BayFirst Financial Corp 10-Q/A for FY2026 Q1
BayFirst Financial Corp. (BAFN)
10-Q/A
2026-08-12
For: 2026-03-31
View Original
Added on
August 13, 2026
About this 10-Q/A
BayFirst Financial Corp filed this 10-Q/A on August 12, 2026, covering the quarter ended March 31, 2026 (FY2026 Q1).
Headline figures
Quarter ended March 31, 2026, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net loss
- $5.93M
- compared with a net loss of $938K a year earlier
- Diluted EPS
- -$1.54
- compared with -$0.32 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the fiscal period ended | |||||
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from to | |||||
Commission file number 001-41068
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||
(Address of Principal Executive Offices) | (Zip Code) | ||||
(727 ) 440-6848
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. | ||
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). | ||
| Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): | ||
| Large accelerated filer | o | Accelerated filer | o | |||||||||||
| x | Smaller reporting company | |||||||||||||
| Emerging growth company | ||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | ||
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No | ||
The registrant had outstanding | ||
EXPLANATORY NOTE
Restatement Background:
In July 2026, the Company completed and quantified the impact of the asset resolution plan adopted in accordance with the transactions contemplated by the Stock Purchase Agreement dated April 28, 2026. The nature, scope, and potential impact of the asset resolution plan were discussed in the Company’s Form 8-K and the exhibits incorporated therein, filed with the Securities and Exchange Commission on April 30, 2026.
During this process, management also identified $2.8 million, pretax, of deferred origination costs and $2.1 million, pretax, of accrued interest as of March 31, 2026, related to unguaranteed portions of SBA 7(a) loans which had defaulted or were placed into nonaccrual status in prior periods, which resulted in a material understatement of provision for credit losses expense and overstatement of net interest income during the effected quarterly periods in which the errors accumulated in 2024, 2025, and the first quarter of 2026. income during the effected quarterly periods in which the errors accumulated in 2024, 2025, and the first quarter of 2026. Included in the amounts above, provision was understated by $326 thousand, pretax, and net interest income was overstated by $9 thousand, pretax, for the quarter end March 31, 2026. Furthermore, management identified $3.4 million, pretax, of deferred origination costs which should have been netted against gain on sale of guaranteed SBA 7a loans which resulted in a material over statement of gain on sale of government guaranteed loans, during the affected quarterly periods in which the error accumulated in 2024 and 2025.
Items Amended in this Filing
This Amendment No. 1 amends and restates the following items of the Original Form 10-Q:
Part I - Item 1: Financial Statements
Part I - Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations
Part I - Item 4: Controls and Procedures
Part II - Item 6: Exhibits
The principal executive officer and principal financial officer provided new certifications as required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002. The certifications are included in this Form 10-Q/A as Exhibits 31.1, 31.2, and 32. This Form 10-Q/A also includes new consents of the Company’s independent registered public accounting firms as Exhibits 23.1.
For the convenience of the reader, this Form 10-Q/A sets forth each item of Form 10-Q in its entirety, as such information is modified and superseded where necessary to reflect the restatement. Except as provided above, this Amendment does not reflect events occurring subsequent to the filing of the Form 10-Q and does not amend or otherwise update any information in the Form 10-Q.
2
BayFirst Financial Corp.
Table of Contents
| Page | ||||||||
| Item 1. | ||||||||
Condensed Consolidated Statements of Income (Loss) (Unaudited) for the three months ended March 31, 2026 and 2025 | ||||||||
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) for the three months ended March 31, 2026 and 2025 | ||||||||
Condensed Consolidated Statements of Changes in Shareholders’ Equity (Unaudited) for the three months ended March 31, 2026 and 2025 | ||||||||
Condensed Consolidated Statements of Cash Flows (Unaudited) for the three months ended March 31, 2026 and 2025 | ||||||||
| Item 2. | ||||||||
| Item 3. | ||||||||
| Item 4. | ||||||||
| Item 1. | ||||||||
| Item 1A. | ||||||||
| Item 2. | ||||||||
| Item 3. | ||||||||
| Item 4. | ||||||||
| Item 5. | ||||||||
| Item 6. | ||||||||
1
Glossary of Acronyms and Abbreviations
The acronyms and abbreviations identified below may be used throughout this Quarterly Report on Form 10-Q/A or in our other SEC filings. You may find it helpful to refer back to this page while reading this report.
| ACL: Allowance for Credit Losses | FFIEC: Federal Financial Institutions Examination Council | ||||
| AFS: Available for Sale | FHLB: Federal Home Loan Bank | ||||
| AIO: Architecture, Infrastructure, and Operations | FNBB: First National Bankers Bank | ||||
| ALCO: Asset-Liability Committee | FOMC: Federal Open Market Committee | ||||
AOCI: Accumulated Other Comprehensive Income | FRB: Federal Reserve Bank | ||||
| ASC: FASB Accounting Standards Codification | FVO: Fair Value Option | ||||
| ASU: FASB Accounting Standards Update | GAAP: Generally Accepted Accounting Principles | ||||
BHCA: Bank Holding Company Act of 1956, as amended | HFI: Held for Investment | ||||
| BOLI: Bank Owned Life Insurance | HFS: Held for Sale | ||||
| BSA: Bank Secrecy Act of 1970 | HTM: Held to Maturity | ||||
| CARES Act: Coronavirus Aid, Relief, and Economic Security Act | IRA: Individual Retirement Account | ||||
| CBLR: Community Bank Leverage Ratio | ISO: Information Security Officer | ||||
| CDARS: Certificate of Deposit Account Registry Services | IT: Information Technology | ||||
| CECL: Current Expected Credit Losses | JOBS Act: Jumpstart Our Business Startups Act of 2012 | ||||
| CEO: Chief Executive Officer | LGD: Loss Given Default | ||||
CET1: Common Equity Tier 1 Capital | LHFS: Loans Held for Sale | ||||
| CFPB: Consumer Financial Protection Bureau | MMDA: Money Market Deposit Account | ||||
| C&I: Commercial and Industrial | NOW: Negotiable Order of Withdrawal | ||||
| CRO: Chief Risk Officer | NSPP: Non-Qualified Stock Purchase Plan | ||||
| CTO: Chief Technology Officer | OCC: Office of the Comptroller of the Currency | ||||
| Dodd-Frank Act: Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 | OREO: Other Real Estate Owned | ||||
| DRIP: Dividend Reinvestment Plan | OTTI: Other-Than-Temporary Impairment | ||||
| EGC: Emerging Growth Company | PCAOB: Public Company Accounting Oversight Board | ||||
| EPS: Earnings per Share | PD: Probability of Default | ||||
| Equity Plan: The Amended and Restated 2017 Equity Incentive Plan | PPP: Paycheck Protection Program | ||||
| ESG: Environmental, Social, and Governance | ROU: Right of Use | ||||
| ESOP: Employee Stock Ownership Plan | SBA: Small Business Administration | ||||
| Exchange Act: Securities Exchange Act of 1934 | SEC: U.S. Securities and Exchange Commission | ||||
| FASB: Financial Accounting Standards Board | SOFR: Secured Overnight Financing Rate | ||||
| FBCA: Florida Business Corporation Act | U.S.: United States | ||||
| FDIA: Federal Deposit Insurance Act | USDA: United States Department of Agriculture | ||||
| FDIC: Federal Deposit Insurance Corporation | USDA B&I: United States Department of Agriculture Business and Industry | ||||
| FDICIA: Federal Deposit Insurance Corporation Improvement Act | WARM: Weighted Average Remaining Life | ||||
2
BAYFIRST FINANCIAL CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
Part I - Financial Information
Item 1. Financial Statements
| March 31, 2026 | December 31, 2025 | (1) | ||||||||||||
| As restated | As restated | |||||||||||||
| ASSETS | ||||||||||||||
Cash and due from banks | $ | $ | ||||||||||||
Interest-bearing deposits in banks | ||||||||||||||
Cash and cash equivalents | ||||||||||||||
Investment securities available for sale, at fair value (amortized cost: $ | ||||||||||||||
Investment securities held to maturity, at amortized cost, net of allowance for credit losses of $ | ||||||||||||||
Nonmarketable equity securities | ||||||||||||||
Government guaranteed loans HFI, at fair value | ||||||||||||||
Loans HFI, at amortized cost | ||||||||||||||
| Allowance for credit losses on loans | ( | ( | ||||||||||||
Net loans HFI, at amortized cost | ||||||||||||||
Accrued interest receivable | ||||||||||||||
Premises and equipment, net | ||||||||||||||
Loan servicing rights | ||||||||||||||
Deferred income tax asset | ||||||||||||||
Right-of-use operating lease assets | ||||||||||||||
Bank owned life insurance | ||||||||||||||
| Other real estate owned | ||||||||||||||
Other assets | ||||||||||||||
Total assets | $ | $ | ||||||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||
Liabilities: | ||||||||||||||
Noninterest-bearing deposit accounts | $ | $ | ||||||||||||
Interest-bearing transaction accounts | ||||||||||||||
Savings and money market deposit accounts | ||||||||||||||
Time deposits | ||||||||||||||
Total deposits | ||||||||||||||
Subordinated notes | ||||||||||||||
Notes payable | ||||||||||||||
Accrued interest payable | ||||||||||||||
Operating lease liabilities | ||||||||||||||
Accrued expenses and other liabilities | ||||||||||||||
Total liabilities | ||||||||||||||
3
BAYFIRST FINANCIAL CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS CONTINUED
(Dollars in thousands, except per share data)
| March 31, 2026 | December 31, 2025 | (1) | ||||||||||||
| As restated | As restated | |||||||||||||
Shareholders’ equity: | ||||||||||||||
Preferred stock, Series A; no par value, | ||||||||||||||
Preferred stock, Series B; no par value, | ||||||||||||||
Preferred stock, Series C; no par value, | ||||||||||||||
Common stock and additional paid-in capital; no par value, | ||||||||||||||
Accumulated other comprehensive loss, net | ( | ( | ||||||||||||
Unearned compensation | ( | ( | ||||||||||||
Retained earnings | ||||||||||||||
Total shareholders’ equity | ||||||||||||||
Total liabilities and shareholders’ equity | $ | $ | ||||||||||||
(1) Derived from audited consolidated financial statements as amended
See accompanying notes.
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Table of Contents
BAYFIRST FINANCIAL CORP. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (Dollars in thousands, except per share data) | ||
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| As restated | As restated | ||||||||||||||||||||||
Interest income: | |||||||||||||||||||||||
Loans, including fees | $ | $ | |||||||||||||||||||||
Interest-bearing deposits in banks and other | |||||||||||||||||||||||
Total interest income | |||||||||||||||||||||||
Interest expense: | |||||||||||||||||||||||
Deposits | |||||||||||||||||||||||
Borrowings | |||||||||||||||||||||||
Total interest expense | |||||||||||||||||||||||
Net interest income | |||||||||||||||||||||||
Provision for credit losses | |||||||||||||||||||||||
Net interest income after provision for credit losses | |||||||||||||||||||||||
Noninterest income: | |||||||||||||||||||||||
Loan servicing income, net | |||||||||||||||||||||||
| Gain (loss) on sale of government guaranteed loans, net | ( | ||||||||||||||||||||||
Service charges and fees | |||||||||||||||||||||||
Government guaranteed loans fair value loss, net | ( | ( | |||||||||||||||||||||
| Government guaranteed loan packaging fees | |||||||||||||||||||||||
| Gain on sale of premises and equipment | |||||||||||||||||||||||
Other noninterest income | |||||||||||||||||||||||
Total noninterest income | |||||||||||||||||||||||
Noninterest expense: | |||||||||||||||||||||||
Salaries and benefits | |||||||||||||||||||||||
Bonus, commissions, and incentives | |||||||||||||||||||||||
Occupancy and equipment | |||||||||||||||||||||||
Data processing | |||||||||||||||||||||||
Marketing and business development | |||||||||||||||||||||||
Professional services | |||||||||||||||||||||||
Loan servicing and origination expense | |||||||||||||||||||||||
Employee recruiting and development | |||||||||||||||||||||||
Regulatory assessments | |||||||||||||||||||||||
Other noninterest expense | |||||||||||||||||||||||
Total noninterest expense | |||||||||||||||||||||||
Loss before income taxes | ( | ( | |||||||||||||||||||||
Income tax benefit | ( | ( | |||||||||||||||||||||
| Net loss | ( | ( | |||||||||||||||||||||
Preferred stock dividends | |||||||||||||||||||||||
Net loss attributable to common shareholders | $ | ( | $ | ( | |||||||||||||||||||
Basic loss per common share | $ | ( | $ | ( | |||||||||||||||||||
Diluted loss per common share | $ | ( | $ | ( | |||||||||||||||||||
See accompanying notes.
5
Table of Contents
BAYFIRST FINANCIAL CORP. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Dollars in thousands) | ||
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| As restated | As restated | ||||||||||||||||||||||
Net loss | $ | ( | $ | ( | |||||||||||||||||||
Net unrealized gains (losses) on investment securities available for sale | ( | ||||||||||||||||||||||
Deferred income tax expense (benefit) | ( | ||||||||||||||||||||||
Other comprehensive income (loss), net | ( | ||||||||||||||||||||||
Comprehensive income (loss) | $ | ( | $ | ( | |||||||||||||||||||
See accompanying notes.
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Table of Contents
BAYFIRST FINANCIAL CORP. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Dollars in thousands, except per share data) | ||
| Preferred Stock, Series A | Preferred Stock, Series B | Preferred Stock, Series C | Common Stock, Additional Paid-in Capital, and Unearned Compensation | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at January 1, 2025 (as restated) | $ | $ | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based awards - common stock: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted stock expense, net of tax impact | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock option expense | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income, net | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends declared on: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Preferred stock | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common stock ($ | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2025 (as restated) | $ | $ | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at January 1, 2026 (as restated) | $ | $ | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock under: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-qualified stock purchase plan | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted stock expense, net of tax impact | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock option expense | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss, net | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2026 (as restated) | $ | $ | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
See accompanying notes.
7
Table of Contents
BAYFIRST FINANCIAL CORP. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) | ||
| Three Months Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| As restated | As restated | ||||||||||
Cash flows from operating activities: | |||||||||||
| Net loss | $ | ( | $ | ( | |||||||
| Net loss from discontinued operations | |||||||||||
Net income (loss) | ( | ( | |||||||||
Adjustments to reconcile net loss to net cash from operating activities: | |||||||||||
| Depreciation of fixed assets | |||||||||||
| Net securities premium amortization | |||||||||||
| Amortization of debt issuance costs | |||||||||||
| Amortization of premium on loans purchased, net | |||||||||||
| Provision for credit losses | |||||||||||
Accretion of discount on unguaranteed loans | ( | ( | |||||||||
| Deferred tax benefit | ( | ( | |||||||||
Proceeds from sales of government guaranteed loans held for sale | |||||||||||
Net (gains) losses on sales of government guaranteed loans | ( | ||||||||||
| Net amortization of deferred loan costs | |||||||||||
Change in fair value of government guaranteed loans HFI, at fair value | |||||||||||
Amortization of loan servicing rights | |||||||||||
| Gain on sale of premises and equipment | ( | ||||||||||
Non-qualified stock purchase plan expense | |||||||||||
Stock based compensation expense | ( | ||||||||||
Income from bank owned life insurance | ( | ( | |||||||||
| Impairment of equipment and software | |||||||||||
| Capitalization of subordinated debt interest | |||||||||||
Changes in: | |||||||||||
Accrued interest receivable | |||||||||||
Other assets | ( | ( | |||||||||
Accrued interest payable | ( | ||||||||||
Other liabilities | ( | ( | |||||||||
| Net cash provided by operating activities of continuing operations | ( | ||||||||||
Cash flows from investing activities: | |||||||||||
Purchase of investment securities available for sale | ( | ||||||||||
Principal payments on investment securities available for sale | |||||||||||
| Call of investment securities held to maturity | |||||||||||
Net purchase of nonmarketable equity securities | ( | ( | |||||||||
| Purchase of time deposits in banks | ( | ||||||||||
| Maturity of time deposits in banks | |||||||||||
Loan originations/(payments), net | ( | ||||||||||
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BAYFIRST FINANCIAL CORP. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS CONTINUED (Dollars in thousands) | ||
| Three Months Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| As restated | As restated | ||||||||||
Purchase of premises and equipment | ( | ( | |||||||||
| Loss on repossessed assets | |||||||||||
| Net cash provided by (used in) investing activities | ( | ||||||||||
| Cash flows from financing activities: | |||||||||||
Net change in deposits | ( | ( | |||||||||
| Net decrease in short-term borrowings | |||||||||||
Payments on notes payable | ( | ( | |||||||||
Proceeds from issuance of common stock for benefit plans, net | ( | ||||||||||
| Common share buyback - redeemed stock | ( | ||||||||||
Dividends paid on common stock | ( | ||||||||||
Dividends paid on preferred stock | ( | ||||||||||
Net cash provided by (used in) financing activities | ( | ||||||||||
Net change in cash and cash equivalents | ( | ( | |||||||||
Cash and cash equivalents, beginning of period | |||||||||||
Cash and cash equivalents, end of period | $ | $ | |||||||||
Supplemental cash flow information | |||||||||||
Interest paid | $ | $ | |||||||||
Income taxes paid | |||||||||||
Supplemental noncash disclosures | |||||||||||
| Net change in unrealized holding gains (losses) on investment securities available for sale, net of tax effect | ( | ||||||||||
| Accumulated unpaid preferred dividends | ( | ||||||||||
| Transfer of government guaranteed loans HFI to loans HFS | |||||||||||
| Transfer of loans HFI to repossessed assets | |||||||||||
See accompanying notes.
9
BAYFIRST FINANCIAL CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share data) | ||
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements include BayFirst Financial Corp. and its wholly owned subsidiary, BayFirst National Bank (“the Bank”), together referred to as “the Company”.
These unaudited condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles followed within the financial services industry for interim financial information and Article 8 of Regulation S-X. Accordingly, certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to these rules and regulations. The consolidated balance sheet as of December 31, 2025 has been derived from the audited consolidated financial statements of BayFirst Financial Corp. for that date.
All of the Company’s financial results are similar and considered by management to be aggregated into one reportable operating segment. While the Company has assigned certain management responsibilities by branch location or department, the Company evaluates financial performance on a Company-wide basis. Accordingly, the Company currently operates one business segment.
In the opinion of management, all adjustments, consisting of normal and recurring items, considered necessary for a fair presentation of the condensed consolidated financial statements for the interim periods have been included. All significant intercompany accounts and transactions have been eliminated in consolidation. Certain amounts reported in prior periods have been reclassified to conform to current year presentation. These reclassifications did not have a material effect on previously reported net income, shareholders’ equity, or cash flows.
Operating results for the three months ended March 31, 2026 are not necessarily indicative of the results that may be expected for the year ending December 31, 2026. These statements should be read in conjunction with the consolidated financial statements as amended, and notes thereto for the year ended December 31, 2025.
The Company’s significant accounting policies are described in Note 1 of the Notes to Consolidated Financial Statements as amended, for the year ended December 31, 2025 in the Company’s Annual Report filed on Form 10-K/A. For interim reporting purposes, the Company follows the same basic accounting policies and considers each interim period as an integral part of an annual period.
Use of Estimates: To prepare financial statements in conformity with GAAP, management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ. The most significant estimates relate to the ACL, government guaranteed loan servicing rights, and fair value of government guaranteed loans HFI.
Emerging Growth Company Status: The Company is expected to remain an "emerging growth company," as defined in the JOBS Act, through December 31, 2026. Section 107 of the JOBS Act provides that an emerging growth company can take advantage of an extended transition period when complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company has elected to take advantage of this extended transition period, which means these financial statements, as well as financial statements they file in the future for as long as the Company remains an emerging growth company, will be subject to all new or revised accounting standards generally applicable to private companies.
Restatement of Previously Issued Financial Statements
Subsequent to the issuance of the Company's 2025 Consolidated Financial Statements on March 27, 2026, reporting errors were identified in the historical Consolidated Financial Statements related to cumulative misstatements of $2.8 million, pretax, of deferred origination costs and $2.1 million, pretax, of accrued interest as of March 31, 2026, related to unguaranteed portions of SBA 7(a) loans which had defaulted or were placed into nonaccrual status in prior periods, which resulted in a material understatement of provision for credit losses expense and overstatement of net interest income during the effected quarterly periods in which the errors accumulated prior to 2024, and in 2024, 2025, and the first quarter of
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BAYFIRST FINANCIAL CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Dollars in thousands, except per share data) | ||
2026. Furthermore, management identified $3.4 million, pretax, of deferred origination costs which should have been netted against gain on sale of guaranteed SBA 7a loans which resulted in a material over statement of gain on sale of government guaranteed loans, during the affected quarterly periods in which the error accumulated prior to 2024, and in 2024 and 2025. The net $1.9 million cumulative effect on income for the periods prior to 2024 was recorded in the opening retained earnings balance of the earliest period presented in the restated financial statements. Accordingly, the Company has restated the Consolidated Balance Sheets, Consolidated Statements of Income (Loss), Consolidated Statements of Comprehensive Income (Loss), Consolidated Statements of Changes in Shareholders’ Equity, and Consolidated Statements of Cash Flows for the affected periods, to reflect the error correction.
The Company has also updated all accompanying footnotes and disclosures affected by the correction within Note 3. Loans, Note 4. Allowance for Credit Losses, Note 5. Fair Value, Note 6. Government Guaranteed Loan Servicing Activities, Note 11. Regulatory Capital, and Note 13. Earnings per Common Share.
The following is a summary of the impacts on financial statement line items as of the year ended December 31, 2025 and as of and for the quarter ended March 31, 2026 and for the quarter ended March 31, 2025:
| Condensed Consolidated Balance Sheet as of March 31, 2026 | As Reported | Correction | As Restated | ||||||||||||||
Loans HFI, at amortized cost | $ | $ | ( | $ | |||||||||||||
Net loans HFI, at amortized cost | ( | ||||||||||||||||
Accrued interest receivable | ( | ||||||||||||||||
Deferred income tax asset | |||||||||||||||||
Other assets | |||||||||||||||||
Total assets | ( | ||||||||||||||||
Retained earnings | ( | ||||||||||||||||
Total shareholders’ equity | ( | ||||||||||||||||
Total liabilities and shareholders’ equity | ( | ||||||||||||||||
| Condensed Consolidated Balance Sheet as of December 31, 2025 | As Reported | Correction | As Restated | ||||||||||||||
Loans HFI, at amortized cost | $ | $ | ( | $ | |||||||||||||
Net loans HFI, at amortized cost | ( | ||||||||||||||||
Accrued interest receivable | ( | ||||||||||||||||
Deferred income tax asset | |||||||||||||||||
Other assets | |||||||||||||||||
Total assets | ( | ||||||||||||||||
Retained earnings | ( | ||||||||||||||||
Total shareholders’ equity | ( | ||||||||||||||||
Total liabilities and shareholders’ equity | ( | ||||||||||||||||
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BAYFIRST FINANCIAL CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Dollars in thousands, except per share data) | ||
| Condensed Consolidated Statement of Income for the quarter ended March 31, 2026 | As Reported | Correction | As Restated | ||||||||||||||
| Interest income loans, including fees | $ | $ | ( | $ | |||||||||||||
| Total interest income | ( | ||||||||||||||||
| Net interest income | ( | ||||||||||||||||
| Provision for credit losses | |||||||||||||||||
| Net interest income after provision for credit losses | ( | ||||||||||||||||
| Loss before income taxes | ( | ( | ( | ||||||||||||||
| Income tax benefit | ( | ( | ( | ||||||||||||||
| Net loss | ( | ( | ( | ||||||||||||||
| Net loss attributable to common shareholders | ( | ( | ( | ||||||||||||||
| Total basic loss per common share | ( | ( | ( | ||||||||||||||
| Total diluted loss per common share | ( | ( | ( | ||||||||||||||
| Condensed Consolidated Statement of Income for the quarter ended March 31, 2025 | As Reported | Correction | As Restated | ||||||||||||||
| Interest income loans, including fees | $ | $ | ( | $ | |||||||||||||
| Total interest income | ( | ||||||||||||||||
| Net interest income | ( | ||||||||||||||||
| Provision for credit losses | |||||||||||||||||
| Net interest income after provision for credit losses | ( | ||||||||||||||||
| Gain on sale of government guaranteed loans, net | ( | ||||||||||||||||
| Total noninterest income | ( | ||||||||||||||||
| Loss before income taxes | ( | ( | ( | ||||||||||||||
| Income tax benefit | ( | ( | ( | ||||||||||||||
| Net loss | ( | ( | ( | ||||||||||||||
| Net loss attributable to common shareholders | ( | ( | ( | ||||||||||||||
| Total basic loss per common share | ( | ( | ( | ||||||||||||||
| Total diluted loss per common share | ( | ( | ( | ||||||||||||||
| Condensed Consolidated Statement of Comprehensive Income (Loss) for the quarter ended March 31, 2026 | As Reported | Correction | As Restated | ||||||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | |||||||||||
| Comprehensive loss | ( | ( | ( | ||||||||||||||
| Condensed Consolidated Statement of Comprehensive Income (Loss) for the quarter ended March 31, 2025 | As Reported | Correction | As Restated | ||||||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | |||||||||||
| Comprehensive loss | ( | ( | |||||||||||||||
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BAYFIRST FINANCIAL CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Dollars in thousands, except per share data) | ||
| Condensed Consolidated Statement of Changes in Shareholders' Equity for the quarter ended March 31, 2026 | As Reported | Correction | As Restated | ||||||||||||||
| Retained Earnings as of January 1, 2026 | $ | $ | ( | $ | |||||||||||||
| Total Shareholders' Equity as of January 1, 2026 | ( | ||||||||||||||||
| Net loss | ( | ( | ( | ||||||||||||||
| Retained Earnings as of March 31, 2026 | ( | ||||||||||||||||
| Total Shareholders' Equity as of March 31, 2026 | ( | ||||||||||||||||
| Condensed Consolidated Statement of Changes in Shareholders' Equity for the quarter ended March 31, 2025 | As Reported | Correction | As Restated | ||||||||||||||
| Retained Earnings as of January 1, 2025 | $ | $ | ( | $ | |||||||||||||
| Total Shareholders' Equity as of January 1, 2025 | ( | ||||||||||||||||
| Net loss | ( | ( | ( | ||||||||||||||
| Retained Earnings as of March 31, 2025 | ( | ||||||||||||||||
| Total Shareholders' Equity as of March 31, 2025 | ( | ||||||||||||||||
| Condensed Consolidated Statement of Cash Flows for the three months ended March 31, 2026 | As Reported | Correction | As Restated | ||||||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | |||||||||||
| Provision for credit losses | |||||||||||||||||
| Deferred tax benefit | ( | ( | |||||||||||||||
| Net amortization of deferred loan costs | |||||||||||||||||
| Change in Accrued interest receivable | |||||||||||||||||
| Change in Other assets | ( | ( | |||||||||||||||
| Net cash provided by operating activities | ( | ( | |||||||||||||||
Loan originations, net | ( | ||||||||||||||||
| Net cash used in investing activities | ( | ||||||||||||||||
| Condensed Consolidated Statement of Cash Flows for the three months ended March 31, 2025 | As Reported | Correction | As Restated | ||||||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | |||||||||||
| Provision for credit losses | |||||||||||||||||
| Deferred tax benefit | ( | ( | |||||||||||||||
| Net gains on sales of government guaranteed loans | ( | ( | |||||||||||||||
| Net amortization of deferred loan costs | |||||||||||||||||
| Change in Accrued interest receivable | |||||||||||||||||
| Change in Other assets | ( | ( | ( | ||||||||||||||
| Change in Other liabilities | ( | ( | ( | ||||||||||||||
| Net cash provided by operating activities | |||||||||||||||||
Loan originations, net | ( | ( | ( | ||||||||||||||
| Net cash used in investing activities | ( | ( | ( | ||||||||||||||
| Transfer of loans and leases held for investment to loans held for sale | |||||||||||||||||
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
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BAYFIRST FINANCIAL CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Dollars in thousands, except per share data) | ||
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 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.
NOTE 2 – INVESTMENT SECURITIES
The amortized costs, gross unrealized gains and losses, and estimated fair values of investment securities available for sale and investment securities held to maturity at March 31, 2026 and December 31, 2025 as well as the ACL for investment securities held to maturity at March 31, 2026 and December 31, 2025 are summarized as follows:
| March 31, 2026 | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||||||||
Investment securities available for sale: | |||||||||||||||||||||||
Asset-backed securities | $ | $ | $ | ( | $ | ||||||||||||||||||
Mortgage-backed securities: | |||||||||||||||||||||||
U.S. Government-sponsored enterprises | ( | ||||||||||||||||||||||
Collateralized mortgage obligations: | |||||||||||||||||||||||
U.S. Government-sponsored enterprises | ( | ||||||||||||||||||||||
| Corporate bonds | |||||||||||||||||||||||
Total investment securities available for sale | $ | $ | $ | ( | $ | ||||||||||||||||||
| March 31, 2026 | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ACL | ||||||||||||||||||||||||
Investment securities held to maturity: | |||||||||||||||||||||||||||||
| Corporate bonds | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||
Total investment securities held to maturity | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||
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BAYFIRST FINANCIAL CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Dollars in thousands, except per share data) | ||
| December 31, 2025 | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||||||||
Investment securities available for sale: | |||||||||||||||||||||||
Asset-backed securities | $ | $ | $ | ( | $ | ||||||||||||||||||
Mortgage-backed securities: | |||||||||||||||||||||||
U.S. Government-sponsored enterprises | ( | ||||||||||||||||||||||
Collateralized mortgage obligations: | |||||||||||||||||||||||
U.S. Government-sponsored enterprises | ( | ||||||||||||||||||||||
| Corporate bonds | |||||||||||||||||||||||
Total investment securities available for sale | $ | $ | $ | ( | $ | ||||||||||||||||||
| December 31, 2025 | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ACL | ||||||||||||||||||||||||
Investment securities held to maturity: | |||||||||||||||||||||||||||||
| Corporate bonds | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||
Total investment securities held to maturity | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||
The amortized cost and fair value of investment securities as of March 31, 2026 are shown in the table below by contractual maturity. Actual timing may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.
| Available for Sale | Held to Maturity | ||||||||||||||||||||||
| Amortized Cost | Fair Value | Amortized Cost | Fair Value | ||||||||||||||||||||
| One to five years | $ | $ | $ | $ | |||||||||||||||||||
| Five to ten years | |||||||||||||||||||||||
| Beyond ten years | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
No ACL for investment securities AFS was needed at March 31, 2026 or December 31, 2025. Declines in the fair value of the AFS investment portfolio are believed by management to be unrelated to credit losses. When evaluating an investment for credit loss, management considers, among other things, the financial condition of the issuer through the review of credit ratings and, if necessary, corporate financial statements; adverse conditions specifically related to the security such as past due principal or interest; underlying assets that collateralize the debt security; other economic conditions and demographics; and the intent and ability of the Company to hold the investment until the loss position is recovered. Any unrealized losses were largely due to increases in market interest rates over the yields available at the time of purchase. The fair value is expected to recover as the bonds approach their maturity date or market yields for similar investments decline. Management does not believe any of the securities are impaired due to reasons of credit quality. At March 31, 2026, the Company did not intend to sell and believed it was not likely to be required to sell the available for sale securities that were in a loss position prior to full recovery.
As of March 31, 2026, there were no past due principal and interest payments associated with the HTM securities. The Company monitors the credit quality of debt securities held to maturity quarterly through the use of credit ratings. However, the corporate bonds that are held to maturity have no credit rating and the corporate bonds in an unrealized loss position at March 31, 2026 are not material to the financial statements. There was an ACL of $9 on corporate bonds HTM at March 31, 2026 and $7 at December 31, 2025, which was calculated based on applying the long-term historical credit loss rate for similarly rated securities.
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The following table presents the activity in the ACL for investment securities HTM by major security type for the three months ended March 31, 2026 and March 31, 2025:
| For the Three Months Ended | For the Three Months Ended | ||||||||||||||||||||||
| Corporate Bonds | March 31, 2026 | March 31, 2025 | |||||||||||||||||||||
| Balance at beginning of period | $ | $ | |||||||||||||||||||||
| Provision for credit losses on HTM investment securities | |||||||||||||||||||||||
| Investment securities charge-offs | |||||||||||||||||||||||
| Investment securities recoveries | |||||||||||||||||||||||
| Balance at end of period | $ | $ | |||||||||||||||||||||
The following table summarizes investment securities with unrealized losses at March 31, 2026 aggregated by security type and length of time in a continuous unrealized loss position:
| Less than 12 Months | 12 Months or Longer | Total | |||||||||||||||||||||||||||||||||||||||
| March 31, 2026 | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Number of Securities | ||||||||||||||||||||||||||||||||||
| Investment securities available for sale: | |||||||||||||||||||||||||||||||||||||||||
| Asset-backed securities | $ | $ | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||||||
| Mortgage-backed securities: | |||||||||||||||||||||||||||||||||||||||||
| U.S. Government-sponsored enterprises | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Collateralized mortgage obligations: | |||||||||||||||||||||||||||||||||||||||||
| U.S. Government-sponsored enterprises | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Total investment securities available for sale | $ | $ | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||||||
| Investment securities held to maturity: | |||||||||||||||||||||||||||||||||||||||||
| Corporate bonds | $ | $ | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||||||
| Total investment securities held to maturity | $ | $ | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||||||
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BAYFIRST FINANCIAL CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Dollars in thousands, except per share data) | ||
The following table summarizes investment securities with unrealized losses at December 31, 2025 aggregated by security type and length of time in a continuous unrealized loss position:
| Less than 12 Months | 12 Months or Longer | Total | |||||||||||||||||||||||||||||||||||||||
| December 31, 2025 | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Number of Securities | ||||||||||||||||||||||||||||||||||
| Investment securities available for sale: | |||||||||||||||||||||||||||||||||||||||||
| Asset-backed securities | $ | $ | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||||||
| Mortgage-backed securities: | |||||||||||||||||||||||||||||||||||||||||
| U.S. Government-sponsored enterprises | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Collateralized mortgage obligations: | |||||||||||||||||||||||||||||||||||||||||
| U.S. Government-sponsored enterprises | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Total investment securities available for sale | $ | $ | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||||||
| Investment securities held to maturity: | |||||||||||||||||||||||||||||||||||||||||
| Corporate bonds | $ | $ | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||||||
| Total investment securities held to maturity | $ | $ | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||||||
No investment securities were pledged as of March 31, 2026 or December 31, 2025, and there were no sales of investment securities for the three months ended March 31, 2026 or March 31, 2025.
NOTE 3 – LOANS
Loans HFI, excluding loans measured at fair value, at March 31, 2026 and December 31, 2025 were as follows:
| March 31, 2026 | December 31, 2025 | ||||||||||
Real estate: | As restated | As restated | |||||||||
Residential | $ | $ | |||||||||
Commercial | |||||||||||
Construction and land | |||||||||||
Commercial and industrial | |||||||||||
Commercial and industrial - PPP | |||||||||||
Consumer and other | |||||||||||
Loans HFI, excluding loans measured at fair value, gross | |||||||||||
Deferred loan costs, net | |||||||||||
Discount on government guaranteed loans(1) | ( | ( | |||||||||
Premium on loans purchased, net | |||||||||||
Allowance for credit losses | ( | ( | |||||||||
Net loans HFI, excluding loans measured at fair value | $ | $ | |||||||||
(1) The Company allocates the retained portion of loans sold based on relative fair value of the retained portion and the sold portion, which results in a discount on the retained portion.
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NOTE 4 - ALLOWANCE FOR CREDIT LOSSES
The following schedules present the activity in the ACL by loan segment for the three months ended March 31, 2026 and March 31, 2025:
| Three Months Ended | Real Estate - Residential | Real Estate - Commercial | Real Estate - Construction and Land | Commercial and Industrial | Consumer and Other | Total | |||||||||||||||||||||||||||||||||||||||||
| March 31, 2026 (as restated) | |||||||||||||||||||||||||||||||||||||||||||||||
| Beginning Balance | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||
| Charge-offs | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||
| Recoveries | |||||||||||||||||||||||||||||||||||||||||||||||
| Provision | ( | ||||||||||||||||||||||||||||||||||||||||||||||
| Ending Balance | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||
| March 31, 2025 (as restated) | |||||||||||||||||||||||||||||||||||||||||||||||
| Beginning Balance | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||
| Charge-offs | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||
| Recoveries | |||||||||||||||||||||||||||||||||||||||||||||||
| Provision | ( | ||||||||||||||||||||||||||||||||||||||||||||||
| Ending Balance | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||
The ACL represents management’s best estimate of future lifetime expected losses on its HFI loan portfolio. The Company calculates its ACL by estimating expected credit losses on a collective basis for loans that share similar risk characteristics. Loans that do not share similar risk characteristics with other loans are evaluated for credit losses on an individual basis. The Company uses a combination of modeled and non-modeled approaches that incorporates current and future economic conditions to estimate lifetime expected losses on a collective basis. Individually evaluated loans are evaluated for impairment and a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the rate implicit in the original loan agreement or at the fair value of collateral adjusted for selling costs as appropriate if repayment is expected solely from the collateral.
The Company uses reasonable and supportable forecasts that are developed with internal and external data. These are updated quarterly by management and utilize data from the FOMC’s median forecasts of change in national GDP and of national unemployment. The FOMC’s forecast of GDP and unemployment for the next calendar year is used in conjunction with the most recent 4 quarters of historical data from FRED (Federal Reserve Economic Data) to determine changes in certain qualitative factors used in calculating loss rates.
See Note 1 and Note 5 of the Notes to Consolidated Financial Statements for further discussion of the Company’s ACL methodology in the December 31, 2025 Form 10-K/A.
The Company maintains a separate ACL for its off-balance sheet unfunded loan commitments. The ACL on unfunded loan commitments is based on estimates of probability that these commitments will be drawn upon according to historical utilization experience, expected loss severity and loss rates as determined for pooled funded loans. As of March 31, 2026 and December 31, 2025, the ACL for unfunded commitments recorded in other liabilities was $718 and $671 , respectively.
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BAYFIRST FINANCIAL CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Dollars in thousands, except per share data) | ||
The following table presents the activity in the ACL for unfunded commitments for the three months ended March 31, 2026 and March 31, 2025:
| For the Three Months Ended | |||||||||||||||||||||||
| March 31, 2026 | March 31, 2025 | ||||||||||||||||||||||
| Balance at beginning of period | $ | $ | |||||||||||||||||||||
| Provision for credit losses on unfunded commitments | |||||||||||||||||||||||
| Unfunded commitments charge-offs | |||||||||||||||||||||||
| Unfunded commitments recoveries | |||||||||||||||||||||||
| Balance at end of period | $ | $ | |||||||||||||||||||||
The following tables present the principal balance of nonaccrual loans and loans past due over 89 days on accrual by loan segment at March 31, 2026 and December 31, 2025. In the following tables, the principal balance does not include the government guaranteed balance or loans measured at fair value.
| March 31, 2026 | Nonaccrual with no ACL(1) | Nonaccrual with ACL(1) | Loans Past Due Over 89 Days and Accruing(1) | |||||||||||||||||
Real estate - residential | $ | $ | $ | |||||||||||||||||
Real estate - commercial | ||||||||||||||||||||
Commercial and industrial | ||||||||||||||||||||
Consumer and other | ||||||||||||||||||||
Total | $ | $ | $ | |||||||||||||||||
| December 31, 2025 | Nonaccrual with no ACL(1) | Nonaccrual with ACL(1) | Loans Past Due Over 89 Days and Accruing(1) | ||||||||||||||
Real estate - residential | $ | $ | $ | ||||||||||||||
Real estate - commercial | |||||||||||||||||
Real estate - construction and land | |||||||||||||||||
Commercial and industrial | |||||||||||||||||
| Consumer and other | |||||||||||||||||
Total | $ | $ | $ | ||||||||||||||
A financial asset is considered collateral dependent when the debtor is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral. Expected credit losses for collateral dependent loans are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate. Significant quarter over quarter changes are reflective of changes in nonaccrual status and not necessarily associated with credit quality indicators like appraised value. The following tables present the principal balance, including government
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guaranteed balances, of individually analyzed collateral dependent loans by loan portfolio segment as of March 31, 2026 and December 31, 2025:
| March 31, 2026 | Type of Collateral | ACL | |||||||||||||||||||||
| Real Estate | |||||||||||||||||||||||
| Real estate - commercial | $ | $ | |||||||||||||||||||||
.
| December 31, 2025 | Type of Collateral | ACL | |||||||||||||||||||||
| Real Estate | |||||||||||||||||||||||
| Real estate - commercial | $ | $ | |||||||||||||||||||||
The following table presents the aging of the principal balance of past due loans HFI at amortized cost at March 31, 2026 by loan segment:
| 30-89 Days Past Due | Greater Than 89 Days Past Due | Total Past Due | Loans Not Past Due (1) | Total Loans | |||||||||||||||||||||||||
Real estate - residential | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Real estate - commercial | |||||||||||||||||||||||||||||
Real estate - construction and land | |||||||||||||||||||||||||||||
Commercial and industrial | |||||||||||||||||||||||||||||
Commercial and industrial - PPP | |||||||||||||||||||||||||||||
Consumer and other | |||||||||||||||||||||||||||||
Total | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
(1) $ | |||||||||||||||||||||||||||||
The following table presents the aging of the principal balance of past due loans HFI at amortized cost at December 31, 2025 by loan segment:
| 30-89 Days Past Due | Greater Than 89 Days Past Due | Total Past Due | Loans Not Past Due (1) | Total Loans | |||||||||||||||||||||||||
Real estate - residential | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Real estate - commercial | |||||||||||||||||||||||||||||
Real estate - construction and land | |||||||||||||||||||||||||||||
Commercial and industrial | |||||||||||||||||||||||||||||
Commercial and industrial - PPP | |||||||||||||||||||||||||||||
Consumer and other | |||||||||||||||||||||||||||||
Total | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
(1) $ | |||||||||||||||||||||||||||||
Modifications to Borrowers Experiencing Financial Difficulty
For the three months ended March 31, 2026 and the year ended December 31, 2025, there were no loan modifications to borrowers experiencing financial difficulty and no loan modifications that subsequently defaulted during the period.
20
BAYFIRST FINANCIAL CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share data) | ||
Credit Quality Indicators
Internal risk-rating grades are assigned to loans by lending, credit administration or loan review personnel, based on an analysis of the financial and collateral strength and other credit attributes underlying each loan. Management analyzes the resulting ratings, as well as other statistics and factors such as delinquency, to track the migration performance of the portfolio balances. This analysis is performed at least annually. The Bank uses the following definitions for its risk ratings:
Pass – Loans properly approved, documented, collateralized, and performing which do not reflect an abnormal credit risk.
Special Mention – These credits have potential weaknesses that may, if not checked or corrected, weaken the asset, or inadequately protect the Company’s position at some future date. These assets pose elevated risk, but their weakness does not yet justify a “Substandard” classification.
Substandard – These loans are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.
Doubtful – These loans have all the weaknesses inherent in those classified as Substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions, and values, highly questionable and improbable.
The table below sets forth principal balance for the commercial loan portfolio disaggregated by loan segment based on internally assigned risk ratings at March 31, 2026 and gross write offs for the three months ended March 31, 2026 (as restated):
| Revolving | Revolving | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loans | Loans | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Term Loans Amortized Cost Basis by Origination Year | Amortized | Converted | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | 2024 | 2023 | 2022 | Prior | Cost Basis | to Term | Total | |||||||||||||||||||||||||||||||||||||||||||||
Real estate - commercial | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk Rating | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Special mention | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total real estate - commercial loans, at amortized cost, gross | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gross write offs | |||||||||||||||||||||||||||||||||||||||||||||||||||||
21
BAYFIRST FINANCIAL CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share data) | ||
| Revolving | Revolving | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loans | Loans | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Term Loans Amortized Cost Basis by Origination Year | Amortized | Converted | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | 2024 | 2023 | 2022 | Prior | Cost Basis | to Term | Total | |||||||||||||||||||||||||||||||||||||||||||||
Real estate - construction and land | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk Rating | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Special mention | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total real estate - construction and land loans, at amortized cost, gross | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gross write offs | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial and industrial | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk Rating | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Special mention | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total commercial and industrial loans, at amortized cost, gross | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gross write offs | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial and industrial - PPP | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk Rating | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Special mention | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total commercial and industrial - PPP loans, at amortized cost, gross | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gross write offs | |||||||||||||||||||||||||||||||||||||||||||||||||||||
22
BAYFIRST FINANCIAL CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share data) | ||
The table below sets forth principal balance for the commercial loan portfolio disaggregated by loan segment based on internally assigned risk ratings at December 31, 2025 and gross write offs for the year ended December 31, 2025 (as restated):
| Revolving | Revolving | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loans | Loans | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Term Loans Amortized Cost Basis by Origination Year | Amortized | Converted | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | 2022 | 2021 | Prior | Cost Basis | to Term | Total | |||||||||||||||||||||||||||||||||||||||||||||
Real estate - commercial | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk Rating | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Special mention | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total real estate - commercial loans, at amortized cost, gross | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gross write offs | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Real estate - construction and land | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk Rating | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Special mention | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total real estate - construction and land loans, at amortized cost, gross | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gross write offs | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial and industrial | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk Rating | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Special mention | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total commercial and industrial loans, at amortized cost, gross | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gross write offs | |||||||||||||||||||||||||||||||||||||||||||||||||||||
23
BAYFIRST FINANCIAL CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share data) | ||
| Revolving | Revolving | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loans | Loans | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Term Loans Amortized Cost Basis by Origination Year | Amortized | Converted | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | 2022 | 2021 | Prior | Cost Basis | to Term | Total | |||||||||||||||||||||||||||||||||||||||||||||
Commercial and industrial - PPP | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk Rating | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Special mention | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total commercial and industrial - PPP loans, at amortized cost, gross | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gross write offs | |||||||||||||||||||||||||||||||||||||||||||||||||||||
The Company considers the performance of the loan portfolio to determine its impact on the ACL. For residential and consumer loan classes, the Company evaluates credit quality based on the aging status of the loan by payment activity. The following table presents the principal balance at March 31, 2026 of residential and consumer loans based on payment activity as well as gross write offs for the three months ended March 31, 2026 (as restated).
| Revolving | Revolving | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loans | Loans | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Term Loans Amortized Cost Basis by Origination Year | Amortized | Converted | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | 2024 | 2023 | 2022 | Prior | Cost Basis | to Term | Total | |||||||||||||||||||||||||||||||||||||||||||||
Real estate - residential | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Payment Performance | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Performing | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Nonperforming | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total real estate - residential loans, at amortized cost, gross | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gross write offs | |||||||||||||||||||||||||||||||||||||||||||||||||||||
24
BAYFIRST FINANCIAL CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share data) | ||
| Revolving | Revolving | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loans | Loans | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Term Loans Amortized Cost Basis by Origination Year | Amortized | Converted | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | 2024 | 2023 | 2022 | Prior | Cost Basis | to Term | Total | |||||||||||||||||||||||||||||||||||||||||||||
Consumer and other | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Payment Performance | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Performing | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Nonperforming | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total consumer and other loans, at amortized cost, gross | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gross write offs | |||||||||||||||||||||||||||||||||||||||||||||||||||||
The following table presents the principal balance at December 31, 2025 of residential and consumer loans based on payment activity as well as gross write offs for the year ended December 31, 2025 (as restated).
| Revolving | Revolving | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loans | Loans | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Term Loans Amortized Cost Basis by Origination Year | Amortized | Converted | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | 2022 | 2021 | Prior | Cost Basis | to Term | Total | |||||||||||||||||||||||||||||||||||||||||||||
Real estate - residential | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Payment Performance | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Performing | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Nonperforming | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total real estate - residential loans, at amortized cost, gross | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gross write offs | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Consumer and other | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Payment Performance | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Performing | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Nonperforming | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total consumer and other loans, at amortized cost, gross | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gross write offs | |||||||||||||||||||||||||||||||||||||||||||||||||||||
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BAYFIRST FINANCIAL CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share data) | ||
NOTE 5 – 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.
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.
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 nonrecurring adjustments to the carrying value of loans based on fair value measurements for partial charge-offs of the uncollectible portions of those loans. Nonrecurring 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.
Other Real Estate Owned: Other real estate owned assets are recorded at fair value less estimated costs to sell upon the transfer of a loan to other real estate owned and, subsequently, continue to be measured and carried at fair value. The fair value of other real estate owned is based on recent real estate appraisals which are generally updated annually. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales, cost, and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.
Appraisals for other real estate owned are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by either the Company or the Company's appraisal services vendor. Once received, management reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics. Management compares the best-efforts price of collateral that has been sold to the most recent appraised value to determine what additional adjustment should be made to the appraised value to arrive at fair value.
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BAYFIRST FINANCIAL CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share data) | ||
Repossessed Assets: Repossessed assets are recorded at fair value less estimated costs to sell upon the transfer of a loan to repossessed assets. The fair value of a repossessed asset, upon initial recognition, is estimated using a market approach or based on observable market data, such as a current appraisal, recent sale price of similar assets, or assumptions specific to the individual property or equipment, such as management applied discounts used to further reduce values to a net realizable value when observable inputs become stale.
Assets measured at fair value on a recurring basis at March 31, 2026 are summarized below. There were no liabilities carried at fair value on a recurring basis at March 31, 2026.
| Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||||||||||
Financial assets | |||||||||||||||||||||||
Investment securities available for sale | $ | $ | $ | $ | |||||||||||||||||||
Government guaranteed loans HFI, at fair value | |||||||||||||||||||||||
Assets measured at fair value on a recurring basis at December 31, 2025 are summarized below. There were no liabilities carried at fair value on a recurring basis at December 31, 2025.
| Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||||||||||
Financial assets | |||||||||||||||||||||||
Investment securities available for sale | $ | $ | $ | $ | |||||||||||||||||||
Government guaranteed loans HFI, at fair value | |||||||||||||||||||||||
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 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 determined whether it was 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.
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BAYFIRST FINANCIAL CORP. NOTES TO CONDENSED 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 measured at fair value at March 31, 2026 and December 31, 2025.
| March 31, 2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Loans | Nonaccrual(1) | 90 Days or More Past Due(1) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Carrying Amount | Unpaid Principal Balance | Fair Value Gain (Loss) | Fair Value Carrying Amount | Unpaid Principal Balance | Fair Value Gain (Loss) | Fair Value Carrying Amount | Unpaid Principal Balance | Fair Value Gain (Loss) | |||||||||||||||||||||||||||||||||||||||||||||
Real estate - commercial | $ | $ | $ | $ | $ | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
Commercial and industrial | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Total loans HFI, at fair value | $ | $ | $ | ( | $ | $ | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Loans | Nonaccrual(1) | 90 Days or More Past Due(1) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Carrying Amount | Unpaid Principal Balance | Fair Value Gain (Loss) | Fair Value Carrying Amount | Unpaid Principal Balance | Fair Value Gain (Loss) | Fair Value Carrying Amount | Unpaid Principal Balance | Fair Value Gain (Loss) | |||||||||||||||||||||||||||||||||||||||||||||
Real estate - commercial | $ | $ | $ | ( | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
Commercial and industrial | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Total loans HFI, at fair value | $ | $ | $ | ( | $ | $ | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||
(1) The nonaccrual and 90 days or more past due loan balances do not include the portion of government guaranteed loan balances.
The total amount of net gains and losses from changes in fair value and interest income included in earnings for the three months ended March 31, 2026 and March 31, 2025 for government guaranteed loans HFI, at fair value, were as follows:
| Three Months Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Interest income | $ | $ | |||||||||
| Change in fair value | ( | ( | |||||||||
Total gain, net | $ | $ | |||||||||
Changes in fair value for government guaranteed loans HFI, at fair value, were included in Government guaranteed loans fair value loss, net on the Condensed Consolidated Statements of Income.
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BAYFIRST FINANCIAL CORP. NOTES TO CONDENSED 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 three months ended March 31, 2026 and March 31, 2025:
| Three Months Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
Balance of government guaranteed loans HFI at fair value, beginning of period | $ | $ | |||||||||
| New government guaranteed originations at fair value | |||||||||||
| Loans sold | ( | ||||||||||
Principal payments | ( | ( | |||||||||
Total fair value gains (losses) during the period | ( | ( | |||||||||
Balance of government guaranteed loans HFI at fair value, end of period | $ | $ | |||||||||
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 that fall within Level 3 of the fair value hierarchy at March 31, 2026 and December 31, 2025:
| Fair Value | Valuation Technique | Unobservable Inputs | Range (Weighted Average) | ||||||||||||||||||||
| March 31, 2026 | |||||||||||||||||||||||
Government guaranteed loans HFI, at fair value | $ | Discounted | Discount rate | ||||||||||||||||||||
| cash flow | Conditional prepayment rate | ||||||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||
Government guaranteed loans HFI, at fair value | $ | Discounted | Discount rate | ||||||||||||||||||||
| cash flow | Conditional prepayment rate | ||||||||||||||||||||||
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.
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Assets measured at fair value on a nonrecurring basis at March 31, 2026 are summarized below:
| Fair Value | Valuation Technique(s) | Significant Unobservable Input(s) | Discount % Amount | Valuation Level | |||||||||||||||||||||||||
Individually evaluated loans | $ | Discounted appraisals, estimated net realizable value of collateral | Collateral discounts | 3 | |||||||||||||||||||||||||
Other real estate owned | $ | Discounted appraisals, estimated net realizable value of collateral | Collateral discounts | 3 | |||||||||||||||||||||||||
Repossessed assets | $ | Discounted appraisals, estimated net realizable value of collateral | Collateral discounts | 3 | |||||||||||||||||||||||||
Assets measured at fair value on a nonrecurring basis at December 31, 2025 are summarized below:
| Fair Value | Valuation Technique(s) | Significant Unobservable Input(s) | Discount % Amount | Valuation level | |||||||||||||||||||||||||
Individually evaluated loans | $ | Discounted appraisals, estimated net realizable value of collateral | Collateral discounts | 3 | |||||||||||||||||||||||||
| Other real estate owned | $ | Discounted appraisals, estimated net realizable value of collateral | Collateral discounts | 3 | |||||||||||||||||||||||||
| Repossessed assets | $ | Discounted appraisals, estimated net realizable value of collateral | Collateral discounts | 3 | |||||||||||||||||||||||||
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BAYFIRST FINANCIAL CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share data) | ||
Fair Value of Financial Instruments
The carrying values and estimated fair values of financial instruments not carried at fair value, at March 31, 2026 and December 31, 2025 are as follows:
| March 31, 2026 | December 31, 2025 | ||||||||||||||||||||||||||||
| (as restated) | (as restated) | ||||||||||||||||||||||||||||
| Level | Carrying Value | Fair Value | Carrying Value | Fair Value | |||||||||||||||||||||||||
Assets: | |||||||||||||||||||||||||||||
Cash and cash equivalents | 1 | $ | $ | $ | $ | ||||||||||||||||||||||||
Investment securities held to maturity | 2 | ||||||||||||||||||||||||||||
Nonmarketable equity securities, at cost | 2 | ||||||||||||||||||||||||||||
Loans HFI, at amortized cost | 3 | ||||||||||||||||||||||||||||
Accrued interest receivable | 2 | ||||||||||||||||||||||||||||
Government guaranteed loan servicing rights | 3 | ||||||||||||||||||||||||||||
Liabilities: | |||||||||||||||||||||||||||||
Noninterest-bearing deposit accounts | 2 | $ | $ | $ | $ | ||||||||||||||||||||||||
Interest-bearing transaction accounts | 2 | ||||||||||||||||||||||||||||
Savings and money market deposit accounts | 2 | ||||||||||||||||||||||||||||
Time deposits | 2 | ||||||||||||||||||||||||||||
Subordinated notes | 2 | ||||||||||||||||||||||||||||
Notes payable | 2 | ||||||||||||||||||||||||||||
Accrued interest payable | 2 | ||||||||||||||||||||||||||||
NOTE 6 – GOVERNMENT GUARANTEED LOAN SERVICING ACTIVITIES
At March 31, 2026 and December 31, 2025, the balance of government guaranteed loans HFI, excluding PPP loans, retained by the Company was $287,282 and $302,986 , respectively, of which $75,057 and $70,123 represented the guaranteed portion of the loans. Loans serviced for others are not included in the accompanying Condensed Consolidated Balance Sheets. The unpaid principal balances of government guaranteed loans serviced for others requiring recognition of a servicing asset were $832,047 and $885,505 at March 31, 2026 and December 31, 2025, respectively.
In December 2025, the Company sold SBA 7(a) loans with principal balance of $96,602 to Banesco USA as part of the Company’s restructure related to the discontinuance of SBA 7(a) lending. Of those loans, there were $26,749 of loans with a servicing asset of $1,691 .
Activity for government guaranteed loan servicing rights for the three months ended March 31, 2026 and March 31, 2025 follows:
| Three Months Ended | |||||||||||||||||||||||
| March 31, 2026 | March 31, 2025 | ||||||||||||||||||||||
Beginning of period | $ | $ | |||||||||||||||||||||
Additions | |||||||||||||||||||||||
Amortization | ( | ( | |||||||||||||||||||||
End of period | $ | $ | |||||||||||||||||||||
The fair value of government guaranteed loan servicing rights was $14,653 and $16,041 at March 31, 2026 and December 31, 2025, respectively. Fair value was determined using a weighted average discount rate of 14.13 % and a
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weighted average prepayment speed of 11.25 % at March 31, 2026. Fair value was determined using a weighted average discount rate of 13.88 % and a weighted average prepayment speed of 11.16 % at December 31, 2025. 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 three months ended March 31, 2026 and March 31, 2025:
| Three Months Ended | |||||||||||||||||||||||
| March 31, 2026 | March 31, 2025 | ||||||||||||||||||||||
| (as restated) | |||||||||||||||||||||||
Gain (loss) on sale of guaranteed portion of government guaranteed loans | $ | ( | $ | ||||||||||||||||||||
Fair value of loan servicing rights created | |||||||||||||||||||||||
Gain (loss) on sale of government guaranteed loans, net | $ | ( | $ | ||||||||||||||||||||
NOTE 7 – LEASES
For the three months ended March 31, 2026 and March 31, 2025, the components of total lease cost and supplemental information related to operating leases were as follows:
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
Operating lease cost | $ | $ | |||||||||||||||||||||
Short-term lease cost | |||||||||||||||||||||||
Total lease cost, net (1) | $ | $ | |||||||||||||||||||||
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
Cash flows related to operating lease liabilities | $ | $ | |||||||||||||||||||||
At March 31, 2026, the weighted average discount rate of operating leases was 7.14 % and the weighted average remaining life of operating leases was 12.73 years.
The future minimum lease payments for operating leases, subsequent to March 31, 2026, as recorded on the balance sheet, are summarized as follows:
| 2026 | $ | ||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| 2030 | |||||
| Thereafter | |||||
Total undiscounted lease payments | $ | ||||
Less: imputed interest | ( | ||||
| $ | |||||
NOTE 8 – OTHER BORROWINGS
At March 31, 2026 and December 31, 2025, the Company had no
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 $387,578 of real estate-related loans as of March 31,
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2026. Based on this collateral and the Bank's holdings of FHLB stock, the Bank was eligible to borrow up to $187,805 from the FHLB at March 31, 2026.
In addition, the Bank has a secured line of credit with the Federal Reserve Bank of Atlanta which was secured by $49,755 of commercial loans as of March 31, 2026. 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 Bank was eligible to borrow up to $28,787 from the FRB at March 31, 2026.
The Company has $6,000 of Subordinated Notes (the “Notes”) that mature June 30, 2031 and are redeemable after 5 years which is June 30, 2026. The Notes 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 after June 30, 2026. Under the note agreements, the floating rates are based on a SOFR benchmark plus 3.78 % per annum.
On December 29, 2025, the Company and the holders of the Company’s Notes entered into an Amendment to the Notes (the “Amendment”), effective as of December 26, 2025. Pursuant to the Amendment, instead of the Company paying interest on the Notes, the outstanding principal of the Notes shall be increased by the amount of interest due as of the date of the Amendment and that becomes due through and including June 30, 2026. In addition, if the Company does not pay all amounts due on the Notes by June 30, 2026, at the Company’s option, (i) it shall pay the holders 3.00 3.00
The balance of Notes outstanding at the Company, net of offering costs, amounted to $6,099 and $5,962 at March 31, 2026 and December 31, 2025, respectively. The increase was primarily the result of the deferred interest payment that were due in January 2026.
The Company has a term note with quarterly principal and interest payments with interest at Prime (6.75 % at March 31, 2026). The note matures on March 10, 2029 and the balance of the note was $1,479 and $1,593 at March 31, 2026 and December 31, 2025, 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. On December 30, 2025, lender agreed that the Company may defer the quarterly interest payment due December 10, 2025 on its term loan until March 10, 2026. The deferred interest was paid as agreed.
As part of the amendment to the subordinated note and term note, the Company obtained a waiver related to financial debt covenants.
NOTE 9 – 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 $53 and $69 for the three months ended March 31, 2026 and March 31, 2025, respectively.
Restricted Stock
The Company awarded shares of restricted common stock to certain employees and 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 three months ended March 31, 2026 and March 31, 2025 follows:
| Shares | Weighted-Average Grant-Date Fair Value, per share | ||||||||||
Nonvested at January 1, 2026 | $ | ||||||||||
Vested | ( | ( | |||||||||
Nonvested at March 31, 2026 | $ | ||||||||||
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BAYFIRST FINANCIAL CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share data) | ||
| Shares | Weighted-Average Grant-Date Fair Value, per share | ||||||||||
Nonvested at January 1, 2025 | $ | ||||||||||
Granted | |||||||||||
Vested | ( | ( | |||||||||
Forfeited | ( | ( | |||||||||
Nonvested at March 31, 2025 | $ | ||||||||||
At March 31, 2026, there was $281 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 1.5 years. The total fair value of shares vested during the three months ended March 31, 2026 and March 31, 2025 on the vesting date was $165 and $370 , respectively.
Stock Options
The Equity Plan permits the grant of stock options to the Company’s employees and 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 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 the grant.
A summary of the activity in the Equity Plan for the three months ended March 31, 2026 and March 31, 2025 follows:
| Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (in years) | Aggregate Intrinsic Value | ||||||||||||||||||||
Outstanding at January 1, 2026 | $ | ||||||||||||||||||||||
Forfeited | ( | ( | |||||||||||||||||||||
Outstanding at March 31, 2026 | $ | $ | |||||||||||||||||||||
Vested and exercisable at March 31, 2026 | $ | $ | |||||||||||||||||||||
| Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (in years) | Aggregate Intrinsic Value | ||||||||||||||||||||
Outstanding at January 1, 2025 | $ | ||||||||||||||||||||||
Exercised | ( | ( | |||||||||||||||||||||
Outstanding at March 31, 2025 | $ | $ | |||||||||||||||||||||
Vested and exercisable at March 31, 2025 | $ | $ | |||||||||||||||||||||
There were no
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NOTE 10 – 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. For the three months ended March 31, 2026 and March 31, 2025, there were no
All employees and Directors are eligible to participate in the NSPP. Expense recognized in relation to the NSPP for the three months ended March 31, 2026 and March 31, 2025 was $0 and $5 , respectively. During the three months ended March 31, 2026, 3,028 shares were purchased at an average price of $6.02 . For the three months ended March 31, 2025, there were no shares issued.
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 for twenty years following separation of service. The liability recorded for the Agreement was $294 and $316 at March 31, 2026 and December 31, 2025, respectively, and the related expense for the three months ended March 31, 2026 was $3 and the related expense for the three months ended March 31, 2025 was $3 . Payments began in July 2024 as a result of 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. Previous to January 2026, the Company contributed 3 % of each employee’s salary each pay period as a safe harbor contribution. In January 2026, the Company updated the plan to change the contribution from the non-elective contribution to a matching contribution equal to 100 % of the first 4 % and 50 % of the next 2 % of employee contributions. Expense recognized in relation to the 401(k) plan was $134 and $264 for the three months ended March 31, 2026 and March 31, 2025, respectively.
The Company had an ESOP for eligible employees with outstanding loans as a result of the acquisition of shares in 2021 and the termination of the nationwide residential lending division in 2022. On September 30, 2025, the Plan was terminated and the remaining 19,691 shares in the ESOP unallocated account with a fair value of $175 were returned to the Company in partial satisfaction of the outstanding balances on the ESOP loans. The ESOP accounts of the participants were 100 % vested as of the date of the termination. As part of the termination of the plan, the Company forgave the indebtedness of the outstanding loans which totaled $365 . There was $30 expense for the three months ended March 31, 2025. The Company’s ESOP, which was internally leveraged, did not report the loan receivable extended to the ESOP as an asset and did not report the ESOP debt due to the Company.
NOTE 11 – 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 capital adequacy requirements to which it was subject at March 31, 2026 and December 31, 2025.
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. The Bank must maintain a “well capitalized” rating to access brokered deposits without FDIC waiver. An “adequately capitalized” rating requires an FDIC waiver to access brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At March 31, 2026 and December 31, 2025, the Bank did not meet all of its regulatory capital requirements to be well-capitalized but the consummation of the capital raise is expected to meet these capital requirements going forward.
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 326 on January 1, 2023, 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 March 31, 2026 (as restated):
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BAYFIRST FINANCIAL CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share data) | ||
| Actual | Required for Capital Adequacy Purposes | To be Well Capitalized Under Prompt Corrective Action Regulations | |||||||||||||||||||||||||||||||||
| Amount | Ratio | Amount | Ratio | Amount | Ratio | ||||||||||||||||||||||||||||||
Total Capital | |||||||||||||||||||||||||||||||||||
(to Risk Weighted Assets) | $ | % | $ | % | $ | % | |||||||||||||||||||||||||||||
Tier 1 Capital | |||||||||||||||||||||||||||||||||||
(to Risk Weighted Assets) | $ | % | $ | % | $ | % | |||||||||||||||||||||||||||||
Common Equity Tier 1 Capital | |||||||||||||||||||||||||||||||||||
(to Risk Weighted Assets) | $ | % | $ | % | $ | % | |||||||||||||||||||||||||||||
Tier 1 Capital | |||||||||||||||||||||||||||||||||||
(to Average Assets) | $ | % | $ | % | $ | % | |||||||||||||||||||||||||||||
Actual and required capital amounts and ratios for the Bank are presented below at December 31, 2025 (as restated):
| Actual | Required for Capital Adequacy Purposes | To be Well Capitalized Under Prompt Corrective Action Regulations | |||||||||||||||||||||||||||||||||
| Amount | Ratio | Amount | Ratio | Amount | Ratio | ||||||||||||||||||||||||||||||
Total Capital | |||||||||||||||||||||||||||||||||||
(to Risk Weighted Assets) | $ | % | $ | % | $ | % | |||||||||||||||||||||||||||||
Tier 1 Capital | |||||||||||||||||||||||||||||||||||
(to Risk Weighted Assets) | $ | % | $ | % | $ | % | |||||||||||||||||||||||||||||
Common Equity Tier 1 Capital | |||||||||||||||||||||||||||||||||||
(to Risk Weighted Assets) | $ | % | $ | % | $ | % | |||||||||||||||||||||||||||||
Tier 1 Capital | |||||||||||||||||||||||||||||||||||
(to Average Assets) | $ | % | $ | % | $ | % | |||||||||||||||||||||||||||||
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. The Company has temporarily suspended common and preferred stock dividends, see Part II Item 3 of the 10K/A for additional information.
NOTE 12 – 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 March 31, 2026 and December 31, 2025 were as follows:
| March 31, 2026 | December 31, 2025 | ||||||||||
Unfunded loan commitments | $ | $ | |||||||||
Unused lines of credit | |||||||||||
Standby letters of credit | |||||||||||
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BAYFIRST FINANCIAL CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share data) | ||
All unused lines of credit at March 31, 2026 and December 31, 2025 were variable rate lines of credit and the majority of unfunded loan commitments at March 31, 2026 and December 31, 2025 were commitments to fund variable rate loans. Unfunded loan commitments are generally entered into for periods of 90
NOTE 13 – EARNINGS PER COMMON SHARE
The following table sets forth the computation of basic and diluted earnings per common share for the three months ended March 31, 2026 and March 31, 2025:
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| (As restated) | (As restated) | ||||||||||||||||||||||
Basic: | |||||||||||||||||||||||
Net loss | $ | ( | $ | ( | |||||||||||||||||||
Less: Preferred stock dividend earned | |||||||||||||||||||||||
Net loss attributable to common shareholders | $ | ( | $ | ( | |||||||||||||||||||
Weighted average common shares outstanding | |||||||||||||||||||||||
Basic loss per common share: | $ | ( | $ | ( | |||||||||||||||||||
Diluted: | |||||||||||||||||||||||
| Net loss | $ | ( | $ | ( | |||||||||||||||||||
Less: Preferred stock dividend earned | |||||||||||||||||||||||
Add: Series B preferred stock and preferred C stock dividends | |||||||||||||||||||||||
Net loss attributable to common shareholders | $ | ( | $ | ( | |||||||||||||||||||
Weighted average common shares outstanding for basic loss per common share | |||||||||||||||||||||||
Add: Dilutive effects of conversion of Series B preferred stock and Preferred C to common stock | |||||||||||||||||||||||
Add: Dilutive effects of assumed exercises of stock options and warrants | |||||||||||||||||||||||
Average shares and dilutive potential common shares | |||||||||||||||||||||||
Diluted loss per common share: | $ | ( | $ | ( | |||||||||||||||||||
The following securities outstanding at March 31, 2026 and March 31, 2025 have been excluded from the calculation of weighted average shares outstanding as their effect on the calculation of loss per share are antidilutive:
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
Common stock options | |||||||||||||||||||||||
| Convertible Series B preferred stock | |||||||||||||||||||||||
| Convertible Series C preferred stock | |||||||||||||||||||||||
NOTE 14 - SEGMENT INFORMATION
The Company’s revenue is primarily derived from the business of banking. The Company’s financial performance is monitored on a consolidated basis by senior management, who are considered to be the Bank’s Chief Operating Decision Maker (“CODM”). Senior management includes the following officers of the Company: Chief Executive Officer; President, Chief Operating Officer; and Executive Vice President, Chief Financial Officer.
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BAYFIRST FINANCIAL CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share data) | ||
All of the Company’s financial results are similar and considered by management to be aggregated into one reportable operating segment. While the Company has assigned certain management responsibilities by branch location or department, the Company’s CODM evaluates financial performance on a Company-wide basis. The majority of the Company’s revenue is from the business of banking, and the Company’s branch locations have similar economic characteristics, products, services and customers. Accordingly, all of the Company’s operations are considered by the CODM to be aggregated in one reportable operating segment.
Financial performance is measured monthly and the primary measures of performance are net interest income after provision for credit losses, return on average assets, and return on average common equity, and significant operating expenses detailed below, as compared to the budget when assessing the Company’s segment. The allocation of resources throughout the Company is based on consolidated profitability. The presentation of financial performance is consistent with amounts and financial statement line items shown in the Company’s condensed consolidated balance sheets and condensed consolidated statements of income. Additionally, the Company’s significant expenses are adequately segmented by category and amount in the condensed consolidated statements of income to include all significant items when considering both qualitative and quantitative factors. Significant expenses of the Company include interest on deposits and borrowings, professional fees, loan servicing and origination expenses, and compensation.
NOTE 15 – RESTRUCTURE CHARGES
On September 29, 2025, the Company signed a definitive agreement to sell a portion of the Company’s SBA 7(a) loan portfolio. In conjunction with the agreement, the Company planned to exit the SBA 7(a) lending business. The loan sale and exit of SBA 7(a) lending business was completed in the fourth quarter of 2025. The transaction resulted in restructure charges totaling $7,283 , including $3,719 for employee compensation and benefits costs, $2,864 for recognition of asset impairment, $435 for the transaction deal cost, and $265 for miscellaneous charges. All of these expenses were recorded in 2025. As of March 31, 2026, there were $371 of unpaid charges outstanding.
NOTE 16 – SUBSEQUENT EVENTS
Restatement of Previously Issued Financial Statements
As previously disclosed in the Current Report on Form 8-K filed with the SEC on July 15, 2026, the Company is restating its previously issued financial statements as and for the years ended December 31, 2024, and December 31, 2025, and the quarter ended March 31, 2026. For further details refer to Note 1 of the 2025 10-K/A.
Stock Purchase and Exchange Agreements and Rights Offering
On July 14, 2026, the Company obtained shareholder approval to amend the BayFirst Financial Corp. Articles of Incorporation to increase the number of authorized shares of the common stock from 15,000,000 to 100,000,000 and exchanged all 4,000 outstanding shares of Mandatorily Convertible Cumulative Perpetual Preferred Stock, Series D, and all 4,000 outstanding shares of Mandatorily Convertible Cumulative Perpetual Preferred Stock, Series E for a total of 22,856,000 shares of common stock. Upon conversion, all shares of Series D and Series E Preferred Stock were retired. Management also noted a Mid-August launch date for the rights offering, discussed in the Stock Purchase Agreement included with the Company’s Form 8-K and the exhibits dated April 28, 2026, and filed with the Securities and Exchange Commission on April 30, 2026.
Asset Resolution Plan
The Company has completed and quantified the impact of the asset resolution plan adopted in accordance with the transactions contemplated by the Stock Purchase Agreement dated April 28, 2026. The nature, scope, and potential impact of the asset resolution plan were discussed in the Company’s Form 8-K and the exhibits incorporated therein, filed with the Securities and Exchange Commission on April 30, 2026.
The asset resolution plan includes the identification of specific loans within the Company’s government guaranteed loan portfolio, as well as adjustments to the net amount expected to be collected on over 7,000 unguaranteed SBA 7(a) small balance loans. These adjustments impact loans measured at amortized cost in accordance with ASC 326 and loans measured at fair value in accordance with ASC 825. These adjustments amount to $38.4 million.
Furthermore, the Company will book an impairment of $1.5 million on a non-marketable equity investment in a firm who was a partner with the Company’s former SBA 7(a) lending business and will also write down by $1.6 million the unamortized premiums on the Company’s portfolio of purchased fully guaranteed USDA loans which are at risk of default or early prepayment.
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Table of Contents
BAYFIRST FINANCIAL CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share data) | ||
Redemption of Series A and Series B Preferred Shares
On July 20, 2026, the Company sent notifications to holders of Series A and Series B Preferred Shares formally redeeming all outstanding. On August 10, 2026, payment in the amount of $6,463,746.25 for Preferred Series A, including accrued dividends of $302,746.25 , and payment in the amount of $3,240,687.60 for Preferred Series B, including accrued dividends of $117,687.60 .
Management
On April 28, 2026, the Board elected Alfred Rogers, Jr. (“Al”) as Chief Executive Officer and President of the Bank, in place of Tom Zernick who retired on May 1, 2026. On May 14, 2026, the BayFirst Financial Corp. received the non-objection of the Federal Reserve Bank of Atlanta, to appoint Al to serve as the Company’s President and Chief Executive Officer, principal executive officer, and as a member of its Board of Directors.
Rights Offering
On April 30, 2026, the Company filed a registration statement on Form S-1 regarding the public offering of up to 4,108,072 shares of Common Stock at an offering price of $3.50 per share. The Company intends to exclusively market this offering to its shareholders of record on May 12, 2026.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion is an analysis of the results of operations for the three months ended March 31, 2026 and March 31, 2025 and financial condition as of March 31, 2026 and December 31, 2025. This discussion and analysis should be read in conjunction with the condensed consolidated financial statements and related notes.
In addition to the historical information contained herein, this Form 10-Q/A includes "forward-looking statements" within the meaning of such term in the Private Securities Litigation Reform Act of 1995. These statements are subject to many risks and uncertainties, including, but not limited to, the effects of health crises, global military hostilities, weather events, or climate changes, including its effects on the economic environment, its customers and its operations, as well as any changes to federal, state or local government laws, regulations or orders in connection with them; the ability of the Company to implement its strategy and expand its banking operations; changes in interest rates and other general economic, business and political conditions, including changes in the financial markets, credit quality or global military hostilities; changes in business plans as circumstances warrant; risks related to mergers and acquisitions; changes in benchmark interest rates used to price loans and deposits, changes in tax laws, regulations and guidance; enforcement actions initiated by our regulators and their impact on our operations; the impact of data breaches or other cybersecurity incidents; enforcement actions initiated by our regulators and their impact on our operations; and other risks detailed from time to time in filings made by the Company with the SEC. Readers should note that the forward-looking statements included herein are not a guarantee of future events, and that actual events may differ materially from those made in or suggested by the forward-looking statements.
Forward-looking statements generally can be identified by the use of forward-looking terminology such as "will," "propose," "may," "plan," "seek," "expect," "intend," "estimate," "anticipate," "believe," "continue," or similar terminology. Any forward-looking statements presented herein are made only as of the date of this document, and the Company does not undertake any obligation to update or revise any forward-looking statements to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.
Overview
The following discussion and analysis presents the financial condition and results of operations on a consolidated basis. However, because the Company conducts all of its material business operations through the Bank, the discussion and analysis relates to activities primarily conducted at the subsidiary level. The following discussion should be read in conjunction with the condensed consolidated financial statements.
As a one-bank holding company, the Company generates most of its revenue from interest on loans and noninterest income. The primary sources of funding for its loans are loan payments, deposits, and borrowings. The Company is dependent on noninterest income, which is derived from service fee income. The largest expenses are interest on those deposits and borrowings, professional fees, loan servicing and origination expenses, and salaries and commissions plus related employee benefits. The Company measures its performance through its net interest income after provision for credit losses, return on average assets, and return on average common equity, while maintaining appropriate regulatory leverage and risk-based capital ratios.
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In the fourth quarter 2025, The Company sold a portion of its SBA 7(a) loan portfolio. In conjunction with the sale and as a result of the comprehensive strategic review aimed at reducing expenses and derisking the Bank's balance sheet, BayFirst exited the SBA 7(a) lending business. Banesco USA assumed servicing of loans included in the sale and has been engaged as subservicer on the remaining SBA 7(a) loans retained by BayFirst. In addition, the Company reduced staff.
Application of Critical Accounting Policies and Estimates
The preparation of condensed consolidated financial statements in accordance with GAAP requires the Company to make estimates and judgments that affect reported amounts of assets, liabilities, income and expenses and related disclosure of contingent assets and liabilities. The Company bases those estimates on historical experience and on various other assumptions that are believed to be reasonable under current circumstances, results of which form the basis for making judgments about the carrying value of certain assets and liabilities that are not readily available from other sources. Estimates are evaluated on an ongoing basis. Actual results may differ from these estimates.
Accounting policies, as described in detail in the notes to the Company’s condensed consolidated financial statements, are an integral part of the Company’s condensed consolidated financial statements. A thorough understanding of these accounting policies is essential when reviewing the Company’s reported results of operations and financial position. Management believes that the critical accounting policies and estimates listed below require the Company to make difficult, subjective or complex judgments about matters that are inherently uncertain. At March 31, 2026, the most critical of these significant accounting policies in understanding the estimates and assumptions involved in preparing the condensed consolidated financial statements were the policies related to the ACL, fair value measurement of government guaranteed loan servicing rights and government guaranteed loans HFI at fair value, which are discussed more fully in the December 31, 2025 Form 10-K/A.
Changes in these estimates that are likely to occur from period to period, or the use of different estimates that the Company could have reasonably used in the current period, could have a material impact on the Company’s financial position or results of operation.
Further, the Company is an emerging growth company. The JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected to take advantage of this extended transition period. This means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies do so. This may make the Company’s financial statements not comparable with those of public companies which are neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period because of the potential differences in accounting standards used.
Recent Developments
Restatement of Previously Issued Financial Statements
As previously disclosed in the Current Report on Form 8-K filed with the SEC on July 15, 2026, the Company is restating its previously issued financial statements as and for the years ended December 31, 2024, and December 31, 2025, and the quarter ended March 31, 2026. For further details refer to Note 1 of the 2025 10-K/A.
Stock Purchase and Exchange Agreements and Rights Offering
On July 14, 2026, the Company obtained shareholder approval to amend the BayFirst Financial Corp. Articles of Incorporation to increase the number of authorized shares of the common stock from 15,000,000 to 100,000,000 and exchanged all 4,000 outstanding shares of Mandatorily Convertible Cumulative Perpetual Preferred Stock, Series D, and all 4,000 outstanding shares of Mandatorily Convertible Cumulative Perpetual Preferred Stock, Series E for a total of 22,856,000 shares of common stock. Upon conversion, all shares of Series D and Series E Preferred Stock were retired. Management also noted a Mid-August launch date for the rights offering, discussed in the Stock Purchase Agreement included with the Company’s Form 8-K and the exhibits dated April 28, 2026, and filed with the Securities and Exchange Commission on April 30, 2026.
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Asset Resolution Plan
The Company has completed and quantified the impact of the asset resolution plan adopted in accordance with the transactions contemplated by the Stock Purchase Agreement dated April 28, 2026. The nature, scope, and potential impact of the asset resolution plan were discussed in the Company’s Form 8-K and the exhibits incorporated therein, filed with the Securities and Exchange Commission on April 30, 2026.
The asset resolution plan includes the identification of specific loans within the Company’s government guaranteed loan portfolio, as well as adjustments to the net amount expected to be collected on over 7,000 unguaranteed SBA 7(a) small balance loans. These adjustments impact loans measured at amortized cost in accordance with ASC 326 and loans measured at fair value in accordance with ASC 825. These adjustments amount to $38.4 million.
Furthermore, the Company will book an impairment of $1.5 million on a non-marketable equity investment in a firm who was a partner with the Company’s former SBA 7(a) lending business and will also write down by $1.6 million the unamortized premiums on the Company’s portfolio of purchased fully guaranteed USDA loans which are at risk of default or early prepayment.
Redemption of Series A and Series B Preferred Shares
On July 20, 2026, the Company sent notifications to holders of Series A and Series B Preferred Shares formally redeeming all outstanding. On August 10, 2026, payment in the amount of $6,463,746.25 for Preferred Series A, including accrued dividends of $302,746.25, and payment in the amount of $3,240,687.60 for Preferred Series B, including accrued dividends of $117,687.60.
Management
On April 28, 2026, the Board elected Alfred Rogers, Jr. (“Al”) as Chief Executive Officer and President of the Bank, in place of Tom Zernick who retired on May 1, 2026. On May 14, 2026, the BayFirst Financial Corp. received the non-objection of the Federal Reserve Bank of Atlanta, to appoint Al to serve as the Company’s President and Chief Executive Officer, principal executive officer, and as a member of its Board of Directors.
Rights Offering
On April 30, 2026, the Company filed a registration statement on Form S-1 regarding the public offering of up to 4,108,072 shares of Common Stock at an offering price of $3.50 per share. The Company intends to exclusively market this offering to its shareholders of record on May 12, 2026.
As previously disclosed in the Company’s 8K, filed with the Securities and Exchange Commission (“SEC”) on July 15, 2026, the Company and the Audit Committee have concluded and informed our current auditor, Forvis Mazars, LLP, that our audited consolidated financial statements for the Affected Periods require restatement and are not reliable.
The accounting errors impacting our Financial Statements include correcting historical impact of nonaccrual loan transactions and correcting gain on sale of government guaranteed loan transactions.
The discussion of financial results presented here is reflective of the restatement adjustments. Refer to Note 1 of the consolidated financial statements included elsewhere in this Quarterly Report for more information on the restatement.
Selected Financial Data - Unaudited
| As of and for the Three Months Ended | |||||||||||||||||||||||||||||
| (Dollars in thousands, except for share data) | 3/31/2026 | 12/31/2025 | 3/31/2025 | ||||||||||||||||||||||||||
| As restated | As restated | As restated | |||||||||||||||||||||||||||
| Income Statement Data: | |||||||||||||||||||||||||||||
| Net interest income | $ | 9,440 | $ | 11,152 | $ | 10,610 | |||||||||||||||||||||||
| Provision for credit losses | 3,404 | 2,314 | 4,560 | ||||||||||||||||||||||||||
| Noninterest income | 884 | (104) | 8,488 | ||||||||||||||||||||||||||
| Noninterest expense | 14,886 | 11,869 | 15,813 | ||||||||||||||||||||||||||
| Income tax benefit | (2,036) | (439) | (337) | ||||||||||||||||||||||||||
| Net loss | (5,930) | (2,696) | (938) | ||||||||||||||||||||||||||
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| As of and for the Three Months Ended | |||||||||||||||||||||||||||||
| (Dollars in thousands, except for share data) | 3/31/2026 | 12/31/2025 | 3/31/2025 | ||||||||||||||||||||||||||
| As restated | As restated | As restated | |||||||||||||||||||||||||||
| Preferred stock dividends | 385 | 385 | 385 | ||||||||||||||||||||||||||
| Net loss attributable to common shareholders | $ | (6,315) | $ | (3,081) | $ | (1,323) | |||||||||||||||||||||||
| Balance Sheet Data: | |||||||||||||||||||||||||||||
| Average loans HFI | $ | 939,714 | $ | 991,830 | $ | 1,082,323 | |||||||||||||||||||||||
| Average loans HFI at amortized cost | 881,938 | 933,401 | 1,022,956 | ||||||||||||||||||||||||||
| Average total assets | 1,213,823 | 1,328,923 | 1,281,267 | ||||||||||||||||||||||||||
| Average common shareholders’ equity | 64,448 | 67,481 | 91,117 | ||||||||||||||||||||||||||
| Total loans HFI | 924,220 | 958,014 | 1,080,125 | ||||||||||||||||||||||||||
| Total loans HFI, excluding government guaranteed loan balances | 849,157 | 887,885 | 939,287 | ||||||||||||||||||||||||||
| Allowance for credit losses on loans | 20,632 | 21,996 | 16,513 | ||||||||||||||||||||||||||
| Total assets | 1,189,671 | 1,294,269 | 1,285,629 | ||||||||||||||||||||||||||
| Total deposits | 1,085,869 | 1,183,938 | 1,128,267 | ||||||||||||||||||||||||||
| Common shareholders’ equity | 58,421 | 64,758 | 89,070 | ||||||||||||||||||||||||||
| Per Share Data: | |||||||||||||||||||||||||||||
| Basic loss per common share | $ | (1.54) | $ | (0.75) | $ | (0.32) | |||||||||||||||||||||||
| Diluted loss per common share | $ | (1.54) | $ | (0.75) | $ | (0.32) | |||||||||||||||||||||||
| Dividends per common share | $ | — | $ | — | $ | 0.08 | |||||||||||||||||||||||
| Book value per common share | $ | 14.22 | $ | 15.76 | $ | 21.57 | |||||||||||||||||||||||
Tangible book value per common share(1) | $ | 14.22 | $ | 15.76 | $ | 21.57 | |||||||||||||||||||||||
| Performance Ratios: | |||||||||||||||||||||||||||||
Return on average assets(2) | (1.95) | % | (0.81) | % | (0.29) | % | |||||||||||||||||||||||
Return on average common equity(2) | (39.19) | % | (18.26) | % | (5.81) | % | |||||||||||||||||||||||
Net interest margin(2) | 3.44 | % | 3.60 | % | 3.65 | % | |||||||||||||||||||||||
| Asset Quality Data: | |||||||||||||||||||||||||||||
| Net charge-offs | $ | 4,719 | $ | 4,865 | $ | 3,461 | |||||||||||||||||||||||
Net charge-offs/average loans HFI at amortized cost(2) | 2.14 | % | 2.08 | % | 1.35 | % | |||||||||||||||||||||||
Nonperforming loans(3) | $ | 21,453 | $ | 24,343 | $ | 24,806 | |||||||||||||||||||||||
Nonperforming loans (excluding government guaranteed balance)(3) | $ | 15,873 | $ | 16,271 | $ | 15,078 | |||||||||||||||||||||||
Nonperforming loans/total loans HFI(3) | 2.46 | % | 2.69 | % | 2.43 | % | |||||||||||||||||||||||
Nonperforming loans (excluding gov’t guaranteed balance)/total loans HFI(3) | 1.82 | % | 1.80 | % | 1.48 | % | |||||||||||||||||||||||
| ACL/Total loans HFI at amortized cost | 2.36 | % | 2.43 | % | 1.62 | % | |||||||||||||||||||||||
| Other Data: | |||||||||||||||||||||||||||||
Full-time equivalent employees | 143 | 144 | 305 | ||||||||||||||||||||||||||
| Banking centers | 12 | 12 | 12 | ||||||||||||||||||||||||||
(1) See section entitled "GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures" below for a reconciliation to most comparable GAAP equivalent. | |||||||||||||||||||||||||||||
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| As of and for the Three Months Ended | |||||||||||||||||||||||||||||
| (Dollars in thousands, except for share data) | 3/31/2026 | 12/31/2025 | 3/31/2025 | ||||||||||||||||||||||||||
| As restated | As restated | As restated | |||||||||||||||||||||||||||
(2) Annualized | |||||||||||||||||||||||||||||
(3) Excludes loans measured at fair value | |||||||||||||||||||||||||||||
Reconciliation and Management Explanation of Non-GAAP Financial Measures
Some of the financial measures included in this report are not measures of financial condition or performance recognized by GAAP. These non-GAAP financial measures include tangible common shareholders' equity and tangible book value per common share. The management team uses these non-GAAP financial measures in its analysis of its performance, and they believe that providing this information to financial analysts and investors allows them to evaluate capital adequacy.
The following presents the calculation of the non-GAAP financial measures:
| Tangible Common Shareholders' Equity and Tangible Book Value Per Common Share (Unaudited) | ||||||||||||||||||||
| As of | ||||||||||||||||||||
| (Dollars in thousands, except for share data) | March 31, 2026 | December 31, 2025 | March 31, 2025 | |||||||||||||||||
| As restated | As restated | As restated | ||||||||||||||||||
| Total shareholders’ equity | $ | 75,628 | $ | 81,580 | $ | 105,121 | ||||||||||||||
| Less: Preferred stock liquidation preference | (17,207) | (16,822) | (16,051) | |||||||||||||||||
| Total equity available to common shareholders | 58,421 | 64,758 | 89,070 | |||||||||||||||||
| Less: Goodwill | — | — | — | |||||||||||||||||
| Tangible common shareholders' equity | $ | 58,421 | $ | 64,758 | $ | 89,070 | ||||||||||||||
| Common shares outstanding | 4,108,072 | 4,108,069 | 4,129,027 | |||||||||||||||||
| Tangible book value per common share | $ | 14.22 | $ | 15.76 | $ | 21.57 | ||||||||||||||
Results of Operations
BayFirst’s operating results depend on its net interest income, which is the difference between interest income on interest-earning assets and interest expense on interest-bearing liabilities, consisting primarily of deposits. Net interest income is determined by the difference between yields earned on interest-earning assets and rates paid on interest-bearing liabilities (“interest rate spread”) and the relative amounts of interest-earning assets and interest-bearing liabilities. The interest rate spread is affected by regulatory, economic, and competitive factors which influence interest rates, loan demand, and deposit flows. In addition, the Company’s operating results can be affected by the level of nonperforming assets, as well as the level of the noninterest income and the noninterest expenses, such as compensation , loan servicing and origination expenses, and income taxes.
Historically, the Company has been dependent on noninterest income, derived primarily from service fee income and net gain on the sales of the guaranteed portion of government guaranteed loans, as well as fair value adjustments for certain loans which management has elected the fair value option. While the Company retains some of its government guaranteed loans on the balance sheet, the Company sold both the guaranteed balance of its government guaranteed loans, as well as a percentage of the unguaranteed portions of such loans.
In the fourth quarter of 2025, the Company sold a portion of its SBA 7(a) loan portfolio. In conjunction with the sale and as a result of the comprehensive strategic review aimed at reducing expenses and derisking the Bank's balance sheet, BayFirst exited the SBA 7(a) lending business. Banesco USA assumed servicing of loans included in the sale and has been engaged as subservicer on the remaining SBA 7(a) loans retained by BayFirst.
Net Loss
The Company had a net loss for the three months ended March 31, 2026 of $5.9 million, or $1.54 per common share and diluted common share, compared to net income for the three months ended March 31, 2025 of $0.9 million, or $0.32 per
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common and diluted common share. The change from the first quarter of 2025 was due to a decrease in net interest income of $1.2 million, a decrease in noninterest income of $7.6 million, partially offset by a decrease in provision for credit losses of $1.2 million, a decrease in noninterest expense of $0.9 million, and a decrease in income tax expenses of $1.7 million.
Net Interest Income
Net interest income was $9.4 million for the three months ended March 31, 2026, an decrease from $10.6 million during the three months ended March 31, 2025. The decrease in net interest income during the first quarter of 2026, as compared to the year ago quarter, was mainly due to a decrease in loan interest income, including fees, of $3.4 million, partially offset by an increase in interest income on interest bearing deposits in banks and other of $0.6 million and a decrease in interest expense on deposits of $1.5 million.
Net interest margin was 3.44% for the first quarter of 2026, which represented a decrease from 3.65% for the first quarter of 2025.
Average Balance Sheet and Analysis of Net Interest Income
The following table sets forth, for the periods indicated, information regarding: (i) the total dollar amount of interest and dividend income of BayFirst from interest-earning assets and the resultant average yields; (ii) the total dollar amount of interest expense on interest-bearing liabilities and the resultant average cost; (iii) net interest income; (iv) interest rate spread; (v) net interest margin; and (vi) ratio of average interest-earning assets to average interest-bearing liabilities. Loans in nonaccrual status, for the purposes of the following computations, are included in the average loan balances. FRB,
FHLB, and FNBB restricted equity holdings are included in other interest-earning assets. The Company did not have a significant amount of tax-exempt assets.
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| Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||||||||||||||
| As restated | As restated | ||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | Average Balance | Interest | Yield | Average Balance | Interest | Yield | |||||||||||||||||||||||||||||
Interest-earning assets: | |||||||||||||||||||||||||||||||||||
Investment securities | $ | 31,722 | $ | 259 | 3.31 | % | $ | 38,344 | $ | 368 | 3.89 | % | |||||||||||||||||||||||
Loans(1) | 939,714 | 15,921 | 6.87 | 1,082,323 | 19,362 | 7.26 | |||||||||||||||||||||||||||||
Other | 141,968 | 1,250 | 3.57 | 58,111 | 566 | 3.95 | |||||||||||||||||||||||||||||
Total interest-earning assets | 1,113,404 | 17,430 | 6.35 | 1,178,778 | 20,296 | 6.98 | |||||||||||||||||||||||||||||
Noninterest-earning assets | 100,419 | 102,489 | |||||||||||||||||||||||||||||||||
Total assets | $ | 1,213,823 | $ | 1,281,267 | |||||||||||||||||||||||||||||||
Interest-bearing liabilities: | |||||||||||||||||||||||||||||||||||
NOW, MMDA and savings | $ | 608,801 | $ | 4,016 | 2.68 | $ | 719,600 | $ | 6,097 | 3.44 | |||||||||||||||||||||||||
Time deposits | 393,810 | 3,877 | 3.99 | 304,790 | 3,334 | 4.44 | |||||||||||||||||||||||||||||
Other borrowings | 7,556 | 97 | 5.21 | 21,364 | 255 | 4.84 | |||||||||||||||||||||||||||||
Total interest-bearing liabilities | 1,010,167 | 7,990 | 3.21 | 1,045,754 | 9,686 | 3.76 | |||||||||||||||||||||||||||||
Demand deposits | 101,537 | 103,875 | |||||||||||||||||||||||||||||||||
Noninterest-bearing liabilities | 20,657 | 24,470 | |||||||||||||||||||||||||||||||||
Shareholders’ equity | 81,462 | 107,168 | |||||||||||||||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 1,213,823 | $ | 1,281,267 | |||||||||||||||||||||||||||||||
Net interest income | $ | 9,440 | $ | 10,610 | |||||||||||||||||||||||||||||||
Interest rate spread | 3.14 | 3.22 | |||||||||||||||||||||||||||||||||
Net interest margin (2) | 3.44 | 3.65 | |||||||||||||||||||||||||||||||||
Ratio of average interest-earning assets to average interest-bearing liabilities | 110.22 | % | 112.72 | % | |||||||||||||||||||||||||||||||
(1) Includes nonaccrual loans. | |||||||||||||||||||||||||||||||||||
(2) Net interest margin represents annualized net interest income divided by average total interest-earning assets. | |||||||||||||||||||||||||||||||||||
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Rate/Volume Analysis
The table below presents the effects of volume and rate changes on interest income and expense for the periods indicated. Changes in volume are changes in the average balance multiplied by the previous period’s average rate. Changes in rate are changes in the average rate multiplied by the average balance from the previous period. The net changes attributable to the combined impact of both rate and volume have been allocated proportionately to the changes due to volume and the changes due to rate. Loans in nonaccrual status, for the purpose of the following computations, are included in the average loan balances. FRB, FHLB, and FNBB restricted equity holdings are included in other interest-earning assets. The Company did not have a significant amount of tax-exempt assets.
| (Dollars in thousands) | Rate | Volume | Total | ||||||||||||||
Three Months Ended March 31, 2026 vs. March 31, 2025 (as restated): | |||||||||||||||||
Interest-earning assets: | |||||||||||||||||
Investment securities | $ | (51) | $ | (58) | $ | (109) | |||||||||||
Loans | (986) | (2,455) | (3,441) | ||||||||||||||
Other interest-earning assets | (59) | 743 | 684 | ||||||||||||||
Total interest-earning assets | (1,096) | (1,770) | (2,866) | ||||||||||||||
Interest-bearing liabilities: | |||||||||||||||||
NOW, MMDA and savings | (1,227) | (854) | (2,081) | ||||||||||||||
Time deposits | (358) | 901 | 543 | ||||||||||||||
Other borrowings | 18 | (176) | (158) | ||||||||||||||
Total interest-bearing liabilities | (1,567) | (129) | (1,696) | ||||||||||||||
Net change in net interest income | $ | 471 | $ | (1,641) | $ | (1,170) | |||||||||||
Provision for Credit Losses
The provision for credit losses is charged to operations to adjust the ACL to a level deemed appropriate by management and is based upon the volume and type of lending the Bank conducts, industry standards, the amount of nonperforming loans, general economic conditions, particularly as they relate to its market area, economic forecasts, and other factors that may affect the ability to collect on the loans in its portfolio.
The Company recorded a provision for credit losses on loans for the three months ended March 31, 2026 of $3.4 million compared to a provision of $4.6 million for the three months ended March 31, 2025. During the three months ended March 31, 2026, $4.7 million of net charge offs were recorded compared to $3.5 million during the three months ended March 31, 2025.
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Noninterest Income
The following table presents noninterest income for the three months ended March 31, 2026 and March 31, 2025.
For the Three Months Ended March 31, | |||||||||||||||||||||||
| (Dollars in thousands) | 2026 | 2025 | |||||||||||||||||||||
| As restated | |||||||||||||||||||||||
Noninterest income: | |||||||||||||||||||||||
Loan servicing income, net | $ | 770 | $ | 736 | |||||||||||||||||||
Gain on sale of SBA and PPP loans, net | (97) | 7,064 | |||||||||||||||||||||
Service charges and fees | 490 | 449 | |||||||||||||||||||||
SBA loan fair value loss | (533) | (755) | |||||||||||||||||||||
| Government guaranteed loan packaging fees | — | 716 | |||||||||||||||||||||
| Gain on sale of premises and equipment | 13 | — | |||||||||||||||||||||
Other noninterest income | 241 | 278 | |||||||||||||||||||||
Total noninterest income | $ | 884 | $ | 8,488 | |||||||||||||||||||
Noninterest income was $0.9 million during the three months ended March 31, 2026, a decrease from $8.5 million during the three months ended March 31, 2025. The decrease in the first quarter of 2026, as compared to the first quarter of 2025, was the result a decrease in gain on sale of government guaranteed loans of $7.2 million and a decrease in government guaranteed loan packaging fees of $0.7 million.
Noninterest Expense
The following table presents noninterest expense for the three months ended March 31, 2026 and March 31, 2025.
For the Three Months Ended March 31, | |||||||||||||||||||||||
| (Dollars in thousands) | 2026 | 2025 | |||||||||||||||||||||
Noninterest expense: | |||||||||||||||||||||||
Salaries and benefits | $ | 5,069 | $ | 7,998 | |||||||||||||||||||
Bonus, commissions, and incentives | 290 | 71 | |||||||||||||||||||||
Occupancy and equipment | 1,368 | 1,634 | |||||||||||||||||||||
Data processing | 1,489 | 2,045 | |||||||||||||||||||||
Marketing and business development | 123 | 487 | |||||||||||||||||||||
Professional services | 1,164 | 732 | |||||||||||||||||||||
Loan servicing and origination expense | 3,836 | 1,035 | |||||||||||||||||||||
Employee recruiting and development | 202 | 617 | |||||||||||||||||||||
Regulatory assessments | 578 | 339 | |||||||||||||||||||||
| Restructure charges | — | — | |||||||||||||||||||||
| Director compensation | 137 | 176 | |||||||||||||||||||||
| Liability and fidelity bond insurance | 162 | 143 | |||||||||||||||||||||
| ATM and interchange | 131 | 109 | |||||||||||||||||||||
| Telecommunication | 68 | 115 | |||||||||||||||||||||
Other noninterest expense | 269 | 312 | |||||||||||||||||||||
Total noninterest expense | $ | 14,886 | $ | 15,813 | |||||||||||||||||||
Noninterest expense was $14.9 million during the three months ended March 31, 2026, an decrease from $15.8 million during the three months ended March 31, 2025. The decrease in the first quarter of 2026, as compared to the first quarter of
47
2025, was primarily due to a decrease in compensation expense of $2.7 million and a decrease in data processing expenses of $0.6 million, partially offset by an increase in loan servicing and origination expense of $2.8 million.
Income Taxes
Income tax benefit was $2.0 million for the three months ended March 31, 2026, a decrease from income tax benefit of $0.3 million for the three months ended March 31, 2025. The change was attributed to an increase in net loss.
At March 31, 2026, the Company had $22.7 million federal net operating loss carryforward and $22.5 million of state net operating loss carryforward. At March 31, 2025, the Company had no federal net operating loss carryforward and $16 thousand of state net operating loss carryforward. The Company expects to fully utilize the net operating losses.
The effective income tax rate was 25.56% for the three months ended March 31, 2026 and 26.43% for the three months ended March 31, 2025.
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Financial Condition
Investment Securities
The following table presents the fair value of the Company's investment securities portfolio classified as available for sale as of March 31, 2026 and December 31, 2025.
| (Dollars in thousands) | March 31, 2026 | December 31, 2025 | |||||||||
| Investment securities available for sale: | |||||||||||
Asset-backed securities | $ | 2,724 | $ | 2,822 | |||||||
Mortgage-backed securities: | |||||||||||
U.S. Government-sponsored enterprises | 4,760 | 4,899 | |||||||||
Collateralized mortgage obligations: | |||||||||||
U.S. Government-sponsored enterprises | 17,182 | 17,768 | |||||||||
Corporate bonds | 3,865 | 3,874 | |||||||||
Total investment securities available for sale | $ | 28,531 | $ | 29,363 | |||||||
The net unrealized loss on the investment securities AFS at March 31, 2026 and December 31, 2025, was $2.7 million and $2.6 million, respectively.
The following table presents the amortized cost of the Company's investment securities portfolio classified as held to maturity as of March 31, 2026 and December 31, 2025.
| (Dollars in thousands) | March 31, 2026 | December 31, 2025 | |||||||||
| Investment securities held to maturity: | |||||||||||
Corporate bonds | $ | 2,500 | $ | 2,500 | |||||||
Total investment securities held to maturity | $ | 2,500 | $ | 2,500 | |||||||
There was a $9 thousand ACL on the corporate bonds HTM as of March 31, 2026 and $7 thousand at December 31, 2025. The net unrealized loss on the investment securities HTM at March 31, 2026, was $122 thousand compared with a net unrealized loss on investment securities HTM of $116 thousand at December 31, 2025.
No investment securities were pledged as of March 31, 2026 or December 31, 2025, and there were no sales of investment securities for the three months ended March 31, 2026 or the three months ended March 31, 2025.
49
The investment securities available for sale presented in the following tables are reported at amortized cost and by contractual maturity as of March 31, 2026 and December 31, 2025. Actual timing may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Additionally, residential mortgage-backed securities and collateralized mortgage obligations receive monthly principal payments, which are not reflected below.
| March 31, 2026 | |||||||||||||||||||||||||||||||||||||||||||||||
| One year or less | One to five years | Five to ten years | After ten years | ||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | Amortized Cost | Average Yield | Amortized Cost | Average Yield | Amortized Cost | Average Yield | Amortized Cost | Average Yield | |||||||||||||||||||||||||||||||||||||||
Asset-backed securities | $ | — | — | % | $ | — | — | % | $ | — | — | % | $ | 2,720 | 4.85 | % | |||||||||||||||||||||||||||||||
Mortgage-backed securities: | |||||||||||||||||||||||||||||||||||||||||||||||
U.S. Government-sponsored enterprises | — | — | — | — | — | — | 5,149 | 2.92 | |||||||||||||||||||||||||||||||||||||||
Collateralized mortgage obligations: | |||||||||||||||||||||||||||||||||||||||||||||||
| U.S. Government-sponsored enterprises | — | — | — | — | — | — | 19,554 | 2.34 | |||||||||||||||||||||||||||||||||||||||
Corporate bonds | — | — | 3,845 | 4.88 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
Total investment securities available for sale | $ | — | — | % | $ | 3,845 | 4.88 | % | $ | — | — | % | $ | 27,423 | 2.70 | % | |||||||||||||||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||
| One year or less | One to five years | Five to ten years | After ten years | ||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | Amortized Cost | Average Yield | Amortized Cost | Average Yield | Amortized Cost | Average Yield | Amortized Cost | Average Yield | |||||||||||||||||||||||||||||||||||||||
Asset-backed securities | $ | — | — | % | $ | — | — | % | $ | — | — | % | $ | 2,827 | 2.96 | % | |||||||||||||||||||||||||||||||
Mortgage-backed securities: | |||||||||||||||||||||||||||||||||||||||||||||||
U.S. Government-sponsored enterprises | — | — | — | — | — | — | 5,264 | 2.99 | |||||||||||||||||||||||||||||||||||||||
Collateralized mortgage obligations: | |||||||||||||||||||||||||||||||||||||||||||||||
| U.S. Government-sponsored enterprises | — | — | — | — | — | — | 20,040 | 2.32 | |||||||||||||||||||||||||||||||||||||||
Corporate bonds | — | — | 3,843 | 5.04 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
Total investment securities available for sale | $ | — | — | % | $ | 3,843 | 5.04 | % | $ | — | — | % | $ | 28,131 | 2.51 | % | |||||||||||||||||||||||||||||||
The investment securities held to maturity presented in the following tables are reported at amortized cost and by contractual maturity as of March 31, 2026 and December 31, 2025. Actual timing may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Additionally, residential mortgage-backed securities receive monthly principal payments, which are not reflected below.
| March 31, 2026 | |||||||||||||||||||||||||||||||||||||||||||||||
| One year or less | One to five years | Five to ten years | After ten years | ||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | Amortized Cost | Average Yield | Amortized Cost | Average Yield | Amortized Cost | Average Yield | Amortized Cost | Average Yield | |||||||||||||||||||||||||||||||||||||||
Corporate bonds | $ | — | — | % | $ | 1,500 | 4.38 | % | $ | 1,000 | 4.38 | % | $ | — | — | % | |||||||||||||||||||||||||||||||
Total investment securities held to maturity | $ | — | — | % | $ | 1,500 | 4.38 | % | $ | 1,000 | 4.38 | % | $ | — | — | % | |||||||||||||||||||||||||||||||
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| December 31, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||
| One year or less | One to five years | Five to ten years | After ten years | ||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | Amortized Cost | Average Yield | Amortized Cost | Average Yield | Amortized Cost | Average Yield | Amortized Cost | Average Yield | |||||||||||||||||||||||||||||||||||||||
Corporate bonds | $ | — | — | % | $ | 1,500 | 4.38 | % | $ | 1,000 | 4.38 | % | $ | — | — | % | |||||||||||||||||||||||||||||||
Total investment securities held to maturity | $ | — | — | % | $ | 1,500 | 4.38 | % | $ | 1,000 | 4.38 | % | $ | — | — | % | |||||||||||||||||||||||||||||||
Loan Portfolio Composition
The Company offers a variety of products designed to meet the credit needs of our borrowers. Our lending activities primarily consist of government guaranteed, commercial real estate, commercial business, residential mortgage, and consumer loans. Senior management and loan officers have continued to develop new sources of loan referrals, particularly among centers of local influence and real estate professionals, and have also enjoyed repeat business from loyal customers in the markets the Bank serves. The Bank has no concentration of credit in any industry that represents 10% or more of its loan portfolio. Additionally, the loan portfolio is well-diversified across major loan types with a low concentration of non owner-occupied commercial real estate loans which makes up 10% of the total portfolio. The following table sets forth the composition of its HFI loan portfolio.
| March 31, 2026 | December 31, 2025 | ||||||||||||||||||||||
| (Dollars in thousands) | Amount | % of Total | Amount | % of Total | |||||||||||||||||||
| Loans HFI: | As restated | As restated | |||||||||||||||||||||
| Government guaranteed loans HFI, at fair value | $ | 51,807 | $ | 54,076 | |||||||||||||||||||
Loans HFI, at amortized cost: | |||||||||||||||||||||||
Residential real estate | 359,305 | 41.5 | % | 365,427 | 40.7 | % | |||||||||||||||||
Commercial real estate | 216,643 | 25.0 | 215,771 | 24.0 | |||||||||||||||||||
Construction and land | 36,732 | 4.2 | 48,397 | 5.4 | |||||||||||||||||||
Commercial and industrial | 171,666 | 19.8 | 181,566 | 20.2 | |||||||||||||||||||
Commercial and industrial – PPP | 6 | — | 6 | — | |||||||||||||||||||
Consumer and other | 82,269 | 9.5 | 86,441 | 9.7 | |||||||||||||||||||
Loans HFI, at amortized cost, gross | 866,621 | 100.0 | % | 897,608 | 100.0 | % | |||||||||||||||||
| Discount on government guaranteed loans | (6,007) | (6,811) | |||||||||||||||||||||
Premium on loans purchased, net | 2,446 | 2,650 | |||||||||||||||||||||
Deferred loan costs, net | 9,353 | 10,491 | |||||||||||||||||||||
Allowance for credit losses | (20,632) | (21,996) | |||||||||||||||||||||
Loans HFI, at amortized cost, net | 851,781 | 881,942 | |||||||||||||||||||||
Total loans HFI, net | $ | 903,588 | $ | 936,018 | |||||||||||||||||||
For the three months ended March 31, 2026, the Bank originated $2.4 million in loans through conventional lending channels and $0.8 million in government guaranteed loans. In addition, the Bank sold $0.8 million of government guaranteed loans to Banesco USA as part of the Bank’s discontinuance of SBA 7(a) lending.
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Loan Maturity/Rate Sensitivity
The following table shows the contractual maturities of our loans at March 31, 2026. Loan balances in this table include loans HFI at fair value, loans HFI at amortized cost, discount on retained balances of loans sold, premium and discount on loans purchased, and deferred loan costs, net.
| (Dollars in thousands) (as restated) | Due in One Year or Less | Due After One Year to Five Years | Due After Five Years to 15 Years | Due After 15 Years | Total | ||||||||||||||||||||||||
Real estate: | |||||||||||||||||||||||||||||
Residential | $ | 1,482 | $ | 597 | $ | 14,815 | $ | 342,691 | $ | 359,585 | |||||||||||||||||||
Commercial | 2,347 | 5,488 | 55,609 | 165,862 | 229,306 | ||||||||||||||||||||||||
Construction and land | 3,694 | — | 3,648 | 29,390 | 36,732 | ||||||||||||||||||||||||
Commercial and industrial | 10,453 | 22,891 | 171,217 | 8,557 | 213,118 | ||||||||||||||||||||||||
Commercial and industrial - PPP | 6 | — | — | — | 6 | ||||||||||||||||||||||||
Consumer and other | 2,355 | 19,093 | 18,589 | 45,436 | 85,473 | ||||||||||||||||||||||||
Total loans HFI | $ | 20,337 | $ | 48,069 | $ | 263,878 | $ | 591,936 | $ | 924,220 | |||||||||||||||||||
The following table shows the loans with contractual maturities of greater than one year that have fixed or adjustable interest rates at March 31, 2026.
| (Dollars in thousands) (as restated) | Fixed Interest Rate | Adjustable Interest Rate | |||||||||
Real estate: | |||||||||||
Residential | $ | 68,677 | $ | 289,426 | |||||||
Commercial | 4,299 | 222,660 | |||||||||
Construction and land | 494 | 32,544 | |||||||||
Commercial and industrial | 15,902 | 186,763 | |||||||||
Consumer and other | 77,597 | 5,521 | |||||||||
Total loans HFI | $ | 166,969 | $ | 736,914 | |||||||
Credit Risk
The Bank’s primary business is making commercial, consumer, and real estate loans. This activity inevitably has risks for potential credit losses, the magnitude of which depends on a variety of economic factors affecting borrowers, which are beyond its control. The Bank has developed policies and procedures for evaluating the overall quality of its credit portfolio and the timely identification of potential problem loans. Management’s judgment as to the adequacy of the allowance is based upon a number of assumptions about the economic environment that it believes impacts credit quality as of the balance sheet date that it believes to be reasonable, but which may or may not prove accurate. Thus, there can be no assurance that charge-offs in future periods will not exceed the ACL, or that additional increases in the ACL will not be required.
Allowance for Credit Losses. The Bank must maintain an adequate ACL based on a comprehensive methodology that assesses the probable losses inherent in its loan portfolio. The Bank maintains an ACL based on a number of quantitative and qualitative factors, including levels and trends of past due and nonaccrual loans, asset classifications, change in volume and mix of loans, collateral value, historical loss experience, size and complexity of individual credits, and economic conditions. In addition to this, the Company uses reasonable and supportable forecasts that are developed with internal and external data. These are updated quarterly by management and utilize data from the FOMC’s median forecasts of change in national GDP and of national unemployment. Provisions for credit losses are provided on both a specific and general basis. Specific allowances are provided for individual loans that do not share similar risk characteristics with instruments evaluated using a collective (pooled) basis. General valuation allowances are determined by loan pools with a further evaluation of various quantitative and qualitative factors noted above.
52
The Bank periodically reviews the assumptions and formulates methodologies by which changes are made to the specific and general valuation ACL in an effort to refine such allowances in light of the current status of the factors described above.
All nonaccrual loans and modifications to loans for borrowers experiencing financial difficulty are reviewed to determine if the loans share the same risk characteristics as the pooled loans. If the loan does not share the same risk characteristics, the loan is evaluated individually for credit losses. Specific allocation of reserves for individually evaluated loans considers the value of the collateral, the financial condition of the borrower, and industry and current economic trends. The Bank reviews the collateral value, cash flow, and other support on each individually evaluated credit. Any deficiency outlined by a real estate collateral evaluation analysis, or cash flow shortfall, is accounted for through a specific allocation for the loan.
In 2025, in response to continued elevated charge-offs, increases in nonperforming loans and continued economic uncertainty, Management assessed and strengthened the Bank’s problem loan administration processes to ensure they were sufficiently identifying and timely risk-rating problem loans. The scope and frequency of the Bank’s independent, external loan review program were also expanded. Management believes that the updated processes around problem loan administration are adequate and that loan risk ratings are accurate.
Nonperforming Assets. At March 31, 2026, the Company had $17.5 million in nonperforming assets, excluding government guaranteed loan balances. The ACL represented 2.36% of total loans HFI at amortized cost. At March 31, 2025, the Company had $16.6 million in nonperforming assets, excluding government guaranteed loan balances. The ACL represented 1.62% of total loans HFI at amortized cost. The increase in nonperforming assets was partially the result of a nonaccrual loan for $2.6 million that is fully secured and has no ACL allocated. Total loans HFI at March 31, 2026 and March 31, 2025 included government guaranteed balances and loans measured at fair value, which had no reserves allocated to them. ACL as a percentage of loans HFI at amortized cost, not including government guaranteed loan balances, was 2.55% at March 31, 2026, compared to 1.85% at March 31, 2025.
The following table sets forth certain information on nonaccrual loans, loans 90 days or more past due, and foreclosed assets, the ratio of such loans and foreclosed assets to total assets as of the dates indicated, and certain other related information.
| (Dollars in thousands) | March 31, 2026 | March 31, 2025 | |||||||||||||||
| As restated | As restated | ||||||||||||||||
Nonperforming loans (government guaranteed balances), at amortized cost, gross | $ | 5,580 | $ | 9,728 | |||||||||||||
Nonperforming loans (unguaranteed balances), at amortized cost, gross | 15,873 | 15,078 | |||||||||||||||
Total nonperforming loans, at amortized cost, gross | 21,453 | 24,806 | |||||||||||||||
Nonperforming loans (government guaranteed balances), at fair value | 208 | 507 | |||||||||||||||
Nonperforming loans (unguaranteed balances), at fair value | 1,230 | 1,419 | |||||||||||||||
Total nonperforming loans, at fair value | 1,438 | 1,926 | |||||||||||||||
OREO | 400 | 132 | |||||||||||||||
| Repossessed assets | 583 | 36 | |||||||||||||||
Total nonperforming assets, gross | $ | 23,874 | $ | 26,900 | |||||||||||||
Nonperforming loans as a percentage of total loans HFI(1) | 2.46 | % | 2.43 | % | |||||||||||||
Nonperforming loans (excluding government guaranteed balances) to total loans HFI(1) | 1.82 | % | 1.48 | % | |||||||||||||
Nonperforming assets as a percentage of total assets | 2.01 | % | 2.09 | % | |||||||||||||
Nonperforming assets (excluding government guaranteed balances) to total assets | 1.39 | % | 1.22 | % | |||||||||||||
ACL to nonperforming loans(1) | 96.17 | % | 66.57 | % | |||||||||||||
ACL to nonperforming loans (excluding government guaranteed balances)(1) | 129.98 | % | 109.52 | % | |||||||||||||
(1) Excludes loans measured at fair value
53
The following table sets forth information with respect to activity in the ACL for loans for the periods shown:
| (Dollars in thousands) | At and for the Three Months Ended March 31, | ||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| As restated | As restated | ||||||||||||||||||||||
Allowance at beginning of period | $ | 21,996 | $ | 15,512 | |||||||||||||||||||
Charge-offs: | |||||||||||||||||||||||
Residential real estate | (519) | (7) | |||||||||||||||||||||
Commercial real estate | (315) | (139) | |||||||||||||||||||||
Commercial and industrial | (3,722) | (3,117) | |||||||||||||||||||||
Consumer and other | (537) | (493) | |||||||||||||||||||||
Total charge-offs | (5,093) | (3,756) | |||||||||||||||||||||
Recoveries: | |||||||||||||||||||||||
Residential real estate | — | 20 | |||||||||||||||||||||
Commercial real estate | 22 | — | |||||||||||||||||||||
Commercial and industrial | 286 | 193 | |||||||||||||||||||||
Consumer and other | 66 | 82 | |||||||||||||||||||||
Total recoveries | 374 | 295 | |||||||||||||||||||||
Net charge-offs | (4,719) | (3,461) | |||||||||||||||||||||
Provision for credit losses on loans | 3,355 | 4,462 | |||||||||||||||||||||
Allowance at end of period | $ | 20,632 | $ | 16,513 | |||||||||||||||||||
Net charge-offs to average loans HFI at amortized cost | 2.14 | % | 1.35 | % | |||||||||||||||||||
Allowance as a percent of total loans HFI at amortized cost | 2.36 | % | 1.62 | % | |||||||||||||||||||
Allowance as a percent of loans HFI at amortized cost, not including government guaranteed loans | 2.55 | % | 1.85 | % | |||||||||||||||||||
Allowance as a percent of nonperforming loans at amortized cost, gross | 96.17 | % | 66.57 | % | |||||||||||||||||||
Total loans HFI | $ | 924,220 | $ | 1,080,125 | |||||||||||||||||||
Average loans HFI at amortized cost | $ | 881,938 | $ | 1,022,956 | |||||||||||||||||||
Nonperforming loans (including government guaranteed balances) at amortized cost, gross | $ | 21,453 | $ | 24,806 | |||||||||||||||||||
Nonperforming loans (excluding government guaranteed balances) at amortized cost, gross | $ | 15,873 | $ | 15,078 | |||||||||||||||||||
Guaranteed balance of government guaranteed loans | $ | 75,063 | $ | 140,838 | |||||||||||||||||||
54
The following table details net charge-offs to average loans outstanding by loan category for the three months ended March 31, 2026 and March 31, 2025.
| Three Months Ended March 31, 2026 | Three Months Ended March 31, 2025 | ||||||||||||||||||||||||||||||||||
| As restated | As restated | ||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | Net (Charge-off) Recovery | Average Loans HFI at amortized cost | Net (Charge-off) Recovery Ratio | Net (Charge-off) Recovery | Average Loans HFI at amortized cost | Net (Charge-off) Recovery Ratio | |||||||||||||||||||||||||||||
Residential real estate | $ | (519) | $ | 357,766 | (0.58) | % | $ | 13 | $ | 325,911 | 0.02 | % | |||||||||||||||||||||||
Commercial real estate | (293) | 274,003 | (0.43) | (139) | 360,940 | (0.15) | |||||||||||||||||||||||||||||
Commercial and industrial | (3,436) | 164,884 | (8.34) | (2,924) | 241,280 | (4.85) | |||||||||||||||||||||||||||||
Commercial and industrial - PPP | — | 6 | — | — | 633 | — | |||||||||||||||||||||||||||||
Consumer and other | (471) | 85,279 | (2.21) | (411) | 94,192 | (1.75) | |||||||||||||||||||||||||||||
Total loans HFI at amortized cost | $ | (4,719) | $ | 881,938 | (2.14) | % | $ | (3,461) | $ | 1,022,956 | (1.35) | % | |||||||||||||||||||||||
SBA and Other Government Guaranteed Loans
The following table sets forth, for the periods indicated, information regarding the SBA and other government guaranteed lending activity, excluding PPP loans. In addition to the Bank’s routine loan sale activity, the Bank sold $97.4 million of government guaranteed loans to Banesco USA as part of the Bank’s discontinuance of SBA 7(a) lending in the fourth quarter 2025 and first quarter of 2026..
| (Dollars in thousands) | At and for the Three Months Ended March 31, | At and for the Year Ended December 31, | ||||||||||||||||||
| Government Guaranteed, Excluding PPP | 2026 | 2025 | 2025 | |||||||||||||||||
Number of loans originated | 1 | 525 | 1,388 | |||||||||||||||||
Amount of loans originated | $ | 762 | $ | 106,323 | $ | 278,334 | ||||||||||||||
Average loan size originated | $ | 762 | $ | 203 | $ | 201 | ||||||||||||||
Government guaranteed loan balances sold | $ | — | $ | 72,523 | $ | 198,996 | ||||||||||||||
| Total government guaranteed loan balances: | ||||||||||||||||||||
Guaranteed portion of government guaranteed loan balances HFI | $ | 75,057 | $ | 140,381 | $ | 70,123 | ||||||||||||||
Unguaranteed portion of government guaranteed loan balances HFI | 212,225 | 281,814 | 232,863 | |||||||||||||||||
Total government guaranteed loans HFI | 287,282 | 422,195 | 302,986 | |||||||||||||||||
Government guaranteed loans serviced for others | $ | 832,047 | $ | 1,065,754 | $ | 885,505 | ||||||||||||||
| Government guaranteed loans sold to Banesco USA | $ | 762 | $ | — | $ | 96,602 | ||||||||||||||
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The following table sets forth, at the dates indicated, the geographic disbursement of gross principal balances of its government guaranteed loan portfolio. The “All Other” category includes states with less than 5% in any period presented.
| March 31, | |||||||||||||||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | Amount | % of Total | Amount | % of Total | |||||||||||||||||||||||||||||||
Florida | $ | 93,619 | 33 | % | $ | 144,636 | 34 | % | |||||||||||||||||||||||||||
California | 24,983 | 9 | 46,918 | 11 | |||||||||||||||||||||||||||||||
| Tennessee | 20,001 | 7 | 27,067 | 6 | |||||||||||||||||||||||||||||||
Texas | 24,128 | 8 | 29,468 | 7 | |||||||||||||||||||||||||||||||
All Other | 124,551 | 43 | 174,106 | 42 | |||||||||||||||||||||||||||||||
Total government guaranteed loans, excluding PPP loans | $ | 287,282 | 100 | % | $ | 422,195 | 100 | % | |||||||||||||||||||||||||||
Deposits
General. In addition to deposits, sources of funds available for lending and for other purposes include loan repayments and historically proceeds from the sales of loans. Loan repayments are a relatively stable source of funds, while deposit inflows and outflows are influenced significantly by general interest rates and market conditions. Borrowings, as well as available lines of credit, may be used on a short-term basis to compensate for reductions in other sources, such as deposits at less than projected levels.
Deposits. Deposits are sourced principally from within its primary service area of Pinellas, Hillsborough, Manatee, Pasco, and Sarasota Counties, Florida. The Bank offers a wide selection of deposit instruments including demand deposit accounts, NOW accounts, money market accounts, regular savings accounts, time deposit accounts, and retirement savings plans (such as IRA accounts).
Time deposit rates are set to encourage longer maturities as cost and market conditions will allow. Deposit account terms vary, with the primary differences being the minimum balance required, the time period the funds must remain on deposit, and the interest rate.
The Bank emphasizes commercial banking relationships in an effort to increase demand deposits as a percentage of total deposits. Deposit interest rates are set by management at least monthly or more often if conditions require, based on a review of loan demand, projected cash flows and a survey of rates among competitors.
Brokered deposits. At times, the Bank has brokered time deposit and non-maturity deposit relationships available to diversify its funding sources. Brokered deposits offer several benefits relative to other funding sources, such as: maturity structures which cannot be duplicated in the current retail market, deposit gathering outside the market of the existing deposit base, the unsecured nature of these liabilities, and the ability to quickly generate funds. The Bank’s internal policy limits the use of brokered deposits as a funding source to no more than 20% of total assets. The Company's ability to accept or renew brokered deposits is contingent upon the Bank maintaining a capital level of "well capitalized." At March 31, 2026 and December 31, 2025, the Company had $183.9 million and $195.5 million, respectively, of brokered deposits.
The amount of each of the following categories of deposits, at the dates indicated, are as follows:
| (Dollars in thousands) | March 31, 2026 | December 31, 2025 | |||||||||||||||||||||
Noninterest-bearing deposit accounts | $ | 111,476 | 10.3 | % | $ | 95,731 | 8.1 | % | |||||||||||||||
Interest-bearing transaction accounts | 153,860 | 14.2 | 231,227 | 19.5 | |||||||||||||||||||
Money market accounts | 411,226 | 37.9 | 434,930 | 36.7 | |||||||||||||||||||
Savings accounts | 21,555 | 2.0 | 19,709 | 1.7 | |||||||||||||||||||
Subtotal | 698,117 | 64.4 | 781,597 | 66.0 | |||||||||||||||||||
Total time deposits | 387,752 | 35.6 | 402,341 | 34.0 | |||||||||||||||||||
Total deposits | $ | 1,085,869 | 100.0 | % | $ | 1,183,938 | 100.0 | % | |||||||||||||||
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At March 31, 2026, the Company held approximately $188.9 million of deposits that exceeded the FDIC insurance limit which was 17% of total deposits.
The following table provides information on the maturity distribution of the time deposits exceeding the FDIC insurance limit of $250 thousand as of March 31, 2026.
| (Dollars in thousands) | |||||
Three months or less | $ | 32,342 | |||
Over three months through six months | 17,511 | ||||
Over six months through 12 months | 25,160 | ||||
Over 12 months | 38,634 | ||||
Total time deposits over $250 | $ | 113,647 | |||
Deposits decreased $98.1 million or 8.28% for the three months ended March 31, 2026, with increases in noninterest-bearing deposit account balances, money market deposit account balances, and time deposit balances, partially offset by decreases in interest-bearing transaction account balances and savings account balances.
Other Borrowings
At March 31, 2026 and December 31, 2025, the Company had no borrowings outstanding from the FHLB or FRB.
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 $387.6 million of real estate-related loans as of March 31, 2026. Based on this collateral and the Bank's holdings of FHLB stock, the Bank was eligible to borrow up to $187.8 million from the FHLB at March 31, 2026.
In addition, the Bank has a line of credit with the Federal Reserve Bank of Atlanta which was secured by $49.8 million of commercial loans as of March 31, 2026. 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 Bank was eligible to borrow up to $28.8 million from the FRB at March 31, 2026.
The Company has $6.0 million of Subordinated Notes (the “Notes”) that mature June 30, 2031 and are redeemable after 5 years which is June 30, 2026. The Notes 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 after June 30, 2026. Under the note agreements, the floating rates are based on a SOFR benchmark plus 3.78% per annum.
On December 29, 2025, the Company and the holders of the Company’s Notes entered into an Amendment to the Notes (the “Amendment”), effective as of December 26, 2025. Pursuant to the Amendment, instead of the Company paying interest on the Notes, the outstanding principal of the Notes shall be increased by the amount of interest due as of the date of the Amendment and that becomes due through and including June 30, 2026. In addition, if the Company does not pay all amounts due on the Notes by June 30, 2026, at the Company’s option, (i) it shall pay the holders 3.00% of the outstanding principal of the Notes, or (ii) the principal of the Notes shall be increased by 3.00%.
The balance of Subordinated Notes outstanding at the Company, net of offering costs, amounted to $6.1 million and $6.0 million at March 31, 2026 and December 31, 2025, respectively.The increase was primarily the result of the deferred interest payment that were due in January 2026.
The Company has a term note with quarterly principal and interest payments with interest at Prime (6.75% at March 31, 2026). The note matures on March 10, 2029 and the balance of the note was $1.5 million and $1.6 million at March 31, 2026 and December 31, 2025, respectively. The note is secured by 100% of the stock of the Company and requires the Company to comply with certain loan covenants during the term of the note. On December 30, 2025, the lender agreed that the Bank may defer the quarterly interest payment due December 10, 2025 on its term loan until March 10, 2026. The deferred interest was paid as agreed.
As part of the amendment to the subordinated note and term note, the Company obtained a waiver related to financial debt covenants.
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Capital Resources
Shareholders' equity is influenced primarily by earnings, dividends, the Company's sales and repurchases of its common and preferred stock, and changes in accumulated other comprehensive income caused primarily by fluctuations in unrealized gains or losses, net of taxes, on available for sale investment securities.
Shareholders' equity was $75.6 million at March 31, 2026 as compared to $81.6 million at December 31, 2025. The decrease was primarily due to net loss of $5.9 million.
The Company strives to maintain an adequate capital base to support its activities in a safe and sound manner while at the same time maximizing shareholder value. Management assesses capital adequacy against the risk inherent in the balance sheet, recognizing that unexpected loss is the common denominator of risk and that common equity has the greatest capacity to absorb unexpected loss.
The Bank is subject to regulatory capital requirements imposed by various regulatory agencies. Failure to meet minimum capital requirements can initiate certain mandatory and discretionary actions by banking regulators that, if undertaken, could have a direct material effect on BayFirst’s and the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company must meet specific capital guidelines that involve quantitative measures of its assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by regulators about components, risk weightings, and other factors.
At March 31, 2026, the Bank did not meet all of its regulatory capital requirements to be well-capitalized but the consummation of the capital raise is expected to meet these capital requirements going forward.
The Bank’s actual capital amounts and percentages were as shown in the table below:
| Actual | Minimum(1) | Well Capitalized(2) | |||||||||||||||||||||||||||||||||
| (Dollars in thousands)(as restated) | Amount | Percent | Amount | Percent | Amount | Percent | |||||||||||||||||||||||||||||
As of March 31, 2026 | |||||||||||||||||||||||||||||||||||
Total Capital (to risk-weighted assets) | $ | 82,158 | 9.00 | % | $ | 73,033 | 8.00 | % | $ | 91,291 | 10.00 | % | |||||||||||||||||||||||
Tier 1 Capital (to risk-weighted assets) | 70,624 | 7.74 | 54,774 | 6.00 | 73,033 | 8.00 | |||||||||||||||||||||||||||||
Common Equity Tier 1 Capital (to risk-weighted assets) | 70,624 | 7.74 | 41,081 | 4.50 | 59,339 | 6.50 | |||||||||||||||||||||||||||||
Tier 1 Capital (to total assets) | 70,624 | 5.89 | 47,992 | 4.00 | 59,989 | 5.00 | |||||||||||||||||||||||||||||
As of December 31, 2025 | |||||||||||||||||||||||||||||||||||
Total Capital (to risk-weighted assets) | 91,085 | 9.48 | 76,867 | 8.00 | 96,084 | 10.00 | |||||||||||||||||||||||||||||
Tier 1 Capital (to risk-weighted assets) | 78,951 | 8.22 | 57,650 | 6.00 | 76,867 | 8.00 | |||||||||||||||||||||||||||||
Common Equity Tier 1 Capital (to risk-weighted assets) | 78,951 | 8.22 | 43,238 | 4.50 | 62,455 | 6.50 | |||||||||||||||||||||||||||||
Tier 1 Capital (to total assets) | 78,951 | 5.98 | 52,837 | 4.00 | 66,046 | 5.00 | |||||||||||||||||||||||||||||
(1) Minimum to be considered “adequately capitalized” under Basel III Capital Adequacy.
(2) Minimum to be considered “well capitalized” under Prompt Corrective Actions Provisions.
Off-Balance Sheet Arrangements
The Bank is a party to financial instruments with off-balance sheet risk in the normal course of business. These financial instruments primarily include unfunded loan commitments, unfunded lines of credit, and standby letters of credit. The Bank uses these financial instruments to meet the financing needs of its customers. These financial instruments involve, to varying degrees, elements of credit, interest rate, and liquidity risk. These do not present unusual risks and management does not anticipate any accounting losses that would have a material effect on the Bank.
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A summary of the amounts of the Bank’s financial instruments, with off-balance sheet risk as of the dates indicated, was as follows:
| (Dollars in thousands) | March 31, 2026 | December 31, 2025 | |||||||||
Unfunded loan commitments | $ | 17,674 | $ | 1,257 | |||||||
Unused lines of credit | 191,307 | 207,665 | |||||||||
Standby letters of credit | 1,161 | 1,161 | |||||||||
Total | $ | 210,142 | $ | 210,083 | |||||||
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Management evaluates each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained if deemed necessary by the Bank upon extension of credit is based on management’s credit evaluation of the customer.
Standby letters-of-credit are conditional lending commitments that the Bank issues to guarantee the performance of a customer to a third party and to support private borrowing arrangements. Essentially, letters of credit have expiration dates within one year of the issue date. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending credit.
In general, loan commitments and letters of credit are made on the same terms, including with respect to collateral, as outstanding loans. Each customer’s creditworthiness and the collateral required are evaluated on a case-by-case basis.
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 March 31, 2026 and December 31, 2025, ACL for off-balance sheet loan commitments totaled $718 thousand and $671 thousand, respectively.
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Contractual Obligations
In the ordinary course of its operations, the Company enters into certain contractual obligations. Total contractual obligations at March 31, 2026 were $416.3 million, an decrease from $431.4 million at December 31, 2025. The decrease was primarily due to a decrease in time deposits of $14.6 million.
The following tables present our contractual obligations as of March 31, 2026 and December 31, 2025.
Contractual Obligations as of March 31, 2026 | |||||||||||||||||||||||||||||
| (Dollars in thousands) | Less than One Year | One to Three Years | Three to Five Years | Over Five Years | Total | ||||||||||||||||||||||||
| Operating lease obligations | $ | 2,128 | $ | 2,861 | $ | 2,719 | $ | 13,246 | $ | 20,954 | |||||||||||||||||||
| Long-term borrowings | 456 | 912 | 111 | — | 1,479 | ||||||||||||||||||||||||
| Subordinated notes | — | — | — | 6,099 | 6,099 | ||||||||||||||||||||||||
| Time deposits | 322,707 | 62,681 | 2,364 | — | 387,752 | ||||||||||||||||||||||||
| Total | $ | 325,291 | $ | 66,454 | $ | 5,194 | $ | 19,345 | $ | 416,284 | |||||||||||||||||||
Contractual Obligations as of December 31, 2025 | |||||||||||||||||||||||||||||
| (Dollars in thousands) | Less than One Year | One to Three Years | Three to Five Years | Over Five Years | Total | ||||||||||||||||||||||||
| Operating lease obligations | $ | 2,119 | $ | 3,064 | $ | 2,706 | $ | 13,594 | $ | 21,483 | |||||||||||||||||||
| Long-term borrowings | 456 | 912 | 225 | — | 1,593 | ||||||||||||||||||||||||
| Subordinated notes | — | — | — | 5,962 | 5,962 | ||||||||||||||||||||||||
| Time deposits | 318,112 | 81,873 | 2,356 | — | 402,341 | ||||||||||||||||||||||||
| Total | $ | 320,687 | $ | 85,849 | $ | 5,287 | $ | 19,556 | $ | 431,379 | |||||||||||||||||||
Liquidity
Liquidity management is the process by which the Bank manages the flow of funds necessary to meet its financial commitments on a timely basis and at a reasonable cost to take advantage of earnings enhancement opportunities. These financial commitments include withdrawals by depositors, credit commitments to borrowers, expenses of the operations, and capital expenditures. The Bank generally maintains a minimum liquidity ratio of liquid assets to total assets of at least 7.0%. Liquid assets include cash and due from banks, federal funds sold, interest-bearing deposits with banks and unencumbered investment securities available for sale. The on-balance sheet liquidity ratio at March 31, 2026 was 13.92%, as compared to 18.44% at December 31, 2025.
For the three months ended March 31, 2026, the Bank there were no dividends needed to its parent company in order to meet liquidity needs to make interest payments on its debt obligations, dividends on shares of its preferred stock and common stock, and payment of operating expenses. The Company suspended the payment of dividends in 2025. As of March 31, 2026, BayFirst Financial Corp. held $401 thousand in cash and cash equivalents.
The Company expects that all the liquidity needs, including the contractual commitments, can be met by currently available liquid assets and cash flows. In the event any unforeseen demand or commitments were to occur, the Company could access the borrowing capacity with the FHLB or FRB, or lines of credit with other financial institutions. The Company does not rely on investment securities as the main source of liquidity and does not foresee the need to sell investment securities for cash flow purposes. In addition, the Company has the ability to obtain non-brokered wholesale deposits as another source of liquidity. The Company expects that the currently available liquid assets and the ability to borrow from the FHLB, FRB, and other financial institutions would be sufficient to satisfy the liquidity needs without any material adverse effect on the Company’s liquidity.
A description of BayFirst’s debt obligations is set forth above under the heading “Other Borrowings.”
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market Risk and Interest Rate Sensitivity
Market risk is the risk of loss from adverse changes in market prices and rates. Market risk arises primarily from interest-rate risk inherent in lending and deposit taking activities. To that end, the Company actively monitors and manages its interest-rate risk exposure. The measurement of market risk associated with financial instruments is meaningful only when all related and offsetting on- and off-balance sheet transactions are aggregated, and the resulting net positions are identified. Disclosures about the fair value of financial instruments, which reflect changes in market prices and rates, should also be considered.
The objective in managing interest-rate risk is to minimize the adverse impact of changes in interest rates on net interest income and capital, while adjusting the asset-liability structure to obtain the maximum yield-cost spread on that structure. The Company relies primarily on its asset-liability structure to control interest rate risk. A sudden or substantial change in interest rates may impact its earnings, to the extent that the interest rates borne by assets and liabilities do not change at the same rate, to the same extent, or on the same basis.
The Company established a comprehensive interest rate risk management policy which is administered by management. The policy establishes risk limits, which are quantitative measures of the percentage change in net interest income (net interest income at risk) and the fair value of equity capital (economic value of equity at risk) resulting from a hypothetical change in interest rates for maturities from one day to 30 years. Management measures the potential adverse impacts that changing interest rates may have on its short-term earnings, long-term value, and liquidity with computer-generated simulation analysis. The simulation model is designed to capture call features and interest rate caps and floors embedded in investment and loan contracts. As with any method of analyzing interest rate risk, there are certain shortcomings inherent in the interest rate modeling methodology used. When interest rates change, actual movements in different categories of interest-earning assets and interest-bearing liabilities, loan prepayments, and withdrawals of time and other deposits, may deviate significantly from the assumptions used in modeling. The methodology does not measure the impact that higher rates may have on borrowers’ ability to service their debts, or the impact of rate changes on demand for loan and deposit products.
To minimize the potential for adverse effects of changes in interest rates on the results of the operations, the Company monitors assets and liabilities to better match the maturities and repricing terms of the interest-earning assets and interest-bearing liabilities. To do this, the Company (i) emphasizes the origination of adjustable-rate and variable-rate loans to be HFI; (ii) maintains a stable core deposit base; and (iii) maintains a significant portion of liquid assets (cash, interest-bearing deposits with other banks, and available for sale investment securities).
Management regularly reviews its exposure to changes in interest rates. Among the factors they consider are changes in the mix of interest-earning assets and interest-bearing liabilities, interest rate spreads and repricing periods. ALCO reviews, on at least a quarterly basis, its interest rate risk position.
The interest rate risk position is measured and monitored at the Bank using net interest income simulation models and economic value of equity sensitivity analysis that captures both short-term and long-term interest-rate risk exposure.
Modeling the sensitivity of net interest income and the economic value of equity to changes in market interest rates is highly dependent on numerous assumptions incorporated into the modeling process. The models used for these measurements rely on estimates of the potential impact that changes in interest rates may have on the value and prepayment speeds on all components of its loan and investment portfolios, as well as embedded options and cash flows of other assets and liabilities. Balance sheet growth assumptions are also included in the simulation modeling process. The analysis provides a framework as to what the overall sensitivity position is as of the most recent reported position and the impact that potential changes in interest rates may have on net interest income and the economic value of its equity.
Net interest income simulation involves forecasting net interest income under a variety of interest rate scenarios including instantaneous shocks.
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The estimated impact on the net interest income as of March 31, 2026 and December 31, 2025, assuming immediate parallel moves in interest rates, is presented in the table below.
| March 31, 2026 | December 31, 2025 | ||||||||||||||||||||||
| Change in rates | Following 12 months | Following 24 months | Following 12 months | Following 24 months | |||||||||||||||||||
| +400 basis points | 1.3 | % | (3.2) | % | 5.2 | % | (3.2) | % | |||||||||||||||
| +300 basis points | 1.9 | (1.3) | 5.2 | (0.9) | |||||||||||||||||||
| +200 basis points | 1.8 | (0.3) | 4.1 | 0.2 | |||||||||||||||||||
| +100 basis points | 1.2 | 0.3 | 2.5 | 0.6 | |||||||||||||||||||
| -100 basis points | (0.1) | (0.2) | (1.1) | (0.5) | |||||||||||||||||||
| -200 basis points | (2.4) | (2.7) | (3.9) | (2.8) | |||||||||||||||||||
Management strategies may impact future reporting periods, as the actual results may differ from simulated results due to the timing, magnitude, and frequency of interest rate changes, the difference between actual experience and the characteristics assumed, as well as changes in market conditions. Market-based prepayment speeds are factored into the analysis for loan and investment securities portfolios. Rate sensitivity for transactional deposit accounts is modeled based on both historical experience and external industry studies.
The Company uses economic value of equity sensitivity analysis to understand the impact of interest rate changes on long-term cash flows, income, and capital. Economic value of equity is based on discounting the cash flows for all balance sheet instruments under different interest rate scenarios.
The table below presents the change in the economic value of equity as of March 31, 2026 and December 31, 2025, assuming immediate parallel shifts in interest rates.
| Change in rates | March 31, 2026 | December 31, 2025 | |||||||||
| +400 basis points | (17.2) | % | (15.6) | % | |||||||
| +300 basis points | (12.4) | (10.9) | |||||||||
| +200 basis points | (8.0) | (6.9) | |||||||||
| +100 basis points | (3.7) | (3.1) | |||||||||
| -100 basis points | 4.4 | 4.1 | |||||||||
| -200 basis points | 7.0 | 7.6 | |||||||||
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
An evaluation of the Company’s disclosure controls and procedures (as defined in Rules 13(a)-15(e) and 15(d)-15(e) of the Exchange Act), was carried out under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer as of March 31, 2026, the last day of the period covered by this Quarterly Report. The Company’s Chief Executive Officer and Chief Financial Officer concluded that, as a result of the material weakness in internal control over financial reporting described below, our disclosure controls and procedures were not effective as of March 31, 2026.
Notwithstanding the conclusion that our disclosure controls and procedures were not effective as of March 31, 2026, and notwithstanding the material weakness in our internal control over financial reporting described below, management believes that the condensed consolidated financial statements and related financial information included in this Amended Quarterly Report on Form 10-Q/A fairly present in all material respects our financial condition, results of operations, and cash flows as of the dates presented and for the periods ended on such dates, in conformity with accounting principles generally accepted in the United States of America.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Internal control over financial reporting is a process
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designed by, or under the supervision of, our principal executive and principal financial officers, and effected by our Board of Directors, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
•pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;
•provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
•provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.
Under the supervision and with the participation of our management, including our Chief Executive Officer, Chief Financial Officer, and Chief Risk Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of March 31, 2026, based on the framework in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.
Based on that evaluation, management concluded that our internal control over financial reporting was not effective as of March 31, 2026 due to the material weakness described below.
We identified a material weakness in our internal control over financial reporting related to operating effectiveness of control activities and monitoring of how loans are placed in nonaccrual status and charged off as well as how origination costs are recognized on loans after a portion of the loan has been sold and the resulting gain on sale of government guaranteed loans is calculated. Insufficient review of expense and charge off entries by personnel without appropriate subject matter expertise, management of the same personnel and internal audit. Specifically, procedures used with the system of record were incomplete or incorrect.
This material weakness resulted in a reasonable possibility that a material misstatement of our annual or interim financial statements would not be prevented or detected on a timely basis.
Remediation Plan
Management has begun implementing the following measures to remediate the material weakness:
•Reviews of all related procedures for completeness and correctness
•Training of personnel and management
•Escalation process to senior management
•Evaluating automating steps to insure consistent and correct processes
Management expects this plan to be implemented in the third quarter of 2026.
We will not consider the material weakness remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are designed and operating effectively. The Audit Committee of our Board of Directors is monitoring these remediation efforts.
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Part II
Item 1. Legal Proceedings
In the normal course of business, the Company is named or threatened to be named as a defendant in various lawsuits, none of which is expected to have a material effect on the Company. However, given the nature, scope and complexity of the extensive legal and regulatory landscape applicable to its business (including laws and regulations governing consumer protection, fair lending, fair labor, privacy, information security, anti-money laundering and anti-terrorism), the Company, like all banking organizations, is subject to heightened legal and regulatory compliance and litigation risk. There are no material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which the Company is a party or to which its property is the subject.
Item 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully consider the factors discussed under "Part I--Item 1A--Risk Factors" in the Company's Form 10-K/A for the year ended December 31, 2025. There have been no material changes from those risk factors previously disclosed. These factors could materially and adversely affect the Company's business, financial condition, liquidity, results of operations and capital position, and could cause its actual results to differ materially from its historical results or the results contemplated by the forward-looking statements contained in this report.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Unregistered Sales of Equity Securities
None.
Issuer Purchases of Equity Securities
None.
Item 3. Defaults Upon Senior Securities
On July 28, 2025, the Company’s Board of Directors approved the temporary suspension of the Company’s quarterly cash dividends on its 9% Series A Cumulative Nonconvertible Preferred Stock, 8% Series B Cumulative Convertible Preferred Stock, and 11% Series C Cumulative Convertible Preferred Stock commencing with the October 2025 dividend. As of the date of this March 31, 2026 Quarterly Report on Form 10-Q/A, an aggregate of $1,156,058 in dividends had accrued.
Item 4. Mine Safety Disclosures
Not applicable.
Item 9B. Other Information
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ITEM 6. EXHIBITS
(a)Exhibits.
| Exhibit Number | Exhibit Name | |||||||
| *3.1 | ||||||||
| *3.2 | ||||||||
| *3.3 | ||||||||
| *3.4 | ||||||||
| *3.5 | ||||||||
| *3.6 | ||||||||
| *4.1 | ||||||||
| *4.2 | ||||||||
| *4.3 | ||||||||
| *4.4 | ||||||||
| *10.1 | ||||||||
| *10.2 | ||||||||
| *10.3 | ||||||||
| *10.4 | ||||||||
| 31.1 | ||||||||
| 31.2 | ||||||||
| 32.1 | ||||||||
| 32.2 | ||||||||
| 101 | Financial information from the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2026, formatted in iXBRL interactive data files pursuant to Rule 405 of Regulation S-T: (i) Condensed Consolidated Balance Sheets; (ii) Condensed Consolidated Statements of Income; (iii) Condensed Consolidated Statements of Comprehensive Income; (iv) Condensed Consolidated Statements of Shareholders’ Equity; (v) Condensed Consolidated Statements of Cash Flows; and (vi) Notes to the Condensed Consolidated Financial Statements – filed herewith. | |||||||
| 104 | ||||||||
•Incorporated by reference
65
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
BAYFIRST FINANCIAL CORP. | ||||||||
| Date: | August 12, 2026 | |||||||
| By: | /s/ Robin L. Oliver | |||||||
| Robin L. Oliver | ||||||||
| Chief Operating Officer (Principal Executive Officer) | ||||||||
| Date: | August 12, 2026 | |||||||
| By: | /s/ Scott J. McKim | |||||||
| Scott J. McKim | ||||||||
| Chief Financial Officer (Principal Financial Officer\Principal Accounting Officer) | ||||||||
66
CERTIFICATIONS REQUIRED BY
RULE 13a-14(a) OR RULE 15d-14(a)
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Robin L. Oliver, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q/A (the “Report”) of BayFirst Financial Corp., Inc. (the “Registrant”);
2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;
3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this Report;
4. The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13(a)-15(f) and 15(d)-15(f)) for the Registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared;
b) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and
c) Disclosed in this Report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
d) Disclosed in this Report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
5. The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
BAYFIRST FINANCIAL CORP.
Date: August 12, 2026
By: /s/ Robin L. Oliver
Robin L.Oliver
Chief Operating Officer
(principal executive officer)
CERTIFICATIONS REQUIRED BY
RULE 13a-14(a) OR RULE 15d-14(a)
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Scott J. McKim, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q/A (the “Report”) of BayFirst Financial Corp., Inc. (the “Registrant”);
2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;
3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this Report;
4. The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13(a)-15(f) and 15(d)-15(f)) for the Registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared;
b) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and
c) Disclosed in this Report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
d) Disclosed in this Report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
5. The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
BAYFIRST FINANCIAL CORP.
Date: August 12, 2026
By: /s/ Scott J. McKim
Scott J. McKim
Chief Financial Officer
(principal financial officer)
CERTIFICATIONS PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Robin L. Oliver, Chief Operating Officer of BayFirst Financial Corp. (the “Company”) certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
1)The Quarterly Report on Form 10-Q/A of the Company for the quarter period ended March 31, 2026 (the “Report”) fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
BAYFIRST FINANCIAL CORP.
Date: August 12, 2026
By: /s/ Robin L. Oliver
Robin L. Oliver
Chief Operating Officer
(principal executive officer)
CERTIFICATIONS PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Scott J. McKim, Chief Financial Officer of BayFirst Financial Corp. (the “Company”) certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
1) The Quarterly Report on Form 10-Q/A of the Company for the quarter period ended March 31, 2026 (the “Report”) fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
BAYFIRST FINANCIAL CORP.
Date: August 12, 2026
By: /s/ Scott J. McKim
Scott J. McKim
Chief Financial Officer
(principal financial officer)