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    BAFN
    Earnings call· Jun 2026(Q2 FY26)

    BayFirst Financial Q2 FY26 earnings call BAFN

    Aug 14, 2026 Source

    Executive summary

    BayFirst Financial Corp. Q2 FY26 — Asset Resolution and Strategic Reorientation

    BayFirst Financial Corp. reported a significant net loss in Q2 FY26, primarily driven by a comprehensive asset resolution plan and one-time charges totaling $43.8 million, alongside restatements for prior period errors. The quarter also saw an $80 million capital raise, strengthening capital ratios and enabling a strategic reorientation towards core relationship banking and traditional commercial lending, with new leadership appointments and a planned branch expansion.

    Highlights

    5

    • Completed an $80 million capital raise at the end of April.

    • Shareholders' equity increased by $40.3 million to $115.9 million at quarter-end.

    • Tier 1 leverage ratio improved to 8.3% from 5.89% in Q1 FY26.

    • Normalized net interest margin (excluding one-time impacts) was 4.07% in Q2 FY26.

    • Cost of funds decreased 24 basis points QoQ to 2.66% and 49 basis points YTD.

    Concerns

    5

    • Reported a net loss of $32.7 million in Q2 FY26, compared to a restated net loss of $5.9 million in Q1 FY26.

    • Asset resolution plan resulted in a $41.5 million pretax impact.

    • Material misstatements from prior periods (2024, 2025, Q1 2026) required financial restatement.

    • Deposits decreased $97 million (9%) QoQ and $175 million (15%) YoY to $989 million.

    • Tangible book value per share decreased to $4.82 from $14.22 QoQ.

    Operational metrics

    22
    Shareholders' equity
    $115.9 millionup $40.3 million from Q1 FY26
    Q2 FY26

    Increase from capital raise net of asset resolution plan.

    Net accumulated other comprehensive loss
    $2.1 millionincreased slightly by $57,000 QoQ
    Q2 FY26
    Normalized Net Interest Margin
    4.07%
    Q2 FY26

    Excluding the one-time impact mentioned as part of the asset resolution plan.

    Cost of funds
    2.66%down 24 basis points from Q1 FY26
    Q2 FY26

    Reflecting efforts to exit promotional rate balances and brokered deposit balances.

    Noninterest income (one-time impacts)
    $8 million
    Q2 FY26

    Related to the Board-approved asset resolution plan.

    Noninterest expense (one-time charges)
    $2.5 million
    Q2 FY26

    Related to actions under the asset resolution plan and change in control payment.

    Compensation costs (one-time)
    $600,000higher
    Q2 FY26

    Driven largely by accrued change in control payment.

    Total unguaranteed SBA 7(a) loan balances
    $142 milliondown from $159.3 million at Q1 FY26
    Q2 FY26
    Annualized charge-offs as percentage of average loans held for investment
    2.08%decrease from 2.14% in Q1 FY26
    Q2 FY26
    Allowance for credit losses on loans to total loans HFI at amortized cost (excluding government-guaranteed loan balances)
    5.82%up from 2.55% at Q1 FY26 and 2.60% at FY25
    Q2 FY26
    SBA BOLT loan portfolio reserve
    32.8%
    Q2 FY26
    SBA FlashCap portfolio reserve
    25%
    Q2 FY26
    Core C&I SBA loan portfolio reserve
    23%
    Q2 FY26
    Real estate-backed SBA loan portfolio reserve
    1%
    Q2 FY26

    This part of the portfolio performs as expected and is not a big loss driver.

    Nonperforming loans (excluding government guaranteed balances) current and paying
    $3.1 million
    Q2 FY26

    These balances will be evaluated for potential return to accrual status.

    Classified loans current and performing
    68%
    Q2 FY26

    Working with borrowers towards resolution.

    Treasury fee revenue growth
    75%YoY
    FY25 over FY24

    On track to continue that increase this year.

    FDIC insured deposits
    80%
    Q2 FY26
    On-balance sheet liquidity ratio
    14.95%
    Q2 FY26
    Wholesale borrowings
    $0
    Q2 FY26
    Tax rate
    25%
    Q2 FY26
    Rights offering shares
    4.1 million
    August 2026

    Expected to launch in August.

    Industry KPIs

    12
    MetricValueDetails
    Loans$882.8 millionUSD
    Deposits$989 millionUSD
    Cet1 ratio8.3%%
    Capital returns—
    Fee income lines—
    Allowance reserves$45.1 millionUSD
    Net interest income$9.4 millionUSD
    Net interest margin3.48%%
    Net charge offs npls$4.5 millionUSD
    Total operating expenses$17.7 millionUSD
    Provision for credit losses$29.7 millionUSD
    Efficiency ratio operating leverage—

    Product announcements

    1
    ProductTypeDetails
    New retail location in South Tampalaunch

    Risks & headwinds

    5
    Legacy credit issues from unguaranteed SBA 7(a) loansQ2 FY26

    $41.5 million pretax impact from asset resolution plan

    Mitigation: Asset resolution plan deployed, increased allowance for credit losses, exit from SBA 7(a) lending business.

    Material misstatements from prior periods2024, 2025, Q1 2026

    $2.8 million deferred origination costs and $2.1 million accrued interest (as of March 31, 2026); $3.4 million deferred origination costs (2024 and 2025)

    Mitigation: Financial statements restated, amended SEC filings, internal operational remediation activities ongoing, exit from SBA 7(a) lending to prevent recurrence.

    One-time charges related to strategic reorientationQ2 FY26

    $2.2 million for vendor contract write-offs and change in control payment accrual

    Mitigation: These are one-time charges associated with assessing existing business and making strategic updates.

    Deposit decrease due to funding strategy changesQ2 FY26

    Deposits decreased $97 million (9%) QoQ and $175 million (15%) YoY to $989 million

    Mitigation: Intentional reduction of high-rate promotional deposits from non-relationship customers and broker deposits; focus on improving deposit mix towards lower-cost, relationship-based accounts.

    Tangible book value per share dilutionQ2 FY26

    Decreased to $4.82 from $14.22 QoQ

    Mitigation: Capital raise completed, focus on profitable growth and maximizing rights offering for shareholders.

    What to watch in Q3 FY26

    5

    Rights Offering Completion

    August 2026
    CurrentCommunications to be mailed next week (mid-August)
    TargetSuccessful launch and completion of rights offering

    Why it matters

    Will provide additional capital and impact tangible book value per share, supporting the bank's strategic growth initiatives.

    The rights offering, we'll launch that in August. I just wanted to mention when the shareholder meeting was, and that's in September.

    Q&A highlights

    6

    How quickly will the new South Tampa branch hit breakeven?

    Management expects the new South Tampa branch to reach breakeven sooner than two years, citing the investment and immediate account openings in the prosperous market.

    “I would say, given our investment, it would be sooner than that.”

    asked by Ross Haberman · answered by Alfred Rogers

    2 min read6 chapters

    Detailed Narrative

    01

    Asset Resolution and Financial Restatement

    The company undertook a comprehensive asset resolution plan in Q2 FY26, resulting in a $41.5 million pretax impact from charge-offs, increased allowance for credit losses on SBA 7(a) loans, impairment of an equity investment, and write-down of unamortized premiums. Concurrently, material misstatements from prior periods (2024, 2025, Q1 2026) were identified and corrected, leading to restated financials and amended SEC filings. Management emphasized that exiting the SBA 7(a) lending business will prevent recurrence of these errors.

    02

    Capital Strengthening and Shareholder Actions

    BayFirst completed an $80 million capital raise in April. Shareholders approved an increase in authorized common stock from 15 million to 100 million, facilitating the conversion and retirement of Series D and E preferred stock into 22,856,000 common shares. Series A and B preferred shares were also redeemed in July. A rights offering for existing shareholders, delayed due to the restatement, is now scheduled to launch in August, with communications to be mailed next week.

    03

    Strategic Reorientation and Leadership Changes

    The bank is exiting the SBA 7(a) lending business and refocusing on traditional commercial and consumer lending within its market. New leadership appointments include Trey Korhn as Chief Banking Officer and Samantha Hill as Director of Retail Banking, aimed at sharpening execution and accelerating growth in core relationship banking. Adam Curtis continues to lead commercial lending as Chief Lending Officer, reporting to Trey.

    04

    Deposit and Funding Strategy

    Deposits decreased by $97 million (9%) QoQ to $989 million, primarily due to the intentional reduction of high-rate promotional deposits from non-relationship customers and broker deposits. The bank is focused on improving its deposit mix towards lower-cost, relationship-based accounts and reducing its cost of funds, which decreased 24 bps QoQ to 2.66% and 49 bps YTD. 80% of deposits were FDIC insured at quarter-end.

    05

    Loan Portfolio and Credit Quality

    Loans held for investment decreased by $41.4 million (4%) QoQ to $882.8 million. The asset resolution plan significantly increased the allowance for credit losses to 5.37% of total loans (5.82% excluding government-guaranteed loans). Nonperforming loans (excluding government-guaranteed) decreased to $14.4 million from $15.9 million QoQ, with 68% of classified loans being current and performing.

    06

    Operational Efficiency and Growth Initiatives

    The company is investing in technology and process improvements to enhance efficiency and customer experience. A new retail branch is scheduled to open in South Tampa in September, expanding the bank's presence in the Tampa Bay market and supporting its strategy of growing core relationships and disciplined lending. The treasury fee revenue grew 75% YoY in FY25 and is on track to continue increasing this year, supported by existing systems and planned team expansion.

    AI-generated summary of the company’s earnings call. Not investment advice.