Bayfirst Financial Corp.
11/10/2026 | Press release | Distributed by Public on 11/10/2026 13:31
Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)
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 nine months ended September 30, 2026 and September 30, 2025 and financial condition as of September 30, 2026 and December 31, 2025. This discussion and analysis should be read in conjunction with the condensed 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, credit quality 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; enforcement actions initiated by our regulators and their impact on our operations; the impact of data breaches or other cybersecurity incidents; enforcement actions initiated by our regulators and their impact on our operations; 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 condensed consolidated financial statements.
As a one-bank holding company, the Company generates most of its revenue from interest on loans and noninterest income. The primary sources of funding for its loans are loan payments, deposits, and borrowings. The Company is dependent on noninterest income, which is derived from service fee income. The largest expenses are interest on those deposits and borrowings, professional fees, loan servicing and 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 condensed 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 condensed consolidated financial statements, are an integral part of the Company's condensed 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 September 30, 2026, the most critical of these significant accounting policies in understanding the estimates and assumptions involved in preparing the condensed consolidated financial statements were the policies 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, 2025 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
Restatement of Previously Issued Financial Statements
As previously disclosed in the Current Report on Form 8-K filed with the SEC on July 15, 2026, the Company is restating its previously issued financial statements as and for the years ended December 31, 2024, and December 31, 2025, and the quarter ended March 31, 2026.
During this process, management identified $2.8 million, pretax, of deferred origination costs and $2.1 million, pretax, of accrued interest as of March 31, 2026, related to unguaranteed portions of SBA 7(a) loans which had defaulted or were placed into nonaccrual status in prior periods, which resulted in a material understatement of provision for credit losses expense and overstatement of net interest income during the effected quarterly periods in which the errors accumulated in 2024, 2025, and the first quarter of 2026. Furthermore, management identified $3.4 million, pretax, of deferred origination costs which should have been netted against gain on sale of guaranteed SBA 7a loans which resulted in a material over statement of gain on sale of government guaranteed loans, during the affected quarterly periods in which the error accumulated in 2024 and 2025.
The discussion of financial results presented are reflective of the restatement adjustments. Refer to Note 1 of the consolidated financial statements included in the 2025 Annual Report for more information on the restatement.
Rights Offering
On October 8, 2026, the Company sold and issued 4,107,908 common shares at $3.50 per common share in or as part of the Company's rights offering. The offering resulted in gross proceeds of $14.4 million which will be used to improve capital levels of the Company and the Bank, and support the continued growth of the Bank.
Series C Preferred Stock
Between September 30, 2026 and December 28, 2026, the no call period on the Company's Series C preferred shares will expire. The Board has voted to redeem the preferred shares and notifications were sent to those Series C preferred stock shareholders. These preferred shares have a conversion option priced at the Company's last reported tangible book value per share. On November 6, 2026, 4,183 Series C preferred shares were converted to 1,148,615 common shares for 29 shareholders at $3.64 per share. The remaining Series C preferred shareholders may elect to convert their shares to common stock in the fourth quarter. Any remaining shares will be redeemed by December 31, 2026.
Selected Financial Data - Unaudited
| As of and for the Three Months Ended |
As of and for the Nine Months Ended
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| (Dollars in thousands, except for share data) | 9/30/2026 | 6/30/2026 | 9/30/2025 | 9/30/2026 | 9/30/2025 | ||||||||||||||||||||||||
| As restated | As restated | ||||||||||||||||||||||||||||
| Income Statement Data: | |||||||||||||||||||||||||||||
| Net interest income | $ | 10,627 | $ | 9,422 | $ | 11,318 | $ | 29,489 | $ | 34,055 | |||||||||||||||||||
| Provision for credit losses | (69) | 28,977 | 11,165 | 32,312 | 23,332 | ||||||||||||||||||||||||
| Noninterest income (loss) | 1,101 | (6,809) | (1,070) | (4,824) | 17,949 | ||||||||||||||||||||||||
| Noninterest expense | 12,816 | 17,676 | 25,215 | 45,378 | 58,556 | ||||||||||||||||||||||||
| Income tax benefit | (342) | (11,375) | (7,055) | (13,753) | (8,015) | ||||||||||||||||||||||||
| Net loss | (677) | (32,665) | (19,077) | (39,272) | (21,869) | ||||||||||||||||||||||||
| Preferred stock dividends | 277 | 386 | 385 | 1,048 | 1,156 | ||||||||||||||||||||||||
| Net loss attributable to common shareholders | $ | (954) | $ | (33,051) | $ | (19,462) | $ | (40,320) | $ | (23,025) | |||||||||||||||||||
| Balance Sheet Data: | |||||||||||||||||||||||||||||
| Average loans HFI | $ | 891,603 | $ | 908,950 | $ | 1,129,337 | $ | 913,246 | $ | 1,109,865 | |||||||||||||||||||
| Average loans HFI at amortized cost | 848,578 | 858,931 | 1,054,946 | 862,845 | 1,039,931 | ||||||||||||||||||||||||
| Average total assets | 1,121,140 | 1,185,392 | 1,339,795 | 1,173,112 | 1,313,423 | ||||||||||||||||||||||||
| Average common shareholders' equity | 59,761 | 67,624 | 86,976 | 71,552 | 89,474 | ||||||||||||||||||||||||
| Government guaranteed loans HFS | - | - | 94,052 | - | 94,052 | ||||||||||||||||||||||||
| As of and for the Three Months Ended |
As of and for the Nine Months Ended
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| (Dollars in thousands, except for share data) | 9/30/2026 | 6/30/2026 | 9/30/2025 | 9/30/2026 | 9/30/2025 | ||||||||||||||||||||||||
| As restated | As restated | ||||||||||||||||||||||||||||
| Total loans HFI | 902,966 | 882,840 | 993,109 | 902,966 | 993,109 | ||||||||||||||||||||||||
| Total loans HFI, excluding government guaranteed loan balances | 832,904 | 805,684 | 917,816 | 832,904 | 917,816 | ||||||||||||||||||||||||
| Allowance for credit losses on loans | 41,762 | 45,081 | 24,485 | 41,762 | 24,485 | ||||||||||||||||||||||||
| Total assets | 1,147,929 | 1,134,925 | 1,340,222 | 1,147,929 | 1,340,222 | ||||||||||||||||||||||||
| Total deposits | 1,014,154 | 988,874 | 1,171,457 | 1,014,154 | 1,171,457 | ||||||||||||||||||||||||
| Common shareholders' equity | 98,095 | 19,850 | 67,921 | 98,095 | 67,921 | ||||||||||||||||||||||||
| Per Share Data: | |||||||||||||||||||||||||||||
| Basic loss per common share | $ | (0.04) | $ | (8.05) | $ | (4.71) | $ | (3.76) | $ | (5.57) | |||||||||||||||||||
| Diluted loss per common share | $ | (0.04) | $ | (8.05) | $ | (4.71) | $ | (3.76) | $ | (5.57) | |||||||||||||||||||
| Dividends per common share | $ | - | $ | - | $ | - | $ | - | $ | 0.16 | |||||||||||||||||||
| Book value per common share | $ | 3.64 | $ | 4.83 | $ | 16.50 | $ | 3.64 | $ | 16.50 | |||||||||||||||||||
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Tangible book value per common share(1)
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$ | 3.64 | $ | 4.82 | $ | 16.50 | $ | 3.64 | $ | 16.50 | |||||||||||||||||||
| Performance Ratios: | |||||||||||||||||||||||||||||
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Return on average assets(2)
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(0.24) | % | (11.02) | % | (5.70) | % | (4.46) | % | (2.22) | % | |||||||||||||||||||
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Return on average common equity(2)
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(6.39) | % | (195.50) | % | (89.51) | % | (75.13) | % | (34.31) | % | |||||||||||||||||||
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Net interest margin(2)
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4.07 | % | 3.48 | % | 3.64 | % | 3.66 | % | 3.76 | % | |||||||||||||||||||
| Asset Quality Data: | |||||||||||||||||||||||||||||
| Net charge-offs | $ | 3,228 | $ | 4,460 | $ | 3,544 | $ | 12,407 | $ | 14,147 | |||||||||||||||||||
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Net charge-offs/average loans HFI at amortized cost(2)
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1.52 | % | 2.08 | % | 1.34 | % | 1.92 | % | 1.81 | % | |||||||||||||||||||
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Nonperforming loans(3)
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$ | 14,013 | $ | 18,457 | $ | 24,687 | $ | 14,013 | $ | 24,687 | |||||||||||||||||||
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Nonperforming loans (excluding government guaranteed balance)(3)
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$ | 13,445 | $ | 14,434 | $ | 15,822 | $ | 13,445 | $ | 15,822 | |||||||||||||||||||
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Nonperforming loans/total loans HFI(3)
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1.63 | % | 2.20 | % | 2.65 | % | 1.63 | % | 2.65 | % | |||||||||||||||||||
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Nonperforming loans (excluding gov't guaranteed balance)/total loans HFI(3)
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1.56 | % | 1.72 | % | 1.70 | % | 1.56 | % | 1.70 | % | |||||||||||||||||||
| ACL/Total loans HFI at amortized cost | 4.85 | % | 5.37 | % | 2.63 | % | 4.85 | % | 2.63 | % | |||||||||||||||||||
| Other Data: | |||||||||||||||||||||||||||||
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Full-time equivalent employees
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146 | 148 | 237 | 146 | 237 | ||||||||||||||||||||||||
| Banking centers | 12 | 11 | 12 | 12 | 12 | ||||||||||||||||||||||||
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(1) See section entitled "GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures" below for a reconciliation to most comparable GAAP equivalent.
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(2) Annualized
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(3) Excludes loans measured at fair value
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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:
| Tangible Common Shareholders' Equity and Tangible Book Value Per Common Share (Unaudited) | ||||||||||||||||||||
| As of | ||||||||||||||||||||
| (Dollars in thousands, except for share data) | September 30, 2026 | June 30, 2026 | September 30, 2025 | |||||||||||||||||
| As restated | ||||||||||||||||||||
| Total shareholders' equity | $ | 104,541 | $ | 115,901 | $ | 83,972 | ||||||||||||||
| Less: Preferred stock liquidation preference | (6,446) | (96,051) | (16,051) | |||||||||||||||||
| Total equity available to common shareholders | 98,095 | 19,850 | 67,921 | |||||||||||||||||
| Less: Intangible assets | (62) | (62) | - | |||||||||||||||||
| Tangible common shareholders' equity | $ | 98,033 | $ | 19,788 | $ | 67,921 | ||||||||||||||
| Common shares outstanding | 26,962,725 | 4,106,905 | 4,116,913 | |||||||||||||||||
| Tangible book value per common share | $ | 3.64 | $ | 4.82 | $ | 16.50 | ||||||||||||||
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 compensation , loan servicing and origination expenses, and income taxes.
Historically, the Company has been dependent on noninterest income, derived primarily from service fee income and 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 sold both the guaranteed balance of its government guaranteed loans, as well as a percentage of the unguaranteed portions of such loans.
In the fourth quarter of 2025, the Company sold a portion of its SBA 7(a) loan portfolio. In conjunction with the sale and as a result of the comprehensive strategic review aimed at reducing expenses and derisking the Bank's balance sheet, BayFirst exited the SBA 7(a) lending business. A third party assumed servicing of loans included in the sale and has been engaged as subservicer on the remaining SBA 7(a) loans retained by BayFirst.
Net Loss
The Company had a net loss for the three months ended September 30, 2026 of $0.7 million, or $0.04 per common share and diluted common share, compared to net income for the three months ended September 30, 2025 of $19.1 million, or $4.71 per common and diluted common share. The change from the third quarter of 2025 was the due to decreases in provision for credit losses of $11.2 million and noninterest expense of $12.4 million, and an increase in noninterest income of $2.2 million, partially offset with a decrease in income tax benefit of $6.7 million.
For the nine months ended September 30, 2026, the Company had a net loss of $39.3 million, or $3.76 per common share and diluted common share, a decrease from net loss of $21.9 million, or $5.57 per common share and diluted common share, for the nine months ended September 30, 2025. The change was primarily due to decreases in net interest income of $4.6 million and noninterest income of $22.8 million and increases in provision for credit losses of $13.5 million and noninterest expense of $13.2 million, partially offset by income tax benefit of $5.7 million.
Net Interest Income
Net interest income was $10.6 million for the three months ended September 30, 2026, a decrease from $11.3 million during the three months ended September 30, 2025. The decrease in net interest income during the third quarter of 2026, as compared to the year ago quarter, was mainly due to a decrease in loan interest income, including fees, of $4.8 million, partially offset by a decrease in interest expense on deposits of $3.1 million.
Net interest margin was 4.07% for the third quarter of 2026, which represented an increase from 3.64% for the third quarter of 2025.
Net interest income was $29.5 million for the nine months ended September 30, 2026, a decrease from $34.1 million for the nine months ended September 30, 2025. The decrease was mainly due to a decrease in loan interest income, including fees, of $14.7 million, partially offset by a decrease in interest expense of $8.7 million.
Net interest margin increased to 3.66% for the nine months ended September 30, 2026, compared to 3.76% for the nine months ended September 30, 2025.
Average Balance Sheet and Analysis of Net Interest Income
The following table sets forth, for the periods indicated, information regarding: (i) the total dollar amount of interest and dividend income of BayFirst from interest-earning assets and the resultant average yields; (ii) the total dollar amount of interest expense on interest-bearing liabilities and the resultant average cost; (iii) net interest income; (iv) interest rate spread; (v) net interest margin; and (vi) ratio of average interest-earning assets to average interest-bearing liabilities. Loans in nonaccrual status, for the purposes of the following computations, are included in the average loan balances. FRB,
FHLB, and FNBB restricted equity holdings are included in other interest-earning assets. The Company did not have a significant amount of tax-exempt assets.
| Three Months Ended September 30, | |||||||||||||||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||||||||||||||
| As restated | |||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | Average Balance | Interest | Yield | Average Balance | Interest | Yield | |||||||||||||||||||||||||||||
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Interest-earning assets:
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Investment securities
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$ | 29,835 | $ | 259 | 3.44 | % | $ | 32,521 | $ | 282 | 3.44 | % | |||||||||||||||||||||||
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Loans(1)
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891,603 | 15,951 | 7.10 | 1,135,629 | 20,746 | 7.25 | |||||||||||||||||||||||||||||
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Other
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114,325 | 1,037 | 3.60 | 65,955 | 664 | 3.99 | |||||||||||||||||||||||||||||
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Total interest-earning assets
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1,035,763 | 17,247 | 6.61 | 1,234,105 | 21,692 | 6.97 | |||||||||||||||||||||||||||||
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Noninterest-earning assets
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85,377 | 105,690 | |||||||||||||||||||||||||||||||||
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Total assets
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$ | 1,121,140 | $ | 1,339,795 | |||||||||||||||||||||||||||||||
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Interest-bearing liabilities:
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NOW, MMDA and savings
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$ | 561,868 | $ | 3,553 | 2.51 | $ | 704,339 | $ | 6,058 | 3.41 | |||||||||||||||||||||||||
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Time deposits
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307,418 | 2,930 | 3.78 | 336,596 | 3,518 | 4.15 | |||||||||||||||||||||||||||||
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Other borrowings
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7,217 | 137 | 7.53 | 67,478 | 798 | 4.69 | |||||||||||||||||||||||||||||
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Total interest-bearing liabilities
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876,503 | 6,620 | 3.00 | 1,108,413 | 10,374 | 3.71 | |||||||||||||||||||||||||||||
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Demand deposits
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111,137 | 105,464 | |||||||||||||||||||||||||||||||||
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Noninterest-bearing liabilities
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22,490 | 22,891 | |||||||||||||||||||||||||||||||||
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Shareholders' equity
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111,010 | 103,027 | |||||||||||||||||||||||||||||||||
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Total liabilities and shareholders' equity
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$ | 1,121,140 | $ | 1,339,795 | |||||||||||||||||||||||||||||||
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Net interest income
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$ | 10,627 | $ | 11,318 | |||||||||||||||||||||||||||||||
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Interest rate spread
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3.61 | 3.26 | |||||||||||||||||||||||||||||||||
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Net interest margin (2)
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4.07 | 3.64 | |||||||||||||||||||||||||||||||||
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Ratio of average interest-earning assets to average interest-bearing liabilities
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118.17 | % | 111.34 | % | |||||||||||||||||||||||||||||||
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(1) Includes nonaccrual loans.
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(2) Net interest margin represents annualized net interest income divided by average total interest-earning assets.
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For the Nine Months Ended September 30,
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| 2026 | 2025 | ||||||||||||||||||||||||||||||||||
| As restated | |||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | Average Balance | Interest | Yield | Average Balance | Interest | Yield | |||||||||||||||||||||||||||||
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Interest-earning assets:
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Investment securities
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$ | 30,760 | $ | 774 | 3.36 | % | $ | 35,917 | $ | 1,095 | 4.08 | % | |||||||||||||||||||||||
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Loans(1)
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913,246 | 46,675 | 6.83 | 1,111,985 | 61,346 | 7.38 | |||||||||||||||||||||||||||||
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Other
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133,820 | 3,593 | 3.59 | 61,468 | 1,831 | 3.98 | |||||||||||||||||||||||||||||
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Total interest-earning assets
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1,077,826 | 51,042 | 6.33 | 1,209,370 | 64,272 | 7.11 | |||||||||||||||||||||||||||||
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Noninterest-earning assets
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95,286 | 104,053 | |||||||||||||||||||||||||||||||||
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Total assets
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$ | 1,173,112 | $ | 1,313,423 | |||||||||||||||||||||||||||||||
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Interest-bearing liabilities:
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NOW, MMDA and savings
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$ | 579,568 | $ | 11,046 | 2.55 | $ | 711,114 | $ | 18,179 | 3.42 | |||||||||||||||||||||||||
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Time deposits
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350,326 | 10,180 | 3.89 | 314,619 | 10,110 | 4.30 | |||||||||||||||||||||||||||||
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Other borrowings
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7,404 | 327 | 5.90 | 54,620 | 1,928 | 4.72 | |||||||||||||||||||||||||||||
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Total interest-bearing liabilities
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937,298 | 21,553 | 3.07 | 1,080,353 | 30,217 | 3.74 | |||||||||||||||||||||||||||||
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Demand deposits
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108,559 | 105,031 | |||||||||||||||||||||||||||||||||
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Noninterest-bearing liabilities
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21,572 | 22,514 | |||||||||||||||||||||||||||||||||
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Shareholders' equity
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105,683 | 105,525 | |||||||||||||||||||||||||||||||||
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Total liabilities and shareholders' equity
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$ | 1,173,112 | $ | 1,313,423 | |||||||||||||||||||||||||||||||
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Net interest income
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$ | 29,489 | $ | 34,055 | |||||||||||||||||||||||||||||||
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Interest rate spread
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3.26 | 3.37 | |||||||||||||||||||||||||||||||||
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Net interest margin (2)
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3.66 | 3.76 | |||||||||||||||||||||||||||||||||
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Ratio of average interest-earning assets to average interest-bearing liabilities
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114.99 | % | 111.94 | % | |||||||||||||||||||||||||||||||
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(1) Includes nonaccrual loans.
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(2) Net interest margin represents annualized net interest income divided by average total interest-earning assets.
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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 September 30, 2026 vs. September 30, 2025 (as restated):
|
|||||||||||||||||
|
Interest-earning assets:
|
|||||||||||||||||
|
Investment securities
|
$ | - | $ | (23) | $ | (23) | |||||||||||
|
Loans
|
(421) | (4,374) | (4,795) | ||||||||||||||
|
Other interest-earning assets
|
(71) | 444 | 373 | ||||||||||||||
|
Total interest-earning assets
|
(492) | (3,953) | (4,445) | ||||||||||||||
|
Interest-bearing liabilities:
|
|||||||||||||||||
|
NOW, MMDA and savings
|
(1,420) | (1,085) | (2,505) | ||||||||||||||
|
Time deposits
|
(296) | (292) | (588) | ||||||||||||||
|
Other borrowings
|
309 | (970) | (661) | ||||||||||||||
|
Total interest-bearing liabilities
|
(1,407) | (2,347) | (3,754) | ||||||||||||||
|
Net change in net interest income
|
$ | 915 | $ | (1,606) | $ | (691) | |||||||||||
| (Dollars in thousands) | Rate | Volume | Total | ||||||||||||||
|
Nine Months Ended September 30, 2026 vs. September 30, 2025 (as restated):
|
|||||||||||||||||
|
Interest-earning assets:
|
|||||||||||||||||
| Investment securities | $ | (176) | $ | (145) | $ | (321) | |||||||||||
|
Loans
|
(4,278) | (10,393) | (14,671) | ||||||||||||||
|
Other interest-earning assets
|
(197) | 1,959 | 1,762 | ||||||||||||||
|
Total interest-earning assets
|
(4,651) | (8,579) | (13,230) | ||||||||||||||
|
Interest-bearing liabilities:
|
|||||||||||||||||
|
NOW, MMDA, and savings
|
(4,130) | (3,003) | (7,133) | ||||||||||||||
|
Time deposits
|
(1,018) | 1,088 | 70 | ||||||||||||||
|
Other borrowings
|
389 | (1,990) | (1,601) | ||||||||||||||
|
Total interest-bearing liabilities
|
(4,759) | (3,905) | (8,664) | ||||||||||||||
|
Net change in net interest income
|
$ | 108 | $ | (4,674) | $ | (4,566) | |||||||||||
Provision for Credit Losses
The provision for credit losses is charged to operations to adjust the ACL 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 recovery for credit losses on loans for the three months ended September 30, 2026 of $0.1 million compared to a provision of $11.2 million for the three months ended September 30, 2025. The decrease in the provision expense was primarily the result of $30.5 million of expense related to the asset resolution plan recorded in the second quarter of 2026. During the three months ended September 30, 2026, $3.2 million of net charge offs were recorded compared to $3.5 million during the three months ended September 30, 2025.
The Company recorded a provision for credit losses for the nine months ended September 30, 2026 of $32.3 million compared to a $23.3 million provision for the nine months ended September 30, 2025. For the nine months ended
September 30, 2026, net loan charge offs totaled $12.4 million compared to $14.1 million for the nine months ended September 30, 2025. The increase in provision was the result of provision expense booked during the second quarter as determined by the asset resolution plan.
The ACL was $41.8 million at September 30, 2026 and $24.5 million at September 30, 2025.
Noninterest Income (Loss)
The following table presents noninterest income (loss) for the nine months ended September 30, 2026 and September 30, 2025.
|
For the Three Months Ended September 30,
|
For the Nine Months Ended September 30,
|
||||||||||||||||||||||
| (Dollars in thousands) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
|
Noninterest income (loss):
|
As restated | As restated | |||||||||||||||||||||
|
Loan servicing income, net
|
$ | 655 | $ | 761 | 2,013 | 1,981 | |||||||||||||||||
|
Gain (loss) on sale of SBA and PPP loans, net
|
- | 3,039 | (97) | 15,975 | |||||||||||||||||||
|
Service charges and fees
|
507 | 474 | 1,494 | 1,396 | |||||||||||||||||||
|
Fair value adjustment on loans held for sale
|
- | (5,096) | - | (5,096) | |||||||||||||||||||
|
SBA loan fair value loss
|
(38) | (882) | (7,039) | 805 | |||||||||||||||||||
| Government guaranteed loan packaging fees | - | 380 | - | 1,673 | |||||||||||||||||||
| Loss on nonmarketable equity securities | - | - | (1,500) | - | |||||||||||||||||||
| Loss on sale of premises and equipment | - | - | (21) | - | |||||||||||||||||||
|
Other noninterest income (loss)
|
(23) | 254 | 326 | 1,215 | |||||||||||||||||||
|
Total noninterest income (loss)
|
$ | 1,101 | $ | (1,070) | (4,824) | 17,949 | |||||||||||||||||
Noninterest income was $1.1 million during the three months ended September 30, 2026, an increase from a negative $1.1 million during the three months ended September 30, 2025. The increase in the third quarter of 2026, as compared to the third quarter of 2025, was the result of a third quarter 2025 fair value adjustment on loans held for sale of $5.1 million, partially offset by a decrease in gain on sale of government guaranteed loans of $3.0 million.
Noninterest income was a negative $4.8 million for the nine months ended September 30, 2026, a decrease from $17.9 million for the nine months ended September 30, 2025. The decrease was primarily the result of a decrease in gain on sale of government guaranteed loans of $16.1 million, a decrease in government guaranteed loan fair value gains of $7.8 million, a decrease in government guaranteed loan packaging fees of $1.7 million and second quarter 2026 loss on nonmarketable equity securities of $1.5 million, partially offset by a 2025 fair value adjustment on loans held for sale of $5.1 million.
Noninterest Expense
The following table presents noninterest expense for the nine months ended September 30, 2026 and September 30, 2025.
|
For the Three Months Ended September 30,
|
For the Nine Months Ended September 30,
|
||||||||||||||||||||||
| (Dollars in thousands) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
|
Noninterest expense:
|
|||||||||||||||||||||||
|
Salaries and benefits
|
$ | 4,466 | $ | 7,637 | $ | 14,867 | $ | 23,748 | |||||||||||||||
|
Bonus, commissions, and incentives
|
576 | 530 | 1,607 | 863 | |||||||||||||||||||
|
Occupancy and equipment
|
1,307 | 1,525 | 4,027 | 4,738 | |||||||||||||||||||
|
Data processing
|
1,406 | 2,049 | 5,544 | 6,172 | |||||||||||||||||||
|
Marketing and business development
|
76 | 262 | 356 | 1,152 | |||||||||||||||||||
|
Professional services
|
571 | 859 | 2,907 | 2,373 | |||||||||||||||||||
|
Loan servicing and origination expense
|
3,004 | 3,273 | 9,962 | 6,866 | |||||||||||||||||||
|
Employee recruiting and development
|
213 | 364 | 663 | 1,443 | |||||||||||||||||||
|
Regulatory assessments
|
515 | 484 | 1,704 | 1,175 | |||||||||||||||||||
| Restructure charges | - | 7,262 | - | 7,262 | |||||||||||||||||||
| Director compensation | 93 | 137 | 189 | 390 | |||||||||||||||||||
| Liability and fidelity bond insurance | 173 | 168 | 507 | 468 | |||||||||||||||||||
| ATM and interchange | 135 | 134 | 425 | 356 | |||||||||||||||||||
| Telecommunication | 65 | 82 | 197 | 282 | |||||||||||||||||||
|
Other noninterest expense
|
216 | 449 | 2,423 | 1,268 | |||||||||||||||||||
|
Total noninterest expense
|
$ | 12,816 | $ | 25,215 | $ | 45,378 | $ | 58,556 | |||||||||||||||
Noninterest expense was $12.8 million during the three months ended September 30, 2026, a decrease from $25.2 million during the three months ended September 30, 2025. The decrease in the third quarter of 2026, as compared to the third quarter of 2025, was primarily due to the third quarter 2025 restructuring expense of $7.3 million, and a decrease in compensation expense of $3.1 million.
Noninterest expense was $45.4 million for the nine months ended September 30, 2026, a decrease from $58.6 million for the nine months ended September 30, 2025. The decrease was primarily the result of the third quarter 2025 restructuring expense of $7.3 million, a decrease in compensation expense of $8.1 million, partially offset by an increase in loan servicing and origination expense of $3.1 million.
Income Taxes
Income tax benefit was $0.3 million for the three months ended September 30, 2026, an increase from income tax benefit of $7.1 million for the three months ended September 30, 2025. The change was attributed to a decrease in net loss.
Income tax benefit was $13.8 million for the nine months ended September 30, 2026, a decrease from income tax expense of $8.0 million for the nine ended September 30, 2025. The change was attributed to a higher net loss for the current year.
At September 30, 2026, the Company had $36.2 million federal net operating loss carryforward and $34.6 million of state net operating loss carryforward. At September 30, 2025, the Company had $7.3 million of federal net operating loss carryforward and $7.9 million of state net operating loss carryforward. The Company expects to fully utilize the net operating losses.
The effective income tax rate was 25.94% for the nine months ended September 30, 2026 and 26.82% for the nine months ended September 30, 2025.
Financial Condition
Investment Securities
The following table presents the fair value of the Company's investment securities portfolio classified as available for sale as of September 30, 2026 and December 31, 2025.
| (Dollars in thousands) | September 30, 2026 | December 31, 2025 | |||||||||
| Investment securities available for sale: | |||||||||||
|
Asset-backed securities
|
$ | 2,550 | $ | 2,822 | |||||||
|
Mortgage-backed securities:
|
|||||||||||
|
U.S. Government-sponsored enterprises
|
4,305 | 4,899 | |||||||||
|
Collateralized mortgage obligations:
|
|||||||||||
|
U.S. Government-sponsored enterprises
|
15,636 | 17,768 | |||||||||
|
Corporate bonds
|
1,365 | 3,874 | |||||||||
|
Total investment securities available for sale
|
$ | 23,856 | $ | 29,363 | |||||||
The net unrealized loss on the investment securities AFS at September 30, 2026 and December 31, 2025, was $3.6 million and $2.6 million, respectively.
The following table presents the amortized cost of the Company's investment securities portfolio classified as held to maturity as of September 30, 2026 and December 31, 2025.
| (Dollars in thousands) | September 30, 2026 | December 31, 2025 | |||||||||
| Investment securities held to maturity: | |||||||||||
|
Corporate bonds
|
$ | 2,500 | $ | 2,500 | |||||||
|
Total investment securities held to maturity
|
$ | 2,500 | $ | 2,500 | |||||||
There was a $7 thousand ACL on the corporate bonds HTM as of September 30, 2026 and $7 thousand at December 31, 2025. The net unrealized loss on the investment securities HTM at September 30, 2026, was $153 thousand compared with a net unrealized loss on investment securities HTM of $116 thousand at December 31, 2025.
No investment securities were pledged as of September 30, 2026 or December 31, 2025, and there were no sales of investment securities for the nine months ended September 30, 2026 or the nine months ended September 30, 2025.
The investment securities available for sale presented in the following tables are reported at amortized cost and by contractual maturity as of September 30, 2026 and December 31, 2025. 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.
| September 30, 2026 | |||||||||||||||||||||||||||||||||||||||||||||||
| 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
|
$ | - | - | % | $ | - | - | % | $ | - | - | % | $ | 2,533 | 4.85 | % | |||||||||||||||||||||||||||||||
|
Mortgage-backed securities:
|
|||||||||||||||||||||||||||||||||||||||||||||||
|
U.S. Government-sponsored enterprises
|
- | - | - | - | - | - | 4,919 | 3.01 | |||||||||||||||||||||||||||||||||||||||
|
Collateralized mortgage obligations:
|
|||||||||||||||||||||||||||||||||||||||||||||||
| U.S. Government-sponsored enterprises | - | - | - | - | - | - | 18,642 | 2.36 | |||||||||||||||||||||||||||||||||||||||
|
Corporate bonds
|
- | - | 1,360 | 5.23 | - | - | - | - | |||||||||||||||||||||||||||||||||||||||
|
Total investment securities available for sale
|
$ | - | - | % | $ | 1,360 | 5.23 | % | $ | - | - | % | $ | 26,094 | 2.72 | % | |||||||||||||||||||||||||||||||
| December 31, 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
|
$ | - | - | % | $ | - | - | % | $ | - | - | % | $ | 2,827 | 2.96 | % | |||||||||||||||||||||||||||||||
|
Mortgage-backed securities:
|
|||||||||||||||||||||||||||||||||||||||||||||||
|
U.S. Government-sponsored enterprises
|
- | - | - | - | - | - | 5,264 | 2.99 | |||||||||||||||||||||||||||||||||||||||
|
Collateralized mortgage obligations:
|
|||||||||||||||||||||||||||||||||||||||||||||||
| U.S. Government-sponsored enterprises | - | - | - | - | - | - | 20,040 | 2.32 | |||||||||||||||||||||||||||||||||||||||
|
Corporate bonds
|
- | - | 3,843 | 5.04 | - | - | - | - | |||||||||||||||||||||||||||||||||||||||
|
Total investment securities available for sale
|
$ | - | - | % | $ | 3,843 | 5.04 | % | $ | - | - | % | $ | 28,131 | 2.51 | % | |||||||||||||||||||||||||||||||
The investment securities held to maturity presented in the following tables are reported at amortized cost and by contractual maturity as of September 30, 2026 and December 31, 2025. 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.
| September 30, 2026 | |||||||||||||||||||||||||||||||||||||||||||||||
| 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 | % | $ | - | - | % | |||||||||||||||||||||||||||||||
| December 31, 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 | % | $ | - | - | % | |||||||||||||||||||||||||||||||
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 loan portfolio is well-diversified across major loan types with a low concentration of non owner-occupied commercial real estate loans which makes up 13% of the total portfolio. The following table sets forth the composition of its HFI loan portfolio.
| September 30, 2026 | December 31, 2025 | ||||||||||||||||||||||
| (Dollars in thousands) | Amount | % of Total | Amount | % of Total | |||||||||||||||||||
| Loans HFI: | As restated | ||||||||||||||||||||||
| Government guaranteed loans HFI, at fair value | $ | 42,204 | $ | 54,076 | |||||||||||||||||||
|
Loans HFI, at amortized cost:
|
|||||||||||||||||||||||
|
Residential real estate
|
348,865 | 40.7 | % | 365,427 | 40.7 | % | |||||||||||||||||
|
Commercial real estate
|
228,589 | 26.7 | 215,771 | 24.0 | |||||||||||||||||||
|
Construction and land
|
35,976 | 4.2 | 48,397 | 5.4 | |||||||||||||||||||
|
Commercial and industrial
|
177,062 | 20.7 | 181,566 | 20.2 | |||||||||||||||||||
|
Commercial and industrial - PPP
|
- | - | 6 | - | |||||||||||||||||||
|
Consumer and other
|
66,903 | 7.7 | 86,441 | 9.7 | |||||||||||||||||||
|
Loans HFI, at amortized cost, gross
|
857,395 | 100.0 | % | 897,608 | 100.0 | % | |||||||||||||||||
| Discount on government guaranteed loans | (4,472) | (6,811) | |||||||||||||||||||||
|
Premium on loans purchased, net
|
688 | 2,650 | |||||||||||||||||||||
|
Deferred loan costs, net
|
7,151 | 10,491 | |||||||||||||||||||||
|
Allowance for credit losses
|
(41,762) | (21,996) | |||||||||||||||||||||
|
Loans HFI, at amortized cost, net
|
819,000 | 881,942 | |||||||||||||||||||||
|
Total loans HFI, net
|
$ | 861,204 | $ | 936,018 | |||||||||||||||||||
For the nine months ended September 30, 2026, the Bank originated $97.0 million in loans through conventional lending channels and $0.8 million in government guaranteed loans. In addition, the Bank sold $0.8 million of government guaranteed loans to a third party as part of the Bank's discontinuance of SBA 7(a) lending.
Loan Maturity/Rate Sensitivity
The following table shows the contractual maturities of our loans at September 30, 2026. 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
|
$ | 1,698 | $ | 1,193 | $ | 14,644 | $ | 331,545 | $ | 349,080 | |||||||||||||||||||
|
Commercial
|
2,192 | 29,014 | 53,766 | 154,618 | 239,590 | ||||||||||||||||||||||||
|
Construction and land
|
531 | 4,474 | 3,936 | 27,035 | 35,976 | ||||||||||||||||||||||||
|
Commercial and industrial
|
41,267 | 24,346 | 138,708 | 4,222 | 208,543 | ||||||||||||||||||||||||
|
Consumer and other
|
2,705 | 9,253 | 15,945 | 41,874 | 69,777 | ||||||||||||||||||||||||
|
Total loans HFI
|
$ | 48,393 | $ | 68,280 | $ | 226,999 | $ | 559,294 | $ | 902,966 | |||||||||||||||||||
The following table shows the loans with contractual maturities of greater than one year that have fixed or adjustable interest rates at September 30, 2026.
| (Dollars in thousands) |
Fixed
Interest Rate
|
Adjustable
Interest Rate
|
|||||||||
|
Real estate:
|
|||||||||||
|
Residential
|
$ | 64,336 | $ | 283,046 | |||||||
|
Commercial
|
28,451 | 208,947 | |||||||||
|
Construction and land
|
- | 35,445 | |||||||||
|
Commercial and industrial
|
17,051 | 150,225 | |||||||||
|
Consumer and other
|
63,393 | 3,679 | |||||||||
|
Total loans HFI
|
$ | 173,231 | $ | 681,342 | |||||||
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, 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. 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.
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.
The Company completed and quantified the impact of the asset resolution in the second quarter of 2026. The asset resolution plan included the identification of specific loans within the Company's government guaranteed loan portfolio, as well as adjustments to the net amount expected to be collected on over 7,000 unguaranteed SBA 7(a) small balance loans. As a result, the Company recorded $41.5 million of provision expense, write-downs on loans measured at fair value, amortization of premiums paid on purchased government guaranteed loans, and impairment on nonmarketable securities during the quarter.
Nonperforming Assets. At September 30, 2026, the Company had $14.0 million in nonperforming assets, excluding government guaranteed loan balances. The ACL represented 4.85% of total loans HFI at amortized cost. At September 30, 2025, the Company had $17.6 million in nonperforming assets, excluding government guaranteed loan balances. The ACL represented 2.63% of total loans HFI at amortized cost. Total loans HFI at September 30, 2026 and September 30, 2025 included government guaranteed balances 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 5.20% at September 30, 2026, compared to 2.80% at September 30, 2025. The increase in ACL percentage was the result of provision expense booked during the quarter as determined by the asset resolution plan.
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) |
September 30, 2026 |
September 30, 2025 |
December 31, 2025 |
||||||||||||||
| As restated | As restated | ||||||||||||||||
|
Nonperforming loans (government guaranteed balances), at amortized cost, gross
|
$ | 568 | $ | 8,865 | $ | 8,072 | |||||||||||
|
Nonperforming loans (unguaranteed balances), at amortized cost, gross
|
13,445 | 15,822 | 16,271 | ||||||||||||||
|
Total nonperforming loans, at amortized cost, gross
|
14,013 | 24,687 | 24,343 | ||||||||||||||
|
Nonperforming loans (government guaranteed balances), at fair value
|
- | - | 83 | ||||||||||||||
|
Nonperforming loans (unguaranteed balances), at fair value
|
114 | 1,385 | 1,453 | ||||||||||||||
|
Total nonperforming loans, at fair value
|
114 | 1,385 | 1,536 | ||||||||||||||
|
OREO
|
410 | 400 | 400 | ||||||||||||||
| Repossessed assets | 253 | 32 | 263 | ||||||||||||||
|
Total nonperforming assets, gross
|
$ | 14,790 | $ | 26,504 | $ | 26,542 | |||||||||||
|
Nonperforming loans as a percentage of total loans HFI(1)
|
1.63 | % | 2.65 | % | 2.69 | % | |||||||||||
|
Nonperforming loans (excluding government guaranteed balances) to total loans HFI(1)
|
1.56 | % | 1.70 | % | 1.80 | % | |||||||||||
|
Nonperforming assets as a percentage of total assets
|
1.29 | % | 1.98 | % | 2.05 | % | |||||||||||
|
Nonperforming assets (excluding government guaranteed balances) to total assets
|
1.21 | % | 1.21 | % | 1.29 | % | |||||||||||
|
ACL to nonperforming loans(1)
|
298.02 | % | 99.18 | % | 90.35 | % | |||||||||||
|
ACL to nonperforming loans (excluding government guaranteed balances)(1)
|
310.61 | % | 154.75 | % | 135.18 | % | |||||||||||
(1) Excludes loans measured at fair value
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 September 30,
|
At and for the Nine Months Ended September 30,
|
|||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
|
Allowance at beginning of period
|
$ | 45,081 | $ | 17,041 | $ | 21,995 | $ | 15,512 | |||||||||||||||
|
Charge-offs:
|
|||||||||||||||||||||||
|
Residential real estate
|
(121) | (121) | (1,163) | (963) | |||||||||||||||||||
|
Commercial real estate
|
(291) | - | (761) | (485) | |||||||||||||||||||
|
Commercial and industrial
|
(2,853) | (3,433) | (10,375) | (11,907) | |||||||||||||||||||
|
Commercial and industrial - PPP
|
- | (1) | - | (1) | |||||||||||||||||||
|
Consumer and other
|
(405) | (314) | (1,253) | (1,767) | |||||||||||||||||||
|
Total charge-offs
|
(3,670) | (3,869) | (13,552) | (15,123) | |||||||||||||||||||
|
Recoveries:
|
|||||||||||||||||||||||
|
Residential real estate
|
1 | - | 95 | 27 | |||||||||||||||||||
|
Commercial real estate
|
97 | 3 | 119 | 5 | |||||||||||||||||||
|
Commercial and industrial
|
234 | 190 | 715 | 653 | |||||||||||||||||||
|
Consumer and other
|
110 | 132 | 216 | 291 | |||||||||||||||||||
|
Total recoveries
|
442 | 325 | 1,145 | 976 | |||||||||||||||||||
|
Net charge-offs
|
(3,228) | (3,544) | (12,407) | (14,147) | |||||||||||||||||||
|
Provision for credit losses on loans
|
(91) | 10,988 | 32,173 | 23,120 | |||||||||||||||||||
|
Allowance at end of period
|
$ | 41,762 | $ | 24,485 | $ | 41,761 | $ | 24,485 | |||||||||||||||
|
Net charge-offs to average loans HFI at amortized cost
|
1.52 | % | 1.34 | % | 1.92 | % | 1.81 | % | |||||||||||||||
|
Allowance as a percent of total loans HFI at amortized cost
|
4.85 | % | 2.63 | % | 4.85 | % | 2.63 | % | |||||||||||||||
|
Allowance as a percent of loans HFI at amortized cost, not including government guaranteed loans
|
5.20 | % | 2.80 | % | 5.20 | % | 2.80 | % | |||||||||||||||
|
Allowance as a percent of nonperforming loans at amortized cost, gross
|
298.02 | % | 99.18 | % | 298.02 | % | 99.18 | % | |||||||||||||||
|
Total loans HFI
|
$ | 902,966 | $ | 993,109 | $ | 902,966 | $ | 993,109 | |||||||||||||||
|
Average loans HFI at amortized cost
|
$ | 848,578 | $ | 1,054,946 | $ | 862,845 | $ | 1,039,931 | |||||||||||||||
|
Nonperforming loans (including government guaranteed balances) at amortized cost, gross
|
$ | 14,013 | $ | 24,687 | $ | 14,013 | $ | 24,687 | |||||||||||||||
|
Nonperforming loans (excluding government guaranteed balances) at amortized cost, gross
|
$ | 13,445 | $ | 15,822 | $ | 13,445 | $ | 15,822 | |||||||||||||||
|
Guaranteed balance of government guaranteed loans
|
$ | 70,062 | $ | 75,293 | $ | 70,062 | $ | 75,293 | |||||||||||||||
The following table details net charge-offs to average loans outstanding by loan category for the three months ended September 30, 2026 and September 30, 2025.
| Three Months Ended September 30, 2026 | Three Months Ended September 30, 2025 | ||||||||||||||||||||||||||||||||||
| (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
|
$ | (120) | $ | 342,044 | (0.14) | % | $ | (121) | $ | 356,159 | (0.14) | % | |||||||||||||||||||||||
|
Commercial real estate
|
(194) | 266,216 | (0.29) | 3 | 367,664 | - | |||||||||||||||||||||||||||||
|
Commercial and industrial
|
(2,619) | 168,910 | (6.20) | (3,243) | 237,790 | (5.46) | |||||||||||||||||||||||||||||
|
Commercial and industrial - PPP
|
- | - | - | (1) | 131 | (3.05) | |||||||||||||||||||||||||||||
|
Consumer and other
|
(295) | 71,408 | (1.65) | (182) | 93,202 | (0.78) | |||||||||||||||||||||||||||||
|
Total loans HFI at amortized cost
|
$ | (3,228) | $ | 848,578 | (1.52) | % | $ | (3,544) | $ | 1,054,946 | (1.34) | % | |||||||||||||||||||||||
The following table details net charge-offs to average loans outstanding by loan category for the nine months ended September 30, 2026 and September 30, 2025.
| Nine Months Ended September 30, 2026 | Nine Months Ended September 30, 2025 | ||||||||||||||||||||||||||||||||||
| (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
|
$ | (1,068) | $ | 350,297 | (0.41) | % | $ | (936) | $ | 341,915 | (0.37) | % | |||||||||||||||||||||||
|
Commercial real estate
|
(642) | 269,808 | (0.32) | (480) | 366,988 | (0.17) | |||||||||||||||||||||||||||||
|
Commercial and industrial
|
(9,660) | 164,322 | (7.84) | (11,254) | 236,774 | (6.34) | |||||||||||||||||||||||||||||
|
Commercial and industrial - PPP
|
- | - | - | (1) | 353 | (0.38) | |||||||||||||||||||||||||||||
|
Consumer and other
|
(1,037) | 78,418 | (1.76) | (1,476) | 93,901 | (2.10) | |||||||||||||||||||||||||||||
|
Total loans HFI, at amortized cost
|
$ | (12,407) | $ | 862,845 | (1.92) | % | $ | (14,147) | $ | 1,039,931 | (1.81) | % | |||||||||||||||||||||||
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. In addition to the Bank's routine loan sale activity, the Bank sold $97.4 million of government guaranteed loans to a third party as part of the Bank's discontinuance of SBA 7(a) lending in the fourth quarter 2025 and first quarter of 2026.
| (Dollars in thousands) |
At and for the Nine Months Ended September 30,
|
At and for the Year Ended December 31,
|
||||||||||||||||||
| Government Guaranteed, Excluding PPP | 2026 | 2025 | 2025 | |||||||||||||||||
|
Number of loans originated
|
1 | 1,352 | 1,388 | |||||||||||||||||
|
Amount of loans originated
|
$ | 762 | $ | 259,730 | $ | 278,334 | ||||||||||||||
|
Average loan size originated
|
$ | 762 | $ | 192 | $ | 201 | ||||||||||||||
|
Government guaranteed loan balances sold
|
$ | - | $ | 191,228 | $ | 198,996 | ||||||||||||||
| Total government guaranteed loan balances: | ||||||||||||||||||||
|
Guaranteed portion of government guaranteed loan balances HFI
|
$ | 70,062 | $ | 75,280 | $ | 70,123 | ||||||||||||||
|
Unguaranteed portion of government guaranteed loan balances HFI
|
185,706 | 238,700 | 232,863 | |||||||||||||||||
|
Total government guaranteed loans HFI
|
255,768 | 313,980 | 302,986 | |||||||||||||||||
|
Government guaranteed loans serviced for others
|
$ | 717,254 | $ | 1,038,738 | $ | 885,505 | ||||||||||||||
| Government guaranteed loans sold to a third party | $ | 762 | $ | - | $ | 96,602 | ||||||||||||||
The following table sets forth, at the dates indicated, the geographic disbursement of gross principal balances of its government guaranteed loan portfolio. The "All Other" category includes states with less than 5% in any period presented.
| September 30, | December 31, | ||||||||||||||||||||||||||||||||||
| 2026 | 2025 | 2025 | |||||||||||||||||||||||||||||||||
| (Dollars in thousands) | Amount | % of Total | Amount | % of Total | Amount | % of Total | |||||||||||||||||||||||||||||
|
Florida
|
$ | 94,329 | 37 | % | $ | 139,784 | 34 | % | $ | 92,975 | 31 | % | |||||||||||||||||||||||
|
California
|
19,970 | 8 | 42,401 | 10 | 26,730 | 9 | |||||||||||||||||||||||||||||
| Tennessee | 12,516 | 5 | 23,361 | 6 | |||||||||||||||||||||||||||||||
|
Texas
|
21,841 | 9 | 32,574 | 8 | 24,765 | 8 | |||||||||||||||||||||||||||||
|
All Other
|
107,112 | 41 | 176,853 | 42 | 136,966 | 45 | |||||||||||||||||||||||||||||
|
Total government guaranteed loans, excluding PPP loans
|
$ | 255,768 | 100 | % | $ | 414,973 | 100 | % | $ | 302,986 | 100 | % | |||||||||||||||||||||||
Deposits
General. In addition to deposits, sources of funds available for lending and for other purposes include loan repayments and historically 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, 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 September 30, 2026 and December 31, 2025, the Company had $165.7 million and $195.5 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) | September 30, 2026 | December 31, 2025 | |||||||||||||||||||||
|
Noninterest-bearing deposit accounts
|
$ | 121,193 | 12.0 | % | $ | 95,731 | 8.1 | % | |||||||||||||||
|
Interest-bearing transaction accounts
|
142,555 | 14.1 | 231,227 | 19.5 | |||||||||||||||||||
|
Money market accounts
|
424,090 | 41.8 | 434,930 | 36.7 | |||||||||||||||||||
|
Savings accounts
|
21,488 | 2.1 | 19,709 | 1.7 | |||||||||||||||||||
|
Subtotal
|
709,326 | 70.0 | 781,597 | 66.0 | |||||||||||||||||||
|
Total time deposits
|
304,828 | 30.0 | 402,341 | 34.0 | |||||||||||||||||||
|
Total deposits
|
$ | 1,014,154 | 100.0 | % | $ | 1,183,938 | 100.0 | % | |||||||||||||||
At September 30, 2026, the Company held approximately $217.9 million of deposits that exceeded the FDIC insurance limit which was 21% 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 September 30, 2026.
| (Dollars in thousands) | |||||
|
Three months or less
|
$ | 30,151 | |||
|
Over three months through six months
|
17,563 | ||||
|
Over six months through 12 months
|
25,358 | ||||
|
Over 12 months
|
11,039 | ||||
|
Total time deposits over $250
|
$ | 84,111 | |||
Deposits decreased $169.8 million or 14.34% for the nine months ended September 30, 2026, with decreases in interest-bearing transaction account balances, money market deposit account balances, and time deposit balances, partially offset by increases in noninterest-bearing deposit account balances and time deposit balances. The decrease in deposits over the past year was primarily due to decreases in high-rate promotional deposits held with non-relationship customers and brokered deposits.
Other Borrowings
At September 30, 2026 and December 31, 2025, the Company had no borrowings outstanding from the FHLB or FRB.
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 bear interest at variable rates set by the FHLB. Any advances that the Bank were to obtain would be secured by a blanket lien on $351.0 million of real estate-related loans as of September 30, 2026. Based on this collateral and the Bank's holdings of FHLB stock, the Bank was eligible to borrow up to $174.6 million from the FHLB at September 30, 2026.
In addition, the Bank has a line of credit with the Federal Reserve Bank of Atlanta which was secured by $42.8 million of commercial loans as of September 30, 2026. 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 $32.0 million from the FRB at September 30, 2026.
The Company has $6.0 million of Subordinated Notes (the "Notes") that mature June 30, 2031 and was redeemable after 5 years which was June 30, 2026. The Notes carried interest at a fixed rate of 4.50% per annum for the initial 5 years of term and now carries interest at a floating rate for the final 5 years of term after June 30, 2026. Under the note agreements, the floating rates are based on a SOFR benchmark plus 3.78% per annum which was 7.86% at September 30, 2026.
On December 29, 2025, the Company and the holders of the Company's Notes entered into an Amendment to the Notes (the "Amendment"), effective as of December 26, 2025. Pursuant to the Amendment, instead of the Company paying interest on the Notes, the outstanding principal of the Notes shall be increased by the amount of interest due as of the date
of the Amendment and that becomes due through and including June 30, 2026. The Company paid the deferred interest as agreed. The Company was in compliance with all financial debt covenants.
The balance of Subordinated Notes outstanding at the Company, net of offering costs, amounted to $6.0 million at September 30, 2026 and December 31, 2025.
The Company has a term note with quarterly principal and interest payments with interest at Prime (6.75% at September 30, 2026). The note matures on March 10, 2029 and the balance of the note was $1.1 million and $1.6 million at September 30, 2026 and December 31, 2025, 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. On December 30, 2025, the lender agreed that the Bank may defer the quarterly interest payment due December 10, 2025 on its term loan until March 10, 2026. The deferred interest was paid as agreed. 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 $104.5 million at September 30, 2026 as compared to $81.6 million at December 31, 2025. The increase was primarily due to the $74.5 million Series D and Series E preferred stock capital raise and subsequent conversion to common stock, partially offset by the net loss of $39.3 million and redemption of Series A and B preferred stock of $9.5 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.
Management believes that the Bank met capital adequacy requirements to which it was subject at September 30, 2026 and December 31, 2025.
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 September 30, 2026
|
|||||||||||||||||||||||||||||||||||
|
Total Capital (to risk-weighted assets)
|
$ | 108,574 | 12.44 | % | $ | 69,820 | 8.00 | % | $ | 87,276 | 10.00 | % | |||||||||||||||||||||||
|
Tier 1 Capital (to risk-weighted assets)
|
97,274 | 11.15 | 52,365 | 6.00 | 69,820 | 8.00 | |||||||||||||||||||||||||||||
|
Common Equity Tier 1 Capital (to risk-weighted assets)
|
97,274 | 11.15 | 39,274 | 4.50 | 56,729 | 6.50 | |||||||||||||||||||||||||||||
|
Tier 1 Capital (to total assets)
|
97,274 | 8.79 | 44,249 | 4.00 | 55,311 | 5.00 | |||||||||||||||||||||||||||||
|
As of December 31, 2025 (as restated)
|
|||||||||||||||||||||||||||||||||||
|
Total Capital (to risk-weighted assets)
|
91,085 | 9.48 | 76,867 | 8.00 | 96,084 | 10.00 | |||||||||||||||||||||||||||||
|
Tier 1 Capital (to risk-weighted assets)
|
78,951 | 8.22 | 57,650 | 6.00 | 76,867 | 8.00 | |||||||||||||||||||||||||||||
|
Common Equity Tier 1 Capital (to risk-weighted assets)
|
78,951 | 8.22 | 43,238 | 4.50 | 62,455 | 6.50 | |||||||||||||||||||||||||||||
|
Tier 1 Capital (to total assets)
|
78,951 | 5.98 | 52,837 | 4.00 | 66,046 | 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) |
September 30, 2026 |
December 31, 2025 |
|||||||||
|
Unfunded loan commitments
|
$ | - | $ | 1,257 | |||||||
|
Unused lines of credit
|
190,211 | 207,665 | |||||||||
|
Standby letters of credit
|
1,361 | 1,161 | |||||||||
|
Total
|
$ | 191,572 | $ | 210,083 | |||||||
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.
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 utilization rates to calculate the ACL for off-balance sheet loan commitments. At September 30, 2026 and December 31, 2025, ACL for off-balance sheet loan commitments totaled $810 thousand and $671 thousand, respectively.
Contractual Obligations
In the ordinary course of its operations, the Company enters into certain contractual obligations. Total contractual obligations at September 30, 2026 were $331.8 million, a decrease from $431.4 million at December 31, 2025. The decrease was primarily due to a decrease in time deposits of $97.5 million.
The following tables present our contractual obligations as of September 30, 2026 and December 31, 2025.
|
Contractual Obligations as of September 30, 2026
|
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| (Dollars in thousands) | Less than One Year | One to Three Years | Three to Five Years | Over Five Years | Total | ||||||||||||||||||||||||
| Operating lease obligations | $ | 1,953 | $ | 2,648 | $ | 2,746 | $ | 12,549 | $ | 19,896 | |||||||||||||||||||
| Long-term borrowings | 456 | 682 | - | - | 1,138 | ||||||||||||||||||||||||
| Subordinated notes | - | - | - | 5,968 | 5,968 | ||||||||||||||||||||||||
| Time deposits | 281,972 | 22,216 | 640 | - | 304,828 | ||||||||||||||||||||||||
| Total | $ | 284,381 | $ | 25,546 | $ | 3,386 | $ | 18,517 | $ | 331,830 | |||||||||||||||||||
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Contractual Obligations as of December 31, 2025
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| (Dollars in thousands) | Less than One Year | One to Three Years | Three to Five Years | Over Five Years | Total | ||||||||||||||||||||||||
| Operating lease obligations | $ | 2,119 | $ | 3,064 | $ | 2,706 | $ | 13,594 | $ | 21,483 | |||||||||||||||||||
| Long-term borrowings | 456 | 912 | 225 | - | 1,593 | ||||||||||||||||||||||||
| Subordinated notes | - | - | - | 5,962 | 5,962 | ||||||||||||||||||||||||
| Time deposits | 318,112 | 81,873 | 2,356 | - | 402,341 | ||||||||||||||||||||||||
| Total | $ | 320,687 | $ | 85,849 | $ | 5,287 | $ | 19,556 | $ | 431,379 | |||||||||||||||||||
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 September 30, 2026 was 13.49%, as compared to 18.44% at December 31, 2025.
For the nine months ended September 30, 2026, the Bank did not pay any dividends. The Company suspended the payment of both common stock and preferred stock dividends in 2025. Preferred dividend payments were reinstated in the third quarter of 2026. As of September 30, 2026, BayFirst Financial Corp. held $2.0 million 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 non-brokered 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 debt obligations is set forth above under the heading "Other Borrowings."
Bayfirst Financial Corp. published this content on November 10, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on November 10, 2026 at 19:31 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]