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What changed in BayFirst Financial Corp.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of BayFirst Financial Corp.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+258 added−296 removedSource: 10-K (2025-03-25) vs 10-K (2024-03-28)

Top changes in BayFirst Financial Corp.'s 2024 10-K

258 paragraphs added · 296 removed · 234 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

70 edited+6 added−16 removed116 unchanged
Biggest changeBank loans are subject to federal laws applicable to credit transactions, such as the: • Federal Truth-In-Lending Act , which governs disclosures of credit terms to consumer borrowers; • Community Reinvestment Act , which requires financial institutions to meet their obligations to provide for the total credit needs of the communities they serve, including investing their assets in loans to low and moderate-income borrowers; • Home Mortgage Disclosure Act requiring financial institutions to provide information to enable public officials to determine whether a financial institution is fulfilling its obligations to meet the housing needs of the community it serves; • Equal Credit Opportunity Act prohibiting discrimination on the basis of race, creed, or other prohibitive factors in extending credit; • Real Estate Settlement Procedures Act , which requires lenders to disclose certain information regarding the nature and cost of real estate settlements, and prohibits certain lending practices, as well as limits escrow account amounts in real estate transactions; • Fair Credit Reporting Act governing the collection of consumer debts by collection agencies; and • The rules and regulations of various federal agencies charged with the responsibility of implementing such federal laws.
Biggest changeBank loans are subject to federal laws applicable to credit transactions, such as the: • Federal Truth-In-Lending Act , which governs disclosures of credit terms to consumer borrowers; • Community Reinvestment Act , which requires financial institutions to meet their obligations to provide for the total credit needs of the communities they serve, including investing their assets in loans to low and moderate-income borrowers; • Home Mortgage Disclosure Act requiring financial institutions to provide information to enable public officials to determine whether a financial institution is fulfilling its obligations to meet the housing needs of the community it serves; • Equal Credit Opportunity Act prohibiting discrimination on the basis of race, creed, or other prohibitive factors in extending credit; • Real Estate Settlement Procedures Act , which requires lenders to disclose certain information regarding the nature and cost of real estate settlements, and prohibits certain lending practices, as well as limits escrow account amounts in real estate transactions; • Fair Credit Reporting Act governing the collection of consumer debts by collection agencies; and • The rules and regulations of various federal agencies charged with the responsibility of implementing such federal laws. 14 Table of Contents Bank operations are also subject to the: • Gramm-Leach-Bliley Act of 1999 , which contains privacy provisions that requires the Bank to maintain privacy policies intended to safeguard consumer financial information, to disclose these policies to the customers, and allow customers to “opt out” of having their financial service providers disclose their confidential financial information to nonaffiliated third parties, subject to certain exceptions; • Right to Financial Privacy Act , which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records; and • Electronic Funds Transfer Act and Regulation E , which govern automatic deposits to, and withdrawals from, deposit accounts and customers’ rights and liabilities arising from the use of debit cards, automated teller machines, and other electronic banking services.
BayFirst focuses its government guaranteed and commercial lending divisions on providing the customer quick turnaround, competitive rates, and an easy application process. The Bank offers personal lines of credit, 3 Table of Contents auto, boat, and recreational vehicle loans, residential mortgages, and home equity lines of credit. The Bank has been particularly successful in penetrating the small business community.
BayFirst focuses its government guaranteed and commercial lending divisions on providing the customer quick turnaround, competitive rates, and an easy application process. The Bank offers personal lines of credit, auto, boat, and recreational vehicle loans, residential mortgages, and home equity lines of credit. The Bank has been particularly successful in 3 Table of Contents penetrating the small business community.
BayFirst utilizes this national business line to provide financial support for the delivery and expansion of traditional banking services, and to serve as a specialized lead product to introduce the Bank to new customers in the Tampa Bay region. BayFirst strives to be a progressive institution in its products and services, technology, design, and social responsibility.
BayFirst utilizes this national business line to provide financial support for the delivery and expansion of traditional banking services, and to serve as a specialized lead product to introduce the Bank to new customers in the Tampa Bay/Sarasota region. BayFirst strives to be a progressive institution in its products and services, technology, design, and social responsibility.
Among the instruments of monetary policy available to the Federal Reserve are: (i) conducting open market operations in United States government securities; (ii) changing the discount rates of borrowings of depository institutions; (iii) imposing or changing reserve requirements against depository institutions’ deposits; and (iv) imposing or changing reserve requirements against certain borrowing by banks and their affiliates.
Among the instruments of monetary policy available to the Federal Reserve are: (i) conducting open market operations in United States government securities; (ii) changing the discount rates of borrowings of depository institutions; (iii) imposing or changing reserve requirements against depository institutions’ deposits; and (iv) imposing or changing reserve requirements against certain borrowings by banks and their affiliates.
The non-complex loans are originated pursuant to the SBA 7(a) Small Loan Program up to $350,000 and are underwritten through a streamlined underwriting and packaging process. Although the SBA 7(a) Small Loan Program permits broader underwriting and loan purpose parameters, non-complex CreditBench loans are limited to those underwritten via historical cash flow and exclude start-up and business acquisition financing.
The non-complex loans are originated pursuant to the SBA 7(a) Small Loan Program up to $350,000 and are underwritten through a streamlined underwriting and packaging process. Although the SBA 7(a) Small Loan Program permits broader underwriting and loan purpose parameters, non-complex loans are limited to those underwritten via historical cash flow and exclude start-up and business acquisition financing.
Item 1. Business BayFirst Financial Corp. BayFirst Financial Corp. is a bank holding company that operates through its wholly owned subsidiary, BayFirst National Bank (the “Bank”), together referred to as “the Company or “BayFirst”. BayFirst commenced its bank holding company operations on September 1, 2000, by acquiring all shares of the Bank.
Item 1. Business BayFirst Financial Corp. BayFirst Financial Corp. is a bank holding company that operates through its wholly owned subsidiary, BayFirst National Bank (the “Bank”), together referred to as “the Company” or “BayFirst”. BayFirst commenced its bank holding company operations on September 1, 2000, by acquiring all shares of the Bank.
Prior to those decisions, the Residential Mortgage Division operated from the banking centers in the Tampa Bay area and loan production offices nationwide. As a result of the discontinuance, the nationwide residential line of business was reclassified as a discontinued operation and reported in the financial statements as such.
Prior to those decisions, the Residential Mortgage Division operated from the banking centers in the Tampa Bay/Sarasota area and loan production offices nationwide. As a result of the discontinuance, the nationwide residential line of business was reclassified as a discontinued operation and reported in the financial statements as such.
CreditBench also has an advanced technology platform for our SBA 7(a) Small Loan Program that enables the Bank to utilize and support technology-enabled banking products and services as well as various financial technology applications.
The Bank also has an advanced technology platform for our SBA 7(a) Small Loan Program that enables the Bank to utilize and support technology-enabled banking products and services as well as various financial technology applications.
These competitors include: • national, super-regional, and regional financial institutions that have well-established branches and significant market share in the communities the Bank serves; • non-bank government guaranteed lenders; • finance companies, investment banking and brokerage firms, and insurance companies that offer bank-like products; • credit unions, which can offer highly competitive rates on loans and deposits because they receive tax advantages not available to commercial banks; • other community banks that compete with the Bank for clients desiring a high level of service; and • technology-based financial institutions, including large national, super-regional, and regional banks offering online deposit, bill payment and mortgage loan application services.
These competitors include: 4 Table of Contents • national, super-regional, and regional financial institutions that have well-established branches and significant market share in the communities the Bank serves; • non-bank government guaranteed lenders; • finance companies, investment banking and brokerage firms, and insurance companies that offer bank-like products; • credit unions, which can offer highly competitive rates on loans and deposits because they receive tax advantages not available to commercial banks; • other community banks that compete with the Bank for clients desiring a high level of service; and • technology-based financial institutions, including large national, super-regional, and regional banks offering online deposit, bill payment and mortgage loan application services.
The Compensation Committee of the Board of Directors has primary responsibility for risks and exposures associated with the compensation policies, plans, and practices regarding both executive compensation, Board compensation, and the compensation structure generally.
The Compensation Committee of the Board of Directors has primary responsibility for risks and exposures associated with the compensation policies, plans, and practices regarding executive compensation, Board compensation, and the compensation structure generally.
The Bank’s business deposit products and related services include free checking accounts, interest-bearing checking accounts, savings accounts, MMDA, and access to business mobile and online banking, treasury management, cash management, merchant processing services, remote deposit capture, and night depository. A wide range of loans are also offered, including commercial, consumer, and real estate loans.
The Bank’s business deposit products and related services include free checking accounts, interest-bearing checking accounts, savings accounts, MMDA, and access to business mobile and online banking, treasury management, cash management, merchant processing services, lock box services, remote deposit capture, and night depository. A wide range of loans are also offered, including commercial, consumer, and real estate loans.
Anti-Money Laundering Banks are subject to significant regulation and supervision relative to anti-money laundering: • such regulation is broad and includes the extraterritorial jurisdiction of the United States; • compliance and due diligence obligations are significant and may be costly; • banks may be compelled to produce documents located both inside and outside the United States, including those of foreign institutions that have a correspondent relationship in the United States; and 15 Table of Contents • banks enjoy a safe harbor from civil liability to customers for banks’ activities under anti-money laundering laws and regulation.
Anti-Money Laundering Banks are subject to significant regulation and supervision relative to anti-money laundering: • such regulation is broad and includes the extraterritorial jurisdiction of the United States; • compliance and due diligence obligations are significant and may be costly; • banks may be compelled to produce documents located both inside and outside the United States, including those of foreign institutions that have a correspondent relationship in the United States; and • banks enjoy a safe harbor from civil liability to customers for banks’ activities under anti-money laundering laws and regulation.
Generally, Sections 23A and 23B: (1) limit the extent to which a bank or its subsidiaries may engage in “covered transactions” with any one 11 Table of Contents affiliate to an amount equal to 10% of that bank’s capital stock and surplus (i.e., tangible capital); and (2) require that all such transactions be on terms substantially the same, or at least as favorable to the bank or subsidiary, as those provided to a non-affiliate.
Generally, Sections 23A and 23B: (1) limit the extent to which a bank or its subsidiaries may engage in “covered transactions” with any one affiliate to an amount equal to 10% of that bank’s capital stock and surplus (i.e., tangible capital); and (2) require that all such transactions be on terms substantially the same, or at least as favorable to the bank or subsidiary, as those provided to a non-affiliate.
Future legislation regarding financial institutions may change banking statutes and the 16 Table of Contents operating environment of the Company in substantial and unpredictable ways, and could increase or decrease the cost of doing business, limit or expand permissible activities or affect the competitive balance depending upon whether any of this potential legislation will be enacted, and if enacted, the effect that it or any implementing regulations, would have on the financial condition or results of operations of the Company.
Future legislation regarding financial institutions may change banking statutes and the operating environment of the Company in substantial and unpredictable ways, and could increase or decrease the cost of doing business, limit or expand permissible activities or affect the competitive balance depending upon whether any of this potential legislation will be enacted, and if enacted, the effect that it or any implementing regulations, would have on the financial condition or results of operations of the Company.
The Federal Reserve may impose civil money penalties for activities conducted by a bank holding company, its nonbanking subsidiaries, and officials of either on a knowing and reckless basis, if those activities caused a substantial loss to a depository institution. The penalties can be as high as $1.0 million for each day the activity continues.
The Federal Reserve may impose civil money penalties for activities conducted by a bank holding company, its nonbanking 10 Table of Contents subsidiaries, and officials of either on a knowing and reckless basis, if those activities caused a substantial loss to a depository institution. The penalties can be as high as $1.0 million for each day the activity continues.
In addition, the tested capability of these vendors to automatically switch over to standby systems should allow the Bank to recover the systems and provide business continuity quickly in case of a disaster. 7 Table of Contents Privacy, Data Protection and Cybersecurity The regulatory framework for data privacy and cybersecurity is rapidly evolving.
In addition, the tested capability of these vendors to automatically switch over to standby systems should allow the Bank to recover the systems and provide business continuity quickly in case of a disaster. Privacy, Data Protection and Cybersecurity The regulatory framework for data privacy and cybersecurity is rapidly evolving.
The BHCA generally requires every bank holding company to obtain approval from the Federal Reserve before: • acquiring all or substantially all of the assets of a bank; • acquiring direct or indirect ownership or control of 5% or more of the voting shares of any bank or bank holding company; or • merging or consolidating with another bank holding company.
The BHCA generally requires every bank holding company to obtain approval from the Federal Reserve before: 9 Table of Contents • acquiring all or substantially all of the assets of a bank; • acquiring direct or indirect ownership or control of 5% or more of the voting shares of any bank or bank holding company; or • merging or consolidating with another bank holding company.
Approval by regulatory authorities is required if the effect of dividends declared would cause the regulatory capital of the Bank to fall below specified minimum levels. Approval is also required if dividends declared exceed the net profits of the Bank for that year combined with the retained net profits for the preceding two years.
Approval by regulatory authorities is required if the effect of dividends declared would cause the regulatory capital of the Bank to fall below specified minimum levels. 13 Table of Contents Approval is also required if dividends declared exceed the net profits of the Bank for that year combined with the retained net profits for the preceding two years.
The primary exception allows the ownership of shares by a bank holding company in any company the activities of which the Federal Reserve has 10 Table of Contents determined to be so closely related to banking or to managing or controlling banks that ownership of shares of that company is appropriate.
The primary exception allows the ownership of shares by a bank holding company in any company the activities of which the Federal Reserve has determined to be so closely related to banking or to managing or controlling banks that ownership of shares of that company is appropriate.
Failure to meet these capital requirements could subject the bank to prompt corrective action provisions of the FDIA, which may include filing with the appropriate bank regulatory authorities a plan describing the means and a schedule for achieving the minimum capital requirements.
Failure to meet these capital requirements could subject the bank to prompt corrective action provisions of the FDIA, which may include filing with the appropriate bank 12 Table of Contents regulatory authorities a plan describing the means and a schedule for achieving the minimum capital requirements.
These applicable rules generally require a sponsor of this type of transaction to retain an economic interest equal to at least 5% percent of the aggregate credit risk of the assets collateralizing an issuance. • Expanded FDIC resolution authority.
These applicable rules generally require a sponsor of this type of transaction to retain an economic interest equal to at least 5% percent of the aggregate credit risk of the assets collateralizing an issuance. 15 Table of Contents • Expanded FDIC resolution authority.
Employee Engagement The Bank believes employee engagement is what sets the Bank apart from the competition. The Bank endeavors to recruit and retain some of the best and brightest talent across the U.S. When highly talented, skilled and driven individuals join the organization, they bring with them some of the best ideas, strategies, procedures and thoughts.
Employee Engagement The Bank believes employee engagement is what sets the Bank apart from the competition. The Bank endeavors to recruit and retain some of the best and brightest talent across the United States. When highly talented, skilled and driven individuals join the organization, they bring with them some of the best ideas, strategies, procedures and thoughts.
In 2023, BayFirst established a living minimum wage of $20 per hour. The Bank has a generous 401(k) plan, plus a discretionary profit-sharing contributions to its Employee Stock Ownership Plan. Most employees are shareholders through their participation in the ESOP. Additionally, employees have the opportunity to grow their ownership through a discounted non-qualified Employee Stock Purchase Plan.
BayFirst maintains a living minimum wage of $20 per hour. The Bank has a generous 401(k) plan, plus a discretionary profit-sharing contribution to its Employee Stock Ownership Plan. Most employees are shareholders through their participation in the ESOP. Additionally, employees have the opportunity to grow their ownership through a discounted non-qualified Employee Stock Purchase Plan.
Commercial loan decisions are documented as to the borrower’s business, loan purpose, the evaluation of the repayment source and associated risks, the evaluation of collateral, loan covenants, loan monitoring requirements, and the risk rating rationale.
Commercial loan decisions are documented as to the borrower’s business, loan purpose, the evaluation of the repayment source and associated risks, the evaluation of collateral, loan covenants, loan 5 Table of Contents monitoring requirements, and the risk rating rationale.
Emphasis is placed on proper loan documentation to ensure full guarantee performance in the event of payment defaults. The revenue generated from CreditBench’s loan originations is primarily derived from three sources: interest income, loan servicing, and premiums from the sale of loans.
Emphasis is placed on proper loan documentation to ensure full guarantee performance in the event of payment defaults. The revenue generated from the Bank’s government guaranteed loan originations is primarily derived from three sources: interest income, loan servicing, and premiums from the sale of loans.
Human Capital Since opening in 1999, BayFirst has grown significantly without losing sight of its commitment to making an impact in the communities served and being Here for What’s Next® in the lives of the Company’s customers, communities, employees, and investors.
Human Capital Since opening in 1999, BayFirst has grown significantly without losing sight of its commitment to make an impact in the communities served and be Here for What’s Next® in the lives of the Company’s customers, communities, employees, and investors.
The council actively advocates for the ongoing implementation and evaluation of internal and external programs, initiatives, and procedures to ensure the bank remains forward-thinking and aligned with the ever-evolving societal landscape. Through its focus on diversity, equity, and inclusion, the council works to fulfill its obligation to be the voice for all associated with BayFirst.
The council actively advocates for the ongoing implementation and evaluation of internal and external programs, initiatives, and procedures to ensure the bank remains forward-thinking and aligned with the ever-evolving societal landscape. Through its focus on cultural responsibility, the council works to fulfill its obligation to be the voice for all associated with BayFirst.
As of December 31, 2023, BayFirst had 306 employees (304 full-time and 2 part-time) and recognizes that they are its greatest asset. Providing a work environment that is inclusive, transparent, and comfortable for all is foundational to the Bank’s core beliefs. The Company is an organization that values open communication and collaboration in a professional and challenging, yet informal atmosphere.
As of December 31, 2024, BayFirst had 299 employees (298 full-time and 1 part-time) and recognizes that they are its greatest asset. Providing a work environment that is inclusive, transparent, and comfortable for all is foundational to the Bank’s core beliefs. The Company is an organization that values open communication and collaboration in a professional and challenging, yet informal atmosphere.
BayFirst’s primary source of income is from the Bank, which serves a broad spectrum of consumers and small businesses in the Tampa Bay region and is supported by a national government guaranteed lending business line.
BayFirst’s primary source of income is from the Bank, which serves a broad spectrum of consumers and small businesses in the Tampa Bay/Sarasota region and is supported by a national government guaranteed lend ing business.
CreditBench primarily originates loans through the SBA 7(a) program, and, to a lesser extent, through the USDA’s B&I program. Occasionally, CreditBench originates loans through the SBA’s 504 loan program, the International Trade Loan program, and the SBA Express Loan program. CreditBench originates two distinct types of loans: complex loans and non-complex loans.
The Bank originates loans through the SBA 7(a) program, and, to a lesser extent, through the USDA’s B&I program. Occasionally, the Bank originates loans through the SBA’s 504 loan program, International Trade Loan program, and Express Loan program. The Bank originates two distinct types of government guaranteed loans: complex loans and non-complex loans.
The FFIEC released its Architecture, Infrastructure, and Operations (AIO) Booklet in June 2021. The AIO Booklet calls for a layered security approach that incorporates administrative, procedural, and physical controls to include employee, vendor, and client awareness training. The Bank’s cybersecurity and information security practices incorporate preventative, detective, corrective, compensatory, and deterrent controls.
The FFIEC’s Architecture, Infrastructure, and Operations (AIO) Booklet, calls for a layered security approach that incorporates administrative, procedural, and physical controls to include employee, vendor, and client awareness training. The Bank’s cybersecurity and information security practices incorporate preventative, detective, corrective, compensatory, and deterrent .controls.
The Bank does not engage in any foreign business activities. The Bank offers its products and services through its Community Banking Division and its separately branded loan origination platform, CreditBench. CreditBench is a government guaranteed lender with specific expertise in originating SBA 7(a) loans and USDA loans throughout the nation.
The Bank does not engage in any foreign business activities. The Bank offers its products and services through its Community Banking Division and its government guaranteed lending division. The Bank is a government guaranteed lender with specific expertise in originating SBA 7(a) loans and USDA loans throughout the nation.
Failing to have adequate cybersecurity safeguards in place, in accordance with AIO and other applicable regulations and laws, can result in supervisory criticism, monetary penalties and reputational harm. In November 2021, the Federal Reserve, OCC, and FDIC adopted a new regulation for computer-security incident notification requirements for banking organizations and their bank service providers.
Failing to have adequate cybersecurity safeguards in place, in accordance with AIO and other applicable regulations and laws, can result in supervisory criticism, monetary penalties and reputational harm. 7 Table of Contents The Federal Reserve, OCC, and FDIC adopted regulations for computer-security incident notification requirements for banking organizations and their bank service providers.
Mortgage-servicing assets, deferred tax assets, and investments in financial institutions are limited to an aggregate of 15% of CET1 and 10% of CET1 individually. Additional Tier 1 Capital includes noncumulative perpetual preferred stock, Tier 1 minority interests, grandfathered trust preferred securities, and Troubled Asset Relief Program instruments, less applicable regulatory adjustments and deductions.
Mortgage-servicing assets, deferred tax assets, and investments in financial institutions are limited to an aggregate of 15% of CET1 and 10% of CET1 individually. Additional Tier 1 Capital includes noncumulative perpetual preferred stock, and Tier 1 minority interests, less applicable regulatory adjustments and deductions.
The Bank provides paid volunteer time off to all employees building engagement and pride in the organization while encouraging teams to give back to their communities.
The Bank provides paid volunteer time off to encourage all employees to give back to their community, while building engagement and pride in the organization.
CET1 Capital is the sum of common stock instruments and related surplus net of treasury stock, retained earnings, AOCI and qualifying minority interests, less applicable regulatory adjustments and deductions that include AOCI (if an irrevocable option to neutralize AOCI is exercised).
Capital is then classified into three categories, Common Equity Tier 1, Additional Tier 1, and Tier 2. CET1 Capital is the sum of common stock instruments and related surplus net of treasury stock, retained earnings, AOCI and qualifying minority interests, less applicable regulatory adjustments and deductions that include AOCI (if an irrevocable option to neutralize AOCI is exercised).
Future Legislation Various other legislative and regulatory initiatives, including proposals to overhaul the banking regulatory system are from time to time introduced in Congress and state legislatures, as well as regulatory agencies. The latest example was the passing of the Dodd-Frank Act.
Future Legislation Various other legislative and regulatory initiatives, including proposals to overhaul the banking regulatory system are from time to time introduced in Congress and state legislatures, as well as regulatory agencies.
Control is conclusively presumed to exist when an individual or company acquires 25% or more of any class of voting securities of a bank holding company.
Control is conclusively presumed to exist when an individual or company acquires 25% or more of any class of voting securities of a bank holding company. Control is rebuttably presumed to exist if a person acquires 10% or more, but less than 25%, of any class of voting securities.
As of December 31, 2023, BayFirst had consolidated total assets of $1.12 billion, total loans held for investment of $915.7 million, total deposits of $985.1 million, and total shareholders’ equity of $100.7 million. BayFirst’s corporate office is located at the BayFirst Executive Center, 700 Central Avenue, St. Petersburg, Florida 33701.
As of December 31, 2024, BayFirst had consolidated total assets of $1.29 billion, total loans held for investment of $1.07 billion, total deposits of $1.14 billion, and total shareholders’ equity of $110.9 million. BayFirst’s corporate office is located at the BayFirst Executive Center, 700 Central Avenue, St. Petersburg, Florida 33701.
Bolt loans are guaranteed up to 85% by the SBA and are primarily underwritten based upon predictive scores and character analysis of the business and its principals. 6 Table of Contents All CreditBench loans regardless of size which require projection-based underwriting or have other complex characteristics, such as business acquisition financing, are underwritten subject to SBA or USDA B&I guidelines and contain a thorough underwriting analysis based on the credit quality of any guarantor as well as the historical and projected debt service coverage.
All government guaranteed loans regardless of size which require projection-based underwriting or have other complex characteristics, such as business acquisition financing, are underwritten subject to SBA or USDA B&I guidelines and contain a thorough underwriting analysis based on the credit quality of any guarantor as well as the historical and projected debt service coverage.
In addition, the Banks’ no-cost, short-term disability policy is administered in-house and provides up to 12 weeks of medical leave at 100% pay. The Bank recognizes the burdensome expense of dependent care and provides a company match to employees’ dependent care FSA accounts.
BayFirst provides both paid maternity and paternity leave through the parental leave program. In addition, the Banks’ no-cost, salary continuation policy is administered in-house and provides up to 12 weeks of medical disability leave at 100% pay. The Bank recognizes the burdensome expense of dependent care and provides a company match to employees’ dependent care FSA accounts.
BayFirst offers a wide range of health and welfare plans designed to fit its diverse population. The Bank provides 100% employer-paid premiums for medical, dental, vision, disability, and life insurance for the employee.
BayFirst offers a wide range of health and welfare plans designed to fit its diverse population. The Bank provides 100% employer-paid premiums for medical, dental, vision, disability, and life insurance for the employee. The Bank offers an employee wellness program designed to support the whole employee which encompasses physical, mental, social, and financial wellness.
The assessment base on which a bank’s deposit insurance premiums is paid to the FDIC is now calculated based on its average consolidated total assets less its average equity.
The FDIC has published guidelines on the adjustment of assessment rates for certain institutions. The assessment base on which a bank’s deposit insurance premiums is paid to the FDIC is now calculated based on its average consolidated total assets less its average equity.
Instead, a bank holding company with less than $3 billion generally applies the risk-based capital and leverage capital guidelines on a bank only basis and must only meet a debt-to-equity ratio at the holding company level. The Federal Reserve risk-based capital guidelines apply directly to insured state banks, regardless of whether they are subsidiaries of a bank holding company.
Instead, a bank holding company with less than $3 billion generally applies the risk-based capital and leverage capital guidelines on a bank only basis and must only meet a debt-to-equity ratio at the holding company level.
Regardless of the loan type or amount, no single individual has sole loan approval authority. The objective of the loan approval process is to provide a disciplined, consistent, predictable, and collaborative approach to larger credits, while maintaining responsiveness to client needs.
The objective of the loan approval process is to provide a disciplined, consistent, predictable, and collaborative approach to larger credits, while maintaining responsiveness to client needs.
Payment of dividends by the Bank may be restricted at any time at the discretion of its applicable regulatory authorities if they deem such dividends to constitute an unsafe and/or unsound banking practice. 14 Table of Contents Fiscal and Monetary Policies The business and earnings of a bank may be significantly affected by the fiscal and monetary policies of the federal government and its agencies.
Payment of dividends by the Bank may be restricted at any time at the discretion of its applicable regulatory authorities if they deem such dividends to constitute an unsafe and/or unsound banking practice.
The Bank offers specialized business and personal checking accounts, internet banking and online bill payment, remote capture and deposit, cash management, wire transfers, safety deposit boxes, courier services, retail investment services, and ACH originations, among other services. Retail investment services are facilitated through an independent broker-dealer through a relationship with a shared service organization.
The Bank offers specialized business and personal checking accounts, internet banking and online bill payment, lock box services, remote capture and deposit, cash management, wire transfers, safety deposit boxes, courier services, retail investment services, and ACH originations, among other services.
The Board of Directors, both directly and through their committees, are responsible for overseeing the risk management processes, including quarterly enterprise risk management assessments and annual assessments in the following areas: (i) cyber; (ii) BSA/anti-money laundering; and (iii) third-party risk, with each of the committees of the Board of Directors assuming a different and important role in overseeing the management of the risks.
The Board of Directors, both directly and through their committees, are responsible for overseeing the risk management processes, including quarterly enterprise risk management assessments and annual assessments in the following areas: (i) cyber; (ii) BSA/anti-money laundering; and (iii) third-party risk, with each of the committees of the Board of Directors assuming a different and important role in overseeing the management of the risks. 6 Table of Contents The Audit and Risk Management Committees of the Board of Directors are responsible for overseeing risks associated with financial matters (particularly financial reporting, accounting practices and policies, disclosure controls and procedures, and internal control over financial reporting) as well as other enterprise risks.
The commercial lending efforts are directed principally toward businesses and professionals who otherwise do business with us, and include commercial real estate mortgages, construction and development loans, working capital loans, and business expansion loans. In addition, the Bank has a minority lending program for women or minority business owners looking to take their business to the next level.
The commercial lending efforts are directed principally toward businesses and professionals who otherwise do business with us, and include commercial real estate mortgages, construction and development loans, working capital loans, and business expansion loans.
Banks are particularly affected by the policies of the Federal Reserve, which regulates the supply of money and credit in the United States.
Fiscal and Monetary Policies The business and earnings of a bank may be significantly affected by the fiscal and monetary policies of the federal government and its agencies. Banks are particularly affected by the policies of the Federal Reserve, which regulates the supply of money and credit in the United States.
Under the guidelines, capital is compared to the relative risk related to the balance sheet. To derive the risk included in the balance sheet, risk weights from 0% to 250% are applied to different balance sheet and off-balance sheet assets, primarily based on the relative credit risk of the counterparty.
To derive the risk included in the balance sheet, risk weights from 0% to 250% are applied to different balance sheet and off-balance sheet assets, primarily based on the relative credit risk of the counterparty. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.
Tier 2 Capital includes subordinated debt and preferred stock not included in Additional Tier 1 Capital, total capital minority interests not included in Tier 1, and ACL not exceeding 1.25% percent of risk-weighted assets, less applicable regulatory adjustments and deductions. 12 Table of Contents Smaller banks are subject to the following capital level threshold requirements: Capital Category Threshold Ratios Total Risk-Based Capital Ratio Tier 1 Risk-Based Capital Ratio CET1 Risk-Based Capital Ratio Tier 1 Leverage Capital Ratio Well capitalized 10.00% 8% 6.5% 5% Adequately capitalized 8% 6% 4.5% 4% Undercapitalized Significantly undercapitalized Critically undercapitalized Tangible Equity/Total Assets ≤ 2% .
Smaller banks are subject to the following capital level threshold requirements: Capital Category Threshold Ratios Total Risk-Based Capital Ratio Tier 1 Risk-Based Capital Ratio CET1 Risk-Based Capital Ratio Tier 1 Leverage Capital Ratio Well capitalized 10.00% 8% 6.5% 5% Adequately capitalized 8% 6% 4.5% 4% Undercapitalized Significantly undercapitalized Critically undercapitalized Tangible Equity/Total Assets ≤ 2% .
During the second quarter of 2022, 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. CreditBench also originates USDA B&I loans for businesses located in qualifying areas.
Underwriting, quality control, and technology are centralized and scalable for potential increases in loan volume. During the second quarter of 2022, the Company launched our Bolt loan program, an SBA 7(a) loan product designed to expeditiously provide working capital loans of $150 thousand or less to businesses throughout the country.
BayFirst has an active Diversity, Equity, and Inclusion council with a purpose of ensuring BayFirst reflects the values, respects the viewpoints, and acknowledges the differences of not only the community members it serves, but also the people it employs.
Females represented 59% of the Company’s employee base while minorities represented 32% of its population. The officer base was 50% female and 19% minority. BayFirst has an active employee council with the purpose of ensuring BayFirst reflects the values, respects the viewpoints, and acknowledges the differences of not only the community members it serves, but also the people it employs.
Both agencies’ requirements, which are substantially similar, establish minimum capital ratios in relation to assets, both on an aggregate basis as adjusted for credit risks and off-balance sheet exposures. The risk weights assigned to assets are based primarily on credit risks. Depending upon the riskiness of a particular asset, it is assigned to a risk category.
The Federal Reserve risk-based capital guidelines apply directly to banks, regardless of whether they are subsidiaries of a bank holding 11 Table of Contents company. Both agencies’ requirements, which are substantially similar, establish minimum capital ratios in relation to assets, both on an aggregate basis as adjusted for credit risks and off-balance sheet exposures.
CreditBench’s loan origination efforts are targeted to a broad range of industries and geographies, with a focus on building relationships with borrowers. This diversification is intended to mitigate the Bank’s credit risk. Deposit products are also marketed to borrowers, particularly those borrowers in the Bank's primary market area . CreditBench originates loans through two distinct channels.
Government guaranteed loans are designed to assist small businesses in obtaining financing. The Bank’s loan origination efforts are targeted to a broad range of industries and geographies, with a focus on building relationships with borrowers. This diversification is intended to mitigate the Bank’s credit risk.
There can be no assurance that the 5 Table of Contents United States Congress, the Florida Legislature, or the applicable bank regulatory agencies will not enact legislation or promulgate regulations that may further increase competitive pressures on the Bank.
There can be no assurance that the United States Congress, the Florida Legislature, or the applicable bank regulatory agencies will not enact legislation or promulgate regulations that may further increase competitive pressures on the Bank. Lending Philosophy and Credit Risk Management Historically, the Company believes they have made sound, high-quality loans while recognizing that lending involves a degree of risk.
Currently, the Core Government Guaranteed Loan Team is concentrated in the Tampa Bay area with an expanding national sales team. FlashCap employs an internal sales team and uses referral partners and financial technology companies to originate government guaranteed loans nationwide. Underwriting, quality control, and technology are centralized and scalable for potential increases in loan volume.
The Bank’s Government Guaranteed Lending Team makes government guaranteed loans throughout the U.S., with a particular emphasis on business acquisition financing. Currently, the Government Guaranteed Lending Team is concentrated in the Tampa Bay/Sarasota area with an expanding national sales team. FlashCap employs an internal sales team and uses referral partners and financial technology companies to originate government guaranteed loans nationwide.
Branching National banks and state banks can establish branches in any state if that state would permit the establishment of the branch by a state bank chartered in that state. 13 Table of Contents Deposit Insurance Assessments The deposits of a bank are insured by the FDIC up to the limits under applicable law, which currently is set at $250,000 for accounts under the same ownership.
Deposit Insurance Assessments The deposits of a bank are insured by the FDIC up to the limits under applicable law, which currently is set at $250,000 for accounts under the same ownership. Banks are subject to deposit insurance premium assessments. The FDIC imposes a risk-based deposit premium assessment system.
The Bank’s loan approval process is characterized by centralized authority supported by a risk control environment that provides for prompt and thorough underwriting of loans. The loan approval process begins with obtaining detailed financial and other information from the Bank’s borrowers. The Bank also relies on its loan and executive officers’ in-depth knowledge of its markets and borrowers.
The loan approval process begins with obtaining detailed financial and other information from the Bank’s borrowers. The Bank also relies on its loan and executive officers’ in-depth knowledge of its markets and borrowers. Regardless of the loan type or amount, no single individual has sole loan approval authority.
Lending Philosophy and Credit Risk Management Historically, the Company believes they have made sound, high-quality loans while recognizing that lending involves a degree of risk. The Bank’s centralized credit approval process and loan policies are designed to assist management in managing this risk. The policies provide a general framework for loan origination, monitoring, and funding.
The Bank’s centralized credit approval process and loan policies are designed to assist management in managing this risk. The policies provide a general framework for loan origination, monitoring, and funding. The Bank’s loan approval process is characterized by centralized authority supported by a risk control environment that provides for prompt and thorough underwriting of loans.
The Bank offers both a tuition reimbursement and student loan assistance program to all eligible employees. The Bank offers these programs to nurture the professional development of the Bank’s colleagues and ease the financial burden associated with continuing education.
The Bank offers both a tuition reimbursement and student loan assistance program to all eligible employees.
To arrive at an assessment rate for a banking institution, the FDIC places it in one of four risk categories determined by reference to its capital levels and supervisory ratings. In the case of those institutions in the lowest risk category, the FDIC further determines its assessment rate based on certain specified financial ratios or, if applicable, long-term debt ratings.
Under this system, the assessment rates for an insured depository institution vary according to the level of risk incurred in its activities. To arrive at an assessment rate for a banking institution, the FDIC places it in one of four risk categories determined by reference to its capital levels and supervisory ratings.
As of December 31, 2023, the Community Banking Division operated from eleven banking centers in the Tampa Bay area: five in Pinellas County, two in Hillsborough County, one in Manatee County, and three in Sarasota County. Additionally, in February 2024, the Bank opened the twelfth banking center which is located in Sarasota.
As of December 31, 2024, the Community Banking Division operated from twelve banking centers in the Tampa Bay area: five in Pinellas County, two in Hillsborough County, one in Manatee County, and four in Sarasota County. Government Guaranteed Lending The Bank originates government guaranteed loans on a nationwide basis, with a particular emphasis on SBA 7(a) loans.
The assessment rate schedule can change from time to time, at the discretion of the FDIC, subject to certain limits. Under the current system, premiums are assessed quarterly. The FDIC has published guidelines on the adjustment of assessment rates for certain institutions.
In the case of those institutions in the lowest risk category, the FDIC further determines its assessment rate based on certain specified financial ratios or, if applicable, long-term debt ratings. The assessment rate schedule can change from time to time, at the discretion of the FDIC, subject to certain limits. Under the current system, premiums are assessed quarterly.
There are no free-standing derivatives associated with the current lending process. The Bank engages a subservicer for residential mortgage loans that is currently servicing most portfolio residential mortgage loans. Competition All phases of the Bank’s operations are highly competitive. Many commercial banks and other competitors have assets, capital, lending limits, and name recognition that are materially larger than the Bank’s.
The Bank continues to offer fixed and variable rate home mortgages for the purchase and refinance of residential properties through the community banking centers . Competition All phases of the Bank’s operations are highly competitive. Many commercial banks and other competitors have assets, capital, lending limits, and name recognition that are materially larger than the Bank’s.
Within the FlashCap program, we offer Bolt loans up to $150,000 for working capital purposes.
Within the FlashCap program, we offer our Bolt loans up to $150,000 for working capital purposes. Bolt loans are guaranteed up to 85% by the SBA and are primarily underwritten based upon predictive scores and character analysis of the business and its principals.
Under the rule, a qualifying organization may elect to use the CBLR framework if its CBLR is greater than 9%.
Under the rule, a qualifying organization may elect to use the CBLR framework if its CBLR is greater than 9%. Branching Subject to OCC approval, national and state banks can establish branches in any state if that state would permit the establishment of the branch by a state bank chartered in that state.
One is its team of government guaranteed lenders, known as the Core Government Guaranteed Loan Team. The other is for smaller loans that are processed through financial technology platforms, collectively known and branded as FlashCap. CreditBench’s Core Government Guaranteed Loan Team makes government guaranteed loans throughout the U.S., with a particular emphasis on business acquisition financing.
Deposit products are also marketed to borrowers, particularly those borrowers in the Bank's primary market area . The Bank originates loans through two distinct channels. One is its team of government guaranteed lenders, known as the Government Guaranteed Lending Team. The other is for smaller loans that are processed through financial technology platforms, collectively known and branded as FlashCap.
As of December 31, 2023, the Bank’s employee base was comprised of individuals from all walks of life, genders, ethnicities, races, ages and differing economic and social backgrounds. Females represented 59% of the Company’s employee base while minorities represented 32% of its population. The officer base was 50% female and 19% minority.
This inclusive culture enhances its workforce, expands the markets and fosters a culture of belonging for its employees, customers and communities in which the Bank serves. As of December 31, 2024,the Bank’s employee base was comprised of individuals from all walks of life, genders, ethnicities, races, ages and differing economic and social backgrounds.
Removed
During the second quarter of 2022, the Bank began the Bolt loan program, an SBA 7(a) loan product designed to expeditiously provide working capital loans of $150 thousand or less to businesses. The Bank has originated 3,408 Bolt loans totaling $441.8 million through December 31, 2023.
Added
The Bank has a healthcare banking solution with flexible lending options and other financial solutions designed specifically for healthcare businesses to help healthcare practitioners and their employees thrive. In addition, the Bank has a minority lending program for women or minority business owners looking to take their business to the next level.
Removed
CreditBench The Bank, through its separately branded loan origination platform CreditBench, originates government guaranteed loans on a nationwide basis, with a particular emphasis on SBA 7(a) loans. Government guaranteed loans are designed to assist small businesses in obtaining financing.
Added
The Bank has originated 5,726 Bolt loans totaling $741.5 million through December 31, 2024. The Bank also originates USDA B&I loans for businesses located in qualifying areas.
Removed
The Bank continues to offer fixed and variable rate home mortgages for the purchase and refinance of residential properties through the community banking centers . The Bank sells most of the residential mortgage loans which are originated into the secondary market through a broker arrangement. The Bank also originates loans to be held in its loan portfolio.
Added
The Bank has an advanced technology platform for our SBA 7(a) Small Loan Program that enables the Bank to utilize and support technology-enabled banking products and services as well as various financial technology applications.
Removed
The portfolio loans are generally high quality, adjustable rate, non-conforming mortgages located in the primary service area where there is a greater opportunity to cross- 4 Table of Contents sell other Bank products and services. The ability to fund such non-conforming loans provides the Bank a competitive advantage compared to non-bank mortgage lenders.
Added
The Bank offers these programs to nurture the professional development of the Bank’s colleagues and ease the financial burden associated with continuing education. 8 Table of Contents Corporate Social Responsibility The Bank’s cultural foundation of being current and comfortable for all drives inclusion throughout the entire organization.
Removed
The Bank’s residential mortgages are originated, processed, underwritten, and closed to secondary market standards or Bank policy. In connection with the origination of mortgage loans intended for sale, the Bank uses a broker to underwrite, close, and sell the loans. For loans held in its loan portfolio, the Bank underwrites and closes these loans in-house utilizing the brokers’ technology system.
Added
The risk weights assigned to assets are based primarily on credit risks. Depending upon the riskiness of a particular asset, it is assigned to a risk category. Under the guidelines, capital is compared to the relative risk related to the balance sheet.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAny preferred shares issued in the future may further restrict our ability to declare or pay dividends on any junior stock, including the common stock. 28 Table of Contents We are also subject to state and federal statutory and regulatory limitations on our ability to pay dividends on our capital stock.
Biggest changeAdditionally, our Articles of Incorporation provide that our Board of Directors may authorize and issue additional series of preferred stock without shareholder 27 Table of Contents approval. Any preferred shares issued in the future may further restrict our ability to declare or pay dividends on any junior stock, including the common stock.
If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and the price of our common stock may be more volatile.
If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and the price of our common stock may be more volatile.
Risk Factor Summary Our business is subject to uncertainties and risks and our risk factors can be broadly summarized by the following: • Our ability to grow the size and geographic scope of our loan generation, loan sale, and deposit gathering business, and the infrastructure needed to support it; • Possible loan defaults, devaluation of collateral, adverse political, environmental, or economic events, and competition; • Interest rates and available sources of liquidity; • Our ability to raise capital and the effects of doing so on our shareholders; • The potential that we are subject to fraud, incorrect judgments, or other bad acts of third parties; • Laws, regulations, rules, and standards to which we are subject and the government agencies with which we interact; • Recruitment, retention, development, performance, and potential bad acts of our key executives and other employees, as well as transactions with them and our directors; • Dividend and other restrictions placed on us by our outstanding preferred stock, restrictions that may be imposed by future issuances of preferred stock, and our pledging of the stock in the Bank to secure a loan; • Rapidly developing technology; • Estimates used in certain valuations, including our allowance for credit losses; and • Features of our stock, such as liquidity, dilution, the lack of preemptive rights, our SEC reporting status, and the concentration of ownership among our insiders.
Risk Factor Summary Our business is subject to uncertainties and risks and our risk factors can be broadly summarized by the following: • Our ability to grow the size and geographic scope of our loan generation, loan sale, and deposit gathering business, and the infrastructure needed to support it; • Possible loan defaults, devaluation of collateral, adverse political, environmental, or economic events, and competition; • Interest rates and available sources of liquidity; • Our ability to raise capital and the effects of doing so on our shareholders; • The potential that we are subject to fraud, incorrect judgments, or other bad acts of third parties; • Laws, regulations, rules, and standards to which we are subject and the government agencies with which we interact; 16 Table of Contents • Recruitment, retention, development, performance, and potential bad acts of our key executives and other employees, as well as transactions with them and our directors; • Dividend and other restrictions placed on us by our outstanding preferred stock, restrictions that may be imposed by future issuances of preferred stock, and our pledging of the stock in the Bank to secure a loan; • Rapidly developing technology; • Estimates used in certain valuations, including our allowance for credit losses; and • Features of our stock, such as liquidity, dilution, the lack of preemptive rights, our SEC reporting status, and the concentration of ownership among our insiders.
At December 31, 2023, our one-year interest rate sensitivity position was asset sensitive, such that a gradual increase in interest rates during the next twelve months would have a positive impact on our net interest income. Our results of operations are affected by changes in interest rates and our ability to manage this risk.
At December 31, 2024, our one-year interest rate sensitivity position was asset sensitive, such that a gradual increase in interest rates during the next twelve months would have a positive impact on our net interest income. Our results of operations are affected by changes in interest rates and our ability to manage this risk.
Expansion involves a number of risks, including the costs associated with identifying and evaluating potential acquisitions and merger partners, inaccurate estimates and judgments regarding credit, operations, management and market risks of the target institution, our ability to finance expansion, possible dilution to our existing shareholders, the diversion of our management’s attention to the 24 Table of Contents negotiation of a transaction, the integration of the operations and personnel of combining businesses, and the possibility of unknown or contingent liabilities.
Expansion involves a number of risks, including the costs associated with identifying and evaluating potential acquisitions and merger partners, inaccurate estimates and judgments regarding credit, operations, management and market risks of the target institution, our ability to finance expansion, possible dilution to our existing shareholders, the diversion of our management’s attention to the negotiation of a transaction, the integration of the operations and personnel of combining businesses, and the possibility of unknown or contingent liabilities.
The Florida property insurance market is in crises and the inability of our borrowers to obtain insurance on properties securing our loans may adversely affect the value of the collateral, the performance of our loan portfolio, and our ability to make loans secured by real estate.
The Florida property insurance market is in crisis and the inability of our borrowers to obtain insurance on properties securing our loans may adversely affect the value of the collateral, the performance of our loan portfolio, and our ability to make loans secured by real estate.
Our clients’ or our websites or systems may be subject to attacks intended to obtain unauthorized access to confidential information, destroy data, or disable or sabotage services, often through the introduction of computer viruses or malware, cyberattacks, and other means. 21 Table of Contents Furthermore, the methods of cyberattacks change frequently and may not be recognized until or after launch.
Our clients’ or our websites or systems may be subject to attacks intended to obtain unauthorized access to confidential information, destroy data, or disable or sabotage services, often through the introduction of computer viruses or malware, cyberattacks, and other means. Furthermore, the methods of cyberattacks change frequently and may not be recognized until or after launch.
We also from time to time pursue the sales of unguaranteed portions of such loans, which provide us with additional liquidity and capital capacity to permit us to make additional loans when needed.
We also from time to time pursue the sales of unguaranteed portions of such loans, which provide us with additional liquidity and capital capacity to permit us to make additional loans.
We have expanded into new markets with which we have less familiarity with than our historic markets. We intend to continue to expand the location and number of our Florida banking centers and the national scope of our SBA and USDA loan origination efforts when we identify attractive opportunities.
We have expanded into new markets with which we have less familiarity with than our historic markets. 19 Table of Contents We intend to continue to expand the location and number of our Florida banking centers and the national scope of our SBA and USDA loan origination efforts when we identify attractive opportunities.
We cannot predict the effects of future legislation and new or revised regulations on us, our competitors, or on the financial markets and economy, although they may significantly increase costs and impede the efficiency of our internal business processes. Inflation could negatively impact our business and our profitability.
We cannot predict the effects of future 24 Table of Contents legislation and new or revised regulations on us, our competitors, or on the financial markets and economy, although they may significantly increase costs and impede the efficiency of our internal business processes. Inflation could negatively impact our business and our profitability.
Disruptions in U.S. and global financial 19 Table of Contents markets, and changes in oil production and supply in those and other areas, also affect the economy and stock prices in the U.S., which can affect our earnings, capital, as well as the ability of our customers to repay loans.
Disruptions in U.S. and global financial markets, and changes in oil production and supply in those and other areas, also affect the economy and stock prices in the U.S., which can affect our earnings, capital, as well as the ability of our customers to repay loans.
Liquidity may also be adversely impacted by bank supervisory and regulatory authorities mandating changes in the composition of our balance sheet to asset classes that are less liquid. 17 Table of Contents Changes in interest rates affect our profitability and assets.
Liquidity may also be adversely impacted by bank supervisory and regulatory authorities mandating changes in the composition of our balance sheet to asset classes that are less liquid. Changes in interest rates affect our profitability and assets.
Similar to other financial institutions, our operational risk can manifest itself in many ways, such as errors related to failed or inadequate processes, faulty or disabled 26 Table of Contents computer systems, fraud by employees or outside persons, and exposure to external events. We are dependent on our operational infrastructure to help manage these risks.
Similar to other financial institutions, our operational risk can manifest itself in many ways, such as errors related to failed or inadequate processes, faulty or disabled computer systems, fraud by employees or outside persons, and exposure to external events. We are dependent on our operational infrastructure to help manage these risks.
Such events could result in a decline in loan originations, a decline in the value or destruction of properties securing loans and a decrease in credit quality, negatively impacting our business and results of operations. 23 Table of Contents Public health emergencies could hurt our business.
Such events could result in a decline in loan originations, a decline in the value or destruction of properties securing loans and a decrease in credit quality, negatively impacting our business and results of operations. Public health emergencies could hurt our business.
Future changes in financial accounting and reporting standards could require us to apply a new or revised standard retroactively, which could result in a material adverse effect on our financial condition or could even require us to restate prior period financial statements. We face risks related to our operational, technological, and organizational infrastructure.
Future changes in financial accounting and reporting standards could require us to apply a new or revised standard retroactively, which could result in a material adverse effect on our financial condition or could even require us to restate prior period financial statements. 25 Table of Contents We face risks related to our operational, technological, and organizational infrastructure.
The local economy is heavily influenced by tourism, real estate, and other service-based industries. Factors that could affect the local economy include declines in tourism, higher energy costs, reduced consumer or corporate spending, natural disasters or adverse weather and a significant decline in real estate values.
The local economy is heavily influenced by tourism, real estate, and other service-based industries. Factors that could affect the local economy include declines in tourism, higher energy costs, reduced consumer or corporate spending, natural disasters or adverse weather and a significant decline in real 21 Table of Contents estate values.
Our Board of Directors owns a significant percentage of our shares and will be able to make decisions to which you may be opposed. As of December 31, 2023, BayFirst’s directors and named executive officers as a group owned approximately 14.42% of our outstanding common stock.
Our Board of Directors owns a significant percentage of our shares and will be able to make decisions to which you may be opposed. As of December 31, 2024, BayFirst’s directors and named executive officers as a group owned approximately 14.43% of our outstanding common stock.
In addition, the directors and named executive officers have stock options to acquire shares of common stock, which, if fully exercised within sixty days of December 31, 2023, would have resulted in them owning approximately 18.83% of our outstanding common stock.
In addition, the directors and named executive officers have stock options to acquire shares of common stock, which, if fully exercised within sixty days of December 31, 2024, would have resulted in them owning approximately 18.62% of our outstanding common stock.
We face substantial competition in all areas of our operations from a variety of different competitors, many of which are larger and may have more financial resources than we do. Such competitors primarily include Internet banks and national, regional and community banks within the various markets we serve.
We operate in a highly competitive industry and market area. We face substantial competition in all areas of our operations from a variety of different competitors, many of which are larger and may have more financial resources than we do. Such competitors primarily include Internet banks and national, regional and community banks within the various markets we serve.
If economic conditions were to worsen nationally, regionally, or locally, we could experience a decline in credit quality and loan and deposit demand. Such declines could negatively affect our business and have a material adverse effect on our capital, financial condition, results of operations, and future growth.
We monitor market conditions and economic factors throughout, and beyond, our geographic markets. If economic conditions were to worsen nationally, regionally, or locally, we could experience a decline in credit quality and loan and deposit demand. Such declines could negatively affect our business and have a material adverse effect on our capital, financial condition, results of operations, and future growth.
BayFirst has outstanding debt and either BayFirst or the Bank may incur additional debt. At December 31, 2023, BayFirst had a $2.39 million term loan and $5.95 million in subordinated debt. BayFirst’s obligation to make payments on its debt will reduce the amount of cash available to BayFirst to pay dividends on its common stock.
BayFirst has outstanding debt and either BayFirst or the Bank may incur additional debt. At December 31, 2024, BayFirst had a $1.93 million term loan and $5.96 million in subordinated debt. BayFirst’s obligation to make payments on its debt will reduce the amount of cash available to BayFirst to pay dividends on its common stock.
We have pledged 100% of the outstanding shares of the Bank’s capital stock to secure a term loan with another financial institution with a balance of $2.4 million as of December 31, 2023.
We have pledged 100% of the outstanding shares of the Bank’s capital stock to secure a term loan with another financial institution with a balance of $1.9 million as of December 31, 2024.
The loss or unavailability of such officers or employees could have a material adverse effect on our operations and prospects. Such adverse effect may be magnified if any such officer or employee were to become employed with a competitor of ours. On December 31,2023, our Chief Executive Officer Anthony Leo retired.
The loss or unavailability of such officers or employees could have a material adverse effect on our operations and prospects. Such adverse effect may be magnified if any such officer or employee were to become employed with a competitor of ours.
We are an emerging growth company, as defined in the JOBS Act, and we intend to take advantage of certain exemptions from various reporting requirements that are applicable to public companies that are not emerging growth companies.
We are an emerging growth company, and expect to remain an emergin g growth company through December 31, 2026, as defined in the JOBS Act, and we intend to take advantage of certain exemptions from various reporting requirements that are applicable to public companies that are not emerging growth companies.
If any of these valuations are inaccurate, our consolidated financial statements may not reflect the correct value of our foreclosed upon real estate, and our credit loss reserve may not accurately reflect loan impairments. Inaccurate valuations of properties could materially adversely affect our business, results of operations and financial condition. We operate in a highly competitive industry and market area.
If any of these valuations are inaccurate, our consolidated financial statements may not reflect the correct value of our foreclosed upon real estate, and our credit loss reserve may not 23 Table of Contents accurately reflect loan impairments. Inaccurate valuations of properties could materially adversely affect our business, results of operations and financial condition.
Any such incident could put confidential customer information at risk, which may result in significant liability to us, subject us to additional regulatory scrutiny, damage our reputation, result in a loss of customers, cause us to incur significant expense to remediate any damage and inhibit current and potential customers from using our online banking services, any or all of which could have a material adverse effect on our results of operations and financial condition.
Any such incident could put confidential customer information at risk, which may result in significant liability to us, subject us to additional regulatory scrutiny, damage our reputation, result in a loss of customers, cause us to incur significant expense to remediate any damage and inhibit current and potential customers from using our online banking services, any or all of which could have a material adverse effect on our results of operations and financial condition. 20 Table of Contents A failure or breach, including cyberattacks, of our computer systems or other technologies could disrupt our business, result in the disclosure of confidential information, and create significant financial and legal exposure.
In addition, our regulators periodically review our credit loss reserve and may request an increase in the provision for credit losses or the recognition of loan charge-offs, based on judgments different than those of management.
In addition, our regulators periodically review our credit loss reserve and may request an increase in the provision for credit losses or the recognition of loan charge-offs, based on judgments different than those of management. If real estate values in our markets decline, we could experience losses upon foreclosure of the loan or sale of the real estate.
Failure to use such funds effectively might harm your investment. 27 Table of Contents If equity research analysts do not publish research or reports about our business, or if they do publish such reports but issue unfavorable commentary or downgrade our common stock, the price and trading volume of our common stock could decline.
If equity research analysts do not publish research or reports about our business, or if they do publish such reports but issue unfavorable commentary or downgrade our common stock, the price and trading volume of our common stock could decline.
This changed the current method of providing allowances for credit losses that are probable. Our loan origination processes present heightened opportunities for borrower or referral fraud. The loans we originate through our technology partners and referral sources are obtained primarily through an online application process. We do not generally meet with the borrowers in person.
Our loan origination processes present heightened opportunities for borrower or referral fraud. The loans we originate through our technology partners and referral sources are obtained primarily through an online application process. We do not generally meet with the borrowers in person. Our referral sources also are involved in assisting the borrowers with completing their loan applications.
Further, concerns over the long-term impacts of climate change have led and may continue to lead to governmental efforts around the world to mitigate those impacts. Investors, consumers, and businesses also may change their behavior on their own as a result of these concerns. The State of Florida could be disproportionately impacted by long-term climate changes.
Investors, consumers, and businesses also may change their behavior on their own as a result of these concerns. The State of Florida could be disproportionately impacted by long-term climate changes.
Our management may determine that it is in the best interest of the Company or the Bank to apply our capital in a manner that is inconsistent with a shareholder’s wishes.
Our management may determine that it is in the best 26 Table of Contents interest of the Company or the Bank to apply our capital in a manner that is inconsistent with a shareholder’s wishes. Failure to use such funds effectively might harm your investment.
If real estate values in our markets decline, we could experience losses upon foreclosure of the loan or sale of the real estate. A material portion of our loan portfolio consists of mortgages secured by real estate located in Pinellas, Pasco, Hillsborough, Manatee, and Sarasota Counties, Florida.
A material portion of our loan portfolio consists of mortgages secured by real estate located in Pinellas, Pasco, Hillsborough, Manatee, and Sarasota Counties, Florida.
If a borrower or a referral source intentionally, or unintentionally, provides us with incorrect information that we rely on in underwriting a loan, we could be subject to increased credit risk for that loan.
Therefore, it is difficult for us to definitively ascertain or confirm a borrower’s identity, structure, creditworthiness, or veracity in completing the loan application process. If a borrower or a referral source intentionally, or unintentionally, provides us with incorrect information that we rely on in underwriting a loan, we could be subject to increased credit risk for that loan.
Such actions could have a material adverse effect on our business, financial condition, results of operations, and future prospects. 22 Table of Contents We may be required to make increases in our credit loss reserve and to charge off loans in the future, which could adversely affect our results of operations.
We may be required to make increases in our credit loss reserve and to charge off loans in the future, which could adversely affect our results of operations.
If we are not able to fully and promptly provide training to our employees, or develop appropriate protocols, our employees may be susceptible to mistakes, fail to recognize fraud or other weaknesses in our operations, or fail to recognize or mitigate other risks.
If we are not able to fully and promptly provide training to our employees, or develop appropriate protocols, our employees may be susceptible to mistakes, fail to recognize fraud or other weaknesses in our operations, or fail to recognize or mitigate other risks. 18 Table of Contents Changes in economic and political conditions could adversely affect our earnings through declines in deposits, loan demand, the ability of our customers to repay loans and the value of the collateral securing our loans.
Our business and results of operations may be adversely affected by these and other negative effects of future hurricanes, tropical storms, related flooding and wind damage and other similar weather events. Climate change may be increasing the severity and frequency of adverse weather conditions, making the impact from these types of natural disasters on us or customers worse.
Our business and results of operations may be adversely affected by these and other negative effects of future hurricanes, tropical storms, 22 Table of Contents related flooding and wind damage and other similar weather events.
We depend on the sale of both the guaranteed and unguaranteed portions of our government guaranteed loans, but also face risks relating to the retained portions of unguaranteed loans.
If we are not successful in implementing this strategy, our income and results of operations may be adversely affected. 17 Table of Contents We depend on the sale of both the guaranteed and unguaranteed portions of our government guaranteed loans, but also face risks relating to the retained portions of unguaranteed loans.
In the case of a failure or breach of such systems, their functionality may be disabled. In addition, the confidentiality and integrity of our and our clients’ information may be compromised. Further, to access our products and services, our clients may use computers and mobile devices that are beyond our security systems.
There is no assurance that our computer systems and other technologies will provide absolute security. In the case of a failure or breach of such systems, their functionality may be disabled. In addition, the confidentiality and integrity of our and our clients’ information may be compromised.
If significant inflation continues, our business could also be negatively affected by, among other things, increased loan default and losses. If we experience such effects of inflation, our results of operations could suffer. ESG risks could adversely affect our reputation and shareholder, employee, client and third party relationships.
If significant inflation continues, our business could also be negatively affected by, among other things, increased loan default and losses. If we experience such effects of inflation, our results of operations could suffer. An economic downturn could have a material adverse effect on our capital, financial condition, results of operations, and future growth.
Private parties may also have the ability to challenge our performance under fair lending laws in private class action litigation.
Private parties may also have the ability to challenge our performance under fair lending laws in private class action litigation. Such actions could have a material adverse effect on our business, financial condition, results of operations, and future prospects.
To do so, we must identify qualified and interested borrowers and have sufficient capital and liquidity to support and fund such loans. If we are not successful in implementing this strategy, our income and results of operations may be adversely affected.
To do so, we must identify qualified and interested borrowers and have sufficient capital and liquidity to support and fund such loans.
Higher funding costs reduce our net interest margin, net interest income, and net income. In recent months, the environment for maintaining and growing deposits has become more challenging.
Higher funding costs reduce our net interest margin, net interest income, and net income. The environment for maintaining and growing deposits has become more challenging. Should we experience a decrease in deposits, we may need to rely on higher cost wholesale funding, which would adversely affect our financial performance and net income.
Changes in economic and political conditions could adversely affect our earnings through declines in deposits, loan demand, the ability of our customers to repay loans and the value of the collateral securing our loans. Our success depends to a significant extent upon local and national economic and political conditions, as well as governmental fiscal and monetary policies.
Our success depends to a significant extent upon local and national economic and political conditions, as well as governmental fiscal and monetary policies.
Removed
This is partially attributable to the FRB reducing the size of its balance sheet through quantitative tightening and continues to increase interest rates giving depositors an incentive to move deposits to money market funds and other higher-yielding alternatives.
Added
Further, to access our products and services, our clients may use computers and mobile devices that are beyond our security systems.
Removed
In addition, recent unusually high levels of withdrawals from other, larger banks, which in some cases has resulted in bank failure, may result in similar withdrawal patterns at the Company. Should we experience any of these events, we may need to rely on higher cost wholesale funding, which would adversely affect our financial performance and net income.
Added
The development and use of artificial intelligence by us or others, or our inability to effectively and timely implement its use, may adversely affect the Company. The use of artificial intelligence in the banking industry is developing and growing. Customer demand may cause us and others to offer products or services incorporating artificial intelligence.
Removed
The Bank adopted ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments effective January 1, 2023. This standard required financial institutions to determine periodic estimates of lifetime expected credit 18 Table of Contents losses on financial instruments and other commitments to extend credit.
Added
As with many developing technologies, artificial intelligence presents risks and challenges that could affect its further development, adoption, and use, and therefore our business. Our future success will depend, in part, upon our ability to invest in and use appropriate technology, which may include artificial intelligence.
Removed
Our referral sources also are involved in assisting the borrowers with completing their loan applications. Therefore, it is difficult for us to definitively ascertain or confirm a borrower’s identity, structure, creditworthiness, or veracity in completing the loan application process.
Added
To effectively make such investments, we may need to expend significant financial, human, and other resources. However, we may not be able to implement artificial intelligence in an effective or timely way, thus adversely impacting our operations. This may also adversely impact our ability to compete with financial institutions which have greater resources to invest in such technological improvements.
Removed
Our Boards 20 Table of Contents selected the current Bank President Thomas Zernick to become Chief Executive Officer of the Company and Robin Oliver to become President and COO of the Company. If this transition is not effective or if we encounter problems in implementing it, our performance may suffer.
Added
Ultimately, any artificial intelligence we develop or use may be flawed. If our use of artificial intelligence, or its use by third parties with which we do business or otherwise interact, is deficient, biased, or inaccurate, or compromises customer privacy or implicates other ethics issues, we could be subject to competitive harm, potential legal liability, and brand or reputational harm.
Removed
A failure or breach, including cyberattacks, of our computer systems or other technologies could disrupt our business, result in the disclosure of confidential information, and create significant financial and legal exposure. There is no assurance that our computer systems and other technologies will provide absolute security.
Added
Climate change may be increasing the severity and frequency of adverse weather conditions, making the impact from these types of natural disasters on us or customers worse. Further, concerns over the long-term impacts of climate change have led and may continue to lead to governmental efforts around the world to mitigate those impacts.
Removed
Furthermore, the Financial Accounting Standards Board has issued a current expected credit loss rule, which will change our accounting for losses by requiring us to record, at the time of origination, credit losses expected throughout the life of loans, held-to-maturity investment securities, and certain other assets and off-balance sheet credit exposures as opposed to the current practice of recording losses when it is probable that a loss event has occurred.
Added
We are also subject to state and federal statutory and regulatory limitations on our ability to pay dividends on our capital stock.
Removed
We implemented this new standard on January 1, 2023 and we will recognize a one-time adjustment to the allowance of $3.1 million.
Removed
Also, if charge-offs in future periods exceed the allowance, we will need additional provisions to increase the allowance, which would result in a decrease in net income and capital, and could have a material adverse effect on our financial condition and results of operations.
Removed
For example, the Dodd-Frank Act in particular represented a significant overhaul of many aspects of the regulation of the financial services industry, some of which have yet to be implemented.
Removed
As a publicly traded company, we face increasing public scrutiny related to ESG activities. If we fail to act responsibly in areas, such as DEI, environmental stewardship, human capital management, support for our local communities, corporate governance, and transparency, or fail to consider ESG factors in our business operations, our reputation may be adversely affected.
Removed
Furthermore, as a result of the diversity of our clients and business partners, we may face negative publicity because of the identity of our clients or business partners and the public’s view of those entities.
Removed
Additionally, we may face pressure to not do business in certain industries that are viewed as harmful to the environment or are otherwise negatively perceived, which could impact our growth.
Removed
If we, or our clients or business partners, become the subject of such negative 25 Table of Contents publicity, our ability to attract and retain clients, employees, and business partners, may be negatively impacted, which could affect our results of operation or growth prospects.
Removed
Additionally, investors and shareholder advocates are increasing their emphasis on how corporations address ESG issues in their business strategies. An economic downturn could have a material adverse effect on our capital, financial condition, results of operations, and future growth. We monitor market conditions and economic factors throughout, and beyond, our geographic markets.
Removed
Additionally, our Articles of Incorporation provide that our Board of Directors may authorize and issue additional series of preferred stock without shareholder approval.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

5 edited+2 added−0 removed4 unchanged
Biggest changeKey elements of the comprehensive Information Security Program include: • A mix of administrative and technical tools and controls appropriate to the size and complexity of the Bank to protect the confidentiality, integrity, and availability of critical systems and data, including the privacy of customer data, in compliance with applicable laws and regulations. • Risk assessments are conducted to: (a) identify reasonably foreseeable internal and external threats that could result in unauthorized disclosure, misuse, alteration, or destruction of critical Bank systems and data, (b) determine the likelihood and potential impact of the threats, and (c) determine the sufficiency of controls and mitigating factors to reduce the risks identified. • A detailed Cyber Incident Response Plan which includes engagement of a third-party that specializes in cybersecurity for financial institutions to assist in incident response and recovery and communications with the Board, regulators, law enforcement and Federal and State Government offices, as required.
Biggest changeControl coverage includes Board approved policies, layers of network security, encryption of data at rest and in transit, vulnerability scans of technology assets, logging and monitoring, identity and access management, secure coding, and email security. • Risk assessments are conducted to: (a) identify reasonably foreseeable internal and external threats that could result in unauthorized disclosure, misuse, alteration, or destruction of critical Bank systems and data, (b) determine the likelihood and potential impact of the threats, and (c) determine the sufficiency of controls and mitigating factors to reduce the risks identified. • A detailed Cyber Incident Response Plan which includes engagement of a third-party that specializes in cybersecurity for financial institutions to assist in incident response and recovery and communications with the Board, regulators, law enforcement and Federal and State Government offices, as required.
The Company’s Board of Directors delegates oversight of the Bank's processes for identifying, assessing, and mitigating material risks, including cybersecurity risks, to the Board Audit and Risk Management Committee. Senior Leadership, including the CTO and CRO, managed third-party service providers and advisors to maintain and continuously enhance the Bank's Information Security Program.
The Company’s Board of Directors delegates oversight of the Bank's processes for identifying, assessing, and mitigating material risks, including cybersecurity risks, to the Board Audit and Risk Management Committee. Senior Leadership, including the CTO and CRO, manage third-party service providers and advisors to maintain and continuously enhance the Bank's Information Security Program.
“Risk Factors” for a discussion of cybersecurity risks. 30 Table of Contents
“Risk Factors” for a discussion of cybersecurity risks. 29 Table of Contents
Item 1C. Cybersecurity 29 Table of Contents Cybersecurity Risk Management and Strategy Cybersecurity risks are constantly evolving and becoming increasingly pervasive across all industries. We use people, process, and technology controls to manage and mitigate cybersecurity risk.
Item 1C. Cybersecurity Cybersecurity Risk Management and Strategy Cybersecurity risks are constantly evolving and becoming increasingly pervasive across all industries. The Company uses a blend of people, process, and technology controls to manage and mitigate cybersecurity risk.
While the Bank has not experienced a business-impacting cyber incident to date, the Cyber Incident Response Plan is tested at least annually and updated as required so that personnel are prepared for an actual incident. • Security Awareness training to help employees understand their information protection and cybersecurity responsibilities, including targeted campaigns on common social engineering techniques utilized by threat actors. • A third-party risk management program to classify suppliers according to risk and identify those that require enhanced cyber due diligence. • Annual independent third-party penetration tests, vulnerability scans, assessments and audits of the Bank's Information Security Program elements.
In addition, targeted cybersecurity playbooks are maintained to respond to common threats, including malware, ransomware and denial of service attacks. • Security Awareness training to help employees understand their information protection and cybersecurity responsibilities, including targeted campaigns on phishing and other common social engineering techniques utilized by threat actors. • A third-party risk management program to classify suppliers according to risk and identify those that require enhanced cyber due diligence. • Annual independent third-party penetration tests, external vulnerability scans, assessments and audits of the Bank's Information Security Program elements.
Added
Key elements of the comprehensive Information Security Program include: • A mix of administrative and technical tools and controls appropriate to the size and complexity of the Bank to protect the confidentiality, integrity, and availability of critical systems and data, including the privacy of customer data, in compliance with applicable laws, rules, and regulations.
Added
While the Bank has not experienced a business-impacting cyber incident to date, the Cyber Incident Response Plan is tested at least annually and updated as required so that personnel are prepared for an actual incident.

Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−0 removed3 unchanged
Biggest changePetersburg, FL 33701 Corporate and Bank Headquarters Lease 2017 9190 Seminole Boulevard Seminole, FL 33772 Banking Center Own 1999 5250 Park Boulevard Pinellas Park, FL 33781 Banking Center Own 2006 2520 Countryside Boulevard Clearwater, FL 33763 Banking Center Own 2018 2033 Main Street, Suite 101 Sarasota, FL 34237 Banking Center Lease 2018 3015 West Columbus Drive Tampa, FL 33607 Banking Center Own 2020 401 N.
Biggest changePetersburg, FL 33701 Corporate and Bank Headquarters Lease 2017 9190 Seminole Boulevard Seminole, FL 33772 Banking Center Lease 1999 5250 Park Boulevard Pinellas Park, FL 33781 Banking Center Own 2006 2520 Countryside Boulevard Clearwater, FL 33763 Banking Center Lease 2018 2033 Main Street, Suite 101 Sarasota, FL 34237 Banking Center Lease 2018 3015 West Columbus Drive Tampa, FL 33607 Banking Center Own 2020 401 N.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

2 edited+0 added−0 removed1 unchanged
Biggest changeThere are no material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which the Company is a party or to which its property is the subject. It em 4. Mine Safety Disclosures Not applicable. Part II
Biggest changeThere are no material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which the Company is a party or to which its property is the subject. It em 4. Mine Safety Disclosures Not applicable. 30 Table of Contents Part II
Item 3. Legal Proceedings In the normal course of business, the Company is named or threatened to be named as a defendant in various lawsuits, none of which they expect to have a material effect on the Company.
Item 3. Legal Proceedings In the normal course of business, the Company is named or threatened to be named as a defendant in various lawsuits, none of which is expected to have a material effect on the Company.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

4 edited+0 added−2 removed3 unchanged
Biggest changeIssuer Purchases of Equity Securities Share Buyback Program. On February 28, 2023, the Board of Directors approved the Company’s 2023 Stock Repurchase Program (“Repurchase Program”). The Repurchase Program permits the Company to repurchase up to $1,000,000 of the Company’s issued and outstanding common stock. The Repurchase Program ended as of December 31, 2023.
Biggest changeOn January 28, 2025, the Company’s Board of Directors authorized a stock repurchase program for the repurchase of up to $2,000,000 of the Company’s issued and outstanding common stock over a period beginning on January 28, 2025, and continuing until the earlier of the completion of the repurchase, or December 31, 2025, or termination of the program by the Board of Directors.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information The common stock began trading on the Nasdaq under the symbol “BAFN” on November 30, 2021. Prior to that, the common stock was traded on the OTC Markets Group Inc. (OTCQX) under the symbol “FHBI”.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information The common stock began trading on the Nasdaq under the symbol “BAFN” on November 30, 2021. Prior to that, the common stock was traded on the OTC Markets Group Inc. (OTCQX) under the symbol “FHBI”. Share Buyback Program.
The tax is imposed on the fair 31 Table of Contents value of the stock of a covered corporation that is repurchased in a given year, less the fair market value of any stock issued in that year. A “covered corporation” is any domestic corporation whose stock is traded on an established securities market, such as Nasdaq.
The tax is imposed on the fair value of the stock of a covered corporation that is repurchased in a given year, less the fair market value of any stock issued in that year. A “covered corporation” is any domestic corporation whose stock is traded on an established securities market, such as Nasdaq.
The impact of the Inflation Reduction Act of 2022 on our consolidated financial statements will be dependent on the extent of stock repurchases made in future periods. The following table sets forth information regarding the Company’s repurchase of shares of its outstanding common stock during the three months ended December 31, 2023.
The impact of the Inflation Reduction Act of 2022 on our consolidated financial statements will be dependent on the extent of stock repurchases made in future periods. Item 6. {Reserved}
Removed
Period Number of Shares Average Price Paid Per Share Cumulative Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares That May Yet be Purchased Under the Plans or Programs October 1-31, 2023 — $ — 900 $ 987,178 November 1-30, 2023 — — 900 $ 987,178 December 1-31, 2023 — — 900 $ 987,178 Total — $ — Under applicable state law, Florida corporations are not permitted to retain treasury stock.
Removed
As such, the price paid for the repurchased shares reduces the amount of common stock on the consolidated balance sheet. As of December 31, 2023, total shares repurchased for $12,822 had been redeemed since the Repurchase Program was implemented. The repurchased shares remain authorized, unissued shares. Item 6. {Reserved}

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

100 edited+9 added−26 removed52 unchanged
Biggest changeCONSOLIDATED BALANCE SHEETS (Dollars in thousands, except per share data) Selected Financial Data - Unaudited As of and for the Three Months Ended As of and for the Year Ended (Dollars in thousands, except for share data) 12/31/2023 9/30/2023 12/31/2022 12/31/2023 12/31/2022 Income Statement Data: Net interest income $ 8,877 $ 8,393 $ 8,574 $ 36,431 $ 30,000 Provision for credit losses (1) 2,737 3,001 700 10,445 (700) Noninterest income 14,691 14,679 8,404 49,755 31,550 Noninterest expense 18,466 17,427 13,493 67,707 55,212 Income tax expense 704 674 672 2,119 1,560 Net income from continuing operations 1,661 1,970 2,113 5,915 5,478 Net loss from discontinued operations (6) (47) (791) (213) (5,827) Net income (loss) 1,655 1,923 1,322 5,702 (349) Preferred stock dividends 341 208 208 965 832 Net income available to (loss attributable to) common shareholders $ 1,314 $ 1,715 $ 1,114 $ 4,737 $ (1,181) Balance Sheet Data: Average loans HFI, excluding PPP loans $ 900,289 $ 841,920 $ 703,193 $ 829,012 $ 608,563 Average loans HFI at amortized cost, excluding PPP loans 812,446 773,749 677,172 754,612 580,308 Average total assets 1,108,550 1,088,517 925,194 1,058,124 904,546 Average common shareholders’ equity 82,574 81,067 80,158 80,718 82,589 Total loans HFI 915,726 878,447 728,652 915,726 728,652 Total loans HFI, excluding PPP loans 912,524 863,203 709,479 912,524 709,479 Total loans HFI, excluding government guaranteed loan balances 698,106 687,141 569,892 698,106 569,892 Allowance for credit losses (1) 13,497 13,365 9,046 13,497 9,046 Total assets 1,117,766 1,133,979 938,895 1,117,766 938,895 Common shareholders’ equity 84,656 82,725 82,279 84,656 82,279 Per Share Data: Basic earnings (loss) per common share $ 0.32 $ 0.42 $ 0.28 $ 1.16 $ (0.29) Diluted earnings (loss) per common share $ 0.32 $ 0.41 $ 0.28 $ 1.12 $ (0.22) Dividends per common share $ 0.08 $ 0.08 $ 0.08 $ 0.32 $ 0.32 Book value per common share $ 20.60 $ 20.12 $ 20.35 $ 20.60 $ 20.35 Tangible book value per common share (2) $ 20.60 $ 20.12 $ 20.35 $ 20.60 $ 20.35 Performance Ratios: Return on average assets (3) 0.60 % 0.71 % 0.57 % 0.54 % (0.04) % Return on average common equity (3) 6.37 % 8.46 % 5.56 % 5.87 % (1.43) % Net interest margin (3) 3.48 % 3.36 % 4.19 % 3.78 % 3.97 % Dividend payout ratio 25.03 % 19.15 % 28.99 % 27.70 % (108.95) % Asset Quality Data: Net charge-offs $ 2,612 $ 2,234 $ 1,393 $ 8,987 $ 3,706 Net charge-offs/average loans HFI at amortized cost, excluding PPP (3) 1.29 % 1.15 % 0.82 % 1.19 % 0.64 % Nonperforming loans (4) $ 9,688 $ 9,518 $ 10,468 $ 9,688 $ 10,468 Nonperforming loans (excluding government guaranteed balance) (4) $ 8,264 $ 7,997 $ 3,671 $ 8,264 $ 3,671 Nonperforming loans/total loans HFI (4) 1.18 % 1.20 % 1.49 % 1.18 % 1.49 % 33 Table of Contents BAYFIRST FINANCIAL CORP.
Biggest changeCONSOLIDATED BALANCE SHEETS (Dollars in thousands, except per share data) Selected Financial Data - Unaudited As of and for the Three Months Ended As of and for the Year Ended (Dollars in thousands, except for share data) 12/31/2024 9/30/2024 12/31/2023 12/31/2024 12/31/2023 Income Statement Data: Net interest income $ 10,653 $ 9,449 $ 8,877 $ 38,026 $ 36,431 Provision for credit losses 4,546 3,122 2,737 14,726 10,445 Noninterest income 22,276 12,272 14,691 60,469 49,755 Noninterest expense 15,335 17,064 18,466 66,782 67,707 Income tax expense 3,272 398 704 4,315 2,119 Net income from continuing operations 9,776 1,137 1,661 12,672 5,915 Net loss from discontinued operations — — (6) (69) (213) Net income 9,776 1,137 1,655 12,603 5,702 Preferred stock dividends 385 385 341 1,541 965 Net income available to common shareholders $ 9,391 $ 752 $ 1,314 $ 11,062 $ 4,737 Balance Sheet Data: Average loans HFI $ 1,077,504 $ 1,034,819 $ 913,039 $ 1,009,353 $ 845,193 Average loans HFI at amortized cost 1,003,867 948,528 825,196 928,814 770,793 Average total assets 1,273,296 1,228,040 1,108,550 1,201,820 1,058,124 Average common shareholders’ equity 87,961 86,381 82,574 86,174 80,718 Total loans HFI 1,066,559 1,042,445 915,726 1,066,559 915,726 Total loans HFI, excluding government guaranteed loan balances 917,075 885,444 698,106 917,075 698,106 Allowance for credit losses 15,512 14,186 13,497 15,512 13,497 Total assets 1,288,297 1,245,099 1,117,766 1,288,297 1,117,766 Total deposits 1,143,229 1,112,196 985,138 1,143,229 985,138 Common shareholders’ equity 94,869 86,242 84,656 94,869 84,656 Per Share Data: Basic earnings per common share $ 2.27 $ 0.18 $ 0.32 $ 2.68 $ 1.16 Diluted earnings per common share $ 2.11 $ 0.18 $ 0.32 $ 2.62 $ 1.12 Dividends per common share $ 0.08 $ 0.08 $ 0.08 $ 0.32 $ 0.32 Book value per common share $ 22.95 $ 20.86 $ 20.60 $ 22.95 $ 20.60 Tangible book value per common share (1) $ 22.95 $ 20.86 $ 20.60 $ 22.95 $ 20.60 Performance Ratios: Return on average assets (2) 3.07 % 0.37 % 0.60 % 1.05 % 0.54 % Return on average common equity (2) 42.71 % 3.48 % 6.37 % 12.84 % 5.87 % Net interest margin (2) 3.60 % 3.34 % 3.48 % 3.45 % 3.78 % Dividend payout ratio 3.52 % 43.98 % 25.03 % 11.96 % 27.70 % Asset Quality Data: Net charge-offs $ 3,369 $ 2,757 $ 2,612 $ 13,039 $ 8,987 Net charge-offs/average loans HFI at amortized cost (2) 1.34 % 1.16 % 1.27 % 1.40 % 1.17 % Nonperforming loans (3) $ 17,607 $ 15,489 $ 9,688 $ 17,607 $ 9,688 Nonperforming loans (excluding government guaranteed balance) (3) $ 13,570 $ 10,992 $ 8,264 $ 13,570 $ 8,264 Nonperforming loans/total loans HFI (3) 1.75 % 1.62 % 1.18 % 1.75 % 1.18 % 32 Table of Contents BAYFIRST FINANCIAL CORP.
Our lending activities primarily consist of government guaranteed loans, real estate loans, commercial business loans, residential mortgage, and consumer loans. Senior management and loan officers have continued to develop new sources of loan referrals, particularly among centers of local influence and real estate professionals, and have also enjoyed repeat business from loyal customers in the markets the Bank serves.
Our lending activities primarily consist of government guaranteed, commercial real estate, commercial business, residential mortgage, and consumer loans. Senior management and loan officers have continued to develop new sources of loan referrals, particularly among centers of local influence and real estate professionals, and have also enjoyed repeat business from loyal customers in the markets the Bank serves.
These statements are subject to many risks and uncertainties, including, but not limited to, the effects of health crises, global military hostilities, or climate changes, including its effects on the economic environment, its customers and its 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 or global military hostilities; 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.
These statements are subject to many risks and uncertainties, including, but not limited to, the effects of health crises, global military hostilities, weather events, or climate changes, including its effects on the economic environment, its customers and its 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 or global military hostilities; 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.
At the time of adoption, the ACL for loans increased by $3.1 million to 1.73% of loans, the reserve on unfunded commitments increased $213 thousand, and an $18 thousand reserve was established for held to maturity investment securities .These one-time increases resulted in an after tax decrease to capital of $2.5 million, with no impact to earnings.
At the time of adoption, the reserves for loans increased by $3.1 million to 1.73% of loans, the reserve on unfunded commitments increased $213 thousand, and an $18 thousand reserve was established for held to maturity investment securities . These one-time increases resulted in an after tax decrease to capital of $2.5 million, with no impact to earnings.
The investment securities available for sale presented in the following tables are reported at amortized cost and by contractual maturity as of December 31, 2023 and December 31, 2022. Actual timing may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.
The investment securities available for sale presented in the following tables are reported at amortized cost and by contractual maturity as of December 31, 2024 and December 31, 2023. Actual timing may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.
The Company expects that all the liquidity needs, including the contractual commitments can be met by currently available liquid assets and cash flows. In the event any unforeseen demand or commitments were to occur, the Company would access the borrowing capacity with the FHLB, FRB, and lines of credit with other financial institutions.
The Company expects that all the liquidity needs, including the contractual commitments can be met by currently available liquid assets and cash flows. In the event any unforeseen demand or commitments were to occur, the Company could access the borrowing capacity with the FHLB or FRB, or lines of credit with other financial institutions.
Any forward-looking statements presented herein are made only as of the date of this document, and the Company does not undertake any obligation to update or revise any forward-looking statements to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise. 32 Table of Contents BAYFIRST FINANCIAL CORP.
Any forward-looking statements presented herein are made only as of the date of this document, and the Company does not undertake any obligation to update or revise any forward-looking statements to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise. 31 Table of Contents BAYFIRST FINANCIAL CORP.
The Bank offers a wide selection of deposit instruments including demand deposit accounts, NOW accounts, money-market accounts, regular savings accounts, certificate of deposit accounts, and retirement savings plans (such as IRA accounts). Certificate of deposit rates are set to encourage longer maturities as cost and market conditions will allow.
The Bank offers a wide selection of deposit instruments including demand deposit accounts, NOW accounts, money market accounts, regular savings accounts, time deposit accounts, and retirement savings plans (such as IRA accounts). Time deposit rates are set to encourage longer maturities as cost and market conditions will allow.
Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Management evaluates each customer’s credit worthiness on a case-by-case basis.
Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since some of the commitments are expected to expire without being drawn upon, the total 49 Table of Contents commitment amounts do not necessarily represent future cash requirements. Management evaluates each customer’s credit worthiness on a case-by-case basis.
In addition, the Company’s operating results can be affected by the level of nonperforming assets, as well as the level of the noninterest income and the noninterest expenses, such as salaries and employee benefits, and occupancy and equipment costs, as well as income taxes.
In addition, the Company’s operating results can be affected by the level of nonperforming assets, as well as the level of the noninterest income and the noninterest expenses, such as salaries and employee benefits, occupancy and equipment costs, and loan origination expenses as well as income taxes.
Specific allocation of reserves for individually evaluated loans considers the value of the collateral, the financial condition of the borrower, and industry and current economic trends. The Bank reviews the collateral value, cash flow, and tertiary support on each individually evaluated credit.
Specific allocation of reserves for individually evaluated loans considers the value of the collateral, the financial condition of the borrower, and industry and current economic trends. The Bank reviews the collateral value, cash flow, and other support on each individually evaluated credit.
Deposit account terms vary, with the primary differences being the minimum balance required, the time period the funds must remain on deposit, and the interest rate. 49 Table of Contents The Bank emphasizes commercial banking relationships in an effort to increase demand deposits as a percentage of total deposits.
Deposit account terms vary, with the primary differences being the minimum balance required, the time period the funds must remain on deposit, and the interest rate. The Bank emphasizes commercial banking relationships in an effort to increase demand deposits as a percentage of total deposits.
While the Company retains some of its government guaranteed loans on the balance sheet, the 36 Table of Contents Company may sell both the guaranteed balance of its government guaranteed loans, as well as a percentage of the unguaranteed portions of such loans. In the second quarter of 2022, the Bank discontinued its primary consumer direct residential mortgage business line.
While the Company retains some of its government guaranteed loans on the balance sheet, the Company may sell both the guaranteed balance of its government guaranteed loans, as well as a percentage of the unguaranteed portions of such loans. In the second quarter of 2022, the Bank discontinued its primary consumer direct residential mortgage business line.
This evaluation is inherently subjective as it requires numerous estimates, including the loss for internal risk ratings, collateral values, and the amounts and timing of expected future cash flows. The Company’s ACL on loans is estimated using relevant information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts.
This evaluation is inherently subjective as it requires numerous estimates, including collateral values, and the amounts and timing of expected future cash flows. The Company’s ACL on loans is estimated using relevant information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts.
The following table provides information on the maturity distribution of the time deposits exceeding the FDIC insurance limit of $250 thousand as of December 31, 2023.
The following table provides information on the maturity distribution of the time deposits exceeding the FDIC insurance limit of $250 thousand as of December 31, 2024.
The Company does 53 Table of Contents not rely on investment securities as the main source of liquidity and does not foresee the need to sell investment securities for cash flow purposes. In addition, the Company has the ability to obtain wholesale deposits as another source of liquidity.
The Company does not rely on investment securities as the main source of liquidity and does not foresee the need to sell investment securities for cash flow purposes. In addition, the Company has the ability to obtain wholesale deposits as another source of liquidity.
The balance of Subordinated Debentures outstanding at the Company, net of offering costs, amounted to $5.9 million and $6.0 million at December 31, 2023 and December 31, 2022, respectively. The Company has a term note with quarterly principal and interest payments with interest at Prime (8.50% at December 31, 2023).
The balance of Subordinated Debentures outstanding at the Company, net of offering costs, amounted to $6.0 million and $5.9 million at December 31, 2024 and December 31, 2023, respectively. The Company has a term note with quarterly principal and interest payments with interest at Prime (7.50% at December 31, 2024).
Management assesses capital adequacy against the risk inherent in the balance sheet, recognizing that unexpected loss is the common denominator of risk and that common equity has the greatest capacity to absorb unexpected loss. The Bank is subject to regulatory capital requirements imposed by various regulatory banking agencies.
Management assesses capital adequacy against the risk inherent in the balance 48 Table of Contents sheet, recognizing that unexpected loss is the common denominator of risk and that common equity has the greatest capacity to absorb unexpected loss. The Bank is subject to regulatory capital requirements imposed by various regulatory agencies.
This means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private 35 Table of Contents companies do so.
This means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies do so.
The Debentures carry interest at a fixed rate of 4.50% per annum for the initial 5 years of term and carry interest at a floating rate for the final 5 years of term. Under the debt agreements, the floating rates are based on a SOFR benchmark plus 3.78% per annum.
The Debentures carry interest at a fixed rate of 4.50% per annum for the initial 5 years of term and carry interest at a floating rate for the final 5 years of term after June 30, 2026. Under the debt agreements, the floating rates are based on a SOFR benchmark plus 3.78% per annum.
At December 31, 2023, the most critical of these significant accounting policies in understanding the estimates and assumptions involved in preparing the consolidated financial statements were the policies related to the ACL, fair value measurement of government guaranteed loan servicing rights and government guaranteed loans HFI at fair value, which are discussed more fully below.
At December 31, 2024, the most critical of these significant accounting policies in understanding the estimates and assumptions involved in preparing the consolidated financial statements were the 33 Table of Contents policies related to the ACL, fair value measurement of government guaranteed loan servicing rights and government guaranteed loans HFI at fair value, which are discussed more fully below.
The Company maintains an ACL for its off-balance sheet loan commitments which is calculated by loan type using estimated line utilization rates based on historical usage. Loss rates for outstanding loans is applied to the estimated 52 Table of Contents utilization rates to calculate the ACL for off-balance sheet loan commitments.
The Company maintains an ACL for its off-balance sheet loan commitments which is calculated by loan type using estimated line utilization rates based on historical usage. Loss rates for outstanding loans is applied to the estimated utilization rates to calculate the ACL for off-balance sheet loan commitments.
In the third quarter of 2022, management decided to discontinue the nationwide residential lending business. As a result of the discontinuance, the nationwide residential line of business was reclassified as a discontinued operation and reported in the financial statements as such.
In the third quarter of 2022, management decided to discontinue the nationwide residential lending business. As a result of the 35 Table of Contents discontinuance, the nationwide residential mortgage line of business was reclassified as a discontinued operation and reported in the financial statements as such.
As of December 31, 2023, the Company was in compliance with all financial debt covenants.
As of December 31, 2024, the Company was in compliance with all financial debt covenants.
The Company is dependent on noninterest income, which is derived primarily from net gain on the sales of the guaranteed portion of government guaranteed loans. The largest expenses are interest on those deposits and borrowings, professional fees, and salaries and commissions plus related employee benefits.
The Company is dependent on noninterest income, which is derived primarily from net gain on the sales of the guaranteed portion of governm ent guaranteed loans. The largest expenses are interest on those deposits and borrowings, professional fees, loan origination expenses, and salaries and commissions plus related employee benefits.
The note matures on March 10, 2029 and the balance of the note was $2.4 million and $2.8 million at December 31, 2023 and December 31, 2022, respectively. The note is secured by 100% of the stock of the Company and requires the Company to comply with certain loan covenants during the term of the note.
The note matures on March 10, 2029 and the balance of the note was $1.9 million and $2.4 million at December 31, 2024 and December 31, 2023, respectively. The note is secured by 100% of the stock of the Company and requires the Company to comply with certain loan covenants during the term of the note.
At December 31, 2023 and December 31, 2022, the Bank's capital ratios were in excess of the requirement to be "well capitalized" under the regulatory guidelines. 51 Table of Contents As of the dates indicated, the Bank met all capital adequacy requirements to which it is subject.
At December 31, 2024 and December 31, 2023, the Bank's capital ratios were in excess of the requirement to be "well capitalized" under the regulatory guidelines. As of the dates indicated, the Bank met all capital adequacy requirements to which it is subject.
Management believes that the critical 34 Table of Contents accounting policies and estimates listed below require the Company to make difficult, subjective or complex judgments about matters that are inherently uncertain.
Management believes that the critical accounting policies and estimates listed below require the Company to make difficult, subjective or complex judgments about matters that are inherently uncertain.
Net interest margin including discontinued operations decreased to 3.78% for the year ended December 31, 2023 , compared to 3.97% for the year ended December 31, 2022 . 38 Table of Contents Average Balance Sheet and Analysis of Net Interest Income The following table sets forth, for the periods indicated, information regarding: (i) the total dollar amount of interest and dividend income of BayFirst from interest-earning assets and the resultant average yields; (ii) the total dollar amount of interest expense on interest-bearing liabilities and the resultant average cost; (iii) net interest income; (iv) interest rate spread; (v) net interest margin; and (vi) ratio of average interest-earning assets to average interest-bearing liabilities.
Net interest margin decreased to 3.45% for the year ended December 31, 2024, compared to 3.78% for the year ended December 31, 2023 . 36 Table of Contents Average Balance Sheet and Analysis of Net Interest Income The following table sets forth, for the periods indicated, information regarding: (i) the total dollar amount of interest and dividend income of BayFirst from interest-earning assets and the resultant average yields; (ii) the total dollar amount of interest expense on interest-bearing liabilities and the resultant average cost; (iii) net interest income; (iv) interest rate spread; (v) net interest margin; and (vi) ratio of average interest-earning assets to average interest-bearing liabilities.
The Bank has no concentration of credit in any industry that represents 10% or more of its loan portfolio. Additionally, the l oan portfolio is well-diversified across major loan types with a low concentration of non owner-occupied commercial real estate loans which makes up 8% of the total portfolio.
The Bank has no concentration of credit in any industry that represents 10% or more of its loan portfolio. Additionally, the l oan portfolio is well-diversified across major loan types with a low concentration of non owner-occupied commercial real estate loans which makes up 7% of the total portfolio. The following table sets forth the composition of its loan portfolio.
Government-sponsored enterprises $ — — % $ — — % $ — — % $ 2 2.65 % Corporate bonds — — 4,000 5.79 1,000 4.38 — — Total investment securities held to maturity $ — — % $ 4,000 5.79 % $ 1,000 4.38 % $ 2 2.65 % Loan Portfolio Composition The Company offers a variety of products designed to meet the credit needs of our borrowers.
Government-sponsored enterprises $ — — % $ — — % $ — — % $ 1 4.30 % Corporate bonds — — 1,500 4.38 1,000 4.38 — — Total investment securities held to maturity $ — — % $ 1,500 4.38 % $ 1,000 4.38 % $ 1 4.30 % Loan Portfolio Composition The Company offers a variety of products designed to meet the credit needs of our borrowers.
The Company's ability to accept or renew brokered deposits is contingent upon the Bank maintaining a capital level of "well capitalized." At December 31, 2023 and December 31, 2022, the Company had $30.0 million and $746 thousand, respectively, of brokered deposits.
The Company's ability to accept or renew brokered deposits is contingent upon the Bank maintaining a capital level of "well capitalized." At December 31, 2024 and December 31, 2023, the Company had $112.1 million and $30.0 million, respectively, of brokered deposits.
BayFirst’s Board of Directors declared a quarterly cash dividend of $22.50 on the Series A Preferred Stock. The dividend was payable March 1, 2024 to shareholders of record as of January 15, 2024. The amount and timing of the dividend is in accordance with the terms of the Series A Preferred Stock. First Quarter Preferred Series B Stock Dividend.
BayFirst’s Board of Directors declared a quarterly cash dividend of $22.50 on the Series A Preferred Stock. The dividend will be payable April 1, 2025 to shareholders of record as of January 15, 2025. The amount and timing of the dividend is in accordance with the terms of the Series A Preferred Stock. First Quarter Preferred Series B Stock Dividend.
Overview The following discussion and analysis presents the financial condition and results of operations on a consolidated basis. However, because the Company conducts all of its material business operations through the Bank, the discussion and analysis relates to activities primarily conducted at the subsidiary level. The following discussion should be read in conjunction with the consolidated financial statements.
However, because the Company conducts all of its material business operations through the Bank, the discussion and analysis relates to activities primarily conducted at the subsidiary level. The following discussion should be read in conjunction with the consolidated financial statements.
BayFirst’s Board of Directors declared a quarterly cash dividend of $20.00 on the Series B Convertible Preferred Stock. The dividend was payable March 1, 2024 to shareholders of record as of January 15, 2024. The amount and timing of the dividend is in accordance with the terms of the Series B Convertible Preferred Stock.
BayFirst’s Board of Directors declared a quarterly cash dividend of $20.00 on the Series B Convertible Preferred Stock. The dividend will be payable April 1, 2025 to shareholders of record as of January 15, 2025. The amount and timing of the dividend is in accordance with the terms of the Series B Convertible Preferred Stock.
Income Taxes Income tax expense from continuing operations was $2.1 million for the year ended December 31, 2023, an increase of $0.6 million from income tax expense of $1.6 million for the year ended December 31, 2022. The increase was primarily due to the increase in pre-tax earnings from continuing operations.
Income Taxes Income tax expense from continuing operations was $4.3 million for the year ended December 31, 2024, an increase from income tax expense of $2.1 million for the year ended December 31, 2023. The increase was primarily due to the increase in pre-tax earnings from continuing operations.
Government-sponsored enterprises $ 1 $ 2 Corporate bonds 2,500 5,000 Total investment securities held to maturity $ 2,501 $ 5,002 There was a $17 thousand ACL on the corporate bonds HTM as of December 31, 2023 and no ACL as of December 31, 2022.
Government-sponsored enterprises $ — $ 1 Corporate bonds 2,500 2,500 Total investment securities held to maturity $ 2,500 $ 2,501 There was a $12 thousand ACL on the corporate bonds HTM as of December 31, 2024 and a $17 thousand ACL on the corporate bonds HTM as of December 31, 2023.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion is an analysis of the results of operations for the fiscal years ended December 31, 2023 and December 31, 2022 and financial condition as of December 31, 2023 and December 31, 2022.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion is an analysis of the results of operations for the year ended December 31, 2024 and December 31, 2023 and financial condition as of December 31, 2024 and December 31, 2023.
First Quarter Preferred Series C Stock Dividend. BayFirst’s Board of Directors declared a quarterly cash dividend of $27.50 on the Series C Cumulative Convertible Preferred Stock. The dividend was payable March 1, 2024 to shareholders of record as of January 15, 2024.
First Quarter Preferred Series C Stock Dividend. BayFirst’s Board of Directors declared a quarterly cash dividend of $27.50 on the Series C Cumulative Convertible Preferred Stock. The dividend will be payable April 1, 2025 to shareholders of record as of January 15, 2025.
At December 31, 2023 and December 31, 2022, ACL for off-balance sheet loan commitments totaled $839 thousand and $511 thousand, respectively. Contractual Obligations In the ordinary course of its operations, the Company enters into certain contractual obligations. Total contractual obligations at December 31, 2023 were $280.7 million, an increase of $105.8 million from $174.9 million at December 31, 2022.
At December 31, 2024 and December 31, 2023, ACL for off-balance sheet loan commitments totaled $516 thousand and $839 thousand, respectively. Contractual Obligations In the ordinary course of its operations, the Company enters into certain contractual obligations. Total contractual obligations at December 31, 2024 were $341.7 million, an increase from $280.7 million at December 31, 2023.
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.
(2) Annualized (3) Excludes loans measured at fair value . `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.
The following table sets forth certain information on nonaccrual loans and foreclosed assets, the ratio of such loans and foreclosed assets to total assets as of the dates indicated, and certain other related information.
The following table sets forth certain information on nonaccrual loans, loans 90 days or more past due, and foreclosed assets, the ratio of such loans and foreclosed assets to total assets as of the dates indicated, and certain other related information.
As a one-bank holding company, the Company generates most of its revenue from interest on loans and gain-on-sale income derived from the sale of government guaranteed loans into the secondary market. The primary source of funding for its loans is deposits.
As a one-bank holding company, the Company generates most of its revenue from interest on loans and gain on sale income derived from the sale of government guaranteed loans into the secondary market. The primary sources of funding for its loans are loan sales, loan payments, deposits, and borrowings.
A summary of the amounts of the Bank’s financial instruments, with off-balance sheet risk as of the dates indicated, is as follows: (Dollars in thousands) December 31, 2023 December 31, 2022 Unfunded loan commitments $ 7,392 $ 23,512 Unused lines of credit 178,440 134,366 Standby letters of credit 186 244 Total $ 186,018 $ 158,122 Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.
A summary of the amounts of the Bank’s financial instruments, with off-balance sheet risk as of the dates indicated, was as follows: (Dollars in thousands) December 31, 2024 December 31, 2023 Unfunded loan commitments $ 21,174 $ 7,392 Unused lines of credit 199,411 178,440 Standby letters of credit 276 186 Total $ 220,861 $ 186,018 Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.
Government-sponsored enterprises $ — — % $ — — % $ — — % $ 1 4.30 % Corporate bonds — — 1,500 4.38 1,000 4.38 — — Total investment securities held to maturity $ — — % $ 1,500 4.38 % $ 1,000 4.38 % $ 1 4.30 % December 31, 2022 One year or less One to five years Five to ten years After ten years (Dollars in thousands) Amortized Cost Average Yield Amortized Cost Average Yield Amortized Cost Average Yield Amortized Cost Average Yield Mortgage-backed securities: U.S.
December 31, 2024 One year or less One to five years Five to ten years After ten years (Dollars in thousands) Amortized Cost Average Yield Amortized Cost Average Yield Amortized Cost Average Yield Amortized Cost Average Yield Corporate bonds $ — — % $ 1,500 4.38 % $ 1,000 4.38 % $ — — % Total investment securities held to maturity $ — — % $ 1,500 4.38 % $ 1,000 4.38 % $ — — % 41 Table of Contents December 31, 2023 One year or less One to five years Five to ten years After ten years (Dollars in thousands) Amortized Cost Average Yield Amortized Cost Average Yield Amortized Cost Average Yield Amortized Cost Average Yield Mortgage-backed securities: U.S.
FRB, FHLB, and FNBB restricted equity holdings are included in other interest-earning assets. The Company did not have a significant amount of tax-exempt assets. (Dollars in thousands) Rate Volume Total Year Ended December 31, 2023 vs.
Loans in nonaccrual status, for the purpose of the following computations, are included in the average loan balances. FRB, FHLB, and FNBB restricted equity holdings are included in other interest-earning assets. The Company did not have a significant amount of tax-exempt assets. (Dollars in thousands) Rate Volume Total Year Ended December 31, 2024 vs.
T he Company recorded a provision for credit losses for the year ended December 31, 2023 of $10.4 million compared to a $0.7 million negative provision under the incurred loss methodology for the year ended December 31, 2022.
T he Company recorded a provision for credit losses for the year ended December 31, 2024 of $14.7 million compared to a $10.4 million provision for the year ended December 31, 2023.
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 (Unaudited) As of (Dollars in thousands, except for share data) December 31, 2023 September 30, 2023 December 31, 2022 Total shareholders’ equity $ 100,707 $ 94,165 $ 91,884 Less: Preferred stock liquidation preference (16,051) (11,440) (9,605) Total equity available to common shareholders 84,656 82,725 82,279 Less: Goodwill — — — Tangible common shareholders' equity $ 84,656 $ 82,725 $ 82,279 Common shares outstanding 4,110,470 4,110,650 4,042,474 Tangible book value per common share $ 20.60 $ 20.12 $ 20.35 Application of Critical Accounting Policies and Estimates The preparation of consolidated financial statements in accordance with GAAP requires the Company to make estimates and judgments that affect reported amounts of assets, liabilities, income and expenses and related disclosure of contingent assets and liabilities.
The following presents these non-GAAP financial measures calculated in accordance with GAAP: Tangible Common Shareholders' Equity and Tangible Book Value Per Common Share (Unaudited) As of (Dollars in thousands, except for share data) December 31, 2024 September 30, 2024 December 31, 2023 Total shareholders’ equity $ 110,920 $ 102,293 $ 100,707 Less: Preferred stock liquidation preference (16,051) (16,051) (16,051) Total equity available to common shareholders 94,869 86,242 84,656 Less: Goodwill — — — Tangible common shareholders' equity $ 94,869 $ 86,242 $ 84,656 Common shares outstanding 4,132,986 4,134,059 4,110,470 Tangible book value per common share $ 22.95 $ 20.86 $ 20.60 Application of Critical Accounting Policies and Estimates The preparation of consolidated financial statements in accordance with GAAP requires the Company to make estimates and judgments that affect reported amounts of assets, liabilities, income and expenses and related disclosure of contingent assets and liabilities.
December 31, 2023 One year or less One to five years Five to ten years After ten years (Dollars in thousands) Amortized Cost Average Yield Amortized Cost Average Yield Amortized Cost Average Yield Amortized Cost Average Yield Mortgage-backed securities: U.S.
December 31, 2024 One year or less One to five years Five to ten years After ten years (Dollars in thousands) Amortized Cost Average Yield Amortized Cost Average Yield Amortized Cost Average Yield Amortized Cost Average Yield Asset-backed securities $ — — % $ — — % $ 1,804 5.10 % $ 3,225 5.72 % Mortgage-backed securities: U.S.
On January 23, 2024, BayFirst’s Board of Directors declared a first quarter 2024 cash dividend of $0.08 per common share, payable March 15, 2024 to common shareholders of record as of March 1, 2024. This dividend marks the 31 st consecutive quarterly cash dividend paid since BayFirst initiated cash dividends in 2016. First Quarter Preferred Series A Stock Dividend.
On January 28, 2025, BayFirst’s Board of Directors declared a first quarter 2025 cash dividend of $0.08 per common share, payable March 15, 2025 to common shareholders of record as of March 1, 2025. The Company has continuously paid quarterly common stock cash dividends since 2016. First Quarter Preferred Series A Stock Dividend.
This may make the Company’s financial statements not comparable with those of public companies which are neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period because of the potential differences in accounting standards used.
This may make the Company’s financial statements not comparable with those of public companies which are neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period because of the potential differences in accounting standards used. 34 Table of Contents Overview The following discussion and analysis presents the financial condition and results of operations on a consolidated basis.
Rate/Volume Analysis The table below presents the effects of volume and rate changes on interest income and expense for the periods indicated. Changes in volume are changes in the average balance multiplied by the previous period’s average rate. Changes in rate are changes in the average rate multiplied by the average balance from the previous period.
(3) Net interest margin represents net interest income divided by average total interest-earning assets. 37 Table of Contents Rate/Volume Analysis The table below presents the effects of volume and rate changes on interest income and expense for the periods indicated. Changes in volume are changes in the average balance multiplied by the previous period’s average rate.
Net Income For the year ended 2023, net income was $5.7 million, or $1.12 per diluted common share, an increase of $6.0 million from the net loss of $0.3 million , or $0.22 per diluted common share, for the year ended 2022.
Net Income For the year ended December 31, 2024, net income was $12.6 million, or $2.68 per common share, or $2.62 per diluted common share, an increase from net income of $5.7 million, or $1.16 per common share, or $1.12 per diluted common share, for the year ended December 31, 2023.
In addition to this, the Company uses reasonable and supportable forecasts utilizing data from the FOMC’s median forecasts of change in national GDP and of national unemployment. Provisions for credit losses are provided on both a specific and general basis.
In addition to this, t he Company uses reasonable and supportable forecasts that are developed with internal and external data. These 43 Table of Contents are updated quarterly by management and utilize data from the FOMC’s median forecasts of change in national GDP and of national unemployment. Provisions for credit losses are provided on both a specific and general basis.
For the Year Ended December 31, (Dollars in thousands) 2023 2022 Noninterest income: Loan servicing income, net $ 2,826 $ 2,040 Gain on sale of government guaranteed loans, net 24,553 21,720 Service charges and fees 1,721 1,306 Government guaranteed loan fair value gain 15,718 4,756 Government guaranteed loan packaging fees 3,664 774 Other noninterest income 1,273 954 Total noninterest income $ 49,755 $ 31,550 Noninterest income from continuing operations was $49.8 million for the year ended December 31, 2023, an increase of $18.2 million or 57.7% from $31.6 million for the year ended December 31, 2022.
For the Year Ended December 31, (Dollars in thousands) 2024 2023 Noninterest income: Loan servicing income, net $ 3,100 $ 2,826 Gain on sale of government guaranteed loans, net 28,252 24,553 Service charges and fees 1,794 1,721 Government guaranteed loan fair value gain 9,843 15,718 Government guaranteed loan packaging fees 4,105 3,664 Gain on sale of premises and equipment 11,649 — Other noninterest income 1,726 1,273 Total noninterest income $ 60,469 $ 49,755 Noninterest income from continuing operations was $60.5 million for the year ended December 31, 2024, an increase from $49.8 million for the year ended December 31, 2023.
The Bank’s actual capital amounts and percentages are as shown in the table below: Actual Minimum (1) Well Capitalized (2) (Dollars in thousands) Amount Percent Amount Percent Amount Percent As of December 31, 2023 Total Capital (to risk-weighted assets) $ 114,256 13.03 % $ 70,169 8.00 % $ 87,711 10.00 % Tier 1 Capital (to risk-weighted assets) 103,274 11.77 52,627 6.00 70,169 8.00 Common Equity Tier 1 Capital (to risk-weighted assets) 103,274 11.77 39,470 4.50 57,012 6.50 Tier 1 Capital (to total assets) 103,274 9.38 44,024 4.00 55,030 5.00 As of December 31, 2022 Total Capital (to risk-weighted assets) 108,307 15.00 57,767 8.00 72,209 10.00 Tier 1 Capital (to risk-weighted assets) 99,269 13.75 43,325 6.00 57,767 8.00 Common Equity Tier 1 Capital (to risk-weighted assets) 99,269 13.75 32,494 4.50 46,936 6.50 Tier 1 Capital (to total assets) 99,269 10.79 36,816 4.00 46,020 5.00 (1) Minimum to be considered “adequately capitalized” under Basel III Capital Adequacy.
The Bank’s actual capital amounts and percentages were as shown in the table below: Actual Minimum (1) Well Capitalized (2) (Dollars in thousands) Amount Percent Amount Percent Amount Percent As of December 31, 2024 Total Capital (to risk-weighted assets) $ 124,420 12.14 % $ 81,985 8.00 % $ 102,482 10.00 % Tier 1 Capital (to risk-weighted assets) 111,586 10.89 61,489 6.00 81,985 8.00 Common Equity Tier 1 Capital (to risk-weighted assets) 111,586 10.89 46,117 4.50 66,613 6.50 Tier 1 Capital (to total assets) 111,586 8.82 50,579 4.00 63,224 5.00 As of December 31, 2023 Total Capital (to risk-weighted assets) 114,256 13.03 70,169 8.00 87,711 10.00 Tier 1 Capital (to risk-weighted assets) 103,274 11.77 52,627 6.00 70,169 8.00 Common Equity Tier 1 Capital (to risk-weighted assets) 103,274 11.77 39,470 4.50 57,012 6.50 Tier 1 Capital (to total assets) 103,274 9.38 44,024 4.00 55,030 5.00 (1) Minimum to be considered “adequately capitalized” under Basel III Capital Adequacy.
These financial commitments include withdrawals by depositors, credit commitments to borrowers, expenses of the operations, and capital expenditures. The Bank generally maintains a liquidity ratio of liquid assets to total assets of at least 7.0%. Liquid assets include cash and due from banks, federal funds sold, interest-bearing deposits with banks and unencumbered investment securities available for sale.
These financial commitments include withdrawals by depositors, credit commitments to borrowers, expenses of the operations, and capital expenditures. The Bank generally maintains a minimum liquidity ratio of liquid assets to total assets of at least 7.0%.
(Dollars in thousands) December 31, 2023 December 31, 2022 Nonperforming loans (government guaranteed balances), at amortized cost, gross $ 1,424 $ 6,797 Nonperforming loans (unguaranteed balances), at amortized cost, gross 8,264 3,671 Total nonperforming loans, at amortized cost, gross 9,688 10,468 Nonperforming loans (government guaranteed balances), at fair value — — Nonperforming loans (unguaranteed balances), at fair value 648 — Total nonperforming loans, at fair value 648 — OREO — 56 Total nonperforming assets, gross $ 10,336 $ 10,524 Nonperforming loans as a percentage of total loans HFI (1) 1.18 % 1.49 % Nonperforming loans (excluding government guaranteed balances) to total loans HFI (1) 1.00 % 0.52 % Nonperforming assets as a percentage of total assets 0.92 % 1.12 % Nonperforming assets (excluding government guaranteed balances) to total assets 0.74 % 0.40 % ACL to nonperforming loans (1) 139.32 % 86.42 % ACL to nonperforming loans (excluding government guaranteed balances) (1) 163.32 % 246.42 % (1) Excludes loans accounted for at fair value 47 Table of Contents The following table sets forth information with respect to activity in the ACL for loans for the periods shown: (Dollars in thousands) At and for the Year Ended December 31, 2023 2022 Allowance at beginning of period $ 9,046 $ 13,452 Impact of adopting ASC 326 3,107 — Charge-offs: Commercial real estate (108) (42) Commercial and industrial (6,240) (3,632) Commercial and industrial - PPP (223) — Consumer and other (3,280) (669) Total charge-offs (9,851) (4,343) Recoveries: Commercial real estate 87 80 Commercial and industrial 435 503 Consumer and other 334 54 Total recoveries 864 637 Net charge-offs (8,987) (3,706) Provision for credit losses 10,331 (700) Allowance at end of period $ 13,497 $ 9,046 Net charge-offs to average loans HFI at amortized cost 1.17 % 0.60 % Allowance as a percent of total loans HFI at amortized cost 1.64 % 1.29 % Allowance as a percent of loans HFI at amortized cost, not including government guaranteed loans 2.03 % 1.62 % Allowance as a percent of nonperforming loans at amortized cost, gross 139.32 % 86.42 % Total loans HFI $ 915,726 $ 728,652 Average loans HFI at amortized cost $ 770,793 $ 620,267 Nonperforming loans (including government guaranteed balances) at amortized cost, gross $ 9,688 $ 10,468 Nonperforming loans (excluding government guaranteed balances) at amortized cost, gross $ 8,264 $ 3,671 Guaranteed balance of government guaranteed loans $ 217,620 $ 158,760 The following table details net charge-offs to average loans outstanding by loan category for the years ended December 31, 2023 and December 31, 2022.
(Dollars in thousands) December 31, 2024 December 31, 2023 Nonperforming loans (government guaranteed balances), at amortized cost, gross $ 4,037 $ 1,424 Nonperforming loans (unguaranteed balances), at amortized cost, gross 13,570 8,264 Total nonperforming loans, at amortized cost, gross 17,607 9,688 Nonperforming loans (government guaranteed balances), at fair value — — Nonperforming loans (unguaranteed balances), at fair value 1,490 648 Total nonperforming loans, at fair value 1,490 648 OREO 132 — Repossessed assets 36 — Total nonperforming assets, gross $ 19,265 $ 10,336 Nonperforming loans as a percentage of total loans HFI (1) 1.75 % 1.18 % Nonperforming loans (excluding government guaranteed balances) to total loans HFI (1) 1.35 % 1.00 % Nonperforming assets as a percentage of total assets 1.50 % 0.92 % Nonperforming assets (excluding government guaranteed balances) to total assets 1.06 % 0.74 % ACL to nonperforming loans (1) 88.10 % 139.32 % ACL to nonperforming loans (excluding government guaranteed balances) (1) 114.31 % 163.32 % (1) Excludes loans measured at fair value 44 Table of Contents The following table sets forth information with respect to activity in the ACL for loans for the periods shown: (Dollars in thousands) At and for the Year Ended December 31, 2024 2023 Allowance at beginning of period $ 13,497 $ 9,046 Impact of adopting ASC 326 — 3,107 Charge-offs: Residential real estate (20) — Commercial real estate (60) (108) Commercial and industrial (10,956) (6,240) Commercial and industrial - PPP — (223) Consumer and other (2,938) (3,280) Total charge-offs (13,974) (9,851) Recoveries: Residential real estate 1 8 Commercial real estate 7 87 Commercial and industrial 606 435 Consumer and other 321 334 Total recoveries 935 864 Net charge-offs (13,039) (8,987) Provision for credit losses on loans 15,054 10,331 Allowance at end of period $ 15,512 $ 13,497 Net charge-offs to average loans HFI at amortized cost 1.40 % 1.17 % Allowance as a percent of total loans HFI at amortized cost 1.54 % 1.64 % Allowance as a percent of loans HFI at amortized cost, not including government guaranteed loans 1.79 % 2.03 % Allowance as a percent of nonperforming loans at amortized cost, gross 88.10 % 139.32 % Total loans HFI $ 1,066,559 $ 915,726 Average loans HFI at amortized cost $ 928,814 $ 770,793 Nonperforming loans (including government guaranteed balances) at amortized cost, gross $ 17,607 $ 9,688 Nonperforming loans (excluding government guaranteed balances) at amortized cost, gross $ 13,570 $ 8,264 Guaranteed balance of government guaranteed loans $ 149,484 $ 229,662 45 Table of Contents The following table details net charge-offs to average loans outstanding by loan category for the year ended December 31, 2024 and December 31, 2023.
Contractual Obligations as of December 31, 2023 (Dollars in thousands) Less than One Year One to Three Years Three to Five Years Over Five Years Total Operating lease obligations $ 1,105 $ 1,861 $ 413 $ — $ 3,379 Short-term borrowings 10,000 — — — 10,000 Long-term borrowings 456 912 912 109 2,389 Subordinated notes — — — 5,949 5,949 Time deposits 173,887 84,552 569 — 259,008 Total $ 185,448 $ 87,325 $ 1,894 $ 6,058 $ 280,725 Contractual Obligations as of December 31, 2022 (Dollars in thousands) Less than One Year One to Three Years Three to Five Years Over Five Years Total Operating lease obligations $ 1,450 $ 2,267 $ 1,245 $ — $ 4,962 Short-term borrowings 25,000 — — — 25,000 Long-term borrowings 456 912 912 564 2,844 Subordinated notes 50 — — 5,942 5,992 Time deposits 120,240 15,587 299 — 136,126 Total $ 146,740 $ 17,854 $ 1,544 $ 8,786 $ 174,924 Liquidity Liquidity management is the process by which the Bank manages the flow of funds necessary to meet its financial commitments on a timely basis and at a reasonable cost to take advantage of earnings enhancement opportunities.
Contractual Obligations as of December 31, 2024 (Dollars in thousands) Less than One Year One to Three Years Three to Five Years Over Five Years Total Operating lease obligations $ 2,032 $ 3,870 $ 2,653 $ 14,960 $ 23,515 Short-term borrowings — — — — — Long-term borrowings 456 912 566 — 1,934 Subordinated notes — — — 5,956 5,956 Time deposits 279,253 28,803 2,212 — 310,268 Total $ 281,741 $ 33,585 $ 5,431 $ 20,916 $ 341,673 Contractual Obligations as of December 31, 2023 (Dollars in thousands) Less than One Year One to Three Years Three to Five Years Over Five Years Total Operating lease obligations $ 1,105 $ 1,861 $ 413 $ — $ 3,379 Short-term borrowings 10,000 — — — 10,000 Long-term borrowings 456 912 912 109 2,389 Subordinated notes — — — 5,949 5,949 Time deposits 173,887 84,552 569 — 259,008 Total $ 185,448 $ 87,325 $ 1,894 $ 6,058 $ 280,725 Liquidity Liquidity management is the process by which the Bank manages the flow of funds necessary to meet its financial commitments on a timely basis and at a reasonable cost to take advantage of earnings enhancement opportunities.
For the Year Ended December 31, (Dollars in thousands) 2023 2022 Noninterest expense: Salaries and benefits $ 30,973 $ 27,422 Bonus, commissions, and incentives 5,726 2,394 Occupancy and equipment 4,758 3,995 Data processing 5,611 4,828 Marketing and business development 3,336 2,660 Professional services 3,657 4,083 Loan origination and collection 7,425 3,711 Employee recruiting and development 2,177 2,230 Regulatory assessments 881 457 Director compensation 575 686 Liability and fidelity bond insurance 546 463 ATM and interchange 534 381 Telecommunication 387 367 Other noninterest expense 1,121 1,535 Total noninterest expense $ 67,707 $ 55,212 41 Table of Contents Noninterest expense was $67.7 million during the year ended December 31, 2023, an increase of $12.5 million or 22.6% from $55.2 million for the year ended December 31, 2022.
For the Year Ended December 31, (Dollars in thousands) 2024 2023 Noninterest expense: Salaries and benefits $ 31,063 $ 30,973 Bonus, commissions, and incentives 4,445 5,726 Occupancy and equipment 4,848 4,758 Data processing 6,745 5,611 Marketing and business development 2,050 3,336 Professional services 3,882 3,657 Loan origination and collection 6,391 7,425 Employee recruiting and development 2,186 2,177 Regulatory assessments 1,249 881 Director compensation 574 575 Liability and fidelity bond insurance 563 546 ATM and interchange 532 534 Telecommunication 486 387 Other noninterest expense 1,768 1,121 Total noninterest expense $ 66,782 $ 67,707 39 Table of Contents Noninterest expense was $66.8 million for the year ended December 31, 2024, a decrease from $67.7 million for the year ended December 31, 2023 .
At December 31, 2023, the Company had $1.8 million of federal net operating loss carryforward and $0.4 million of state net operating loss carryforward. The net operating loss carryforwards do not expire. At December 31, 2022, the Company had $2.2 million of federal net operating loss carryforward and $0.4 million of state net operating loss carryforward.
At December 31, 2023, the Company had $1.8 million of federal net operating loss carryforward and $0.4 million of state net operating loss carryforward. The net operating loss carryforwards do not expire. The effective income tax rate was 25.40% for the year ended December 31, 2024 and 26.44% for the year ended December 31, 2023.
As a result of the accounting change, equity was reduced by $2.5 million. The Company strives to maintain an adequate capital base to support its activities in a safe and sound manner while at the same time attempting to maximize shareholder value.
The Company strives to maintain an adequate capital base to support its activities in a safe and sound manner while at the same time maximizing shareholder value.
The amount of each of the following categories of deposits, at the dates indicated, are as follows: (Dollars in thousands) December 31, 2023 December 31, 2022 Noninterest-bearing deposits $ 93,708 9.5 % $ 93,235 11.8 % Interest-bearing transaction accounts 259,422 26.3 202,656 25.5 Money market accounts 355,946 36.2 345,200 43.4 Savings 17,054 1.7 17,853 2.2 Subtotal 726,130 73.7 658,944 82.9 Total time deposits 259,008 26.3 136,126 17.1 Total deposits $ 985,138 100.0 % $ 795,070 100.0 % At December 31, 2023, the Company held approximately $162.3 million of deposits that exceeded the FDIC insurance limit which was 16% of total deposits.
The amount of each of the following categories of deposits, at the dates indicated, are as follows: (Dollars in thousands) December 31, 2024 December 31, 2023 Noninterest-bearing deposit accounts $ 101,743 8.9 % $ 93,708 9.5 % Interest-bearing transaction accounts 256,793 22.5 259,422 26.3 Money market accounts 455,519 39.8 355,946 36.2 Savings accounts 18,906 1.7 17,054 1.7 Subtotal 832,961 72.9 726,130 73.7 Total time deposits 310,268 27.1 259,008 26.3 Total deposits $ 1,143,229 100.0 % $ 985,138 100.0 % 47 Table of Contents At December 31, 2024, the Company held approximately $213.4 million of deposits that exceeded the FDIC insurance limit which was 19% of total deposits.
(Dollars in thousands) At and for the Year Ended December 31, Government Guaranteed, Excluding PPP 2023 2022 Number of loans originated 2,817 1,364 Amount of loans originated $ 547,469 $ 386,024 Average loan size originated $ 194 $ 283 Government guaranteed loan balances sold $ 437,935 $ 311,783 Government unguaranteed loan balances sold $ 13,669 $ 13,803 Total government guaranteed loans $ 395,877 $ 300,219 Government guaranteed loan balances $ 214,418 $ 139,587 Government unguaranteed loan balances $ 181,459 $ 160,632 Government guaranteed loans serviced for others $ 855,756 $ 660,600 The Bank makes government guaranteed loans throughout the United States.
(Dollars in thousands) At and for the Year Ended December 31, Government Guaranteed, Excluding PPP 2024 2023 Number of loans originated 2,508 2,817 Amount of loans originated $ 431,375 $ 547,469 Average loan size originated $ 172 $ 194 Government guaranteed loan balances sold $ 385,342 $ 437,935 Government unguaranteed loan balances sold $ — $ 13,669 Total government guaranteed loan balances: Guaranteed portion of government guaranteed loan balances $ 148,543 $ 214,418 Unguaranteed portion of government guaranteed loan balances $ 277,420 $ 181,459 Total government guaranteed loans $ 425,963 $ 395,877 Government guaranteed loans serviced for others $ 1,056,665 $ 855,756 46 Table of Contents The Bank makes government guaranteed loans throughout the United States.
At December 31, 2023, the Company had $8.3 million in nonperforming assets, excluding government guaranteed loan balances, and their ACL represented 1.64% of total loans HFI at amortized cost.
At December 31, 2023, the Company had $8.9 million in nonperforming assets, excluding government guaranteed loan balances, and the ACL represented 1.64% of total loans HFI at amortized cost. The increase in nonperforming assets was partially the result of a nonaccrual loan for $2.7 million that is fully secured and there was no ACL allocated.
Shareholders' equity increase d $8.8 million to $100.7 million at December 31, 2023 as compared to $91.9 million at December 31, 2022. The increase was primarily due to net income of $5.7 million and the issuance of preferred stock of $6.4 million. This was partially offset by the implementation of the new credit loss accounting standard.
Shareholders' equity was $110.9 million at December 31, 2024 as compared to $100.7 million at December 31, 2023. The increase was primarily due to net income of $12.6 million, partially offset by common stock dividends of $1.3 million and preferred stock dividends of $1.5 million.
Government-sponsored enterprises — — — — — — 4,133 1.55 Collateralized mortgage obligations: U.S.
Government-sponsored enterprises — — — — 4,463 4.63 3,328 1.25 Collateralized mortgage obligations: U.S.
Government-sponsored enterprises — — — — — — 20,382 1.82 Corporate bonds — — 11,332 6.23 — — — — Total investment securities available for sale $ — — % $ 11,332 6.23 % $ — — % $ 32,265 2.90 % 43 Table of Contents December 31, 2022 One year or less One to five years Five to ten years After ten years (Dollars in thousands) Amortized Cost Average Yield Amortized Cost Average Yield Amortized Cost Average Yield Amortized Cost Average Yield Asset-backed securities $ — — % $ — — % $ — — % $ 9,873 5.40 % Mortgage-backed securities: U.S.
Government-sponsored enterprises — — — — — — 18,627 1.82 Corporate bonds — — 8,832 5.58 — — — — Total investment securities available for sale $ — — % $ 8,832 5.58 % $ 6,267 4.76 % $ 25,180 2.25 % December 31, 2023 One year or less One to five years Five to ten years After ten years (Dollars in thousands) Amortized Cost Average Yield Amortized Cost Average Yield Amortized Cost Average Yield Amortized Cost Average Yield Asset-backed securities $ — — % $ — — % $ — — % $ 8,041 6.25 % Mortgage-backed securities: U.S.
December 31, 2023 2022 (Dollars in thousands) Amount % of Total Amount % of Total Florida $ 123,418 31 % $ 91,760 31 % California 45,661 12 35,365 12 Tennessee 32,185 8 22,378 7 Texas 24,861 6 19,598 7 All Other 169,752 43 131,118 43 Total government guaranteed loans, excluding PPP loans $ 395,877 100 % $ 300,219 100 % Deposits General.
December 31, 2024 2023 (Dollars in thousands) Amount % of Total Amount % of Total Florida $ 142,711 34 % $ 123,418 31 % California 48,464 11 45,661 12 Tennessee 28,926 7 32,185 8 Texas 30,238 7 24,861 6 All Other 175,624 41 169,752 43 Total government guaranteed loans, excluding PPP loans $ 425,963 100 % $ 395,877 100 % Deposits General.
Government-sponsored enterprises — — — — — — 22,031 1.89 Corporate bonds — — 9,981 3.70 1,356 4.34 — — Total investment securities available for sale $ — — % $ 9,981 3.70 % $ 1,356 4.34 % $ 36,037 2.81 % The investment securities held to maturity presented in the following tables are reported at amortized cost and by contractual maturity as of December 31, 2023 and December 31, 2022.
Government-sponsored enterprises — — — — — — 20,382 1.82 Corporate bonds — — 11,332 6.23 — — — — Total investment securities available for sale $ — — % $ 11,332 6.23 % $ — — % $ 32,265 2.90 % The investment securities held to maturity presented in the following tables are reported at amortized cost and by contractual maturity as of December 31, 2024 and December 31, 2023.
The Company measures its performance through its net interest income after provision for credit losses, return on average assets, and return on average common equity, while maintaining appropriate regulatory leverage and risk-based capital ratios. Recent Developments Preferred Stock Offering. On September 30, 2023, the Company issued 1,835 shares of 11.0% Series C Cumulative Convertible Preferred Stock.
The Company measures its performance through its net interest income after provision for credit losses, return on average assets, and return on average common equity, while maintaining appropriate regulatory leverage and risk-based capital ratios. Recent Developments Share Repurchase Program. The Company announced that its Board of Directors adopted a share repurchase program.
BayFirst’s liquidity needs are to make interest payments on its debt obligations, dividends on shares of its Series A Preferred Stock, Series B Convertible Preferred Stock, Series C Cumulative Convertible Preferred Stock, and common stock, and payment of certain operating expenses. As of December 31, 2023, BayFirst Financial Corp. held $954 thousand in cash and cash equivalents.
For the year ended 2024, the Bank paid dividends of $3.80 million to BayFirst in order to meet liquidity needs to make interest payments on its debt obligations, dividends on shares of its preferred stock and common stock, and payment of operating expenses. As of December 31, 2024, BayFirst Financial Corp. held $479 thousand in cash and cash equivalents.
For the Year Ended December 31, 2023 2022 (Dollars in thousands) Average Balance Interest Yield Average Balance Interest Yield Interest-earning assets: Investment securities $ 44,108 $ 1,847 4.19 % $ 43,768 $ 1,065 2.43 % Loans, excluding PPP (1) (2) 829,054 62,924 7.59 667,088 38,280 5.74 PPP loans 16,181 266 1.64 39,959 959 2.40 Other 74,905 3,481 4.65 73,867 1,009 1.37 Total interest-earning assets 964,248 68,518 7.11 824,682 41,313 5.01 Noninterest-earning assets 93,876 79,864 Total assets $ 1,058,124 $ 904,546 Interest-bearing liabilities: NOW, MMDA and savings $ 617,467 $ 21,817 3.53 $ 602,491 $ 6,175 1.02 Time deposits 206,978 8,978 4.34 72,603 1,669 2.30 PPPLF advances — — — 5,667 20 0.35 Other borrowings 28,130 1,291 4.59 22,708 702 3.09 Total interest-bearing liabilities 852,575 32,086 3.76 703,469 8,566 1.22 Demand deposits 101,740 101,193 Noninterest-bearing liabilities 12,262 7,690 Shareholders’ equity 91,547 92,194 Total liabilities and shareholders’ equity $ 1,058,124 $ 904,546 Net interest income $ 36,432 $ 32,747 Interest rate spread 3.35 3.79 Net interest margin (3) 3.78 3.97 Ratio of average interest-earning assets to average interest-bearing liabilities 113.10 % 117.23 % (1) Includes nonaccrual loans.
For the Year Ended December 31, 2024 2023 (Dollars in thousands) Average Balance Interest Yield Average Balance Interest Yield Interest-earning assets: Investment securities $ 41,509 $ 1,659 4.00 % $ 44,108 $ 1,847 4.19 % Loans, excluding PPP (1) (2) 1,007,027 78,808 7.83 829,054 62,924 7.59 PPP loans 2,326 23 0.99 16,181 266 1.64 Other 51,760 2,320 4.48 74,905 3,481 4.65 Total interest-earning assets 1,102,622 82,810 7.51 964,248 68,518 7.11 Noninterest-earning assets 99,198 93,876 Total assets $ 1,201,820 $ 1,058,124 Interest-bearing liabilities: NOW, MMDA and savings $ 669,941 $ 27,934 4.17 $ 617,467 $ 21,817 3.53 Time deposits 285,957 14,938 5.22 206,978 8,978 4.34 Other borrowings 35,728 1,912 5.35 28,130 1,291 4.59 Total interest-bearing liabilities 991,626 44,784 4.52 852,575 32,086 3.76 Demand deposits 95,507 101,740 Noninterest-bearing liabilities 12,462 12,262 Shareholders’ equity 102,225 91,547 Total liabilities and shareholders’ equity $ 1,201,820 $ 1,058,124 Net interest income $ 38,026 $ 36,432 Interest rate spread 2.99 3.35 Net interest margin (3) 3.45 3.78 Ratio of average interest-earning assets to average interest-bearing liabilities 111.19 % 113.10 % (1) Includes nonaccrual loans.
The increase was mainly due to an increase in loan interest income, including fees, of $26.7 million, partially offset by an increase in deposit interest expense of $23.0 million.
The increase was mainly due to an increase in loan interest income, including fees, of $15.6 million, partially offset by an increase in interest expense on deposits of $12.1 million and a decrease in interest income on interest-bearing deposit from banks of $1.3 million.
(2) Includes $42 at an average yield of 2.02% and $58,525 at an average yield of 4.69% of residential loans held for sale from discontinued operations as of December 31, 2023 and December 31, 2022, respectively. (3) Net interest margin represents net interest income divided by average total interest-earning assets.
(2) Includes no residential loans held for sale from discontinued operations as of December 31, 2024 and $42 at an average yield of 2.02% as of December 31, 2023.
ACL as a percentage of loans HFI at amortized cost, not including government guaranteed loan balances, was 2.03% under CECL at December 31, 2023, compared to 1.62% under the incurred loss method at December 31, 2022.
Total loans HFI at December 31, 2024 and December 31, 2023 included government guaranteed loans and loans measured at fair value, which had no reserves allocated to them. ACL as a percentage of loans HFI at amortized cost, not including government guaranteed loan balances, was 1.79% at December 31, 2024, compared to 2.03% at December 31, 2023.
Government-sponsored enterprises 17,098 18,220 Corporate bonds 11,308 11,084 Total investment securities available for sale $ 39,575 $ 42,349 The net unrealized loss on the investment securities AFS at December 31, 2023, was $4.0 million compared with a net unrealized loss on investment securities AFS of $5.0 million at December 31, 2022.
Government-sponsored enterprises 7,130 3,236 Collateralized mortgage obligations: U.S. Government-sponsored enterprises 15,286 17,098 Corporate bonds 8,885 11,308 Total investment securities available for sale $ 36,291 $ 39,575 The net unrealized loss on the investment securities AFS at December 31, 2024 and December 31, 2023, was $4.0 million.
(Dollars in thousands) December 31, 2023 December 31, 2022 Investment securities held to maturity: Mortgage-backed securities: U.S.
The following table presents the amortized cost of the Company's investment securities portfolio classified as held to maturity as of December 31, 2024 and December 31, 2023. (Dollars in thousands) December 31, 2024 December 31, 2023 Investment securities held to maturity: Mortgage-backed securities: U.S.
The net unrealized loss on the investment securities HTM at December 31, 2023, was $238 thousand compared with a net unrealized loss on investment securities HTM of $247 thousand at December 31, 2022.
The net unrealized loss on the investment securities HTM at December 31, 2024, was $154 thousand compared with a net unrealized loss on investment securities HTM of $238 thousand at December 31, 2023. 40 Table of Contents No investment securities were pledged as of December 31, 2024 or December 31, 2023, and there were no sales of investment securities for the year ended December 31, 2024 or year ended December 31, 2023.
The net changes attributable to the 39 Table of Contents combined impact of both rate and volume have been allocated proportionately to the changes due to volume and the changes due to rate. Loans in nonaccrual status, for the purpose of the following computations, are included in the average loan balances.
Changes in rate are changes in the average rate multiplied by the average balance from the previous period. The net changes attributable to the combined impact of both rate and volume have been allocated proportionately to the changes due to volume and the changes due to rate.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

9 edited+0 added−2 removed10 unchanged
Biggest changeThe interest rate risk position is measured and monitored at the Bank using net interest income simulation models and economic value of equity sensitivity analysis that captures both short-term and long-term interest-rate risk exposure.
Biggest changeThe interest rate risk position is measured and monitored at the Bank using net interest income simulation models and economic value of equity sensitivity analysis that captures both short-term and long-term interest-rate risk exposure. 51 Table of Contents Modeling the sensitivity of net interest income and the economic value of equity to changes in market interest rates is highly dependent on numerous assumptions incorporated into the modeling process.
December 31, 2023 December 31, 2022 Change in rates Following 12 months Following 24 months Following 12 months Following 24 months +400 basis points 14.7 % 12.8 % 11.0 % 11.9 % +300 basis points 12.7 12.1 9.4 10.5 +200 basis points 7.6 7.4 5.4 6.1 +100 basis points 2.5 2.6 1.3 1.8 -100 basis points (4.5) (4.5) (3.8) (4.4) -200 basis points (9.1) (9.1) (8.3) (9.5) Management strategies may impact future reporting periods, as the actual results may differ from simulated results due to the timing, magnitude, and frequency of interest rate changes, the difference between actual experience and the characteristics assumed, as well as changes in market conditions.
December 31, 2024 December 31, 2023 Change in rates Following 12 months Following 24 months Following 12 months Following 24 months +400 basis points 11.1 % 9.9 % 14.7 % 12.8 % +300 basis points 10.0 9.5 12.7 12.1 +200 basis points 5.9 5.7 7.6 7.4 +100 basis points 1.8 1.9 2.5 2.6 -100 basis points (3.7) (3.7) (4.5) (4.5) -200 basis points (7.7) (7.8) (9.1) (9.1) Management strategies may impact future reporting periods, as the actual results may differ from simulated results due to the timing, magnitude, and frequency of interest rate changes, the difference between actual experience and the characteristics assumed, as well as changes in market conditions.
The models used for these measurements rely on estimates of the potential impact that changes in interest rates may have on the value and prepayment speeds on all components of its loan portfolio, investment portfolio, as well as embedded options and cash flows of other assets and liabilities. Balance sheet growth assumptions are also included in the simulation modeling process.
The models used for these measurements rely on estimates of the potential impact that changes in interest rates may have on the value and prepayment speeds on all components of its loan and investment portfolios, as well as embedded options and cash flows of other assets and liabilities. Balance sheet growth assumptions are also included in the simulation modeling process.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Market Risk and Interest Rate Sensitivity Market risk is the risk of loss from adverse changes in market prices and rates. Market risk arises primarily from interest-rate risk inherent in loan and deposit taking activities. To that end, the Company actively monitors and manages its interest-rate risk exposure.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Market Risk and Interest Rate Sensitivity Market risk is the risk of loss from adverse changes in market prices and rates. Market risk arises primarily from interest-rate risk inherent in lending and deposit taking activities. To that end, the Company actively monitors and manages its interest-rate risk exposure.
Economic value of equity is based on discounting the cash flows for all balance sheet instruments under different interest rate scenarios. The table below presents the change in the economic value of equity as of December 31, 2023 and December 31, 2022, assuming immediate parallel shifts in interest rates.
Economic value of equity is based on discounting the cash flows for all balance sheet instruments under different interest rate scenarios. The table below presents the change in the economic value of equity as of December 31, 2024 and December 31, 2023, assuming immediate parallel shifts in interest rates.
A sudden or substantial increase in interest rates may impact its earnings, to the extent that the interest rates borne by assets and liabilities do not change at the same rate, to the same extent, or on the same basis. The Company established a comprehensive interest rate risk management policy which is administered by management’s Asset-Liability Committee.
A sudden or substantial change in interest rates may impact its earnings, to the extent that the interest rates borne by assets and liabilities do not change at the same rate, to the same extent, or on the same basis. The Company established a comprehensive interest rate risk management policy which is administered by management.
Change in rates December 31, 2023 December 31, 2022 +400 basis points (6.3) % (12.7) % +300 basis points (4.1) (9.5) +200 basis points (3.3) (7.0) +100 basis points (2.7) (4.3) -100 basis points 0.2 2.6 -200 basis points (0.3) 5.0 55 Table of Contents
Change in rates December 31, 2024 December 31, 2023 +400 basis points (5.3) % (6.3) % +300 basis points (2.9) (4.1) +200 basis points (2.5) (3.3) +100 basis points (2.6) (2.7) -100 basis points (0.1) 0.2 -200 basis points (0.4) (0.3) 52 Table of Contents
The analysis provides a framework as to what the overall sensitivity position is as of the most recent reported position and the impact that potential changes in interest rates may have on net interest income and the economic value of its equity. 54 Table of Contents Net interest income simulation involves forecasting net interest income under a variety of interest rate scenarios including instantaneous shocks.
The analysis provides a framework as to what the overall sensitivity position is as of the most recent reported position and the impact that potential changes in interest rates may have on net interest income and the economic value of its equity.
The estimated impact on the net interest income as of December 31, 2023 and December 31, 2022, assuming immediate parallel moves in interest rates, is presented in the table below.
Net interest income simulation involves forecasting net interest income under a variety of interest rate scenarios including instantaneous shocks. The estimated impact on the net interest income as of December 31, 2024 and December 31, 2023, assuming immediate parallel moves in interest rates, is presented in the table below.
Removed
Modeling the sensitivity of net interest income and the economic value of equity to changes in market interest rates is highly dependent on numerous assumptions incorporated into the modeling process.
Removed
Changes noted between the two periods reflect recent enhancements in the asset/liability modeling, including projected values for non-maturity deposits in changing interest rate environments.

Other BAFN 10-K year-over-year comparisons