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BAFN Incurs Q1 Loss on SBA Loan Credit Stress, Stock Down 10%
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Shares of BayFirst Financial Corp. (BAFN - Free Report) have declined 10% since the company reported results for the quarter ended March 31, 2026, underperforming the S&P 500 index’s 2.4% growth over the same period. Over the past month, BayFirst shares have gained 9%, trailing the S&P 500’s 10.8% growth.
BayFirst incurred a first-quarter 2026 net loss of $1.48 per common share, wider than the net loss of 17 cents per share recorded in the prior-year quarter.
Net interest income fell 14.1% year over year to $9.4 million, while noninterest income dropped sharply to $0.9 million from $8.8 million a year ago due largely to lower gains on government-guaranteed loan sales following the company’s exit from SBA 7(a) lending. Total noninterest expense declined 5.9% from the prior-year period to $14.9 million, though provision for credit losses remained elevated at $3.1 million.
The company incurred a net loss of $5.7 million, wider than the net loss of $0.3 million recorded in the prior-year quarter.
BayFirst Financial Corp. Price, Consensus and EPS Surprise
Loans held for investment decreased 14.2% year over year to $930.4 million, reflecting loan sales and the discontinuation of SBA 7(a) lending operations. Deposits declined 3.8% from a year earlier to $1.1 billion, primarily due to reductions in high-rate promotional deposits and brokered deposits. Despite the decline in balances, noninterest-bearing deposits increased during the quarter, and the bank reported a 27-basis-point reduction in cost of funds.
Net interest margin narrowed to 3.42% from 3.77% in the year-ago quarter as loan yields declined and earning assets contracted. Total assets fell 7.4% year over year to $1.2 billion, while tangible book value per common share declined to $15.74 from $22.77 a year earlier.
The company continued emphasizing its community banking franchise in the Tampa Bay-Sarasota region. BayFirst ranked as the third-largest community banking franchise in the market among institutions with less than $10 billion in assets. Treasury management fee income continued to grow, and the bank increased checking accounts by 6% year to date.
Credit Quality and Capital Position
Asset quality metrics remained pressured. Net charge-offs totaled $4.4 million during the quarter, compared with $3.3 million in the prior-year quarter, while annualized net charge-offs as a percentage of average loans reached 1.98%, up from 1.28% a year earlier. The allowance for credit losses ratio stood at 2.35% at quarter-end versus 1.61% a year ago. Nonperforming assets represented 2% of total assets, slightly improved from 2.08% a year earlier.
Management said ongoing weakness within the legacy unguaranteed SBA 7(a) portfolio continued to drive elevated charge-offs and reserve requirements. Executives noted that approximately $100 million of the bank’s $159 million unguaranteed SBA portfolio carried reserves near 13%, with management acknowledging continued uncertainty surrounding future defaults.
Capital ratios also weakened from prior-year levels. The bank’s Tier 1 leverage ratio was 6.54% at March 31, 2026, compared with 8.56% a year earlier, while the total capital ratio fell to 9.84% from 11.73%. Management stated the bank was not considered “well-capitalized” at quarter-end, though the recently completed capital raise is expected to restore compliance with regulatory capital thresholds.
Management Commentary and Strategic Priorities
Management highlighted an $80 million private investment in public equity, or PIPE, transaction completed during the quarter. The company issued convertible preferred stock that may convert into approximately 22.9 million common shares at an effective price of $3.50 per share, subject to shareholder and regulatory approvals.
The company also named veteran banker Alfred Rogers as chief executive officer and president of BayFirst National Bank, succeeding retiring executive Tom Zernick. Rogers said his priorities include resolving problem assets, restoring profitability and expanding relationship banking within the Tampa Bay market. Executives emphasized that future growth efforts will focus exclusively on the Tampa Bay and Sarasota regions rather than expanding lending programs outside those markets.
Other Developments
BayFirst said it plans to develop an Asset Resolution Plan following the PIPE transaction to address criticized assets through dispositions, workouts or upgrades. The company also announced plans to resume dividend payments to preferred shareholders and redeem its Series A preferred shares. Additionally, BayFirst filed a registration statement for a proposed public offering of up to 4.1 million common shares priced at $3.50 per share and scheduled a special shareholder meeting for July 14, 2026, to approve an increase in authorized shares related to the capital raise.
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BAFN Incurs Q1 Loss on SBA Loan Credit Stress, Stock Down 10%
Shares of BayFirst Financial Corp. (BAFN - Free Report) have declined 10% since the company reported results for the quarter ended March 31, 2026, underperforming the S&P 500 index’s 2.4% growth over the same period. Over the past month, BayFirst shares have gained 9%, trailing the S&P 500’s 10.8% growth.
BayFirst incurred a first-quarter 2026 net loss of $1.48 per common share, wider than the net loss of 17 cents per share recorded in the prior-year quarter.
Net interest income fell 14.1% year over year to $9.4 million, while noninterest income dropped sharply to $0.9 million from $8.8 million a year ago due largely to lower gains on government-guaranteed loan sales following the company’s exit from SBA 7(a) lending. Total noninterest expense declined 5.9% from the prior-year period to $14.9 million, though provision for credit losses remained elevated at $3.1 million.
The company incurred a net loss of $5.7 million, wider than the net loss of $0.3 million recorded in the prior-year quarter.
BayFirst Financial Corp. Price, Consensus and EPS Surprise
BayFirst Financial Corp. price-consensus-eps-surprise-chart | BayFirst Financial Corp. Quote
Balance Sheet and Operating Trends
Loans held for investment decreased 14.2% year over year to $930.4 million, reflecting loan sales and the discontinuation of SBA 7(a) lending operations. Deposits declined 3.8% from a year earlier to $1.1 billion, primarily due to reductions in high-rate promotional deposits and brokered deposits. Despite the decline in balances, noninterest-bearing deposits increased during the quarter, and the bank reported a 27-basis-point reduction in cost of funds.
Net interest margin narrowed to 3.42% from 3.77% in the year-ago quarter as loan yields declined and earning assets contracted. Total assets fell 7.4% year over year to $1.2 billion, while tangible book value per common share declined to $15.74 from $22.77 a year earlier.
The company continued emphasizing its community banking franchise in the Tampa Bay-Sarasota region. BayFirst ranked as the third-largest community banking franchise in the market among institutions with less than $10 billion in assets. Treasury management fee income continued to grow, and the bank increased checking accounts by 6% year to date.
Credit Quality and Capital Position
Asset quality metrics remained pressured. Net charge-offs totaled $4.4 million during the quarter, compared with $3.3 million in the prior-year quarter, while annualized net charge-offs as a percentage of average loans reached 1.98%, up from 1.28% a year earlier. The allowance for credit losses ratio stood at 2.35% at quarter-end versus 1.61% a year ago. Nonperforming assets represented 2% of total assets, slightly improved from 2.08% a year earlier.
Management said ongoing weakness within the legacy unguaranteed SBA 7(a) portfolio continued to drive elevated charge-offs and reserve requirements. Executives noted that approximately $100 million of the bank’s $159 million unguaranteed SBA portfolio carried reserves near 13%, with management acknowledging continued uncertainty surrounding future defaults.
Capital ratios also weakened from prior-year levels. The bank’s Tier 1 leverage ratio was 6.54% at March 31, 2026, compared with 8.56% a year earlier, while the total capital ratio fell to 9.84% from 11.73%. Management stated the bank was not considered “well-capitalized” at quarter-end, though the recently completed capital raise is expected to restore compliance with regulatory capital thresholds.
Management Commentary and Strategic Priorities
Management highlighted an $80 million private investment in public equity, or PIPE, transaction completed during the quarter. The company issued convertible preferred stock that may convert into approximately 22.9 million common shares at an effective price of $3.50 per share, subject to shareholder and regulatory approvals.
The company also named veteran banker Alfred Rogers as chief executive officer and president of BayFirst National Bank, succeeding retiring executive Tom Zernick. Rogers said his priorities include resolving problem assets, restoring profitability and expanding relationship banking within the Tampa Bay market. Executives emphasized that future growth efforts will focus exclusively on the Tampa Bay and Sarasota regions rather than expanding lending programs outside those markets.
Other Developments
BayFirst said it plans to develop an Asset Resolution Plan following the PIPE transaction to address criticized assets through dispositions, workouts or upgrades. The company also announced plans to resume dividend payments to preferred shareholders and redeem its Series A preferred shares. Additionally, BayFirst filed a registration statement for a proposed public offering of up to 4.1 million common shares priced at $3.50 per share and scheduled a special shareholder meeting for July 14, 2026, to approve an increase in authorized shares related to the capital raise.