BayFirst Financial (NASDAQ:BAFN) reported a wider first-quarter loss while outlining an $80 million capital raise, leadership changes, and steps to reposition the bank following its exit from SBA 7(a) lending.
Capital raise, rights offering, and preferred actions
Chairman Anthony Saravanos said the company raised $80 million through a private investment in public equity (PIPE) financing. Under the transaction, BayFirst issued shares of convertible preferred stock that, subject to shareholder and regulatory approvals, will convert to or be exchanged for about 22.9 million shares of common stock at an effective purchase price of $3.50 per share.
In addition, Saravanos said the board decided to resume dividend payments to preferred shareholders and will formally redeem the Series A preferred shares.
CEO transition and board updates
Saravanos introduced Al Rogers as the new Chief Executive Officer and President of BayFirst National Bank, joining CFO Scott McKim and COO Robin Oliver on the call. Saravanos said Rogers’ appointment to the bank board and his CEO role at the bank “have received all necessary regulatory approvals.”
He added that Rogers’ appointment as CEO and President of the holding company and as a director is “contingent upon receipt of regulatory non-objection.” Saravanos also said the board appointed Kenneth R. Lehman to both boards, with the holding company and bank appointments contingent upon regulatory non-objections.
First-quarter results: loss widens as SBA 7(a) exit continues to reshape revenue
CFO Scott McKim reported a net loss of $5.7 million for the first quarter, compared with a net loss of $2.8 million in the fourth quarter of 2025.
McKim said loans held for investment declined to $930.4 million, down $33.5 million (3%) from the prior quarter and down $154.4 million (14%) from a year earlier. He attributed most of the year-over-year decrease to loan sales and the company’s exit from SBA 7(a) lending.
Deposits fell to $1.09 billion, down $98 million (8%) during the quarter and down $42.4 million (4%) from a year earlier. McKim said the quarterly decline was primarily due to reductions in “high rate promotional deposits held with non-relationship customers” and lower broker deposits. He added that 83% of deposits were FDIC insured at March 31, 2026, and that the bank had no wholesale borrowings.
McKim said the bank’s balance sheet liquidity ratio was 13.85% at March 31, while shareholders’ equity ended the quarter at $81.9 million, down by the amount of the quarterly loss. Tangible book value per share declined to $15.74 from $17.22 at the end of the fourth quarter. Net accumulated other comprehensive loss ended at $2.1 million, increasing slightly during the quarter.
Net interest margin was 3.42%, down 16 basis points from the fourth quarter. Net interest income totaled $9.4 million, down $1.7 million from the prior quarter, which McKim said reflected a loan portfolio sale completed in December 2025 of about $97 million. He noted the bank’s cost of funds improved, down 27 basis points from the fourth quarter, driven by efforts to exit promotional-rate and brokered deposits.
Non-interest income was $884,000, an increase of $1 million from the fourth quarter but down $7.9 million from the year-ago quarter. McKim said the year-over-year decline primarily reflected reduced gains on sales of SBA 7(a) government-guaranteed loans following the company’s exit from that business.
Non-interest expense rose to $14.9 million, up $3 million from the fourth quarter. McKim said $2.3 million of the increase reflected a full quarter of servicing costs on the legacy SBA 7(a) portfolio. He noted the bank continues to receive a servicing strip on guaranteed balances sold previously and holds the related servicing rights, with net revenue of $770,000 recorded in non-interest income after amortization. Compensation costs rose by $700,000, which McKim attributed to lower deferred personnel costs and higher commission and bonus expenses.
Credit: charge-offs remain concentrated in unguaranteed SBA 7(a) portfolio
Provision for credit losses was $3.1 million in the quarter, compared with $2 million in the fourth quarter and $4.4 million in the year-ago quarter. Net charge-offs were $4.4 million, slightly below the $4.6 million recorded in the fourth quarter.
McKim said unguaranteed SBA 7(a) loans accounted for $3.4 million of first-quarter net charge-offs. The bank’s unguaranteed SBA 7(a) loan balances were $159.3 million at March 31, down $12.3 million from year-end 2025.
Annualized net charge-offs were 1.98% of average loans held for investment, up slightly from 1.94% in the prior quarter. The allowance for credit losses (ACL) ratio on loans held for investment was 2.35% at March 31, compared to 2.42% at year-end 2025 and 1.61% a year earlier.
COO Robin Oliver said total non-performing loans, excluding government-guaranteed balances, were $15.9 million at quarter end, down from $16.3 million in the fourth quarter. She said the non-performing loan ratio (excluding government-guaranteed balances) was 1.81%, up 1 basis point from the fourth quarter and up 34 basis points from the year-ago quarter. Oliver also noted that of the $15.9 million in non-performing loans, $3.8 million were “current and paying as agreed.”
Oliver said classified loans were “relatively unchanged” from the prior quarter, and that 68% of classified loans were current and performing as the bank works with borrowers toward resolution. She said the bank is working with its lender service provider that services the SBA 7(a) portfolio to enhance collection processes and obtain updated borrower financials, while evaluating credits for upgrade or return to accrual status where appropriate.
Capital impact and strategic priorities
McKim said the additional $80 million of capital is expected to support growth and expansion of the community bank, with a focus on relationship-based lending within its retail footprint. He said the bank has “no plans to deploy lending programs outside of the Tampa Bay and Sarasota markets,” and described the capital as providing support while the bank continues to manage the legacy unguaranteed SBA 7(a) portfolio.
The bank’s Tier 1 leverage ratio was 6.54% at March 31, 2026, compared with 6.52% at year-end 2025 and 8.56% at March 31, 2025. Total capital to risk-weighted assets was 9.84%, compared with 10.18% at year-end 2025 and 11.73% a year earlier. On a pro forma basis, assuming a $42 million capital contribution from the holding company to the bank, McKim said Tier 1 leverage would improve to 10.02% as of March 31 and total capital to risk-weighted assets would improve to 14.40% as of April 30, 2026.
Rogers told investors his initial priorities include gaining a deeper understanding of the portfolio, “returning to profitability,” and expanding and deepening relationships with local customers. He said BayFirst plans to leverage its branch network with more focus and “expand our presence, specifically in the Tampa metropolitan area,” beyond the two branches the bank currently has in that area.
During Q&A, McKim addressed reserves in the unguaranteed SBA 7(a) book, saying the “Bolt and the FlashCap” components represent about $100 million of the $159 million unguaranteed SBA 7(a) balance and are reserved at “close to 13%.” He said those reserves account for “approximately almost $12 million” of the roughly $20 million allowance, while core real estate and core C&I segments are reserved closer to 4%. McKim also compared the Bolt and FlashCap components to “a small business credit card,” adding that the portfolio is “for the most part” unsecured.
In response to a question on liquidity, McKim said the bank’s liquidity ratio was about 13.6% at the end of the first quarter—roughly $130 million on a $1 billion base—adding that figure was as of March 31 and did not include the newly completed capital raise.
About BayFirst Financial (NASDAQ:BAFN)
BayFirst Financial Corp (NASDAQ: BAFN) is the bank holding company for BayFirst National Bank, which operates as a Florida-chartered community bank. The company provides a range of commercial banking services, catering to both business and individual customers in the Tampa Bay region. BayFirst Financial emphasizes relationship-driven banking, offering personalized solutions tailored to the needs of local clients.
The company’s product suite includes deposit accounts such as checking, savings, money market accounts and certificates of deposit.
