BayFirst Financial (BAFN) risk factors, FY2024 10-K

Other

1. 01Changes in interest rates affect our profitability and assets
2. 02Loss of deposits or a change in deposit mix could increase our funding costs and adversely affect our performance
3. 03We may be unable to continue to produce the volume of loans necessary to support our SBA and other government guaranteed lending business
4. 04We depend on the sale of both the guaranteed and unguaranteed portions of our government guaranteed loans, but also face risks relating to the retained portions of unguaranteed loans
5. 05Our loan origination processes present heightened opportunities for borrower or referral fraud
6. 06Our loan referral sources operate independently from us and may take actions for which we may be held responsible
7. 07We rely heavily on technology partners and other referral sources in our government guaranteed loan origination process
8. 08Our branch network and government guaranteed lending operations are expanding at a rapid pace. As a result, we may not be able to provide comprehensive or timely training to staff
9. 09Changes in economic and political conditions could adversely affect our earnings through declines in deposits, loan demand, the ability of our customers to repay loans and the value of the collateral securing our loans
10. 10A shutdown of the Federal government would likely result in us being temporarily unable to make SBA and other government guaranteed loans
11. 11Changes in the laws or regulations governing our SBA and other government guaranteed lending activities and our mortgage lending business may adversely affect our ability to operate them profitably
12. 12We may not be able to retain or grow our core deposit base, which could adversely impact our funding costs
13. 13Unrealized losses in the Bank’s investment portfolio could affect liquidity
14. 14We have expanded into new markets with which we have less familiarity with than our historic markets
15. 15We are dependent on our management team and any of their departure, or subsequent employment with a competitor could adversely affect our operations
16. 16We have pledged the outstanding shares of the Bank to secure a loan, and if we cannot repay the loan when due, the lender may foreclose on the loan and take ownership of the Bank
17. 17We engage in transactions with our directors and their related interests, which creates the potential for conflicts of interest
18. 18We may not be able to collect on the guarantees of our SBA or other government guaranteed loans if borrowers default
19. 19Our Internet-based systems and online commerce activities are subject to security threats that could adversely affect our business
20. 20A failure or breach, including cyberattacks, of our computer systems or other technologies could disrupt our business, result in the disclosure of confidential information, and create significant financial and legal exposure
21. 21The development and use of artificial intelligence by us or others, or our inability to effectively and timely implement its use, may adversely affect the Company
22. 22The valuation of our SBA and USDA related servicing rights is based on estimates and subject to fluctuation based on market conditions and other factors that are beyond our control
23. 23Changes in business and economic conditions, in particular those of the Florida markets in which we operate, could lead to lower asset quality and decreased earnings
24. 24Most expansion activities require approval of our regulators, which we may not be able to obtain, or that may impose conditions that we find to be unacceptable
25. 25We are subject to numerous laws designed to protect consumers, including the Community Reinvestment Act and fair lending laws, and failure to comply with these laws could lead to material penalties and have negative effects on our business
26. 26We may be required to make increases in our credit loss reserve and to charge off loans in the future, which could adversely affect our results of operations
27. 27If real estate values in our markets decline, we could experience losses upon foreclosure of the loan or sale of the real estate
28. 28Hurricanes or other adverse weather events, as well as climate change, could negatively affect our local economies or disrupt our operations, which could have an adverse effect on our business and results of operations
29. 29related flooding and wind damage and other similar weather events. Climate change may be increasing the severity and frequency of adverse weather conditions, making the impact from these types of natural disasters on us or customers worse
30. 30The Florida property insurance market is in crisis and the inability of our borrowers to obtain insurance on properties securing our loans may adversely affect the value of the collateral, the performance of our loan portfolio, and our ability to make loans secured by real estate
31. 31Public health emergencies could hurt our business
32. 32Our loan portfolio includes a material amount of commercial real estate and commercial and industrial loans
33. 33Our use of appraisals in deciding whether to make a loan secured by real property or how to value the loan in the future may not accurately describe the net value of the collateral that we can realize
34. 34We operate in a highly competitive industry and market area
35. 35We may face risks with respect to future expansion
36. 36We may need additional capital in the future, but such capital may not be available when needed
37. 37We are subject to government regulation and monetary policy that could constrain our growth and profitability
38. 38Legislation and regulatory proposals enacted in response to market and economic conditions may materially adversely affect our business and results of operations
39. 39Inflation could negatively impact our business and our profitability
40. 40An economic downturn could have a material adverse effect on our capital, financial condition, results of operations, and future growth
41. 41We may incur losses if asset values decline, including due to changes in interest rates and prepayment speeds
42. 42Technological changes, including online and mobile banking, have the potential of disrupting our business model, and we may have fewer resources than many competitors to invest in technological improvements
43. 43Changes in accounting standards may affect our performance
44. 44We face risks related to our operational, technological, and organizational infrastructure

Risks Related to Our Securities

1. 45A vibrant public trading market for our common stock has not and may not develop, which may hinder your ability to sell the common stock and may lower the market price of the stock
2. 46Shareholders may face dilution resulting from the issuance of common stock in the future
3. 47The price of our common stock could be volatile
4. 48An investment in our common stock is not an insured deposit
5. 49Owning our stock will not give you the right to participate in any future offerings of our capital stock and your ownership could be diluted
6. 50Management has broad discretion concerning the use of our capital
7. 51If equity research analysts do not publish research or reports about our business, or if they do publish such reports but issue unfavorable commentary or downgrade our common stock, the price and trading volume of our common stock could decline
8. 52Our Board of Directors owns a significant percentage of our shares and will be able to make decisions to which you may be opposed
9. 53We have outstanding preferred stock and our Board may authorize the issuance of additional series of preferred stock
10. 54BayFirst has outstanding debt and either BayFirst or the Bank may incur additional debt
11. 55We are restricted by law and government policy in our ability to pay dividends to our shareholders
12. 56approval. Any preferred shares issued in the future may further restrict our ability to declare or pay dividends on any junior stock, including the common stock
13. 57We are an emerging growth company, and the reduced disclosure requirements applicable to emerging growth companies may make our common stock less attractive to investors
14. 58We are a smaller reporting company and are exempt from certain disclosure requirements, which could make our common stock less attractive to potential investors
15. 59Certain provisions of Florida and federal law may discourage or prevent a takeover of BayFirst and result in a lower market price for our common stock