BayFirst Financial Corp.

BayFirst Financial Corp. (the "Company" or "BayFirst") operates as a bank holding company through its wholly owned subsidiary, BayFirst National Bank (the "Bank"), serving consumers and small businesses primarily in the Tampa Bay/Sarasota region of Florida. The Bank converted its charter to a national banking association in 2022 and operates from its main office and eleven additional banking centers in the Tampa Bay/Sarasota area. The Company's primary source of income is from the Bank, which focuses on providing personalized relationships and flexibility to its target customer segments.

The Bank's core business model revolves around community banking services, offering specialized business and personal checking accounts, internet banking, online bill payment, lock box services, remote capture and deposit, cash management, wire transfers, safety deposit boxes, courier services, retail investment services, and ACH originations. Deposit products include interest-bearing and noninterest-bearing checking accounts, MMDAs, savings accounts, certificates of deposit, and IRAs. Lending products encompass commercial, consumer, and real estate loans, with a focus on commercial real estate mortgages, construction and development loans, working capital loans, and business expansion loans for businesses and professionals. The Bank also has a healthcare banking solution and a minority lending program. While the nationwide SBA 7(a) lending division was discontinued in Q3 2025, the Bank continues to offer USDA loans and SBA 504 loans through its community banking centers.

The Company's product and service lines are primarily categorized into Community Banking and Government Guaranteed Lending. The Community Banking division offers a comprehensive suite of deposit and loan products to consumers and small to medium-sized businesses in its local Florida markets. The Government Guaranteed Lending division, following the discontinuation of SBA 7(a) lending, now focuses on USDA B&I and SBA 504 loans, which are offered through the community banking centers. The USDA B&I loans are guaranteed up to 80% ¹ by the USDA, incentivizing lending to rural businesses. The Residential Mortgage Division, which previously operated nationwide, was discontinued in Q3 2022 and reclassified as a discontinued operation. The Bank continues to offer fixed and variable rate home mortgages for purchase and refinance of residential properties through its community banking centers.

For the year ended December 31, 2025, BayFirst reported a net loss of $22.9 million ², a significant decrease from net income of $12.6 million ³ in the prior year. Diluted EPS was $(5.93) ⁴ for 2025, down from $2.62 ⁵ in 2024. Total assets as of December 31, 2025, were $1.30 billion ⁶, with total loans held for investment of $963.9 million ⁷. Total deposits stood at $1.18 billion ⁸, and total shareholders' equity was $87.6 million ⁹. The allowance for credit losses on loans was $21.996 million ¹⁰. The Company had $1.593 million ¹¹ in notes payable and $5.962 million ¹² in subordinated notes. Free cash flow is not explicitly provided, but net cash provided by operating activities was $285.295 million ¹³ for 2025.

Comparing 2025 to 2024, total revenue, as represented by total interest income plus total noninterest income, decreased from $143.279 million ¹⁴ to $104.190 million ¹⁵. Net interest income increased by $7.759 million ¹⁶ to $45.785 million ¹⁷ in 2025 from $38.026 million ¹⁸ in 2024, with the net interest margin expanding to 3.75% ¹⁹ from 3.45% ²⁰. However, noninterest income saw a substantial decrease of $42.073 million ²¹ to $18.396 million ²² in 2025 from $60.469 million ²³ in 2024, primarily due to a $11.649 million ²⁴ gain on sale of premises and equipment in 2024 that did not recur, a $16.532 million ²⁵ decrease in gain on sale of government guaranteed loans, and a $10.918 million ²⁶ decrease in government guaranteed loan fair value gains. The provision for credit losses increased by $9.860 million ²⁷ to $24.586 million ²⁸ in 2025 from $14.726 million ²⁹ in 2024. Noninterest expense increased by $3.643 million ³⁰ to $70.425 million ³¹ in 2025 from $66.782 million ³².

Significant operational developments during 2025 included the discontinuation of the nationwide SBA 7(a) lending business in the third quarter, which involved the sale of a portion of its SBA 7(a) loan portfolio and engaging Banesco USA as subservicer for the remaining SBA 7(a) loans. This strategic review aimed at reducing expenses and derisking the Bank's balance sheet. The Company also incurred restructure charges of $7.283 million ³³ related to this exit, including $3.719 million ³⁴ for employee compensation and benefits, $2.864 million ³⁵ for asset impairment, $435 thousand ³⁶ for transaction deal costs, and $265 thousand ³⁷ for miscellaneous charges. Staff was reduced by 52% ³⁸ over the calendar year. The ESOP was terminated on September 30, 2025, with remaining shares returned to the Company and outstanding loans forgiven. The Board of Directors suspended payments of dividends to common and preferred shareholders in July 2025.

The filing does not provide specific forward-looking revenue, margin, or EPS guidance for the upcoming period.

The Company's growth strategy is supported by its investment in information technology systems and staff, which are expected to enhance capabilities for new products, improve customer experience, increase profitability through efficiencies, maintain cybersecurity, and provide scalability for future growth. The Company utilizes nationally recognized software vendors and their cloud/hosted models to outsource data processing, with internal network and e-mail systems administered by a managed service provider specializing in financial institutions. The production infrastructure is maintained in a data center facility near Tampa, Florida, with power and connectivity redundancy and a cloud-based disaster recovery environment. The scalability of this infrastructure is intended to support the Bank's growth strategy.

The Company anticipates that its liquidity needs, including contractual commitments, can be met by currently available liquid assets and cash flows. In the event of unforeseen demand or commitments, the Company has access to borrowing capacity with the FHLB, up to $187.142 million ³⁹ as of December 31, 2025, and the FRB, up to $32.124 million ⁴⁰ as of December 31, 2025, 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. Additionally, the Company has the ability to obtain non-brokered wholesale deposits as another source of liquidity.

The Company expects to remain an "emerging growth company" through December 31, 2026 ⁴¹, and has elected to take advantage of the extended transition period for complying with new or revised financial accounting standards. This means the Company will adopt new or revised accounting standards at the time private companies do, which may make its financial statements not comparable with those of public companies that are not emerging growth companies or have opted out of the extended transition period.

The Company faces numerous material risks, including the potential need for additional capital in the future, which may not be available on acceptable terms or at all, potentially leading to regulatory enforcement actions, inability to resume dividend payments or stock repurchases, and hindered growth. Liquidity risk is significant, as actions by the Federal Home Loan Bank of Atlanta or the Board of Governors of the Federal Reserve System could reduce borrowing capacity, and the Company may struggle to attract deposits at competitive rates, potentially increasing funding costs. Interest rate fluctuations pose a substantial risk to profitability, as the Company's net interest income is highly sensitive to changes in market interest rates, and an asset-sensitive position means declining rates could reduce net interest income. Economic and political conditions, both local and national, including inflation, recession, unemployment, and geopolitical events, could adversely affect deposit levels, loan demand, borrower repayment ability, and collateral values. Specifically, a Federal government shutdown could temporarily halt USDA government guaranteed loan originations and sales, decreasing fee and interest income. Changes in laws or regulations governing USDA government guaranteed lending activities could impact profitability. The Florida property insurance market crisis, characterized by significantly higher premiums or inability to secure insurance, may adversely affect real estate sales and values, loan collateral, and portfolio performance. Cybersecurity threats are constantly evolving, and a failure or breach of computer systems could disrupt business, lead to confidential information disclosure, and result in significant financial and legal exposure. The Company has pledged 100% ⁴² of the Bank's capital stock to secure a term loan with a balance of $1.6 million ⁴³ as of December 31, 2025, maturing on March 10, 2029 ⁴⁴, and failure to repay could result in foreclosure and loss of the Bank.

Management's message to shareholders emphasizes a commitment to navigating challenges and adapting strategic priorities. The Company undertook a comprehensive strategic review in 2025, leading to the discontinuation of the nationwide SBA 7(a) lending business to reduce expenses and derisk the Bank's balance sheet. This involved a significant staff reduction of 52% ⁴⁵ over the calendar year and incurring restructure charges of $7.283 million ⁴⁶. A key theme is the focus on community banking services in the Tampa Bay/Sarasota region and continued offering of USDA and SBA 504 loans through these centers. Management also highlighted the temporary suspension of common and preferred stock dividends since July 2025, with no current plans to resume payments, indicating a focus on capital preservation and addressing financial performance. The Company's strategic priorities include maintaining an adequate capital base, managing interest rate risk through its asset-liability structure, and making significant investments in information technology systems to support future growth and enhance customer experience.