BayFirst Financial Corp.

What they do

BayFirst Financial Corp. is a one-bank holding company operating through BayFirst National Bank (national charter since 2022), headquartered at the BayFirst Executive Center, 700 Central Avenue, St. Petersburg, Florida. The Bank operates its main office plus eleven additional banking centers in the Tampa Bay/Sarasota area and takes deposits and makes commercial, consumer and real estate loans. It discontinued its nationwide SBA 7(a) lending division in the third/ fourth quarter of 2025 and continues to offer SBA 504 and USDA loans through community banking centers. It does not engage in foreign business activities.

Revenue drivers

• Community banking net interest income — Interest on commercial, consumer and real estate loans funded by deposits and borrowings; the Bank reported $882.8 million of loans held for investment and $988.9 million of deposits at June 30, 2026.
• Government guaranteed lending (SBA 504 / USDA) — USDA and SBA 504 loans continue to be originated through the community banking centers after the nationwide SBA 7(a) lending division was discontinued; the Company also sold $97.4 million of government guaranteed loans to a third party as part of exiting SBA 7(a).
• Noninterest / service fee income — The Company states it is dependent on noninterest income derived from service fee income; it also previously recorded gains on sale of government guaranteed loans, an area it disclosed had been overstated.
• Deposit products and treasury services — Interest-bearing and noninterest-bearing checking, MMDAs, savings, CDs and IRAs, plus business treasury management, merchant processing, lock box and remote deposit capture, marketed to consumers, small/medium businesses and professionals in Pinellas, Hillsborough, Sarasota, Manatee and Pasco Counties.

Recent performance

For the second quarter of 2026 BayFirst reported a net loss of $32.7 million, or $8.05 per common share, versus a restated net loss of $5.9 million, or $1.54 per share, in the first quarter of 2026. The quarter included $41.5 million of provision expense, write-downs on loans measured at fair value, amortization of premiums on purchased government guaranteed loans, and impairment on nonmarketable securities related to the asset resolution plan. Net interest margin was 3.48%, up 4 basis points from 3.44% in the first quarter of 2026 but down 53 basis points from 4.01% in the second quarter of 2025. Loans held for investment fell $41.4 million, or 4.5%, during the quarter to $882.8 million, and deposits fell $97.0 million, or 8.9%, to $988.9 million. Book value per common share declined to $4.83 at June 30, 2026 from $14.22 at March 31, 2026.

Strategy

Management says it completed and quantified an asset resolution plan adopted in connection with a Stock Purchase Agreement dated April 28, 2026, identifying specific loans in the government guaranteed portfolio and adjusting expected collections on over 7,000 unguaranteed SBA 7(a) small balance loans. The April 28, 2026 capital raise was $80 million before transaction fees, of which $60 million was invested in the Bank during the second quarter of 2026. BayFirst continues to invest in community banking, including the upcoming opening of a new branch in South Tampa. Management states the Bank remains well capitalized and is focused on fundamentals of profitability and serving its Tampa Bay and Sarasota markets.

Risks

• Accounting restatement and unreliable prior financials — The Company identified an understatement of provision expense and an overstatement of gain on sale of government guaranteed loans, and filed an 8-K on July 15, 2026 stating previously issued financials were not reliable.
• Credit losses on unguaranteed SBA 7(a) loans — The asset resolution plan required $41.5 million of expense and adjustments to expected collections on over 7,000 unguaranteed SBA 7(a) small balance loans.
• Deposit runoff and funding mix — Deposits fell $97.0 million, or 8.9%, in the second quarter of 2026 and $174.9 million, or 15.0%, year over year, driven by declines in high-rate promotional accounts, savings and money market balances, brokered deposits and time deposits.
• Capital adequacy and dividend capacity — BayFirst's risk factor summary cites the need for additional capital, the effect of raising capital on shareholders, and dividend and other restrictions from its outstanding preferred stock plus the pledging of Bank stock to secure a loan.

Outlook

Management says the asset resolution plan was a deliberate step it believes strengthens the balance sheet and positions the Company well for the future, and that the Bank remains well capitalized. BayFirst says it is taking a disciplined approach to the issues affecting performance with a focus on profitability and its local markets. It also cites continued investment in Community Banking, including the upcoming South Tampa branch, regardless of near-term conditions.