BayFirst Financial Corp.BAFN
BayFirst Financial Corp. New Standards Disclosure
Adoption of New Accounting Standards:
ASU No. 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures" is intended to improve the disclosures about a public entity’s reportable segments and addresses requests from investors and other decision makers for additional, more detailed information about a reportable segment’s expenses. The amendment applies to all public entities that are required to report segment information in accordance with Topic 280. This was adopted in 2024 and applied retrospectively to all periods presented. Adoption of the amendment did not have a material impact on these consolidated financial statement disclosures.
On January 1, 2023, the Company adopted ASU No. 2016-13 “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”) along with its amendments, which replaces the incurred loss impairment methodology in past standards with the CECL methodology and requires consideration of a broader range of information to determine credit loss estimates. The measurement of expected losses under the CECL
methodology is applicable to financial assets measured at amortized cost, as well as unfunded commitments that are considered off-balance sheet credit exposures at the reporting date. The measurement is based on historical experience, current conditions, and reasonable and supportable forecasts and requires enhanced disclosures related to the significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. In addition, ASU 2016-13 amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. One such change is to require credit losses to be presented as an allowance rather than as a write-down on available-for-sale debt securities management does not intend to sell.
The Company adopted ASC 326 using the modified retrospective method for all financial assets measured at amortized cost and off-balance sheet credit exposures. The Company recorded a decrease to retained earnings of $2,508, net of tax, comprised of a $3,107 pretax increase in the ACL for loans and $18 for HTM securities combined with a $213 pretax increase in reserve on unfunded commitments, as of January 1, 2023 for the cumulative effect of adopting ASC 326.
The pre-tax impact of the January 1, 2023 adoption is summarized in the table below:
| January 1, 2023 | December 31, 2022 | ||||||||||||||||
| Allowance for credit losses | As Reported Under | Pre-ASC 326 | Impact of | ||||||||||||||
| ASC 326 | Adoption | ASC 326 Adoption | |||||||||||||||
| Assets | |||||||||||||||||
| Investment securities HTM - corporate bonds | $ | 18 | $ | — | $ | 18 | |||||||||||
| Loans HFI, at amortized cost | |||||||||||||||||
| Real estate - residential | 2,210 | 731 | 1,479 | ||||||||||||||
| Real estate - commercial | 1,569 | 956 | 613 | ||||||||||||||
| Real estate - construction and land | 309 | 28 | 281 | ||||||||||||||
| Commercial and industrial | 7,298 | 6,182 | 1,116 | ||||||||||||||
| Consumer and other | 767 | 1,090 | (323) | ||||||||||||||
| Unallocated | — | 59 | (59) | ||||||||||||||
| Loans HFI, at amortized cost total | 12,153 | 9,046 | 3,107 | ||||||||||||||
| Liabilities | |||||||||||||||||
| Allowance for credit loss for unfunded commitments | 724 | 511 | 213 | ||||||||||||||
| Total | $ | 12,877 | $ | 9,557 | $ | 3,320 | |||||||||||
New Accounting Standards Not Yet Adopted:
In October 2023, the FASB issued ASU No. 2023-06 “Disclosure Improvements - Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative” (“ASU 2023-06”). ASU 2023-06 amends the ASC to incorporate certain disclosure requirements from SEC Release No. 33-10532 - Disclosure Update and Simplification that was issued in 2018. The effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. The Company does not believe this standard will have a material impact on its Consolidated Financial Statements.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740) Improvements to Income Tax Disclosures ("ASU 2023-09"). This ASU was issued to enhance the transparency and decision usefulness of income tax disclosures. The ASU addresses investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. Retrospective application in all prior periods is permitted. The amendments in this standard will be effective for the Company on January 1, 2025. The Company assessed the impact of this standard and does not expect it to have a material impact on the Company’s consolidated financial statements.
In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Disaggregation of Income Statement Expenses Disclosure (“ASU 2024-03”). This ASU was issued to improve the disclosures about public business entity’s expenses and address investor’s requests for more detailed information about the types of expenses (including purchases of inventory, employee compensation, depreciation, amortization, and depletion) in commonly presented expense captions. The amendments in this standard will be effective for the Company for the fiscal year ended December 31, 2027 and subsequent interim periods. The amendments should be applied either prospectively to the financial statements issued for reporting periods after the effective date of this update or retrospectively to any and all prior periods presented in the
financial statements. We are currently evaluating the impact these changes may have on the Company’s consolidated financial statements.
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About New Standards Disclosures
New accounting standards disclosures describe recently adopted pronouncements and those not yet effective, along with management's assessment of their expected impact. This section provides an early warning system for upcoming changes to how a company reports its financial results, often years before the new rules take effect.
Key signals: when management describes a not-yet-adopted standard's impact as "material" or "still being evaluated," it signals potential significant changes to reported metrics upon adoption. Watch for standards that affect a company's core operations — for example, revenue recognition changes for software companies or lease accounting changes for retailers with large store footprints. The transition method chosen (full retrospective versus modified retrospective) affects comparability with prior periods. Companies that delay adoption to the latest permitted date may be struggling with implementation complexity. Compare the disclosed impact assessments against peers in the same industry to gauge whether management's expectations are reasonable.