BAYFIRST FINANCIAL CORP. The following discussion explains our financial condition and results of operations as of and for the three months endedMarch 31, 2022 . The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes presented elsewhere in this report and our Annual Report on Form 10-K for the year endedDecember 31, 2021 , filed with theSEC onMarch 30, 2022 . Annualized results for these interim periods may not be indicative of results for the full year or future periods. In addition to the historical information contained herein, this Form 10-Q includes "forward-looking statements" within the meaning of such term in the Private Securities Litigation Reform Act of 1995. These statements are subject to many risks and uncertainties, including, but not limited to, the effects of the COVID-19 pandemic, including its effects on the economic environment, our customers and our operations, as well as any changes to federal, state or local government laws, regulations or orders in connection with the pandemic; the ability of the Company to implement its strategy and expand its lending 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, including the elimination of LIBOR and the development of substitutes; changes in tax laws, regulations and guidance; and other risks detailed from time to time in filings made by the Company with theSEC . Readers should note that the forward-looking statements included herein are not a guarantee of future events, and that actual events may differ materially from those made in or suggested by the forward-looking statements. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "will," "propose," "may," "plan," "seek," "expect," "intend," "estimate," "anticipate," "believe," "continue," or similar terminology. Any forward-looking statements presented herein are made only as of the date of this document, and we do not undertake any obligation to update or revise any forward-looking statements to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise. Overview The following discussion and analysis presents our financial condition and results of operations on a consolidated basis. However, because we conduct all of our 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 our consolidated financial statements. As a one-bank holding company, we generate most of our revenue from interest on loans and gain-on-sale income derived from the sale of loans into the secondary market. Our primary source of funding for our loans is deposits. We are dependent on noninterest income, which is derived primarily from residential loan fee income and net gain on the sales of the guaranteed portion of government guaranteed loans. Our largest expenses are interest on those deposits and salaries plus related employee benefits. We measure our performance through our net interest income after provision for loan losses, return on average assets, and return on average common equity, while maintaining appropriate regulatory leverage and risk-based capital ratios. 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 Company bases those estimates on historical experience and on various other assumptions that are believed to be reasonable under current circumstances, results of which form the basis for making judgments about the carrying value of certain assets and liabilities that are not readily available from other sources. Estimates are evaluated on an ongoing basis. Actual results may differ from these estimates. Accounting policies, as described in detail in the notes to the Company's consolidated financial statements, are an integral part of the Company's consolidated financial statements. A thorough understanding of these accounting policies is essential when reviewing the Company's reported results of operations and financial position. 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. AtMarch 31, 2022 , the most critical of these significant accounting policies in understanding the estimates and assumptions involved in preparing our consolidated financial statements were the policies 30
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related to the allowance for loan losses, and fair value measurement of SBA servicing rights, residential loans held for sale and residential derivatives, which are discussed more fully below.
Allowance for Loan Losses
The allowance for loan losses is calculated with the objective of maintaining a reserve sufficient to absorb estimated probable losses. Management's determination of the appropriateness of the allowance is based on periodic evaluations of the loan portfolio, lending-related commitments, and other relevant factors. This evaluation is inherently subjective as it requires numerous estimates, including the loss content for internal risk ratings, collateral values, and the amounts and timing of expected future cash flows. In addition, management may include qualitative adjustments intended to capture the impact of other uncertainties in the lending environment such as underwriting standards, current economic and political conditions, and other factors affecting the credit quality. Changes to one or more of the estimates used could result in a different estimated allowance for loan losses.
Fair Value Measurements
Mortgage derivatives, loans held for sale, investments, and certain other loans
are recorded at fair value on a recurring basis. Additionally, from time to
time, other assets and liabilities may be recorded at fair value on a
nonrecurring basis, such as impaired loans, other real estate, SBA servicing
rights, and certain other assets and liabilities. Fair value is an estimate of
the exchange price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction (i.e., not a forced transaction, such as a
liquidation or distressed sale) between market participants at the measurement
date and is based on the assumptions market participants would use when pricing
an asset or liability. Fair value measurement and disclosure guidance
establishes a three-level hierarchy for disclosure of assets and liabilities
recorded at fair value. Valuations generated from model-based techniques that
use at least one significant assumption not observable in the market are
considered Level 3 and reflect estimates of assumptions market participants
would use in pricing the asset or liability.
Changes in these estimates that are likely to occur from period to period, or
the use of different estimates that the Company could have reasonably used in
the current period, could have a material impact on the Company's financial
position or results of operation.
Further, the Company is an emerging growth company. The JOBS Act exempts
emerging growth companies from being required to comply with new or revised
financial accounting standards until private companies are required to comply
with the new or revised financial accounting standards. The JOBS Act provides
that an emerging growth company can elect to opt out of the extended transition
period and comply with the requirements that apply to non-emerging growth
companies but any such election to opt out is irrevocable. We have elected to
take advantage of this extended transition period. 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. 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.
Recent Developments
Final Approval to Convert to a National Bank - On April 19, 2022 , the Bank
received final approval from the Office of the Comptroller of the Currency to
convert First Home Bank to BayFirst National Bank . The conversion is expected to
take place on May 16, 2022 .
Second Quarter Common Stock Dividend. On April 26, 2022 , BayFirst's Board of
Directors declared a second quarter 2022 cash dividend of $0.08 per common
share. The dividend will be payable June 15, 2022 to common shareholders of
record as of June 1, 2022 . This dividend marks the 24th consecutive quarterly
cash dividend paid since BayFirst initiated cash dividends in 2016.
Second Quarter Preferred Series A Stock Dividend. On April 26, 2022 , BayFirst's
Board of Directors declared a quarterly cash dividend of $22.50 on our Series A
Preferred Stock. The dividend will be payable June 15, 2022 to shareholders of
record as of June 1, 2022 . The amount and timing of the dividend is in
accordance with the terms of the Series A Preferred Stock.
Second Quarter Preferred Series B Stock Dividend. On April 26, 2022 , BayFirst's
Board of Directors declared a quarterly cash dividend of $20.00 on our Series B
Convertible Preferred Stock. The dividend will be payable June 15, 2022
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to shareholders of record as of
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Selected Financial Data - Unaudited
As of and for the Three Months Ended
(Dollars in thousands, except per share data) 3/31/2022 12/31/2021 3/31/2021
Income Statement Data:
Net interest income $ 6,406 $ 6,693 $ 12,630
Provision for loan losses (2,400) (2,500) 2,000
Noninterest income 18,868 24,214 33,159
Noninterest expense 27,647 30,224 33,721
Income tax expense 14 372 2,557
Net income 13 2,811 7,511
Preferred stock dividends 208 208 332Net income (loss attributable to) available to common shareholders
$ (195) $ 2,603 $ 7,179 Balance Sheet Data: Average loans held for investment, excluding PPP loans 520,559 518,697 413,558 Average total assets 872,311 923,485 1,636,211 Average common shareholders' equity 83,990 83,056 57,944 Total loans held for investment 561,797 583,948 1,388,533 Total loans held for investment, excluding PPP loans 517,434 504,525 421,259 Total loans held for investment, excl gov't gtd loan balances 365,584 323,363 288,960 Allowance for loan losses 10,170 13,452 22,017 Total assets 888,541 917,095 1,716,831 Common shareholders' equity 85,274 86,685 66,046 Per Share Data: (2) Basic earnings (loss) per common share$ (0.05) $ 0.66 $ 2.05 Diluted earnings (loss) per common share$ (0.05) $ 0.61 $ 1.82 Dividends per common share$ 0.080 $ 0.070 $ 0.067 Book value per common share$ 21.25 $ 21.77 $ 17.95 Tangible book value per common share (1)$ 21.22 $ 21.75 $ 17.93 Performance Ratios: Return on average assets 0.01 % 1.22 % 1.84 % Return on average common equity (0.93) % 12.54 % 49.56 % Net interest margin 3.25 % 3.07 % 3.21 % Dividend payout ratio (164.25) % 10.65 % 3.26 % Asset Quality Data: Net charge-offs$ 882 $ 664 $ 1,145 Net charge-offs/avg loans held for investment excl PPP 0.68 % 0.51 % 1.11 % Nonperforming loans$ 8,834 $ 11,909 $ 9,741 Nonperforming loans (excluding gov't gtd balance)$ 2,660 $ 3,967 $ 3,242 Nonperforming loans/total loans held for investment 1.57 % 2.04 % 0.70 %
Nonperforming loans (excl gov't gtd balance)/total loans held for investment
0.47 % 0.68 % 0.57 %
ALLL/Total loans held for investment 1.81 % 2.30 % 1.59 %
ALLL/Total loans held for investment, excl PPP loans 1.97 % 2.67 % 5.23 %
Other Data:
Full-time equivalent employees 575 637 649
Banking center offices 7 7 6
Loan production offices 20 23 22
(1) See section entitled "GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures" below for a
reconciliation to most comparable GAAP equivalent.
(2) Adjusted for the three-for-two stock split, effective
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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. Our management uses these non-GAAP financial measures in its analysis of our performance, and we believe that providing this information to financial analysts and investors allows them to evaluate capital adequacy.
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
As of
(Dollars in thousands, except per share
data) March 31, 2022 December 31, 2021 March 31, 2021
(Unaudited) (Unaudited) (Unaudited)
Total shareholders' equity $ 94,879 $ 96,290 $ 79,421
Less: Preferred stock liquidation
preference (9,605) (9,605) (13,375)
Total equity available to common
shareholders 85,274 86,685 66,046
Less: Goodwill (100) (100) (100)
Tangible common shareholders' equity $ 85,174 $
86,585
Common shares outstanding 4,013,173 3,981,117 3,678,566
Tangible book value per common share $ 21.22 $ 21.75 $ 17.93
Results of Operations
BayFirst's operating results depend on our net interest income, which is the
difference between interest income on interest-earning assets and interest
expense on interest-bearing liabilities, consisting primarily of deposits. Net
interest income is determined by the difference between yields earned on
interest-earning assets and rates paid on interest-bearing liabilities
("interest rate spread") and the relative amounts of interest-earning assets and
interest-bearing liabilities. Our interest rate spread is affected by
regulatory, economic, and competitive factors which influence interest rates,
loan demand, and deposit flows. In addition, our operating results can be
affected by the level of nonperforming loans, as well as the level of
our noninterest income, and our noninterest expenses, such as salaries and
employee benefits, occupancy and equipment costs, and income taxes.
We are dependent on noninterest income, which is derived primarily from
residential loan fee income and net gain on the sales of the guaranteed portion
of government guaranteed loans. We operate residential mortgage loan production
offices in a number of states. We sell a substantial portion of the mortgage
loans that we originate on the secondary market which generates gains on the
sale of these loans. Additionally, while we retained some of our government
guaranteed loans on our balance sheet, we sell both the guaranteed balance of
our government guaranteed loans, as well as a percentage of the unguaranteed
portions of such loans. This activity generates gains on sales on the guaranteed
portions of the loans.
Net Income
We had net income for the three months ended March 31, 2022 of $13 thousand , or
$(0.05) per diluted common share, compared to net income for the three months
ended March 31, 2021 of $7.51 million , or $1.82 per diluted common share. The
decrease of $7.50 million in net income was the result of lower PPP income and
residential loan fee income, partially offset by higher income from the sale of
SBA loans, and lower noninterest expense.
Net Interest Income
Net interest income was$6.41 million for the three months endedMarch 31, 2022 , a decrease of$6.22 million or 49.28% compared to net interest income for the three months endedMarch 31, 2021 of$12.63 million . This decrease was primarily due to lower net PPP loan interest and origination fee income. The net interest margin for the three months endedMarch 31, 2022 was 3.25% compared to 3.21% for the three months endedMarch 31, 2021 . With the recent rate increase enacted by theFederal Reserve , the net interest margin in future periods could improve as the majority of our SBA loan portfolio rates are tied to Prime resetting quarterly at the beginning of each quarter with a lag in rate increases on deposit accounts. 34
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Average Balance Sheet and Analysis of Net Interest Income
The following tables set forth, for the periods indicated, information
regarding: (i) the total dollar amount of interest and dividend income of
BayFirst from interest-earning assets and the resultant average yields; (ii) the
total dollar amount of interest expense on interest-bearing liabilities and the
resultant average cost; (iii) net interest income; (iv) interest rate spread;
(v) net interest margin; and (vi) ratio of average interest-earning assets to
average interest-bearing liabilities. Loans in nonaccrual status, for the
purposes of the following computations, are included in the average loan
balances. FRB, FHLB, and FNBB restricted equity holdings are included in other
interest-earning assets. The Company did not have a significant amount of
tax-exempt assets.
Three Months Ended
2022 2021
(Dollars in thousands) Average Balance Interest
Yield Average Balance Interest YieldInterest-earning assets: Investment securities$ 30,647 $ 97 1.28 % $ - $ - 0.00 % Loans, excluding PPP (1) 604,055 7,112 4.77 % 591,050 6,599 4.53 % PPP loans 58,058 443 3.09 % 878,532 8,212 3.79 % Other 106,472 88 0.34 % 123,907 81 0.27 % Total interest-earning assets 799,232 7,740 3.93 % 1,593,489 14,892 3.79 % Noninterest-earning assets 73,079 42,722 Total assets$ 872,311 $ 1,636,211 Interest-bearing liabilities: NOW, MMDA and savings$ 609,467 $ 1,086 0.72 %$ 444,612 $ 1,033 0.94 % Time deposits 39,344 131 1.35 % 96,152 287 1.21 % PPPLF advances 22,983 20 0.35 % 885,028 766 0.35 % Other borrowings 9,258 97 4.25 % 57,732 176 1.24 % Total interest-bearing liabilities 681,052 1,334 0.79 % 1,483,524 2,262 0.62 % Demand deposits 95,457 71,894 Noninterest-bearing liabilities 2,207 7,804 Shareholders' equity 93,595 72,989 Total liabilities and shareholders' equity$ 872,311 $ 1,636,211 Net interest income$ 6,406 $ 12,630 Interest rate spread 3.13 % 3.17 % Net interest margin (2) 3.25 % 3.21 % Ratio of average interest-earning assets to average interest-bearing liabilities 117.35 % 107.41 %
(1) Includes nonaccrual loans. (2) Net interest margin represents net interest income divided by average total interest-earning assets.
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Rate/Volume Analysis
The tables below present 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. 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. 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
Three Months EndedMarch 31, 2022 vs.March 31, 2021 : Interest-earning assets: Investment securities $ -$ 97 $ 97 Loans, excluding PPP 366 147 513 PPP loans (1,277) (6,492) (7,769) Other interest-earning assets 19 (12) 7 Total interest-earning assets (892) (6,260) (7,152) Interest-bearing liabilities: NOW, MMDA, and savings (275) 328 53 Time deposits 30 (186) (156) PPPLF advances - (746) (746) Other borrowings 161 (240) (79) Total interest-bearing liabilities (84) (844) (928) Net change in net interest income$ (808) $ (5,416) $ (6,224) Provision for Loan Losses The provision for loan losses is charged to operations to increase the total allowance to a level deemed appropriate by management and is based upon the volume and type of lending we conduct, industry standards, the amount of nonperforming loans, general economic conditions, particularly as they relate to our market area, and other factors that may affect our ability to collect on the loans in our portfolio. As the financial impact of the COVID-19 pandemic became more predictable throughout 2021, the Company began adjusting its allowance for loan losses from the historic high levels reached in 2020 at the onset of the pandemic. The Company continued this trend in the first quarter of 2022 which resulted in a negative provision for the three months endedMarch 31, 2022 of$2.40 million . This compared to a$2.00 million provision for the three months endedMarch 31, 2021 . During the three months endedMarch 31, 2022 , we charged off$882 thousand in loans compared to$1.15 million during the three months endedMarch 31, 2021 . Our ALLL was$10.17 million atMarch 31, 2022 and$22.02 million atMarch 31, 2021 . 36
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Noninterest Income
The following table presents noninterest income for the three months ended
For the Three Months Ended March 31,
(Dollars in thousands) 2022 2021
Noninterest income:
Residential loan fee income $ 13,191 $ 32,029
Loan servicing income, net 461 704
Gain on sale of government guaranteed loans, net 4,621 -
Service charges and fees 282 222
SBA loan fair value gain (loss) (197) 72
Other noninterest income 510 132
Total noninterest income $
18,868
Noninterest income was$18.87 million during the three months endedMarch 31, 2022 , a decrease of$14.29 million or 43.10% from$33.16 million during the three months endedMarch 31, 2021 . The decrease was primarily due to the decrease in residential loan fee income of$18.84 million or 58.82% as a result of a decrease in residential mortgage volume of$380.29 million partially offset by an increase in gains on SBA loan sales.
Noninterest Expense
The following table presents noninterest expense for the three months ended
For the Three Months Ended March 31,
(Dollars in thousands) 2022 2021
Noninterest expense:
Salaries and benefits $ 13,697 $ 13,167
Bonus, commissions, and incentives 4,606 11,873
Mortgage banking 1,002 1,695
Occupancy and equipment 1,421 1,332
Data processing 1,467 1,269
Marketing and business development 1,742 1,642
Professional services 1,307 924
Loan origination and collection 670 496
Employee recruiting and development 871 614
Regulatory assessments 69 102
Other noninterest expense 795 607
Total noninterest expense $ 27,647 $ 33,721
Noninterest expense was $27.65 million during the three months ended March 31,
2022 , a decrease of $6.07 million or 18.01% from $33.72 million during the three
months ended March 31, 2021 . The decrease was primarily due to lower residential
mortgage commissions. Additionally, the Company reduced headcount in the first
quarter of 2022 by 65 with 62 of those from the Residential Mortgage Division.
With a decline in production volume in the Residential Mortgage Division, the
Company reduced its workforce to adjust to the expectations for volume moving
forward. The impact to expense from the reduction of the workforce in the first
quarter 2022 will not provide a meaningful reduction of noninterest expenses
until the second quarter of 2022 and beyond.
Income Taxes
Income tax expense was$14 thousand for the three months endedMarch 31, 2022 , a decrease of$2.54 million from income tax expense of$2.56 million for the three months endedMarch 31, 2021 . The decrease was primarily due to the 37
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decrease in pre-tax earnings. The effective income tax rate was 24.07% for the
three months ended
Financial Condition
Investment Securities The following table presents the fair value of the Company's investment
securities portfolio classified as available-for-sale as of
(Dollars in thousands) March 31, 2022 December 31, 2021 Asset-backed securities $ 7,571 $ 7,535 Mortgaged-backed securities: U.S. Government-sponsored enterprises 4,065 4,394 Collateralized mortgage obligations: U.S. Government-sponsored enterprises 22,146 18,964 Corporate bonds 7,874 - Total investment securities available for sale$ 41,656 $ 30,893
The Company held one security held to maturity at
No securities were pledged as ofMarch 31, 2022 orDecember 31, 2021 , and there were no sales of securities during the three months endedMarch 31, 2022 or the year endedDecember 31, 2021 . The securities available-for-sale presented in the following tables are reported at amortized cost and by contractual maturity as ofMarch 31, 2022 andDecember 31, 2021 . Actual timing may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Additionally, residential mortgage-backed securities and collateralized mortgage obligations receive monthly principal payments, which are not reflected below. March 31, 2022 One year or less One to five years Five to ten years After ten years Amortized Amortized Amortized Amortized (Dollars in thousands) Cost Average Yield Cost Average Yield Cost Average Yield Cost Average Yield Asset-backed securities $ - - % $ - - % $ - - %$ 7,621 1.80 % Mortgaged-backed securities:U.S. Government -sponsored enterprises - - % - - % - - % 4,388 1.53 % Collateralized mortgage obligations:U.S. Government -sponsored enterprises - - % - - % - - % 23,721 1.64 % Corporate bonds - - % 5,018 1.18 % 2,856 2.98 % - - % Total investment securities available for sale $ - - % $ 5,018 1.18 % $ 2,856 2.98 %$ 35,730 1.66 % 38
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December 31, 2021
One year or less One to five years Five to ten years After ten years
Amortized Amortized Amortized Amortized
(Dollars in thousands) Cost Average Yield Cost Average Yield Cost Average Yield Cost Average Yield
Asset-backed securities $ - - % $ - - % $ - - % $ 7,624 0.90 %
Mortgaged-backed securities:
U.S. Government -sponsored
enterprises - - % - - % - - % 4,470 1.32 %
Collateralized mortgage
obligations:
U.S. Government -sponsored
enterprises - - % - - % - - % 19,370 1.31 %
Total investment securities
available for sale $ - - % $ - - % $ - - % $ 31,464 1.21 %
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Loan Portfolio Composition
Through the efforts of our management and loan officers, strong loan production
resulted from our ability to take advantage of the economic recovery and
consolidation in our markets. 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. We have no concentration of
credit in any industry that represents 10% or more of our loan portfolio. The
following table sets forth the composition of our loan portfolio, including LHFS
as of the dates indicated.
March 31, 2022 December 31, 2021
(Dollars in thousands) Amount % of Total Amount % of Total
Residential loans held for sale $ 75,022 $ 114,131
Government guaranteed loans, held for
sale 1,445 1,460
SBA loans held for investment, at fair
value 8,769 9,614
Loans held for investment, at amortized
cost:
Residential real estate 102,897 18.7 % 87,235 15.3 %
Commercial real estate 189,684 34.5 % 163,477 28.7 %
Construction and land 18,038 3.3 % 18,632 3.3 %
Commercial and industrial 180,163 32.8 % 217,155 38.0 %
Commercial and industrial - PPP 44,792 8.2 % 80,158 14.1 %
Consumer and other 13,502 2.5 % 3,581 0.6 %
Loans held for investment, at amortized
cost, gross 549,076 100.0 % 570,238 100.0 %
Discount on SBA 7(a) loans sold (3,335) (3,866)
Discount on PPP loans purchased (10) (13)
Deferred loan costs (fees), net 7,297 7,975
Allowance for loan losses (10,170) (13,452)
Loans held for investment, at amortized
cost, net $ 542,858 $ 560,882 In general, construction loans are originated as construction-to-permanent loans. Third party take-out financing, where applicable, is typically in the form of permanent first mortgage conforming loans.
During the three months endedMarch 31, 2022 , we originated approximately$63.59 million in loans through conventional lending channels,$47.33 million in loans through CreditBench (our SBA lending function), and$335.56 million through the Residential Mortgage Lending Division. During the three months endedMarch 31, 2021 , we originated approximately$20.56 million in loans through conventional lending channels,$15.52 million through CreditBench, exclusive of PPP loans,$285.84 million of PPP loans, and$715.85 million through the Residential Mortgage Lending Division. In 2021, we originated approximately$94.90 million in new loans through conventional lending channels,$169.47 million in loans through CreditBench, exclusive of PPP loans,$329.32 million of PPP loans, and$2.22 billion through the Residential Mortgage Lending Division. 40
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Loan Maturity/Rate Sensitivity
The following table shows the contractual maturities of our loans atMarch 31, 2022 . Loan balances in this table include loans held for investment at fair value, loans held for investment at amortized cost, discount on retained balances of loans sold, discount on PPP loans purchased, and deferred loan costs, net. Due After One Due in One Year Year to Five Due After Five Due After 15 (Dollars in thousands) or Less Years Years to 15 Years Years Total Real estate: Residential $ 4,362 $ 326 $ 8,669$ 89,512 $ 102,869 Commercial 5,271 1,839 24,319 163,104 194,533 Construction and land 2,676 773 635 13,954 18,038 Commercial and industrial 6,947 9,578 165,307 6,565 188,397 Commercial and industrial - PPP 21,234 23,129 - - 44,363 Consumer and other 585 9,317 3,136 559 13,597 Total loans $ 41,075$ 44,962 $ 202,066$ 273,694 $ 561,797
The following table shows our loans with contractual maturities of greater than
one year that have fixed or adjustable interest rates at
Fixed Adjustable
(Dollars in thousands) Interest Rate Interest Rate
Real estate:
Residential $ 23,590 $ 74,917
Commercial 2,428 186,834
Construction and land 5,596 9,766
Commercial and industrial 19,089 162,361
Commercial and industrial - PPP 23,129 -
Consumer and other 3,917 9,095
Total loans $ 77,749 $ 442,973
Credit Risk
The Bank's primary business is making commercial, consumer, and real estate
loans. This activity inevitably has risks for potential loan losses, the
magnitude of which depends on a variety of economic factors affecting borrowers,
which are beyond our control. We have developed policies and procedures for
evaluating the overall quality of our credit portfolio and the timely
identification of potential problem loans. Management's judgment as to the
adequacy of the allowance is based upon a number of assumptions about the
economic environment that it believes impacts credit quality as of the balance
sheet date that it believes to be reasonable, but which may or may not prove
accurate. Thus, there can be no assurance that charge-offs in future periods
will not exceed the ALLL, or that additional increases in the ALLL will not be
required.
Allowance for Loan Losses. The Bank must maintain an adequate ALLL based on a
comprehensive methodology that assesses the probable losses inherent in our loan
portfolio. We maintain an ALLL based on a number of quantitative and qualitative
factors, including levels and trends of past due and nonaccrual loans, asset
classifications, loan grades, change in volume and mix of loans, collateral
value, historical loss experience, size and complexity of individual credits and
economic conditions. Provisions for loan losses are provided on both a specific
and general basis. Specific allowances are provided for impaired credits for
which the expected/anticipated loss is measurable. General valuation allowances
are determined by a portfolio segmentation based on collateral type with a
further evaluation of various quantitative and qualitative factors noted above.
We periodically review the assumptions and formulate methodologies by which
additions are made to the specific and general valuation allowances for loan
losses in an effort to refine such allowances in light of the current status of
the factors described above. The methodology is presented to and approved by the
Bank's Board of Directors. Future additional provisions to the loan loss reserve
may be made as appropriate as new loans are originated or as existing loans may
deteriorate.
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All adversely classified loans are evaluated for impairment. If a loan is deemed impaired, it is evaluated for potential loss exposure. The evaluation occurs at the time the loan is classified and on a regular basis thereafter (at least quarterly). This evaluation is documented in a status report relating to a specific loan or relationship. Specific allocation of reserves on impaired loans considers the value of the collateral, the financial condition of the borrower, and industry and current economic trends. We review the collateral value, cash flow, and tertiary support on each impaired credit. Any deficiency outlined by a real estate collateral evaluation analysis, or cash flow shortfall, is accounted for through a specific allocation for the loan. For performing loans which are evaluated collectively, we perform a portfolio segmentation based on loan type. The government guaranteed loan balances are included in the collectively evaluated for portfolio balances. The loss factors for each segment are calculated using actual loan loss history for each segment of loans over the most recent one to three years, depending on the segment and vintage year of the loans in the segment of SBA loans. The Bank's actual loss experience is supplemented with other economic factors based on the risks present for each portfolio segment. These economic factors include consideration of the following: levels of, and trends in delinquencies and impaired loans; levels of, and trends in charge-offs and recoveries; migration of loans to the classification of special mention, substandard, or doubtful; trends in volume and terms of loans; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedures, and practices; experience, ability, and depth of lending management and other relevant staff; national and local economic trends and conditions; industry conditions; and effects of changes in credit concentration.
While management believes our ALLL is adequate as of
Nonperforming Assets. AtMarch 31, 2022 , we had$2.66 million in nonperforming assets, excluding government guaranteed loan balances, and our ALLL represented 1.81% of total loans. AtMarch 31, 2021 , we had$3.24 million in nonperforming assets, excluding government guaranteed loan balances, and our ALLL represented 1.59% of total loans held for investment. Total loans atMarch 31, 2022 andMarch 31, 2021 include government guaranteed loans, as well as PPP loans, which have no reserves allocated to them. ALLL as a percentage of loans, not including residential loans held for sale and government guaranteed loan balances, was 2.71% atMarch 31, 2022 , compared to 7.35% atMarch 31, 2021 . AtDecember 31, 2021 , we had$3.97 million in nonperforming assets, excluding government guaranteed loan balances, and our ALLL represented 2.30% of total loans, including PPP loans. Total loans atDecember 31, 2021 include government guaranteed loans which have no reserves allocated to them. ALLL as a percentage of loans, not including residential loans held for sale and government guaranteed loan balances, was 4.04% atDecember 31, 2021 .
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.
March 31, March 31, December 31,
(Dollars in thousands) 2022 2021 2021
Nonperforming loans (government guaranteed balances)
2,660 3,242 3,967
Total nonperforming loans 8,834 9,741 11,909
OREO 3 - 3
Total nonperforming assets $ 8,837
1.57 % 0.70 % 2.04 %
Nonperforming loans (excluding government guaranteed balances) to total loans held for investment
0.47 % 0.23 % 0.68 %
Nonperforming assets as a percentage of total assets 0.99 %
0.57 % 1.30 %
Nonperforming assets (excluding government guaranteed balances) to total assets
0.30 % 0.19 % 0.43 %
ALLL to nonperforming loans 115.12 % 226.02 % 112.96 %
ALLL to nonperforming loans (excluding government
guaranteed balances) 382.33 % 679.12 % 339.10 %
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The following table sets forth information with respect to activity in the ALLL
for the periods shown:
At and for the
Three Months Ended
(Dollars in thousands) March 31,
2022 2021
Allowance at beginning of period $ 13,452 $ 21,162
Charge-offs:
Commercial and industrial (1,031) (1,137)
Consumer and other (15) (16)
Total charge-offs (1,046) (1,153)
Recoveries:
Commercial real estate 8 -
Commercial and industrial 153 5
Consumer and other 3 3
Total recoveries 164 8
Net charge-offs (882) (1,145)
Provision for loan losses (2,400) 2,000
Allowance at end of period $ 10,170 $ 22,017
Net charge-offs to average loans held for investment 0.61 % 0.35 %
Allowance as a percent of total loans held for investment 1.81 % 1.59 %
Allowance as a percent of loans held for investment, not including government guaranteed loans
2.71 % 7.35 %
Allowance as a percent of nonperforming loans 115.12 % 226.02 %
Total loans held for investment $ 563,242 $ 1,388,533
Average loans held for investment $ 578,617 $ 1,292,090
Nonperforming loans (including government guaranteed balances) $ 8,834 $ 9,741
Nonperforming loans (excluding government guaranteed balances) $ 2,660 $ 3,242
Guaranteed balance of all government guaranteed loans $ 187,444 $ 1,089,098
Loans held for sale, residential
The following table details net charge-offs to average loans outstanding by loan
category for the years ended
2022 2021
(Dollars in thousands) Net Charge-off/(Recovery) Average Loans HFI Net Charge-off/(Recovery) Ratio Net Charge-off/(Recovery) Average Loans HFI Net Charge-off/(Recovery) Ratio
Residential real estate $ - $ 76,881 - % $ - $ 54,987 - %
Commercial real estate (8) 216,373 (0.01) - 151,259 -
Commercial and industrial 878 222,305 1.58 1,132 205,889 2.20
Commercial and industrial - PPP - 58,058 - - 878,532 -
Consumer and other 12 5,000 0.96 13 1,423 3.65
Total loans $ 882 $ 578,617 0.61 % $ 1,145 $ 1,292,090 0.35 %
We recorded a negative provision of $2.40 million during the three months ended
March 31, 2022 , compared to a provision of $2.00 million for the same period in
2021. For the year ended 2021, the provision for loan losses was $3.50 million .
During 2020 and the first quarter of 2021, we increased the qualitative factors
in the allowance for loan losses calculation for the decline in economic
indicators caused by the COVID-19 pandemic resulting in significant provision
expense in those periods. As asset quality has remained stable and as many of
the Company's SBA loans were bolstered by additional government support,
additional provision for loan losses was not deemed necessary. Since 2016, the
Company's loan
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losses have been incurred primarily in its SBA unguaranteed loan portfolio, particularly loans originated under the SBA 7(a) Small Loan Program. The Small Loan Program represents loans of$350,000 or less and such loans carry an SBA guarantee of 75% to 90% of the loan, depending on the original principal balance. The default rate on loans originated in the SBA 7(a) Small Loan Program is significantly higher than the Bank's other SBA 7(a) loans, conventional commercial loans, or residential mortgage loans. Nonperforming assets to total assets, excluding government guaranteed loan balances, were 0.30%, as ofMarch 31, 2022 , as compared to 0.19% as ofMarch 31, 2021 . This percentage was 0.43% as ofDecember 31, 2021 . Since the majority of the Company's loan portfolio consisted of SBA loans, most of which received from the SBA principal and interest payments under Section 1112 of the CARES Act during 2020 and 2021, asset quality trends may appear more favorable than they otherwise would without the SBA's support under the CARES Act. As ofMarch 31, 2022 , a total of 13 loans with principal balances of$676 thousand were under payment deferrals. Of those, all were government guaranteed loans with$358 thousand in outstanding unguaranteed balances. As expected, the level of SBA loans on deferral increased with the expiration of the Section 1112 payment support afforded under the CARES Act at which point certain borrowers requested payment deferrals. With the Economic Aid Act signed into law onDecember 27, 2020 , Section 1112 CARES Act payments were extended, with some stipulations, which assisted the majority of our SBA borrowers for three months and, depending on the type of business, up to eight months of additional principal and interest payments with a cap of$9,000 per month per borrower, beginning inFebruary 2021 . Although the Company's asset quality trends indicate minimal stress on the portfolio, management incorporated a qualitative measure in the allowance for loan losses calculation.
SBA and Other Government Guaranteed Loans
The following table sets forth, for the periods indicated, information regarding
our SBA and other government guaranteed lending activity, excluding PPP loans.
At and for the
At and for the Three Months Ended Year Ended
(Dollars in thousands) March 31, December 31,
Government Guaranteed, Excluding PPP 2022 2021 2021
Number of loans originated 86 49 374
Amount of loans originated $ 47,332 $ 15,520 $ 169,467
Average loan size originated $ 550 $ 317 $ 453
Government guaranteed loan balances sold $ 71,345 $ - $ 44,854
Government unguaranteed loan balances sold $ 4,351 $ - 5,034
Total government guaranteed loans $ 271,317 $ 261,502 $ 300,415
Government guaranteed loan balances $ 143,081 $ 121,824 $ 171,548
Government unguaranteed loan balances $ 128,236 $ 147,258 $ 128,867
Government guaranteed loans serviced for others $ 507,986
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We make government guaranteed loans throughoutthe United States . The following table sets forth, at the dates indicated, information regarding the geographic disbursement of our SBA loan portfolio. The "All Other" category includes states with less than 5% in any period presented. March 31, December 31, 2022 2021 2021 (Dollars in thousands) Amount % of Total Amount % of Total Amount % of Total Florida$ 83,129 31 %$ 65,622 25 %$ 89,143 30 % California 29,967 11 % 34,163 13 % 32,924 11 % Texas 17,835 7 % 17,992 7 % 20,976 7 % Georgia 12,512 5 % 14,093 5 % 13,894 5 % All Other 127,874 46 % 129,632 50 % 143,478 47 % Total government guaranteed loans, excluding PPP loans$ 271,317 100 %$ 261,502 100 %$ 300,415 100 % Residential Mortgage Loans
The following table sets forth, for the periods indicated, information regarding our residential mortgage lending activity.
For the Three Months Ended March 31,
(Dollars in thousands) 2022 2021
Number of loans originated 1,051 2,372
Amount of loans originated $ 335,560 $ 715,849
Average loan size originated $ 319 $ 302
Loan balances sold $ 371,929 $ 710,465
Deposits
General. In addition to deposits, sources of funds available for lending and for
other purposes include loan repayments and proceeds from the sales of loans.
Loan repayments are a relatively stable source of funds, while deposit inflows
and outflows are influenced significantly by general interest rates and market
conditions. Borrowings, as well as available lines of credit, may be used on a
short-term basis to compensate for reductions in other sources, such as deposits
at less than projected levels.
Deposits. Deposits are attracted principally from within our primary service
area of Pinellas , Hillsborough , Manatee , Pasco , and Sarasota Counties, Florida .
We offer 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. 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. We emphasize commercial banking
relationships in an effort to increase demand deposits as a percentage of total
deposits. Deposit interest rates are set by management at least monthly or more
often if conditions require it, based on a review of loan demand, deposit flows
for the previous period and a survey of rates among competitors and other
financial institutions in Florida .
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The amounts of each of the following categories of deposits, at the dates indicated, are as follows: (Dollars in thousands) March 31, 2022 December 31, 2021 Noninterest-bearing deposits$ 92,680 12.0 % $ 83,638 11.6 % Interest-bearing transaction accounts 180,815 23.5 % 163,495 22.7 % Money market accounts 447,837 58.2 % 408,257 56.5 % Savings 17,010 2.2 % 15,607 2.2 % Subtotal 738,342 95.9 % 670,997 93.0 % Total time deposits 31,787 4.1 % 50,688 7.0 % Total deposits$ 770,129 100.0 %$ 721,685 100.0 %
At
The following table provides information on the maturity distribution of the time deposits exceeding theFDIC insurance limit of$250,000 as ofMarch 31, 2022 . (Dollars in thousands) Three months or less$ 1,100 Over three months through six months 312 Over six months through 12 months 3,766 Over 12 months 979 Total$ 6,157 Other Borrowings InJune 2021 , the Company issued$6.00 million of Subordinated Debentures (the "Debentures") that matureJune 30, 2031 and are redeemable after five years. The Debentures carry interest at a fixed rate of 4.50% per annum for the initial five years of their term and carry interest at a floating rate for the final five years of their term. Under the terms of the Debentures, the floating rates are based on a SOFR benchmark plus 3.78% per annum. The Debentures were issued to redeem a$6.00 million Subordinated Debenture which was issued inDecember 2018 and which carried interest at a fixed rate of 6.875% per annum.
The balance of Subordinated Debentures outstanding at the Company, net of
offering costs, amounted to
InMarch 2020 , the Company renegotiated the terms of its outstanding senior debt and combined its line of credit and term note into one amortizing note with quarterly principal and interest payments with interest at Prime (3.50% atMarch 31, 2022 ). The new note matures onMarch 10, 2029 and the balance of the note was$3.19 million and$3.30 million atMarch 31, 2022 andDecember 31, 2021 , respectively. The note is secured by 100% of the stock of the Bank and requires the Company to comply with certain loan covenants during the term of the note. InApril 2020 , the Company entered into theFederal Reserve Bank's PPPLF. Under the PPPLF, advances were secured by pledges of loans to small businesses originated by the Company under the PPP. The PPPLF accrued interest at 0.35% per annum and matured at various dates equal to the maturity date of the PPPLF collateral pledged to secure the advance, and accelerated on and to the extent of any PPP loan forgiveness reimbursement by the SBA for any PPPLF collateral or the date of purchase by the SBA from the borrower of any PPPLF collateral. On the maturity date of each advance, the Company repaid the advance plus accrued interest. The balance outstanding on this facility was$69.65 million atDecember 31, 2021 . In the first quarter of 2022, the Company repaid the remaining balance of the advance.
Capital Resources
Shareholders' equity is influenced primarily by earnings, dividends, the Company's sales and repurchases of its common and preferred stock and changes in accumulated other comprehensive income caused primarily by fluctuations in unrealized gains or losses, net of taxes, on available for sale investment securities.
Shareholders' equity decreased$1.41 million to$94.88 million atMarch 31, 2022 as compared to$96.29 million atDecember 31, 2021 . The decrease was the result of decreases of$1.04 million of accumulated other comprehensive income 46
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due to increases in net unrealized losses on available-for-sale securities,$208 thousand of dividends declared on our preferred stock, and$321 thousand of dividends declared on our common stock during the three months endedMarch 31, 2022 . We strive to maintain an adequate capital base to support our activities in a safe and sound manner while at the same time attempting to maximize shareholder value. We assess capital adequacy against the risk inherent in our 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. Failure to meet minimum capital requirements can initiate certain mandatory and discretionary actions by banking regulators that, if undertaken, could have a direct material effect on BayFirst's and the Bank's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, we must meet specific capital guidelines that involve quantitative measures of our assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. Our capital amounts and classification are also subject to qualitative judgments by regulators about components, risk weightings, and other factors. In 2020, the Federal banking regulatory agencies adopted a rule to simplify the methodology for measuring capital adequacy for smaller, uncomplicated banks. This CBLR is calculated as the ratio of tangible equity capital divided by average total consolidated assets. CBLR tangible equity is defined as total equity capital, prior to including minority interests, and excluding accumulated other comprehensive income, deferred tax assets arising from net operating loss and tax credit carryforwards, goodwill, and other intangible assets (other than mortgage servicing assets). Under the proposal, a qualifying organization may elect to use the CBLR framework if its CBLR is greater than 9%. The Bank has elected not to use the CBLR framework.
At
As of the dates indicated, the Bank met all capital adequacy requirements to
which it is subject. The Bank's actual capital amounts and percentages are as
shown in the table below (dollars in thousands):
Actual Minimum(1) Well Capitalized(2)
(Dollars in thousands) Amount Percent Amount Percent Amount Percent
As of March 31, 2022
Total Capital (to risk-weighted
assets) $ 106,128 19.45 % $ 43,656 8.00 % $ 54,570 10.00 %
Tier 1 Capital (to risk-weighted
assets) 99,247 18.19 % 32,742 6.00 % 43,656 8.00 %
Common Equity Tier 1 Capital (to
risk-weighted assets) 99,247 18.19 % 24,556 4.50 % 35,470 6.50 %
Tier 1 Capital (to total assets) 99,247 11.75 % 33,774 4.00 % 42,218 5.00 %
As of December 31, 2021
Total Capital (to risk-weighted
assets) 106,002 21.25 % 39,909 8.00 % 49,886 10.00 %
Tier 1 Capital (to risk-weighted
assets) 99,656 19.98 % 29,932 6.00 % 39,909 8.00 %
Common Equity Tier 1 Capital (to
risk-weighted assets) 99,656 19.98 % 22,449 4.50 % 32,426 6.50 %
Tier 1 Capital (to total assets) 99,656 12.22 % 32,619 4.00 % 40,774 5.00 %
____________
(1) To be considered "adequately capitalized" under the
(2) To be considered "well capitalized" under the
Contractual Obligations
In the ordinary course of our operations, we enter into certain contractual obligations. Total contractual obligations atMarch 31, 2022 were$45.89 million , a decrease of$89.08 million from$134.97 million atDecember 31, 2021 . The decrease was primarily due to the payoff of$69.65 million in PPP Liquidity Facility and a decrease in time deposits of$18.90 million . 47
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The following tables present our contractual obligations as of
Contractual Obligations as of
One to Three Three to Five
(Dollars in thousands) Less than One Year Years Years Over Five Years Total
Operating lease obligations $ 1,409 $ 2,161 $ 1,211 $ 151 $ 4,932
Long-term borrowings - - - 3,186 3,186
Subordinated notes - - - 5,987 5,987
Time deposits 25,097 5,773 917 - 31,787
Total $ 26,506 $ 7,934 $ 2,128 $ 9,324 $ 45,892 Contractual Obligations as of
One to Three Three to Five
(Dollars in thousands) Less than One Year Years Years Over Five Years Total
Operating lease obligations $ 1,454 $ 2,249 $ 1,279 $ 301 $ 5,283
Long-term borrowings - - - 3,299 3,299
PPP Liquidity Facility 44,647 - 25,007 - 69,654
Subordinated notes - - - 6,050 6,050
Time deposits 40,868 9,210 610 - 50,688
Total $ 86,969 $ 11,459 $ 26,896 $ 9,650 $ 134,974 Off-Balance Sheet Arrangements
The Bank is a party to financial instruments with off-balance sheet risk in the normal course of business. These financial instruments primarily include unfunded loan commitments, undisbursed loans in process, unfunded lines of credit, and standby letters of credit. The Bank uses these financial instruments to meet the financing needs of its customers. These financial instruments involve, to varying degrees, elements of credit, interest rate, and liquidity risk. These do not present unusual risks and management does not anticipate any accounting losses that would have a material effect on the Bank.
A summary of the amounts of the Bank's financial instruments, with off-balance sheet risk as of the dates indicated, is as follows:
March 31, December 31,
(Dollars of thousands) 2022 2021
Unfunded loan commitments $ 15,411 $ 18,567
Unused lines of credit 62,470 52,076
Standby letters of credit 68 68
Total $ 77,949 $ 70,711
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. 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. The amount of collateral obtained if deemed
necessary by the Bank upon extension of credit is based on management's credit
evaluation of the counterparty.
Standby letters-of-credit are conditional lending commitments that we issue to
guarantee the performance of a customer to a third party and to support private
borrowing arrangements. Essentially, letters of credit issued have expiration
dates within one year of the issue date. The credit risk involved in
issuing letters of credit is essentially the same as that involved in extending
credit. The Bank may hold collateral supporting those commitments. Newly issued
or modified guarantees that are not derivative contracts have been recorded on
the Bank's balance sheet at their fair value at inception.
In general, loan commitments and letters of credit are made on the same terms, including with respect to collateral, as outstanding loans. Each customer's creditworthiness and the collateral required are evaluated on a case-by-case basis.
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Liquidity
Liquidity management is the process by which we manage the flow of funds necessary to meet our financial commitments on a timely basis and at a reasonable cost and to take advantage of earnings enhancement opportunities. These financial commitments include withdrawals by depositors, credit commitments to borrowers, expenses of our operations, and capital expenditures. The Bank generally maintains a liquidity ratio of liquid assets to total assets, excluding PPP loans pledged to the PPPLF, 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. Our on-balance sheet liquidity ratio atMarch 31, 2022 was 18.77%, as compared to 16.76% atDecember 31, 2021 . During the three months endedMarch 31, 2022 , the Bank purchased additional investment securities, all of which were classified as investment securities available for sale. The fair value of all of our investment securities available for sale totaled$41.66 million atMarch 31, 2022 . During each of the quarters of 2021 and the first quarter of 2022,the Bank paid a dividend of$250 thousand to BayFirst. Prior to that, the Bank retained its earnings to support its growth. Therefore, BayFirst's liquidity had historically been dependent soley on funds received from the issuance and sale of debt and equity securities. 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, and common stock, and payment of certain operating expenses. As ofMarch 31, 2022 , BayFirst held$1.51 million in cash and cash equivalents.
A description of BayFirst's and the Bank's debt obligations is set forth above under the heading "Other Borrowings."
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