BayFirst Financial Corp

NOTE 6 –FAIR VALUE

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:

Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access at the measurement date.

Level 2 – Significant other observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, and other inputs that are observable or can be corroborated by observable market data.

Level 3 – Significant unobservable inputs that reflect a Company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

BAYFIRST FINANCIAL CORP.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Dollars in thousands, except per share data)

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The following is a description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy.

Investment Securities Available for Sale: The fair values of investment securities available for sale are determined by matrix pricing, which is a mathematical technique used to value debt securities without relying exclusively on quoted prices for the specific investment securities, but rather by relying on the investment securities’ relationship to other benchmark quoted investment securities (Level 2). Management obtains the fair values of investment securities available for sale on a monthly basis from a third party pricing service.

Residential Loans Held for Sale: The Company had elected to account for residential loans held for sale at fair value. The fair value of loans held for sale was determined using either actual quoted prices for the assets (Level 1) whenever possible or quoted prices for similar assets, adjusted for specific attributes of that loan (Level 2). The fair value gain (loss) on loans held for sale is included in discontinued operations in the Consolidated Statements of Income.

Government Guaranteed Loans HFI, at Fair Value: The Company has elected to account for certain government guaranteed loans HFI at fair value. Fair value is calculated based on the present value of estimated future payments (Level 3). The valuation model uses interest rate, prepayment speed, and default rate assumptions that market participants would use in estimating future payments. Whenever available, the present value is validated against available market data.

Individually Evaluated Loans: Periodically, the Company records non-recurring adjustments to the carrying value of loans based on fair value measurements for partial charge-offs of the uncollectible portions of those loans. Non-recurring adjustments can also include certain impairment amounts for collateral-dependent loans calculated when establishing the ACL. Loans are considered collateral dependent when the Company has determined that foreclosure of the collateral is probable or when a borrower is experiencing financial difficulty and the loan is expected to be repaid substantially through the operation or sale of collateral. A collateral dependent loan’s ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the loan as of the measurement date. Fair value of the loan’s collateral is determined by appraisals, independent valuation, or management’s estimation of fair value which is then adjusted for the cost related to liquidation of the collateral. Collateral dependent loans are generally classified as Level 3 based on management’s judgment and estimation.

Government Guaranteed Loan Servicing Rights: The fair value of government guaranteed loan servicing rights is based on a valuation model that calculates the present value of estimated net servicing income. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income. There were no government guaranteed loan servicing rights carried at fair value at December 31, 2023 and December 31, 2022. On a quarterly basis, government guaranteed loan servicing rights are evaluated for impairment based upon the fair value of the rights as compared to the cost. If the carrying amount exceeds fair value, impairment is recorded so that the servicing asset is carried at fair value.

Assets measured at fair value on a recurring basis at December 31, 2023 are summarized below. There were no liabilities carried at fair value on a recurring basis at December 31, 2023.

BAYFIRST FINANCIAL CORP.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Dollars in thousands, except per share data)

Assets measured at fair value on a recurring basis at December 31, 2022 are summarized below. There were no liabilities carried at fair value on a recurring basis at December 31, 2022.

(1)Classified as assets from discontinued operations or liabilities from discontinued operations on the consolidated balance sheet.

There were no transfers between levels for assets and liabilities recorded at fair value on a recurring basis during the reported periods.

Financial Instruments Recorded Using Fair Value Option

The Company has elected the fair value option for residential loans held for sale. These loans are intended for sale and are classified as assets from discontinued operations on the consolidated balance sheet. The Company believes that the fair value is the best indicator of the resolution of these loans. Interest income from discontinued operations is recorded based on the contractual term of the loan and in accordance with the Company’s policy on loans HFI. There were no residential loans held for sale as of December 31, 2023. None of the loans were 90 days or more past due or on nonaccrual at December 31, 2022.

The aggregate fair value, contractual balance, and gain at December 31, 2022 for residential loans held for sale from discontinued operations were as follows:

The total amounts of interest income from discontinued operations and losses from changes in fair value included in earnings for the years ended December 31, 2023 and December 31, 2022 for residential loans held for sale from discontinued operations were as follows:

The Company also elected the fair value option for certain of its government guaranteed loans HFI as the Company believed that fair value was the best indicator of the resolution of those loans at that time. Depending on market conditions and liquidity needs of the Company, management determines whether it is advantageous to hold or sell government guaranteed loans on a loan-by-loan basis. The portion of these loans guaranteed by the government are generally readily marketable in the secondary market and the portion of the loans that are not guaranteed may be sold periodically to other third party financial institutions. Interest income on these loans is recorded based on the contractual term of the loan and in accordance with the Company’s policy on other loans HFI.

BAYFIRST FINANCIAL CORP.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Dollars in thousands, except per share data)

The following tables provide more information about the fair value carrying amount and the unpaid principal outstanding of HFI government guaranteed loans accounted for under the fair value option at December 31, 2023 and December 31, 2022.

(1) The nonaccrual and 90 days or more past due loan balances do not include the government guaranteed balance

The total amount of gains and losses from changes in fair value and interest income included in earnings for the years ended December 31, 2023 and December 31, 2022 for government guaranteed loans HFI, at fair value, were as follows:

Changes in fair value for government guaranteed loans HFI, at fair value, were included in Government guaranteed loans fair value gain on the Consolidated Statements of Income.

BAYFIRST FINANCIAL CORP.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Dollars in thousands, except per share data)

The table below presents a reconciliation of government guaranteed loans HFI, at fair value, which were valued on a recurring basis and used significant unobservable inputs (Level 3) for the years ended December 31, 2023 and December 31, 2022:

The Company’s valuation of government guaranteed loans HFI, at fair value, was supported by an analysis prepared by an independent third party and approved by management. The approach to determine fair value involved several steps: 1) identifying each loan’s unique characteristics, including balance, payment type, term, coupon, age, and principal and interest payment; 2) projecting these loan level characteristics for the life of each loan; and 3) performing discounted cash flow modeling.

The following table provides information about the valuation techniques and unobservable inputs used in the valuation of government guaranteed loans HFI fall within Level 3 of the fair value hierarchy at December 31, 2023 and December 31, 2022:

The significant unobservable inputs impacting the fair value measurement of government guaranteed loans HFI, at fair value, include discount rates and conditional prepayment rates. Increases in discount rates or prepayment rates would result in a lower fair value measurement. Although the prepayment rate and discount rate are not directly interrelated, they -generally move in opposite directions. The discount rates and conditional prepayment rates were weighted by the relative principal balance outstanding of these loans.

Assets measured at fair value on a nonrecurring basis at December 31, 2023 are summarized below:

BAYFIRST FINANCIAL CORP.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Dollars in thousands, except per share data)

Assets measured at fair value on a nonrecurring basis at December 31, 2022 are summarized below:

Fair Value of Financial Instruments

The carrying values and estimated fair values of financial instruments not carried at fair value, at December 31, 2023 and December 31, 2022 are as follows:

(1)Includes balances of $2 classified as assets from discontinued operations on the consolidated balance sheet as of December 31, 2022.

(2)Classified as assets from discontinued operations on the consolidated balance sheet.

NOTE 7 –GOVERNMENT GUARANTEED LOAN SERVICING ACTIVITIES

At December 31, 2023 and December 31, 2022, the principal balance of government guaranteed loans, excluding PPP loans, retained by the Company was $395,877 and $300,219, respectively, of which $214,418 and $139,587 represented the guaranteed portion of the loans. Loans serviced for others are not included in the accompanying Consolidated Balance Sheets. The unpaid principal balances of government guaranteed loans serviced for others requiring recognition of a servicing asset were $855,756 and $660,600 at December 31, 2023 and December 31, 2022, respectively.

BAYFIRST FINANCIAL CORP.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Dollars in thousands, except per share data)

Activity for government guaranteed loan servicing rights for the years ended December 31, 2023 and December 31, 2022 follows:

The fair value of government guaranteed loan servicing rights was $16,318 and $13,051 at December 31, 2023 and December 31, 2022, respectively. Fair value was determined using a weighted average discount rate of 14.50% and a weighted average prepayment speed of 11.42% at December 31, 2023. Fair value was determined using a weighted average discount rate of 14.88% and a weighted average prepayment speed of 9.93% at December 31, 2022. The government guaranteed loan servicing rights are amortized over the life of a loan on a loan-by-loan basis.

The following table presents the components of net gain on sale of government guaranteed loans for the years ended December 31, 2023 and December 31, 2022:

NOTE 8 -PREMISES AND EQUIPMENT

Premises and equipment at December 31, 2023 and December 31, 2022 were as follows:

(1)There wereno premises and equipment assets classified as assets from discontinued operations as of December 31, 2023 or December 31, 2022.

Depreciation and amortization expense including expense from discontinued operations was$2,245 and $1,980 for the years ended December 31, 2023 and December 31, 2022, respectively.

BAYFIRST FINANCIAL CORP.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Dollars in thousands, except per share data)

NOTE 9 –LEASES

For theyears ended December 31, 2023 and December 31, 2022, the components of total lease cost and supplemental information related to operating leases were as follows:

(1)Includes lease costs reported as discontinued operations of $136 and $893 for the years ended December 31, 2023 and December 31, 2022, respectively.

At December 31, 2023, the weighted average discount rate of operating leases was 2.37% and the weighted average remaining life of operating leases was 3.14 years.

The future minimum lease payments for operating leases, subsequent to December 31, 2023, as recorded on the balance sheet, are summarized as follows:

Impairment of ROU Assets

ROU assets from operating leases are subject to the impairment guidance in ASC 360, Property, Plant, and Equipment, and are reviewed for impairment when indicators of impairment are present. ASC 360 requires three steps to identify, recognize and measure impairment. If indicators of impairment are present (Step 1), the Company performs a recoverability test (Step 2) comparing the sum of the estimated undiscounted cash flows attributable to the ROU asset in question to the carrying amount. The Company estimates the fair value of the ROU asset and recognizes an impairment loss when the carrying amount exceeds the estimated fair value (Step 3).

During 2022, the Company closed leased mortgage lending offices as part of its discontinuance of the nationwide residential lending operation. The mortgage lending offices were evaluated as outlined above to determine whether the operating leases were impaired. As part of the recoverability test, the Company elected to exclude operating lease liabilities from the carrying amount of the asset group. The undiscounted future cash flows used in the recoverability test were based on assumptions made by the Company rather than market participant assumptions. Since an election was made to exclude operating lease liabilities from the asset or asset group, all future cash lease payments for the lease were also excluded. In addition, the Company elected to exclude operating lease liabilities from the estimated fair value, consistent with the recoverability test. When determining the fair value of the ROU asset, the Company estimated what market participants would pay to lease the assets assuming the highest and best use in the assets’ current forms.

BAYFIRST FINANCIAL CORP.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Dollars in thousands, except per share data)

Based on the analysis, the Company concluded that the ROU assets for these offices were impaired and had a remaining ROU carrying value of $348 as of December 31, 2023. The analyses resulted in no additional impairment for the year ended December 31, 2023.

NOTE 10 -DEPOSITS

The amount of each of the following categories of deposits at December 31, 2023 and December 31, 2022 was as follows:

The aggregate amount of time deposits in denominations of $250 or more at December 31, 2023 and December 31, 2022 was approximately $107,969 and $55,278, respectively. At December 31, 2023 the scheduled maturities of total time deposits were as follows:

NOTE 11 –OTHER BORROWINGS

At December 31, 2023, the Company had $10,000 of borrowings at 5.57% from the FHLB andno borrowings from the FRB. There were $25,000 of borrowings at 4.50% from the FRB andno borrowings from the FHLB at December 31, 2022.

The Bank is a member of the FHLB of Atlanta, which provides short- and long-term funding collateralized by mortgage-related assets to its members. FHLB short-term borrowings bear interest at variable rates set by the FHLB. Any advances that the bank were to obtain would be secured by a blanket lien on $285,852 of real estate-related loans as of December 31, 2023. Based on this collateral and the Company's holdings of FHLB stock, the Company was eligible to borrow up to

$153,456 from the FHLB at December 31, 2023.

In addition, the Bank has a secured line of credit with the Federal Reserve Bank of Atlanta which was secured by $57,696 of commercial loans as of December 31, 2023. FRB short-term borrowings bear interest at variable rates based on the FOMC's target range for the federal funds rate. Based on this collateral, the Company was eligible to borrow up to $40,428 from the FRB at December 31, 2023.

In June 2021, the Company issued $6,000 of Subordinated Debentures (the “Debentures”) that mature June 30, 2031 and are redeemable after 5 years. The Debentures carry interest at a fixed rate of 4.50% per annum for the initial 5 years of term and carry interest at a floating rate for the final 5 years of term. Under the debt agreements, the floating rates are based on a SOFR benchmark plus 3.78% per annum. The balance of Subordinated Debentures outstanding at the Company, net of offering costs, amounted to $5,949 and $5,992 at December 31, 2023 and December 31, 2022, respectively.

The Company has a term note with quarterly principal and interest payments with interest at Prime (8.50% at December 31, 2023). The note matures on March 10, 2029 and the balance of the note was $2,389 and $2,844 at December 31, 2023 and December 31, 2022, 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. As of December 31, 2023, the Company was in compliance with all financial debt covenants.

BAYFIRST FINANCIAL CORP.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Dollars in thousands, except per share data)

NOTE 12 –STOCK-BASED COMPENSATION

The Equity Plan governs the Company’s restricted stock grants and stock options. Total compensation cost charged against income related to the Equity Plan was $651 and $763 for the years ended December 31, 2023 and December 31, 2022, respectively.

Restricted Stock

The Company awarded shares of restricted common stock to certain employees and non-employee directors for which compensation expense is recognized ratably over the vesting period of the awards based on the fair value of the stock at issue date.

A summary of changes in the Company’s nonvested restricted shares for the years ended December 31, 2023 follows:

At December 31, 2023, there was $454 of total unrecognized compensation cost related to nonvested restricted shares granted under the Equity Plan that is expected to be recognized over a weighted average period of 3.2 years. The total fair value of shares vested during the years ended December 31, 2023 and December 31, 2022 was $252 and $209, respectively.

Stock Options

The Equity Plan permits the grant of stock options to the Company’s employees and non-employee directors for up to 15% of the total number of shares of Company common stock issued and outstanding, up to 1,500,000 shares. Option awards are

granted with an exercise price equal to the market price of the Company’s common stock at the date of grant. The market price of the Company’s common stock is the closing sales price of the Common Stock on Nasdaq on the date of the grant. Those option awards generally have a vesting period of 5 years for employees and 3 years for non-employee directors and have 10-year contractual terms.

The fair value of each option award is estimated on the date of grant using a closed form option valuation (Black-Scholes) model that uses the assumptions noted in the table below. Expected volatility is based on an average of historical volatility of peer financial institutions. The expected term of options granted represents the period of time that options granted are expected to be outstanding, which takes into account that the options are not transferable. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

A summary of the activity in the Equity Plan for the year ended December 31, 2023 follows:

BAYFIRST FINANCIAL CORP.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Dollars in thousands, except per share data)

There wereno options granted during the years ended December 31, 2023 or December 31, 2022. Total unrecognized compensation cost related to nonvested stock options granted under the Equity Plan was $56 at December 31, 2023. This cost is expected to be recognized over a weighted average period of 1.62 years.

NOTE 13 –OTHER BENEFIT PLANS

The Company has established a stock dividend reinvestment and stock purchase plan. Under the DRIP, eligible shareholders can voluntarily purchase stock with their dividend or can make additional stock purchases. During the year ended December 31, 2023,10,589 shares were purchased at an average price of $14.98. During the year ended December 31, 2022,15,290 shares were purchased at an average price of $17.22.

All employees and Directors are eligible to participate in the NSPP. Expense recognized in relation to the NSPP for the years ended December 31, 2023 and December 31, 2022 was $27 and $87, respectively.

The Company has a Salary Continuation Agreement (the “Agreement”) with the Company’s retired CEO. In accordance with the Agreement, the executive will receive an annual benefit of $25 fortwenty years following separation of service. The liability recorded for the Agreement was $351 and $336 at December 31, 2023 and December 31, 2022, respectively, and the related expense for the years ended December 31, 2023 and December 31, 2022 was $15 and $23, respectively. Payments are expected to begin in July 2024 from the retirement of the CEO on December 31, 2023.

The Company has a 401(k) plan that covers all employees subject to certain age and service requirements. The Company contributes 3% of each employee’s salary each pay period as a safe harbor contribution. The Company may also match employee contributions each year at the discretion of the Board of Directors. However, there was no match of contributions in 2023. Expense recognized in relation to the 401(k) plan was $906 and $1,580 for the years ended December 31, 2023 and December 31, 2022, respectively. The discontinuation of the nationwide residential lending division during 2022 triggered a partial plan termination and all affected employees were 100% vested in the Company’s contributions into the plan.

The Company has an ESOP for eligible employees. Each year, the Company’s Board of Directors may approve a discretionary percentage of employees’ salaries to be contributed to the ESOP for eligible employees. In 2021, the ESOP trust acquired 14,154 shares of the Company’s stock. As this is a leveraged plan, unallocated shares are distributed to employees annually. There were 8,493 unallocated shares with a fair value of $111 and 11,323 unallocated shares with a fair value of $197 remaining as of December 31, 2023 and December 31, 2022, respectively. The ESOP trust’s outstanding loan, which is secured by the unallocated shares, bears a fixed interest rate equal to Prime Rate as of the note date, which was 3.25%. The note requires an annual payment of principal and interest through December 2026. The Company’s ESOP, which is internally leveraged, does not report the loan receivable extended to the ESOP as an asset and does not report the ESOP debt due to the Company.

The discontinuation of the nationwide residential lending division during 2022 triggered a partial plan termination and all affected employees were 100% vested in the Company’s contributions into the ESOP. As a result of the exit of affected participants from the plan, the plan acquired 23,383 shares of the Company’s stock. As this is a leveraged plan, unallocated shares are distributed to employees annually. There were 18,706 unallocated shares with a fair value of $244 remaining as of December 31, 2023. The ESOP trust was issued afive year loan bearing an interest rate equal to Prime Rate as of the note date, which was 8.25% and adjusts annually as of the first day of each succeeding calendar year to reflect the Prime Rate as of the first business day of the calendar year. The note requires an annual payment of principal and interest through December 2027. The Company’s ESOP, which is internally leveraged, does not report the loan receivable extended to the ESOP as an asset and does not report the ESOP debt due to the Company.

The Board did not approve any contributions in 2023 and 2022. There was $133 and $71 of expense related to the ESOP for the years ended December 31, 2023 and December 31, 2022, respectively.

BAYFIRST FINANCIAL CORP.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Dollars in thousands, except per share data)

NOTE 14 –INCOME TAXES

Income tax expense (benefit) for the years ended December 31, 2023 and December 31, 2022 was as follows:

The effective tax rate differed from the federal statutory rate of 21% in 2023 and 2022 as follows:

BAYFIRST FINANCIAL CORP.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Dollars in thousands, except per share data)

Deferred tax assets and liabilities at December 31, 2023 and December 31, 2022 were due to the following:

At December 31, 2023, the Company had $1,787 of federal net operating loss carryforward and $374 of state net operating loss carryforward. At December 31, 2022, the Company had $2,215 of federal net operating loss carryforward and $362 of state net operating loss carryforward. The net operating loss carryforwards do not expire.

The Company and its subsidiary file a consolidated U.S. Corporation federal income tax return which is subject to examination by taxing authorities for years 2020 and later. There wereno unrecognized tax benefits at December 31, 2023, and the Company does not expect the total amount of unrecognized tax benefits to significantly increase in the next twelve months. The Company recognizes interest and/or penalties related to income tax matters in income tax expense when applicable. The Company did not record any interest and penalties for 2023 and 2022.

NOTE 15 –REGULATORY MATTERS

Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action. Management believes that the Bank met all capital adequacy requirements to which it was subject at December 31, 2023 and December 31, 2022.

Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At December 31, 2023 and December 31, 2022, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the institution’s classification.

In February 2019, the federal bank regulatory agencies issued a final rule that revised certain capital regulations under ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and included a transition option that allows banking organizations to phase in, over a three year period, the day one adverse effects of adoption on their regulatory capital ratios (three year transition option). In connection with the adoption of ASC

BAYFIRST FINANCIAL CORP.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Dollars in thousands, except per share data)

326 on January 1, 2021, the Company recognized an after-tax cumulative effect reduction to retained earnings. The Company elected to adopt the three year transition option and the deferral has been applied in capital ratios presented below. Actual and required capital amounts and ratios for the Bank are presented below at December 31, 2023:

Actual and required capital amounts and ratios for the Bank are presented below at December 31, 2022:

Dividend Restrictions

Banking regulations limit the amount of dividends that may be paid. Approval by regulatory authorities is required if the effect of dividends declared would cause the regulatory capital of the Bank to fall below specified minimum levels. Approval is also required if dividends declared exceed the net profits of the Bank for that year combined with the retained net profits for the preceding two years.

BAYFIRST FINANCIAL CORP.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Dollars in thousands, except per share data)

NOTE 16 –MORTGAGE BANKING ACTIVITIES - DISCONTINUED OPERATIONS

The following table presents the components of the residential loan fee income from discontinued operations for theyears ended December 31, 2023 and December 31, 2022:

Prior to the discontinuance of the nationwide mortgage operations, the Company entered into interest rate lock commitments, which were commitments to originate loans where the interest rate on the loan was determined prior to funding and the clients had locked into that interest rate. The Company then locked in the loan and interest rate with an investor and committed to deliver the loan if settlement occurred (“best efforts”) or committed to deliver the locked loan in a binding (“mandatory”) delivery program with an investor. It was the Company’s practice to enter into forward commitments for the future delivery of residential mortgage loans when interest rate lock commitments were entered into in order to economically hedge the effect of changes in interest rates resulting from its commitments to fund the loans. Interest rate lock commitments and mandatory commitments to deliver loans to investors were considered derivatives.

There were no mortgage banking derivatives outstanding as of December 31, 2023. The following table reflects the amount and fair value of mortgage banking derivatives included in the assets and liabilities from discontinued operations on the Consolidated Balance Sheets at December 31, 2022:

NOTE 17 –RELATED PARTY TRANSACTIONS

Loans to principal officers, directors, and their affiliates during 2023 and 2022 were as follows:

Deposits from principal officers, directors, and their affiliates at December 31, 2023 and December 31, 2022 were $8,337 and $5,518, respectively.

The Company leases a portion of an office building from a related party of a Company Director. Rent payments related to these leases amounted to $709 and $647 for the years ended December 31, 2023 and December 31, 2022.

The Company entered into transactions during the normal course of business with an insurance agency that is a related party of a Company Director. Payments to the insurance agency amounted to $405 and $316 for the years ended December 31, 2023 and December 31, 2022.

BAYFIRST FINANCIAL CORP.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Dollars in thousands, except per share data)

NOTE 18 –LOAN COMMITMENTS AND OTHER RELATED ACTIVITIES

Some financial instruments, such as loan commitments, credit lines, and letters of credit, are issued to meet customer financing needs. These are agreements to provide credit or to support the credit of others, as long as conditions established in the contract are met, and usually have expiration dates. Commitments may expire without being used. Off-balance sheet risk to credit loss exists up to the face amount of these instruments, although material losses are not anticipated. The same credit policies that are used for loans are used to make such commitments, including obtaining collateral at exercise of the commitment.

The contractual amounts of financial instruments with off-balance sheet risk at December 31, 2023 and December 31, 2022 were as follows:

All unused lines of credit at December 31, 2023 and December 31, 2022 were variable rate lines of credit and the majority of unfunded loan commitments at December 31, 2023 and December 31, 2022 were commitments to fund variable rate loans. Unfunded loan commitments are generally entered into for periods of 90 days or less.

The Company maintains an ACL for its off-balance sheet loan commitments which is calculated by loan type using estimated line utilization rates based on historical usage. Loss rates for outstanding loans is applied to the estimated utilization rates to calculate the ACL for off-balance sheet loan commitments. At December 31, 2023 and December 31, 2022, ACL for off-balance sheet loan commitments totaled $839 and $511, respectively.

BAYFIRST FINANCIAL CORP.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Dollars in thousands, except per share data)

`NOTE 19 –EARNINGS PER COMMON SHARE

The following table sets forth the computation of basic and diluted earnings per common share for the years ended December 31, 2023 and December 31, 2022:

The following securities outstanding at December 31, 2023 and December 31, 2022 have been excluded from the calculation of weighted average shares outstanding as their effect on the calculation of earnings (loss) per share are antidilutive:

BAYFIRST FINANCIAL CORP.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Dollars in thousands, except per share data)

NOTE 20 –PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION

Condensed financial information of BayFirst Financial Corp. follows:

BAYFIRST FINANCIAL CORP.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Dollars in thousands, except per share data)

BAYFIRST FINANCIAL CORP.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Dollars in thousands, except per share data)