Summary of BayFirst Financial Corp. Q2 2026 Earnings Call

1Key Financial Results and Metrics

Net Loss: Reported a net loss of $32.7 million for Q2 2026, compared to a restated net loss of $5.9 million in Q1 2026.

Asset Resolution Impact: The asset resolution plan accounted for $41.5 million of the loss, with an overall adjustment of $38.4 million related to the legacy SBA 7(a) loan portfolio.

Provision for Credit Losses: Increased to $29.7 million from $3.4 million in Q1 2026.

Loans Held for Investment: Decreased by $41.4 million (4%) quarter-over-quarter and $237.7 million (21%) year-over-year to $882.8 million.

Deposits: Decreased by $97 million (9%) in Q2 and $175 million (15%) year-over-year to $989 million.

Tangible Book Value per Share: Dropped to $4.82 from $14.22 in Q1 2026.

Net Interest Margin: Increased to 3.48%, with a normalized margin of 4.07% excluding one-time impacts.

2Strategic Updates and Business Highlights

Capital Raise: Successfully raised $80 million in April 2026 to strengthen the bank's capital position.

Management Changes: New leadership appointments, including Trey Korhn as Chief Banking Officer, to enhance retail and commercial banking operations.

Branch Expansion: Plans to open a new retail location in South Tampa, increasing the branch network to 12.

Focus on Relationship Banking: Emphasis on building long-term customer relationships and transitioning from high-cost transactional accounts to stable deposits.

3Forward Guidance and Outlook

Growth Strategy: Management aims to return to profitability by focusing on traditional commercial and consumer lending while managing legacy loan issues.

Loan Pipeline: A strong pipeline is noted, with expectations for growth in both loans and deposits.

Rights Offering: A rights offering is expected to launch in mid-August 2026, following the completion of financial restatements.

4Bad News, Challenges, or Points of Concern

Legacy Issues: The bank continues to address significant legacy credit issues related to the SBA 7(a) loans, impacting financial results and necessitating restatements.

Declining Metrics: Notable declines in loans and deposits raise concerns about the bank's growth trajectory and customer retention.

Noninterest Income: Reported negative noninterest income of $6.8 million, a significant decline from the previous year, primarily due to the exit from the SBA 7(a) lending business.

Operational Risks: The need for ongoing remediation of internal controls over financial reporting poses a risk to future performance.

5Notable Q&A Insights

Branch Breakeven: Management anticipates the new South Tampa branch will reach breakeven sooner than the typical two-year timeframe.

SBA Loan Reserves: Detailed breakdown of reserves for unguaranteed SBA loans was provided, indicating a cautious approach to managing this portfolio.

Rights Offering Timing: Clarification that the rights offering will proceed in August, with communications to shareholders expected soon.

Core Earnings Power: Core operating loss for the quarter was approximately $200,000, indicating a near breakeven position moving forward.

Deposit Strategy: The bank has shifted focus to relationship-based deposits, reducing reliance on high-rate promotional accounts. This summary encapsulates the key aspects of BayFirst Financial Corp.'s Q2 2026 earnings call, highlighting both the challenges faced and the strategic initiatives underway to foster future growth.