10q10k10q10k.net

What changed in BayFirst Financial Corp.'s 10-K — 2024 vs 2025

vs

Paragraph-level year-over-year comparison of BayFirst Financial Corp.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+220 added−263 removedSource: 10-K (2026-03-27) vs 10-K (2025-03-25)

Top changes in BayFirst Financial Corp.'s 2025 10-K

220 paragraphs added · 263 removed · 187 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

47 edited+7 added−20 removed125 unchanged
Biggest changeBank loans are subject to federal laws applicable to credit transactions, such as the: • Federal Truth-In-Lending Act , which governs disclosures of credit terms to consumer borrowers; • Community Reinvestment Act , which requires financial institutions to meet their obligations to provide for the total credit needs of the communities they serve, including investing their assets in loans to low and moderate-income borrowers; • Home Mortgage Disclosure Act requiring financial institutions to provide information to enable public officials to determine whether a financial institution is fulfilling its obligations to meet the housing needs of the community it serves; • Equal Credit Opportunity Act prohibiting discrimination on the basis of race, creed, or other prohibitive factors in extending credit; • Real Estate Settlement Procedures Act , which requires lenders to disclose certain information regarding the nature and cost of real estate settlements, and prohibits certain lending practices, as well as limits escrow account amounts in real estate transactions; • Fair Credit Reporting Act governing the collection of consumer debts by collection agencies; and • The rules and regulations of various federal agencies charged with the responsibility of implementing such federal laws. 14 Table of Contents Bank operations are also subject to the: • Gramm-Leach-Bliley Act of 1999 , which contains privacy provisions that requires the Bank to maintain privacy policies intended to safeguard consumer financial information, to disclose these policies to the customers, and allow customers to “opt out” of having their financial service providers disclose their confidential financial information to nonaffiliated third parties, subject to certain exceptions; • Right to Financial Privacy Act , which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records; and • Electronic Funds Transfer Act and Regulation E , which govern automatic deposits to, and withdrawals from, deposit accounts and customers’ rights and liabilities arising from the use of debit cards, automated teller machines, and other electronic banking services.
Biggest changeBank loans are subject to federal laws applicable to credit transactions, such as the: • Federal Truth-In-Lending Act , which governs disclosures of credit terms to consumer borrowers; • Community Reinvestment Act , which requires financial institutions to meet their obligations to provide for the total credit needs of the communities they serve, including investing their assets in loans to low and moderate-income borrowers; • Home Mortgage Disclosure Act requiring financial institutions to provide information to enable public officials to determine whether a financial institution is fulfilling its obligations to meet the housing needs of the community it serves; • Equal Credit Opportunity Act prohibiting discrimination on the basis of race, creed, or other prohibitive factors in extending credit; • Real Estate Settlement Procedures Act , which requires lenders to disclose certain information regarding the nature and cost of real estate settlements, and prohibits certain lending practices, as well as limits escrow account amounts in real estate transactions; • Fair Credit Reporting Act governing the collection of consumer debts by collection agencies; and 13 Table of Contents • The rules and regulations of various federal agencies charged with the responsibility of implementing such federal laws.
There can be no assurance that the United States Congress, the Florida Legislature, or the applicable bank regulatory agencies will not enact legislation or promulgate regulations that may further increase competitive pressures on the Bank. Lending Philosophy and Credit Risk Management Historically, the Company believes they have made sound, high-quality loans while recognizing that lending involves a degree of risk.
There can be no assurance that the United States Congress, the Florida Legislature, or the applicable bank regulatory agencies will not enact legislation or promulgate regulations that may further increase competitive pressures on the Bank. Lending Philosophy and Credit Risk Management Historically, the Bank believes they have made sound, high-quality loans while recognizing that lending involves a degree of risk.
One of the greatest engagement and communication tools is the “What’s Next” call where ALL employees are invited to a weekly video conference where ideas are exchanged, updates are provided, and business and individual recognitions are communicated.
One of the greatest engagement and communication tools is the “What’s Next” call where ALL employees are invited to a bi-weekly video conference where ideas are exchanged, updates are provided, and business and individual recognitions are communicated.
This inclusive culture enhances its workforce, expands the markets and fosters a culture of belonging for its employees, customers and communities in which the Bank serves. As of December 31, 2024,the Bank’s employee base was comprised of individuals from all walks of life, genders, ethnicities, races, ages and differing economic and social backgrounds.
This inclusive culture enhances its workforce, expands the markets and fosters a culture of belonging for its employees, customers and communities in which the Bank serves. As of December 31, 2025, the Bank’s employee base was comprised of individuals from all walks of life, genders, ethnicities, races, ages and differing economic and social backgrounds.
The Federal Reserve may impose civil money penalties for activities conducted by a bank holding company, its nonbanking 10 Table of Contents subsidiaries, and officials of either on a knowing and reckless basis, if those activities caused a substantial loss to a depository institution. The penalties can be as high as $1.0 million for each day the activity continues.
The Federal Reserve may impose civil money penalties for activities conducted by a bank holding company, its nonbanking subsidiaries, and officials of either on a knowing and reckless basis, if those activities caused a substantial loss to a depository institution. The penalties can be as high as $1.0 million for each day the activity continues.
BayFirst focuses its government guaranteed and commercial lending divisions on providing the customer quick turnaround, competitive rates, and an easy application process. The Bank offers personal lines of credit, auto, boat, and recreational vehicle loans, residential mortgages, and home equity lines of credit. The Bank has been particularly successful in 3 Table of Contents penetrating the small business community.
BayFirst focuses its government guaranteed and commercial lending divisions on providing the customer quick turnaround, competitive rates, and an easy application process. The Bank offers personal lines of credit, auto, boat, and recreational vehicle loans, residential mortgages, and home equity lines of credit. The Bank has been particularly successful in penetrating the small business community.
Tier 2 Capital includes subordinated debt and preferred stock not included in Additional Tier 1 Capital, total capital minority interests not included in Tier 1, and ACL not exceeding 1.25% percent of risk-weighted assets, less applicable regulatory adjustments and deductions.
Tier 2 Capital includes subordinated notes and preferred stock not included in Additional Tier 1 Capital, total capital minority interests not included in Tier 1, and ACL not exceeding 1.25% percent of risk-weighted assets, less applicable regulatory adjustments and deductions.
Further, federal bank regulatory authorities have additional discretion to require a bank holding company to divest itself of any bank or nonbank subsidiary if the agency determines that divestiture may aid the depository institution’s financial condition. The Dodd-Frank Act codified the Federal Reserve’s policy on serving as a source of financial strength.
Further, federal bank regulatory authorities have additional discretion to require a bank holding company to divest itself of any bank or nonbank subsidiary if the agency determines that 9 Table of Contents divestiture may aid the depository institution’s financial condition. The Dodd-Frank Act codified the Federal Reserve’s policy on serving as a source of financial strength.
Total Rewards The Bank’s competitive compensation and benefits package helps attract and retain top talent throughout the U.S. and demonstrates its belief that engaged and satisfied employees directly correlate to engaged and satisfied customers, generating long-term value for the Company’s stakeholders. The Bank’s goal is to provide the most competitive compensation and benefit plans possible.
Total Rewards The Bank’s competitive compensation and benefits package helps attract and retain top talent and demonstrates its belief that engaged and satisfied employees directly correlate to engaged and satisfied customers, generating long-term value for the Company’s stakeholders. The Bank’s goal is to provide the most competitive compensation and benefit plans possible.
Insurance of deposits may be terminated by the FDIC upon a finding that the institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by a bank’s federal regulatory agency.
Deposit insurance may be terminated by the FDIC upon a finding that the institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by a bank’s federal regulatory agency.
Anti-tying Restrictions Bank holding companies and affiliates are prohibited from tying the provision of services, such as extensions of credit, to other services offered by a holding company or its affiliates. Capital Adequacy Requirements Banks are subject to regulatory capital requirements imposed by the Federal Reserve and the FDIC.
Anti-tying Restrictions Bank holding companies and affiliates are prohibited from tying the provision of services, such as extensions of credit, to other services offered by a holding company or its affiliates. 10 Table of Contents Capital Adequacy Requirements Banks are subject to regulatory capital requirements imposed by the Federal Reserve and the FDIC.
The BHCA generally requires every bank holding company to obtain approval from the Federal Reserve before: 9 Table of Contents • acquiring all or substantially all of the assets of a bank; • acquiring direct or indirect ownership or control of 5% or more of the voting shares of any bank or bank holding company; or • merging or consolidating with another bank holding company.
The BHCA generally requires every bank holding company to obtain approval from the Federal Reserve before: • acquiring all or substantially all of the assets of a bank; • acquiring direct or indirect ownership or control of 5% or more of the voting shares of any bank or bank holding company; or • merging or consolidating with another bank holding company.
These competitors include: 4 Table of Contents • national, super-regional, and regional financial institutions that have well-established branches and significant market share in the communities the Bank serves; • non-bank government guaranteed lenders; • finance companies, investment banking and brokerage firms, and insurance companies that offer bank-like products; • credit unions, which can offer highly competitive rates on loans and deposits because they receive tax advantages not available to commercial banks; • other community banks that compete with the Bank for clients desiring a high level of service; and • technology-based financial institutions, including large national, super-regional, and regional banks offering online deposit, bill payment and mortgage loan application services.
These competitors include: • national, super-regional, and regional financial institutions that have well-established branches and significant market share in the communities the Bank serves; • finance companies, investment banking and brokerage firms, and insurance companies that offer bank-like products; • credit unions, which can offer highly competitive rates on loans and deposits because they receive tax advantages not available to commercial banks; • other community banks that compete with the Bank for clients desiring a high level of service; and • technology-based financial institutions, including large national, super-regional, and regional banks offering online deposit, bill payment and mortgage loan application services.
Failure to meet these capital requirements could subject the bank to prompt corrective action provisions of the FDIA, which may include filing with the appropriate bank 12 Table of Contents regulatory authorities a plan describing the means and a schedule for achieving the minimum capital requirements.
Failure to meet these capital requirements could subject the bank to prompt corrective action provisions of the FDIA, which may include filing with the appropriate bank regulatory authorities a plan describing the means and a schedule for achieving the minimum capital requirements.
These applicable rules generally require a sponsor of this type of transaction to retain an economic interest equal to at least 5% percent of the aggregate credit risk of the assets collateralizing an issuance. 15 Table of Contents • Expanded FDIC resolution authority.
These applicable rules generally require a sponsor of this type of transaction to retain an economic interest equal to at least 5% percent of the aggregate credit risk of the assets collateralizing an issuance. • Expanded FDIC resolution authority.
Failing to have adequate cybersecurity safeguards in place, in accordance with AIO and other applicable regulations and laws, can result in supervisory criticism, monetary penalties and reputational harm. 7 Table of Contents The Federal Reserve, OCC, and FDIC adopted regulations for computer-security incident notification requirements for banking organizations and their bank service providers.
Failing to have adequate cybersecurity safeguards in place, in accordance with AIO and other applicable regulations and laws, can result in supervisory criticism, monetary penalties and reputational harm. The Federal Reserve, OCC, and FDIC adopted regulations for computer-security incident notification requirements for banking organizations and their bank service providers.
The extent of these powers depends upon whether the institution in question is considered “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” or “critically undercapitalized.” Generally, as an institution is deemed to be less well capitalized, the scope and severity of the agencies’ powers increase, ultimately permitting the agency to appoint a receiver for the institution.
The extent of these powers depends upon whether the institution in question is considered “well capitalized,” “adequately capitalized,” 11 Table of Contents “undercapitalized,” “significantly undercapitalized,” or “critically undercapitalized.” Generally, as an institution is deemed to be less than well capitalized, the scope and severity of the agencies’ powers increase, ultimately permitting the agency to appoint a receiver for the institution.
Any change in applicable laws or regulations may have a material adverse effect on the business. BayFirst Financial Corp. BayFirst is a bank holding company within the meaning of the Bank Holding Company Act of 1956, as amended.
Any change in applicable laws or regulations may have a material adverse effect on the business. 8 Table of Contents BayFirst Financial Corp. BayFirst is a bank holding company within the meaning of the Bank Holding Company Act of 1956, as amended.
Other federal and state laws and regulations impact the ability to share certain information with affiliates and non-affiliates for marketing and/or non-marketing purposes, or to contact clients with marketing offers. Current federal law also requires financial institutions to implement a comprehensive information security program.
Other federal and state laws and regulations impact the ability to share certain information with affiliates 6 Table of Contents and non-affiliates for marketing and/or non-marketing purposes, or to contact clients with marketing offers. Current federal law also requires financial institutions to implement a comprehensive information security program.
Commercial loan decisions are documented as to the borrower’s business, loan purpose, the evaluation of the repayment source and associated risks, the evaluation of collateral, loan covenants, loan 5 Table of Contents monitoring requirements, and the risk rating rationale.
Commercial loan decisions are documented as to the borrower’s business, loan purpose, the evaluation of the repayment source and associated risks, the evaluation of collateral, loan covenants, loan monitoring requirements, and the risk rating rationale.
As of December 31, 2024, BayFirst had 299 employees (298 full-time and 1 part-time) and recognizes that they are its greatest asset. Providing a work environment that is inclusive, transparent, and comfortable for all is foundational to the Bank’s core beliefs. The Company is an organization that values open communication and collaboration in a professional and challenging, yet informal atmosphere.
As of December 31, 2025, BayFirst had 145 employees (144 full-time and 1 part-time) and recognizes that they are its greatest asset. Providing a work environment that is inclusive, transparent, and comfortable for all is foundational to the Bank’s core beliefs. The Company is an organization that values open communication and collaboration in a professional and challenging, yet informal atmosphere.
In addition, the Dodd-Frank Act generally requires lenders or securitizers to retain an economic interest in the credit risk relating to loans the lender sells or mortgage and other asset-backed securities that the securitizer issues.
In addition, the Dodd-Frank Act generally requires lenders or securitizers to retain an economic interest in the credit risk relating to loans the lender sells or mortgage and other asset-backed securities 14 Table of Contents that the securitizer issues.
In addition, recent legislative and regulatory changes and technological advances have enabled customers to conduct banking activities without regard to geographic barriers, through internet and telephone-based banking and similar services.
In addition, recent legislative and regulatory changes and technological advances have enabled customers to conduct banking activities without regard to 4 Table of Contents geographic barriers, through internet and telephone-based banking and similar services.
Females represented 59% of the Company’s employee base while minorities represented 32% of its population. The officer base was 50% female and 19% minority. BayFirst has an active employee council with the purpose of ensuring BayFirst reflects the values, respects the viewpoints, and acknowledges the differences of not only the community members it serves, but also the people it employs.
Females represented 60% of the Company’s employee base while minorities represented 34% of its population. The officer base was 57% female and 16% minority. BayFirst has an active employee council with the purpose of ensuring BayFirst reflects the values, respects the viewpoints, and acknowledges the differences of not only the community members it serves, but also the people it employs.
BayFirst provides both paid maternity and paternity leave through the parental leave program. In addition, the Banks’ no-cost, salary continuation policy is administered in-house and provides up to 12 weeks of medical disability leave at 100% pay. The Bank recognizes the burdensome expense of dependent care and provides a company match to employees’ dependent care FSA accounts.
In addition, the Banks’ no-cost, salary continuation policy is administered in-house and provides up to 12 weeks of medical disability leave at 100% pay. The Bank recognizes the burdensome expense of dependent care and provides a company match to employees’ dependent care FSA accounts.
Capital is then classified into three categories, Common Equity Tier 1, Additional Tier 1, and Tier 2. CET1 Capital is the sum of common stock instruments and related surplus net of treasury stock, retained earnings, AOCI and qualifying minority interests, less applicable regulatory adjustments and deductions that include AOCI (if an irrevocable option to neutralize AOCI is exercised).
CET1 Capital is the sum of common stock instruments and related surplus net of treasury stock, retained earnings, AOCI and qualifying minority interests, less applicable regulatory adjustments and deductions that include AOCI (if an irrevocable option to neutralize AOCI is exercised).
As of December 31, 2024, BayFirst had consolidated total assets of $1.29 billion, total loans held for investment of $1.07 billion, total deposits of $1.14 billion, and total shareholders’ equity of $110.9 million. BayFirst’s corporate office is located at the BayFirst Executive Center, 700 Central Avenue, St. Petersburg, Florida 33701.
As of December 31, 2025, BayFirst had consolidated total assets of $1.30 billion, total loans held for investment of $963.9 million, total deposits of $1.18 billion, and total shareholders’ equity of $87.6 million. BayFirst’s corporate office is located at the BayFirst Executive Center, 700 Central Avenue, St. Petersburg, Florida 33701.
The Bank offers these programs to nurture the professional development of the Bank’s colleagues and ease the financial burden associated with continuing education. 8 Table of Contents Corporate Social Responsibility The Bank’s cultural foundation of being current and comfortable for all drives inclusion throughout the entire organization.
The Bank offers both a tuition reimbursement and student loan assistance program to all eligible employees. The Bank offers these programs to nurture the professional development of the Bank’s colleagues and ease the financial burden associated with continuing education. Corporate Social Responsibility The Bank’s cultural foundation of being current and comfortable for all drives inclusion throughout the entire organization.
Training and Development As part of the commitment to being a top employer in the industry and the premier community bank of Tampa Bay, BayFirst offers a growing internal Learning and Development Center where employees not only learn compliance and regulation, but also have the opportunity to strengthen core competencies for career growth and personal development.
The Bank provides paid volunteer time off to encourage all employees to give back to their community, while building engagement and pride in the organization. 7 Table of Contents Training and Development As part of the commitment to being a top employer in the industry and the premier community bank of Tampa Bay, BayFirst offers a growing internal Learning and Development Center where employees not only learn compliance and regulation, but also have the opportunity to strengthen core competencies for career growth and personal development.
Instead, a bank holding company with less than $3 billion generally applies the risk-based capital and leverage capital guidelines on a bank only basis and must only meet a debt-to-equity ratio at the holding company level.
Instead, a bank holding company with less than $3 billion in assets generally applies the risk-based capital and leverage capital guidelines on a bank only basis and must only meet a debt-to-equity ratio at the holding company level. The Federal Reserve risk-based capital guidelines apply directly to banks, regardless of whether they are subsidiaries of a bank holding company.
Additionally, the FBCA provides that the Company may only pay dividends if the dividend payment would not render BayFirst insolvent, or cause BayFirst to be unable to meet obligations as they come due. These provisions could have the effect of limiting the ability to pay dividends. Banking regulations limit the amount of dividends that may be paid.
Additionally, the FBCA provides that the Company may only pay dividends if the dividend payment would not render BayFirst insolvent, or cause BayFirst to be unable to meet obligations as they come due.
Portfolio loans are primarily underwritten by the Bank on the borrowers’ financial strength and cash flow, with conservative loan-to-value requirements. Consumer loans include loans to individuals for automobiles, boats, and other major personal, family, or household purposes. They are underwritten on the credit quality of the individual borrower and may be secured or unsecured.
Consumer loans include loans to individuals for automobiles, boats, and other major personal, family, or household purposes. They are underwritten on the credit quality of the individual borrower and may be secured or unsecured.
The Board of Directors, both directly and through their committees, are responsible for overseeing the risk management processes, including quarterly enterprise risk management assessments and annual assessments in the following areas: (i) cyber; (ii) BSA/anti-money laundering; and (iii) third-party risk, with each of the committees of the Board of Directors assuming a different and important role in overseeing the management of the risks. 6 Table of Contents The Audit and Risk Management Committees of the Board of Directors are responsible for overseeing risks associated with financial matters (particularly financial reporting, accounting practices and policies, disclosure controls and procedures, and internal control over financial reporting) as well as other enterprise risks.
The Board of Directors, both directly and through their committees, are responsible for overseeing the risk management processes, including quarterly enterprise risk management assessments and annual assessments in the following areas: (i) cyber; (ii) BSA/anti-money laundering; and (iii) third-party risk, with each of the committees of the Board of Directors assuming a different and important role in overseeing the management of the risks.
All government guaranteed loans regardless of size which require projection-based underwriting or have other complex characteristics, such as business acquisition financing, are underwritten subject to SBA or USDA B&I guidelines and contain a thorough underwriting analysis based on the credit quality of any guarantor as well as the historical and projected debt service coverage.
All government guaranteed loans regardless of size which require projection-based underwriting or have other complex characteristics, such as business acquisition financing, are underwritten subject to SBA or USDA B&I guidelines and contain a thorough underwriting analysis based on the credit quality of any guarantor as well as the historical and projected debt service coverage. 5 Table of Contents Risk Management The Company believes that effective risk management and control processes are critical to safety and soundness of the Bank, the ability to predict and manage the challenges that they face, and, ultimately, the long-term corporate success.
BayFirst offers a wide range of health and welfare plans designed to fit its diverse population. The Bank provides 100% employer-paid premiums for medical, dental, vision, disability, and life insurance for the employee. The Bank offers an employee wellness program designed to support the whole employee which encompasses physical, mental, social, and financial wellness.
The Bank provides 100% employer-paid premiums for medical, dental, vision, disability, and life insurance for the employee. The Bank offers an employee wellness program designed to support the whole employee which encompasses physical, mental, social, and financial wellness. BayFirst provides both paid maternity and paternity leave through the parental leave program.
As of December 31, 2024, the Community Banking Division operated from twelve banking centers in the Tampa Bay area: five in Pinellas County, two in Hillsborough County, one in Manatee County, and four in Sarasota County. Government Guaranteed Lending The Bank originates government guaranteed loans on a nationwide basis, with a particular emphasis on SBA 7(a) loans.
As of December 31, 2025, the Community Banking Division operated from twelve banking centers in the Tampa Bay area: five in Pinellas County, two in Hillsborough County, one in Manatee County, and four in Sarasota County. 3 Table of Contents Government Guaranteed Lending In the fourth quarter of 2025, management discontinued its nationwide SBA 7(a) lending business.
BayFirst maintains a living minimum wage of $20 per hour. The Bank has a generous 401(k) plan, plus a discretionary profit-sharing contribution to its Employee Stock Ownership Plan. Most employees are shareholders through their participation in the ESOP. Additionally, employees have the opportunity to grow their ownership through a discounted non-qualified Employee Stock Purchase Plan.
BayFirst maintains a living minimum wage of $20 per hour. The Bank has a generous 401(k) plan. Additionally, employees have the opportunity to grow their ownership in the Company through a discounted non-qualified Employee Stock Purchase Plan. BayFirst offers a wide range of health and welfare plans designed to fit its diverse population.
The Bank utilizes a broker arrangement to originate residential mortgage loans to be sold in the secondary market. These residential mortgage loans are underwritten to meet secondary market standards so that loans can be sold into the secondary market. Some residential mortgage loans are held for the Bank’s portfolio.
The Bank utilizes a broker arrangement to originate residential mortgage loans to be sold in the secondary market. These residential mortgage loans are underwritten to meet secondary market standards. Some residential mortgage loans are held for the Bank’s portfolio. Portfolio loans are primarily underwritten by the Bank on the borrowers’ financial strength and cash flow, with conservative loan-to-value requirements.
To derive the risk included in the balance sheet, risk weights from 0% to 250% are applied to different balance sheet and off-balance sheet assets, primarily based on the relative credit risk of the counterparty. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.
Under the guidelines, capital is compared to the relative risk related to the balance sheet. To derive the risk included in the balance sheet, risk weights from 0% to 250% are applied to different balance sheet and off-balance sheet assets, primarily based on the relative credit risk of the counterparty.
The Bank continues to offer fixed and variable rate home mortgages for the purchase and refinance of residential properties through the community banking centers . Competition All phases of the Bank’s operations are highly competitive. Many commercial banks and other competitors have assets, capital, lending limits, and name recognition that are materially larger than the Bank’s.
Competition All phases of the Bank’s operations are highly competitive. Many commercial banks and other competitors have assets, capital, lending limits, and name recognition that are materially larger than the Bank’s. The Bank competes with other financial service providers for loans and deposits.
The Federal Reserve risk-based capital guidelines apply directly to banks, regardless of whether they are subsidiaries of a bank holding 11 Table of Contents company. Both agencies’ requirements, which are substantially similar, establish minimum capital ratios in relation to assets, both on an aggregate basis as adjusted for credit risks and off-balance sheet exposures.
Both agencies’ requirements, which are substantially similar, establish minimum capital ratios in relation to assets, both on an aggregate basis as adjusted for credit risks and off-balance sheet exposures. The risk weights assigned to assets are based primarily on credit risks. Depending upon the riskiness of a particular asset, it is assigned to a risk category.
The Bank does not engage in any foreign business activities. The Bank offers its products and services through its Community Banking Division and its government guaranteed lending division. The Bank is a government guaranteed lender with specific expertise in originating SBA 7(a) loans and USDA loans throughout the nation.
The Bank does not engage in any foreign business activities. The Bank offers its products and services through its community banking centers. In the third quarter of 2025, the Bank discontinued its SBA 7(a) lending division but continues to provide USDA loans and SBA 404 loans through the community banking centers.
Prior to those decisions, the Residential Mortgage Division operated from the banking centers in the Tampa Bay/Sarasota area and loan production offices nationwide. As a result of the discontinuance, the nationwide residential line of business was reclassified as a discontinued operation and reported in the financial statements as such.
Residential Mortgage Division In the third quarter of 2022, management decided to discontinue its nationwide residential lending business. Prior to those decisions, the Residential Mortgage Division operated from the banking centers in the Tampa Bay/Sarasota area and loan production offices nationwide.
BayFirst’s primary source of income is from the Bank, which serves a broad spectrum of consumers and small businesses in the Tampa Bay/Sarasota region and is supported by a national government guaranteed lend ing business.
BayFirst’s primary source of income is from the Bank, which serves a broad spectrum of consumers and small businesses in the Tampa Bay/Sarasota region. BayFirst strives to be a progressive institution in its products and services, technology, design, and social responsibility.
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. 13 Table of Contents 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.
These provisions could have the effect of limiting the ability to pay dividends. 12 Table of Contents 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.
The Bank originates loans through the SBA 7(a) program, and, to a lesser extent, through the USDA’s B&I program. Occasionally, the Bank originates loans through the SBA’s 504 loan program, International Trade Loan program, and Express Loan program. The Bank originates two distinct types of government guaranteed loans: complex loans and non-complex loans.
The Bank originates loans through the USDA’s B&I program. The Bank also originates loans through the SBA’s 504 loan program.
The federal government guarantees 75% to 90% of SBA loan balances and up to 80% of USDA B&I loan balances as an incentive for financial institutions to make loans to small businesses. Eligible uses of SBA and USDA B&I loans are for working capital, equipment financing, debt refinancing, purchase of inventory, new construction, building acquisitions, business acquisitions, and startup expenses.
The Bank continues to offer SBA 504 and USDA loans through the community banking centers . The USDA guarantees up to 80% of USDA B&I loan balances as an incentive for financial institutions to make loans to businesses located in rural areas. The loans can be priced competitively relative to conventional financing.
Removed
BayFirst utilizes this national business line to provide financial support for the delivery and expansion of traditional banking services, and to serve as a specialized lead product to introduce the Bank to new customers in the Tampa Bay/Sarasota region. BayFirst strives to be a progressive institution in its products and services, technology, design, and social responsibility.
Added
As a result of the discontinuance, the nationwide residential line of business was reclassified as a discontinued operation and reported in the financial statements as such. The Bank continues to offer fixed and variable rate home mortgages for the purchase and refinance of residential properties through the community banking centers .
Removed
The Bank also has an advanced technology platform for our SBA 7(a) Small Loan Program that enables the Bank to utilize and support technology-enabled banking products and services as well as various financial technology applications.
Added
The Audit and Risk Management Committees of the Board of Directors are responsible for overseeing risks associated with financial matters (particularly financial reporting, accounting practices and policies, disclosure controls and procedures, and internal control over financial reporting) as well as other enterprise risks.
Removed
The Bank participates in interbank credit arrangements to permit the Bank to take part in corporate or other business entity loans for amounts which are greater than its lending limits.
Added
The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Capital is then classified into three categories, Common Equity Tier 1, Additional Tier 1, and Tier 2.
Removed
Government guaranteed loans are designed to assist small businesses in obtaining financing. The Bank’s loan origination efforts are targeted to a broad range of industries and geographies, with a focus on building relationships with borrowers. This diversification is intended to mitigate the Bank’s credit risk.
Added
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. In July 2025, the Board of Directors suspended payments of dividends to common and preferred shareholders.
Removed
Deposit products are also marketed to borrowers, particularly those borrowers in the Bank's primary market area . The Bank originates loans through two distinct channels. One is its team of government guaranteed lenders, known as the Government Guaranteed Lending Team. The other is for smaller loans that are processed through financial technology platforms, collectively known and branded as FlashCap.
Added
Bank operations are also subject to the: • Gramm-Leach-Bliley Act of 1999 , which contains privacy provisions that requires the Bank to maintain privacy policies intended to safeguard consumer financial information, to disclose these policies to the customers, and allow customers to “opt out” of having their financial service providers disclose their confidential financial information to nonaffiliated third parties, subject to certain exceptions; • Right to Financial Privacy Act , which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records; and • Electronic Funds Transfer Act and Regulation E , which govern automatic deposits to, and withdrawals from, deposit accounts and customers’ rights and liabilities arising from the use of debit cards, automated teller machines, and other electronic banking services.
Removed
The Bank’s Government Guaranteed Lending Team makes government guaranteed loans throughout the U.S., with a particular emphasis on business acquisition financing. Currently, the Government Guaranteed Lending Team is concentrated in the Tampa Bay/Sarasota area with an expanding national sales team. FlashCap employs an internal sales team and uses referral partners and financial technology companies to originate government guaranteed loans nationwide.
Added
FDICIA In November 2025, the FDIC adjusted several asset-based regulatory thresholds governing annual independent audit and reporting requirements for insured depository institutions.
Removed
Underwriting, quality control, and technology are centralized and scalable for potential increases in loan volume. During the second quarter of 2022, the Company launched our Bolt loan program, an SBA 7(a) loan product designed to expeditiously provide working capital loans of $150 thousand or less to businesses throughout the country.
Added
Under the FDIC’s final rule, the asset threshold for requiring an annual independent audit of the institution has been raised from $500 million in total assets to $1 billion, the threshold for requiring management reports on internal controls has increased from $1 billion to $5 billion, and the threshold for audit committee independence requirements was increased from $3 billion to $5 billion in total assets.
Removed
The Bank has originated 5,726 Bolt loans totaling $741.5 million through December 31, 2024. The Bank also originates USDA B&I loans for businesses located in qualifying areas.
Removed
The Bank has an advanced technology platform for our SBA 7(a) Small Loan Program that enables the Bank to utilize and support technology-enabled banking products and services as well as various financial technology applications.
Removed
The program maximum limit for SBA loans is $5.0 million, and the program maximum limit for USDA loans is $25.0 million. Both can be priced competitively relative to conventional financing. The Bank manages its government guaranteed lending program through a staff experienced in business development, loan documentation and monitoring, and accounting.
Removed
Emphasis is placed on proper loan documentation to ensure full guarantee performance in the event of payment defaults. The revenue generated from the Bank’s government guaranteed loan originations is primarily derived from three sources: interest income, loan servicing, and premiums from the sale of loans.
Removed
The Bank may elect to hold the government guaranteed portion of a loan on its balance sheet to increase interest income. Alternatively, the Bank may sell that portion to realize a premium on the sale.
Removed
In addition, the Bank may also sell a portion of the unguaranteed balance of certain government guaranteed loans, depending on a loan’s terms, the offer price, its liquidity and capital positions, and the perceived credit risk. Residential Mortgage Division In the third quarter of 2022, management decided to discontinue its nationwide residential lending business.
Removed
The Bank competes with other financial service providers for loans and deposits.
Removed
The non-complex loans are originated pursuant to the SBA 7(a) Small Loan Program up to $350,000 and are underwritten through a streamlined underwriting and packaging process. Although the SBA 7(a) Small Loan Program permits broader underwriting and loan purpose parameters, non-complex loans are limited to those underwritten via historical cash flow and exclude start-up and business acquisition financing.
Removed
Within the FlashCap program, we offer our Bolt loans up to $150,000 for working capital purposes. Bolt loans are guaranteed up to 85% by the SBA and are primarily underwritten based upon predictive scores and character analysis of the business and its principals.
Removed
Risk Management The Company believes that effective risk management and control processes are critical to safety and soundness of the Bank, the ability to predict and manage the challenges that they face, and, ultimately, the long-term corporate success.
Removed
The Bank provides paid volunteer time off to encourage all employees to give back to their community, while building engagement and pride in the organization.
Removed
The Bank offers both a tuition reimbursement and student loan assistance program to all eligible employees.
Removed
The risk weights assigned to assets are based primarily on credit risks. Depending upon the riskiness of a particular asset, it is assigned to a risk category. Under the guidelines, capital is compared to the relative risk related to the balance sheet.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

36 edited+3 added−26 removed143 unchanged
Biggest changeHolders of shares of our capital stock are only entitled to receive such dividends as our Board may declare out of funds legally available for such payments. Although we have recently declared cash dividends on our common stock, we are not required to do so and may reduce or eliminate our common stock dividend in the future.
Biggest changeWe are restricted by law and government policy in our ability to pay dividends to our shareholders. Holders of shares of our capital stock are only entitled to receive such dividends as our Board may declare out of funds legally available for such payments.
If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and the price of our common stock may be more volatile.
If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and the price of our common stock may be more volatile.
Any such incident could put confidential customer information at risk, which may result in significant liability to us, subject us to additional regulatory scrutiny, damage our reputation, result in a loss of customers, cause us to incur significant expense to remediate any damage and inhibit current and potential customers from using our online banking services, any or all of which could have a material adverse effect on our results of operations and financial condition. 20 Table of Contents A failure or breach, including cyberattacks, of our computer systems or other technologies could disrupt our business, result in the disclosure of confidential information, and create significant financial and legal exposure.
Any such incident could put confidential customer information at risk, which may result in significant liability to us, subject us to additional regulatory scrutiny, damage our reputation, result in a loss of customers, cause us to incur significant expense to remediate any damage and inhibit current and potential customers from using our online banking services, any or all of which could have a material adverse effect on our results of operations and financial condition. 18 Table of Contents A failure or breach, including cyberattacks, of our computer systems or other technologies could disrupt our business, result in the disclosure of confidential information, and create significant financial and legal exposure.
At December 31, 2024, our one-year interest rate sensitivity position was asset sensitive, such that a gradual increase in interest rates during the next twelve months would have a positive impact on our net interest income. Our results of operations are affected by changes in interest rates and our ability to manage this risk.
At December 31, 2025, our one-year interest rate sensitivity position was asset sensitive, such that a gradual increase in interest rates during the next twelve months would have a positive impact on our net interest income. Our results of operations are affected by changes in interest rates and our ability to manage this risk.
The local economy is heavily influenced by tourism, real estate, and other service-based industries. Factors that could affect the local economy include declines in tourism, higher energy costs, reduced consumer or corporate spending, natural disasters or adverse weather and a significant decline in real 21 Table of Contents estate values.
The local economy is heavily influenced by tourism, real estate, and other service-based industries. Factors that could affect the local economy include declines in tourism, higher energy costs, reduced consumer or corporate spending, natural disasters or adverse weather and a significant decline in real 19 Table of Contents estate values.
Furthermore, the terms of our subordinated debt and the preferred stock will prohibit us from declaring or paying any dividends on any junior series of our capital stock, including our common stock, or from repurchasing, redeeming or acquiring such junior stock, unless we have declared and paid full dividends on our outstanding preferred stock for the most recently completed dividend period.
Furthermore, the terms of our subordinated notes and the preferred stock will prohibit us from declaring or paying any dividends on any junior series of our capital stock, including our common stock, or from repurchasing, redeeming or acquiring such junior stock, unless we have declared and paid full dividends on our outstanding preferred stock for the most recently completed dividend period.
Additionally, our Articles of Incorporation provide that our Board of Directors may authorize and issue additional series of preferred stock without shareholder 27 Table of Contents approval. Any preferred shares issued in the future may further restrict our ability to declare or pay dividends on any junior stock, including the common stock.
Additionally, our Articles of Incorporation provide that our Board of Directors may authorize and issue additional series of preferred stock without shareholder approval. Any preferred shares issued in the future may further restrict our ability to declare or pay dividends on any junior 25 Table of Contents stock, including the common stock.
If any of these valuations are inaccurate, our consolidated financial statements may not reflect the correct value of our foreclosed upon real estate, and our credit loss reserve may not 23 Table of Contents accurately reflect loan impairments. Inaccurate valuations of properties could materially adversely affect our business, results of operations and financial condition.
If any of these valuations are inaccurate, our consolidated financial statements may not reflect the correct value of our foreclosed upon real estate, and our credit loss reserve may not 21 Table of Contents accurately reflect loan impairments. Inaccurate valuations of properties could materially adversely affect our business, results of operations and financial condition.
A shutdown of the Federal government would likely result in us being temporarily unable to make SBA and other government guaranteed loans. If the Federal government experiences a shutdown, it is likely that the SBA, and other agencies which guaranty some of the loans we make, will be unable to process those loans and sell those loans.
A shutdown of the Federal government would likely result in us being temporarily unable to make USDA government guaranteed loans. If the Federal government experiences a shutdown, it is likely that the USDA, and other agencies which guaranty some of the loans we make, will be unable to process those loans and sell those loans.
Our business and results of operations may be adversely affected by these and other negative effects of future hurricanes, tropical storms, 22 Table of Contents related flooding and wind damage and other similar weather events.
Our business and results of operations may be adversely affected by these and other negative effects of future hurricanes, tropical storms, 20 Table of Contents related flooding and wind damage and other similar weather events.
If significant inflation continues, our business could also be negatively affected by, among other things, increased loan default and losses. If we experience such effects of inflation, our results of operations could suffer. An economic downturn could have a material adverse effect on our capital, financial condition, results of operations, and future growth.
If significant inflation continues, our business could 22 Table of Contents also be negatively affected by, among other things, increased loan default and losses. If we experience such effects of inflation, our results of operations could suffer. An economic downturn could have a material adverse effect on our capital, financial condition, results of operations, and future growth.
In addition, the mix of assets and liabilities could change as varying levels of market interest rates might present our customer base with more attractive options. Loss of deposits or a change in deposit mix could increase our funding costs and adversely affect our performance. Deposits are a low cost and stable source of funding.
In addition, the mix of assets and liabilities could change as varying levels of market interest rates might present our customer base with more attractive options. 16 Table of Contents Loss of deposits or a change in deposit mix could increase our funding costs and adversely affect our performance. Deposits are a low cost and stable source of funding.
Risk Factor Summary Our business is subject to uncertainties and risks and our risk factors can be broadly summarized by the following: • Our ability to grow the size and geographic scope of our loan generation, loan sale, and deposit gathering business, and the infrastructure needed to support it; • Possible loan defaults, devaluation of collateral, adverse political, environmental, or economic events, and competition; • Interest rates and available sources of liquidity; • Our ability to raise capital and the effects of doing so on our shareholders; • The potential that we are subject to fraud, incorrect judgments, or other bad acts of third parties; • Laws, regulations, rules, and standards to which we are subject and the government agencies with which we interact; 16 Table of Contents • Recruitment, retention, development, performance, and potential bad acts of our key executives and other employees, as well as transactions with them and our directors; • Dividend and other restrictions placed on us by our outstanding preferred stock, restrictions that may be imposed by future issuances of preferred stock, and our pledging of the stock in the Bank to secure a loan; • Rapidly developing technology; • Estimates used in certain valuations, including our allowance for credit losses; and • Features of our stock, such as liquidity, dilution, the lack of preemptive rights, our SEC reporting status, and the concentration of ownership among our insiders.
Risk Factor Summary Our business is subject to uncertainties and risks and our risk factors can be broadly summarized by the following: • Our ability to grow our loan portfolio, deposits gathering business, and the infrastructure needed to support it; 15 Table of Contents • Possible loan defaults, devaluation of collateral, adverse political, environmental, or economic events, and competition; • Interest rates and available sources of liquidity; • Our ability to raise capital and the effects of doing so on our shareholders; • The potential that we are subject to fraud, incorrect judgments, or other bad acts of third parties; • Laws, regulations, rules, and standards to which we are subject and the government agencies with which we interact; • Recruitment, retention, development, performance, and potential bad acts of our key executives and other employees, as well as transactions with them and our directors; • Dividend and other restrictions placed on us by our outstanding preferred stock, restrictions that may be imposed by future issuances of preferred stock, and our pledging of the stock in the Bank to secure a loan; • Rapidly developing technology; • Estimates used in certain valuations, including our allowance for credit losses; and • Features of our stock, such as liquidity, dilution, the lack of preemptive rights, our SEC reporting status, and the concentration of ownership among our insiders.
We cannot predict the effects of future 24 Table of Contents legislation and new or revised regulations on us, our competitors, or on the financial markets and economy, although they may significantly increase costs and impede the efficiency of our internal business processes. Inflation could negatively impact our business and our profitability.
We cannot predict the effects of future legislation and new or revised regulations on us, our competitors, or on the financial markets and economy, although they may significantly increase costs and impede the efficiency of our internal business processes. Inflation could negatively impact our business and our profitability.
Future changes in financial accounting and reporting standards could require us to apply a new or revised standard retroactively, which could result in a material adverse effect on our financial condition or could even require us to restate prior period financial statements. 25 Table of Contents We face risks related to our operational, technological, and organizational infrastructure.
Future changes in financial accounting and reporting standards could require us to apply a new or revised standard retroactively, which could result in a material adverse effect on our financial condition or could even require us to restate prior period financial statements. We face risks related to our operational, technological, and organizational infrastructure.
In addition, we are heavily dependent on the strength and capability of our technology systems, which we use both to interface with our customers and to manage our internal financial and other systems.
In addition, we are heavily dependent on the strength and capability of our technology systems, which we use both to interface with our customers and to manage our internal financial and 23 Table of Contents other systems.
Our Board of Directors owns a significant percentage of our shares and will be able to make decisions to which you may be opposed. As of December 31, 2024, BayFirst’s directors and named executive officers as a group owned approximately 14.43% of our outstanding common stock.
Our Board of Directors owns a significant percentage of our shares and will be able to make decisions to which you may be opposed. As of December 31, 2025, BayFirst’s directors and named executive officers as a group owned approximately 14.90% of our outstanding common stock.
Our profitability depends to a large extent on the Bank’s net interest income, which is the difference between income on interest-earning assets, such as loans and investment securities, and expenses on interest-bearing liabilities, such as deposits and borrowings.
Changes in interest rates affect our profitability and assets. Our profitability depends to a large extent on the Bank’s net interest income, which is the difference between income on interest-earning assets, such as loans and investment securities, and expenses on interest-bearing liabilities, such as deposits and borrowings.
The Bank’s access to liquidity sources could be affected by unrealized losses if investments must be sold at a loss, tangible capital ratios continue to decline from an increase in unrealized losses or realized credit losses, the FHLB or other sources reduce capacity or bank regulators impose restrictions on the Bank such as a limit on interest rates it may pay on deposits or its ability to access brokered deposits.
Unrealized losses do not affect regulatory capital ratios. 17 Table of Contents The Bank’s access to liquidity sources could be affected by unrealized losses if investments must be sold at a loss, tangible capital ratios continue to decline from an increase in unrealized losses or realized credit losses, the FHLB or other sources reduce capacity or bank regulators impose restrictions on the Bank such as a limit on interest rates it may pay on deposits or its ability to access brokered deposits.
We have pledged 100% of the outstanding shares of the Bank’s capital stock to secure a term loan with another financial institution with a balance of $1.9 million as of December 31, 2024.
We have pledged 100% of the outstanding shares of the Bank’s capital stock to secure a term loan with another financial institution with a balance of $1.6 million as of December 31, 2025.
The terms of those shares currently require us to pay quarterly dividends of $385 thousand (subject to increase if we do not timely redeem them) and prohibit us from paying common stock dividends if we are delinquent in payment of preferred stock dividends.
The terms of those shares entitle the holders to quarterly dividends of $385 thousand (subject to increase if we do not timely redeem them) and prohibit us from paying common stock dividends if we are delinquent in payment of preferred stock dividends.
In addition, the directors and named executive officers have stock options to acquire shares of common stock, which, if fully exercised within sixty days of December 31, 2024, would have resulted in them owning approximately 18.62% of our outstanding common stock.
In addition, the directors and named executive officers have stock options to acquire shares of common stock, which, if fully exercised within sixty days of December 31, 2025, would have resulted in them owning approximately 19.12% of our outstanding common stock.
Our SBA and other government lending programs and our mortgage lending activities are subject to laws and regulations administered by government agencies such as the SBA, the United States Department of Housing and Urban Development, and the United States Department of Agriculture.
Our USDA government lending programs are subject to laws and regulations administered by government agencies such as the United States Department of Housing and Urban Development and the United States Department of Agriculture.
If equity research analysts do not publish research or reports about our business, or if they do publish such reports but issue unfavorable commentary or downgrade our common stock, the price and trading volume of our common stock could decline.
Failure to use such funds effectively might harm your investment. 24 Table of Contents If equity research analysts do not publish research or reports about our business, or if they do publish such reports but issue unfavorable commentary or downgrade our common stock, the price and trading volume of our common stock could decline.
Any delay in closing these types of loans, or losing the opportunity to originate or sell them, could result in decreased fee and interest income, which would adversely affect our financial performance.
Any delay in closing these types of loans, or losing the opportunity to originate or sell them, could result in decreased fee and interest income, which would adversely affect our financial performance. Changes in the laws or regulations governing our USDA government guaranteed lending activities may adversely affect our ability to operate them profitably.
Our management may determine that it is in the best 26 Table of Contents interest of the Company or the Bank to apply our capital in a manner that is inconsistent with a shareholder’s wishes. Failure to use such funds effectively might harm your investment.
Our management may determine that it is in the best interest of the Company or the Bank to apply our capital in a manner that is inconsistent with a shareholder’s wishes.
Additionally, our Articles of Incorporation provide that our Board of Directors may authorize additional series of preferred stock without shareholder approval. Accordingly, the issuance of new shares of preferred stock may adversely affect the rights of the holders of shares of our common stock. BayFirst has outstanding debt and either BayFirst or the Bank may incur additional debt.
Additionally, our Articles of Incorporation provide that our Board of Directors may authorize additional series of preferred stock without shareholder approval. Accordingly, the issuance of new shares of preferred stock may adversely affect the rights of the holders of shares of our common stock. Since July 1, 2025, the Board of Directors has not declared preferred dividends for payment.
If our financial performance is unsatisfactory or if negative economic events or disruptions in the capital markets occur, it may not be possible for us to find sources of sufficient capital for our business operations. If we are unable to obtain future financing, we may not have the resources available to fund our planned growth.
If our financial performance is unsatisfactory, if financial market participants have an unfavorable view of the Company and its performance, or if negative economic events or disruptions in the capital markets occur, it may not be possible for us to find sources of sufficient capital for our business operations.
We may need additional capital in the future, but such capital may not be available when needed. We may need to obtain additional debt or equity financing to fund future growth and meet our capital needs. We cannot guarantee that such financing will be available to us on acceptable terms or at all.
Risk Factors Related to Our Business We may need additional capital in the future, but such capital may not be available when needed. We may need to obtain additional debt or equity financing to meet our capital needs, absorb losses, fund future growth, or meet the requirements of our regulators.
Liquidity may also be adversely impacted by bank supervisory and regulatory authorities mandating changes in the composition of our balance sheet to asset classes that are less liquid. Changes in interest rates affect our profitability and assets.
Our inability to raise funds through traditional deposits, brokered deposits, borrowings, the sale of investment securities or loans, and other sources could negatively affect our liquidity or result in increased funding costs. Liquidity may also be adversely impacted by bank supervisory and regulatory authorities mandating changes in the composition of our balance sheet to asset classes that are less liquid.
The increase or decrease in unrealized losses is reflected in Accumulated Other Comprehensive Income (“AOCI”) on the balance sheet and increases or reduces book capital, and therefore, the tangible common equity ratio. Unrealized losses do not affect regulatory capital ratios.
As market interest rates increase, the unrealized losses on the Bank’s investment portfolio also increase. As market interest rates decrease, the unrealized losses on the Bank’s investment portfolio also decrease. The increase or decrease in unrealized losses is reflected in AOCI on the balance sheet and increases or reduces book capital, and therefore, the tangible common equity ratio.
Either or both of BayFirst or the Bank may issue additional debt. Payments due on such debt will further reduce the amount of money available to BayFirst to pay dividends on its common stock. We are restricted by law and government policy in our ability to pay dividends to our shareholders.
BayFirst’s obligation to make payments on its debt will reduce the amount of cash available to BayFirst to pay dividends on its common stock. BayFirst may issue additional debt. Payments due on such debt will further reduce the amount of money available to BayFirst to pay dividends on its common stock.
BayFirst has outstanding debt and either BayFirst or the Bank may incur additional debt. At December 31, 2024, BayFirst had a $1.93 million term loan and $5.96 million in subordinated debt. BayFirst’s obligation to make payments on its debt will reduce the amount of cash available to BayFirst to pay dividends on its common stock.
BayFirst has outstanding debt and either BayFirst or the Bank may incur additional debt. BayFirst has outstanding debt and either BayFirst may incur additional debt. At December 31, 2025, BayFirst had a $1.59 million term loan and $5.96 million in subordinated notes.
Risk Factors Related to Our Business Liquidity risk could impair our ability to fund operations and jeopardize our financial condition. Liquidity is essential to our business. Actions by the Federal Home Loan Bank of Atlanta or the Board of Governors of the Federal Reserve System may reduce our borrowing capacity.
Liquidity is essential to our business. Actions by the Federal Home Loan Bank of Atlanta or the Board of Governors of the Federal Reserve System may reduce our borrowing capacity. Additionally, we may not be able to attract deposits at competitive rates.
Our success depends to a significant extent upon local and national economic and political conditions, as well as governmental fiscal and monetary policies.
Changes in economic and political conditions could adversely affect our earnings through declines in deposits, loan demand, the ability of our customers to repay loans and the value of the collateral securing our loans. Our success depends to a significant extent upon local and national economic and political conditions, as well as governmental fiscal and monetary policies.
We are also subject to state and federal statutory and regulatory limitations on our ability to pay dividends on our capital stock.
Since July of 2025, the Board of Directors has not declared dividends for common shareholders and preferred shareholders and has no plans to resume the declaration or payment of dividends. We are also subject to state and federal statutory and regulatory limitations on our ability to pay dividends on our capital stock.
Removed
Additionally, we may not be able to attract deposits at competitive rates. Our inability to raise funds through traditional deposits, brokered deposits, borrowings, the sale of investment securities or loans, and other sources could negatively affect our liquidity or result in increased funding costs.
Added
Our ability to maintain capital at required levels depends on many factors, including our financial performance, asset quality, loan growth, dividend policy, and the overall condition of the capital markets. We cannot guarantee that any needed financing will be available to us on acceptable terms or at all.
Removed
We may be unable to continue to produce the volume of loans necessary to support our SBA and other government guaranteed lending business. Our business strategy places a significant emphasis on SBA and other government guaranteed lending. In order to successfully implement this strategy, we must originate and fund a substantial dollar amount of loans.
Added
If we are unable to obtain future financing, we may become subject to regulatory enforcement actions, not be able to resume paying dividends or repurchasing stock, not be able to grow, and experience other adverse effects to our business, financial condition, and results of operations. Liquidity risk could impair our ability to fund operations and jeopardize our financial condition.
Removed
To do so, we must identify qualified and interested borrowers and have sufficient capital and liquidity to support and fund such loans.
Added
Historically, the Board of Directors has declared cash dividends, we are not required to do so and may reduce or eliminate our common stock dividend in the future. This could adversely affect the market price of our common stock.
Removed
If we are not successful in implementing this strategy, our income and results of operations may be adversely affected. 17 Table of Contents We depend on the sale of both the guaranteed and unguaranteed portions of our government guaranteed loans, but also face risks relating to the retained portions of unguaranteed loans.
Removed
Our strategy historically has been, and may continue to be, to sell both the guaranteed balances of SBA and other government guaranteed loans, as well as a percentage of the unguaranteed portions of such loans, within legally allowable limits.
Removed
A material portion of our net income and profitability depended, and may continue to depend, on gains on sales of the guaranteed portions of the government guaranteed loans that we originate.
Removed
We also from time to time pursue the sales of unguaranteed portions of such loans, which provide us with additional liquidity and capital capacity to permit us to make additional loans.
Removed
Our ability to sell both the guaranteed and unguaranteed portions of these loans is dependent upon our ability to identify purchasers with the demand and capacity to buy them, the attractiveness of the loans, our underwriting quality, and other factors.
Removed
Our ability to continue to make new loans and hold them in our loan portfolio will be limited by our current capital and liquidity positions. To the extent we retain the unguaranteed portion of these loans in our portfolio, we may be required to make significant provisions to our ACL.
Removed
Our loan origination processes present heightened opportunities for borrower or referral fraud. The loans we originate through our technology partners and referral sources are obtained primarily through an online application process. We do not generally meet with the borrowers in person. Our referral sources also are involved in assisting the borrowers with completing their loan applications.
Removed
Therefore, it is difficult for us to definitively ascertain or confirm a borrower’s identity, structure, creditworthiness, or veracity in completing the loan application process. If a borrower or a referral source intentionally, or unintentionally, provides us with incorrect information that we rely on in underwriting a loan, we could be subject to increased credit risk for that loan.
Removed
Such increased risk could result in increased loan losses or heightened provisions to our ACL, either of which would adversely affect our credit quality and net income. We may also become subject to heightened regulatory scrutiny for making loans to such borrowers and may be required to dedicate time and other resources to addressing regulatory concerns.
Removed
Our loan referral sources operate independently from us and may take actions for which we may be held responsible. Our referral sources for SBA and other government guaranteed loans operate independently from us and have the initial interactions with many loan applicants and borrowers.
Removed
As part of those interactions, our referral sources may take actions which violate laws, regulations, or our policies. These may include, among other things, charging impermissible fees, failing to provide or properly complete required documentation or disclosures, making false or misleading statements, or encouraging an applicant to make misrepresentations.
Removed
In certain instances, the Bank may be held responsible by an applicant or a government agency for such actions. If that were to happen, the Bank may be required to pay restitution or fines, be subject to regulatory enforcement actions, or lose certain statuses with the SBA or other government agencies.
Removed
We rely heavily on technology partners and other referral sources in our government guaranteed loan origination process. As part of our government guaranteed lending strategy, we use the services of technology partners and other referral sources. These arrangements allow us to originate loans throughout the U.S. via the internet. We do not have an exclusivity arrangement with any referral source.
Removed
Therefore, we cannot be assured that we will be able to originate and close or maintain any specific level of government guaranteed loans through such sources in the future. In addition, our technology partners are subject to online commerce risks generally, including hacking and use of the site by persons using fraudulent credentials.
Removed
Should we not continue to generate a substantial volume of loan business through our use of referral sources, or if they experience operational interruptions, or direct loans to other lenders, our government guaranteed lending may be materially reduced, which could reduce our net income and our asset growth.
Removed
Our operations are growing at a rapid pace and our training programs and operational protocols may lag behind our growth. Our branch network and government guaranteed lending operations are expanding at a rapid pace. As a result, we may not be able to provide comprehensive or timely training to staff.
Removed
We may also not develop appropriate operational protocols as we expand our products and services. If we fail to do so, our employees may not have a set of standards and expectations pursuant to which they perform their assigned duties.
Removed
If we are not able to fully and promptly provide training to our employees, or develop appropriate protocols, our employees may be susceptible to mistakes, fail to recognize fraud or other weaknesses in our operations, or fail to recognize or mitigate other risks. 18 Table of Contents Changes in economic and political conditions could adversely affect our earnings through declines in deposits, loan demand, the ability of our customers to repay loans and the value of the collateral securing our loans.
Removed
Changes in the laws or regulations governing our SBA and other government guaranteed lending activities and our mortgage lending business may adversely affect our ability to operate them profitably.
Removed
As market interest rates increase, the unrealized losses on the Bank’s investment portfolio also increase. As market interest rates decrease, the unrealized losses on the Bank’s investment portfolio also decrease.
Removed
We have expanded into new markets with which we have less familiarity with than our historic markets. 19 Table of Contents We intend to continue to expand the location and number of our Florida banking centers and the national scope of our SBA and USDA loan origination efforts when we identify attractive opportunities.
Removed
Our senior management and Board of Directors have less familiarity with out of state markets and may not fully understand the nuances of our new Florida markets. We are dependent on the expertise and actions of the bankers we have hired to be successful in these markets.
Removed
This could adversely affect the market price of our common stock.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

5 edited+2 added−1 removed5 unchanged
Biggest changeIn addition, targeted cybersecurity playbooks are maintained to respond to common threats, including malware, ransomware and denial of service attacks. • Security Awareness training to help employees understand their information protection and cybersecurity responsibilities, including targeted campaigns on phishing and other common social engineering techniques utilized by threat actors. • A third-party risk management program to classify suppliers according to risk and identify those that require enhanced cyber due diligence. • Annual independent third-party penetration tests, external vulnerability scans, assessments and audits of the Bank's Information Security Program elements.
Biggest changeThe IRP is tested at least annually and updated as required. • Security Awareness training to help employees understand their information protection and cybersecurity responsibilities, including targeted campaigns on phishing and other common social engineering techniques utilized by threat actors. • A third-party risk management program to classify suppliers according to risk and identify those that require enhanced cyber due diligence. • Annual independent third-party penetration tests, external vulnerability scans, assessments and audits of the Bank's Information Security Program elements.
Control coverage includes Board approved policies, layers of network security, encryption of data at rest and in transit, vulnerability scans of technology assets, logging and monitoring, identity and access management, secure coding, and email security. • Risk assessments are conducted to: (a) identify reasonably foreseeable internal and external threats that could result in unauthorized disclosure, misuse, alteration, or destruction of critical Bank systems and data, (b) determine the likelihood and potential impact of the threats, and (c) determine the sufficiency of controls and mitigating factors to reduce the risks identified. • A detailed Cyber Incident Response Plan which includes engagement of a third-party that specializes in cybersecurity for financial institutions to assist in incident response and recovery and communications with the Board, regulators, law enforcement and Federal and State Government offices, as required.
Control coverage includes Board approved policies, layers of network and cloud security, encryption of data at rest and in transit, vulnerability scans of technology assets, logging and monitoring, identity and access management, and email security. • Risk assessments are conducted to: (a) identify reasonably foreseeable internal and external threats that could result in unauthorized disclosure, misuse, alteration, or destruction of critical Bank systems and data, (b) determine the likelihood and potential impact of the threats, and (c) determine the sufficiency of controls and mitigating factors to reduce the risks identified. • A detailed Cyber Incident Response Plan (“IRP”) which includes engagement of a third-party that specializes in cybersecurity for financial institutions to assist in incident response and recovery and communications with the Board, regulators, law enforcement and Federal and State Government offices, as required.
The Company’s Board of Directors delegates oversight of the Bank's processes for identifying, assessing, and mitigating material risks, including cybersecurity risks, to the Board Audit and Risk Management Committee. Senior Leadership, including the CTO and CRO, manage third-party service providers and advisors to maintain and continuously enhance the Bank's Information Security Program.
The Company’s Board of Directors delegates oversight of the Bank's processes for identifying, assessing, and mitigating material risks, including cybersecurity risks, to the Board Risk Compliance Committee. Senior Leadership, including the CRO and the Director of Information Technology, manage third-party service providers and advisors to maintain and continuously enhance the Bank's Information Security Program.
“Risk Factors” for a discussion of cybersecurity risks. 29 Table of Contents
“Risk Factors” for a discussion of cybersecurity risks. 27 Table of Contents
The CTO, CRO, and the Bank's third-party virtual ISO regularly present to the Board Audit and Risk Management Committee on the state of cybersecurity at the Bank, including any business-impacting incidents and emerging industry risks.
The CRO, Director of Information Technology, and the Bank's third-party virtual ISO regularly present to the Board Risk Compliance Committee on the state of cybersecurity at the Bank, including any business-impacting incidents and emerging industry risks.
Removed
While the Bank has not experienced a business-impacting cyber incident to date, the Cyber Incident Response Plan is tested at least annually and updated as required so that personnel are prepared for an actual incident.
Added
In addition, targeted cybersecurity playbooks are maintained to respond to common threats, including malware, ransomware, and denial of service attacks.
Added
The Bank experienced two low-rated cyber incidents in the past year which did not have a material impact.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed2 unchanged
Biggest changeThere 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. It em 4. Mine Safety Disclosures Not applicable. 30 Table of Contents Part II
Biggest changeThere 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. It em 4. Mine Safety Disclosures Not applicable. 28 Table of Contents Part II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

1 edited+2 added−5 removed1 unchanged
Biggest changeItem 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information The common stock began trading on the Nasdaq under the symbol “BAFN” on November 30, 2021. Prior to that, the common stock was traded on the OTC Markets Group Inc. (OTCQX) under the symbol “FHBI”. Share Buyback Program.
Biggest changeItem 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information As of March 16, 2026, the Company had 533 shareholders of record. The common stock began trading on the Nasdaq under the symbol “BAFN” on November 30, 2021. Prior to that, the common stock was traded on the OTC Markets Group Inc.
Removed
The Inflation Reduction Act of 2022 created a new nondeductible 1% excise tax on repurchases of corporate stock by certain publicly traded corporations or their specified affiliates after December 31, 2022.
Added
(OTCQX) under the symbol “FHBI”. Any over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.
Removed
The tax is imposed on the fair value of the stock of a covered corporation that is repurchased in a given year, less the fair market value of any stock issued in that year. A “covered corporation” is any domestic corporation whose stock is traded on an established securities market, such as Nasdaq.
Added
There were 18,029 shares repurchased during the year ended December 31, 2025. On October 28, 2025, the Company’s Board of Directors terminated the stock repurchase program effective immediately. Item 6. {Reserved}
Removed
The excise tax applies to all of the stock of a covered corporation regardless of whether the corporation has profits or losses.
Removed
The act contains several exceptions to the excise tax, including, but not limited to, any repurchase of stock: in which the total value of the repurchased stock in a given year does not exceed $1,000,000; that is contributed to an employer sponsored retirement plan or other similar stock compensation plan; that is taxed as a dividend.
Removed
The impact of the Inflation Reduction Act of 2022 on our consolidated financial statements will be dependent on the extent of stock repurchases made in future periods. Item 6. {Reserved}

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

92 edited+18 added−24 removed45 unchanged
Biggest changeCONSOLIDATED BALANCE SHEETS (Dollars in thousands, except per share data) Selected Financial Data - Unaudited As of and for the Three Months Ended As of and for the Year Ended (Dollars in thousands, except for share data) 12/31/2024 9/30/2024 12/31/2023 12/31/2024 12/31/2023 Income Statement Data: Net interest income $ 10,653 $ 9,449 $ 8,877 $ 38,026 $ 36,431 Provision for credit losses 4,546 3,122 2,737 14,726 10,445 Noninterest income 22,276 12,272 14,691 60,469 49,755 Noninterest expense 15,335 17,064 18,466 66,782 67,707 Income tax expense 3,272 398 704 4,315 2,119 Net income from continuing operations 9,776 1,137 1,661 12,672 5,915 Net loss from discontinued operations — — (6) (69) (213) Net income 9,776 1,137 1,655 12,603 5,702 Preferred stock dividends 385 385 341 1,541 965 Net income available to common shareholders $ 9,391 $ 752 $ 1,314 $ 11,062 $ 4,737 Balance Sheet Data: Average loans HFI $ 1,077,504 $ 1,034,819 $ 913,039 $ 1,009,353 $ 845,193 Average loans HFI at amortized cost 1,003,867 948,528 825,196 928,814 770,793 Average total assets 1,273,296 1,228,040 1,108,550 1,201,820 1,058,124 Average common shareholders’ equity 87,961 86,381 82,574 86,174 80,718 Total loans HFI 1,066,559 1,042,445 915,726 1,066,559 915,726 Total loans HFI, excluding government guaranteed loan balances 917,075 885,444 698,106 917,075 698,106 Allowance for credit losses 15,512 14,186 13,497 15,512 13,497 Total assets 1,288,297 1,245,099 1,117,766 1,288,297 1,117,766 Total deposits 1,143,229 1,112,196 985,138 1,143,229 985,138 Common shareholders’ equity 94,869 86,242 84,656 94,869 84,656 Per Share Data: Basic earnings per common share $ 2.27 $ 0.18 $ 0.32 $ 2.68 $ 1.16 Diluted earnings per common share $ 2.11 $ 0.18 $ 0.32 $ 2.62 $ 1.12 Dividends per common share $ 0.08 $ 0.08 $ 0.08 $ 0.32 $ 0.32 Book value per common share $ 22.95 $ 20.86 $ 20.60 $ 22.95 $ 20.60 Tangible book value per common share (1) $ 22.95 $ 20.86 $ 20.60 $ 22.95 $ 20.60 Performance Ratios: Return on average assets (2) 3.07 % 0.37 % 0.60 % 1.05 % 0.54 % Return on average common equity (2) 42.71 % 3.48 % 6.37 % 12.84 % 5.87 % Net interest margin (2) 3.60 % 3.34 % 3.48 % 3.45 % 3.78 % Dividend payout ratio 3.52 % 43.98 % 25.03 % 11.96 % 27.70 % Asset Quality Data: Net charge-offs $ 3,369 $ 2,757 $ 2,612 $ 13,039 $ 8,987 Net charge-offs/average loans HFI at amortized cost (2) 1.34 % 1.16 % 1.27 % 1.40 % 1.17 % Nonperforming loans (3) $ 17,607 $ 15,489 $ 9,688 $ 17,607 $ 9,688 Nonperforming loans (excluding government guaranteed balance) (3) $ 13,570 $ 10,992 $ 8,264 $ 13,570 $ 8,264 Nonperforming loans/total loans HFI (3) 1.75 % 1.62 % 1.18 % 1.75 % 1.18 % 32 Table of Contents BAYFIRST FINANCIAL CORP.
Biggest changeSelected Financial Data - Unaudited As of and for the Three Months Ended As of and for the Year Ended (Dollars in thousands, except for share data) 12/31/2025 9/30/2025 12/31/2024 12/31/2025 12/31/2024 Income Statement Data: Net interest income $ 11,158 $ 11,280 $ 10,653 $ 45,785 $ 38,026 Provision for credit losses 2,007 10,915 4,546 24,586 14,726 Noninterest income (104) (1,046) 22,276 18,396 60,469 Noninterest expense 11,869 25,215 15,335 70,425 66,782 Income tax expense (benefit) (359) (6,994) 3,272 (7,893) 4,315 29 Table of Contents As of and for the Three Months Ended As of and for the Year Ended (Dollars in thousands, except for share data) 12/31/2025 9/30/2025 12/31/2024 12/31/2025 12/31/2024 Net income (loss) from continuing operations (2,463) (18,902) 9,776 (22,937) 12,672 Net loss from discontinued operations — — — — (69) Net income (loss) (2,463) (18,902) 9,776 (22,937) 12,603 Preferred stock dividends 385 385 385 1,541 1,541 Net income available to (loss attributable to) common shareholders $ (2,848) $ (19,287) $ 9,391 $ (24,478) $ 11,062 Balance Sheet Data: Average loans HFI $ 997,710 $ 1,134,911 $ 1,077,504 $ 1,085,260 $ 1,009,353 Average loans HFI at amortized cost 939,281 1,060,520 1,003,867 1,018,913 928,814 Average total assets 1,334,912 1,345,553 1,273,296 1,323,321 1,201,820 Average common shareholders’ equity 73,470 92,734 87,961 89,184 86,174 Government guaranteed loans HFS — 94,052 — — — Total loans HFI 963,894 998,683 1,066,559 963,894 1,066,559 Total loans HFI, excluding government guaranteed loan balances 893,765 923,390 917,075 893,765 917,075 Allowance for credit losses on loans 21,996 24,485 15,512 21,996 15,512 Total assets 1,300,258 1,345,978 1,288,297 1,300,258 1,288,297 Total deposits 1,183,938 1,171,457 1,143,229 1,183,938 985,138 Common shareholders’ equity 70,747 73,677 94,869 70,747 94,869 Per Share Data: Basic earnings (loss) per common share $ (0.69) $ (4.66) $ 2.27 $ (5.93) $ 2.68 Diluted earnings (loss) per common share $ (0.69) $ (4.66) $ 2.11 $ (5.93) $ 2.62 Dividends per common share $ — $ — $ 0.08 $ 0.16 $ 0.24 Book value per common share $ 17.22 $ 17.90 $ 22.95 $ 17.22 $ 22.95 Tangible book value per common share (1) $ 17.22 $ 17.90 $ 22.95 $ 17.22 $ 22.95 Performance Ratios: Return on average assets (2) (0.74) % (5.62) % 3.07 % (1.73) % 1.05 % Return on average common equity (2) (15.51) % (83.19) % 42.71 % (27.45) % 12.84 % Net interest margin (2) 3.58 % 3.61 % 3.60 % 3.75 % 3.45 % Asset Quality Data: Net charge-offs $ 4,558 $ 3,294 $ 3,369 $ 17,952 $ 13,039 Net charge-offs/average loans HFI at amortized cost (2) 1.94 % 1.24 % 1.34 % 1.76 % 1.40 % Nonperforming loans (3) $ 24,343 $ 24,687 $ 17,607 $ 24,343 $ 17,607 Nonperforming loans (excluding government guaranteed balance) (3) $ 16,271 $ 15,822 $ 13,570 $ 16,271 $ 13,570 Nonperforming loans/total loans HFI (3) 2.68 % 2.63 % 1.75 % 2.68 % 1.75 % Nonperforming loans (excluding gov’t guaranteed balance)/total loans HFI (3) 1.79 % 1.69 % 1.35 % 1.79 % 1.35 % ACL/Total loans HFI at amortized cost 2.42 % 2.61 % 1.54 % 2.42 % 1.54 % Other Data: Full-time equivalent employees 144 237 299 144 299 30 Table of Contents As of and for the Three Months Ended As of and for the Year Ended (Dollars in thousands, except for share data) 12/31/2025 9/30/2025 12/31/2024 12/31/2025 12/31/2024 Banking centers 12 12 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.
(2) Annualized (3) Excludes loans measured at fair value . `GAAP 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.
(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.
In addition to deposits, sources of funds available for lending and for other purposes include loan repayments and 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.
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.
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 Year Ended December 31, 2024 vs.
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 Year Ended December 31, 2025 vs.
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 49 Table of Contents commitment amounts do not necessarily represent future cash requirements. Management evaluates each customer’s credit worthiness on a case-by-case basis.
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.
In addition to this, t he Company uses reasonable and supportable forecasts that are developed with internal and external data. These 43 Table of Contents 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.
In addition to this, t he 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.
Deposit interest rates are set by management at least monthly or more often if conditions require it, based on a review of loan demand, recent 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.
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.
This evaluation is inherently subjective as it requires numerous estimates, including collateral values, and the amounts and timing of expected future cash flows. The Company’s ACL on loans is estimated using relevant information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts.
This evaluation is inherently subjective as it requires numerous estimates, including collateral values, and the amounts and timing of expected future cash flows. The Company’s ACL on loans is estimated using relevant information, from internal and external sources, 31 Table of Contents relating to past events, current conditions, and reasonable and supportable forecasts.
Management assesses capital adequacy against the risk inherent in the balance 48 Table of Contents 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.
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.
Item 7. 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 year ended December 31, 2024 and December 31, 2023 and financial condition as of December 31, 2024 and December 31, 2023.
Item 7. 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 year ended December 31, 2025 and December 31, 2024 and financial condition as of December 31, 2025 and December 31, 2024.
The following table provides information on the maturity distribution of the time deposits exceeding the FDIC insurance limit of $250 thousand as of December 31, 2024.
The following table provides information on the maturity distribution of the time deposits exceeding the FDIC insurance limit of $250 thousand as of December 31, 2025.
In the third quarter of 2022, management decided to discontinue the nationwide residential lending business. As a result of the 35 Table of Contents discontinuance, the nationwide residential mortgage line of business was reclassified as a discontinued operation and reported in the financial statements as such.
In the third quarter of 2022, management decided to discontinue the nationwide residential lending business. As a result of the discontinuance, the nationwide residential mortgage line of business was reclassified as a discontinued operation and reported in the financial statements as such.
The Bank’s internal policy limits the use of brokered deposits as a funding source to no more than 15% of total assets.
The Bank’s internal policy limits the use of brokered deposits as a funding source to no more than 20% of total assets.
Total loans HFI at December 31, 2024 and December 31, 2023 included government guaranteed loans 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 1.79% at December 31, 2024, compared to 2.03% at December 31, 2023.
Total loans HFI at December 31, 2025 and December 31, 2024 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 2.58% at December 31, 2025, compared to 1.79% at December 31, 2024.
The Debentures 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 debt agreements, the floating rates are based on a SOFR benchmark plus 3.78% per annum.
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.
At December 31, 2024, the most critical of these significant accounting policies in understanding the estimates and assumptions involved in preparing the consolidated financial statements were the 33 Table of Contents 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 below.
At December 31, 2025, the most critical of these significant accounting policies in understanding the estimates and assumptions involved in preparing the 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 below.
(3) Net interest margin represents net interest income divided by average total interest-earning assets. 37 Table of Contents 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.
(2) Net interest margin represents annualized net interest income divided by average total interest-earning assets. 34 Table of Contents 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.
The note matures on March 10, 2029 and the balance of the note was $1.9 million and $2.4 million at December 31, 2024 and December 31, 2023, 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.
The note matures on March 10, 2029 and the balance of the note was $1.6 million and $1.9 million at December 31, 2025 and December 31, 2024, 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.
Net interest margin decreased to 3.45% for the year ended December 31, 2024, compared to 3.78% for the year ended December 31, 2023 . 36 Table of Contents 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.
Net interest margin increased to 3.75% for the year ended December 31, 2025, compared to 3.45% for the year ended December 31, 2024 . 33 Table of Contents 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.
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 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; and other risks detailed from time to time in filings made by the Company with the SEC.
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.
The Bank has no concentration of credit in any industry that represents 10% or more of its loan portfolio. Additionally, the l oan portfolio is well-diversified across major loan types with a low concentration of non owner-occupied commercial real estate loans which makes up 7% of the total portfolio. The following table sets forth the composition of its loan portfolio.
The Bank has no concentration of credit in any industry that represents 10% or more of its loan portfolio. Additionally, the l oan portfolio is well-diversified across major loan types with a low concentration of non owner-occupied commercial real estate loans which makes up 9% of the total portfolio.
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. 31 Table of Contents BAYFIRST FINANCIAL CORP.
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.
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 December 31, 2024 and December 31, 2023. (Dollars in thousands) December 31, 2024 December 31, 2023 Investment securities available for sale: Asset-backed securities $ 4,990 $ 7,933 Mortgage-backed securities: U.S.
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 December 31, 2025 and December 31, 2024. (Dollars in thousands) December 31, 2025 December 31, 2024 Investment securities available for sale: Asset-backed securities $ 2,822 $ 4,990 Mortgage-backed securities: U.S.
The Company is dependent on noninterest income, which is derived primarily from net gain on the sales of the guaranteed portion of governm ent guaranteed loans. The largest expenses are interest on those deposits and borrowings, professional fees, loan origination expenses, and salaries and commissions plus related employee benefits.
The Company is dependent on noninterest income, which is derived from net gain on the sales of the guaranteed portion of governm ent 32 Table of Contents guaranteed loans and 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's ability to accept or renew brokered deposits is contingent upon the Bank maintaining a capital level of "well capitalized." At December 31, 2024 and December 31, 2023, the Company had $112.1 million and $30.0 million, respectively, of brokered deposits.
The Company's ability to accept or renew brokered deposits is contingent upon the Bank maintaining a capital level of "well capitalized." At December 31, 2025 and December 31, 2024, the Company had $195.5 million and $112.1 million, respectively, of brokered deposits.
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 consolidated financial statements.
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 consolidated financial statements.
The Company is dependent on noninterest income, which is derived primarily from 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.
Historically, the Company has been dependent on noninterest income, derived primarily from net gain on the sales of the guaranteed portion of government guaranteed loans and service fee income, as well as fair value adjustments for certain loans which management has elected the fair value option.
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) December 31, 2024 December 31, 2023 Unfunded loan commitments $ 21,174 $ 7,392 Unused lines of credit 199,411 178,440 Standby letters of credit 276 186 Total $ 220,861 $ 186,018 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.
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) December 31, 2025 December 31, 2024 Unfunded loan commitments $ 1,257 $ 21,174 Unused lines of credit 207,665 199,411 Standby letters of credit 1,161 276 Total $ 210,083 $ 220,861 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.
At December 31, 2023, the Company had $8.9 million in nonperforming assets, excluding government guaranteed loan balances, and the ACL represented 1.64% of total loans HFI at amortized cost. The increase in nonperforming assets was partially the result of a nonaccrual loan for $2.7 million that is fully secured and there was no ACL allocated.
At December 31, 2024, the Company had $15.2 million in nonperforming assets, excluding government guaranteed loan balances. The ACL represented 1.54% 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.
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 salaries and employee benefits, occupancy and equipment costs, and loan origination expenses as well as income taxes.
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.
The balance of Subordinated Debentures outstanding at the Company, net of offering costs, amounted to $6.0 million and $5.9 million at December 31, 2024 and December 31, 2023, respectively. The Company has a term note with quarterly principal and interest payments with interest at Prime (7.50% at December 31, 2024).
The balance of Subordinated Notes outstanding at the Company, net of offering costs, amounted to $6.0 million at December 31, 2025 and December 31, 2024. The Company has a term note with quarterly principal and interest payments with interest at Prime (6.75% at December 31, 2025).
As a one-bank holding company, the Company generates most of its revenue from interest on loans and gain on sale income derived from the sale of government guaranteed loans into the secondary market. The primary sources of funding for its loans are loan sales, loan payments, deposits, and borrowings.
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.
Government-sponsored enterprises 7,130 3,236 Collateralized mortgage obligations: U.S. Government-sponsored enterprises 15,286 17,098 Corporate bonds 8,885 11,308 Total investment securities available for sale $ 36,291 $ 39,575 The net unrealized loss on the investment securities AFS at December 31, 2024 and December 31, 2023, was $4.0 million.
Government-sponsored enterprises 4,899 7,130 Collateralized mortgage obligations: U.S. Government-sponsored enterprises 17,768 15,286 Corporate bonds 3,874 8,885 Total investment securities available for sale $ 29,363 $ 36,291 The net unrealized loss on the investment securities AFS at December 31, 2025 and December 31, 2024, was $2.6 million and $4.0 million , respectively .
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. Recent Developments Share Repurchase Program. The Company announced that its Board of Directors adopted a share repurchase program.
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.
The following presents these non-GAAP financial measures calculated in accordance with GAAP: Tangible Common Shareholders' Equity and Tangible Book Value Per Common Share (Unaudited) As of (Dollars in thousands, except for share data) December 31, 2024 September 30, 2024 December 31, 2023 Total shareholders’ equity $ 110,920 $ 102,293 $ 100,707 Less: Preferred stock liquidation preference (16,051) (16,051) (16,051) Total equity available to common shareholders 94,869 86,242 84,656 Less: Goodwill — — — Tangible common shareholders' equity $ 94,869 $ 86,242 $ 84,656 Common shares outstanding 4,132,986 4,134,059 4,110,470 Tangible book value per common share $ 22.95 $ 20.86 $ 20.60 Application of Critical Accounting Policies and Estimates The preparation of 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 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) December 31, 2025 September 30, 2025 December 31, 2024 Total shareholders’ equity $ 87,569 $ 89,728 $ 110,920 Less: Preferred stock liquidation preference (16,822) (16,051) (16,051) Total equity available to common shareholders 70,747 73,677 94,869 Less: Goodwill — — — Tangible common shareholders' equity $ 70,747 $ 73,677 $ 94,869 Common shares outstanding 4,108,069 4,116,913 4,132,986 Tangible book value per common share $ 17.22 $ 17.90 $ 22.95 Application of Critical Accounting Policies and Estimates The preparation of 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.
For the year ended 2024, the Bank paid dividends of $3.80 million to BayFirst 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. As of December 31, 2024, BayFirst Financial Corp. held $479 thousand in cash and cash equivalents.
For the year ended December 31, 2025, the Bank paid dividends of $3.3 million 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.
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. 34 Table of Contents Overview The following discussion and analysis presents the financial condition and results of operations on a consolidated basis.
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.
The following table presents the amortized cost of the Company's investment securities portfolio classified as held to maturity as of December 31, 2024 and December 31, 2023. (Dollars in thousands) December 31, 2024 December 31, 2023 Investment securities held to maturity: Mortgage-backed securities: U.S.
The following table presents the amortized cost of the Company's investment securities portfolio classified as held to maturity as of December 31, 2025 and December 31, 2024.
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.
General valuation allowances are determined by loan pools with a further evaluation of various quantitative and qualitative factors noted above. 40 Table of Contents 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.
December 31, 2024 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 $ — — % $ — — % $ 1,804 5.10 % $ 3,225 5.72 % Mortgage-backed securities: U.S.
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.
The amount and timing of the dividend is in accordance with the terms of the Series C Cumulative Convertible Preferred Stock. 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.
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.
Government-sponsored enterprises $ — $ 1 Corporate bonds 2,500 2,500 Total investment securities held to maturity $ 2,500 $ 2,501 There was a $12 thousand ACL on the corporate bonds HTM as of December 31, 2024 and a $17 thousand ACL on the corporate bonds HTM as of December 31, 2023.
(Dollars in thousands) December 31, 2025 December 31, 2024 Investment securities held to maturity: Corporate bonds $ 2,500 $ 2,500 Total investment securities held to maturity $ 2,500 $ 2,500 There was a $7 thousand ACL on the corporate bonds HTM as of December 31, 2025 and $12 thousand at December 31, 2024.
For the Year Ended December 31, (Dollars in thousands) 2024 2023 Noninterest income: Loan servicing income, net $ 3,100 $ 2,826 Gain on sale of government guaranteed loans, net 28,252 24,553 Service charges and fees 1,794 1,721 Government guaranteed loan fair value gain 9,843 15,718 Government guaranteed loan packaging fees 4,105 3,664 Gain on sale of premises and equipment 11,649 — Other noninterest income 1,726 1,273 Total noninterest income $ 60,469 $ 49,755 Noninterest income from continuing operations was $60.5 million for the year ended December 31, 2024, an increase from $49.8 million for the year ended December 31, 2023.
For the Year Ended December 31, (Dollars in thousands) 2025 2024 Noninterest income: Loan servicing income, net 2,769 3,100 Gain on sale of SBA and PPP loans, net 11,720 28,252 Service charges and fees 1,867 1,794 SBA loan fair value gain (loss) (1,075) 9,843 Government guaranteed loan packaging fees 1,768 4,105 Gain on sale of premises and equipment — 11,649 Other non-interest income 1,347 1,726 Total noninterest income 18,396 60,469 Noninterest income from continuing operations was $18.4 million for the year ended December 31, 2025, a decrease from $60.5 million for the year ended December 31, 2024.
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%.
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.
Contractual Obligations as of December 31, 2024 (Dollars in thousands) Less than One Year One to Three Years Three to Five Years Over Five Years Total Operating lease obligations $ 2,032 $ 3,870 $ 2,653 $ 14,960 $ 23,515 Short-term borrowings — — — — — Long-term borrowings 456 912 566 — 1,934 Subordinated notes — — — 5,956 5,956 Time deposits 279,253 28,803 2,212 — 310,268 Total $ 281,741 $ 33,585 $ 5,431 $ 20,916 $ 341,673 Contractual Obligations as of December 31, 2023 (Dollars in thousands) Less than One Year One to Three Years Three to Five Years Over Five Years Total Operating lease obligations $ 1,105 $ 1,861 $ 413 $ — $ 3,379 Short-term borrowings 10,000 — — — 10,000 Long-term borrowings 456 912 912 109 2,389 Subordinated notes — — — 5,949 5,949 Time deposits 173,887 84,552 569 — 259,008 Total $ 185,448 $ 87,325 $ 1,894 $ 6,058 $ 280,725 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.
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 Contractual Obligations as of December 31, 2024 (Dollars in thousands) Less than One Year One to Three Years Three to Five Years Over Five Years Total Operating lease obligations $ 2,032 $ 3,870 $ 2,653 $ 14,960 $ 23,515 Long-term borrowings 456 912 566 — 1,934 Subordinated notes — — — 5,956 5,956 Time deposits 279,253 28,803 2,212 — 310,268 Total $ 281,741 $ 33,585 $ 5,431 $ 20,916 $ 341,673 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.
Government-sponsored enterprises — — — — — — 20,382 1.82 Corporate bonds — — 11,332 6.23 — — — — Total investment securities available for sale $ — — % $ 11,332 6.23 % $ — — % $ 32,265 2.90 % The investment securities held to maturity presented in the following tables are reported at amortized cost and by contractual maturity as of December 31, 2024 and December 31, 2023.
Government-sponsored enterprises — — — — — — 18,627 1.82 Corporate bonds — — 8,832 5.58 — — — — Total investment securities available for sale $ — — % $ 8,832 5.58 % $ 6,267 4.76 % $ 25,180 2.25 % The investment securities held to maturity presented in the following tables are reported at amortized cost and by contractual maturity as of December 31, 2025 and December 31, 2024.
December 31, 2024 December 31, 2023 (Dollars in thousands) Amount % of Total Amount % of Total Loans HFI: Government guaranteed loans HFI, at fair value $ 60,833 $ 91,508 Loans HFI, at amortized cost: Residential real estate 330,870 33.3 % 264,126 32.5 % Commercial real estate 305,721 30.9 293,595 36.2 Construction and land 32,914 3.3 26,272 3.2 Commercial and industrial 226,522 22.9 177,566 21.9 Commercial and industrial – PPP 941 0.1 3,202 0.4 Consumer and other 93,826 9.5 47,287 5.8 Loans HFI, at amortized cost, gross 990,794 100.0 % 812,048 100.0 % Discount on government guaranteed loans (8,306) (7,040) Premium on loans purchased, net 3,739 4,503 Deferred loan costs, net 19,499 14,707 Allowance for credit losses (15,512) (13,497) Loans HFI, at amortized cost, net 990,214 810,721 Total loans HFI, net $ 1,051,047 $ 902,229 For the year ended December 31, 2024, the Bank originated $269.8 million in loans through conventional lending channels and $431.4 million in loans through its government guaranteed lending function.
December 31, 2025 December 31, 2024 (Dollars in thousands) Amount % of Total Amount % of Total Loans HFI: Government guaranteed loans HFI, at fair value $ 54,076 $ 60,833 Loans HFI, at amortized cost: Residential real estate 365,427 40.7 % 330,870 33.3 % Commercial real estate 215,771 24.0 305,721 30.9 Construction and land 48,397 5.4 32,914 3.3 Commercial and industrial 181,566 20.2 226,522 22.9 Commercial and industrial – PPP 6 — 941 0.1 Consumer and other 86,441 9.7 93,826 9.5 Loans HFI, at amortized cost, gross 897,608 100.0 % 990,794 100.0 % Discount on government guaranteed loans (6,811) (8,306) Premium on loans purchased, net 2,650 3,739 Deferred loan costs, net 16,371 19,499 Allowance for credit losses (21,996) (15,512) Loans HFI, at amortized cost, net 887,822 990,214 Total loans HFI, net $ 941,898 $ 1,051,047 For the year ended December 31, 2025, the Bank originated $137.4 million in loans through conventional lending channels and $278.3 million in loans through its government guaranteed lending function.
The amount of each of the following categories of deposits, at the dates indicated, are as follows: (Dollars in thousands) December 31, 2024 December 31, 2023 Noninterest-bearing deposit accounts $ 101,743 8.9 % $ 93,708 9.5 % Interest-bearing transaction accounts 256,793 22.5 259,422 26.3 Money market accounts 455,519 39.8 355,946 36.2 Savings accounts 18,906 1.7 17,054 1.7 Subtotal 832,961 72.9 726,130 73.7 Total time deposits 310,268 27.1 259,008 26.3 Total deposits $ 1,143,229 100.0 % $ 985,138 100.0 % 47 Table of Contents At December 31, 2024, the Company held approximately $213.4 million of deposits that exceeded the FDIC insurance limit which was 19% of total deposits.
The amount of each of the following categories of deposits, at the dates indicated, are as follows: (Dollars in thousands) December 31, 2025 December 31, 2024 Noninterest-bearing deposit accounts $ 95,731 8.1 % $ 101,743 8.9 % Interest-bearing transaction accounts 231,227 19.5 256,793 22.5 Money market accounts 434,930 36.7 455,519 39.8 Savings accounts 19,709 1.7 18,906 1.7 Subtotal 781,597 66.0 832,961 72.9 Total time deposits 402,341 34.0 310,268 27.1 Total deposits $ 1,183,938 100.0 % $ 1,143,229 100.0 % At December 31, 2025, the Company held approximately $177.0 million of deposits that exceeded the FDIC insurance limit which was 15% of total deposits.
December 31, 2024 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 % $ — — % 41 Table of Contents December 31, 2023 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 Mortgage-backed securities: U.S.
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 % $ — — % 38 Table of Contents December 31, 2024 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.
December 31, 2024 2023 (Dollars in thousands) Amount % of Total Amount % of Total Florida $ 142,711 34 % $ 123,418 31 % California 48,464 11 45,661 12 Tennessee 28,926 7 32,185 8 Texas 30,238 7 24,861 6 All Other 175,624 41 169,752 43 Total government guaranteed loans, excluding PPP loans $ 425,963 100 % $ 395,877 100 % Deposits General.
December 31, 2025 2024 (Dollars in thousands) Amount % of Total Amount % of Total Florida $ 92,975 31 % $ 142,711 34 % California 26,730 9 48,464 11 Tennessee 21,550 7 28,926 7 Texas 24,765 8 30,238 7 All Other 136,966 45 175,624 41 Total government guaranteed loans, excluding PPP loans $ 302,986 100 % $ 425,963 100 % 43 Table of Contents Deposits General.
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.
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.
(Dollars in thousands) December 31, 2024 December 31, 2023 Nonperforming loans (government guaranteed balances), at amortized cost, gross $ 4,037 $ 1,424 Nonperforming loans (unguaranteed balances), at amortized cost, gross 13,570 8,264 Total nonperforming loans, at amortized cost, gross 17,607 9,688 Nonperforming loans (government guaranteed balances), at fair value — — Nonperforming loans (unguaranteed balances), at fair value 1,490 648 Total nonperforming loans, at fair value 1,490 648 OREO 132 — Repossessed assets 36 — Total nonperforming assets, gross $ 19,265 $ 10,336 Nonperforming loans as a percentage of total loans HFI (1) 1.75 % 1.18 % Nonperforming loans (excluding government guaranteed balances) to total loans HFI (1) 1.35 % 1.00 % Nonperforming assets as a percentage of total assets 1.50 % 0.92 % Nonperforming assets (excluding government guaranteed balances) to total assets 1.06 % 0.74 % ACL to nonperforming loans (1) 88.10 % 139.32 % ACL to nonperforming loans (excluding government guaranteed balances) (1) 114.31 % 163.32 % (1) Excludes loans measured at fair value 44 Table of Contents 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 Year Ended December 31, 2024 2023 Allowance at beginning of period $ 13,497 $ 9,046 Impact of adopting ASC 326 — 3,107 Charge-offs: Residential real estate (20) — Commercial real estate (60) (108) Commercial and industrial (10,956) (6,240) Commercial and industrial - PPP — (223) Consumer and other (2,938) (3,280) Total charge-offs (13,974) (9,851) Recoveries: Residential real estate 1 8 Commercial real estate 7 87 Commercial and industrial 606 435 Consumer and other 321 334 Total recoveries 935 864 Net charge-offs (13,039) (8,987) Provision for credit losses on loans 15,054 10,331 Allowance at end of period $ 15,512 $ 13,497 Net charge-offs to average loans HFI at amortized cost 1.40 % 1.17 % Allowance as a percent of total loans HFI at amortized cost 1.54 % 1.64 % Allowance as a percent of loans HFI at amortized cost, not including government guaranteed loans 1.79 % 2.03 % Allowance as a percent of nonperforming loans at amortized cost, gross 88.10 % 139.32 % Total loans HFI $ 1,066,559 $ 915,726 Average loans HFI at amortized cost $ 928,814 $ 770,793 Nonperforming loans (including government guaranteed balances) at amortized cost, gross $ 17,607 $ 9,688 Nonperforming loans (excluding government guaranteed balances) at amortized cost, gross $ 13,570 $ 8,264 Guaranteed balance of government guaranteed loans $ 149,484 $ 229,662 45 Table of Contents The following table details net charge-offs to average loans outstanding by loan category for the year ended December 31, 2024 and December 31, 2023.
(Dollars in thousands) December 31, 2025 December 31, 2024 Nonperforming loans (government guaranteed balances), at amortized cost, gross $ 8,072 $ 4,037 Nonperforming loans (unguaranteed balances), at amortized cost, gross 16,271 13,570 Total nonperforming loans, at amortized cost, gross 24,343 17,607 Nonperforming loans (government guaranteed balances), at fair value 83 — Nonperforming loans (unguaranteed balances), at fair value 1,453 1,490 Total nonperforming loans, at fair value 1,536 1,490 OREO 400 132 Repossessed assets 263 36 Total nonperforming assets, gross $ 26,542 $ 19,265 Nonperforming loans as a percentage of total loans HFI (1) 2.68 % 1.75 % Nonperforming loans (excluding government guaranteed balances) to total loans HFI (1) 1.79 % 1.35 % Nonperforming assets as a percentage of total assets 2.04 % 1.50 % Nonperforming assets (excluding government guaranteed balances) to total assets 1.29 % 1.06 % ACL to nonperforming loans (1) 90.35 % 88.10 % ACL to nonperforming loans (excluding government guaranteed balances) (1) 135.18 % 114.31 % (1) Excludes loans measured at fair value 41 Table of Contents 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 Year Ended December 31, 2025 2024 Allowance at beginning of period $ 15,512 $ 13,497 Charge-offs: Residential real estate (983) (20) Commercial real estate (450) (60) Commercial and industrial (15,425) (10,956) Commercial and industrial - PPP (1) — Consumer and other (2,358) (2,938) Total charge-offs (19,217) (13,974) Recoveries: Residential real estate 27 1 Commercial real estate 5 7 Commercial and industrial 497 606 Commercial and industrial - PPP 1 — Consumer and other 734 321 Total recoveries 1,264 935 Net charge-offs (17,953) (13,039) Provision for credit losses on loans 24,436 15,054 Allowance at end of period $ 21,995 $ 15,512 Net charge-offs to average loans HFI at amortized cost 1.76 % 1.40 % Allowance as a percent of total loans HFI at amortized cost 2.42 % 1.54 % Allowance as a percent of loans HFI at amortized cost, not including government guaranteed loans 2.58 % 1.79 % Allowance as a percent of nonperforming loans at amortized cost, gross 90.35 % 88.10 % Total loans HFI $ 963,894 $ 1,066,559 Average loans HFI at amortized cost $ 1,018,913 $ 928,814 Nonperforming loans (including government guaranteed balances) at amortized cost, gross $ 24,343 $ 17,607 Nonperforming loans (excluding government guaranteed balances) at amortized cost, gross $ 16,271 $ 13,570 Guaranteed balance of government guaranteed loans $ 70,129 $ 149,484 42 Table of Contents The following table details net charge-offs to average loans outstanding by loan category for the year ended December 31, 2025 and December 31, 2024.
T he Company recorded a provision for credit losses for the year ended December 31, 2024 of $14.7 million compared to a $10.4 million provision for the year ended December 31, 2023.
T he Company recorded a provision for credit losses for the year ended December 31, 2025 of $24.6 million compared to a $14.7 million provision for the year ended December 31, 2024. For the year ended December 31, 2025, net loan charge offs totaled $18.0 million compared to $13.0 million for the year ended December 31, 2024.
The Bank’s actual capital amounts and percentages were as shown in the table below: Actual Minimum (1) Well Capitalized (2) (Dollars in thousands) Amount Percent Amount Percent Amount Percent As of December 31, 2024 Total Capital (to risk-weighted assets) $ 124,420 12.14 % $ 81,985 8.00 % $ 102,482 10.00 % Tier 1 Capital (to risk-weighted assets) 111,586 10.89 61,489 6.00 81,985 8.00 Common Equity Tier 1 Capital (to risk-weighted assets) 111,586 10.89 46,117 4.50 66,613 6.50 Tier 1 Capital (to total assets) 111,586 8.82 50,579 4.00 63,224 5.00 As of December 31, 2023 Total Capital (to risk-weighted assets) 114,256 13.03 70,169 8.00 87,711 10.00 Tier 1 Capital (to risk-weighted assets) 103,274 11.77 52,627 6.00 70,169 8.00 Common Equity Tier 1 Capital (to risk-weighted assets) 103,274 11.77 39,470 4.50 57,012 6.50 Tier 1 Capital (to total assets) 103,274 9.38 44,024 4.00 55,030 5.00 (1) Minimum to be considered “adequately capitalized” under Basel III Capital Adequacy.
At December 31, 2025, the Bank's capital ratios were in excess of the requirement to be "well capitalized" under the regulatory guidelines. 45 Table of Contents The Bank’s actual capital amounts and percentages were as shown in the table below: Actual Minimum (1) Well Capitalized (2) (Dollars in thousands) Amount Percent Amount Percent Amount Percent As of December 31, 2025 Total Capital (to risk-weighted assets) $ 98,560 10.18 % $ 77,441 8.00 % $ 96,802 10.00 % Tier 1 Capital (to risk-weighted assets) 86,337 8.92 58,081 6.00 77,441 8.00 Common Equity Tier 1 Capital (to risk-weighted assets) 86,337 8.92 43,561 4.50 62,921 6.50 Tier 1 Capital (to total assets) 86,337 6.52 52,983 4.00 66,229 5.00 As of December 31, 2024 Total Capital (to risk-weighted assets) 124,420 12.14 81,985 8.00 102,482 10.00 Tier 1 Capital (to risk-weighted assets) 111,586 10.89 61,489 6.00 81,985 8.00 Common Equity Tier 1 Capital (to risk-weighted assets) 111,586 10.89 46,117 4.50 66,613 6.50 Tier 1 Capital (to total assets) 111,586 8.82 50,579 4.00 63,224 5.00 (1) Minimum to be considered “adequately capitalized” under Basel III Capital Adequacy.
The increase was primarily the result of the pre-tax gain on sale of two branch office properties of $11.6 million, which was a result of a sale-leaseback transaction, and an increase in gain on sale of government guaranteed loans of $3.7 million, partially offset by a decrease in fair value gains on government guaranteed loans of $5.9 million.
The decrease was primarily the result of the gain on sale of two branch office properties of $11.6 million in the fourth quarter of 2024, a decrease in gain on sale of government guaranteed loans of $16.5 million, a decrease in government guaranteed loan fair value gains of $10.9 million, and a decrease in government guaranteed loan packaging fees of $2.3 million.
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.
Specific allowances are provided for individual loans that do not share similar risk characteristics with instruments evaluated using a collective (pooled) basis.
Income tax benefit from discontinued operations was $23 thousand for the year ended December 31, 2024, from income tax benefit of $70 thousand for the year ended December 31, 2023. At December 31, 2024, the Company had no federal net operating loss carryforward and $16 thousand of state net operating loss carryforward.
At December 31, 2024, the Company had no of 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 25.60% for the year ended December 31, 2025 and 25.40% for the year ended December 31, 2024.
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. The Bank may hold collateral supporting those commitments.
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.
Government-sponsored enterprises — — — — — — 18,627 1.82 Corporate bonds — — 8,832 5.58 — — — — Total investment securities available for sale $ — — % $ 8,832 5.58 % $ 6,267 4.76 % $ 25,180 2.25 % December 31, 2023 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 $ — — % $ — — % $ — — % $ 8,041 6.25 % Mortgage-backed securities: 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 % December 31, 2024 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 $ — — % $ — — % $ 1,804 5.10 % $ 3,225 5.72 % Mortgage-backed securities: U.S.
These efforts have helped and are expected to continue to help reduce risk of loss. The ACL was $15.5 million at December 31, 2024 and $13.5 million at December 31, 2023. 38 Table of Contents Noninterest Income The following table presents noninterest income from continuing operations for the year ended December 31, 2024 and December 31, 2023.
The ACL was $22.0 million at December 31, 2025 and $15.5 million at December 31, 2024. 35 Table of Contents Noninterest Income The following table presents noninterest income from continuing operations for the year ended December 31, 2025 and December 31, 2024.
For the Year Ended December 31, (Dollars in thousands) 2024 2023 Noninterest expense: Salaries and benefits $ 31,063 $ 30,973 Bonus, commissions, and incentives 4,445 5,726 Occupancy and equipment 4,848 4,758 Data processing 6,745 5,611 Marketing and business development 2,050 3,336 Professional services 3,882 3,657 Loan origination and collection 6,391 7,425 Employee recruiting and development 2,186 2,177 Regulatory assessments 1,249 881 Director compensation 574 575 Liability and fidelity bond insurance 563 546 ATM and interchange 532 534 Telecommunication 486 387 Other noninterest expense 1,768 1,121 Total noninterest expense $ 66,782 $ 67,707 39 Table of Contents Noninterest expense was $66.8 million for the year ended December 31, 2024, a decrease from $67.7 million for the year ended December 31, 2023 .
For the Year Ended December 31, (Dollars in thousands) 2025 2024 Noninterest expense: Salaries and benefits $ 28,429 $ 31,063 Bonus, commissions, and incentives 855 4,445 Occupancy and equipment 6,068 4,848 Data processing 7,859 6,745 Marketing and business development 1,433 2,050 Professional services 3,456 3,882 Loan servicing and origination expense 8,001 6,391 Employee recruiting and development 1,653 2,186 Regulatory assessments 1,869 1,249 Restructure charges 7,283 — Director compensation 526 427 Liability and fidelity bond insurance 643 431 ATM and interchange 482 432 Telecommunication 341 354 Other noninterest expense 1,527 2,279 Total noninterest expense $ 70,425 $ 66,782 36 Table of Contents Noninterest expense was $70.4 million for the year ended December 31, 2025, an increase from $66.8 million for the year ended December 31, 2024 .
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 and the Bank’s debt obligations is set forth above under the heading “Other Borrowings.”
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.
Net Income For the year ended December 31, 2024, net income was $12.6 million, or $2.68 per common share, or $2.62 per diluted common share, an increase from net income of $5.7 million, or $1.16 per common share, or $1.12 per diluted common share, for the year ended December 31, 2023.
Net Income For the year ended December 31, 2025, the Company had a net loss of $22.9 million, or $5.93 per common share and diluted common share, a decrease from net income of $12.6 million, or $2.68 per common share and diluted common share, for the year ended December 31, 2024.
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.
Shareholders' equity was $87.6 million at December 31, 2025 as compared to $110.9 million at December 31, 2024. The decrease was primarily due to net loss of $22.9 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.
The increase was mainly due to an increase in loan interest income, including fees, of $15.6 million, partially offset by an increase in interest expense on deposits of $12.1 million and a decrease in interest income on interest-bearing deposit from banks of $1.3 million.
The increase was mainly due to an increase in loan interest income, including fees, of $2.4 million and a decrease in interest expense of $4.8 million.
The net unrealized loss on the investment securities HTM at December 31, 2024, was $154 thousand compared with a net unrealized loss on investment securities HTM of $238 thousand at December 31, 2023. 40 Table of Contents No investment securities were pledged as of December 31, 2024 or December 31, 2023, and there were no sales of investment securities for the year ended December 31, 2024 or year ended December 31, 2023.
The net unrealized loss on the investment securities HTM at December 31, 2025, was $116 thousand compared with a net unrealized loss on investment securities HTM of $154 thousand at December 31, 2024.
Other Borrowings At December 31, 2024, the Company had no borrowings from the FHLB or FRB. There was $10.0 million of borrowings at 5.57% from the FHLB and no borrowings from the FRB at December 31, 2023. 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.
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 be ar interest at variable rates set by the FHLB.
For the Year Ended December 31, 2024 2023 (Dollars in thousands) Average Balance Interest Yield Average Balance Interest Yield Interest-earning assets: Investment securities $ 41,509 $ 1,659 4.00 % $ 44,108 $ 1,847 4.19 % Loans, excluding PPP (1) (2) 1,007,027 78,808 7.83 829,054 62,924 7.59 PPP loans 2,326 23 0.99 16,181 266 1.64 Other 51,760 2,320 4.48 74,905 3,481 4.65 Total interest-earning assets 1,102,622 82,810 7.51 964,248 68,518 7.11 Noninterest-earning assets 99,198 93,876 Total assets $ 1,201,820 $ 1,058,124 Interest-bearing liabilities: NOW, MMDA and savings $ 669,941 $ 27,934 4.17 $ 617,467 $ 21,817 3.53 Time deposits 285,957 14,938 5.22 206,978 8,978 4.34 Other borrowings 35,728 1,912 5.35 28,130 1,291 4.59 Total interest-bearing liabilities 991,626 44,784 4.52 852,575 32,086 3.76 Demand deposits 95,507 101,740 Noninterest-bearing liabilities 12,462 12,262 Shareholders’ equity 102,225 91,547 Total liabilities and shareholders’ equity $ 1,201,820 $ 1,058,124 Net interest income $ 38,026 $ 36,432 Interest rate spread 2.99 3.35 Net interest margin (3) 3.45 3.78 Ratio of average interest-earning assets to average interest-bearing liabilities 111.19 % 113.10 % (1) Includes nonaccrual loans.
For the Year Ended December 31, 2025 2024 (Dollars in thousands) Average Balance Interest Yield Average Balance Interest Yield Interest-earning assets: Investment securities $ 34,992 $ 1,363 3.90 % $ 41,509 $ 1,659 4.00 % Loans (1) 1,102,457 81,244 7.37 1,009,353 78,831 7.81 Other 82,210 3,187 3.88 51,760 2,320 4.48 Total interest-earning assets 1,219,659 85,794 7.03 1,102,622 82,810 7.51 Noninterest-earning assets 103,662 99,198 Total assets $ 1,323,321 $ 1,201,820 Interest-bearing liabilities: NOW, MMDA and savings $ 707,938 $ 23,704 3.35 $ 669,941 $ 27,934 4.17 Time deposits 333,012 14,036 4.21 285,957 14,938 5.22 Other borrowings 48,579 2,269 4.67 35,728 1,912 5.35 Total interest-bearing liabilities 1,089,529 40,009 3.67 991,626 44,784 4.52 Demand deposits 104,628 95,507 Noninterest-bearing liabilities 23,698 12,462 Shareholders’ equity 105,466 102,225 Total liabilities and shareholders’ equity $ 1,323,321 $ 1,201,820 Net interest income $ 45,785 $ 38,026 Interest rate spread 3.36 2.99 Net interest margin (2) 3.75 3.45 Ratio of average interest-earning assets to average interest-bearing liabilities 111.94 % 111.19 % (1) Includes nonaccrual loans.
Government-sponsored enterprises — — — — — — 3,842 1.58 Collateralized mortgage obligations: U.S.
Government-sponsored enterprises — — — — — — 5,264 2.99 Collateralized mortgage obligations: U.S.
In addition, the Bank sold guaranteed loan balances of $385.3 million. 42 Table of Contents Loan Maturity/Rate Sensitivity The following table shows the contractual maturities of our loans at December 31, 2024.
In addition, the Bank sold guaranteed loan balances of $199.0 million through its secondary loan sale process. In addition, the Bank sold $96.6 million of government guaranteed loans as part of the Bank’s discontinuance of SBA 7(a) lending. 39 Table of Contents Loan Maturity/Rate Sensitivity The following table shows the contractual maturities of our loans at December 31, 2025.
The Company has $6.0 million of Subordinated Debentures (the “Debentures”) that mature June 30, 2031 and are redeemable after 5 years which is June 30, 2026.
Based on this collateral, the Bank was eligible to borrow up to $32.1 million from the FRB at December 31, 2025. 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.
FHLB short-term borrowings be ar interest at variable rates set by the FHLB. Any a dvances that the Bank were to obtain would be secured by a blanket lien on $350.3 million of real estate-related loans as of December 31, 2024.
Any a dvances that the Bank were to obtain would be secured by a blanket lien on $383.7 million of real estate-related loans as of December 31, 2025. Based on this collateral and the Bank's holdings of FHLB stock, the Bank was eligible to borrow up to $187.1 million from the FHLB at December 31, 2025.
At December 31, 2024 and December 31, 2023, ACL for off-balance sheet loan commitments totaled $516 thousand and $839 thousand, respectively. Contractual Obligations In the ordinary course of its operations, the Company enters into certain contractual obligations. Total contractual obligations at December 31, 2024 were $341.7 million, an increase from $280.7 million at December 31, 2023.
Contractual Obligations In the ordinary course of its operations, the Company enters into certain contractual obligations. Total contractual obligations at December 31, 2025 were $431.4 million, an increase from $341.7 million at December 31, 2024. The increase was primarily due to an increase in time deposits of $92.1 million.
Provision for Credit Losses The provision for credit losses is charged to operations to adjust the total allowance 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.
December 31, 2024: Interest-earning assets: Investment securities $ (41) $ (255) $ (296) Loans (4,604) 7,017 2,413 Other interest-earning assets (348) 1,215 867 Total interest-earning assets (4,993) 7,977 2,984 Interest-bearing liabilities: NOW, MMDA, and savings (5,745) 1,515 (4,230) Time deposits (3,142) 2,240 (902) Other borrowings (266) 623 357 Total interest-bearing liabilities (9,153) 4,378 (4,775) Net change in net interest income $ 4,160 $ 3,599 $ 7,759 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 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.
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.
The decrease was the result of decreases in compensation expenses of $1.2 million, loan origination and collection expense of $1.0 million, and marketing and business development expenses of $1.3 million. The decreases were partially offset by increases in data processing expenses of $1.1 million, regulatory assessments of $0.4 million, and other noninterest expense of $0.6 million.
The increase was primarily the result of the 2025 restructure charges of $7.3 million, an increase in data processing expense of $1.1 million, and an increase in loan servicing and origination expense of $1.6 million, partially offset by a decrease in compensation expense of $6.2 million.
(Dollars in thousands) At and for the Year Ended December 31, Government Guaranteed, Excluding PPP 2024 2023 Number of loans originated 2,508 2,817 Amount of loans originated $ 431,375 $ 547,469 Average loan size originated $ 172 $ 194 Government guaranteed loan balances sold $ 385,342 $ 437,935 Government unguaranteed loan balances sold $ — $ 13,669 Total government guaranteed loan balances: Guaranteed portion of government guaranteed loan balances $ 148,543 $ 214,418 Unguaranteed portion of government guaranteed loan balances $ 277,420 $ 181,459 Total government guaranteed loans $ 425,963 $ 395,877 Government guaranteed loans serviced for others $ 1,056,665 $ 855,756 46 Table of Contents The Bank makes government guaranteed loans throughout the United States.
(Dollars in thousands) At and for the Year Ended December 31, Government Guaranteed, Excluding PPP 2025 2024 Number of loans originated 1,388 2,508 Amount of loans originated $ 278,334 $ 431,375 Average loan size originated $ 201 $ 172 Government guaranteed loan balances sold $ 198,996 $ 385,342 Total government guaranteed loan balances: Guaranteed portion of government guaranteed loan balances HFI $ 70,123 $ 148,543 Unguaranteed portion of government guaranteed loan balances HFI 232,863 277,420 Total government guaranteed loans HFI 302,986 425,963 Government guaranteed loans serviced for others $ 885,505 $ 1,056,665 Government guaranteed loans sold to Banesco USA $ 96,602 $ — The following table sets forth, at the dates indicated, the geographic disbursement of gross principal balances of its government guaranteed loan portfolio.
Additionally, residential mortgage-backed securities and collateralized mortgage obligations receive monthly principal payments, which are not reflected below.
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.
Under CECL, the ACL is based on expected credit losses rather than on incurred losses. The Bank must maintain an adequate ACL based on a comprehensive methodology that assesses the probable losses inherent in its loan portfolio.
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 investment securities available for sale presented in the following tables are reported at amortized cost and by contractual maturity as of December 31, 2024 and December 31, 2023. Actual timing may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.
No investment securities were pledged as of December 31, 2025 or December 31, 2024, and there were no sales of investment securities for the year ended December 31, 2025 or the year ended December 31, 2024. 37 Table of Contents The investment securities available for sale presented in the following tables are reported at amortized cost and by contractual maturity as of December 31, 2025 and December 31, 2024.

… 54 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

5 edited+1 added−0 removed14 unchanged
Biggest changeThe 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. 51 Table of Contents 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.
Biggest changeThe 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.
December 31, 2024 December 31, 2023 Change in rates Following 12 months Following 24 months Following 12 months Following 24 months +400 basis points 11.1 % 9.9 % 14.7 % 12.8 % +300 basis points 10.0 9.5 12.7 12.1 +200 basis points 5.9 5.7 7.6 7.4 +100 basis points 1.8 1.9 2.5 2.6 -100 basis points (3.7) (3.7) (4.5) (4.5) -200 basis points (7.7) (7.8) (9.1) (9.1) 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.
December 31, 2025 December 31, 2024 Change in rates Following 12 months Following 24 months Following 12 months Following 24 months +400 basis points 5.2 % (3.2) % 11.1 % 9.9 % +300 basis points 5.2 (0.9) 10.0 9.5 +200 basis points 4.1 0.2 5.9 5.7 +100 basis points 2.5 0.6 1.8 1.9 -100 basis points (1.1) (0.5) (3.7) (3.7) -200 basis points (3.9) (2.8) (7.7) (7.8) 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.
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 December 31, 2024 and December 31, 2023, assuming immediate parallel shifts in interest rates.
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 December 31, 2025 and December 31, 2024, assuming immediate parallel shifts in interest rates.
Net interest income simulation involves forecasting net interest income under a variety of interest rate scenarios including instantaneous shocks. The estimated impact on the net interest income as of December 31, 2024 and December 31, 2023, assuming immediate parallel moves in interest rates, is presented in the table below.
Net interest income simulation involves forecasting net interest income under a variety of interest rate scenarios including instantaneous shocks. 48 Table of Contents The estimated impact on the net interest income as of December 31, 2025 and December 31, 2024, assuming immediate parallel moves in interest rates, is presented in the table below.
Change in rates December 31, 2024 December 31, 2023 +400 basis points (5.3) % (6.3) % +300 basis points (2.9) (4.1) +200 basis points (2.5) (3.3) +100 basis points (2.6) (2.7) -100 basis points (0.1) 0.2 -200 basis points (0.4) (0.3) 52 Table of Contents
Change in rates December 31, 2025 December 31, 2024 +400 basis points (15.6) % (5.3) % +300 basis points (10.9) (2.9) +200 basis points (6.9) (2.5) +100 basis points (3.1) (2.6) -100 basis points 4.1 (0.1) -200 basis points 7.6 (0.4) 49 Table of Contents
Added
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.

Other BAFN 10-K year-over-year comparisons