BayFirst Financial Corp. Revises Its Second Quarter 2022 Results; Highlighted by Strong SBA 7(a) and Conventional Loan Production, Improved Operating Efficiencies, and Net Interest Margin Expansion

Saint Petersburg, Florida, UNITED STATES


ST. PETERSBURG, Fla., Aug. 03, 2022 (GLOBE NEWSWIRE) -- BayFirst Financial Corp. (NASDAQ: BAFN) (“BayFirst” or the “Company”), parent company of BayFirst National Bank (f/k/a First Home Bank) (the “Bank”) revised its second quarter earnings report to correct the accounting treatment of deferred loan costs on loans on which the Company elected the fair value option. The timing of recognition of fees and costs on such financial instruments differs for loans carried at amortized cost, with costs and fees recognized when incurred, rather than deferred and recognized over the life of the loan. Much of these costs would have been recognized in the third quarter of 2022 assuming the guaranteed and a portion of the unguaranteed components of these loans would be sold at that time. As of June 30, 2022, $806 thousand of costs related to the loans were charged to expense. A significant portion of these costs was previously included in loans held for investment at amortized cost. Due to this adjustment, the Company incurred a $282 thousand loss, or $(0.12) per diluted common share for the second quarter of 2022, instead of net income of $328 thousand, or $0.03 per diluted common share previously reported. This compares to net income of $13 thousand, or $(0.05) per diluted common share in the first quarter of 2022, and $13.0 million, or $2.98 per diluted common share, in the second quarter of 2021. Financial results for the second quarter of 2022 were highlighted by robust loan production in community banking, up more than 200% year to date over last year, as well as one of the best quarters of SBA 7(a) loan production in the Company’s history.

The decrease in earnings during the second quarter of 2022, compared to the first quarter of 2022, is due to a restructuring charge of $630 thousand related to the discontinuation of the direct-to-consumer mortgage business, a reduction in residential loan fee income of $3.0 million, and a $2.7 million increase in loan loss provision, as the Company made a modest provision of $250 thousand in the second quarter compared to a $2.4 million negative provision in the prior quarter, partially offset by a $2.3 million decrease in salaries and benefits, a $2.9 million increase in SBA loan fair value gains, resulting primarily from election of the fair value option on $41.7 million of loans originated in the quarter, and a $1.0 million increase in net interest income.

Compared to the year ago quarter, the decrease in net income for the second quarter of 2022 included the $13.8 million one-time gain on sale of PPP loans in 2021, a $6.0 million decrease in PPP origination fee income and a decrease of $13.1 million in residential loan fee income. These items were partially offset by a decrease in noninterest expense of $8.0 million.

“The second quarter represents a significant turnaround for the Company,” stated Anthony N. Leo, Chief Executive Officer. “We produced excellent core loan growth, improved operating expenses, and expanded our net interest margin by 48 basis points compared to the prior quarter. The investments we made to expand our nationwide SBA production team earlier in the year are paying off, with SBA 7(a) loan production of $90 million during the quarter. This production represents one of the highest performing quarters of SBA loan production in our Company’s history, with record monthly SBA loan production in June. Our SBA business acceleration was in part due to a new lending product, BOLT, that we launched during the quarter to originate SBA loans of $150 thousand or less, which is in high demand and carries an 85% government guaranty. Conventional community bank loan production was also strong, with production up more than 200% year to date over last year, as our lending teams have done an excellent job of bringing in new customer relationships. Our net interest margin benefited from the recent interest rate increases enacted by the Federal Reserve, and we are well positioned to benefit even further in future periods as our SBA loan portfolio rates are tied to prime, with the majority of them resetting quarterly.”

“Our organization is focused on building our community banking franchise in Tampa Bay, supported by national business lines to provide the revenue engine to build out and support our community bank,” Leo continued. “During the quarter and simultaneous with converting to a national banking charter, we rebranded our community bank to the name BayFirst National Bank, which reinforces our commitment to our Tampa Bay communities. We are also continuing our expansion efforts, with plans to open two additional branches in our current markets later this year. While we will continue to support small business owners and homebuyers across the country through our SBA and residential mortgage divisions, we remain a St. Petersburg-based, independent bank focused on making a difference in our own community and in the lives of those we serve.”

Recent Significant Initiatives

  • 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. In its first month since inception, the Company originated 57 BOLT loans totaling $7.5 million, with an additional 296 loans, representing $39 million, closed or in process through July 21, 2022. Over the balance of the third quarter, the Company plans to deploy new automation to the BOLT loan program through its proprietary loan origination system, PowerLOS and open API integration with marketplace lending partners to increase volume and speed of delivery while limiting additional staffing.
  • During the second quarter, the Company completed a restructuring of its Residential Mortgage Division, and discontinued its primary consumer direct residential mortgage business line. The restructuring was undertaken in response to reduced volume due to a lack of refinance demand in the current rising rate environment which directly impacted the consumer direct business line. As a result of this restructuring the Bank will focus resources on its traditional retail mortgage business supported by loan production offices across the nation.
  • A large residential loan production team located in Las Vegas was onboarded after the end of the second quarter during July and, as previously reported, two large residential loan production teams were added in April, one in Branford, CT and the other in Miami, FL. The addition of these offices is expected to increase residential loan production volume once the teams are fully integrated.
  • On May 16th, the Bank converted its charter from a Florida state chartered banking institution to that of a national association and simultaneously changed its name to BayFirst National Bank.

Second Quarter 2022 Performance Review

  • The Company’s SBA loan origination platform, CreditBench, had one of the best quarters of SBA 7(a) loan production in the Company's history. CreditBench originated $90.0 million in new SBA loans during the second quarter of 2022, a 90.2% increase compared to $47.3 million originated in the first quarter of 2022, and an 89.9% increase over the $47.4 million of loans produced during the second quarter of 2021. Additionally, the pipeline continues to remain strong at $179.4 million at June 30, 2022.
  • Loans held for investment, excluding PPP loans, increased by $93.1 million or 18.0% to $610.5 million during the second quarter of 2022 and $145.1 million, or 31.2% over the past year. Production during the quarter was partially offset by $46.8 million in sales of the guaranteed balances of SBA loans.
  • The Residential Mortgage Division originated $305.6 million in loans during the second quarter of 2022, a reduction of 8.9% compared to $335.6 million originated during the first quarter of 2022, and a 48.2% reduction compared to $522.1 million of loans produced during the second quarter of 2021.
  • Deposits decreased by $4.7 million, or 0.6% during the second quarter of 2022 and increased by $133.1 million, or 21.0% over the past year to $765.4 million at June 30, 2022. During the second quarter of 2022, there were increases in transaction accounts and time deposit balances partially offset by decreases in money market and savings account balances. Although the balances decreased slightly as customers utilized more of their existing cash, the number of transaction, savings, and money market accounts increased by 5.5% over the prior quarter.
  • Tangible book value at June 30, 2022 was $20.80 per common share, down from $21.22 at March 31, 2022, primarily due to a reduction in equity as accumulated other comprehensive loss increased in the rising rate environment. Over the course of the past year, tangible book value decreased $0.34 per common share, or 1.6%, from $21.14 at June 30, 2021.
  • Net interest margin expanded 48 bps quarter-over-quarter to 3.73% in the second quarter of 2022, from 3.25% in the first quarter of 2022.

Results of Operations

Net Income (Loss)

The Company incurred a net loss of $282 thousand for the second quarter of 2022 compared to net income of $13 thousand in the first quarter of 2022, and net income of $13.0 million in the second quarter of 2021. The decrease for the second quarter of 2022 from the preceding quarter was primarily due to $3.0 million lower residential loan fee income, and a $2.7 million increase in loan loss provision, as the Company recorded a modest $250 thousand provision for loan loss in the second quarter compared to the $2.4 million negative provision in the prior quarter, partially offset by a $2.9 million increase related to held for investment SBA loan fair value gains, resulting primarily from election of the fair value option on $41.7 million of loans originated in the quarter, and a $2.0 million, or 7.1%, reduction in noninterest expense. The decrease from the second quarter of 2021 was the result of the $13.8 million one-time gain on sale of PPP loans in 2021, lower PPP origination fee and interest income, and lower residential loan fee income, partially offset by higher income from the sale of non-PPP SBA guaranteed loans, and lower noninterest expense.

In the first six months of 2022, the Company incurred a net loss of $269 thousand, a decrease of $20.8 million from net income of $20.5 million in the first six months of 2021, reflecting $32.0 million in lower residential loan fee income, a $13.8 million gain on sale of PPP loan in 2021, and lower PPP income origination fee and interest. These items were partially offset by a $2.4 million increase related to held for investment SBA loan fair value gains, higher gains on non-PPP SBA guaranteed loan sales, a $14.1 million reduction, or 20.9%, in noninterest expense and a $4.2 million lower provision for loan losses.

Net Interest Income and Net Interest Margin

Net interest income was $7.5 million in the second quarter of 2022, an increase of $1.1 million or 16.4% from $6.4 million in the first quarter of 2022, and a decrease of $5.4 million or 42.2% from $12.9 million in the second quarter of 2021. The increase during the second quarter of 2022 as compared to the prior quarter was mainly due to the increase in non-PPP loan interest income and a reduction in deposit interest expense. The decrease during the second quarter of 2022 as compared to the year ago quarter was mainly due to the decrease in net PPP loan interest and origination fee income.

Net interest income was $13.9 million in the first six months of 2022, a decrease of $11.6 million or 45.7% from $25.5 million in the first six months of 2021. The decrease during the first six months of 2022 as compared to the prior year was mainly due to the decrease in net PPP loan interest and origination fee income.

Net interest margin improved to 3.73% for the second quarter of 2022, an expansion of 48 bps, compared to 3.25% for the first quarter of 2022 and an expansion of 27 bps over 3.46% for the second quarter of 2021. Net interest margin improved to 3.49% for the first six months of 2022, compared to 3.34% for the first six months of 2021. With the recent rate increase enacted by the Federal Reserve, the Company anticipates further improvement in its net interest margin as its SBA loan portfolio rates are tied to prime with the vast majority resetting at the beginning of each quarter.

Noninterest Income

Noninterest income was $17.9 million for the second quarter of 2022, a decrease of $1.0 million or 5.1% from $18.9 million in the first quarter of 2022, and a decrease of $20.3 million or 53.2% from $38.2 million in the second quarter of 2021. The decrease in the second quarter of 2022, as compared to the prior quarter was primarily the result of lower residential loan fee income and gain on sale of SBA loans, partially offset by an increase related to held for investment SBA loan fair value gains, resulting primarily from election of the fair value option on $41.7 million of loans originated in the quarter. The decrease from a year ago quarter was primarily the result of the one-time $13.8 million gain on sale of PPP loans in 2021 and a decrease in residential loan fee income, partially offset by an increase in gains on SBA loan sales and the resulting gain in SBA loan servicing income.

Noninterest income was $36.8 million for the first six months of 2022, a decrease of $34.6 million or 48.5% from $71.4 million in the first six months of 2021. The decrease was primarily due to a $32.0 million reduction in residential loan income and the $13.8 million gain on sale of PPP loans in 2021. These items were partially offset by higher gains on the sale of non-PPP SBA loans and a $2.4 million increase related to held for investment SBA loan fair value gains.

Noninterest Expense

Noninterest expense was $25.7 million in the second quarter of 2022, which was a $1.9 million or 7.1% decrease from $27.6 million in the first quarter of 2022 and an $8.0 million or 23.7% decrease compared to $33.7 million in the second quarter of 2021. The decrease from the prior quarter was primarily the result of $2.3 million lower salaries and benefits, partially offset by the $630 thousand residential mortgage division restructuring expense. The decrease from a year ago quarter was primarily due to lower residential mortgage commissions, salaries and benefits, and data processing expense, partially offset by residential mortgage division restructuring expense.

Noninterest expense was $53.3 million in the first six months of 2022, which was a $14.1 million or 20.9% decrease from $67.4 million in the first six months of 2021. The decrease was primarily the result of lower residential mortgage commissions.

Balance Sheet

Assets

Total assets increased by $32.8 million or 3.7% during the second quarter of 2022 to $921.4 million, mainly due to new loan production and an increase in in both held to maturity and available for sale securities, partially offset by a decrease in cash and cash equivalents and the sale of SBA guaranteed loans.

Loans

Loans held for investment, excluding PPP loans, increased by $93.1 million or 18.0% during the second quarter of 2022 and by $145.1 million or 31.2%, over the past year to $610.5 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 $13.2 million in the second quarter of 2022 to $31.2 million, due primarily to PPP forgiveness payments.

Deposits

Deposits decreased by $4.7 million or 0.6% during the second quarter of 2022 and increased $133.1 million or 21.0% compared to June 30, 2021, ending the second quarter of 2022 at $765.4 million. During the quarter, transaction account and time deposit balances increased, partially offset by a decrease in savings and money market account balances. Over the year, savings and money market accounts and transaction account balances increased and time deposit balances decreased.

Asset Quality

Asset quality remained stable in the second quarter of 2022. As the financial impact of the COVID-19 pandemic became more predictable throughout 2021, 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 second quarter of $250 thousand. This compared to a $2.4 million negative provision for the first quarter of 2022, and no provision for loan losses during the second 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 2.14% at June 30, 2022, 2.73% as of March 31, 2022, and 6.67% as of June 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 second quarter of 2022 were $856 thousand, a $26 thousand decrease from $882 thousand for the first quarter of 2022 and a $364 thousand decrease compared to $1.2 million in the second quarter of 2021. Annualized net charge-offs as a percentage of average loans, excluding PPP loans, were 0.61% for the second quarter of 2022, down from 0.7% in the first quarter of 2022 and 1.1% in the second quarter of 2021. Nonperforming assets, excluding government guaranteed loans, to total assets was 0.46% as of June 30, 2022, compared to 0.30% as of March 31, 2022, and 0.30% as of June 30, 2021.

Capital

The Bank’s Tier 1 leverage ratio was 11.37% as of June 30, 2022, a decrease from 11.75% as of March 31, 2022, and from 12.06% at June 30, 2021. The CET 1 and Tier 1 capital ratio to risk-weighted assets were 15.12% as of June 30, 2022, a decrease from 18.19% as of March 31, 2022, and from 21.27% as of June 30, 2021. The total capital to risk-weighted assets ratio was 16.37% as of June 30, 2022, a decrease from 19.45% as of March 31, 2022, and from 22.57% as of June 30, 2021.

Recent Events

Conversion to a National Bank: On May 16, 2022, BayFirst Financial Corp.’s wholly-owned subsidiary completed its conversion to a national bank. As part of this process, the Bank, formerly known as First Home Bank, changed its name to BayFirst National Bank.

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 seven full-service office locations, 21 mortgage loan production offices, and was the top 15 by dollar volume and by number of units originated nationwide through the third quarter ended June 30, 2022, of SBA's 2022 fiscal year.

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 June 30, 2022, BayFirst Financial Corp. had $921.4 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 5our 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) 6/30/2022 3/31/2022 12/31/2021 9/30/2021 6/30/2021
Balance sheet data:          
Average loans held for investment, excluding PPP loans $562,120  $520,559  $518,697  $467,283  $445,893 
Average total assets  879,868   872,311   923,485   1,086,377   1,541,230 
Average common shareholders’ equity  83,235   83,990   83,056   81,989   68,525 
Total loans held for investment  641,737   561,797   583,948   656,294   895,194 
Total loans held for investment, excluding PPP loans  610,527   517,434   504,525   500,647   465,470 
Total loans held for investment, excl gov’t gtd loan balances  458,624   374,353   332,977   316,528   314,438 
Allowance for loan losses  9,564   10,170   13,452   16,616   20,797 
Total assets  921,377   888,541   917,095   943,743   1,198,229 
Common shareholders’ equity  83,690   85,274   86,685   83,593   81,838 
Share data:           
Basic earnings per common share $(0.12) $(0.05) $0.66  $0.27  $3.34 
Diluted earnings per common share  (0.12)  (0.05)  0.61   0.26   2.98 
Dividends per common share  0.08   0.08   0.07   0.07   0.07 
Book value per common share  20.82   21.25   21.77   21.32   21.16 
Tangible book value per common share (1)  20.80   21.22   21.75   21.30   21.14 
Performance and capital ratios:          
Return on average assets  (0.13)%  0.01%  1.22%  0.47%  3.38%
Return on average common equity  (2.35)%  (0.93)%  12.54%  5.12%  74.61%
Net interest margin  3.73%  3.25%  3.07%  3.04%  3.46%
Dividend payout ratio  (65.54)%  (164.25)%  10.65%  26.09%  2.09%
Asset quality ratios:          
Net charge-offs $856  $882  $664  $1,181  $1,220 
Net charge-offs/avg loans held for investment excl PPP  0.61%  0.68%  0.51%  1.01%  1.09%
Nonperforming loans $10,437  $8,834  $11,909  $10,495  $9,884 
Nonperforming loans (excluding gov't gtd balance) $4,245  $2,660  $3,967  $3,756  $3,577 
Nonperforming loans/total loans held for investment  1.63%  1.57%  2.04%  1.60%  1.10%
Nonperforming loans (excl gov’t gtd balance)/total loans held for investment  0.66%  0.47%  0.68%  0.57%  0.40%
ALLL/Total loans held for investment at amortized cost  1.62%  1.84%  2.34%  2.57%  2.35%
ALLL/Total loans held for investment at amortized cost, excl PPP loans  1.71%  2.00%  2.72%  3.39%  4.57%
Other Data:          
Full-time equivalent employees  485   575   637   651   671 
Banking center offices  7   7   7   6   6 
Loan production offices  19   20   17   22   26 
 
(1) See section entitled "GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures" below for a reconciliation to most comparable GAAP equivalent.
 
 

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) June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 June 30, 2021
  (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Total shareholders’ equity $93,295  $94,879  $96,290  $94,298  $92,813 
Less: Preferred stock liquidation preference  (9,605)  (9,605)  (9,605)  (10,705)  (10,975)
Total equity available to common shareholders  83,690   85,274   86,685   83,593   81,838 
Less: Goodwill  (100)  (100)  (100)  (100)  (100)
Tangible common shareholders' equity $83,590  $85,174  $86,585  $83,493  $81,738 
           
Common shares outstanding  4,019,023   4,013,173   3,981,117   3,919,977   3,867,414 
Tangible book value per common share $20.80  $21.22  $21.75  $21.30  $21.14 
                     
                     

BAYFIRST FINANCIAL CORP.
CONSOLIDATED BALANCE SHEETS

(Dollars in thousands) 6/30/20223/31/20226/30/2021
Assets UnauditedUnauditedUnaudited
Cash and due from banks $2,944 $3,141 $2,896 
Interest-bearing deposits in banks  64,992  118,960  102,441 
Cash and cash equivalents  67,936  122,101  105,337 
Time deposits in banks  4,881  3,881  2,381 
Investment securities available for sale  45,283  41,656  22,674 
Investment securities held to maturity  5,016  2  6 
Restricted equity securities, at cost  3,274  2,520  2,820 
Residential loans held for sale  74,708  75,022  126,479 
SBA loans held for sale    1,445   
SBA loans held for investment, at fair value  52,209  8,769  10,070 
Loans held for investment, at amortized cost net of allowance for loan losses of $9,564, $10,170, and $20,797  579,964  542,858  864,327 
Accrued interest receivable  3,190  3,150  7,039 
Premises and equipment, net  31,368  31,037  21,076 
Loan servicing rights  7,952  7,601  6,614 
Deferred income tax assets  1,345  490  2,594 
Right-of-use operating lease assets  3,547  4,166  3,722 
Bank owned life insurance  24,850  24,698  12,351 
Other assets  15,854  19,145  10,739 
Total assets $921,377 $888,541 $1,198,229 
Liabilities:    
Noninterest-bearing deposits $103,613 $92,680 $81,150 
Interest-bearing transaction accounts  195,386  180,815  143,046 
Savings and money market deposits  432,369  464,847  355,045 
Time deposits  34,038  31,787  53,081 
Total deposits  765,406  770,129  632,322 
FHLB and FRB borrowings  40,000     
Subordinated debentures  5,989  5,987  5,982 
Notes payable  3,072  3,186  3,527 
PPP Liquidity Facility      443,906 
Accrued interest payable  31  86  928 
Operating lease liabilities  4,014  4,377  3,923 
Accrued expenses and other liabilities  9,570  9,897  14,828 
Total liabilities  828,082  793,662  1,105,416 
Shareholders’ equity:    
Preferred stock, Series A; no par value, 10,000 shares authorized, 6,395 shares issued and outstanding at June 30, 2022, March 31, 2022, and June 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 4,580 shares issued and outstanding at June 30, 2022, March 31, 2022, and June 30, 2021; aggregate liquidation preference of $3,210, $3,210, and $4,580, respectively  3,123  3,123  4,456 
Common stock and additional paid-in capital; no par value, 15,000,000 shares authorized, 4,019,023, 4,013,173, and 3,867,414 shares issued and outstanding at June 30, 2022, March 31, 2022, and June 30, 2021, respectively  52,432  52,252  49,501 
Accumulated other comprehensive (loss), net  (2,574) (1,458) (122)
Unearned compensation  (467) (630) (29)
Retained earnings  34,620  35,431  32,846 
     Total shareholders’ equity  93,295  94,879  92,813 
Total liabilities and shareholders’ equity $921,377 $888,541 $1,198,229 
 
 

BAYFIRST FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

  For the Quarter Ended Year-to-Date
(Dollars in thousands, except per share data) 6/30/2022 3/31/2022 6/30/2021 6/30/2022 6/30/2021
Interest income:          
Loans, other than PPP $7,924  $7,115  $5,282 $15,039  $11,881
PPP loan interest income  87   140   3,330  227   5,529
PPP origination fee income  200   300   6,234  500   12,247
Interest-bearing deposits in banks and other  415   185   151  600   232
Total interest income  8,626   7,740   14,997  16,366   29,889
Interest expense:          
Deposits  1,060   1,217   1,194  2,277   2,514
PPPLF borrowings     20   655  20   1,421
Other  112   97   244  209   420
Total interest expense  1,172   1,334   2,093  2,506   4,355
Net interest income  7,454   6,406   12,904  13,860   25,534
Provision for loan losses  250   (2,400)    (2,150)  2,000
Net interest income after provision for loan losses  7,204   8,806   12,904  16,010   23,534
Noninterest income:          
Residential loan fee income  10,212   13,191   23,352  23,403   55,381
Loan servicing income, net  438   461   325  899   1,029
Gain (loss) on sale of SBA loans, net  3,848   4,621   13,798  8,469   13,798
Service charges and fees  322   282   364  604   586
SBA loan fair value (loss) gain  2,708   (197)  7  2,511   79
Other noninterest income  371   510   366  881   498
Total noninterest income  17,899   18,868   38,212  36,767   71,371
Noninterest Expense:          
Salaries and benefits  11,416   13,697   12,948  25,113   26,115
Bonus, commissions, and incentives  4,995   4,606   9,218  9,601   21,091
Mortgage banking  677   1,002   1,572  1,679   3,267
Occupancy and equipment  1,382   1,421   1,297  2,803   2,629
Data processing  1,367   1,467   2,593  2,834   3,862
Marketing and business development  1,659   1,742   1,878  3,401   3,520
Professional services  1,075   1,307   843  2,382   1,767
Loan origination and collection  748   670   1,105  1,418   1,601
Employee recruiting and development  474   871   1,008  1,345   1,622
Regulatory assessments  120   69   100  189   202
Residential mortgage division restructuring expense  630        630   
Other noninterest expense  1,133   795   1,106  1,928   1,713
Total noninterest expense  25,676   27,647   33,668  53,323   67,389
Income (loss) before taxes  (573)  27   17,448  (546)  27,516
Income tax expense (benefit)  (291)  14   4,432  (277)  6,989
Net income (loss)  (282)  13   13,016  (269)  20,527
Preferred dividends  208   208   235  416   567
Net income (loss) available to common shareholders $(490) $(195) $12,781 $(685) $19,960
Basic earnings per common share $(0.12) $(0.05) $3.34 $(0.17) $5.44
Diluted earnings per common share $(0.12) $(0.05) $2.98 $(0.17) $4.87
                   
                   

Loan Composition

(Dollars in thousands) 6/30/2022 3/31/2022 12/31/2021 9/30/2021 6/30/2021
Real estate: (Unaudited) (Unaudited)   (Unaudited) (Unaudited)
Residential $122,403  $102,897  $87,235  $79,889  $75,618 
Commercial  216,067   189,684   163,477   151,122   143,388 
Construction and land  9,686   18,038   18,632   17,848   14,293 
Commercial and industrial  168,990   180,163   217,155   232,416   215,359 
Commercial and industrial - PPP  31,430   44,792   80,158   156,783   432,469 
Consumer and other  35,845   13,502   3,581   4,910   3,489 
Loans held for investment, at amortized cost, gross  584,421   549,076   570,238   642,968   884,616 
Deferred loan costs (fees), net  7,629   7,297   7,975   7,298   4,968 
Discount on SBA 7(a) loans sold  (2,521)  (3,335)  (3,866)  (3,753)  (4,420)
Discount on PPP loans purchased  (1)  (10)  (13)  (24)  (40)
Allowance for loan losses  (9,564)  (10,170)  (13,452)  (16,616)  (20,797)
Loans held for investment, at amortized cost $579,964  $542,858  $560,882  $629,873  $864,327 
 
 

Nonperforming Assets (Unaudited)

(Dollars in thousands) 6/30/2022 3/31/2022 12/31/2021 9/30/2021 6/30/2021
Nonperforming loans (government guaranteed balances) $6,192  $6,174  $7,942  $6,739  $6,307 
Nonperforming loans (unguaranteed balances)  4,245   2,660   3,967   3,756   3,577 
Total nonperforming loans  10,437   8,834   11,909   10,495   9,884 
OREO  56   3   3   3    
Total nonperforming assets $10,493  $8,837  $11,912  $10,498  $9,884 
Nonperforming loans as a percentage of total loans held for investment  1.63%  1.57%  2.04%  1.60%  1.10%
Nonperforming loans (excluding government guaranteed balances) to total loans held for investment  0.66%  0.47%  0.68%  0.57%  0.40%
Nonperforming assets as a percentage of total assets  1.14%  0.99%  1.30%  1.11%  0.82%
Nonperforming assets (excluding government guaranteed balances) to total assets  0.46%  0.30%  0.43%  0.40%  0.30%
ALLL to nonperforming loans  91.64%  115.12%  112.96%  158.32%  210.41%
ALLL to nonperforming loans (excluding government guaranteed balances)  225.30%  382.33%  339.10%  442.39%  581.41%


 
Contacts:
   
Anthony N. Leo   Robin L. Oliver
Chief Executive Officer   Chief Financial Officer
727.399.5678   727.685.2082