BayFirst Financial Corp. Reports Third Quarter 2022 Results; Highlighted by Strong SBA 7(a) and Conventional Loan Production and Net Interest Margin Expansion

ST. PETERSBURG, Fla., Oct. 28, 2022 (GLOBE NEWSWIRE) -- BayFirst Financial Corp. (NASDAQ: BAFN) (“BayFirst” or the “Company”), parent company of BayFirst National Bank (the “Bank”) today reported net income from continuing operations of $3.1 million for the third quarter of 2022 compared to $391 thousand in the second quarter of 2022. Following the strategic decision to discontinue the Bank’s nationwide residential mortgage operations, BayFirst recognized a one-time charge of $3.7 million in the third quarter of 2022. Net loss inclusive of discontinued operations was $1.4 million, or $0.35 per diluted share, for the third quarter of 2022, compared to a net loss of $282 thousand, or $0.10 per diluted share, in the second quarter of 2022. In the third quarter of 2021, net income inclusive of discontinued operations was $1.3 million, or $0.26 per diluted share. Quarterly financial results were highlighted by robust loan production in community banking, up 172% year over year, as well as the best quarter of SBA 7(a) loan production in the Company’s history.

The increase in earnings from continuing operations during the third quarter of 2022, compared to the second quarter of 2022, included an increase in interest income of $3.5 million driven primarily from rising interest rates on variable rate loans and a $39.1 million increase in loans held for investment. Results for the third quarter of 2022 included a $750 thousand provision for loan losses, compared to a $250 thousand provision for loan losses in the preceding quarter and a negative provision for loan losses of $3.0 million in the third quarter of 2021.

“The third quarter represented a significant transition for BayFirst as we exited our national mortgage lending business to focus our efforts on building the premier bank of Tampa Bay,” stated Anthony N. Leo, Chief Executive Officer. “Supported by our top 10 SBA lending division CreditBench, and the investments we’ve made in an advanced technology platform, BayFirst is now poised to enter a new era of growth and profitability. Notwithstanding the significant charges associated with discontinuation of the mortgage lending division, we are extremely pleased with third quarter results, as net income from continuing operations was $3.1 million.”

“In addition to improved core operating results from continuing operations, we benefited from strong loan production from community banking and SBA lending. Loans held for investment excluding PPP loans were up 7.9% during the quarter, and 31.6% compared to a year ago, with the growth well diversified across all of our loan categories. SBA lending through our CreditBench division has grown substantially, surpassing last quarter’s record levels, with SBA loan production of $139.2 million. Additionally, our net interest margin improved 90 basis points on a linked quarter basis, as we benefited from recent interest rate increases. With the one-time expenses for exiting the national residential mortgage business behind us, we remain well positioned for growth throughout the rest of the year and into 2023.”

“While other financial institutions in our markets are closing banking centers, we continue to grow our community bank, opening our eighth banking center in West Bradenton last month. We plan to open a second Tampa banking center in early 2023 with two additional branches in Sarasota currently under construction and expected to be open late 2023 or early 2024, expanding our network of bank offices throughout the Tampa Bay region. We were fortunate that Hurricane Ian had minimal impact on our branch locations and overall organization. Our bankers are working to help all businesses and residents that were impacted throughout the broader region,” concluded Leo.

Third Quarter 2022 Performance Review

• The Company’s SBA loan origination platform, CreditBench, originated $139.2 million in new SBA loans during the third quarter of 2022, a 54.7% increase compared to $90.0 million originated in the second quarter of 2022, and a 194.6% increase over $47.3 million of loans produced during the third quarter of 2021. Late in the second quarter, the Company launched BOLT, an SBA 7(a) loan product designed to expeditiously provide working capital loans of $150 thousand or less to businesses throughout the country. During the third quarter, the Company originated 425 BOLT loans totaling $55.9 million.
• Loans held for investment, excluding PPP loans, increased by $48.1 million or 7.9% to $658.7 million during the third quarter of 2022 and $158.0 million, or 31.6% over the past year. Production during the quarter was partially offset by $124.4 million in sales of principal balances of SBA loans.
• The Residential Mortgage Division originated $245.4 million in loans during the third quarter of 2022, a reduction of 19.7% compared to $305.6 million originated during the second quarter of 2022, and a 49.2% reduction compared to $506.7 million of loans produced during the third quarter of 2021.
• Deposits increased by $20.3 million, or 2.7% during the third quarter of 2022 and increased by $110.7 million, or 16.4% over the past year to $785.7 million at September 30, 2022. During the third quarter of 2022, there were increases in time deposit balances of $75.9 million partially offset by decreases in money market and savings account balances of $51.8 million.
• Tangible book value at September 30, 2022 was $20.10 per common share, down from $20.80 at June 30, 2022, primarily due to the net loss and the increase in accumulated other comprehensive loss. Over the course of the past year, tangible book value decreased $1.20 per common share, or 5.6%, from $21.30 at September 30, 2021.
• Net interest margin including discontinued operations expanded 90 bps to 4.63% in the third quarter of 2022, from 3.73% in the second quarter of 2022.

Results of Operations

Net Income (Loss)

Net loss was $1.4 million for the third quarter of 2022 compared to a net loss of $282 thousand in the second quarter of 2022, and net income of $1.3 million in the third quarter of 2021. The increase in net loss for the third quarter of 2022 from the preceding quarter was primarily due to an increase of $3.1 million in charges to discontinue residential operations and a $1.7 million decrease in SBA loan fair value gains, which resulted primarily from election of the fair value option on significantly less principal balance in the third quarter of 2022, compared to second quarter of 2022. This was partially offset by an increase of $2.6 million in net interest income and an increase of $3.6 million in gain on sale of SBA loans. The decrease in net income from the third quarter of 2021 was partially due to a $7.1 million unfavorable change from discontinued operations. Additionally, loan loss provision changed unfavorably by $3.8 million from the third quarter of 2021. This was partially offset by an increase of $1.9 million in net interest income and an increase of $7.8 million in gain on sale of SBA loans.

In the first nine months of 2022, the net loss was $1.7 million, a decrease of $23.5 million from the net income of $21.8 million in the first nine months of 2021. The decrease in net income was the result of an increase in the net loss from discontinued operations of $18.7 million, a $13.8 million gain on sale of PPP loans in 2021 which did not recur in 2022, an increase in non-interest expense on continuing operations of $4.7 million, and lower PPP income. These items were partially offset by a $3.4 million increase related to held for investment SBA loan fair value gains and higher gains on non-PPP SBA guaranteed loan sales of $16.3 million. The increase in the net loss from discontinued operations was primarily the result of a decrease in gain on sale of residential mortgage loans of $46.4 million and the recognition of restructuring charges of $4.3 million for the discontinuation of the nationwide residential mortgage division, partially offset by lower non-interest expense of $26.1 million.

Net Interest Income and Net Interest Margin

Net interest income from continuing operations was $9.2 million in the third quarter of 2022, an increase of $2.6 million or 39.2% from $6.6 million in the second quarter of 2022, and an increase of $1.9 million or 26.0% from $7.3 million in the third quarter of 2021. The increase during the third quarter of 2022 as compared to the prior quarter was mainly due to the increase in non-PPP loan interest income partially offset by an increase in deposit interest expense. The increase during the third quarter of 2022 as compared to the year ago quarter was mainly due to the increase in loan interest income, including fees, of $2.0 million.

Net interest income from continuing operations was $21.4 million in the first nine months of 2022, a decrease of $9.4 million or 30.4% from $30.8 million in the first nine months of 2021. The decrease was mainly due to a decline in net PPP income of $17.8 million.

Net interest margin including discontinued operations improved to 4.63% for the third quarter of 2022, which represented increases of 90 basis points, compared to 3.73% from the preceding quarter and 159 basis points compared to 3.04% from the same quarter last year. Net interest margin including discontinued operations improved to 3.90% for the first nine months of 2022, compared to 3.26% for the first nine months of 2021. With recent rate increases, the Company anticipates further improvement in its net interest margin as its SBA loan portfolio rates are tied to the prime lending rate with the vast majority resetting at the beginning of each calendar quarter.

Noninterest Income

Noninterest income from continuing operations was $9.8 million for the third quarter of 2022, an increase of $2.1 million or 27.7% from $7.7 million in the second quarter of 2022, and an increase of $9.2 million from $610 thousand in the third quarter of 2021. The increase in the third quarter of 2022, as compared to the prior quarter, was primarily due to $3.6 million of additional gain on sale of SBA loans, partially offset by a $1.7 million decrease related to held for investment SBA loan fair value gains. The increase from a year ago quarter was primarily the result of an increase of $7.8 million in gains on SBA loan sales.

Noninterest income from continuing operations was $23.1 million for the first nine months of 2022, an increase of $6.8 million or 41.3% from $16.4 million in the first nine months of 2021. The increase was primarily due to higher gains on the sale of non-PPP SBA loans of $16.3 million and an increase related to held for investment SBA loan fair value gains of $3.4 million, partially offset by the $13.8 million gain on sale of PPP loans in 2021 which did not recur in 2022.

Noninterest Expense

Noninterest expense from continuing operations was $14.2 million in the third quarter of 2022, which was a $466 thousand or 3.4% increase from $13.7 million in the second quarter of 2022 and a $1.6 million or 12.7% increase compared to $12.6 million in the third quarter of 2021. The increase from a year ago quarter was primarily due to higher compensation expense, occupancy expense, data processing expense and loan origination expense, partially offset by lower professional services expense.

Noninterest expense from continuing operations was $41.7 million in the first nine months of 2022, which was a $4.7 million or 12.7% increase from $37.0 million in the first nine months of 2021. The increase was primarily the result of higher salaries and benefits and occupancy expense.

Discontinued Operations

Net loss on discontinued operations was $4.5 million in the third quarter of 2022, which was a $3.8 million increase from a loss of $673 thousand in the second quarter of 2022. The company recorded net income on discontinued operations of $2.6 million in the third quarter of 2021. The increase in the net loss from the previous quarter was the result of a decrease in gains on sale of residential mortgage loans of $3.1 million and an increase in restructuring charges of $3.1 million for the discontinuation of the nationwide residential mortgage division, partially offset by a decrease in noninterest expense, excluding restructuring charges, of $1.2 million and a decrease in income tax benefit of $1.3 million. The $7.1 million decrease in income from the year ago quarter was primarily due to a decrease in residential loan fee income of $14.3 million and the restructuring charges for the discontinuation of residential mortgage division of $3.7 million recorded in the third quarter of 2022. This was partially offset by a decrease in noninterest expense, excluding the restructuring charges, of $8.4 million and a decrease in income tax expense of $2.3 million.

Net loss from discontinued operations was $5.0 million in the first nine months of 2022, which was an $18.6 million reduction from net income of $13.6 million in the first nine months of 2021. The reduction in net income was primarily the result of a decrease in residential loan fee income of $46.4 million and the restructuring charges for the discontinuation of residential mortgage division of $4.3 million recorded in the second and third quarters of 2022. This was partially offset by a $26.1 million decrease in noninterest expense excluding the restructuring charge and a decrease in income tax expense of $6.2 million.

Balance Sheet

Assets

Total assets increased $8.9 million or 1.0% during the third quarter of 2022 to $930.3 million, mainly due to new loan production, partially offset by a decrease in cash and cash equivalents and the sale of $124.4 million in SBA loans.

Loans

Loans held for investment, excluding PPP loans, increased $48.1 million or 7.9% during the third quarter of 2022 and $158.0 million or 31.6%, over the past year to $658.7 million, due to increases in both conventional community bank loans and SBA loans, partially offset by SBA loan sales. PPP loans, net of deferred origination fees, decreased $9.1 million in the third quarter of 2022 to $22.1 million, due primarily to PPP forgiveness payments.

Deposits

Deposits increased $20.3 million or 2.7% during the third quarter of 2022 and increased $110.7 million or 16.4% compared to September 30, 2021, ending the third quarter of 2022 at $785.7 million. During the third quarter, time deposit balances increased, partially offset by a decrease in interest-bearing transaction, savings, and money market account balances. Over the past year, all types of deposit account balances increased.

Asset Quality

Asset quality remained stable in the third quarter of 2022. As the financial impact of the COVID-19 pandemic became more predictable throughout 2021 and 2022, the Company began adjusting downward its allowance for loan losses from the historic high levels reached in 2020 at the onset of the pandemic. The Company recorded a provision for loan losses in the third quarter of $750 thousand, which compared to a $250 thousand provision for the second quarter of 2022, and a $3.0 million negative provision for loan losses during the third quarter of 2021.

The ratio of the allowance for loan losses to total loans held for investment at amortized cost, excluding government guaranteed loans, was 1.90% at September 30, 2022, 2.14% as of June 30, 2022, and 5.29% as of September 30, 2021.

Over the past five years, the Company’s loan 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 thousand or less and carry an SBA guaranty of 75% to 85% of the loan, depending on the original principal balance. The default rate on loans originated in the SBA 7(a) Small Loan Program has been higher than the Bank’s other loans.

Net charge-offs for the third quarter of 2022 were $575 thousand, a $281 thousand decrease from $856 thousand for the second quarter of 2022 and a $606 thousand decrease compared to $1.2 million in the third quarter of 2021. Annualized net charge-offs as a percentage of average loans, excluding PPP loans, were 0.35% for the third quarter of 2022, down from 0.61% in the second quarter of 2022 and 1.01% in the third quarter of 2021. Nonperforming assets, excluding government guaranteed loans, to total assets was 0.44% as of September 30, 2022, compared to 0.47% as of June 30, 2022, and 0.40% as of September 30, 2021.

Capital

The Bank’s Tier 1 leverage ratio was 10.48% as of September 30, 2022, a decrease from 11.37% as of June 30, 2022, and from 12.64% at September 30, 2021. The CET 1 and Tier 1 capital ratio to risk-weighted assets were 13.77% as of September 30, 2022, a decrease from 15.12% as of June 30, 2022, and from 21.21% as of September 30, 2021. The total capital to risk-weighted assets ratio was 15.02% as of September 30, 2022, a decrease from 16.37% as of June 30, 2022, and from 22.50% as of September 30, 2021.

Recent Events

Fourth Quarter Common Stock Dividend. On October 25, 2022, BayFirst’s Board of Directors declared a fourth quarter 2022 cash dividend of $0.08 per common share. The dividend will be payable December 15, 2022 to common shareholders of record as of December 1, 2022. This dividend marks the 26^th consecutive quarterly cash dividend paid since BayFirst initiated cash dividends in 2016.

About BayFirst Financial Corp.

BayFirst Financial Corp. is a registered bank holding company which commenced operations on September 1, 2000. Its primary source of income is from its wholly owned subsidiary, BayFirst National Bank (f/k/a First Home Bank), which commenced business operations on February 12, 1999. BayFirst National Bank is a national banking association. The Bank currently operates eight full-service office locations and was in the top 8 by dollar volume and number of units originated nationwide through the fourth quarter ended September 30, 2022, of SBA's 2022 fiscal year. In the 5 county Tampa Bay market, BayFirst was proud to rank number one by both dollar volume and number of units originated during the same period.

BayFirst Financial Corp., through the Bank, offers a broad range of commercial and consumer banking services including various types of deposit accounts and loans for businesses and individuals. As of September 30, 2022, BayFirst Financial Corp. had $930.3 million in total assets.

Forward Looking Statements

In addition to the historical information contained herein, this presentation 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, global military hostilities, or climate change, including their 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 them; the ability of the Company to implement its strategy and expand its banking operations; changes in interest rates and other general economic, business and political conditions, including changes in the financial markets; changes in business plans as circumstances warrant; risks related to mergers and acquisitions; changes in benchmark interest rates used to price loans and deposits, changes in tax laws, regulations and guidance; and other risks detailed from time to time in filings made by the Company with the SEC, including, but not limited to those “Risk Factors” described in our most recent Form 10-K and Form 10-Q. 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.

BAYFIRST FINANCIAL CORP.
SELECTED FINANCIAL DATA (Unaudited)

	At or for the three months ended
(Dollars in thousands, except for share data)	9/30/2022				6/30/2022				3/31/2022				12/31/2021				9/30/2021
Balance sheet data:
Average loans held for investment, excluding PPP loans	$	663,716			$	561,455			$	520,559			$	518,697			$	467,283
Average total assets		939,847				879,868				872,311				923,485				1,086,377
Average common shareholders’ equity		83,014				83,235				83,990				83,056				81,989
Total loans held for investment		680,805				641,737				561,797				583,948				656,294
Total loans held for investment, excluding PPP loans		658,669				610,527				517,434				504,525				500,647
Total loans held for investment, excl gov’t gtd loan balances		520,408				458,624				374,353				332,977				316,528
Allowance for loan losses		9,739				9,564				10,170				13,452				16,616
Total assets		930,275				921,377				888,541				917,095				943,743
Common shareholders’ equity		81,032				83,690				85,274				86,685				83,593
Share data:
Basic earnings per common share	$	(0.40	)		$	(0.12	)		$	(0.05	)		$	0.66			$	0.26
Diluted earnings per common share		(0.35	)			(0.10	)			(0.05	)			0.61				0.26
Dividends per common share		0.08				0.08				0.08				0.07				0.07
Book value per common share		20.10				20.82				21.25				21.77				21.32
Tangible book value per common share (1)		20.10				20.80				21.22				21.75				21.30
Performance and capital ratios:
Return on average assets		(0.60				(0.13				0.01	%			1.22	%			0.47	%
Return on average common equity		(7.76	)%			(2.35	)%			(0.93	)%			12.54	%			5.12	%
Net interest margin		4.63	%			3.73	%			3.25	%			3.07	%			3.04	%
Dividend payout ratio		(20.02	)%			(65.54	)%			(164.25	)%			10.65	%			26.09	%
Asset quality ratios:
Net charge-offs	$	575			$	856			$	882			$	664			$	1,181
Net charge-offs/avg loans held for investment excl PPP		0.35	%			0.61	%			0.68	%			0.51	%			1.01	%
Nonperforming loans	$	10,267			$	10,437			$	8,834			$	11,909			$	10,495
Nonperforming loans (excluding gov't gtd balance)	$	4,015			$	4,245			$	2,660			$	3,967			$	3,756
Nonperforming loans/total loans held for investment		1.51	%			1.63	%			1.57	%			2.04	%			1.60	%
Nonperforming loans (excl gov’t gtd balance)/total loans held for investment		0.59	%			0.66	%			0.47	%			0.68	%			0.57	%
ALLL/Total loans held for investment at amortized cost		1.48	%			1.62	%			1.84	%			2.34	%			2.57	%
ALLL/Total loans held for investment at amortized cost, excl PPP loans		1.54	%			1.71	%			2.00	%			2.72	%			3.39	%
Other Data:
Full-time equivalent employees(2)		524				485				575				637				651
Banking center offices		8				7				7				7				6
Loan production offices(3)		20				19				20				17				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) Included 254 FTE from discontinued operations as of September 30, 2022.
(3) As of October 2, 2022, three loan production offices remained open.

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)		September 30, 2022				June 30, 2022				March 31, 2022				December 31, 2021				September 30, 2021
		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
Total shareholders’ equity		$	90,637			$	93,295			$	94,879			$	96,290			$	94,298
Less: Preferred stock liquidation preference			(9,605	)			(9,605	)			(9,605	)			(9,605	)			(10,705	)
Total equity available to common shareholders			81,032				83,690				85,274				86,685				83,593
Less: Goodwill			—				(100	)			(100	)			(100	)			(100	)
Tangible common shareholders' equity		$	81,032			$	83,590			$	85,174			$	86,585			$	83,493
Common shares outstanding			4,031,937				4,019,023				4,013,173				3,981,117				3,919,977
Tangible book value per common share		$	20.10			$	20.80			$	21.22			$	21.75			$	21.30

BAYFIRST FINANCIAL CORP.
CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)	9/30/2022			6/30/2022			9/30/2021
Assets	Unaudited			Unaudited			Unaudited
Cash and due from banks	$	3,131		$	2,944		$	2,715
Interest-bearing deposits in banks		33,365			64,992			104,382
Cash and cash equivalents		36,496			67,936			107,097
Time deposits in banks		4,881			4,881			2,381
Investment securities available for sale		42,915			45,283			32,535
Investment securities held to maturity		5,008			5,016			3
Restricted equity securities, at cost		2,531			3,274			2,827
SBA loans held for sale		573			—			—
SBA loans held for investment, at fair value		24,965			52,209			9,805
Loans held for investment, at amortized cost net of allowance for loan losses of $9,739, $9,564, and $16,616		646,101			579,964			629,873
Accrued interest receivable		3,789			3,172			4,275
Premises and equipment, net		32,779			31,058			23,988
Loan servicing rights		9,932			7,760			5,933
Deferred income tax assets		1,937			1,345			1,263
Right-of-use operating lease assets		2,985			2,975			3,387
Bank owned life insurance		25,004			24,850			12,434
Other assets		13,632			13,472			11,774
Assets from discontinued operations		76,747			78,182			96,168
Total assets	$	930,275		$	921,377		$	943,743
Liabilities:
Noninterest-bearing deposits	$	104,215		$	103,613		$	87,625
Interest-bearing transaction accounts		190,985			195,386			157,304
Savings and money market deposits		380,576			432,369			377,452
Time deposits		109,960			34,038			52,653
Total deposits		785,736			765,406			675,034
FHLB and FRB borrowings		28,000			40,000			—
Subordinated debentures		5,990			5,989			5,983
Notes payable		2,958			3,072			3,413
PPP Liquidity Facility		—			—			144,601
Accrued interest payable		236			31			562
Operating lease liabilities		3,355			3,116			3,551
Accrued expenses and other liabilities		9,374			7,290			9,643
Liabilities from discontinued operations		3,989			3,178			6,658
Total liabilities		839,638			828,082			849,445
Shareholders’ equity:
Preferred stock, Series A; no par value, 10,000 shares authorized, 6,395 shares issued and outstanding at September 30, 2022, June 30, 2022, and September 30, 2021, respectively; aggregate liquidation preference of $6,395 each period		6,161			6,161			6,161
Preferred stock, Series B; no par value, 20,000 shares authorized, 3,210, 3,210, and 4,310 shares issued and outstanding at September 30, 2022, June 30, 2022, and September 30, 2021; aggregate liquidation preference of $3,210, $3,210, and $4,580, respectively		3,123			3,123			4,193
Common stock and additional paid-in capital; no par value, 15,000,000 shares authorized, 4,031,937, 4,019,023, and 3,919,977 shares issued and outstanding at September 30, 2022, June 30, 2022, and September 30, 2021, respectively		52,770			52,432			50,546
Accumulated other comprehensive (loss), net		(3,780	)		(2,574	)		(201	)
Unearned compensation		(323	)		(467	)		(23	)
Retained earnings		32,686			34,620			33,622
Total shareholders’ equity		90,637			93,295			94,298
Total liabilities and shareholders’ equity	$	930,275		$	921,377		$	943,743

BAYFIRST FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

	For the Quarter Ended												Year-to-Date
(Dollars in thousands, except per share data)	9/30/2022				6/30/2022				9/30/2021				9/30/2022				9/30/2021
Interest income:
Loans, other than PPP	$	10,510			$	7,057			$	6,263			$	23,945			$	17,584
PPP loan interest income		70				87				692				297				4,751
PPP origination fee income		70				200				1,662				570				13,909
Interest-bearing deposits in banks and other		634				415				188				1,234				420
Total interest income		11,284				7,759				8,805				26,046				36,664
Interest expense:
Deposits		1,856				1,060				1,152				4,133				3,666
PPPLF borrowings		—				—				278				20				1,699
Other		258				112				99				467				519
Total interest expense		2,114				1,172				1,529				4,620				5,884
Net interest income		9,170				6,587				7,276				21,426				30,780
Provision for loan losses		750				250				(3,000	)			(1,400	)			(1,000	)
Net interest income after provision for loan losses		8,420				6,337				10,276				22,826				31,780
Noninterest income:
Loan servicing income, net		620				433				412				1,508				1,441
Gain (loss) on sale of SBA loans, net		7,446				3,848				(338	)			15,915				13,460
Service charges and fees		347				322				261				951				730
SBA loan fair value (loss) gain		999				2,708				72				3,510				151
Other noninterest income		392				367				203				1,262				595
Total noninterest income		9,804				7,678				610				23,146				16,377
Noninterest Expense:
Salaries and benefits		6,758				6,870				6,481				21,177				18,047
Bonus, commissions, and incentives		883				573				414				1,833				2,376
Occupancy and equipment		1,070				973				790				3,010				2,362
Data processing		1,247				1,083				1,047				3,486				4,266
Marketing and business development		662				750				693				2,100				1,727
Professional services		956				979				1,267				3,089				2,554
Loan origination and collection		1,068				748				683				2,486				2,284
Employee recruiting and development		518				532				441				1,653				1,213
Regulatory assessments		110				121				138				299				340
Other noninterest expense		886				1,063				612				2,586				1,847
Total noninterest expense		14,158				13,692				12,566				41,719				37,016
Income/(loss) before taxes from continuing operations		4,066				323				(1,680	)			4,253				11,141
Income tax expense/(benefit) from continuing operations		983				(68	)			(362	)			888				2,968
Net income/(loss) from continuing operations		3,083				391				(1,318	)			3,365				8,173
(Loss)/income from discontinued operations before income taxes		(5,973	)			(896	)			3,459				(6,706	)			18,154
Income tax (benefit)/expense from discontinued operations		(1,488	)			(223	)			861				(1,670	)			4,520
Net (loss)/income from discontinued operations		(4,485	)			(673	)			2,598				(5,036	)			13,634
Net income/(loss)		(1,402	)			(282	)			1,280				(1,671	)			21,807
Preferred dividends		208				208				230				624				797
Net income available to/(loss attributable to) common shareholders	$	(1,610	)		$	(490	)		$	1,050			$	(2,295	)		$	21,010
Basic earnings (loss) per common share:
Continuing operations	$	0.71			$	0.05			$	(0.40	)		$	0.68			$	1.97
Discontinued operations		(1.11	)			(0.17	)			0.66				(1.25	)			3.63
Basic earnings per common share	$	(0.40	)		$	(0.12	)		$	0.26			$	(0.57	)		$	5.60
Diluted earnings (loss) per common share:
Continuing operations	$	0.68			$	0.06			$	(0.40	)		$	0.67			$	1.86
Discontinued operations		(1.03	)			(0.16	)			0.66				(1.15	)			3.27
Diluted earnings per common share	$	(0.35	)		$	(0.10	)		$	0.26			$	(0.48	)		$	5.13

Loan Composition

(Dollars in thousands)	9/30/2022				6/30/2022				3/31/2022				12/31/2021				9/30/2021
Real estate:	(Unaudited)				(Unaudited)				(Unaudited)								(Unaudited)
Residential	$	176,574			$	122,403			$	102,897			$	87,235			$	79,889
Commercial		220,210				216,067				189,684				163,477				151,122
Construction and land		9,259				9,686				18,038				18,632				17,848
Commercial and industrial		183,631				168,990				180,163				217,155				232,416
Commercial and industrial - PPP		22,286				31,430				44,792				80,158				156,783
Consumer and other		37,595				35,845				13,502				3,581				4,910
Loans held for investment, at amortized cost, gross		649,555				584,421				549,076				570,238				642,968
Deferred loan costs (fees), net		9,047				7,629				7,297				7,975				7,298
Discount on SBA 7(a) loans sold		(5,068	)			(4,743	)			(4,624	)			(3,866	)			(3,753	)
Premium/(discount) on loans purchased		2,306				2,221				1,279				(13	)			(24	)
Allowance for loan losses		(9,739	)			(9,564	)			(10,170	)			(13,452	)			(16,616	)
Loans held for investment, at amortized cost	$	646,101			$	579,964			$	542,858			$	560,882			$	629,873

Nonperforming Assets (Unaudited)

(Dollars in thousands)	9/30/2022				6/30/2022				3/31/2022				12/31/2021				9/30/2021
Nonperforming loans (government guaranteed balances)	$	6,252			$	6,192			$	6,174			$	7,942			$	6,739
Nonperforming loans (unguaranteed balances)		4,015				4,245				2,660				3,967				3,756
Total nonperforming loans		10,267				10,437				8,834				11,909				10,495
OREO		56				56				3				3				3
Total nonperforming assets	$	10,323			$	10,493			$	8,837			$	11,912			$	10,498
Nonperforming loans as a percentage of total loans held for investment		1.51	%			1.63	%			1.57	%			2.04	%			1.60	%
Nonperforming loans (excluding government guaranteed balances) to total loans held for investment		0.59	%			0.66	%			0.47	%			0.68	%			0.57	%
Nonperforming assets as a percentage of total assets		1.11	%			1.14	%			0.99	%			1.30	%			1.11	%
Nonperforming assets (excluding government guaranteed balances) to total assets		0.44	%			0.47	%			0.30	%			0.43	%			0.40	%
ALLL to nonperforming loans		94.86	%			91.64	%			115.12	%			112.96	%			158.32	%
ALLL to nonperforming loans (excluding government guaranteed balances)		242.57	%			225.30	%			382.33	%			339.10	%			442.39	%

Contacts: Anthony N. Leo Chief Executive Officer  727.399.5678

Robin L. Oliver Chief Financial Officer 727.685.2082