Business Context and Reporting Period
Company: BayFirst Financial Corp. (BAFN)
Filing Type: Form 10-K (Annual Report)
Period Ended: December 31, 2025
Business Overview: BayFirst is a bank holding company operating through its wholly-owned subsidiary, BayFirst National Bank. It serves consumers and small businesses primarily in the Tampa Bay/Sarasota region of Florida. As of December 31, 2025, the Company reported total assets of $1.30 billion, total loans held for investment of $963.9 million, and total deposits of $1.18 billion.
Key Financial Metrics
| Metric | 2025 (Year Ended) | 2024 (Year Ended) |
|---|---|---|
| Net Interest Income | $45.8 million | $38.0 million |
| Provision for Credit Losses | $24.6 million | $14.7 million |
| Noninterest Income | $18.4 million | $60.5 million |
| Noninterest Expense | $70.4 million | $66.8 million |
| Net Income (Loss) | ($22.9 million) | $12.6 million |
| Diluted EPS (Loss) | ($5.93) | $2.62 |
| Net Interest Margin | 3.75% | 3.45% |
| Return on Average Assets | (1.73%) | 1.05% |
| Return on Average Common Equity | (27.45%) | 12.84% |
| Total Assets | $1.30 billion | $1.29 billion |
| Total Deposits | $1.18 billion | $1.14 billion |
| Allowance for Credit Losses (ACL) | $22.0 million | $15.5 million |
| Nonperforming Loans (NPL) | $24.3 million (2.68% of loans) | $17.6 million (1.75% of loans) |
| Shareholders' Equity | $87.6 million | $110.9 million |
Material Changes vs. Prior Period
- Significant Net Loss: The Company reported a net loss of $22.9 million in 2025, a reversal from a net income of $12.6 million in 2024. This was driven by a $9.9 million increase in the provision for credit losses and a $42.1 million decrease in noninterest income.
- Strategic Restructuring: In Q4 2025, the Company exited its nationwide SBA 7(a) lending business, selling a portion of the portfolio to Banesco USA. This resulted in $7.3 million in restructure charges.
- Decline in Noninterest Income: Noninterest income dropped significantly due to the absence of a $11.6 million gain on the sale of branch properties (which occurred in 2024), a decrease in gains on the sale of government guaranteed loans, and a reduction in fair value gains on SBA loans.
- Asset Quality Deterioration: Net charge-offs increased to $18.0 million from $13.0 million. Nonperforming loans rose to $24.3 million, with the ACL increasing to $22.0 million to cover elevated charge-offs, primarily in the SBA 7(a) portfolio.
- Dividend Suspension: In July 2025, the Board suspended payments of dividends on both common and preferred stock. As of year-end, there were dividends in arrears on all three series of preferred stock.
Guidance, Outlook, Risks, and Unusual Items
- Outlook: Management does not provide specific forward-looking financial guidance in this filing. The Company expects to utilize its net operating loss carryforwards ($11.1 million federal, $10.6 million state) to offset future taxable income.
- Liquidity and Capital: The Bank remains "well capitalized" under regulatory guidelines. Liquidity is supported by $207 million in cash and cash equivalents and access to $187 million in FHLB borrowing capacity and $32 million in FRB borrowing capacity.
- Debt Obligations: The Company holds $6.0 million in subordinated notes (maturing 2031) and a $1.6 million term note (maturing 2029). The term note is secured by 100% of the Bank's stock. Interest on the subordinated notes was capitalized in late 2025.
- Key Risks:
- Credit Risk: Continued economic uncertainty and elevated charge-offs in the commercial and industrial portfolio.
- Interest Rate Risk: The Company is asset-sensitive; rising rates are expected to positively impact net interest income in the short term.
- Regulatory & Operational: Risks related to cybersecurity, compliance with fair lending laws, and the Florida property insurance crisis affecting collateral values.
- Dividend Restrictions: The suspension of dividends and the requirement to pay preferred dividends before common dividends limits capital distribution to shareholders.
Investor Verification Checklist
- Dividend Arrears: Verify the status of preferred stock dividends in arrears (Series A, B, and C) and the timeline for resumption of payments.
- SBA Portfolio Exit: Confirm the final terms of the SBA 7(a) portfolio sale and the extent of retained servicing rights and associated risks.
- Asset Quality Trends: Monitor the trajectory of nonperforming loans and the adequacy of the Allowance for Credit Losses (ACL) given the recent spike in charge-offs.
- Debt Covenants: Review the covenants associated with the $1.6 million term note secured by the Bank's stock and the $6.0 million subordinated notes.
- Capital Ratios: Track the impact of the net loss on tangible common equity and regulatory capital ratios to ensure the "well capitalized" status is maintained.