BayFirst takes a $3.7 million hit for mortgage shutdown in Q3

BayFirst Financial of St. Petersburg, Florida, took a one-time charge of $3.7 million in the third quarter due to the shutdown of its nationwide mortgage banking business.

This pushed the bank's third quarter results into a net loss of $1.4 million, compared with a net loss of $282,000, for the second quarter. The second quarter loss included a $630 million charge for the closing of its consumer direct mortgage business.

Without having to set aside money for the two mortgage channel shutdowns, BayFirst would have earned $3.1 million in the third quarter and $390,000 in the second quarter.

In the third quarter of 2021, BayFirst earned $1.3 million.

"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," said CEO Anthony Leo in a press release. "Notwithstanding the significant charges associated with discontinuation of the mortgage lending division, we are extremely pleased with third quarter results."

BayFirst's residential mortgage division originated $245.4 million during the third quarter, a reduction of 19.7% compared with the $305.6 million produced in the second quarter, and a 49.2% reduction from $506.7 million produced in the third quarter of 2021. The bank specifically cited a "precipitous decline in mortgage volumes and the uncertain outlook for mortgage lending over the coming quarters," for its exit from retail mortgage, but it remains a home lender in the Florida market.

But BayFirst's quarterly financial results were bolstered by robust loan production in community banking, up 172% year over year. Part of the boost came from the Small Business Administration 7(a) program, which can be used by borrowers to purchase properties for their own company's use.

"SBA lending through our CreditBench division has grown substantially, surpassing last quarter's record levels, with SBA loan production of $139.2 million," Leo said. "Additionally, our net interest margin improved 90 basis points on a linked quarter basis, as we benefited from recent interest rate increases."

Worker Adjustment and Retraining Notification filings indicated 58 BayFirst employees losing their jobs because of the contraction.

"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," said Leo.