BAFN 10-Q Quarterly Report June 30, 2025 | Alphaminr
BayFirst Financial Corp.
ALPHAMINR

BAFN 10-Q Quarter ended June 30, 2025

Balance Sheet
Cash Flow
Income Statement
Debt
bafn-20250630
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal period ended June 30, 2025
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 001-41068
BAYFIRST FINANCIAL CORP.
(Exact name of registrant as specified in its charter)
Florida
59-3665079
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
700 Central Avenue
St. Petersburg , Florida
33701
(Address of Principal Executive Offices)
(Zip Code)
( 727 ) 440-6848
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common stock BAFN The Nasdaq Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o Accelerated filer o
Non-accelerated filer x Smaller reporting company x
Emerging growth company x
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).     Yes o No ☒
The registrant had outstanding 4,133,637 shares of common stock as of August 6, 2025.

BayFirst Financial Corp.
Table of Contents
Page
Consolidated Balance Sheets at June 30, 2025 (Unaudited) and December 31, 2024
Item 1A.
Item 3.
Item 4.

1

Glossary of Acronyms and Abbreviations
The acronyms and abbreviations identified below may be used throughout this Quarterly Report on Form 10-Q or in our other SEC filings. You may find it helpful to refer back to this page while reading this report.
ACL: Allowance for Credit Losses FFIEC: Federal Financial Institutions Examination Council
AFS: Available for Sale FHLB: Federal Home Loan Bank
AIO: Architecture, Infrastructure, and Operations FNBB: First National Bankers Bank
ALCO: Asset-Liability Committee
FOMC: Federal Open Market Committee
AOCI: Accumulated Other Comprehensive Income
FRB: Federal Reserve Bank
ASC: FASB Accounting Standards Codification FVO: Fair Value Option
ASU: FASB Accounting Standards Update GAAP: Generally Accepted Accounting Principles
BHCA: Bank Holding Company Act of 1956, as amended
HFI: Held for Investment
BOLI: Bank Owned Life Insurance HTM: Held to Maturity
BSA: Bank Secrecy Act of 1970 IRA: Individual Retirement Account
CARES Act: Coronavirus Aid, Relief, and Economic Security Act ISO: Information Security Officer
CBLR: Community Bank Leverage Ratio IT: Information Technology
CDARS: Certificate of Deposit Account Registry Services JOBS Act: Jumpstart Our Business Startups Act of 2012
CECL: Current Expected Credit Losses LGD: Loss Given Default
CEO: Chief Executive Officer LHFS: Loans Held for Sale
CET1: Common Equity Tier 1 Capital
MMDA: Money Market Deposit Account
CFPB: Consumer Financial Protection Bureau NOW: Negotiable Order of Withdrawal
C&I: Commercial and Industrial NSPP: Non-Qualified Stock Purchase Plan
CRO: Chief Risk Officer OCC: Office of the Comptroller of the Currency
CTO: Chief Technology Officer OREO: Other Real Estate Owned
Dodd-Frank Act: Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 OTTI: Other-Than-Temporary Impairment
DRIP: Dividend Reinvestment Plan PCAOB: Public Company Accounting Oversight Board
EGC: Emerging Growth Company PD: Probability of Default
EPS: Earnings per Share PPP: Paycheck Protection Program
Equity Plan: The Amended and Restated 2017 Equity Incentive Plan ROU: Right of Use
ESG: Environmental, Social, and Governance SBA: Small Business Administration
ESOP: Employee Stock Ownership Plan SEC: U.S. Securities and Exchange Commission
Exchange Act: Securities Exchange Act of 1934 SOFR: Secured Overnight Financing Rate
FASB: Financial Accounting Standards Board U.S.: United States
FBCA: Florida Business Corporation Act USDA: United States Department of Agriculture
FDIA: Federal Deposit Insurance Act USDA B&I: United States Department of Agriculture Business and Industry
FDIC: Federal Deposit Insurance Corporation WARM: Weighted Average Remaining Life
2
BAYFIRST FINANCIAL CORP.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
Part I - Financial Information
Item 1. Financial Statements

June 30, 2025 December 31, 2024
(1)
ASSETS (Unaudited)
Cash and due from banks
$ 6,142 $ 4,499
Interest-bearing deposits in banks
71,157 73,289
Cash and cash equivalents
77,299 77,788
Time deposits in banks
1,280 2,270
Investment securities available for sale, at fair value (amortized cost: $ 33,410 and $ 40,279 at June 30, 2025 and December 31, 2024, respectively)
30,256 36,291
Investment securities held to maturity, at amortized cost, net of allowance for credit losses of $ 9 and $ 12 (fair value: $ 2,369 and $ 2,346 at June 30, 2025 and December 31, 2024, respectively)
2,491 2,488
Nonmarketable equity securities
6,551 4,526
Government guaranteed loans HFI, at fair value
90,687 60,833
Loans HFI, at amortized cost
1,035,112 1,005,726
Allowance for credit losses on loans ( 17,041 ) ( 15,512 )
Net loans HFI, at amortized cost
1,018,071 990,214
Accrued interest receivable
9,495 9,155
Premises and equipment, net
32,407 33,249
Loan servicing rights
16,074 16,534
Right-of-use operating lease assets
15,160 15,814
Bank owned life insurance
26,881 26,513
Other real estate owned 400 132
Other assets
16,815 12,490
Total assets
$ 1,343,867 $ 1,288,297
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Noninterest-bearing deposit accounts
$ 109,698 $ 101,743
Interest-bearing transaction accounts
238,215 256,793
Savings and money market deposit accounts
493,005 474,425
Time deposits
322,878 310,268
Total deposits
1,163,796 1,143,229
FHLB borrowings 40,000 —
Subordinated debentures
5,959 5,956
Notes payable
1,707 1,934
Accrued interest payable
1,148 1,036
Operating lease liabilities
13,819 14,510
Deferred income tax liabilities
895 301
Accrued expenses and other liabilities
8,320 10,411
Total liabilities
1,235,644 1,177,377
3
BAYFIRST FINANCIAL CORP.
CONSOLIDATED BALANCE SHEETS CONTINUED
(Dollars in thousands, except per share data)
June 30, 2025 December 31, 2024
(1)
Shareholders’ equity:
(Unaudited)
Preferred stock, Series A; no par value, 10,000 shares authorized, 6,395 shares issued and outstanding at June 30, 2025 and December 31, 2024; aggregate liquidation preference of $ 6,395
6,161 6,161
Preferred stock, Series B; no par value, 20,000 shares authorized, 3,210 shares issued and outstanding at June 30, 2025 and December 31, 2024; aggregate liquidation preference of $ 3,210
3,123 3,123
Preferred stock, Series C; no par value, 10,000 shares authorized, 6,446 shares issued and outstanding at June 30, 2025 and December 31, 2024; aggregate liquidation preference of $ 6,446
6,446 6,446
Common stock and additional paid-in capital; no par value, 15,000,000 shares authorized, 4,134,127 and 4,132,986 shares issued and outstanding at June 30, 2025 and December 31, 2024, respectively
54,739 54,764
Accumulated other comprehensive loss, net
( 2,368 ) ( 2,956 )
Unearned compensation
( 1,006 ) ( 752 )
Retained earnings
41,128 44,134
Total shareholders’ equity
108,223 110,920
Total liabilities and shareholders’ equity
$ 1,343,867 $ 1,288,297

(1) Derived from audited consolidated financial statements


See accompanying notes.

4
Table of Contents
BAYFIRST FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF INCOME (LOSS) (UNAUDITED)
(Dollars in thousands, except per share data)
Three Months Ended June 30, Six Months Ended June 30,
2025 2024 2025 2024
Interest income:
Loans, including fees
$ 21,459 $ 19,414 $ 41,210 $ 37,642
Interest-bearing deposits in banks and other
1,046 1,013 1,980 1,972
Total interest income
22,505 20,427 43,190 39,614
Interest expense:
Deposits
9,282 10,448 18,713 20,663
Borrowings
875 797 1,130 1,027
Total interest expense
10,157 11,245 19,843 21,690
Net interest income
12,348 9,182 23,347 17,924
Provision for credit losses
7,264 3,000 11,664 7,058
Net interest income after provision for credit losses
5,084 6,182 11,683 10,866
Noninterest income:
Loan servicing income, net
484 805 1,220 1,600
Gain on sale of government guaranteed loans, net 6,136 5,595 13,463 13,684
Service charges and fees
473 452 922 896
Government guaranteed loans fair value gain (loss), net
2,442 3,202 1,687 6,507
Government guaranteed loan packaging fees 577 1,022 1,293 2,429
Other noninterest income
683 577 961 805
Total noninterest income
10,795 11,653 19,546 25,921
Noninterest expense:
Salaries and benefits
8,113 7,829 16,111 15,834
Bonus, commissions, and incentives
262 659 333 2,230
Occupancy and equipment
1,579 1,273 3,213 2,383
Data processing
2,078 1,647 4,123 3,207
Marketing and business development
403 540 890 1,128
Professional services
782 877 1,514 2,226
Loan origination and collection
2,558 1,958 3,593 3,677
Employee recruiting and development
462 549 1,079 1,146
Regulatory assessments
352 279 691 561
Other noninterest expense
939 999 1,794 1,991
Total noninterest expense
17,528 16,610 33,341 34,383
Income (loss) from continuing operations before income taxes
( 1,649 ) 1,225 ( 2,112 ) 2,404
Income tax expense (benefit) from continuing operations
( 412 ) 349 ( 540 ) 645
Net income (loss) from continuing operations ( 1,237 ) 876 ( 1,572 ) 1,759
Loss from discontinued operations before income taxes — ( 14 ) — ( 92 )
Income tax benefit from discontinued operations — ( 4 ) — ( 23 )
Net loss from discontinued operations — ( 10 ) — ( 69 )
Net income (loss)
( 1,237 ) 866 ( 1,572 ) 1,690
Preferred stock dividends
386 386 771 771
Net income available to (loss attributable to) common shareholders
$ ( 1,623 ) $ 480 $ ( 2,343 ) $ 919
5
BAYFIRST FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF INCOME (LOSS) CONTINUED (UNAUDITED)
(Dollars in thousands, except per share data)
Three Months Ended June 30, Six Months Ended June 30,
2025 2024 2025 2024
Basic earnings (loss) per common share:
Continuing operations $ ( 0.39 ) $ 0.12 $ ( 0.57 ) $ 0.24
Discontinued operations — — — ( 0.02 )
Total basic earnings (loss) per common share
$ ( 0.39 ) $ 0.12 $ ( 0.57 ) $ 0.22
Diluted earnings (loss) per common share:
Continuing operations $ ( 0.39 ) $ 0.12 $ ( 0.57 ) $ 0.24
Discontinued operations — — — ( 0.02 )
Total diluted earnings (loss) per common share
$ ( 0.39 ) $ 0.12 $ ( 0.57 ) $ 0.22
See accompanying notes.
6
Table of Contents
BAYFIRST FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
(Dollars in thousands)
Three Months Ended June 30, Six Months Ended June 30,
2025 2024 2025 2024
Net income (loss)
$ ( 1,237 ) $ 866 $ ( 1,572 ) $ 1,690
Net unrealized gains (losses) on investment securities available for sale
35 102 834 ( 172 )
Deferred income tax (expense) benefit
( 25 ) ( 27 ) ( 246 ) 40
Other comprehensive income (loss), net
10 75 588 ( 132 )
Comprehensive income (loss)
$ ( 1,227 ) $ 941 $ ( 984 ) $ 1,558
See accompanying notes.
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BAYFIRST FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)
(Dollars in thousands, except per share data)
Preferred
Stock, Series A 		Preferred
Stock, Series B 		Preferred
Stock, Series C 		Common Stock, Additional
Paid-in Capital, and Unearned Compensation 		Accumulated
Other
Comprehensive
Income (Loss) 		Retained
Earnings 		Total
Balance at April 1, 2024
$ 6,161 $ 3,123 $ 6,446 $ 53,584 $ ( 3,188 ) $ 34,503 $ 100,629
Net income
— — — — — 866 866
Stock-based awards - common stock:
Restricted stock expense, net of tax impact
— — — 99 — — 99
Stock option expense
— — — 9 — — 9
Other comprehensive income, net — — — — 75 — 75
Dividends declared on:
Preferred stock
— — — — — ( 386 ) ( 386 )
Common stock ($ 0.08 per share)
— — — — — ( 330 ) ( 330 )
Balance at June 30, 2024
$ 6,161 $ 3,123 $ 6,446 $ 53,692 $ ( 3,113 ) $ 34,653 $ 100,962
Balance at April 1, 2025
$ 6,161 $ 3,123 $ 6,446 $ 53,651 $ ( 2,378 ) $ 43,082 $ 110,085
Net loss
— — — — — ( 1,237 ) ( 1,237 )
Stock-based awards - common stock:
Restricted stock expense, net of tax impact
— — — 13 — — 13
Stock option expense
— — — 69 — — 69
Other comprehensive income, net
— — — — 10 — 10
Dividends declared on:
—
Preferred stock
— — — — — ( 386 ) ( 386 )
Common stock ($ 0.08 per share)
— — — — — ( 331 ) ( 331 )
Balance at June 30, 2025
$ 6,161 $ 3,123 $ 6,446 $ 53,733 $ ( 2,368 ) $ 41,128 $ 108,223

See accompanying notes.
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BAYFIRST FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)
(Dollars in thousands, except per share data)
Preferred
Stock, Series A 		Preferred
Stock, Series B 		Preferred
Stock, Series C 		Common Stock, Additional
Paid-in Capital, and Unearned Compensation 		Accumulated
Other
Comprehensive
Income (Loss) 		Retained
Earnings 		Total
Balance at January 1, 2024
$ 6,161 $ 3,123 $ 6,446 $ 53,563 $ ( 2,981 ) $ 34,395 $ 100,707
Net income
— — — — — 1,690 1,690
Unearned ESOP shares allocation — — — ( 44 ) — — ( 44 )
Stock-based awards - common stock:
Restricted stock expense, net of tax impact
— — — 151 — — 151
Stock option expense
— — — 22 — — 22
Other comprehensive loss, net — — — — ( 132 ) — ( 132 )
Dividends declared on:
Preferred stock
— — — — — ( 771 ) ( 771 )
Common stock ($ 0.16 per share)
— — — — — ( 661 ) ( 661 )
Balance at June 30, 2024
$ 6,161 $ 3,123 $ 6,446 $ 53,692 $ ( 3,113 ) $ 34,653 $ 100,962
Balance at January 1, 2025
$ 6,161 $ 3,123 $ 6,446 $ 54,012 $ ( 2,956 ) $ 44,134 $ 110,920
Net loss
— — — — — ( 1,572 ) ( 1,572 )
Repurchase of common stock — — — ( 335 ) — — ( 335 )
Stock-based awards - common stock:
Restricted stock expense, net of tax impact
— — — ( 18 ) — — ( 18 )
Stock option expense
— — — 74 — — 74
Other comprehensive income, net
— — — — 588 — 588
Dividends declared on:
Preferred stock
— — — — — ( 771 ) ( 771 )
Common stock ($ 0.16 per share)
— — — — — ( 663 ) ( 663 )
Balance at June 30, 2025
$ 6,161 $ 3,123 $ 6,446 $ 53,733 $ ( 2,368 ) $ 41,128 $ 108,223

See accompanying notes.
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BAYFIRST FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)
Six Months Ended June 30,
2025 2024
Cash flows from operating activities:
Net income (loss) from continuing operations $ ( 1,572 ) $ 1,759
Net loss from discontinued operations — ( 69 )
Net income (loss)
( 1,572 ) 1,690
Adjustments to reconcile net income to net cash from operating activities:
Depreciation of fixed assets 1,108 1,180
Net securities premium amortization 32 56
Amortization of debt issuance costs 3 3
Amortization of premium on loans purchased, net 383 301
Provision for credit losses 11,664 7,058
Accretion of discount on unguaranteed loans
( 1,883 ) ( 1,429 )
Deferred tax expense (benefit) ( 189 ) 563
Origination of government guaranteed loans held for sale
— ( 2,226 )
Proceeds from sales of government guaranteed loans held for sale
146,321 218,446
Net gains on sales of government guaranteed loans
( 13,463 ) ( 13,684 )
Change in fair value of government guaranteed loans HFI, at fair value
( 1,687 ) ( 6,507 )
Amortization of loan servicing rights
3,675 2,881
Gain on other real estate owned ( 423 ) —
Loss on sale of repossessed assets 9 —
Non-qualified stock purchase plan expense
9 13
Stock based compensation expense
56 173
Income from bank owned life insurance
( 368 ) ( 350 )
Changes in:
Accrued interest receivable
( 340 ) ( 870 )
Other assets
( 3,170 ) ( 2,824 )
Accrued interest payable
112 290
Other liabilities
( 2,820 ) ( 2,339 )
Net cash provided by operating activities of continuing operations 137,457 202,494
Net cash used in operating activities of discontinued operations — ( 206 )
Net cash provided by operating activities 137,457 202,288
Cash flows from investing activities:
Purchase of investment securities available for sale
( 5,718 ) ( 4,458 )
Principal payments on investment securities available for sale
1,446 5,120
Principal payments on investment securities held to maturity
— 1
Call of investment securities held to maturity 11,109 —
Net purchase of nonmarketable equity securities
( 2,025 ) ( 2,362 )
Purchase of time deposits in banks ( 10 ) ( 11 )
Maturity of time deposits in banks 1,000 2,396
Purchase of government guaranteed loans — ( 812 )
Loan originations, net
( 202,226 ) ( 297,686 )
Purchase related to other real estate owned
— ( 1,229 )
Purchase of premises and equipment
( 266 ) ( 1,394 )
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BAYFIRST FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS CONTINUED (UNAUDITED)
(Dollars in thousands)
Six Months Ended June 30,
2025 2024
Proceeds on sales of other real estate owned 155 —
Proceeds on sales of repossessed assets 27 —
Net cash used in investing activities ( 196,508 ) ( 300,435 )
Cash flows from financing activities:
Net change in deposits
20,567 57,250
Net increase in short-term borrowings 40,000 45,000
Payments on notes payable
( 227 ) ( 227 )
Proceeds from issuance of common stock for benefit plans, net
( 9 ) ( 13 )
Common share buyback - redeemed stock ( 335 ) —
Unearned ESOP shares — ( 44 )
Dividends paid on common stock
( 663 ) ( 661 )
Dividends paid on preferred stock
( 771 ) ( 771 )
Net cash provided by financing activities
58,562 100,534
Net change in cash and cash equivalents
( 489 ) 2,387
Cash and cash equivalents, beginning of period
77,788 58,385
Cash and cash equivalents, end of period
$ 77,299 $ 60,772
Supplemental cash flow information
Interest paid
$ 19,731 $ 21,400
Income taxes paid
5,296 8
Supplemental noncash disclosures
Net change in unrealized holding gains (losses) on investment securities available for sale, net of tax effect 588 ( 132 )
Transfer of government guaranteed loans HFI to loans HFS 136,073 206,228
Transfer of loans HFI to OREO — 404
Recognition of right of use asset in exchange for new operating lease liabilities
— 296
See accompanying notes.
11
BAYFIRST FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands, except per share data)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include BayFirst Financial Corp. and its wholly owned subsidiary, BayFirst National Bank (“the Bank”), together referred to as “the Company”.
These unaudited consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles followed within the financial services industry for interim financial information and Article 8 of Regulation S-X. Accordingly, certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to these rules and regulations. The consolidated balance sheet as of December 31, 2024 has been derived from the audited consolidated financial statements of BayFirst Financial Corp. for that date.
The Company currently operates one business segment. In the third quarter of 2022, the Company discontinued the Bank’s nationwide residential mortgage loan segment. The operations of this segment are reported as discontinued operations.
In the opinion of management, all adjustments, consisting of normal and recurring items, considered necessary for a fair presentation of the consolidated financial statements for the interim periods have been included. All significant intercompany accounts and transactions have been eliminated in consolidation. Certain amounts reported in prior periods have been reclassified to conform to current year presentation. These reclassifications did not have a material effect on previously reported net income, shareholders’ equity, or cash flows.
Operating results for the six months ended June 30, 2025 are not necessarily indicative of the results that may be expected for the year ending December 31, 2025. These statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2024.
The Company’s significant accounting policies are described in Note 1 of the Notes to Consolidated Financial Statements for the year ended December 31, 2024 in the Company’s Annual Report filed on Form 10-K. For interim reporting purposes, the Company follows the same basic accounting policies and considers each interim period as an integral part of an annual period.
Use of Estimates : To prepare financial statements in conformity with GAAP, management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ. The most significant estimates relate to the ACL, government guaranteed loan servicing rights, and fair value of government guaranteed loans HFI.
Emerging Growth Company Status: The Company is expected to remain an "emerging growth company," as defined in the JOBS Act, through December 31, 2026. Section 107 of the JOBS Act provides that an emerging growth company can take advantage of an extended transition period when complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company has elected to take advantage of this extended transition period, which means these financial statements, as well as financial statements they file in the future for as long as the Company remains an emerging growth company, will be subject to all new or revised accounting standards generally applicable to private companies.
Contingencies : Due to the nature of their activities, the Company is at times engaged in various legal proceedings that arise in the course of normal business, some of which were outstanding as of June 30, 2025. Although the ultimate outcome of all claims and lawsuits outstanding as of June 30, 2025 cannot be ascertained at this time, it is the opinion of management that these matters, when resolved, will not have a material adverse effect on the Company’s results of operations or financial condition.
New Accounting Standards Not Yet Adopted :
In October 2023, the FASB issued ASU No. 2023-06 “Disclosure Improvements - Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative” (“ASU 2023-06”). ASU 2023-06 amends the ASC to incorporate certain disclosure requirements from SEC Release No. 33-10532 - Disclosure Update and Simplification that was issued in 2018. The effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. The Company does not believe this standard will have a material impact on its Consolidated Financial Statements.
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BAYFIRST FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands, except per share data)
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740) Improvements to Income Tax Disclosures ("ASU 2023-09"). This ASU was issued to enhance the transparency and decision usefulness of income tax disclosures. The ASU addresses investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. Retrospective application in all prior periods is permitted. The amendments in this standard will be effective for the Company for annual periods beginning after December 15, 2025. The Company is currently assessing the impact of this standard and does not expect it to have a material impact on the Company’s consolidated financial statements.
In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Disaggregation of Income Statement Expenses Disclosure (“ASU 2024-03”). This ASU was issued to improve the disclosures about public business entity’s expenses and address investor’s requests for more detailed information about the types of expenses (including purchases of inventory, employee compensation, depreciation, amortization, and depletion) in commonly presented expense captions. The amendments in this standard will be effective for the Company for the fiscal year ended December 31, 2027 and subsequent interim periods. The amendments should be applied either prospectively to the financial statements issued for reporting periods after the effective date of this update or retrospectively to any and all prior periods presented in the financial statements. We are currently evaluating the impact these changes may have on the Company’s consolidated financial statements.
NOTE 2 – DISCONTINUED OPERATIONS
During the third quarter of 2022, the Company discontinued the Bank’s nationwide residential mortgage loan production operations. The decision was based on a number of strategic priorities and other factors, including the precipitous decline in mortgage volumes and the uncertain outlook for mortgage lending over future periods. As a result of these actions, the Company classified the operations of the residential mortgage lending division as discontinued under ASC 205-20. There were no assets or liabilities at June 30, 2025 and December 31, 2024 or operating results for the current period.
The following presents operating results of the discontinued operations of the residential mortgage lending division for the three and six months ended June 30, 2024:
Three Months Ended June 30, Six Months Ended June 30,
2024 2024
Noninterest income $ 51 $ 51
Total net revenue 51 51
Noninterest expense 65 143
Loss from discontinued operations before income taxes ( 14 ) ( 92 )
Income tax benefit ( 4 ) ( 23 )
Net loss from discontinued operations $ ( 10 ) $ ( 69 )
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BAYFIRST FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands, except per share data)
NOTE 3 – INVESTMENT SECURITIES
The amortized costs, gross unrealized gains and losses, and estimated fair values of investment securities available for sale and investment securities held to maturity at June 30, 2025 and December 31, 2024 as well as the ACL for investment securities held to maturity at June 30, 2025 and December 31, 2024 are summarized as follows:
June 30, 2025 Amortized
Cost 		Gross
Unrealized
Gains 		Gross
Unrealized
Losses 		Fair
Value
Investment securities available for sale:
Asset-backed securities
$ 3,038 $ 2 $ ( 18 ) $ 3,022
Mortgage-backed securities:
U.S. Government-sponsored enterprises
5,507 — ( 496 ) 5,011
Collateralized mortgage obligations:
U.S. Government-sponsored enterprises
21,028 — ( 2,674 ) 18,354
Corporate bonds 3,837 32 — 3,869
Total investment securities available for sale
$ 33,410 $ 34 $ ( 3,188 ) $ 30,256
June 30, 2025 Amortized
Cost 		Gross
Unrealized
Gains 		Gross
Unrealized
Losses 		Fair
Value 		ACL
Investment securities held to maturity:
Corporate bonds $ 2,500 $ — $ ( 131 ) $ 2,369 $ 9
Total investment securities held to maturity
$ 2,500 $ — $ ( 131 ) $ 2,369 $ 9
December 31, 2024 Amortized
Cost 		Gross
Unrealized
Gains 		Gross
Unrealized
Losses 		Fair
Value
Investment securities available for sale:
Asset-backed securities
$ 5,029 $ — $ ( 39 ) $ 4,990
Mortgage-backed securities:
U.S. Government-sponsored enterprises
7,791 — ( 661 ) 7,130
Collateralized mortgage obligations:
U.S. Government-sponsored enterprises
18,627 — ( 3,341 ) 15,286
Corporate bonds 8,832 53 — 8,885
Total investment securities available for sale
$ 40,279 $ 53 $ ( 4,041 ) $ 36,291
December 31, 2024 Amortized
Cost 		Gross
Unrealized
Gains 		Gross
Unrealized
Losses 		Fair
Value 		ACL
Investment securities held to maturity:
Corporate bonds $ 2,500 $ — $ ( 154 ) $ 2,346 $ 12
Total investment securities held to maturity
$ 2,500 $ — $ ( 154 ) $ 2,346 $ 12
`
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BAYFIRST FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands, except per share data)
The amortized cost and fair value of investment securities as of June 30, 2025 are shown in the table below by contractual maturity. Actual timing may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.
Available for Sale Held to Maturity
Amortized
Cost 		Fair
Value 		Amortized
Cost 		Fair
Value
One to five years $ 3,837 $ 3,869 $ 1,500 $ 1,497
Five to ten years — — 1,000 872
Beyond ten years 29,573 26,387 — —
Total $ 33,410 $ 30,256 $ 2,500 $ 2,369
No ACL for investment securities AFS was needed at June 30, 2025 or December 31, 2024. Declines in the fair value of the AFS investment portfolio are believed by management to be unrelated to credit losses. When evaluating an investment for credit loss, management considers, among other things, the financial condition of the issuer through the review of credit ratings and, if necessary, corporate financial statements; adverse conditions specifically related to the security such as past due principal or interest; underlying assets that collateralize the debt security; other economic conditions and demographics; and the intent and ability of the Company to hold the investment until the loss position is recovered. Any unrealized losses were largely due to increases in market interest rates over the yields available at the time of purchase. The fair value is expected to recover as the bonds approach their maturity date or market yields for similar investments decline. Management does not believe any of the securities are impaired due to reasons of credit quality. At June 30, 2025 , the Company did not intend to sell and believed it was not likely to be required to sell the available for sale securities that were in a loss position prior to full recovery.
As of June 30, 2025, there were no past due principal and interest payments associated with the HTM securities. The Company monitors the credit quality of debt securities held to maturity quarterly through the use of credit ratings. However, the corporate bonds that are held to maturity have no credit rating and the corporate bonds in an unrealized loss position at June 30, 2025 are not material to the financial statements. There was an ACL of $ 9 on corporate bonds HTM at June 30, 2025 and $ 12 at December 31, 2024, which was calculated based on applying the long-term historical credit loss rate for similarly rated securities.
The following table presents the activity in the ACL for investment securities HTM by major security type for the three and six months ended June 30, 2025 and June 30, 2024:
For the Three Months Ended
For the Six Months Ended
For the Three Months Ended
For the Six Months Ended
Corporate Bonds June 30, 2025 June 30, 2024
Balance at beginning of period $ 12 $ 12 $ 14 $ 17
Provision for credit losses on HTM investment securities ( 3 ) ( 3 ) — ( 3 )
Investment securities charge-offs — — — —
Investment securities recoveries — — — —
Balance at end of period $ 9 $ 9 $ 14 $ 14
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BAYFIRST FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands, except per share data)
The following table summarizes investment securities with unrealized losses at June 30, 2025 aggregated by security type and length of time in a continuous unrealized loss position:
Less than 12 Months 12 Months or Longer Total
June 30, 2025 Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses Number of Securities
Investment securities available for sale:
Asset-backed securities $ — $ — $ 1,529 $ ( 18 ) $ 1,529 $ ( 18 ) 1
Mortgage-backed securities:
U.S. Government-sponsored enterprises 2,408 ( 17 ) 2,603 ( 479 ) 5,011 ( 496 ) 3
Collateralized mortgage obligations:
U.S. Government-sponsored enterprises 3,231 ( 1 ) 15,123 ( 2,673 ) 18,354 ( 2,674 ) 8
Total investment securities available for sale $ 5,639 $ ( 18 ) $ 19,255 $ ( 3,170 ) $ 24,894 $ ( 3,188 ) 12
Investment securities held to maturity:
Corporate bonds $ — $ — $ 2,369 $ ( 131 ) $ 2,369 $ ( 131 ) 3
Total investment securities held to maturity $ — $ — $ 2,369 $ ( 131 ) $ 2,369 $ ( 131 ) 3
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BAYFIRST FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands, except per share data)
The following table summarizes investment securities with unrealized losses at December 31, 2024 aggregated by security type and length of time in a continuous unrealized loss position:
Less than 12 Months 12 Months or Longer Total
December 31, 2024 Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses Number of Securities
Investment securities available for sale:
Asset-backed securities $ 1,540 $ ( 3 ) $ 3,450 $ ( 36 ) $ 4,990 $ ( 39 ) 3
Mortgage-backed securities:
U.S. Government-sponsored enterprises 4,412 ( 51 ) 2,718 ( 610 ) 7,130 ( 661 ) 3
Collateralized mortgage obligations:
U.S. Government-sponsored enterprises — — 15,286 ( 3,341 ) 15,286 ( 3,341 ) 7
Corporate bonds — — — — — — 0
Total investment securities available for sale $ 5,952 $ ( 54 ) $ 21,454 $ ( 3,987 ) $ 27,406 $ ( 4,041 ) 13
Investment securities held to maturity:
Corporate bonds $ 416 $ ( 84 ) $ 1,930 $ ( 70 ) $ 2,346 $ ( 154 ) 3
Total investment securities held to maturity $ 416 $ ( 84 ) $ 1,930 $ ( 70 ) $ 2,346 $ ( 154 ) 3
No investment securities were pledged as of June 30, 2025 or December 31, 2024, and there were no sales of investment securities for the three or six months ended June 30, 2025 or June 30, 2024.
NOTE 4 – LOANS
Loans HFI, excluding loans measured at fair value, at June 30, 2025 and December 31, 2024 were as follows:
June 30,
2025 		December 31,
2024
Real estate:
Residential
$ 356,559 $ 330,870
Commercial
292,923 305,721
Construction and land
53,187 32,914
Commercial and industrial
223,239 226,522
Commercial and industrial - PPP
191 941
Consumer and other
93,333 93,826
Loans HFI, excluding loans measured at fair value, gross
1,019,432 990,794
Deferred loan costs, net
21,118 19,499
Discount on government guaranteed loans (1)
( 8,780 ) ( 8,306 )
Premium on loans purchased, net
3,342 3,739
Allowance for credit losses
( 17,041 ) ( 15,512 )
Net loans HFI, excluding loans measured at fair value
$ 1,018,071 $ 990,214
(1) The Company allocates the retained portion of loans sold based on relative fair value of the retained portion and the sold portion, which results in a discount on the retained portion.
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BAYFIRST FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands, except per share data)
NOTE 5 - ALLOWANCE FOR CREDIT LOSSES
The following schedules present the activity in the ACL by loan segment for the three and six months ended June 30, 2025 and June 30, 2024:
Three Months Ended Real Estate - Residential Real Estate - Commercial Real Estate - Construction and Land Commercial and Industrial Consumer and Other Total
June 30, 2025
Beginning Balance $ 1,148 $ 2,161 $ 809 $ 10,378 $ 2,017 $ 16,513
Charge-offs ( 835 ) ( 301 ) — ( 5,061 ) ( 958 ) ( 7,155 )
Recoveries 7 2 — 270 77 356
Provision 859 273 38 5,519 638 7,327
Ending Balance $ 1,179 $ 2,135 $ 847 $ 11,106 $ 1,774 $ 17,041
June 30, 2024
Beginning Balance $ 2,186 $ 1,758 $ 663 $ 6,840 $ 2,459 $ 13,906
Charge-offs — ( 60 ) — ( 2,599 ) ( 771 ) ( 3,430 )
Recoveries — 2 — 111 56 169
Provision ( 952 ) 164 ( 108 ) 3,362 732 3,198
Ending Balance $ 1,234 $ 1,864 $ 555 $ 7,714 $ 2,476 $ 13,843
Real Estate - Residential Real Estate - Commercial Real Estate - Construction and Land Commercial and Industrial Consumer and Other Total
Six Months Ended
June 30, 2025
Beginning Balance $ 1,181 $ 2,096 $ 507 $ 9,607 $ 2,121 $ 15,512
Charge-offs ( 842 ) ( 431 ) — ( 8,027 ) ( 1,451 ) ( 10,751 )
Recoveries 27 2 — 463 159 651
Provision 813 468 340 9,063 945 11,629
Ending Balance $ 1,179 $ 2,135 $ 847 $ 11,106 $ 1,774 $ 17,041
June 30, 2024
Beginning Balance $ 1,987 $ 1,818 $ 519 $ 6,579 $ 2,594 $ 13,497
Charge-offs — ( 60 ) — ( 5,523 ) ( 1,749 ) ( 7,332 )
Recoveries — 4 — 241 174 419
Provision ( 753 ) 102 36 6,417 1,457 7,259
Ending Balance $ 1,234 $ 1,864 $ 555 $ 7,714 $ 2,476 $ 13,843
The ACL represents management’s best estimate of future lifetime expected losses on its HFI loan portfolio. The Company calculates its ACL by estimating expected credit losses on a collective basis for loans that share similar risk characteristics. Loans that do not share similar risk characteristics with other loans are evaluated for credit losses on an individual basis. The Company uses a combination of modeled and non-modeled approaches that incorporates current and future economic conditions to estimate lifetime expected losses on a collective basis. Individually evaluated loans are evaluated for impairment and a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the rate implicit in the original loan agreement or at the fair value of collateral adjusted for selling costs as appropriate if repayment is expected solely from the collateral.
The Company uses reasonable and supportable forecasts that are developed with internal and external data. These are updated quarterly by management and utilize data from the FOMC’s median forecasts of change in national GDP and of national unemployment. The FOMC’s forecast of GDP and unemployment for the next calendar year is used in conjunction
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BAYFIRST FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands, except per share data)
with the most recent 4 quarters of historical data from FRED (Federal Reserve Economic Data) to determine changes in certain qualitative factors used in calculating loss rates.
See Note 1 and Note 5 of the Notes to Consolidated Financial Statements for further discussion of the Company’s ACL methodology in the December 31, 2024 Form 10-K.
The Company maintains a separate ACL for its off-balance sheet unfunded loan commitments. The ACL on unfunded loan commitments is based on estimates of probability that these commitments will be drawn upon according to historical utilization experience, expected loss severity and loss rates as determined for pooled funded loans. As of June 30, 2025 and December 31, 2024, the ACL for unfunded commitments recorded in other liabilities was $ 554 and $ 516 , respectively.
The following table presents the activity in the ACL for unfunded commitments for the three and six months ended June 30, 2025 and June 30, 2024:
For the Three Months Ended
For the Six Months Ended
June 30, 2025 June 30, 2024 June 30, 2025 June 30, 2024
Balance at beginning of period $ 614 $ 839 $ 516 $ 839
Provision for credit losses on unfunded commitments ( 60 ) ( 198 ) 38 ( 198 )
Unfunded commitments charge-offs — — — —
Unfunded commitments recoveries — — — —
Balance at end of period $ 554 $ 641 $ 554 $ 641
The following tables present the principal balance of nonaccrual loans and loans past due over 89 days still on accrual by loan segment at June 30, 2025 and December 31, 2024. In the following tables, the principal balance does not include the government guaranteed balance or loans measured at fair value.
June 30, 2025
Nonaccrual with no ACL (1)
Nonaccrual with ACL (1)
Loans Past Due Over
89 Days Still Accruing (1)
Real estate - residential
$ — $ 6,995 $ 70
Real estate - commercial
2,709 1,241 —
Real estate - construction and land
— 815
Commercial and industrial
290 1,963 —
Consumer and other
— 13 91
Total
$ 2,999 $ 11,027 $ 161
December 31, 2024
Nonaccrual with no ACL (1)
Nonaccrual with ACL (1)
Loans Past Due Over
89 Days Still Accruing (1)
Real estate - residential
$ — $ 5,818 $ —
Real estate - commercial
2,709 2,052 —
Commercial and industrial
— 2,696 —
Consumer and other — — 295
Total
$ 2,709 $ 10,566 $ 295
(1) Excludes loans measured at fair value. See Note 6. Fair Value for additional information .
A financial asset is considered collateral dependent when the debtor is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral. Expected credit losses for collateral dependent loans are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate. Significant quarter over quarter changes are reflective of changes in nonaccrual status and not necessarily associated with
19
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BAYFIRST FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands, except per share data)
credit quality indicators like appraised value. The following tables present the principal balance, including government guaranteed balances, of individually analyzed collateral dependent loans by loan portfolio segment as of June 30, 2025 and December 31, 2024:
June 30, 2025 Type of Collateral ACL
Real Estate
Real estate - commercial $ 2,709 $ —
Commercial and industrial 1,160 —
Total $ 3,869 $ —
.
December 31, 2024 Type of Collateral ACL
Real Estate
Real estate - commercial $ 2,709 $ —

The following table presents the aging of the principal balance of past due loans HFI at amortized cost at June 30, 2025 by loan segment:
30-89 Days
Past Due 		Greater Than
89 Days
Past Due
Total
Past Due
Loans Not
Past Due (1)
Total
Loans
Real estate - residential
$ 2,720 $ 6,716 $ 9,436 $ 347,123 $ 356,559
Real estate - commercial
3,145 3,450 6,595 286,328 292,923
Real estate - construction and land
— 815 815 52,372 53,187
Commercial and industrial
2,747 1,832 4,579 218,660 223,239
Commercial and industrial - PPP
— — — 191 191
Consumer and other
512 104 616 92,717 93,333
Total
$ 9,124 $ 12,917 $ 22,041 $ 997,391 $ 1,019,432
(1) $ 1,994 of balances 30-89 days past due and $ 7,337 of balances greater than 89 days past due are reported as Loans Not Past Due as a result of the government guarantee. Of those loans, $ 157 of commercial and industrial PPP loans were delinquent as of June 30, 2025.
The following table presents the aging of the principal balance of past due loans HFI at amortized cost at December 31, 2024 by loan segment:
30-89 Days
Past Due 		Greater Than
89 Days
Past Due
Total
Past Due
Loans Not
Past Due (1)
Total
Loans
Real estate - residential
$ 1,049 $ 5,818 $ 6,867 $ 324,003 $ 330,870
Real estate - commercial
1,857 4,492 6,349 299,372 305,721
Real estate - construction and land
— — — 32,914 32,914
Commercial and industrial
3,572 1,561 5,133 221,389 226,522
Commercial and industrial - PPP
— — — 941 941
Consumer and other
417 295 712 93,114 93,826
Total
$ 6,895 $ 12,166 $ 19,061 $ 971,733 $ 990,794
(1) $ 10,429 of balances 30-89 days past due and $ 3,407 of balances greater than 89 days past due are reported as Loans Not Past Due as a result of the government guarantee. Of those loans, $ 135 of commercial and industrial PPP loans were delinquent as of December 31, 2024.
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BAYFIRST FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands, except per share data)
Modifications to Borrowers Experiencing Financial Difficulty
For the three and six months ended June 30, 2025 and the year ended December 31, 2024 , there were no loan modifications to borrowers experiencing financial difficulty and no loan modifications that subsequently defaulted during the period.
21
BAYFIRST FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands, except per share data)
Credit Quality Indicators
Internal risk-rating grades are assigned to loans by lending, credit administration or loan review personnel, based on an analysis of the financial and collateral strength and other credit attributes underlying each loan. Management analyzes the resulting ratings, as well as other statistics and factors such as delinquency, to track the migration performance of the portfolio balances. This analysis is performed at least annually. The Bank uses the following definitions for its risk ratings:
Pass – Loans properly approved, documented, collateralized, and performing which do not reflect an abnormal credit risk.
Special Mention – These credits have potential weaknesses that may, if not checked or corrected, weaken the asset, or inadequately protect the Company’s position at some future date. These assets pose elevated risk, but their weakness does not yet justify a “Substandard” classification.
Substandard – These loans are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.
Doubtful – These loans have all the weaknesses inherent in those classified as Substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions, and values, highly questionable and improbable.

22
BAYFIRST FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands, except per share data)
The table below sets forth principal balance for the commercial loan portfolio disaggregated by loan segment based on internally assigned risk ratings at June 30, 2025 and gross write offs for the six months ended June 30, 2025:
Revolving Revolving
Loans Loans
Term Loans Amortized Cost Basis by Origination Year Amortized Converted
2025 2024 2023 2022 2021 Prior Cost Basis to Term Total
Real estate - commercial
Risk Rating
Pass $ 18,601 $ 50,206 $ 49,224 $ 66,707 $ 43,325 $ 46,662 $ 3,090 $ — $ 277,815
Special mention — 81 499 1,886 534 186 15 — 3,201
Substandard — 2,735 2,841 1,473 3,366 1,492 — — 11,907
Doubtful — — — — — — — — —
Total real estate - commercial loans, at amortized cost, gross 18,601 53,022 52,564 70,066 47,225 48,340 3,105 — 292,923
Gross write offs — — 130 216 — 85 — — 431
Real estate - construction and land
Risk Rating
Pass 3,892 9,945 18,125 10,699 1,074 — — — 43,735
Special mention — — — — — — — — —
Substandard — — 9,452 — — — — — 9,452
Doubtful — — — — — — — — —
Total real estate - construction and land loans, at amortized cost, gross 3,892 9,945 27,577 10,699 1,074 — — — 53,187
Gross write offs — — — — — — — — —
Commercial and industrial
Risk Rating
Pass 42,803 56,639 38,211 29,943 7,844 27,484 7,777 — 210,701
Special mention — 554 782 1,217 196 517 — — 3,266
Substandard — 284 2,999 1,935 316 3,383 116 — 9,033
Doubtful — — 43 102 8 86 — — 239
Total commercial and industrial loans, at amortized cost, gross 42,803 57,477 42,035 33,197 8,364 31,470 7,893 — 223,239
Gross write offs 17 1,575 2,915 1,719 273 1,495 33 — 8,027
23
BAYFIRST FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands, except per share data)
Revolving Revolving
Loans Loans
Term Loans Amortized Cost Basis by Origination Year Amortized Converted
2025 2024 2023 2022 2021 Prior Cost Basis to Term Total
Commercial and industrial - PPP
Risk Rating
Pass — — — — 135 56 — — 191
Special mention — — — — — — — — —
Substandard — — — — — — — — —
Doubtful — — — — — — — — —
Total commercial and industrial - PPP loans, at amortized cost, gross — — — — 135 56 — — 191
Gross write offs — — — — — — — — —
The table below sets forth principal balance for the commercial loan portfolio disaggregated by loan segment based on internally assigned risk ratings at December 31, 2024 and gross write offs for the year ended December 31, 2024 :
Revolving Revolving
Loans Loans
Term Loans Amortized Cost Basis by Origination Year Amortized Converted
2024 2023 2022 2021 Prior Cost Basis to Term Total
Real estate - commercial
Risk Rating
Pass $ 58,597 $ 67,244 $ 67,994 $ 46,851 $ 52,733 $ 2,430 $ — $ 295,849
Special mention 153 919 2,890 538 489 15 — 5,004
Substandard — 2,971 857 99 941 — — 4,868
Doubtful — — — — — — — —
Total real estate - commercial loans, at amortized cost, gross 58,750 71,134 71,741 47,488 54,163 2,445 — 305,721
Gross write offs — — 60 — — — — 60
24
BAYFIRST FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands, except per share data)
Revolving Revolving
Loans Loans
Term Loans Amortized Cost Basis by Origination Year Amortized Converted
2024 2023 2022 2021 Prior Cost Basis to Term Total
Real estate - construction and land
Risk Rating
Pass 1,947 18,261 9,891 2,815 — — — 32,914
Special mention — — — — — — — —
Substandard — — — — — — — —
Doubtful — — — — — — — —
Total real estate - construction and land loans, at amortized cost, gross 1,947 18,261 9,891 2,815 — — — 32,914
Gross write offs — — — — — — — —
Commercial and industrial
Risk Rating
Pass 84,402 40,301 32,982 10,715 36,641 8,778 — 213,819
Special mention 189 1,991 3,003 682 3,696 — — 9,561
Substandard 31 1,464 725 — 626 116 — 2,962
Doubtful — 93 — 7 80 — — 180
Total commercial and industrial loans, at amortized cost, gross 84,622 43,849 36,710 11,404 41,043 8,894 — 226,522
Gross write offs — 3,286 3,210 361 4,099 — — 10,956
Commercial and industrial - PPP
Risk Rating
Pass — — — 135 302 — — 437
Special mention — — — — 504 — — 504
Substandard — — — — — — — —
Doubtful — — — — — — — —
Total commercial and industrial - PPP loans, at amortized cost, gross — — — 135 806 — — 941
Gross write offs — — — — — — — —
25
BAYFIRST FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands, except per share data)
The Company considers the performance of the loan portfolio to determine its impact on the ACL. For residential and consumer loan classes, the Company evaluates credit quality based on the aging status of the loan by payment activity. The following table presents the principal balance at June 30, 2025 of residential and consumer loans based on payment activity as well as gross write offs for the six months ended June 30, 2025.
Revolving Revolving
Loans Loans
Term Loans Amortized Cost Basis by Origination Year Amortized Converted
2025 2024 2023 2022 2021 Prior Cost Basis to Term Total
Real estate - residential
Payment Performance
Performing $ 7,627 $ 35,026 $ 24,370 $ 66,892 $ 21,286 $ 15,989 $ 178,304 $ — $ 349,494
Nonperforming — — 772 1,609 1,454 2,402 828 — 7,065
Total real estate - residential loans, at amortized cost, gross 7,627 35,026 25,142 68,501 22,740 18,391 179,132 — 356,559
Gross write offs — — — — — — 842 — 842
Consumer and other
Payment Performance
Performing 9,814 54,786 20,059 6,343 277 51 1,899 — 93,229
Nonperforming — — 13 91 — — — — 104
Total consumer and other loans, at amortized cost, gross 9,814 54,786 20,072 6,434 277 51 1,899 — 93,333
Gross write offs 20 611 174 611 6 5 24 — 1,451
The following table presents the principal balance at December 31, 2024 of residential and consumer loans based on payment activity as well as gross write offs for the year ended December 31, 2024.
Revolving Revolving
Loans Loans
Term Loans Amortized Cost Basis by Origination Year Amortized Converted
2024 2023 2022 2021 Prior Cost Basis to Term Total
Real estate - residential
Payment Performance
Performing $ 29,086 $ 26,473 $ 65,598 $ 32,235 $ 26,395 $ 145,265 $ — $ 325,052
Nonperforming — — 3,565 293 — 1,960 — 5,818
Total real estate - residential loans, at amortized cost, gross 29,086 26,473 69,163 32,528 26,395 147,225 — 330,870
Gross write offs — — — — 20 — — 20
26
BAYFIRST FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands, except per share data)
Revolving Revolving
Loans Loans
Term Loans Amortized Cost Basis by Origination Year Amortized Converted
2024 2023 2022 2021 Prior Cost Basis to Term Total
Consumer and other
Payment Performance
Performing 59,591 21,860 9,840 603 53 1,584 — 93,531
Nonperforming 84 — 186 — — 25 — 295
Total consumer and other loans, at amortized cost, gross 59,675 21,860 10,026 603 53 1,609 — 93,826
Gross write offs — 236 2,351 35 316 — — 2,938
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BAYFIRST FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands, except per share data)
NOTE 6 – FAIR VALUE
Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:
Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access at the measurement date.
Level 2 – Significant other observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, and other inputs that are observable or can be corroborated by observable market data.
Level 3 – Significant unobservable inputs that reflect a Company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.
A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The following is a description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy.
Investment Securities Available for Sale : The fair values of investment securities available for sale are determined by matrix pricing, which is a mathematical technique used to value debt securities without relying exclusively on quoted prices for the specific investment securities, but rather by relying on the investment securities’ relationship to other benchmark quoted investment securities (Level 2). Management obtains the fair values of investment securities available for sale on a monthly basis from a third party pricing service.
Government Guaranteed Loans HFI, at Fair Value : The Company has elected to account for certain government guaranteed loans HFI at fair value. Fair value is calculated based on the present value of estimated future payments (Level 3). The valuation model uses interest rate, prepayment speed, and default rate assumptions that market participants would use in estimating future payments. Whenever available, the present value is validated against available market data.
Individually Evaluated Loans : Periodically, the Company records nonrecurring adjustments to the carrying value of loans based on fair value measurements for partial charge-offs of the uncollectible portions of those loans. Nonrecurring adjustments can also include certain impairment amounts for collateral-dependent loans calculated when establishing the ACL. Loans are considered collateral dependent when the Company has determined that foreclosure of the collateral is probable or when a borrower is experiencing financial difficulty and the loan is expected to be repaid substantially through the operation or sale of collateral. A collateral dependent loan’s ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the loan as of the measurement date. Fair value of the loan’s collateral is determined by appraisals, independent valuation, or management’s estimation of fair value which is then adjusted for the cost related to liquidation of the collateral. Collateral dependent loans are generally classified as Level 3 based on management’s judgment and estimation.
Other Real Estate Owned : Other real estate owned assets are recorded at fair value less estimated costs to sell upon the transfer of a loan to other real estate owned and, subsequently, continue to be measured and carried at fair value. The fair value of other real estate owned is based on recent real estate appraisals which are generally updated annually. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales, cost, and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.
Appraisals for other real estate owned are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by either the Company or the Company's appraisal services vendor. Once received, management reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics. Management compares the best-efforts price of collateral that has been sold to the most recent appraised value to determine what additional adjustment should be made to the appraised value to arrive at fair value.
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Table of Contents
BAYFIRST FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands, except per share data)
Repossessed Assets : Repossessed assets are recorded at fair value less estimated costs to sell upon the transfer of a loan to repossessed assets . The fair value of a repossessed asset, upon initial recognition, is estimated using a market approach or based on observable market data, such as a current appraisal, recent sale price of similar assets, or assumptions specific to the individual property or equipment, such as management applied discounts used to further reduce values to a net realizable value when observable inputs become stale.
Assets measured at fair value on a recurring basis at June 30, 2025 are summarized below. There were no liabilities carried at fair value on a recurring basis at June 30, 2025.
Quoted Prices in
Active Markets
for Identical Assets
(Level 1) 		Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
Financial assets
Investment securities available for sale
$ — $ 30,256 $ — $ 30,256
Government guaranteed loans HFI, at fair value
— — 90,687 90,687
Assets measured at fair value on a recurring basis at December 31, 2024 are summarized below. There were no liabilities carried at fair value on a recurring basis at December 31, 2024.
Quoted Prices in
Active Markets
for Identical Assets
(Level 1) 		Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
Financial assets
Investment securities available for sale
$ — $ 36,291 $ — $ 36,291
Government guaranteed loans HFI, at fair value
— — 60,833 60,833
There were no transfers between levels for assets and liabilities recorded at fair value on a recurring basis during the reported periods.
Financial Instruments Recorded Using Fair Value Option
The Company elected the fair value option for certain of its government guaranteed loans HFI as the Company believed that fair value was the best indicator of the resolution of those loans at that time. Depending on market conditions and liquidity needs of the Company, management determines whether it is advantageous to hold or sell government guaranteed loans on a loan-by-loan basis. The portion of these loans guaranteed by the government are generally readily marketable in the secondary market and the portion of the loans that are not guaranteed may be sold periodically to other third party financial institutions. Interest income on these loans is recorded based on the contractual term of the loan and in accordance with the Company’s policy on other loans HFI.
29
Table of Contents
BAYFIRST FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands, except per share data)
The following tables provide more information about the fair value carrying amount and the unpaid principal outstanding of HFI government guaranteed loans measured at fair value at June 30, 2025 and December 31, 2024.
June 30, 2025
Total Loans
Nonaccrual (1)
90 Days or More Past Due (1)
Fair Value Carrying Amount Unpaid Principal Balance Fair Value Gain (Loss) Fair Value Carrying Amount Unpaid Principal Balance Fair Value Gain (Loss) Fair Value Carrying Amount Unpaid Principal Balance Fair Value Gain (Loss)
Real estate - commercial
$ 16,408 $ 16,293 $ 115 $ 163 $ 167 $ ( 4 ) $ — $ — $ —
Commercial and industrial
74,279 75,236 ( 957 ) 1,267 5,374 ( 4,107 ) — — —
Total loans HFI, at fair value $ 90,687 $ 91,529 $ ( 842 ) $ 1,430 $ 5,541 $ ( 4,111 ) $ — $ — $ —
December 31, 2024
Total Loans
Nonaccrual (1)
90 Days or More Past Due (1)
Fair Value Carrying Amount Unpaid Principal Balance Fair Value Gain (Loss) Fair Value Carrying Amount Unpaid Principal Balance Fair Value Gain (Loss) Fair Value Carrying Amount Unpaid Principal Balance Fair Value Gain (Loss)
Real estate - commercial
$ 15,136 $ 15,075 $ 61 $ — $ — $ — $ — $ — $ —
Commercial and industrial
45,697 46,981 ( 1,284 ) 1,491 2,630 ( 1,139 ) — — —
Total loans HFI, at fair value $ 60,833 $ 62,056 $ ( 1,223 ) $ 1,491 $ 2,630 $ ( 1,139 ) $ — $ — $ —
(1) The nonaccrual and 90 days or more past due loan balances do not include the portion of government guaranteed loan balances.
The total amount of net gains and losses from changes in fair value and interest income included in earnings for the six months ended June 30, 2025 and June 30, 2024 for government guaranteed loans HFI, at fair value, were as follows:
Six Months Ended June 30,
2025 2024
Interest income $ 3,447 $ 4,623
Change in fair value 1,687 6,507
Total gain, net
$ 5,134 $ 11,130
Changes in fair value for government guaranteed loans HFI, at fair value, were included in Government guaranteed loans fair value gain (loss), net on the Consolidated Statements of Income.
30
Table of Contents
BAYFIRST FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands, except per share data)
The table below presents a reconciliation of government guaranteed loans HFI, at fair value, which were valued on a recurring basis and used significant unobservable inputs (Level 3) for the six months ended June 30, 2025 and June 30, 2024:
Six Months Ended June 30,
2025 2024
Balance of government guaranteed loans HFI at fair value, beginning of period
$ 60,833 $ 91,508
New government guaranteed originations at fair value 44,349 74,210
Loans sold ( 12,488 ) ( 84,279 )
Principal payments
( 3,694 ) ( 1,804 )
Total fair value gains (losses) during the period
1,687 6,507
Balance of government guaranteed loans HFI at fair value, end of period
$ 90,687 $ 86,142
The Company’s valuation of government guaranteed loans HFI, at fair value, was supported by an analysis prepared by an independent third party and approved by management. The approach to determine fair value involved several steps: 1) identifying each loan’s unique characteristics, including balance, payment type, term, coupon, age, and principal and interest payment; 2) projecting these loan level characteristics for the life of each loan; and 3) performing discounted cash flow modeling.
The following table provides information about the valuation techniques and unobservable inputs used in the valuation of government guaranteed loans HFI that fall within Level 3 of the fair value hierarchy at June 30, 2025 and December 31, 2024:
Fair Value Valuation
Technique 		Unobservable Inputs Range (Weighted Average)
June 30, 2025
Government guaranteed loans HFI, at fair value
$ 90,687 Discounted Discount rate
5.59 %- 9.09 % ( 9.00 %)
cash flow Conditional prepayment rate
0.00 %- 20.14 % ( 10.27 %)
December 31, 2024
Government guaranteed loans HFI, at fair value
$ 60,833 Discounted Discount rate
6.07 %- 9.57 % ( 8.69 %)
cash flow Conditional prepayment rate
0.00 %- 18.13 % ( 11.61 %)
The significant unobservable inputs impacting the fair value measurement of government guaranteed loans HFI, at fair value, include discount rates and conditional prepayment rates. Increases in discount rates or prepayment rates would result in a lower fair value measurement. Although the prepayment rate and discount rate are not directly interrelated, they generally move in opposite directions. The discount rates and conditional prepayment rates were weighted by the relative principal balance outstanding of these loans.
Assets measured at fair value on a nonrecurring basis (Level 3) at June 30, 2025 are summarized below:
Fair Value Valuation Technique(s) Significant
Unobservable
Input(s) 		Discount % Amount
Individually evaluated loans
$ 3,869 Discounted appraisals, estimated net realizable value of collateral Collateral discounts 10 %
Other real estate owned $ 400 Discounted appraisals, estimated net realizable value of collateral Collateral discounts 10 %
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BAYFIRST FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands, except per share data)
Assets measured at fair value on a nonrecurring basis (Level 3) at December 31, 2024 are summarized below:
Fair Value Valuation Technique(s) Significant
Unobservable
Input(s) 		Discount % Amount
Individually evaluated loans
$ 2,709 Discounted appraisals, estimated net realizable value of collateral Collateral discounts
10 %
Other real estate owned $ 132 Discounted appraisals, estimated net realizable value of collateral Collateral discounts 10 %
Repossessed assets $ 36 Discounted appraisals, estimated net realizable value of collateral Collateral discounts 10 %
Fair Value of Financial Instruments
The carrying values and estimated fair values of financial instruments not carried at fair value, at June 30, 2025 and December 31, 2024 are as follows:
June 30, 2025 December 31, 2024
Level Carrying Value Fair Value Carrying Value Fair Value
Assets:
Cash and cash equivalents
1 $ 77,299 $ 77,299 $ 77,788 $ 77,788
Time deposits in banks
2 1,280 1,267 2,270 2,212
Investment securities held to maturity
2 2,491 2,369 2,488 2,346
Nonmarketable equity securities, at cost
2 6,551 6,551 4,526 4,526
Loans HFI, at amortized cost
3 1,018,071 1,030,879 990,214 986,406
Accrued interest receivable
2 9,495 9,495 9,155 9,155
Government guaranteed loan servicing rights
3 16,074 19,499 16,534 19,473
Liabilities:
Noninterest-bearing deposit accounts
2 $ 109,698 $ 109,698 $ 101,743 $ 101,743
Interest-bearing transaction accounts
2 238,215 238,215 256,793 256,793
Savings and money market deposit accounts
2 493,005 493,005 474,425 474,425
Time deposits
2 322,878 322,878 310,268 307,925
FHLB borrowings 2 40,000 40,000 — —
Subordinated debentures
2 5,959 5,537 5,956 5,511
Notes payable
2 1,707 1,693 1,934 1,919
Accrued interest payable
2 1,148 1,148 1,036 1,036
NOTE 7 – GOVERNMENT GUARANTEED LOAN SERVICING ACTIVITIES
At June 30, 2025 and December 31, 2024, the principal balance of government guaranteed loans, excluding PPP loans, retained by the Company was $ 439,931 and $ 425,963 , respectively, of which $ 152,666 and $ 148,543 represented the guaranteed portion of the loans. Loans serviced for others are not included in the accompanying Consolidated Balance Sheets. The unpaid principal balances of government guaranteed loans serviced for others requiring recognition of a servicing asset were $ 1,064,852 and $ 1,056,665 at June 30, 2025 and December 31, 2024, respectively.
32
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BAYFIRST FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands, except per share data)
Activity for government guaranteed loan servicing rights for the three and six months ended June 30, 2025 and June 30, 2024 follows:
Three Months Ended Six Months Ended
June 30, 2025 June 30, 2024 June 30, 2025 June 30, 2024
Beginning of period
$ 16,460 $ 15,742 $ 16,534 $ 14,959
Additions
1,563 1,514 3,215 3,692
Amortization
( 1,949 ) ( 1,486 ) ( 3,675 ) ( 2,881 )
End of period
$ 16,074 $ 15,770 $ 16,074 $ 15,770
The fair value of government guaranteed loan servicing rights was $ 19,499 and $ 19,473 at June 30, 2025 and December 31, 2024, respectively. Fair value was determined using a weighted average discount rate of 14.25 % and a weighted average prepayment speed of 12.23 % at June 30, 2025. Fair value was determined using a weighted average discount rate of 14.63 % and a weighted average prepayment speed of 11.97 % at December 31, 2024. The government guaranteed loan servicing rights are amortized over the life of a loan on a loan-by-loan basis.
The following table presents the components of net gain on sale of government guaranteed loans for the three and six months ended June 30, 2025 and June 30, 2024:
Three Months Ended Six Months Ended
June 30, 2025 June 30, 2024 June 30, 2025 June 30, 2024
Gain on sale of guaranteed portion of government guaranteed loans
$ 4,573 $ 4,081 $ 10,248 $ 9,992
Fair value of loan servicing rights created
1,563 1,514 3,215 3,692
Gain on sale of government guaranteed loans, net
$ 6,136 $ 5,595 $ 13,463 $ 13,684
NOTE 8 – LEASES
On December 23, 2024, the Bank agreed to a sale-leaseback transaction with Mountainseed Real Estate Services, LLC (the “Buyer”), pursuant to which the Bank sold to the Buyer two properties owned and operated as branch locations (the “Properties”) for an aggregate purchase price of $ 15,000 , including customary closing adjustments. On December 31, 2024, the Bank also entered into triple net lease agreements (the “Lease Agreements”) with the Buyer under which the Bank leases each of the Properties, and pursuant to which the Bank is responsible for the insurance, real estate taxes, and maintenance and repairs for each of the properties. Each of the Lease Agreements became effective upon the closing and have an initial term of 15 years. The Bank’s obligations under the Lease Agreements are guaranteed by BayFirst Financial Corp.
As the rate implicit in the leases generally is not readily determinable for our operating leases, the discount rates used to determine the present value of our lease liability are based on our incremental borrowing rate at the lease commencement date and commensurate with the remaining lease term. Our incremental borrowing rate for a lease is the rate of interest we would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.
For the three and six months ended June 30, 2025 and June 30, 2024, the components of total lease cost and supplemental information related to operating leases were as follows:
Three Months Ended
June 30, 		Six Months Ended
June 30,
2025 2024 2025 2024
Operating lease cost
$ 546 $ 238 $ 1,151 $ 497
Short-term lease cost
76 63 107 72
Total lease cost, net (1)
$ 622 $ 301 $ 1,258 $ 569
(1) There were no lease costs reported as discontinued operations for the three and six months ended June 30, 2025 and $ 61 for the three and six months ended June 30, 2024.
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BAYFIRST FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands, except per share data)
Three Months Ended
June 30, 		Six Months Ended
June 30,
2025 2024 2025 2024
Cash flows related to operating lease liabilities
$ 220 $ 206 496 449
Right-of-use assets obtained in exchange for new operating lease liabilities
— — — 296
At June 30, 2025, the weighted average discount rate of operating leases was 6.96 % and the weighted average remaining life of operating leases was 12.99 years.
The future minimum lease payments for operating leases, subsequent to June 30, 2025, as recorded on the balance sheet, are summarized as follows:
2025 $ 937
2026 2,119
2027 1,751
2028 1,313
2029 1,339
Thereafter 14,961
Total undiscounted lease payments
$ 22,420
Less: imputed interest
( 8,601 )
Net lease liabilities
$ 13,819
NOTE 9 – OTHER BORROWINGS
At June 30, 2025, the Company had $ 40,000 of borrowings at 4.57 % from the FHLB and no borrowings from the FRB. There were no borrowings from the FHLB or FRB at December 31, 2024.
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. Any a dvances that the Bank were to obtain would be secured by a blanket lien on $ 370,588 of real estate-related loans as of June 30, 2025. Based on this collateral and the Bank's holdings of FHLB stock, the Bank was eligible to borrow up to $ 155,540 from the FHLB at June 30, 2025.
In addition, the Bank has a secured line of credit with the Federal Reserve Bank of Atlanta which was secured by $ 78,995 of commercial loans as of June 30, 2025. FRB short-term borrowings bear interest at variable rates based on the FOMC's target range for the federal funds rate. Based on this collateral, the Bank was eligible to borrow up to $ 55,786 from the FRB at June 30, 2025.
The Company has $ 6,000 of Subordinated Debentures (the “Debentures”) that mature June 30, 2031 and are redeemable after 5 years which is June 30, 2026. 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 balance of Subordinated Debentures outstanding at the Company, net of offering costs, amounted to $ 5,959 and $ 5,956 at June 30, 2025 and December 31, 2024, respectively.
The Company has a term note with quarterly principal and interest payments with interest at Prime ( 7.50 % at June 30, 2025). The note matures on March 10, 2029 and the balance of the note was $ 1,707 and $ 1,934 at June 30, 2025 and December 31, 2024, respectively. The note is secured by 100 % of the stock of the Bank and requires the Company to comply with certain loan covenants during the term of the n ote. As of June 30, 2025, the Company was in compliance with all financial debt covenants.
NOTE 10 – STOCK-BASED COMPENSATION
The Equity Plan governs the Company’s restricted stock grants and stock options. Total compensation cost charged against income related to the Equity Plan was $ 150 and $ 172 for the six months ended June 30, 2025 and June 30, 2024, respectively.
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BAYFIRST FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands, except per share data)
Restricted Stock
The Company awarded shares of restricted common stock to certain employees and directors for which compensation expense is recognized ratably over the vesting period of the awards based on the fair value of the stock at issue date.
A summary of changes in the Company’s nonvested restricted shares for the six months ended June 30, 2025 and June 30, 2024 follows:
Shares Weighted-Average
Grant-Date
Fair Value, per share
Nonvested at January 1, 2025
47,485 $ 14.54
Granted
25,800 15.78
Vested
( 24,225 ) ( 13.23 )
Forfeited
( 540 ) ( 15.03 )
Nonvested at June 30, 2025
48,520 $ 15.85
Shares Weighted-Average
Grant-Date
Fair Value, per share
Nonvested at January 1, 2024
52,195 $ 18.75
Granted
30,650 11.70
Vested
( 28,710 ) ( 18.50 )
Forfeited
( 1,025 ) ( 16.48 )
Nonvested at June 30, 2024
53,110 $ 14.86
At June 30, 2025, there was $ 475 of total unrecognized compensation cost related to nonvested restricted shares granted under the Equity Plan that is expected to be recognized over a weighted average period of 1.2 years. The total fair value of shares vested during the six months ended June 30, 2025 and June 30, 2024 was $ 370 and $ 359 , respectively.
Stock Options
The Equity Plan permits the grant of stock options to the Company’s employees and directors for up to 15 % of the total number of shares of Company common stock issued and outstanding, up to 1,500,000 shares. Option awards are
granted with an exercise price equal to the market price of the Company’s common stock at the date of grant. The market price of the Company’s common stock is the closing sales price of the Common Stock on Nasdaq on the date of the grant. Those option awards generally have a vesting period of 5 years for employees and 3 years for directors and have 10-year contractual terms.
The fair value of each option award is estimated on the date of grant using a closed form option valuation (Black-Scholes) model that uses the assumptions noted in the table below. Expected volatility is based on an average of historical volatility of peer financial institutions. The expected term of options granted represents the period of time that options granted are expected to be outstanding, which takes into account that the options are not transferable. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of the grant.
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BAYFIRST FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands, except per share data)
A summary of the activity in the Equity Plan for the six months ended June 30, 2025 and June 30, 2024 follows:
Shares Weighted
Average
Exercise
Price 		Weighted
Average
Remaining
Contractual
Term (in years) 		Aggregate
Intrinsic
Value
Outstanding at January 1, 2025
364,063 $ 15.68
Exercised
( 1,050 ) ( 14.67 )
Outstanding at June 30, 2025
363,013 $ 15.68 3.67 $ —
Vested and exercisable at June 30, 2025
357,748 $ 15.69 3.65 $ —
Shares Weighted
Average
Exercise
Price 		Weighted
Average
Remaining
Contractual
Term (in years) 		Aggregate
Intrinsic
Value
Outstanding at January 1, 2024
367,033 $ 15.68
Forfeited
( 1,575 ) ( 15.41 )
Outstanding at June 30, 2024
365,458 $ 15.68 5.16 $ —
Vested and exercisable at June 30, 2024
350,660 $ 15.71 5.12 $ —
There were no options granted during the six months ended June 30, 2025 or June 30, 2024. Total unrecognized compensation cost related to nonvested stock options granted under the Equity Plan was $ 1 at June 30, 2025. This cost is expected to be recognized over a weighted average period of 0.04 years.
NOTE 11 – OTHER BENEFIT PLANS
The Company has established a stock dividend reinvestment and stock purchase plan. Under the DRIP, eligible shareholders can voluntarily purchase stock with their dividend or can make additional stock purchases. For the six months ended June 30, 2025 and June 30, 2024, there were no shares issued.
All employees and Directors are eligible to participate in the NSPP. Expense recognized in relation to the NSPP for the six months ended June 30, 2025 and June 30, 2024 was $ 9 and $ 13 , respectively.
The Company has a Salary Continuation Agreement (the “Agreement”) with the Company’s retired CEO. In accordance with the Agreement, the executive will receive an annual benefit of $ 25 for twenty years following separation of service. The liability recorded for the Agreement was $ 309 and $ 327 at June 30, 2025 and December 31, 2024, respectively, and the related expense for the six months ended June 30, 2025 was $ 7 and the related expense for the six months ended June 30, 2024 was $ 8 . Payments began in July 2024 as a result of the retirement of the CEO on December 31, 2023.
The Company has a 401(k) plan that covers all employees subject to certain age and service requirements. The Company contributes 3 % of each employee’s salary each pay period as a safe harbor contribution. The Company may also match employee contributions each year at the discretion of the Board of Directors. There was no match of contributions in 2024. Expense recognized in relation to the 401(k) plan was $ 494 and $ 533 for the six months ended June 30, 2025 and June 30, 2024, respectively.
The Company has an ESOP for eligible employees. Each year, the Company’s Board of Directors may approve a discretionary percentage of employees’ salaries to be contributed to the ESOP for eligible employees. In 2021, the ESOP trust acquired 14,154 shares of the Company’s stock. As this is a leveraged plan, unallocated shares are distributed to employees annually. There were 5,662 unallocated shares with a fair value of $ 79 and 8,493 unallocated shares with a fair value of $ 99 remaining as of June 30, 2025 and June 30, 2024, respectively . The ESOP trust’s outstanding loan, which is secured by the unallocated shares, bears a fixed interest rate equal to the Prime Rate as of the note date, which was 3.25 %. The note requires an annual payment of principal and interest through December 2026. The Company’s ESOP, which is internally leveraged, does not report the loan receivable extended to the ESOP as an asset and does not report the ESOP debt due to the Company.
The discontinuation of the nationwide residential lending division during 2022 triggered a partial plan termination and all affected employees were 100 % vested in the Company’s contributions into the ESOP. As a result of the exit of affected
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BAYFIRST FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands, except per share data)
participants from the plan, the plan acquired 23,383 shares of the Company’s stock. As this is a leveraged plan, unallocated shares are distributed to employees annually. There were 14,030 unallocated shares with a fair value of $ 196 and 18,706 unallocated shares with a fair value of $ 217 remaining as of June 30, 2025 and June 30, 2024, respectively . The ESOP trust was issued a five year loan bearing an interest rate equal to the Prime Rate as of the note date, which was 8.25 % and adjusts annually as of the first day of each succeeding calendar year to reflect the Prime Rate as of the first business day of the calendar year. The note requires an annual payment of principal and interest through December 2027. The Company’s ESOP, which is internally leveraged, does not report the loan receivable extended to the ESOP as an asset and does not report the ESOP debt due to the Company.
The Board did not approve any contributions in 2024. There was $ 60 of expense related to the ESOP for the six months ended June 30, 2025 and $ 108 expense for the six months ended June 30, 2024.
NOTE 12 – REGULATORY MATTERS
Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action. Management believes that the Bank met all capital adequacy requirements to which it was subject at June 30, 2025 and December 31, 2024.
Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At June 30, 2025 and December 31, 2024, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the institution’s classification.
In February 2019, the federal bank regulatory agencies issued a final rule that revised certain capital regulations under ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and included a transition option that allows banking organizations to phase in, over a three year period, the day one adverse effects of adoption on their regulatory capital ratios (three year transition option). In connection with the adoption of ASC 326 on January 1, 2023, the Company recognized an after-tax cumulative effect reduction to retained earnings. The Company elected to adopt the three year transition option and the deferral has been applied in capital ratios presented below. Actual and required capital amounts and ratios for the Bank are presented below at June 30, 2025:
Actual
Required for Capital
Adequacy Purposes
To be Well
Capitalized Under
Prompt Corrective
Action Regulations
Amount Ratio Amount
Ratio
Amount Ratio
Total Capital
(to Risk Weighted Assets)
$ 120,052 11.23 % $ 85,513 8.00 % $ 106,891 10.00 %
Tier 1 Capital
(to Risk Weighted Assets)
$ 106,646 9.98 % $ 64,135 6.00 % $ 85,513 8.00 %
Common Equity Tier 1 Capital
(to Risk Weighted Assets)
$ 106,646 9.98 % $ 48,101 4.50 % $ 69,479 6.50 %
Tier 1 Capital
(to Average Assets)
$ 106,646 8.11 % $ 52,582 4.00 % $ 65,728 5.00 %
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BAYFIRST FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands, except per share data)
Actual and required capital amounts and ratios for the Bank are presented below at December 31, 2024:
Actual
Required for Capital
Adequacy Purposes
To be Well
Capitalized Under
Prompt Corrective
Action Regulations
Amount Ratio Amount Ratio Amount Ratio
Total Capital
(to Risk Weighted Assets)
$ 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 Average Assets)
$ 111,586 8.82 % $ 50,579 4.00 % $ 63,224 5.00 %
Dividend Restrictions
Banking regulations limit the amount of dividends that may be paid. Approval by regulatory authorities is required if the effect of dividends declared would cause the regulatory capital of the Bank to fall below specified minimum levels. Approval is also required if dividends declared exceed the net profits of the Bank for that year combined with the retained net profits for the preceding two years.
NOTE 13 – LOAN COMMITMENTS AND OTHER RELATED ACTIVITIES
Some financial instruments, such as loan commitments, credit lines, and letters of credit, are issued to meet customer financing needs. These are agreements to provide credit or to support the credit of others, as long as conditions established in the contract are met, and usually have expiration dates. Commitments may expire without being used. Off-balance sheet risk to credit loss exists up to the face amount of these instruments, although material losses are not anticipated. The same credit policies that are used for loans are used to make such commitments, including obtaining collateral at exercise of the commitment.
The contractual amounts of financial instruments with off-balance sheet risk at June 30, 2025 and December 31, 2024 were as follows:
June 30, 2025 December 31, 2024
Unfunded loan commitments
$ 16,135 $ 21,174
Unused lines of credit
223,071 199,411
Standby letters of credit
1,259 276
All unused lines of credit at June 30, 2025 and December 31, 2024 were variable rate lines of credit and the majority of unfunded loan commitments at June 30, 2025 and December 31, 2024 were commitments to fund variable rate loans. Unfunded loan commitments are generally entered into for periods of 90 days or less.
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 peer historical usage. Loss rates for outstanding loans are applied to the estimated utilization rates to calculate the ACL for off-balance sheet loan commitments. At June 30, 2025 and December 31, 2024, ACL for off-balance sheet loan commitments totaled $ 554 and $ 516 , respectively.
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BAYFIRST FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands, except per share data)
NOTE 14 – EARNINGS PER COMMON SHARE
The following table sets forth the computation of basic and diluted earnings per common share for the three and six months ended June 30, 2025 and June 30, 2024:
Three Months Ended
June 30, 		Six Months Ended
June 30,
2025 2024 2025 2024
Basic:
Income (loss) from continuing operations
$ ( 1,237 ) $ 876 $ ( 1,572 ) $ 1,759
Loss from discontinued operations
— ( 10 ) — ( 69 )
Net income (loss)
( 1,237 ) 866 ( 1,572 ) 1,690
Less: Preferred stock dividends
386 386 771 771
Net income available to (loss attributable to) common shareholders
$ ( 1,623 ) $ 480 $ ( 2,343 ) $ 919
Weighted average common shares outstanding
4,131,670 4,134,581 4,136,370 4,132,533
Basic earnings (loss) per common share:
Continuing operations
$ ( 0.39 ) $ 0.12 $ ( 0.57 ) $ 0.24
Discontinued operations
— — — ( 0.02 )
Total
$ ( 0.39 ) $ 0.12 $ ( 0.57 ) $ 0.22
Diluted:
Income (loss) from continuing operations
$ ( 1,237 ) $ 876 $ ( 1,572 ) $ 1,759
Loss from discontinued operations
— ( 10 ) — ( 69 )
Net income (loss)
( 1,237 ) 866 ( 1,572 ) 1,690
Less: Preferred stock dividends
386 386 771 771
Add: Series B preferred stock and preferred C stock dividends
— — — —
Net income available to (loss attributable to) common shareholders
$ ( 1,623 ) $ 480 $ ( 2,343 ) $ 919
Weighted average common shares outstanding for basic earnings per common share
4,131,670 4,134,581 4,136,370 4,132,533
Add: Dilutive effects of conversion of Series B preferred stock and Preferred C to common stock
— — — —
Add: Dilutive effects of assumed exercises of stock options and warrants
— — — —
Average shares and dilutive potential common shares
4,131,670 4,134,581 4,136,370 4,132,533
Diluted earnings (loss) per common share:
Continuing operations
$ ( 0.39 ) $ 0.12 $ ( 0.57 ) $ 0.24
Discontinued operations
— — — ( 0.02 )
Total
$ ( 0.39 ) $ 0.12 $ ( 0.57 ) $ 0.22
-
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BAYFIRST FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands, except per share data)
The following securities outstanding at June 30, 2025 and June 30, 2024 have been excluded from the calculation of weighted average shares outstanding as their effect on the calculation of earnings (loss) per share are antidilutive:
Three Months Ended
June 30, 		Six Months Ended
June 30,
2025 2024 2025 2024
Common stock options
363,013 365,700 363,013 366,238
Convertible Series B preferred stock 3,210 3,210 3,210 3,210
Convertible Series C preferred stock 6,446 6,446 6,446 6,446
NOTE 15 - SEGMENT INFORMATION
The Company’s revenue is primarily derived from the business of banking. The Company’s financial performance is monitored on a consolidated basis by senior management, who are considered to be the Bank’s Chief Operating Decision Maker (“CODM”). Senior management includes the following officers of the Company: Chief Executive Officer; President, Chief Operating Officer; and Executive Vice President, Chief Financial Officer.
All of the Company’s financial results are similar and considered by management to be aggregated into one reportable operating segment. While the Company has assigned certain management responsibilities by branch location or department, the Company’s CODM evaluates financial performance on a Company-wide basis. The majority of the Company’s revenue is from the business of banking, and the Company’s branch locations have similar economic characteristics, products, services and customers. Accordingly, all of the Company’s operations are considered by the CODM to be aggregated in one reportable operating segment.
Financial performance is measured monthly and the primary measures of performance are net income, net interest income, noninterest income, and significant operating expenses detailed below, as compared to the budget when assessing the Company’s segment. The allocation of resources throughout the Company is based on consolidated profitability. The presentation of financial performance is consistent with amounts and financial statement line items shown in the Company’s consolidated balance sheets and consolidated statements of income. Additionally, the Company’s significant expenses are adequately segmented by category and amount in the consolidated statements of income to include all significant items when considering both qualitative and quantitative factors. Significant expenses of the Company include compensation, occupancy and equipment, data processing, professional services, and loan origination and collection expenses.
NOTE 16 – SUBSEQUENT EVENTS
The Company has evaluated subsequent events for recognition and disclosure through August 11, 2025, which is the date the financial statements were available to be issued. The Company determined that an August 4, 2025 event met the definition of a non-recognized subsequent event in accordance with ASC Topic 855, Subsequent Events. On that date, the Company announced that as part of a comprehensive strategic review aimed at positioning the Company for long-term growth and enhanced shareholder value, the Bank has discontinued its Bolt loan program, effective immediately. The Bolt loan program was an SBA 7(a) loan designed to provide small balance loans to small businesses, typically used for working capital. Accordingly, a reduction in force of 26 Bolt positions and 25 positions in other areas of the Bank was executed, which will save $ 6,000 in annual costs. Combined this represents 17 % of the workforce. The Company expects to record a restructuring charge in the third quarter related to the exit of the Bolt loan program and will also seek offers to sell the Bolt loan balances and Bolt loan origination platform to an unaffiliated third party. To offset these impacts, the Board has suspended dividend payments, and Directors will forgo board fees .
40
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion is an analysis of the results of operations for the three and six months ended June 30, 2025 and June 30, 2024 and financial condition as of June 30, 2025 and December 31, 2024. This discussion and analysis should be read in conjunction with the consolidated financial statements and related notes.
In addition to the historical information contained herein, this Form 10-Q includes "forward-looking statements" within the meaning of such term in the Private Securities Litigation Reform Act of 1995. These statements are subject to many risks and uncertainties, including, but not limited to, the effects of health crises, global military hostilities, weather events, or climate changes, including its effects on the economic environment, its customers and its operations, as well as any changes to federal, state or local government laws, regulations or orders in connection with them; the ability of the Company to implement its strategy and expand its banking operations; changes in interest rates and other general economic, business and political conditions, including changes in the financial markets 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. Readers should note that the forward-looking statements included herein are not a guarantee of future events, and that actual events may differ materially from those made in or suggested by the forward-looking statements.
Forward-looking statements generally can be identified by the use of forward-looking terminology such as "will," "propose," "may," "plan," "seek," "expect," "intend," "estimate," "anticipate," "believe," "continue," or similar terminology. Any forward-looking statements presented herein are made only as of the date of this document, and the Company does not undertake any obligation to update or revise any forward-looking statements to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.
Overview
The following discussion and analysis presents the financial condition and results of operations on a consolidated basis. However, because the Company conducts all of its material business operations through the Bank, the discussion and analysis relates to activities primarily conducted at the subsidiary level. The following discussion should be read in conjunction with the consolidated financial statements.
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. 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 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.
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 Company bases those estimates on historical experience and on various other assumptions that are believed to be reasonable under current circumstances, results of which form the basis for making judgments about the carrying value of certain assets and liabilities that are not readily available from other sources. Estimates are evaluated on an ongoing basis. Actual results may differ from these estimates.
Accounting policies, as described in detail in the notes to the Company’s consolidated financial statements, are an integral part of the Company’s consolidated financial statements. A thorough understanding of these accounting policies is essential when reviewing the Company’s reported results of operations and financial position. Management believes that the critical accounting policies and estimates listed below require the Company to make difficult, subjective or complex judgments about matters that are inherently uncertain. At June 30, 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
41
related to the ACL, fair value measurement of government guaranteed loan servicing rights and government guaranteed loans HFI at fair value, which are discussed more fully in the December 31, 2024 Form 10-K.
Changes in these estimates that are likely to occur from period to period, or the use of different estimates that the Company could have reasonably used in the current period, could have a material impact on the Company’s financial position or results of operation.
Further, the Company is an emerging growth company. The JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected to take advantage of this extended transition period. This means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies do so. This may make the Company’s financial statements not comparable with those of public companies which are neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period because of the potential differences in accounting standards used.
Recent Developments
Bolt Loan Program. On August 4, 2025 the Company announced that as part of a comprehensive strategic review aimed at positioning the Company for long-term growth and enhanced shareholder value, the Bank has discontinued its Bolt loan program, effective immediately. The Bolt loan program was an SBA 7(a) loan designed to provide small balance loans to small businesses, typically used for working capital. Accordingly, a reduction in force of 26 Bolt positions and 25 positions in other areas of the Bank was executed, which will save $6 million in annual costs. Combined this represents 17% of the workforce.The Company expects to record a restructuring charge in the third quarter related to the exit of the Bolt loan program and will also seek offers to sell the Bolt loan balances and Bolt loan origination platform to an unaffiliated third party. To offset these impacts, the Board has suspended dividend payments, and Directors will forgo board fees.
Regulatory. The Bank has also agreed with its regulators to take certain actions designed to improve the Bank’s underwriting and credit administration, strategic planning, and capital preservation. In connection with that, the regulators are also requiring the Bank to achieve and maintain specific capital ratios.
Selected Financial Data - Unaudited
As of and for the Three Months Ended
As of and for the Six Months Ended
(Dollars in thousands, except for share data) 6/30/2025 3/31/2025 6/30/2024 6/30/2025 6/30/2024
Income Statement Data:
Net interest income $ 12,348 $ 10,999 $ 9,182 $ 23,347 $ 17,924
Provision for credit losses 7,264 4,400 3,000 11,664 7,058
Noninterest income 10,795 8,751 11,653 19,546 25,921
Noninterest expense 17,528 15,813 16,610 33,341 34,383
Income tax expense (benefit) (412) (128) 349 (540) 645
Net income (loss) from continuing operations (1,237) (335) 876 (1,572) 1,759
Net loss from discontinued operations — — (10) — (69)
Net income (loss) (1,237) (335) 866 (1,572) 1,690
Preferred stock dividends 386 385 386 771 771
Net income available to (loss attributable to) common shareholders $ (1,623) $ (720) $ 480 $ (2,343) $ 919
Balance Sheet Data:
Average loans HFI $ 1,121,862 $ 1,087,015 $ 984,372 $ 1,104,535 $ 962,026
Average loans HFI at amortized cost 1,047,568 1,027,648 902,417 1,034,728 876,886
Average total assets 1,324,455 1,287,618 1,178,501 1,306,238 1,152,281
42
As of and for the Three Months Ended
As of and for the Six Months Ended
(Dollars in thousands, except for share data) 6/30/2025 3/31/2025 6/30/2024 6/30/2025 6/30/2024
Average common shareholders’ equity 95,049 96,053 84,948 95,548 85,166
Total loans HFI 1,125,799 1,084,817 1,008,314 1,125,799 1,008,314
Total loans HFI, excluding government guaranteed loan balances 972,942 943,979 844,659 972,942 844,659
Allowance for credit losses 17,041 16,513 13,843 17,041 13,843
Total assets 1,343,867 1,291,957 1,217,869 1,343,867 1,217,869
Total deposits 1,163,796 1,128,267 1,042,388 1,163,796 985,138
Common shareholders’ equity 92,172 94,034 84,911 92,172 84,911
Per Share Data:
Basic earnings (loss) per common share $ (0.39) $ (0.17) $ 0.12 $ (0.57) $ 0.22
Diluted earnings (loss) per common share $ (0.39) $ (0.17) $ 0.12 $ (0.57) $ 0.22
Dividends per common share $ 0.08 $ 0.08 $ 0.08 $ 0.16 $ 0.16
Book value per common share $ 22.30 $ 22.77 $ 20.54 $ 22.30 $ 20.54
Tangible book value per common share (1)
$ 22.30 $ 22.77 $ 20.54 $ 22.30 $ 20.54
Performance Ratios:
Return on average assets (2)
(0.37) % (0.10) % 0.29 % (0.24) % 0.29 %
Return on average common equity (2)
(6.83) % (3.00) % 2.26 % (4.90) % 2.16 %
Net interest margin (2)
4.06 % 3.77 % 3.43 % 3.92 % 3.43 %
Asset Quality Data:
Net charge-offs $ 6,799 $ 3,301 $ 3,261 $ 10,100 $ 6,913
Net charge-offs/average loans HFI at amortized cost (2)
2.60 % 1.28 % 1.45 % 1.95 % 1.58 %
Nonperforming loans (3)
$ 21,665 $ 24,806 $ 12,312 $ 21,665 $ 12,312
Nonperforming loans (excluding government guaranteed balance) (3)
$ 14,187 $ 15,078 $ 8,054 $ 14,187 $ 8,054
Nonperforming loans/total loans HFI (3)
2.09 % 2.42 % 1.34 % 2.09 % 1.34 %
Nonperforming loans (excluding gov’t guaranteed balance)/total loans HFI (3)
1.37 % 1.47 % 0.87 % 1.37 % 0.87 %
ACL/Total loans HFI at amortized cost 1.65 % 1.61 % 1.50 % 1.65 % 1.50 %
Other Data:
Full-time equivalent employees
300 305 302 300 302
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
.
Reconciliation and Management Explanation of Non-GAAP Financial Measures
Some of the financial measures included in this report are not measures of financial condition or performance recognized by GAAP. These non-GAAP financial measures include tangible common shareholders' equity and tangible book value per common share. The management team uses these non-GAAP financial measures in its analysis of its performance, and they believe that providing this information to financial analysts and investors allows them to evaluate capital adequacy.
The following presents the calculation of the non-GAAP financial measures:
43
Tangible Common Shareholders' Equity and Tangible Book Value Per Common Share (Unaudited)
As of
(Dollars in thousands, except for share data) June 30, 2025 March 31, 2025 June 30, 2024
Total shareholders’ equity $ 108,223 $ 110,085 $ 100,962
Less: Preferred stock liquidation preference (16,051) (16,051) (16,051)
Total equity available to common shareholders 92,172 94,034 84,911
Less: Goodwill — — —
Tangible common shareholders' equity $ 92,172 $ 94,034 $ 84,911
Common shares outstanding 4,134,127 4,129,027 4,134,219
Tangible book value per common share $ 22.30 $ 22.77 $ 20.54
Results of Operations
BayFirst’s operating results depend on its net interest income, which is the difference between interest income on interest-earning assets and interest expense on interest-bearing liabilities, consisting primarily of deposits. Net interest income is determined by the difference between yields earned on interest-earning assets and rates paid on interest-bearing liabilities (“interest rate spread”) and the relative amounts of interest-earning assets and interest-bearing liabilities. The interest rate spread is affected by regulatory, economic, and competitive factors which influence interest rates, loan demand, and deposit flows. In addition, the Company’s operating results can be affected by the level of nonperforming assets, as well as the level of the noninterest income and the noninterest expenses, such as salaries and employee benefits, occupancy and equipment costs, and loan origination expenses as well as income taxes.
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. While the Company retains some of its government guaranteed loans on the balance sheet, the Company may sell both the guaranteed balance of its government guaranteed loans, as well as a percentage of the unguaranteed portions of such loans.
In the second quarter of 2022, the Bank discontinued its primary consumer direct residential mortgage business line. 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.
Net Income
The Company had a net loss for the three months ended June 30, 2025 of $1.2 million, or $(0.39) per common share and diluted common share, compared to net income for the three months ended June 30, 2024 of $0.9 million, or $0.12 per common and diluted common share. The change from the second quarter of 2024 was due to an increase in provision for credit losses of $4.3 million and an increase in noninterest expense of $0.9 million, partially offset by an increase in net interest income of $3.2 million.
For the six months ended June 30, 2025, the Company had a net loss of $1.6 million, or $(0.57) per common share and diluted common share, a decrease from net income of $1.7 million, or $0.22 per common share and diluted common share, for the six months ended June 30, 2024. The change was primarily due to an increase in provision for credit losses of $4.6 million, a decrease in government guaranteed loan fair value gains of $4.8 million, and a decrease of government guaranteed loan packaging fees of $1.1 million. This was partially offset by an increase in net interest income of $5.4 million and a decrease in noninterest expense of $1.0 million.
Net Interest Income
Net interest income from continuing operations was $12.3 million for the three months ended June 30, 2025, an increase from $9.2 million during the three months ended June 30, 2024. The increase was mainly due to an increase in loan interest income, including fees, of $1.7 million, partially offset by an increase in interest expense from borrowings of $0.6 million.
Net interest margin was 4.06% for the second quarter of 2025, which represented an increase from 3.43% for the second quarter of 2024.
44
Net interest income from continuing operations was $23.3 million for the six months ended June 30, 2025, an increase from $17.9 million for the six months ended June 30, 2024. The increase was mainly due to an increase in loan interest income, including fees, of $3.6 million and a decrease in interest expense of $1.8 million.
Net interest margin increased to 3.92% for the six months ended June 30, 2025, compared to 3.43% for the six months ended June 30, 2024 .

45
Average Balance Sheet and Analysis of Net Interest Income
The following table sets forth, for the periods indicated, information regarding: (i) the total dollar amount of interest and dividend income of BayFirst from interest-earning assets and the resultant average yields; (ii) the total dollar amount of interest expense on interest-bearing liabilities and the resultant average cost; (iii) net interest income; (iv) interest rate spread; (v) net interest margin; and (vi) ratio of average interest-earning assets to average interest-bearing liabilities. Loans in nonaccrual status, for the purposes of the following computations, are included in the average loan balances. FRB,
FHLB, and FNBB restricted equity holdings are included in other interest-earning assets. The Company did not have a significant amount of tax-exempt assets.
Three Months Ended June 30,
2025 2024
(Dollars in thousands) Average  Balance Interest Yield Average  Balance Interest Yield
Interest-earning assets:
Investment securities
$ 36,951 $ 445 4.83 % $ 41,119 $ 438 4.28 %
Loans (1)
1,121,862 21,459 7.67 984,372 19,414 7.93
Other
60,250 601 4.00 51,246 575 4.51
Total interest-earning assets
1,219,063 22,505 7.40 1,076,737 20,427 7.63
Noninterest-earning assets
105,392 101,764
Total assets
$ 1,324,455 $ 1,178,501
Interest-bearing liabilities:
NOW, MMDA and savings
$ 709,571 $ 6,024 3.41 $ 642,362 $ 6,804 4.26
Time deposits
302,122 3,258 4.33 272,142 3,644 5.39
Other borrowings
74,511 875 4.71 56,499 797 5.67
Total interest-bearing liabilities
1,086,204 10,157 3.75 971,003 11,245 4.66
Demand deposits
105,736 94,633
Noninterest-bearing liabilities
21,415 11,866
Shareholders’ equity
111,100 100,999
Total liabilities and shareholders’ equity
$ 1,324,455 $ 1,178,501
Net interest income
$ 12,348 $ 9,182
Interest rate spread
3.65 2.97
Net interest margin (2)
4.06 3.43
Ratio of average interest-earning assets to average interest-bearing liabilities
112.23 % 110.89 %
(1) Includes nonaccrual loans.
(2) Net interest margin represents net interest income divided by average total interest-earning assets.
46
For the Six Months Ended June 30,
2025 2024
(Dollars in thousands) Average  Balance Interest Yield Average  Balance Interest Yield
Interest-earning assets:
Investment securities
$ 37,643 $ 813 4.36 % $ 42,463 $ 870 4.12 %
Loans (1)
1,104,535 41,210 7.52 962,026 37,642 7.87
Other
59,287 1,167 3.97 47,544 1,102 4.66
Total interest-earning assets
1,201,465 43,190 7.25 1,052,033 39,614 7.57
Noninterest-earning assets
104,773 100,248
Total assets
$ 1,306,238 $ 1,152,281
Interest-bearing liabilities:
NOW, MMDA and savings
$ 714,558 $ 12,121 3.42 $ 637,648 $ 13,463 4.25
Time deposits
303,449 6,592 4.38 269,420 7,200 5.37
Other borrowings
48,084 1,130 4.74 38,395 1,027 5.38
Total interest-bearing liabilities
1,066,091 19,843 3.75 945,463 21,690 4.61
Demand deposits
104,811 93,453
Noninterest-bearing liabilities
23,637 12,248
Shareholders’ equity
111,599 101,217
Total liabilities and shareholders’ equity
$ 1,306,138 $ 1,152,381
Net interest income
$ 23,347 $ 17,924
Interest rate spread
3.50 2.96
Net interest margin (2)
3.92 3.43
Ratio of average interest-earning assets to average interest-bearing liabilities
112.70 % 111.27 %
(1) Includes nonaccrual loans.
(2) Net interest margin represents net interest income divided by average total interest-earning assets.
47
Rate/Volume Analysis
The table below presents the effects of volume and rate changes on interest income and expense for the periods indicated. Changes in volume are changes in the average balance multiplied by the previous period’s average rate. Changes in rate are changes in the average rate multiplied by the average balance from the previous period. The net changes attributable to the combined impact of both rate and volume have been allocated proportionately to the changes due to volume and the changes due to rate. Loans in nonaccrual status, for the purpose of the following computations, are included in the average loan balances. FRB, FHLB, and FNBB restricted equity holdings are included in other interest-earning assets. The Company did not have a significant amount of tax-exempt assets.
(Dollars in thousands) Rate Volume Total
Three Months Ended June 30, 2025 vs. June 30, 2024:
Interest-earning assets:
Investment securities
$ 54 $ (47) $ 7
Loans
(645) 2,690 2,045
Other interest-earning assets
(70) 96 26
Total interest-earning assets
(661) 2,739 2,078
Interest-bearing liabilities:
NOW, MMDA and savings
(1,451) 671 (780)
Time deposits
(764) 378 (386)
Other borrowings
(150) 228 78
Total interest-bearing liabilities
(2,365) 1,277 (1,088)
Net change in net interest income
$ 1,704 $ 1,462 $ 3,166
(Dollars in thousands) Rate Volume Total
Six Months Ended June 30, 2025 vs. June 30, 2024:
Interest-earning assets:
Investment securities $ 47 $ (104) $ (57)
Loans
(1,724) 5,292 3,568
Other interest-earning assets
(179) 244 65
Total interest-earning assets
(1,856) 5,432 3,576
Interest-bearing liabilities:
NOW, MMDA, and savings
(2,827) 1,485 (1,342)
Time deposits
(1,439) 831 (608)
Other borrowings
(132) 235 103
Total interest-bearing liabilities
(4,398) 2,551 (1,847)
Net change in net interest income
$ 2,542 $ 2,881 $ 5,423
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.
The Company recorded a provision for credit losses on loans for the three months ended June 30, 2025 of $7.3 million compared to a provision of $3.0 million for the three months ended June 30, 2024. During the three months ended June 30, 2025, $6.8 million of net charge offs in loans were recorded compared to $3.3 million during the three months ended June 30, 2024. Credit challenges for small businesses contributed to an increase in net charge-offs on Bolt SBA 7(a) loans compared to the prior quarter. Although our core SBA and conventional commercial loan portfolio performance remains strong, many of our SBA small business clients continue to struggle in a difficult environment even though many have shown some resilience in the face of inflation and persistent high interest rates.
48
T he Company recorded a provision for credit losses for the six months ended June 30, 2025 of $11.7 million compared to a $7.1 million provision for the six months ended June 30, 2024. The increase of $4.6 million in the provision for credit losses expense was primarily due to higher than expected charge-offs primarily in the Bolt SBA 7(a) portfolio resulting in higher provision expense based on ACL model output . For the six months ended June 30, 2025, net loan charge offs totaled $10.1 million compared to $6.9 million for the six months ended June 30, 2024.
The ACL was $17.0 million at June 30, 2025 and $13.8 million at June 30, 2024.
Noninterest Income
The following table presents noninterest income from continuing operations for the three and six months ended June 30, 2025 and June 30, 2024.
For the Three Months Ended June 30,
For the Six Months Ended June 30,
(Dollars in thousands) 2025 2024 2025 2024
Noninterest income:
Loan servicing income, net
$ 484 $ 805 $ 1,220 $ 1,600
Gain on sale of government guaranteed loans, net 6,136 5,595 13,463 13,684
Service charges and fees
473 452 922 896
Government guaranteed loans fair value gain, net
2,442 3,202 1,687 6,507
Government guaranteed loan packaging fees 577 1,022 1,293 2,429
Other noninterest income
683 577 961 805
Total noninterest income
$ 10,795 $ 11,653 $ 19,546 $ 25,921
Noninterest income from continuing operations was $10.8 million during the three months ended June 30, 2025, a decrease from $11.7 million during the three months ended June 30, 2024. The decrease was the result of decreases in loan servicing income of $0.3 million, fair value gains on government guaranteed loans of $0.8 million, and government guaranteed loan packaging fees of $0.4 million, partially offset by an increase in gain on sale of government guaranteed loans of $0.5 million.
Noninterest income from continuing operations was $19.5 million for the six months ended June 30, 2025, a decrease from $25.9 million for the six months ended June 30, 2024. The decrease was primarily the result of a decrease in government guaranteed loan fair value gains of $4.8 million and a decrease in government guaranteed loan packaging fees of $1.1 million.
49
Noninterest Expense
The following table presents noninterest expense from continuing operations for the three and six months ended June 30, 2025 and June 30, 2024.
For the Three Months Ended June 30,
For the Six Months Ended June 30,
(Dollars in thousands) 2025 2024 2025 2024
Noninterest expense:
Salaries and benefits
$ 8,113 $ 7,829 $ 16,111 $ 15,834
Bonus, commissions, and incentives
262 659 333 2,230
Occupancy and equipment
1,579 1,273 3,213 2,383
Data processing
2,078 1,647 4,123 3,207
Marketing and business development
403 540 890 1,128
Professional services
782 877 1,514 2,226
Loan origination and collection
2,558 1,958 3,593 3,677
Employee recruiting and development
462 549 1,079 1,146
Regulatory assessments
352 279 691 561
Director compensation 77 166 253 285
Liability and fidelity bond insurance 157 142 300 288
ATM and interchange 114 134 223 281
Telecommunication 86 119 201 227
Other noninterest expense
505 438 817 910
Total noninterest expense
$ 17,528 $ 16,610 $ 33,341 $ 34,383
Noninterest expense from continuing operations was $17.5 million durin g the three months ended June 30, 2025, an increase from $16.6 million during the three months ended June 30, 2024 . The increase in the second quarter of 2025, as compared to the second quarter of 2024, was primarily due to higher loan origination and collection expenses of $0.6 million, occupancy expense of $0.3 million, and data processing expense of $0.4 million, partially offset by lower compensation expense of $0.1 million and marketing and business development expenses of $0.1 million.
Noninterest expense was $33.3 million for the six months ended June 30, 2025, a decrease from $34.4 million for the six months ended June 30, 2024 . The decrease was the result of lower compensation expense of $1.6 million and professional service expense of $0.7 million, partially offset by higher occupancy and equipment expense of $0.8 million and data processing expense of $0.9 million.
Income Taxes
Income tax benefit from continuing operations was $412 thousand for the three months ended June 30, 2025, a decrease from income tax expense of $349 thousand for the three months ended June 30, 2024. There was no income tax expense from discontinued operations for the three months ended June 30, 2025, compared to an income tax benefit of $4 thousand for the three months ended June 30, 2024.
Income tax expense from continuing operations was $0.5 million for the six months ended June 30, 2025, a decrease from income tax expense of $0.6 million for the six months ended June 30, 2024. The decrease was primarily due to the decrease in pre-tax earnings from continuing operations. There was no income tax expense from discontinued operations for the six months ended June 30, 2025, compared to an income tax benefit of $23 thousand for the six months ended June 30, 2024.
At June 30, 2025, the Company had no federal net operating loss carryforward and $21 thousand of state net operating loss carryforward. At June 30, 2024, the Company had $1.6 million of federal net operating loss carryforward and $0.4 million of state net operating loss carryforward. The net operating loss carryforwards do not expire.
The effective income tax rate was 25.57% for the six months ended June 30, 2025 and 26.90% for the six months ended June 30, 2024.
Financial Condition
50
Investment Securities
The following table presents the fair value of the Company's investment securities portfolio classified as available for sale as of June 30, 2025 and December 31, 2024.
(Dollars in thousands) June 30, 2025 December 31, 2024
Investment securities available for sale:
Asset-backed securities
$ 3,022 $ 4,990
Mortgage-backed securities:
U.S. Government-sponsored enterprises
5,011 7,130
Collateralized mortgage obligations:
U.S. Government-sponsored enterprises
18,354 15,286
Corporate bonds
3,869 8,885
Total investment securities available for sale
$ 30,256 $ 36,291
The net unrealized loss on the investment securities AFS at June 30, 2025 and December 31, 2024, was $3.2 million and $4.0 million , respectively .
The following table presents the amortized cost of the Company's investment securities portfolio classified as held to maturity as of June 30, 2025 and December 31, 2024.
(Dollars in thousands) June 30, 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 $9 thousand ACL on the corporate bonds HTM as of June 30, 2025 and $12 thousand at December 31, 2024. The net unrealized loss on the investment securities HTM at June 30, 2025, was $131 thousand compared with a net unrealized loss on investment securities HTM of $154 thousand at December 31, 2024.
No investment securities were pledged as of June 30, 2025 or December 31, 2024, and there were no sales of investment securities for the three or six months ended June 30, 2025 or three or six months ended June 30, 2024.
51
The investment securities available for sale presented in the following tables are reported at amortized cost and by contractual maturity as of June 30, 2025 and December 31, 2024. 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.
June 30, 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
$ — — % $ — — % $ — — % $ 3,038 5.29 %
Mortgage-backed securities:
U.S. Government-sponsored enterprises
— — — — — — 5,507 2.79
Collateralized mortgage obligations:
U.S. Government-sponsored enterprises — — — — — — 21,028 2.31
Corporate bonds
— — 3,837 5.64 — — — —
Total investment securities available for sale
$ — — % $ 3,837 5.64 % $ — — % $ 29,573 2.71 %
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. Government-sponsored enterprises
— — — — 4,463 4.63 3,328 1.25
Collateralized mortgage obligations:
U.S. 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 June 30, 2025 and December 31, 2024. Actual timing may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Additionally, residential mortgage-backed securities receive monthly principal payments, which are not reflected below.
June 30, 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 % $ — — %
52
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. Our lending activities primarily consist of government guaranteed, commercial real estate, commercial business, residential mortgage, and consumer loans. Senior management and loan officers have continued to develop new sources of loan referrals, particularly among centers of local influence and real estate professionals, and have also enjoyed repeat business from loyal customers in the markets the Bank serves. The Bank has no concentration of credit in any industry that represents 10% or more of its loan portfolio. Additionally, the 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 10% of the total portfolio. The following table sets forth the composition of its loan portfolio.
June 30, 2025 December 31, 2024
(Dollars in thousands) Amount % of Total Amount % of Total
Loans HFI:
Government guaranteed loans HFI, at fair value $ 90,687 $ 60,833
Loans HFI, at amortized cost:
Residential real estate
356,559 34.9 % 330,870 33.3 %
Commercial real estate
292,923 28.7 305,721 30.9
Construction and land
53,187 5.2 32,914 3.3
Commercial and industrial
223,239 21.9 226,522 22.9
Commercial and industrial – PPP
191 — 941 0.1
Consumer and other
93,333 9.3 93,826 9.5
Loans HFI, at amortized cost, gross
1,019,432 100.0 % 990,794 100.0 %
Discount on government guaranteed loans (8,780) (8,306)
Premium on loans purchased, net
3,342 3,739
Deferred loan costs, net
21,118 19,499
Allowance for credit losses
(17,041) (15,512)
Loans HFI, at amortized cost, net
1,018,071 990,214
Total loans HFI, net
$ 1,108,758 $ 1,051,047
For the six months ended June 30, 2025, the Bank originated $101.7 million in loans through conventional lending channels and $212.7 million in loans through its government guaranteed lending function. In addition, the Bank sold guaranteed loan balances of $139.3 million.
53
Loan Maturity/Rate Sensitivity
The following table shows the contractual maturities of our loans at June 30, 2025. Loan balances in this table include loans HFI at fair value, loans HFI at amortized cost, discount on retained balances of loans sold, premium and discount on loans purchased, and deferred loan costs, net.
(Dollars in thousands) Due in One Year
or Less 		Due After One
Year to Five
Years 		Due After Five
Years to 15 Years 		Due After 15
Years 		Total
Real estate:
Residential
$ 1,808 $ 728 $ 13,328 $ 341,294 $ 357,158
Commercial
2,197 6,815 55,843 249,845 314,700
Construction and land
2,963 3,384 11,624 35,215 53,186
Commercial and industrial
8,040 35,829 249,837 10,158 303,864
Commercial and industrial - PPP
191 — — — 191
Consumer and other
3,026 23,072 23,419 47,183 96,700
Total loans HFI
$ 18,225 $ 69,828 $ 354,051 $ 683,695 $ 1,125,799
The following table shows the loans with contractual maturities of greater than one year that have fixed or adjustable interest rates at June 30, 2025.
(Dollars in thousands)
Fixed
Interest Rate
Adjustable
Interest Rate
Real estate:
Residential
$ 74,117 $ 281,233
Commercial
5,064 307,439
Construction and land
236 49,987
Commercial and industrial
16,189 279,635
Consumer and other
85,174 8,500
Total loans HFI
$ 180,780 $ 926,794
Credit Risk
The Bank’s primary business is making commercial, consumer, and real estate loans. This activity inevitably has risks for potential credit losses, the magnitude of which depends on a variety of economic factors affecting borrowers, which are beyond its control. The Bank has developed policies and procedures for evaluating the overall quality of its credit portfolio and the timely identification of potential problem loans. Management’s judgment as to the adequacy of the allowance is based upon a number of assumptions about the economic environment that it believes impacts credit quality as of the balance sheet date that it believes to be reasonable, but which may or may not prove accurate. Thus, there can be no assurance that charge-offs in future periods will not exceed the ACL, or that additional increases in the ACL will not be required.
Allowance for Credit Losses. The Bank must maintain an adequate ACL based on a comprehensive methodology that assesses the probable losses inherent in its loan portfolio. The Bank maintains an ACL based on a number of quantitative and qualitative factors, including levels and trends of past due and nonaccrual loans, asset classifications, change in volume and mix of loans, collateral value, historical loss experience, size and complexity of individual credits, and economic conditions. In addition to this, 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. 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.
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The Bank periodically reviews the assumptions and formulates methodologies by which changes are made to the specific and general valuation ACL in an effort to refine such allowances in light of the current status of the factors described above.
All nonaccrual loans and modifications to loans for borrowers experiencing financial difficulty are reviewed to determine if the loans share the same risk characteristics as the pooled loans. If the loan does not share the same risk characteristics, the loan is evaluated individually for credit losses. Specific allocation of reserves for individually evaluated loans considers the value of the collateral, the financial condition of the borrower, and industry and current economic trends. The Bank reviews the collateral value, cash flow, and other support on each individually evaluated credit. Any deficiency outlined by a real estate collateral evaluation analysis, or cash flow shortfall, is accounted for through a specific allocation for the loan.
Nonperforming Assets . At June 30, 2025, the Company had $16.0 million in nonperforming assets, excluding government guaranteed loan balances. The ACL represented 1.65% of total loans HFI at amortized cost. At June 30, 2024, the Company had $11.0 million in nonperforming assets, excluding government guaranteed loan balances. The ACL represented 1.50% 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. Total loans HFI at June 30, 2025 and June 30, 2024 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 1.85% at June 30, 2025, compared to 1.73% at June 30, 2024.
The following table sets forth certain information on nonaccrual loans, loans 90 days or more past due, and foreclosed assets, the ratio of such loans and foreclosed assets to total assets as of the dates indicated, and certain other related information.
(Dollars in thousands) June 30,
2025 		June 30,
2024 		December 31,
2024
Nonperforming loans (government guaranteed balances), at amortized cost, gross
$ 7,478 $ 4,258 $ 4,037
Nonperforming loans (unguaranteed balances), at amortized cost, gross
14,187 8,054 13,570
Total nonperforming loans, at amortized cost, gross
21,665 12,312 17,607
Nonperforming loans (government guaranteed balances), at fair value
502 341 —
Nonperforming loans (unguaranteed balances), at fair value
1,430 1,284 1,490
Total nonperforming loans, at fair value
1,932 1,625 1,490
OREO
400 1,633 132
Repossessed assets — — 36
Total nonperforming assets, gross
$ 23,997 $ 15,570 $ 19,265
Nonperforming loans as a percentage of total loans HFI (1)
2.09 % 1.34 % 1.75 %
Nonperforming loans (excluding government guaranteed balances) to total loans HFI (1)
1.37 % 0.87 % 1.35 %
Nonperforming assets as a percentage of total assets
1.79 % 1.28 % 1.50 %
Nonperforming assets (excluding government guaranteed balances) to total assets
1.12 % 0.82 % 1.06 %
ACL to nonperforming loans (1)
78.66 % 112.44 % 88.10 %
ACL to nonperforming loans (excluding government guaranteed balances) (1)
120.12 % 171.88 % 114.31 %
(1) Excludes loans measured at fair value
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The following table sets forth information with respect to activity in the ACL for loans for the periods shown:
(Dollars in thousands)
At and for the Three Months Ended June 30,
At and for the Six Months Ended June 30,
2025 2024 2025 2024
Allowance at beginning of period
$ 16,513 $ 13,906 $ 15,512 $ 13,497
Charge-offs:
Residential real estate
(835) — (842) —
Commercial real estate
(301) (60) (431) (60)
Commercial and industrial
(5,061) (2,599) (8,027) (5,523)
Consumer and other
(958) (771) (1,451) (1,749)
Total charge-offs
(7,155) (3,430) (10,751) (7,332)
Recoveries:
Residential real estate
7 — 27 —
Commercial real estate
2 2 2 4
Commercial and industrial
270 111 463 241
Consumer and other
77 56 159 174
Total recoveries
356 169 651 419
Net charge-offs
(6,799) (3,261) (10,100) (6,913)
Provision for credit losses on loans
7,327 3,198 11,629 7,259
Allowance at end of period
$ 17,041 $ 13,843 $ 17,041 $ 13,843
Net charge-offs to average loans HFI at amortized cost
2.60 % 1.45 % 1.95 % 1.58 %
Allowance as a percent of total loans HFI at amortized cost
1.65 % 1.50 % 1.65 % 1.50 %
Allowance as a percent of loans HFI at amortized cost, not including government guaranteed loans
1.85 % 1.73 % 1.85 % 1.73 %
Allowance as a percent of nonperforming loans at amortized cost, gross
78.66 % 112.44 % 78.66 % 112.44 %
Total loans HFI
$ 1,125,799 $ 1,008,314 $ 1,125,799 $ 1,008,314
Average loans HFI at amortized cost
$ 1,047,568 $ 902,417 $ 1,034,728 $ 876,886
Nonperforming loans (including government guaranteed balances) at amortized cost, gross
$ 21,665 $ 12,312 $ 21,665 $ 12,312
Nonperforming loans (excluding government guaranteed balances) at amortized cost, gross
$ 14,187 $ 8,054 $ 14,187 $ 8,054
Guaranteed balance of government guaranteed loans
$ 152,857 $ 163,655 $ 152,857 $ 163,655
The following table details net charge-offs to average loans outstanding by loan category for the three months ended June 30, 2025 and June 30, 2024.
Three Months Ended June 30, 2025 Three Months Ended June 30, 2024
(Dollars in thousands) Net (Charge-off) Recovery Average Loans HFI at amortized cost Net (Charge-off) Recovery Ratio Net (Charge-off) Recovery Average Loans HFI at amortized cost Net (Charge-off) Recovery Ratio
Residential real estate
$ (828) $ 343,352 (0.96) % $ — $ 285,938 — %
Commercial real estate
(299) 366,800 (0.33) (58) 336,254 (0.07)
Commercial and industrial
(4,791) 242,777 (7.89) (2,488) 201,577 (4.94)
Commercial and industrial - PPP
— 307 — — 2,816 —
Consumer and other
(881) 94,332 (3.74) (715) 75,832 (3.77)
Total loans HFI at amortized cost
$ (6,799) $ 1,047,568 (2.60) % $ (3,261) $ 902,417 (1.45) %
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The following table details net charge-offs to average loans outstanding by loan category for the six months ended June 30, 2025 and June 30, 2024.
Six Months Ended June 30, 2025 Six Months Ended June 30, 2024
(Dollars in thousands) Net (Charge-off) Recovery Average Loans HFI at amortized cost Net (Charge-off) Recovery Ratio Net (Charge-off) Recovery Average Loans HFI at amortized cost Net (Charge-off) Recovery Ratio
Residential real estate
$ (815) $ 334,679 (0.49) % $ — $ 273,613 — %
Commercial real estate
(429) 364,306 (0.24) (56) 335,914 (0.03)
Commercial and industrial
(7,564) 241,008 (6.28) (5,282) 199,211 (5.30)
Commercial and industrial - PPP
— 469 — — 2,948 —
Consumer and other
(1,292) 94,266 (2.74) (1,575) 65,200 (4.83)
Total loans HFI, at amortized cost
$ (10,100) $ 1,034,728 (1.95) % $ (6,913) $ 876,886 (1.58) %
The increase in commercial and industrial loan net charge-offs was the result of macro economic conditions including rapidly rising interest and inflation rates, as well as natural disasters including wildfires and hurricanes.
SBA and Other Government Guaranteed Loans
The following table sets forth, for the periods indicated, information regarding the SBA and other government guaranteed lending activity, excluding PPP loans.
(Dollars in thousands)
At and for the Six Months Ended June 30,
At and for the Year Ended December 31,
Government Guaranteed, Excluding PPP 2025 2024 2024
Number of loans originated
1,108 1,412 2,508
Amount of loans originated
$ 212,686 $ 229,232 $ 431,375
Average loan size originated
$ 192 $ 162 $ 172
Government guaranteed loan balances sold
$ 139,345 $ 206,771 $ 385,342
Total government guaranteed loan balances:
Guaranteed portion of government guaranteed loan balances
$ 152,666 $ 161,331 $ 148,543
Unguaranteed portion of government guaranteed loan balances
$ 287,265 $ 230,576 $ 277,420
Total government guaranteed loans
$ 439,931 $ 391,907 $ 425,963
Government guaranteed loans serviced for others
$ 1,064,852 $ 966,212 $ 1,056,665
The Bank makes government guaranteed loans throughout the United States. The following table sets forth, at the dates indicated, information regarding the geographic disbursement of its government guaranteed loan portfolio. The “All Other” category includes states with less than 5% in any period presented.
June 30,
2025 2024
(Dollars in thousands) Amount % of Total Amount % of Total
Florida
$ 142,625 32 % $ 116,493 30 %
California
47,637 11 53,362 14
Tennessee 27,579 6 30,462 8
Texas
34,469 8 25,974 7
All Other
188,463 43 165,616 41
Total government guaranteed loans, excluding PPP loans
$ 440,773 100 % $ 391,907 100 %
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Deposits
General. 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. Borrowings, as well as available lines of credit, may be used on a short-term basis to compensate for reductions in other sources, such as deposits at less than projected levels.
Deposits. Deposits are sourced principally from within its primary service area of Pinellas, Hillsborough, Manatee, Pasco, and Sarasota Counties, Florida. The Bank offers a wide selection of deposit instruments including demand deposit accounts, NOW accounts, money market accounts, regular savings accounts, time deposit accounts, and retirement savings plans (such as IRA accounts).
Time deposit rates are set to encourage longer maturities as cost and market conditions will allow. Deposit account terms vary, with the primary differences being the minimum balance required, the time period the funds must remain on deposit, and the interest rate.
The Bank emphasizes commercial banking relationships in an effort to increase demand deposits as a percentage of total deposits. Deposit interest rates are set by management at least monthly or more often if conditions require it, based on a review of loan demand, projected cash flows and a survey of rates among competitors.
Brokered deposits . At times, the Bank has brokered time deposit and non-maturity deposit relationships available to diversify its funding sources. Brokered deposits offer several benefits relative to other funding sources, such as: maturity structures which cannot be duplicated in the current retail market, deposit gathering outside the market of the existing deposit base, the unsecured nature of these liabilities, and the ability to quickly generate funds. The Bank’s internal policy limits the use of brokered deposits as a funding source to no more than 20% of total assets. The Company's ability to accept or renew brokered deposits is contingent upon the Bank maintaining a capital level of "well capitalized." At June 30, 2025 and December 31, 2024, the Company had $186.7 million and $112.1 million, respectively, of brokered deposits.
The amount of each of the following categories of deposits, at the dates indicated, are as follows:
(Dollars in thousands) June 30, 2025 December 31, 2024
Noninterest-bearing deposit accounts
$ 109,698 9.4 % $ 101,743 8.9 %
Interest-bearing transaction accounts
238,215 20.5 256,793 22.5
Money market accounts
472,085 40.6 455,519 39.8
Savings accounts
20,920 1.8 18,906 1.7
Subtotal
840,918 72.3 832,961 72.9
Total time deposits
322,878 27.7 310,268 27.1
Total deposits
$ 1,163,796 100.0 % $ 1,143,229 100.0 %
At June 30, 2025, the Company held approximately $235.9 million of deposits that exceeded the FDIC insurance limit which was 20% of total deposits.
The following table provides information on the maturity distribution of the time deposits exceeding the FDIC insurance limit of $250 thousand as of June 30, 2025.
(Dollars in thousands)
Three months or less
$ 51,445
Over three months through six months
15,130
Over six months through 12 months
11,463
Over 12 months
23,137
Total time deposits over $250
$ 101,175
Deposits increased $20.6 million or 1.80% for the six months ended June 30, 2025, with in creases in noninterest-bearing deposit account balances, savings and money market deposit account balances, and time deposit balances, partially offset by a decrease in interest-bearing transaction account balances.
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Other Borrowings
At June 30, 2025, the Company had $40,000 of borrowings at 4.57% from the FHLB and no borrowings from the FRB. There were no borrowings from the FHLB or FRB at December 31, 2024.
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. Any a dvances that the Bank were to obtain would be secured by a blanket lien on $370.6 million of real estate-related loans as of June 30, 2025. Based on this collateral and the Bank's holdings of FHLB stock, the Bank was eligible to borrow up to $155.5 million from the FHLB at June 30, 2025.
In addition, the Bank has a line of credit with the Federal Reserve Bank of Atlanta which was secured by $79.0 million of commercial loans as of June 30, 2025. FRB short-term borrowings bear interest at variable rates based on the FOMC's target range for the federal funds rate. Based on this collateral, the Bank was eligible to borrow up to $55.8 million from the FRB at June 30, 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. 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 balance of Subordinated Debentures outstanding at the Company, net of offering costs, amounted to $6.0 million at June 30, 2025 and December 31, 2024.
The Company has a term note with quarterly principal and interest payments with interest at Prime (7.50% at June 30, 2025). The note matures on March 10, 2029 and the balance of the note was $1.7 million and $1.9 million at June 30, 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. As of June 30, 2025, the Company was in compliance with all financial debt covenants.
Capital Resources
Shareholders' equity is influenced primarily by earnings, dividends, the Company's sales and repurchases of its common and preferred stock, and changes in accumulated other comprehensive income caused primarily by fluctuations in unrealized gains or losses, net of taxes, on available for sale investment securities.
Shareholders' equity was $108.2 million at June 30, 2025 as compared to $110.9 million at December 31, 2024. The decrease was primarily due to net loss of $1.6 million, common stock dividends of $0.7 million, and preferred stock dividends of $0.8 million, partially offset by the decrease in th e accumulated other comprehensive loss of $0.6 million.
The Company strives to maintain an adequate capital base to support its activities in a safe and sound manner while at the same time maximizing shareholder value. Management assesses capital adequacy against the risk inherent in the balance sheet, recognizing that unexpected loss is the common denominator of risk and that common equity has the greatest capacity to absorb unexpected loss.
The Bank is subject to regulatory capital requirements imposed by various regulatory agencies. Failure to meet minimum capital requirements can initiate certain mandatory and discretionary actions by banking regulators that, if undertaken, could have a direct material effect on BayFirst’s and the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company must meet specific capital guidelines that involve quantitative measures of its assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by regulators about components, risk weightings, and other factors.
At June 30, 2025 and December 31, 2024, the Bank's capital ratios were in excess of the requirement to be "well capitalized" under the regulatory guidelines.
59
As of the dates indicated, the Bank met all capital adequacy requirements to which it is subject. 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 June 30, 2025
Total Capital (to risk-weighted assets)
$ 120,052 11.23 % $ 85,513 8.00 % $ 106,891 10.00 %
Tier 1 Capital (to risk-weighted assets)
106,646 9.98 64,135 6.00 85,513 8.00
Common Equity Tier 1 Capital (to risk-weighted assets)
106,646 9.98 48,101 4.50 69,479 6.50
Tier 1 Capital (to total assets)
106,646 8.11 52,582 4.00 65,728 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.
(2) Minimum to be considered “well capitalized” under Prompt Corrective Actions Provisions.
Off-Balance Sheet Arrangements
The Bank is a party to financial instruments with off-balance sheet risk in the normal course of business. These financial instruments primarily include unfunded loan commitments, unfunded lines of credit, and standby letters of credit. The Bank uses these financial instruments to meet the financing needs of its customers. These financial instruments involve, to varying degrees, elements of credit, interest rate, and liquidity risk. These do not present unusual risks and management does not anticipate any accounting losses that would have a material effect on the Bank.
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) June 30,
2025 		December 31,
2024
Unfunded loan commitments
$ 16,135 $ 21,174
Unused lines of credit
223,071 199,411
Standby letters of credit
1,259 276
Total
$ 240,465 $ 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. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Management evaluates each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained if deemed necessary by the Bank upon extension of credit is based on management’s credit evaluation of the customer.
Standby letters-of-credit are conditional lending commitments that the Bank issues to guarantee the performance of a customer to a third party and to support private borrowing arrangements. Essentially, letters of credit have expiration dates within one year of the issue date. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending credit. The Bank may hold collateral supporting those commitments.
In general, loan commitments and letters of credit are made on the same terms, including with respect to collateral, as outstanding loans. Each customer’s creditworthiness and the collateral required are evaluated on a case-by-case basis.
The Company maintains an ACL for its off-balance sheet loan commitments which is calculated by loan type using estimated line utilization rates based on historical usage. Loss rates for outstanding loans is applied to the estimated
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utilization rates to calculate the ACL for off-balance sheet loan commitments. At June 30, 2025 and December 31, 2024, ACL for off-balance sheet loan commitments totaled $554 thousand and $516 thousand, respectively.
Contractual Obligations
In the ordinary course of its operations, the Company enters into certain contractual obligations. Total contractual obligations at June 30, 2025 were $393.0 million, an increase from $341.7 million at December 31, 2024. The increase was primarily due to an increase in short-term borrowings of $40.0 million and an increase in time deposits of $12.6 million.
The following tables present our contractual obligations as of June 30, 2025 and December 31, 2024.
Contractual Obligations as of June 30, 2025
(Dollars in thousands) Less than One Year One to Three Years Three to Five Years Over Five Years Total
Operating lease obligations $ 1,993 $ 3,471 $ 2,679 $ 14,277 $ 22,420
Short-term borrowings 40,000 — — — 40,000
Long-term borrowings 456 912 339 — 1,707
Subordinated notes — — — 5,959 5,959
Time deposits 277,516 43,400 1,962 — 322,878
Total $ 319,965 $ 47,783 $ 4,980 $ 20,236 $ 392,964
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. These financial commitments include withdrawals by depositors, credit commitments to borrowers, expenses of the operations, and capital expenditures. The Bank generally maintains a minimum liquidity ratio of liquid assets to total assets of at least 7.0%. Liquid assets include cash and due from banks, federal funds sold, interest-bearing deposits with banks and unencumbered investment securities available for sale. The on-balance sheet liquidity ratio at June 30, 2025 was 8.28%, as compared to 9.17% at December 31, 2024.
For the six months ended 2025, the Bank paid dividends of $3.30 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 June 30, 2025, BayFirst Financial Corp. held $937 thousand in cash and cash equivalents.
The Company expects that all the liquidity needs, including the contractual commitments can be met by currently available liquid assets and cash flows. In the event any unforeseen demand or commitments were to occur, the Company could access the borrowing capacity with the FHLB or FRB, or lines of credit with other financial institutions. The Company does not rely on investment securities as the main source of liquidity and does not foresee the need to sell investment securities for cash flow purposes. In addition, the Company has the ability to obtain wholesale deposits as another source of liquidity. The Company expects that the currently available liquid assets and the ability to borrow from the FHLB, FRB, and other financial institutions would be sufficient to satisfy the liquidity needs without any material adverse effect on the Company’s liquidity.
A description of BayFirst’s and the Bank’s debt obligations is set forth above under the heading “Other Borrowings.”
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market Risk and Interest Rate Sensitivity
Market risk is the risk of loss from adverse changes in market prices and rates. Market risk arises primarily from interest-rate risk inherent in lending and deposit taking activities. To that end, the Company actively monitors and manages its interest-rate risk exposure. The measurement of market risk associated with financial instruments is meaningful only when all related and offsetting on- and off-balance sheet transactions are aggregated, and the resulting net positions are identified. Disclosures about the fair value of financial instruments, which reflect changes in market prices and rates, should also be considered.
The objective in managing interest-rate risk is to minimize the adverse impact of changes in interest rates on net interest income and capital, while adjusting the asset-liability structure to obtain the maximum yield-cost spread on that structure. The Company relies primarily on its asset-liability structure to control interest rate risk. A sudden or substantial change in interest rates may impact its earnings, to the extent that the interest rates borne by assets and liabilities do not change at the same rate, to the same extent, or on the same basis.
The Company established a comprehensive interest rate risk management policy which is administered by management. The policy establishes risk limits, which are quantitative measures of the percentage change in net interest income (net interest income at risk) and the fair value of equity capital (economic value of equity at risk) resulting from a hypothetical change in interest rates for maturities from one day to 30 years. Management measures the potential adverse impacts that changing interest rates may have on its short-term earnings, long-term value, and liquidity with computer-generated simulation analysis. The simulation model is designed to capture call features and interest rate caps and floors embedded in investment and loan contracts. As with any method of analyzing interest rate risk, there are certain shortcomings inherent in the interest rate modeling methodology used. When interest rates change, actual movements in different categories of interest-earning assets and interest-bearing liabilities, loan prepayments, and withdrawals of time and other deposits, may deviate significantly from the assumptions used in modeling. The methodology does not measure the impact that higher rates may have on borrowers’ ability to service their debts, or the impact of rate changes on demand for loan and deposit products.
To minimize the potential for adverse effects of changes in interest rates on the results of the operations, the Company monitors assets and liabilities to better match the maturities and repricing terms of the interest-earning assets and interest-bearing liabilities. To do this, the Company (i) emphasizes the origination of adjustable-rate and variable-rate loans to be HFI; (ii) maintains a stable core deposit base; and (iii) maintains a significant portion of liquid assets (cash, interest-bearing deposits with other banks, and available for sale investment securities).
Management regularly reviews its exposure to changes in interest rates. Among the factors they consider are changes in the mix of interest-earning assets and interest-bearing liabilities, interest rate spreads and repricing periods. ALCO reviews, on at least a quarterly basis, its interest rate risk position.
The interest rate risk position is measured and monitored at the Bank using net interest income simulation models and economic value of equity sensitivity analysis that captures both short-term and long-term interest-rate risk exposure.
Modeling the sensitivity of net interest income and the economic value of equity to changes in market interest rates is highly dependent on numerous assumptions incorporated into the modeling process. The models used for these measurements rely on estimates of the potential impact that changes in interest rates may have on the value and prepayment speeds on all components of its loan and investment portfolios, as well as embedded options and cash flows of other assets and liabilities. Balance sheet growth assumptions are also included in the simulation modeling process. The analysis provides a framework as to what the overall sensitivity position is as of the most recent reported position and the impact that potential changes in interest rates may have on net interest income and the economic value of its equity.
Net interest income simulation involves forecasting net interest income under a variety of interest rate scenarios including instantaneous shocks.
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The estimated impact on the net interest income as of June 30, 2025 and December 31, 2024, assuming immediate parallel moves in interest rates, is presented in the table below.
June 30, 2025 December 31, 2024
Change in rates Following 12 months Following 24 months Following 12 months Following 24 months
+400 basis points (4.4) % (6.2) % 11.1 % 9.9 %
+300 basis points (2.2) (3.3) 10.0 9.5
+200 basis points (0.8) (1.5) 5.9 5.7
+100 basis points — (0.3) 1.8 1.9
-100 basis points 1.3 0.5 (3.7) (3.7)
-200 basis points 0.9 (1.0) (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. Market-based prepayment speeds are factored into the analysis for loan and investment securities portfolios. Rate sensitivity for transactional deposit accounts is modeled based on both historical experience and external industry studies.
The Company uses economic value of equity sensitivity analysis to understand the impact of interest rate changes on long-term cash flows, income, and capital. Economic value of equity is based on discounting the cash flows for all balance sheet instruments under different interest rate scenarios.
The table below presents the change in the economic value of equity as of June 30, 2025 and December 31, 2024, assuming immediate parallel shifts in interest rates.
Change in rates June 30, 2025 December 31, 2024
+400 basis points (19.7) % (5.3) %
+300 basis points (14.3) (2.9)
+200 basis points (9.2) (2.5)
+100 basis points (4.3) (2.6)
-100 basis points 5.4 (0.1)
-200 basis points 10.1 (0.4)
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
An evaluation of the Company’s disclosure controls and procedures (as defined in Rules 13(a)-15(e) and 15(d)-15(e) of the Exchange Act), was carried out under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer as of June 30, 2025, the last day of the period covered by this Quarterly Report. The Company’s Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of June 30, 2025, in ensuring that the information required to be disclosed in the reports the Company files or submits under the Exchange Act is (i) accumulated and communicated to management (including the Company’s Chief Executive Officer and Chief Financial Officer) as appropriate to allow timely decisions regarding required disclosures, and (ii) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms.
Changes in Internal Control Over Financial Reporting
There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) during the fiscal period to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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Part II
Item 1. Legal Proceedings
In the normal course of business, the Company is named or threatened to be named as a defendant in various lawsuits, none of which is expected to have a material effect on the Company. However, given the nature, scope and complexity of the extensive legal and regulatory landscape applicable to its business (including laws and regulations governing consumer protection, fair lending, fair labor, privacy, information security, anti-money laundering and anti-terrorism), the Company, like all banking organizations, is subject to heightened legal and regulatory compliance and litigation risk. There are no material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which the Company is a party or to which its property is the subject.
Item 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully consider the factors discussed under "Part I--Item 1A--Risk Factors" in the Company's Form 10-K for the year ended December 31, 2024. These factors could materially and adversely affect the Company's business, financial condition, liquidity, results of operations and capital position, and could cause its actual results to differ materially from its historical results or the results contemplated by the forward-looking statements contained in this report.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Unregistered Sales of Equity Securities
None.
Issuer Purchases of Equity Securities
On January 28, 2025, the Company’s Board of Directors authorized a stock repurchase program for the repurchase of up to $2,000,000 of the Company’s issued and outstanding common stock over a period beginning on January 28, 2025, and continuing until the earlier of the completion of the repurchase, or December 31, 2025, or termination of the program by the Board of Directors.
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. 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. The excise tax applies to all of the stock of a covered corporation regardless of whether the corporation has profits or losses. 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. 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.
The following table sets forth information regarding the Company’s repurchase of shares of its outstanding common stock during the three months ended June 30, 2025.
Period
Number of Shares
Average Price Paid Per Share Cumulative Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares That May Yet be Purchased Under the Plans or Programs
April 1-30, 2025 — $ — — $ 1,664,889
May 1-31, 2025 — — — $ 1,664,889
June 1-30, 2025 — — — $ 1,664,889
Total — $ —
Under applicable state law, Florida corporations are not permitted to retain treasury stock. As such, the price paid for the repurchased shares reduces the amount of common stock on the consolidated balance sheet. As of June 30, 2025, total shares repurchased for $335,111 had been redeemed since the Repurchase Program was implemented. The repurchased shares remain authorized, unissued shares.
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Item 3. Defaults Upon Senior Securities
None.
It em 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None .
ITEM 6. EXHIBITS
(a) Exhibits.
Exhibit
Number 		Exhibit Name
3.1
3.2
3.3
3.4
4.1
4.2
4.3
4.4
31.1
31.2
32.1
32.2
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Financial information from the Company’s Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 2025, formatted in iXBRL interactive data files pursuant to Rule 405 of Regulation S-T: (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Income; (iii) Consolidated Statements of Comprehensive Income; (iv) Consolidated Statements of Shareholders’ Equity; (v) Consolidated Statements of Cash Flows; and (vi) Notes to the Consolidated Financial Statements – filed herewith.
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SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
BAYFIRST FINANCIAL CORP.
Date: August 11, 2025
By: /s/ Thomas G. Zernick
Thomas G. Zernick
Chief Executive Officer
(Principal Executive Officer)
Date: August 11, 2025
By: /s/ Scott J. McKim
Scott J. McKim
Chief Financial Officer
(Principal Financial Officer)

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TABLE OF CONTENTS
Part I - Financial InformationItem 1. Financial StatementsNote 1 - Basis Of PresentationNote 2 Discontinued OperationsNote 3 Investment SecuritiesNote 4 LoansNote 5 - Allowance For Credit LossesNote 6 Fair ValueNote 7 Government Guaranteed Loan Servicing ActivitiesNote 8 LeasesNote 9 Other BorrowingsNote 10 Stock-based CompensationNote 11 Other Benefit PlansNote 12 Regulatory MattersNote 13 Loan Commitments and Other Related ActivitiesNote 14 Earnings Per Common ShareNote 15 - Segment InformationNote 16 Subsequent EventsItem 2. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsItem 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. Controls and ProceduresPart IIItem 1. Legal ProceedingsItem 1A. Risk FactorsItem 2. Unregistered Sales Of Equity Securities and Use Of ProceedsItem 3. Defaults Upon Senior SecuritiesItem 4. Mine Safety DisclosuresItem 5. Other InformationItem 6. Exhibits

Exhibits

3.1 Amended and Restated Articles of Incorporation 3.2 Bylaws 3.3 Amendment to Bylaws, dated August22, 2019 3.4 Amendment to Articles of Incorporation, dated September 7, 2023 4.1 Form of common stock certificate 4.2 Form of Series A Preferred Stock certificate 4.3 Form of Series B Convertible Preferred Stock certificate 4.4 Form of Series C Cumulative Convertible Preferred Stock certificate 31.1 Principal Executive Officers Certification required by Rule 13(a)-14(a) - filed herewith 31.2 Principal Financial Officers Certification required by Rule 13(a)-14(a) - filed herewith 32.1 Principal Executive Officers Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 - filed herewith 32.2 Principal Financial Officers Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 - filed herewith