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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal period ended March 31, 2024
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 001-41068
BAYFIRST FINANCIAL CORP.
(Exact name of registrant as specified in its charter)
Florida
59-3665079
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
700 Central Avenue
St. Petersburg, Florida
33701
(Address of Principal Executive Offices)
(Zip Code)
(727) 440-6848
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stockBAFNThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).      Yes  x   No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated fileroAccelerated filero
Non-accelerated filer  xSmaller reporting companyx
Emerging growth companyx
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).     Yes  o   No 
The registrant had outstanding 4,134,459 shares of common stock as of May 7, 2024.


BayFirst Financial Corp.
Table of Contents
Page
Item 1A.
Item 4.

1

Glossary of Acronyms and Abbreviations
The acronyms and abbreviations identified below may be used throughout this Quarterly Report on Form 10-Q or in our other SEC filings. You may find it helpful to refer back to this page while reading this report.
ACL: Allowance for Credit LossesFFIEC: Federal Financial Institutions Examination Council
AFS: Available for SaleFHLB: Federal Home Loan Bank
AIO: Architecture, Infrastructure, and OperationsFNBB: First National Bankers Bank
ALCO: Asset-Liability Committee
FOMC: Federal Open Market Committee
AOCI: Accumulated Other Comprehensive Income
FRB: Federal Reserve Bank
ASC: FASB Accounting Standards CodificationFVO: Fair Value Option
ASU: FASB Accounting Standards UpdateGAAP: Generally Accepted Accounting Principles
BHCA: Bank Holding Company Act of 1956, as amended
HFI: Held for Investment
BOLI: Bank Owned Life InsuranceHTM: Held to Maturity
BSA: Bank Secrecy Act of 1970IRA: Individual Retirement Account
CARES Act: Coronavirus Aid, Relief, and Economic Security ActISO: Information Security Officer
CBLR: Community Bank Leverage RatioIT: Information Technology
CDARS: Certificate of Deposit Account Registry ServicesJOBS Act: Jumpstart Our Business Startups Act of 2012
CECL: Current Expected Credit LossesLGD: Loss Given Default
CEO: Chief Executive OfficerLHFS: Loans Held for Sale
CET1: Common Equity Tier 1 Capital
MMDA: Money Market Deposit Account
CFPB: Consumer Financial Protection BureauNOW: Negotiable Order of Withdrawal
C&I: Commercial and IndustrialNSPP: Non-Qualified Stock Purchase Plan
CRO: Chief Risk OfficerOCC: Office of the Comptroller of the Currency
CTO: Chief Technology OfficerOREO: Other Real Estate Owned
DEI: Diversity, Equity, and InclusionOTTI: Other-Than-Temporary Impairment
Dodd-Frank Act: Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010PCAOB: Public Company Accounting Oversight Board
DRIP: Dividend Reinvestment PlanPD: Probability of Default
EGC: Emerging Growth CompanyPPP: Paycheck Protection Program
EPS: Earnings per SharePPPLF: Paycheck Protection Program Liquidity Facility
Equity Plan: The Amended and Restated 2017 Equity Incentive PlanROU: Right of Use
ESG: Environmental, Social, and GovernanceSBA: Small Business Administration
ESOP: Employee Stock Ownership PlanSEC: U.S. Securities and Exchange Commission
ESPP: Employee Stock Purchase PlanSOFR: Secured Overnight Financing Rate
Exchange Act: Securities Exchange Act of 1934U.S.: United States
FASB: Financial Accounting Standards BoardUSDA: United States Department of Agriculture
FBCA: Florida Business Corporation ActUSDA B&I: United States Department of Agriculture Business and Industry
FDIA: Federal Deposit Insurance ActWARM: Weighted Average Remaining Life
FDIC: Federal Deposit Insurance Corporation
2

BAYFIRST FINANCIAL CORP.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
Part I - Financial Information
Item 8. Financial Statements
March 31, 2024December 31, 2023
(1)
ASSETS(Unaudited)
Cash and due from banks
$4,425 $4,099 
Interest-bearing deposits in banks
53,080 54,286 
Cash and cash equivalents
57,505 58,385 
Time deposits in banks
3,000 4,646 
Investment securities available for sale, at fair value (amortized cost: $46,816 and $43,597 at March 31, 2024 and December 31, 2023, respectively)
42,514 39,575 
Investment securities held to maturity, at amortized cost, net of allowance for credit losses of $14 and $17 (fair value: $2,352 and $2,263 at March 31, 2024 and December 31, 2023, respectively)
2,487 2,484 
Nonmarketable equity securities
5,228 4,770 
Government guaranteed loans held for sale2,226  
Government guaranteed loans HFI, at fair value
77,769 91,508 
Loans HFI, at amortized cost, net of allowance for credit losses of $13,906 and $13,497 at March 31, 2024 and December 31, 2023, respectively
843,193 810,721 
Accrued interest receivable
7,625 7,130 
Premises and equipment, net
39,327 38,874 
Loan servicing rights
15,742 14,959 
Right-of-use operating lease assets
2,499 2,416 
Bank owned life insurance
25,974 25,800 
Other assets
18,805 16,150 
Assets from discontinued operations300 348 
Total assets
$1,144,194 $1,117,766 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Noninterest-bearing deposits
$96,977 $93,708 
Interest-bearing transaction accounts
250,478 259,422 
Savings and money market deposits
391,915 373,000 
Time deposits
267,945 259,008 
Total deposits
1,007,315 985,138 
FHLB borrowings15,000 10,000 
Subordinated debentures
5,950 5,949 
Notes payable
2,276 2,389 
Accrued interest payable
1,598 882 
Operating lease liabilities
2,673 2,619 
Deferred income tax liabilities
728 482 
Accrued expenses and other liabilities
7,496 8,980 
Liabilities from discontinued operations529 620 
Total liabilities
1,043,565 1,017,059 
3

BAYFIRST FINANCIAL CORP.
CONSOLIDATED BALANCE SHEETS CONTINUED
(Dollars in thousands, except per share data)
March 31, 2024December 31, 2023
(1)
Shareholders’ equity:
(Unaudited)
Preferred stock, Series A; no par value, 10,000 shares authorized, 6,395 shares issued and outstanding at March 31, 2024 and December 31, 2023; aggregate liquidation preference of $6,395
6,161 6,161 
Preferred stock, Series B; no par value, 20,000 shares authorized, 3,210 shares issued and outstanding at March 31, 2024 and December 31, 2023; aggregate liquidation preference of $3,210
3,123 3,123 
Preferred stock, Series C; no par value, 10,000 shares authorized, 6,446 shares issued and outstanding at March 31, 2024 and December 31, 2023; aggregate liquidation preference of $6,446
6,446 6,446 
Common stock and additional paid-in capital; no par value, 15,000,000 shares authorized, 4,134,914 and 4,110,470 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively
54,776 54,521 
Accumulated other comprehensive loss, net
(3,188)(2,981)
Unearned compensation
(1,192)(958)
Retained earnings
34,503 34,395 
Total shareholders’ equity
100,629 100,707 
Total liabilities and shareholders’ equity
$1,144,194 $1,117,766 
(1) Derived from audited consolidated financial statements

See accompanying notes.

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BAYFIRST FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in thousands, except per share data)
Three Months Ended March 31,
20242023
Interest income:
Loans, including fees
$18,228 $13,071 
Interest-bearing deposits in banks and other
959 1,180 
Total interest income
19,187 14,251 
Interest expense:
Deposits
10,215 4,923 
Borrowings
230 275 
Total interest expense
10,445 5,198 
Net interest income
8,742 9,053 
Provision for credit losses
4,058 1,942 
Net interest income after provision for credit losses
4,684 7,111 
Noninterest income:
Loan servicing income, net
795 740 
Gain on sale of government guaranteed loans, net8,089 4,409 
Service charges and fees
444 379 
Government guaranteed loans fair value gain
3,305 3,574 
Other noninterest income
1,635 346 
Total noninterest income
14,268 9,448 
Noninterest expense:
Salaries and benefits
8,005 7,835 
Bonus, commissions, and incentives
1,571 804 
Occupancy and equipment
1,110 1,163 
Data processing
1,560 1,347 
Marketing and business development
588 665 
Professional services
1,349 897 
Loan origination and collection
1,719 1,495 
Employee recruiting and development
597 568 
Regulatory assessments
282 99 
Other noninterest expense
992 539 
Total noninterest expense
17,773 15,412 
Income from continuing operations before income taxes
1,179 1,147 
Income tax expense from continuing operations
296 280 
Net income from continuing operations883 867 
Loss from discontinued operations before income taxes(78)(170)
Income tax benefit from discontinued operations(19)(42)
Net loss from discontinued operations(59)(128)
Net income
824 739 
Preferred stock dividends
385 208 
Net income available to common shareholders
$439 $531 
5

BAYFIRST FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF INCOME CONTINUED (UNAUDITED)
(Dollars in thousands, except per share data)
Three Months Ended March 31,
20242023
Basic earnings (loss) per common share:
Continuing operations$0.12 $0.16 
Discontinued operations(0.01)(0.03)
Total basic earnings per common share
$0.11 $0.13 
Diluted earnings (loss) per common share:
Continuing operations$0.12 $0.16 
Discontinued operations(0.01)(0.03)
Total diluted earnings per common share
$0.11 $0.13 
See accompanying notes.
6

Table of Contents
BAYFIRST FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
(Dollars in thousands)
Three Months Ended March 31,
20242023
Net income
$824 $739 
Net unrealized gains (losses) on investment securities available for sale
(274)732 
Deferred income tax (expense) benefit
67 (190)
Other comprehensive income (loss), net
(207)542 
Comprehensive income
$617 $1,281 
See accompanying notes.
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BAYFIRST FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)
(Dollars in thousands, except per share data)
Preferred
Stock, Series A
Preferred
Stock, Series B
Preferred
Stock, Series C
Common Stock
and Additional
Paid-in Capital
Accumulated
Other
Comprehensive
Income (Loss)
Retained
Earnings
Total
Balance at January 1, 2023
$6,161 $3,123 $ $52,845 $(3,724)$33,479 $91,884 
Net loss
— — — — — 739 739 
Impact of ASC 326 Adoption— — — — — (2,508)(2,508)
Issuance of common stock under:
Non-qualified stock purchase plan
— — — 83 — — 83 
Dividend reinvestment plan
— — — 84 — — 84 
Exercise of stock options, net— — — (34)— — (34)
Stock-based awards - common stock:
Restricted stock expense, net of tax impact
— — — 51 — — 51 
Stock option expense
— — — 34 — — 34 
Other comprehensive income, net— — — — 542 — 542 
Dividends declared on:
Preferred stock
— — — — — (208)(208)
Common stock ($0.08 per share)
— — — — — (328)(328)
Balance at March 31, 2023
$6,161 $3,123 $ $53,063 $(3,182)$31,174 $90,339 
Balance at January 1, 2024
$6,161 $3,123 $6,446 $53,563 $(2,981)$34,395 $100,707 
Net income
— — — — — 824 824 
Unearned ESOP shares allocation— — — (44)— — (44)
Stock-based awards - common stock:
Restricted stock expense, net of tax impact
— — — 52 — — 52 
Stock option expense
— — — 13 — — 13 
Other comprehensive loss, net
— — — — (207)— (207)
Dividends declared on:
— 
Preferred stock
— — — — — (385)(385)
Common stock ($0.08 per share)
— — — — — (331)(331)
Balance at March 31, 2024
$6,161 $3,123 $6,446 $53,584 $(3,188)$34,503 $100,629 

See accompanying notes.
8

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BAYFIRST FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)
Three Months Ended March 31,
20242023
Cash flows from operating activities:
Net income from continuing operations$883 $867 
Net loss from discontinued operations(59)(128)
Net income
824 739 
Adjustments to reconcile net income to net cash from operating activities:
Depreciation of fixed assets551 533 
Net securities premium amortization30 20 
Amortization of debt issuance costs1 2 
Amortization of premium on loans purchased, net232 42 
Provision for credit losses4,058 1,942 
Accretion of discount on unguaranteed loans
(590)(481)
Deferred tax expense288 283 
Origination of government guaranteed loans held for sale
(2,226)(1,174)
Proceeds from sales of government guaranteed loans held for sale
134,029 76,882 
Net gains on sales of government guaranteed loans
(8,089)(4,409)
Change in fair value of government guaranteed loans HFI, at fair value
(3,305)(3,574)
Amortization of loan servicing rights
1,395 878 
Non-qualified stock purchase plan expense
7 7 
Stock based compensation expense
65 85 
Income from bank owned life insurance
(174)(154)
Changes in:
Accrued interest receivable
(495)(1,095)
Other assets
(2,309)(581)
Accrued interest payable
716 156 
Other liabilities
(1,430)(5,009)
Net cash provided by operating activities of continuing operations123,637 65,220 
Net cash used in operating activities of discontinued operations(102)(13)
Net cash provided by operating activities123,535 65,207 
Cash flows from investing activities:
Purchase of investment securities available for sale
(4,458) 
Principal payments on investment securities available for sale
1,215 608 
Principal payments on investment securities held to maturity
 2,518 
Net purchase of nonmarketable equity securities
(458)(1,078)
Maturity of time deposits in banks1,646  
Purchase of government guaranteed and consumer loans(629)(35,640)
Loan (originations) and payments, net
(147,024)(100,429)
Purchase of premises and equipment
(1,004)(2,873)
Net cash used in investing activities(150,712)(136,894)
9

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BAYFIRST FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS CONTINUED (UNAUDITED)
(Dollars in thousands)
Three Months Ended March 31,
20242023
Cash flows from financing activities:
Net change in deposits
22,177 137,831 
Net increase in short-term borrowings5,000  
Payments on notes payable
(113)(113)
Proceeds from issuance of common stock for benefit plans, net
(7)126 
Unearned ESOP shares(44) 
Dividends paid on common stock
(331)(328)
Dividends paid on preferred stock
(385)(208)
Net cash provided by financing activities
26,297 137,308 
Net change in cash and cash equivalents
(880)65,621 
Cash and cash equivalents, beginning of period
58,385 66,046 
Cash and cash equivalents, end of period
$57,505 $131,667 
Supplemental cash flow information
Interest paid
$9,729 $5,042 
Income taxes paid
9 2 
Supplemental noncash disclosures
Impact to retained earnings from adoption of ASC 326, net of tax 2,508 
Net change in unrealized holding gains (losses) on investment securities available for sale, net of tax effect(207)542 
Transfer of government guaranteed loans HFI to loans HFS128,118 74,070 
Transfer of loans HFI to OREO404  
Recognition of right of use asset and operating lease liability
263  
See accompanying notes.
10

BAYFIRST FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands, except per share data)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include BayFirst Financial Corp. and its wholly owned subsidiary, BayFirst National Bank, together referred to as “the Company”.
These unaudited consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles followed within the financial services industry for interim financial information and Article 8 of Regulation S-X. Accordingly, they do not include all of the information or notes required for complete financial statements. The consolidated balance sheet as of December 31, 2023 has been derived from the audited consolidated financial statements of BayFirst Financial Corp. for that period.
The Company currently operates one business segment. In the third quarter of 2022, the Company discontinued the Bank’s nationwide residential mortgage loan segment. The operations of this segment are reported as discontinued operations.
In the opinion of management, all adjustments, consisting of normal and recurring items, considered necessary for a fair presentation of the consolidated financial statements for the interim periods have been included. All significant intercompany accounts and transactions have been eliminated in consolidation. Certain amounts reported in prior periods have been reclassified to conform to current year presentation. These reclassifications did not have a material effect on previously reported net income, shareholders’ equity, or cash flows.
Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. These statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2023.
The Company’s significant accounting policies are described in Note 1 of the Notes to Consolidated Financial Statements for the year ended December 31, 2023 in the Company’s Annual Report filed on Form 10-K. For interim reporting purposes, the Company follows the same basic accounting policies and considers each interim period as an integral part of an annual period.
Use of Estimates: To prepare financial statements in conformity with GAAP, management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ. The most significant estimates relate to the ACL, government guaranteed loan servicing rights, and fair value of government guaranteed loans HFI.
Emerging Growth Company Status: The Company is expected to remain an "emerging growth company," as defined in the JOBS Act, through December 31, 2026. Section 107 of the JOBS Act provides that an emerging growth company can take advantage of an extended transition period when complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company has elected to take advantage of this extended transition period, which means these financial statements, as well as financial statements they file in the future for as long as the Company remains an emerging growth company, will be subject to all new or revised accounting standards generally applicable to private companies.
Contingencies: Due to the nature of their activities, the Company and its subsidiary are at times engaged in various legal proceedings that arise in the course of normal business, some of which were outstanding as of March 31, 2024. Although the ultimate outcome of all claims and lawsuits outstanding as of March 31, 2024 cannot be ascertained at this time, it is the opinion of management that these matters, when resolved, will not have a material adverse effect on the Company’s results of operations or financial condition.
NOTE 2 – DISCONTINUED OPERATIONS
During the third quarter of 2022, the Company discontinued the Bank’s nationwide residential mortgage loan production operations. The decision was based on a number of strategic priorities and other factors, including the precipitous decline in mortgage volumes and the uncertain outlook for mortgage lending over future periods. As a result of these actions, the Company classified the operations of the residential mortgage lending division as discontinued under ASC 205-20. The Consolidated Balance Sheets, Consolidated Statements of Income, and Consolidated Statements of Cash Flows present discontinued operations for the current periods and retrospectively for prior periods.
11

Table of Contents
BAYFIRST FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands, except per share data)
The following is a summary of the assets and liabilities of the discontinued operations of the residential mortgage lending division at March 31, 2024 and December 31, 2023:
March 31, 2024December 31, 2023
Assets
Right-of-use operating lease asset$300 $348 
Total assets$300 $348 
Liabilities
Operating lease liability$529 $620 
Total liabilities$529 $620 
The following presents operating results of the discontinued operations of the residential mortgage lending division for the three months ended March 31, 2024 and March 31, 2023:
Three Months Ended March 31,
20242023
Interest income$ $1 
Noninterest expense78 171 
Loss from discontinued operations before income taxes(78)(170)
Income tax benefit(19)(42)
Net loss from discontinued operations$(59)$(128)
NOTE 3 – INVESTMENT SECURITIES
The amortized costs, gross unrealized gains and losses, and estimated fair values of investment securities available for sale and investment securities held to maturity at March 31, 2024 and December 31, 2023 as well as the ACL for investment securities held to maturity at March 31, 2024 and December 31, 2023 are summarized as follows:
March 31, 2024Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
Investment securities available for sale:
Asset-backed securities
$7,263 $ $(55)$7,208 
Mortgage-backed securities:
U.S. Government-sponsored enterprises
8,139  (643)7,496 
Collateralized mortgage obligations:
U.S. Government-sponsored enterprises
20,084  (3,667)16,417 
Corporate bonds11,330 63  11,393 
Total investment securities available for sale
$46,816 $63 $(4,365)$42,514 
March 31, 2024Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
ACL
Investment securities held to maturity:
Mortgage-backed securities:
U.S. Government-sponsored enterprises
$1 $ $ $1 $ 
Corporate bonds2,500  (149)2,351 14 
Total investment securities held to maturity
$2,501 $ $(149)$2,352 $14 
12

Table of Contents
BAYFIRST FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands, except per share data)
December 31, 2023Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
Investment securities available for sale:
Asset-backed securities
$8,041 $6 $(114)$7,933 
Mortgage-backed securities:
U.S. Government-sponsored enterprises
3,842  (606)3,236 
Collateralized mortgage obligations:
U.S. Government-sponsored enterprises
20,382  (3,284)17,098 
Corporate bonds11,332  (24)11,308 
Total investment securities available for sale
$43,597 $6 $(4,028)$39,575 
December 31, 2023Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
ACL
Investment securities held to maturity:
Mortgage-backed securities:
U.S. Government-sponsored enterprises
$1 $ $ $1 $ 
Corporate bonds2,500  (238)2,262 17 
Total investment securities held to maturity
$2,501 $ $(238)$2,263 $17 
`
The amortized cost and fair value of investment securities as of March 31, 2024 are shown in the table below by contractual maturity. Actual timing may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.
Available for SaleHeld to Maturity
Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value
One to five years$11,330 $11,393$1,500 $1,444
Five to ten years4,458 4,4581,000 907
Beyond ten years31,028 26,6631 1
Total$46,816 $42,514$2,501 $2,352
No ACL for investment securities AFS was needed at March 31, 2024 or December 31, 2023. Declines in the fair value of the AFS investment portfolio are believed by management to be temporary in nature. When evaluating an investment for credit loss, management considers, among other things, the length of time and the extent to which the fair value has been in a loss position; the financial condition of the issuer through the review of credit ratings and, if necessary, corporate financial statements; adverse conditions specifically related to the security such as past due principal or interest; underlying assets that collateralize the debt security; other economic conditions and demographics; and the intent and ability of the Company to hold the investment until the loss position is recovered. Any unrealized losses were largely due to increases in market interest rates over the yields available at the time of purchase. The fair value is expected to recover as the bonds approach their maturity date or market yields for such investments decline. Management does not believe any of the securities are impaired due to reasons of credit quality. At March 31, 2024, the Company did not intend to sell and believed it was not likely to be required to sell the available for sale securities that were in a loss position prior to full recovery.
As of March 31, 2024, there were no past due principal and interest payments associated with the HTM securities. The Company monitors the credit quality of debt securities held to maturity quarterly through the use of credit ratings. However, the corporate bonds that are held to maturity have no credit rating and the corporate bonds in an unrealized loss position at March 31, 2024 are not material to the financial statements. There was an ACL of $14 and $17 on corporate bonds HTM at March 31, 2024 and December 31, 2023, respectively, which was calculated based on applying the long-term historical credit loss rate for similarly rated securities.
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Table of Contents
BAYFIRST FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands, except per share data)
The following table presents the activity in the ACL for investment securities HTM by major security type for the three months ended March 31, 2024 and March 31, 2023:
For the Three Months EndedFor the Three Months Ended
Corporate BondsMarch 31, 2024March 31, 2023
Balance at beginning of period$17 $ 
Impact of adopting ASC 326 18 
Provision for credit losses(3) 
Investment securities charge-offs/recoveries  
Investment securities recoveries  
Balance at end of period$14 $18 
The following table summarizes investment securities with unrealized losses at March 31, 2024 aggregated by security type and length of time in a continuous unrealized loss position:
Less than 12 Months12 Months or LongerTotal
March 31, 2024Fair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized LossesNumber of Securities
Investment securities available for sale:
Asset-backed securities$1,817 $(9)$5,391 $(46)$7,208 $(55)3
Mortgage-backed securities:
U.S. Government-sponsored enterprises  3,038 (643)3,038 (643)2
Collateralized mortgage obligations:
U.S. Government-sponsored enterprises  16,417 (3,667)16,417 (3,667)7
Total investment securities available for sale$1,817 $(9)$24,846 $(4,356)$26,663 $(4,365)12
Investment securities held to maturity:
Corporate bonds$ $ $1,852 $(149)$1,852 $(149)2
Total investment securities held to maturity$ $ $1,852 $(149)$1,852 $(149)2
14

Table of Contents
BAYFIRST FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands, except per share data)
The following table summarizes investment securities with unrealized losses at December 31, 2023 aggregated by security type and length of time in a continuous unrealized loss position:
Less than 12 Months12 Months or LongerTotal
December 31, 2023Fair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized LossesNumber of Securities
Investment securities available for sale:
Asset-backed securities$ $ $5,967 $(114)$5,967 $(114)2
Mortgage-backed securities:
U.S. Government-sponsored enterprises  3,236 (606)3,236 (606)2
Collateralized mortgage obligations:
U.S. Government-sponsored enterprises  17,098 (3,284)17,098 (3,284)7
Corporate bonds11,308 (24)  11,308 (24)5
Total investment securities available for sale$11,308 $(24)$26,301 $(4,004)$37,609 $(4,028)16
Investment securities held to maturity:
Corporate bonds$ $ $2,262 $(238)$2,262 $(238)3
Total investment securities held to maturity$ $ $2,262 $(238)$2,262 $(238)3
No investment securities were pledged as of March 31, 2024 or December 31, 2023, and there were no sales of investment securities during the three months ended March 31, 2024 and the year ended December 31, 2023.
NOTE 4 – LOANS
Loans HFI, at amortized cost, at March 31, 2024 and December 31, 2023 were as follows:
March 31,
2024
December 31,
2023
Real estate:
Residential
$285,214 $264,126 
Commercial
273,227 293,595 
Construction and land
36,764 26,272 
Commercial and industrial
182,264 177,566 
Commercial and industrial - PPP
2,965 3,202 
Consumer and other
63,854 47,287 
Loans HFI, at amortized cost, gross
844,288 812,048 
Deferred loan costs, net
16,233 14,707 
Discount on government guaranteed loans sold(1)
(7,674)(7,040)
Premium on loans purchased, net
4,252 4,503 
Allowance for credit losses
(13,906)(13,497)
Loans HFI, at amortized cost
$843,193 $810,721 
(1) The Company allocates the retained portion of loans sold based on relative fair value of the retained portion and the sold portion, which results in a discount on the retained portion.
15

Table of Contents
BAYFIRST FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands, except per share data)
NOTE 5 - ALLOWANCE FOR CREDIT LOSSES
The following schedules present the activity in the ACL by loan segment for the three months ended March 31, 2024 and March 31, 2023:
Three Months EndedReal Estate - ResidentialReal Estate - CommercialReal Estate - Construction and LandCommercial and IndustrialConsumer and OtherUnallocatedTotal
March 31, 2024
Beginning Balance$1,987 $1,818 $519 $6,579 $2,594 $ $13,497 
Charge-offs   (2,924)(978) (3,902)
Recoveries 2  130 118  250 
Provision199 (62)144 3,055 725  4,061 
Ending Balance$2,186 $1,758 $663 $6,840 $2,459 $ $13,906 
March 31, 2023
Beginning Balance$731 $956 $28 $6,182 $1,090 $59 $9,046 
Impact of adopting ASC 3261,479 613 281 1,116 (323)(59)3,107 
Charge-offs   (1,408)(665) (2,073)
Recoveries 2  117 67  186 
Provision148 124 (55)1,209 516  1,942 
Ending Balance$2,358 $1,695 $254 $7,216 $685 $ $12,208 
CECL significantly changed the credit losses estimation model for loans. The ACL represents management’s best estimate of future lifetime expected losses on its HFI loan portfolio. The Company calculates its ACL by estimating expected credit losses on a collective basis for loans that share similar risk characteristics. Loans that do not share similar risk characteristics with other loans are evaluated for credit losses on an individual basis. The Company uses a combination of modeled and non-modeled approaches that incorporates current and future economic conditions to estimate lifetime expected losses on a collective basis. Individually evaluated loans are evaluated for impairment and a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the rate implicit in the original loan agreement or at the fair value of collateral adjusted for selling costs as appropriate if repayment is expected solely from the collateral.
The Company uses reasonable and supportable forecasts that are updated quarterly utilizing data from the FOMC’s median forecasts of change in national GDP and of national unemployment. The FOMC’s forecast of GDP and unemployment for the next calendar year is used in conjunction with the most recent 4 quarters of historical data from FRED (Federal Reserve Economic Data) to determine changes in certain qualitative factors used in calculating loss rates.
See Note 1 and Note 5 of the Notes to Consolidated Financial Statements for further discussion of the Company’s ACL methodology in the December 31, 2023 Form 10-K.
The Company maintains a separate ACL for its off-balance sheet unfunded loan commitments. The ACL on unfunded loan commitments is based on estimates of probability that these commitments will be drawn upon according to historical utilization experience, expected loss severity and loss rates as determined for pooled funded loans. As of March 31, 2024 and December 31, 2023, the ACL for unfunded commitments recorded in other liabilities was $839.
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BAYFIRST FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands, except per share data)
The following table presents the activity in the ACL for unfunded commitments for the three months ended March 31, 2024 and March 31, 2023:
For the Three Months EndedFor the Three Months Ended
March 31, 2024March 31, 2023
Balance at beginning of period$839 $511 
Impact of adopting ASC 326 213 
Provision for credit losses 74 
Unfunded commitments charge-offs  
Unfunded commitments recoveries  
Balance at end of period$839 $798 
The following tables present the principal balance of nonaccrual loans and loans past due over 89 days still on accrual by loan segment at March 31, 2024 and December 31, 2023. In the following tables, the principal balance does not include the government guaranteed balance or loans measured at fair value.
March 31, 2024
Nonaccrual with no ACL(1)
Nonaccrual with ACL(1)
Loans Past Due Over
89 Days Still Accruing(1)
Real estate - residential
$ $5,181 $20 
Real estate - commercial
 901  
Commercial and industrial
 1,296  
Consumer and other
  170 
Total
$ $7,378 $190 
December 31, 2023
Nonaccrual with no ACL(1)
Nonaccrual with ACL(1)
Loans Past Due Over
89 Days Still Accruing(1)
Real estate - residential
$ $4,654 $583 
Real estate - commercial
 $1,159 $ 
Commercial and industrial
 1,587  
Consumer and other  282 
Total
$ $7,400 $865 
(1) Excludes loans measured at fair value. See Note 6. Fair Value for additional information.
A financial asset is considered collateral dependent when the debtor is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral. Expected credit losses for collateral dependent loans are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate. Significant quarter over quarter changes are reflective of changes in nonaccrual status and not necessarily associated with credit quality indicators like appraised value. As of March 31, 2024 there were no loans individually evaluated. The following table presents the principal balance of individually analyzed collateral dependent loans by loan portfolio segment as of December 31, 2023:
December 31, 2023Type of CollateralACL
Business Assets
Commercial and industrial$390 $255 

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BAYFIRST FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands, except per share data)
The following table presents the aging of the principal balance of past due loans HFI at amortized cost at March 31, 2024 by loan segment:
30-89 Days
Past Due
Greater Than
89 Days
Past Due
Total
Past Due
Loans Not
Past Due (1)
Total
Loans
Real estate - residential
$1,704 $4,951 $6,655 $278,559 $285,214 
Real estate - commercial
1,227 543 1,770 271,457 273,227 
Real estate - construction and land