loans loan million term of conventional and

government balances $XXX.X total sold loan grew million XX.X%. of guaranteed balances, Net loan or

our including will health our the for across businesses management banking platform building our of to commitment creation recent banking of needs, of year. the in by business Our the is footprint. deposits This hiring focus premier the follows treasury on care and earlier Bank Tampa who Bay Community the reinforced retail team, small

These XXXX. added machines production in BayFirst solidify for success

voted Magazine all in team for was of am for by accomplishment thank for customers want the Forbes ranked the everyone Florida bank Finally, recognition. to and our this who very remind to I bank want I that XXXX. our top of proud our

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

Scott McKim

Thank Good morning, everyone. you, Tom.

$X.X from mentioned, operations Tom income continuing the net our was in million fourth quarter. As

the million. Excluding sale net income $X.X leaseback gain, quarter was fourth

was sale-leaseback million $X.X net gain. $XX.X million, and For excluding the the full total year, income

During balances grew investment of $XX.X for quarter, held million the fourth X.X%. loans or

quarter the end and quarter. X.X% have million XX.X%. total or During XXXX, the during $X.XX at assets million million overall increased the $XXX.X $XX.X or grew of assets Since end to total

the million or ending Total $XXX,XXX fourth higher Shareholders' comprehensive $X.XX by loss at billion. end from and deposits and the XX, Total million year the this other the deposits XXXX. accumulated increased just during a $XXX.X $XX $X increased $XX.X equity million. million year was at $XXX.X quarter, the X.X% during Net slightly quarter ended increased quarter than of year XXXX. end million December under at of

to was is increased flat at share December quarter. of from value to measurement up per income million points ago quarter. $XX.XX the in fourth XXXX. up million XX, net to Tangible year the our million to the quarter $XX.XX quarter. Tom the interest mentioned, $X.X share This at compared margin our fourth basis $XX.X as end XX% third Net this in book per the Also, quarter and or $X.X X.XX% improved XX quarter, interest from third the

the accounts. migration this of the which migrated gain third price for generated XXXX. is million and was of money and of income, fourth This the to quarter sale Noninterest expense the was on promotional to $XX.X fourth the CDs, by lower from lower deposits quarter the market $XX.X due rate quarter the compared Much of interest quarter. CDs in improvement excluding leaseback $XXX,XXX to during million matured

noted, million on we originated This quarter. By use during Also, the future third periods. will occur loans in value accounting That in the provided value government-guaranteed newly was of comparison, timing down change fair the not variance, use $X.X as $X.X in a the revenue measurements quarter. million the of fair is which suspended from gain Tom quarter. prior

servicing third guaranteed $XXX,XXX rate XXXX, loan the million of government-guaranteed Compared higher $X.X quarter were the gains of and on government in gain was to sale fourth quarter. loans higher

in income excluding This noninterest XXXX. XXXX. gain, guaranteed of XXXX versus and lower full was sale-leaseback gains the sale than lower the is $XXX,XXX the loans from variance to overall related government For year,

company Notably, balances of loan in XXXX. sold is This decrease million related suspending $XXX.X from million Noninterest origination nondeferrable fourth of value $X.X to the $X fair in the of expense is government in quarter million compared measurements. this guaranteed versus quarter. the third and decreased $XXX.X by third-party XXXX, $XXX,XXX expense to also the

more costs and also quarter lower were on third the third recruiting to marketing, more during originations quarter. and costs costs the as the loans fourth combined compared fair -- compensation of in costs reflect quarter, XXXX. were value origination fourth with deferred Lower Also lower recognized versus loan at incentives measured collection the and development in quarter

Commissions, XXXX. million and full $X.X bonus marketing origination XXXX, expenses the year were expenses $X.X third-party $X.X million were expenses of For million were noninterest million lower expense lower, was nondeferrable lower $X.X total incentives data of all than were higher higher other costs million, our Offsetting and $XXX,XXX expenses expenses these $X.X lower as lower. reflecting well of technology collection loan in as processing investment $XXX,XXX. of then costs support originations and to

Provision in million, million SBA and unguaranteed XXXX. by of the in charge-offs for of in $X.X fourth primarily fourth million the loan X(a) $X.X $X.X compared quarter to the increased Net credit quarter $X.X balances. third higher quarter million from losses charge-offs was

higher provision $X.X it than the year, in was $XX.X total For was losses million, credit for XXXX. which million was

to as at December $X.X higher XX, X.XX% as allowance at million were $XX.X ratio amortized XXXX. The credit X.XX% XX, for XXXX, that in which flat XXXX the this million as on investment expense were total of to quarter charge-offs compares provision was $XX at net losses XXXX, XX, million. X.XX% loans to December Total to held was compared costs relatively and last quarter September of of

net the generated which comparable quarter, of purchased loans consumer during to a Our in $XXX,XXX charge-offs third portfolio unsecured QX. party is from over

this At turn will some I comments. over to the call to additional time, Robin make

Robin Oliver

tied in further X would such, delve key have our Good of is nature Thank as particularly the years. credit to of portfolio. quarterly for as many morning, SBA into adjusting it payments I significant and The focus you, over a vast everyone. past the quality to Scott. -- given majority to us, are our loans SBA X their increases of prime borrowers seen our like

are these XXX businesses approximately represent to QX SBA their over in being extending saved. X(a) perform, slowed considerably with said, and a to help the knowing to is help developed has losses, modifications they to new program payments XXXX to that time, bank to for will emphasis pace also lower with continuing are their loans of dealing try loans dates, rates be have inflation. small previously To same by that SBA expected of all maturity of stabilizing. and not borrowers half mentioned That modification the we've express loan lesser been with struggling modified end the an mitigate these date, survive the At To X(a) who high payments. at loans make

In commercial relief and all collateral date. have the natural to a recent had addition, and was of no disasters although we insured, select affecting after payment borrowers as some losses consumer hurricanes result our received these properly area

end to due XXXX. at total third as and increased December declining XX nonperforming improvement as the showed to December days the X.XX% XX assets compares loans quarter-over-quarter, X.XX% past This of XX, quarter to to of XX, Although slightly X.X% assets XXXX. of

from the and X.XX% the as X.XX% for Annualized X amortized well-collateralized year. fourth loans a the up quarter last investment charge-offs driven from by loans. this of in the increase of were average third XXXX, and With of X.XX% net quarter quarter percentage fourth largely for in up being larger held quarter cost

to enhanced addition Credit additional pleased and new monitoring to borrowers, this for month implemented to collections anticipation moved modify and XXXX, In also Officer role efforts portfolio qualified our will being hire to with Chief am to technology as in focus borrowers. consulting prior of I processes a connect a retirement. support of Chief and Credit the new a to volume with better continued announce Officer loans staffing be continue

Finally, I'd XXXX some efficiency for anticipated a and our operational future cover briefly improved as helps company also updates. the improvements. Driving to lay for groundwork initiative key like

PowerLOS mentioned, enhancements us that serve health better the out companies addition Tom homeowners lockbox fourth we solution to rolled treasury already allow associations. and a In platform management care the to in quarter will origination loan

have a process answer requests. e-mail Another the questions asked processes or means. as workflow policies, launch of by technology automation new as notable information questions functionality done automating assist has the instantaneously that for This tool on employees manual new can well been frequently also procedures and other example historically is will tool for automating us that AI in that

will have software As streamline several we that forward and cases XXXX, we this for move other fruition projects costs. further processes, other lower several in to coming use efficiency increase and

I'll thoughts. for to time, it this Tom turn his final At back

Thomas Zernick

Robin. you, Thank

Thanks XXXX. excited my continued our very in I look successes open our BayFirst, and future, to again questions. sharing As would all call joining to it like I'm about and for our CEO I for start today, of I of second now with year as forward you up

Operator

we First, hear at Julienne Sycamore Instructions] will Analytics. from [Operator Cassarino

Julienne Cassarino

gain was years. It's I if pretty great when on books. go that branches, I that was old lease. a for And was how fixed if wondering those was variable. XX curious or just were on branches. just That wondering fixed cost then did I lease the the they a long-term was was

Scott McKim

Thanks the Hi, Julienne. for question.

branch, the XXXX, which countryside started, XXXX. also our you seminal back which when two that was branch our So original was in bank well, this the and branches opened in see kind deck branch, were can slide in of that the sold as we then our and

with -- oldest we Obviously, branch So and gain included reflect as the doesn't well. the it pleased our ones. were pretty original was

As arrangements X%, It each component does rent is far go the It's the stable. lease I year. not the up to with as lease recall. X% associated as go,

there. are that We details out the with our filed So X-K.

the and all question. hopefully, But it. with can You see bits of your that pieces answers kind

Julienne Cassarino

other Yes. -- you do have you branches, And ones how many many I other XX think other own? how

Scott McKim

XX this branches. of we point, X at own other our So

Julienne Cassarino

-- Own sold right, XX so XX your you X out X -- all of you but the own branches. remaining

Okay.

buybacks, dividend. you And Okay, stock it's but about was is pay except to which for the X.. great curious great see, I a again, the --

you've had if historically, if look change right, buyback don't authorization. even much, outstanding, past so though shares And the they you

-- one, I it's but even outstanding. the double $X was only past still I it's of your guess this I And million, at around think X%

of CRE kind $X I wondering after-tax it issues, you and $X you why have that, X%. have out over was It's So capital. gains, if of the I make kind cap any million almost don't not just -- ample concentration don't was curious million of double

with the and tangible XX%, And just I is, think, -- it was trading now. of where book stock I

share why and take wondering buyback Just not more actually count the down.

Thomas Zernick

$XXX here these Yes, very short last a capital on need earning production grow question. loans that to that's million the will are We company to year, we continue over have our machine adequate put loan good be balance to on the producing new our we in a at sheet. across answer And assets BayFirst. is originations

value this the confidence as took we evaluating dollars something opportunity did we the $X very eliminate gain move be to also remaining and show did with accounting to a was We us million get want we forward. we stock, will And important the treatment, continue. that that as and fair position for our in buyback, earnings authorization the our to

Julienne Cassarino

Okay. $X couple that Was million Was authorization a the years ago? of finished?

Robin Oliver

only for open was That year. X

was it term. had -- So X-year it was a authorized, it

Thomas Zernick

of picked December expired replacing really one it been XX, XXXX, we've last up. of not market year it. back That -- kind and out Julienne, It's the for

Julienne Cassarino

big accretive. thinking actually was change, is Right. great it are count deal. those a great. and are was The go on curious was accretive sale big the buybacks. accounting timing. books down. for to are be I thought buybacks the see the how it share I Well, It's accounting about change But long? How I -- buybacks long loans a -- held accretive That's just forgot

Scott McKim

loans loans. would sale you I loans of for SBA of here be mean as booked at on basically all that are our those, those years far the you're if referring going for a tell our book investment. held to those for loans as the value, And portfolio to are And average fair the we and the held I of initially that -- that not life they're while. is portfolio term Yes, of around XX I were the bulk will loans that book X(a) program. estimate

the institutions the coming value like in more it's the you has And Fair to guys also for or follow accounting lending. us that -- the makes from a reporting with it option space well, of to conversations make The -- quite are that provides is leverage, benefit little and look us to other than more different. do kind it's an but had I've else, going is that more anything bit this simply, and comparison. that we're certainly that person of we and some look investors, can other like, look difficult financial in it's

So in step this us back for to is a great line. get

Julienne Cassarino

X on months? over trending what sale And is yes. the lines SBA Yes, that to those Well, how XX sort current of has along -- margin? been gain the past

Scott McKim

XX%. kind XX I'd loans, on it's Bolt are months, to stable, really the the look been say of the at variable. over premiums X margin to XX% the kind and past seeing that is of If I gross we're only done just comment until And those been of any haven't I end case. XXXX. so really I'd kind say, can't XXXX, in the so sales almost the that's or has we same of really That far on still the if sold anything almost,

well been our a it's accepted. in has It manner. product predictable very -- But performs

into XXXX. at it's is level that my continue So that to hope going

Operator

Next, at Capital. [Operator Green we Instructions] Ian Pendragon will hear from

Ian Green

questions first One to quess. I about. I Two ask wanted

and pricing, with portfolio up maturity do significant on see loan C&I. your the is your question the on other And almost that bump that consumer a there floating prime? guess profiles there'll C&I I repricing of be on interest in you consumer, Your based that entirely rate

Robin Oliver

this So is Robin.

a majority with very X(a) is portfolio is we portion is first because the do. of good rate. the asset sensitive, that start and variable vast that lending let -- C&I So our portfolio loan the of balance sheet me of our SBA And

SBA with C&I prime. of loans So tied the our are that -- so quarterly vast adjustable our are almost all to

of not, owner-occupied the have CRE is a conventional or it's balance smaller we existing that certainly, sheet. much other some but business other C&I portion So

lines, variable on fair side, rate there the amount are those changes equity prime of a adjusting as is then consumer And and soon home also rate as well. as

that like most worried be this adjusting not issues and commercial and that credit causing are standpoint. We about rates from portfolio some may banks at other time their

frankly, credit seen the are space the unguaranteed higher in already Our SBA is, borrowers increases, X(a). why for loan have which small rate losses our

Ian Green

in a borrowers assume bit pop they've it's they I guess interest pending, real underwritten a and you are have quite underwrite margin rolling that seeing increase. can the handle actually because And I banks hopefully, off the net rate some few those Yes, it, because

test assuming when loan, big ability the of and cushion what pay, stressed So originate you I'm I you've as the this that you have to assume.

Robin Oliver

Yes, we do, certainly.

Ian Green

that, a with going Now Are just a by them, cash it is have that all of you the the does sort flows that principal all how -- in companies -- does disaster amount keep insurance had works. borrower have mean I how guess, do that I work? that impacted the I other all the of insurance you helps the all hurricane stuff. that was getting sort value And from loan just do and they the question you on like is insurance damage the and repaying of to sense and any -- that to or loan have. or

Robin Oliver

Yes.

for time I really the commercial have us. both But they're throughout flood required have were it's maybe loan of we count zones, in pretty who the way. hands, insurance and I mean to that borrowers loan make handful the period. impacted on some we if immaterial in flood at they're -- So a them can

it's aware any not were we're that So matter shortfall, right? of just where of time, properties have we a a

example, given lot just a month themselves while deferrals properties So different up reopen. we've cleaned for got X of times, to

then make and that dollar proper in the we if are improvements being insurance and and it borrower monitor with large are escrow made. there amounts that certainly, So premiums, sure hold do -- of the

the same the in it's So immaterial boat. -- to loans and smaller portfolio. then consumer some But we relatively are that again, have

Ian Green

residential. as same And

Your model. residential

Robin Oliver

Same as exactly. residential. Yes,

Operator

call. thank questions this weekend. you other time, disconnect And at Once conference no a this we again, good and ask for have please conclude lines. does registered. Ladies we that you attending. currently, today's your Have gentlemen, And

BayFirst Financial (BAFN) 31 Jan 252024 Q4 Earnings call transcript