# BayFirst Financial Corp.

> Clarifo company profile — qualitative business description generated from
> the company's filings. Financial statements, charts and ratios are
> available on Clarifo (https://www.clarifo.com/en/companies/BayFirst Financial Corp.).

## Overview

BayFirst Financial Corp. is a U.S. bank holding company whose operations are conducted primarily through its banking subsidiary. The company earns most of its revenue from interest on loans and from gain-on-sale income tied to government guaranteed loans sold into the secondary market. Its lending mix includes government guaranteed, commercial real estate, commercial business, residential mortgage, and consumer loans. BayFirst has also been active in SBA lending, although it has announced an exit from the SBA 7(a) business as part of a strategic review to reduce expenses and de-risk the balance sheet.

## Products & services

• Government guaranteed lending, including SBA-related loans
• Commercial real estate loans
• Commercial business loans
• Residential mortgage loans
• Consumer loans
• Loan servicing for government guaranteed loans
• Deposit and borrowing-funded banking services

- **Government guaranteed lending** (40%) — Loans backed by government guarantees, including SBA-related originations and sales into the secondary market.
- **Commercial lending** (30%) — Commercial real estate and commercial business loans to local operating companies and property owners.
- **Residential mortgage lending** (15%) — Mortgage loans secured by owner-occupied and other residential properties.
- **Consumer lending** (5%) — Smaller-balance consumer credit products offered to retail borrowers.
- **Loan servicing and fee income** (10%) — Servicing rights and related fee income, especially tied to government guaranteed loans.

- Government guaranteed lending, including SBA-related loans
- Commercial real estate loans
- Commercial business loans
- Residential mortgage loans
- Consumer loans
- Loan servicing for government guaranteed loans
- Deposit and borrowing-funded banking services

## Customers

BayFirst serves small and mid-sized borrowers that need relationship-based credit in the markets where its bank operates. A meaningful part of the franchise has been tied to government guaranteed lending, which typically attracts small businesses and entrepreneurs seeking financing with partial SBA support and secondary-market liquidity. The company also lends to commercial real estate owners, local businesses, and households needing residential mortgage or consumer credit. Management notes that referrals come from centers of local influence, real estate professionals, and repeat customers, indicating a community-banking model built on local relationships rather than national scale.

- **Small business borrowers** (primary) — They borrow through SBA and other government guaranteed programs to fund expansion, equipment, working capital, or acquisitions.
- **Commercial real estate owners** (primary) — They use the bank for property-backed financing, including non-owner occupied CRE exposure.
- **Local commercial customers** (secondary) — Operating businesses borrow for day-to-day liquidity, growth, and relationship banking services.
- **Residential mortgage borrowers** (secondary) — Households buy mortgage loans for home purchase or refinancing in the bank's markets.
- **Consumer borrowers** (emerging) — Retail customers use smaller credit products for personal financing needs.

- Small businesses seeking SBA or other government guaranteed financing
- Commercial real estate borrowers financing income-producing properties
- Local operating businesses needing working capital or term loans
- Residential mortgage borrowers in the bank's local markets
- Consumer borrowers seeking smaller-balance credit products
- Repeat customers and referral-driven borrowers from local networks

## Geography

BayFirst makes government guaranteed loans throughout the United States, but its disclosed portfolio mix shows a clear concentration in Florida. At March 31, 2025, Florida represented 34% of government guaranteed loan balances, followed by California at 11%, Texas at 7%, and Tennessee at 6%, with the remainder spread across many smaller states. This geographic mix matters because the company’s lending and referral network are tied to local market relationships, while credit performance can be influenced by state-level economic conditions, real estate trends, and borrower demand. The broad national footprint reduces dependence on any single state, but the Florida concentration makes the franchise more sensitive to conditions in that market.

- **Florida** (34%) — State-level concentration disclosed for government guaranteed loan balances.
- **California** (11%) — State-level concentration disclosed for government guaranteed loan balances.
- **Texas** (7%) — State-level concentration disclosed for government guaranteed loan balances.
- **Tennessee** (6%) — State-level concentration disclosed for government guaranteed loan balances.
- **All Other U.S. States** (42%) — Represents states with less than 5% individually.

- Government guaranteed lending is originated throughout the United States
- Florida is the largest disclosed state exposure in the government guaranteed book
- California, Texas, and Tennessee are other meaningful lending states
- The remaining exposure is diversified across many smaller states
- Local market relationships and referral channels drive origination activity

## Strategy

BayFirst’s near-term strategy is centered on simplifying the business and reducing risk, highlighted by its decision to exit the SBA 7(a) lending business. The company is selling a portion of the SBA 7(a) portfolio and transferring much of the related staff and servicing activity to Banesco USA, which should lower operating complexity and reduce balance-sheet exposure. Management also emphasizes maintaining diversified lending, preserving capital ratios, and supporting funding through deposits, loan sales, and borrowings. More broadly, the company is trying to protect profitability by focusing on relationship lending and fee income while managing interest-rate and credit-cycle volatility.

- **Exit SBA 7(a) lending** (short-term) — The company is simplifying operations and reducing risk exposure tied to this business line.
- **De-risk the balance sheet** (short-term) — Reducing concentration in higher-complexity lending should improve resilience and capital management.
- **Maintain diversified community banking franchise** (medium-term) — A broader mix of commercial, mortgage, and consumer lending helps offset dependence on one product line.

- Exit the SBA 7(a) business to reduce complexity and risk
- Sell part of the SBA portfolio and transfer servicing where possible
- De-risk the balance sheet by reducing exposure to government guaranteed lending operations
- Preserve diversified lending across CRE, commercial, mortgage, and consumer segments
- Maintain capital and liquidity through deposits, loan sales, and borrowings
- Support earnings with noninterest income from loan sales and servicing

## Risks

BayFirst faces the typical risks of a community and commercial bank, including credit deterioration, interest-rate sensitivity, and funding pressure. The company specifically disclosed that it may need additional capital in the future, and that such capital may not be available on acceptable terms, which could constrain growth or trigger regulatory actions if performance weakens. Its earnings model also depends on gain-on-sale income from government guaranteed loans and servicing fees, so the planned exit from SBA 7(a) creates execution risk and may reduce a historically important source of noninterest income. In addition, the Florida concentration in government guaranteed lending, exposure to commercial real estate, and reliance on deposits and borrowings make the business sensitive to local economic conditions, real estate cycles, and capital market disruptions.

- **Additional capital may be required but unavailable** [high] — The company says it may need debt or equity financing to absorb losses, fund growth, or satisfy regulators, but capital may not be available on acceptable terms.
- **SBA 7(a) exit and portfolio sale execution** [high] — The company is exiting a business line that has contributed to revenue and servicing income, so transition timing and sale terms matter.
- **Credit risk in commercial real estate and small business lending** [high] — Loan performance can deteriorate with weaker borrower cash flow, property values, or local economic stress.
- **Interest-rate and funding cost sensitivity** [medium] — A bank funded by deposits and borrowings can see margin pressure when deposit costs rise faster than asset yields.

- Need for additional capital may not be met on acceptable terms
- Credit losses could rise if borrower quality weakens or real estate markets soften
- Interest-rate changes can pressure loan yields, deposit costs, and net interest income
- Exit from SBA 7(a) creates execution and transition risk
- Dependence on gain-on-sale income and servicing fees can make earnings volatile
- Geographic concentration in Florida increases sensitivity to local economic conditions

## Accounting

BayFirst’s most important accounting judgments relate to credit losses, fair value measurements, and servicing rights. Management identifies the allowance for credit losses, fair value measurement of government guaranteed loan servicing rights, and government guaranteed loans held for investment at fair value as critical estimates, meaning changes in assumptions can materially affect reported earnings and balance sheet values. Because the company sells government guaranteed loans into the secondary market, gain-on-sale accounting and servicing-rights valuation can create quarter-to-quarter volatility depending on loan volumes, pricing, and discount-rate assumptions. The company also notes that it is an emerging growth company and has elected the extended transition period for new accounting standards, which can affect comparability with larger public banks.

- **Allowance for credit losses** — Can materially change earnings and capital ratios
- **Fair value of loan servicing rights** — Can create earnings volatility and asset value changes
- **Gain-on-sale accounting for government guaranteed loans** — Affects noninterest income and comparability across periods

- Allowance for credit losses affects provision expense and loan carrying values
- Fair value of servicing rights can move with prepayment and discount-rate assumptions
- Loans held for investment at fair value can create mark-to-market volatility
- Gain-on-sale income from government guaranteed loans can fluctuate with origination volume and pricing
- Emerging growth company status may reduce comparability with peers on new standards
- Quarterly results can be affected by loan sale timing and servicing valuation changes

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*Last updated: 2026-08-11T04:46:23.498422+00:00*