BayFirst Financial (BAFN) 28 Jul 232023 Q2 Earnings call transcript

Good morning, ladies and gentlemen, and welcome to the BayFirst Financial Corp.'s Second Quarter 2023 Conference Call and Webcast. [Operator Instructions] I would now like to turn the conference over to Mr. Tony Leo, CEO. Please go ahead, sir.

Thank you, Laura. us Oliver; Tom Officer, and with Operating our Scott have Robin Officer; our I our Zernick, President, Chief McKim. Today Chief Financial

who Operating as like us company Robin's with I'd to solely Scott the our First as serving Chief welcome role in this We've CFO. call week her now Officer. segregated to joined

Going will discussing be forward, our Scott financial results.

of forward-looking Today's of you'll measures. to be X and detailed contained discussion presentation. However, call financial tenure, hearing Robin. on investor from include short today, our Scott's in Please performance very the statements on consideration non-GAAP cautionary Page will financial forward-looking the the refer of statement statements

pleased an the current earnings expansion we importantly, are as continued throughout report QX, overall performance have our enjoyed and quarter we increase interest net trend most We of saw that margin, BayFirst's deposits to rate second from steadily cycle. grow,

represents increase now bank Tampa in and our in checking Our South opened our this regulatory commercial third network We're early which to underserved. a expected overall seeking franchise net the Bee growth approval Newtown Financial and XXXX. X,XXX the a region. expansion emphasis Resource and region. This our center our the Tampa Sarasota unique our throughout in We're of Sarasota accounts Sarasota. Trail, Sarasota of Bay Road Bay accounts Ridge in banking reach our we completing is majority year-to-date out also checking North community transaction the serve and district is the The a to footprint the is and new Newtown during direct on banking on and branch. the year. has on minority in resulted flagship new growing city's products than a in to ongoing late This community in Bradenton services area the month XXth center convert Center year retail entire portion our of construction banking commitment North account banking centers and on the to result XX% more open only or of is LPO our of and full-service center to inviting district This Sarasota the balances in Tamiami

key continue small we our growth CreditBench, overall SBA to our placing in Xth lending SBA X(a) advances bank, our currently SBA national build remains balance been government-guaranteed leader within While products a lenders community of core loan the by a technology, program driver nationwide. lending, our lending. all in among Aided division, in have

working BOLT SBA Our in $XX million capital originations $XXX,XXX the market. and BOLT June product provides a carries garnering loans loan of in Launched strong XXXX, in averaging excess XX% now secondary up and are to premiums of month guarantee. an

have base Robin also reach Throughout to into and XX% Tom have We program, products net the is likewise, Bay a in minutes. margin. This in expansion ability few just in deposit moment. Most more USDA interest grow our B&I in a bank's our expansion region. a of of position lending margin grow larger loans we all the franchise lending and expanded banking our government-guaranteed will we here challenging direct which and the lending in deposits the balance in sheet. our generally carrying rate just experienced involves to these about result an guarantee. government-guaranteed success our the our in cycle, our overall asset-sensitive of core across times. speak loans importantly, our Tampa about And continue speak even more will

both we have balances. transaction growth significant As the enjoyed of in I associated mentioned number accounts outset, at the and

our offer ability investing also our continue banking expand on new necessary inviting to in branch banking we're with to centers, to their terms. the we customers the do network While technology

to second in Within that XX a digital account we opening believe we streamlined none system expect the to introduce industry. the days, is next

stable We franchise are discuss base. At to confident attractive, our like deposit turn financial time, this our that these I'd over to investments will core continued it growth result an Robin in in to results. of

Thank Tony. everyone. you, morning, Good

deposit experiencing by you the key during themes sheet the the growth excessive intentionally our reduced the loan recall, equity by assets and assets astounding with deposit positive balances added to and levels in quarter, of time caution total at or increased but equity deposits fears increase fully the the quarter. the stability abundance insured, XX% we continued modest As common were total in year, were quarter And X.X% as upon cash subsided. Overall, industry XX% XX at second held and have may of strong banking base increased as in XX% being stability balance with first quarter this paid headwinds. a as those to second offset of during in industry somewhat more retail deposits an a have a quarter, of shares. the $XXX,XXX in able the preferred dividends a quarter whole earnings in were of growth our X% as focus Stockholders' is since on March in when increased an build non-wholesale by of overall beginning for year-to-date,

per Expected negatively value $XX.XX book to the value from the when the this increased end in model at share of share $XX.XX CECL, impacted Loss quarter book Credit tangible tangible per share first the quarter Although QX. adopted or per company was Current

the slightly interest net $XXX,XXX compared higher higher net million QX. compared The was Net quarter from of somewhat X.XX% noninterest $X.X in second interest an mentioned, of income result from X.XX% of in to income million the to higher and Tony with quarter income quarter in was income quarter, and losses $X.X million in second the provision significantly the increase the this second expense. Net more of and of increased quarter QX As the net 'XX. million income, $XX credit X.XX% in from the XXXX. noninterest first second net the income of an offset as in $X also first for quarter margin higher XXXX second of in to quarter quarter increase and increased by QX, from interest

the and have the deposit a portfolio Although has of risen significant of year, SBA has portion costs The a of real past over for the of longer. rate immediately loans, quarterly, rate commercial loan X majority the consumer company a vast conventional fixed loan with loans or interest repricing low of after much concentration portfolio are repricing which typically estate years adjustment. a variable

from the on and to discussed quarter, reduction dip in in sale government-guaranteed fair primarily on interest a quarter nature gain we continuing and loans, higher was $X.X of by SBA allows for on guaranteed the in in SBA of value loans, grow loans. our the second on of asset-sensitive franchise. Noninterest the operations $X.X pay offset due our premiums customers significant government-guaranteed attract along 'XX, Premiums rate income lower gains returned $XX.X an of to which higher a increase from historically carry an interest levels a of typically of first increase April So after million balance deposits amount of quarter, a previously first which gain conventional call. in our rate to strong million the of sale a loans, partially balances million than with to sheet, in sale us on

sold In loan of quarter, of credit portion addition, a which on sheet unguaranteed unguaranteed we also discount helps modest the reduce $XX loans. our SBA during at million with balance balances to the risk associated

impact a income to guaranteed at loss the actually balances unguaranteed discount, offset previously with gain losses lower the sale sold sale provision as we of earnings for credit deferred While to the on sales these accounting a associated acceleration related in on the positive is from loans. complex and by resulted

I higher were of net second the at $X.X outset, As million QX. income million in compared provision losses the credit noninterest by and increases somewhat $X.X in income mentioned for a quarter to offset the interest in

While a both program We third consumer small increase due unsecured in this the charge-offs the from year. of purchasing party. as January consumer increases well stable, ceased loans party net to did quality our in overall from purchased third SBA asset loan as loans remains

well the as overall charge-offs volume. the unexpected loan However, and our environment increase increase in not given is in SBA just as rate

also We loans. nonperforming increase in an experienced

large or conventional SBA increase this result loan residential primarily loan concerning the was the one as of single-family portfolios. opposed However, in to trends any

Finally, marketing and as also relates to it costs as increased grow our benefits expense to noninterest salaries earnings, build primarily brand. our and continue franchise and we in

Tom positive of basis production the sale ratios assets encouraged lower by earnings than and first towards bank work anticipated, to of XX points earnings well in on turn continuing core return are to trajectory SBA production to to due this franchise over in other and we things are strategy. of on results like the gain point, discuss lower-than-expected as invest our overall our average our building to mainly remained we loan as as earnings. At and I'd quarter, stability Although lower

morning, Good and and results, I for highlights. share strategies, our our call joining banking like an you production thank our update on you with would Robin. today. to deposit Thanks, community loan

community results our excellent lines. QX, During team banking across produced our product once again

industry banking quarter. banking headwinds, While deposits centers some $XX to our experience deposit the of million continues during the grew

Tampa our accounts Bay as increase further saw growth million. through than franchise a importantly, of deposit net $XX we was more year-to-date area. mentioned, in XX, checking the a new value most Our increasing Greater And Tony X,XXX June

Our across team and over mortgages anchored closed by of equity second home Tampa loan credit Bay consumer the QX, during and million $XX closed lines area.

BayFirst. them loan for consumer open of relationships over our XX% true become fact, at checking us clients up a In account as

$XX favorably during during million Our million closed commercial the QX. compares closed loan QX. $XX team This to

and to treasury deposit medium-sized allow a commercial sheet balance loans, us will management products and liquidity suite. continue businesses small with commercial support robust product to excellent Our

of these up earlier. strong majority residential during first $XXX and of here as portfolio with rates XX% granular as Tampa become borrowers the BOLT of adjust Bay. to lending an well. program, Tampa closed loans to $XXX most year-to-date growth discussed also strong million. on area true clients importantly, attributed mortgage QX, CreditBench, our mortgage and platform have NIM quarterly increase in X That's relationship $XXX,XXX the the Tony $XXX bringing during loans over move deposits total the closed year-to-date, months which us The Bay $XX million fueled that mortgages is the to million generates Robin XXXX. which Our government-guaranteed clients they million majority our to These interest our team were guarantee. And

XX-month bench million. trailing over $XXX production is Our credit in

$XX note produces a that million business under been of building by loan last rising with to hesitant our just rate that has waiting have the just However, comment million it funding the loan million our or rate USDA to buy are to important we million QX that on a approvals, Currently, program in borrowers X.X% to core USDA at expect we in environment as QX. $X -- we program. happen results challenged XX.XX%. One is on during SBA prime government-guaranteed and loans $XXX $XX have

we So our I as assets comfortable mentioned, overall, $XX community-friendly in and of lines we and have expand banking million the to XXth we $XXX Sarasota, our franchise leveraged that Tampa the value and, present. Bay as And continue grand where more located by center year-to-date. than our growing is year-to-date celebrate earning feel create opening deposits million spaces environment second to in product clients

our their banking to of a clients, awareness. using We open have we up to commerce otherwise. ever-growing centers space a groups, All new shaver business brand for of has or that banking been collaboration our catalyst nonprofits, This have groups, groups meetings. and now centers community our

I a we concept a share pods [ developed Lastly, around ]. to story deal success want called

and in influence, communities on pod month groups, extensive the realtors, officers. a regions, pods Tampa, lenders, deal Bank the lenders, treasury created mortgage banking areas; centers. Once captains in cetera. SBA centers Our their market reports oftentimes banking Community County, pods Across we staff, every distinct made events from outreach of X Pinellas management, et we the their staff, month, lenders, These loan commercial hold Sarasota center hear their community X and respective and up has consumer of residential to Bradenton.

Our networking I'll become deposits, you. focus has laser events it community strive of to is example have in Tony, loans, more than XXX a to just back one the held year-to-date. deal Bay pods our bank growth area. And and This fueled as take premier the awareness brand Tampa that in we

it Thank questions. you. open like up to this would for At we any time,

first Instructions] line comes Your [Operator Hovde. Justin the from of question from Marca

has you production type? pipeline in how Curious loans. or on is the start to wanted for customer far Just July how change thus seen quarter? material in looking the And been any mix the and have

I'm production? that. sorry, of we type What missed

Production in general?

you go don't why Tom, ahead?

Yes.

Tom. is this Justin,

has are that someone that area biggest acquisition, business larger the SBA et our been fund mentioned, impacted buying use we debt core I by loan the rates Those As building, interest to loans been has cetera. SBA the program. a rising refinance,

in but are So loan small BOLT program, we core by softness our lending in offset the have certainly increases seen the a it's program continued granular SBA been that loans.

to we the And of that we XX% to our the that's have of our have side the we've well, And to outreach. do did tackling. coin, concerned the really been fortunate have do spend the to lend fuel certainly do We growth. to for loan also definitely continue robust lending. and side QX business On that continue owner our about to continues although where they're money time. But seen and asset in well conventional on use just operators, in love will to increase remarkably we pipeline rates. softness We consumer quarter-over-quarter. a a we program earning the we as that interest us And blocking conventional

voicing are off environment rate policy. due the expansion about And the efforts any they Fed's to in are starting customers projects? terms more holding Or concerns new elevated of

conventional debt. add in space, Borrowers what's that do refinance challenged. building or rate and Justin, X.X%, hesitant business rate or prime at will X.XX% you interest it, see have And loan of again, even you points happening. whether a But very a that's to what's prime buy just SBA. on clients projects when couple happening are and borrowing it's a high a Yes, is commercial exactly attractive that's buy continue putting we or be hold, to the to now we was

had of 'XX second margin And helpful. you be you if the NIM expectations Curious for XX. the for spot share the June rate regarding sort that at half any would could of the

rate. sure I'm familiar term I'm the spot Yes. not with

asset quarter, the hesitate was we we was NIM projections discussed, up share Our the second to I in the which of are QX. X.XX% as from But remainder for year. sensitive.

vast demand are So customers up, of the the up Fed or our we're there's the the other of well. those raises then our our that consumer continued even quarter, industry, -- feeling though across rates, time deposit right, first any majority And go loans the all on will rates next and our as loans. the from of rates, variable, go of every HELOC certainly type consumer SBA

interest financial as income, other why that's that to So not some we're squeezed as just due institutions on sensitivity. asset net

I answered any to way. if question, your happy know don't on expand I So but that further in

rate grow I would while XXX successful it add very and in interest net notwithstanding the XXXX, related lending. compression. And portfolio. obviously, loans the to to actually Rob's in commercial observations position conventional headwinds we points, primarily expanded But has the that of continuing at in balance larger have commercial conventional quarter since asset-sensitive sheet. in SBA have been our a had margin the our lending, We March loan to beginning basis margin experienced is of strong cycle the our of others

the to pricing, our and of allowed the allowed NIM. in support assets lending has new bring continuing what grow do, the to us us continue at bank to to growth that's the current We on consumer growth

the asset well sensitivity assets So to position to our both in little ability liability environment. I bit a our also side. as continue want about as to this talk generate

to to low-cost customers. to that the are offer assets, transaction majority customers true the support bank we promotional yield on the introduce savings balances year-to-date. core And funds. community the high account grown of focused growing number have checking to vast we XX% funding Nonetheless, of because are accounts, of and We And is bank. and of new the rates bank that on our means by the SBA and our very able

net end work income and contribute All to to of support in continued franchise. in the to those growth growth our interest the of

or of just products? they of and curious specific higher-yielding asking you've searching how the deposit sort terms competition front, reacting? been kind on of customers And yield Are for seeing thinking about in irrational your curious any are

Well, we are in Florida.

would example, there so for with rate accounts here. set, are those on so and maybe is with we've deposits money a I electronic and checking market BayLive hard rate product our little requires worked the so a forth. bit higher active shoppers, an And with different And market our account say but always XX

sticky offer right, time, build promotional true shopper if trying pick the will. growth will are rate we same and some customers of at savings customers, our up. banking that rates some managers may the So the and accounts, you and employees type on But of number center checking to incentivized accounts

nature. times in a to offer there's the to So be folks build rates, in rates core very and centers. to yes, unique we're really we of always attract as that we those out hear there those banking out able competitive to bank But certainly And are there. are position when customers

add our tremendous but And would in our side provides to the that, our Yes. in flexibility core us asset I general. bank, of growth deposit mix community

emphasis on savings while entirely So and accounts. building checking customers, our primarily is core deposits and focused

promotional and We to funding At rates market exceed rates, assets. time, do to have ability customers in meet meet the or to us same the those introduce same the low-cost need But support of high-yielding to our additional to expand promotional the market. on bank. At demands meet ability focus within growing the the transaction meet our to promotional time, to accounts, we of -- the the funding. have is the awareness

bit, And norms. reversion one the has quality. viewing credit up little comments overall back in and and borrower you're how portfolio to in kind how quality a credit been I it's Any the ticked just noted last me. just for It's historical to that NCOs the release of doing? on on want performance general touch a

at back where SBA we maybe higher, look a from I percentage from our pre-pandemic if the but today, But watch. to really continue are dollars are loan program isn't. little we charge-off to the small something certainly the days It's rate Yes.

they carry than loans very little So amount the had that loans June at I plus an -- this spoke small we've an Tom prime and And XXX guarantee. in done and at had were program the of less that program in our since $XXX,XXX we've done mean and of X% X,XXX-plus in BOLT market astounding XX% we've loans about, losses. we've less charge-off that and 'XX, point.

as think largely of is increase to just due norms to the our kind I historical So really, in volume. increase back just well as increasing the

increased purchase those of the seeing course, point. purchasing amount but January, we what economic off. that bank, see then, are kind a down 'XX and run charge-offs in unsecured environment, in the see of we that current some And in we'll that's So fair mentioned the purchased We at stopped consumer itself those we and runs given portfolio loans. this of hopefully, as

a what's anything if that's or add. So or Tony it driving little to of bit Tom have

the higher our consumer consumer our Frankly, need originated generation which alleviates success loan a loan credit No. department third-party any through of any for risk. loans, bear organic

asset experienced have consumer We in virtually generated quality or generated loans. no our grandly or issues

at [Operator Tony call over now are time. back turn Instructions] this There Mr. any no to Leo the like remarks. closing further questions for I'd to

for I everyone us will would your to for listening support next you and Financial. we very thank again talk and in joining And like much, today, you to just quarter. thank BayFirst of

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