BAFN

Capital & Corporate Actions

• Raised $80 million in new capital at the end of April 2026, the largest foundational step to strengthen the bank for future growth.
• Secured shareholder approval in mid-July 2026 to increase authorized common shares from 15 million to 100 million, completed conversion and retirement of all Series D and Series E preferred stock into 22,856,000 common shares, and redeemed all Series A and Series B preferred stock.
• A rights offering announced in April 2026 was delayed slightly to complete required financial restatements, and is now on track to launch in August 2026.

Legacy Issue Resolution

• Completed deployment of the asset resolution plan to address legacy credit issues concentrated in unguaranteed SBA 7A loan balances. The plan included adjustments to expected collections on over 7,000 individual loans, full/partial charge-offs, increased allowance for credit losses, and fair value adjustments, for a total pre-tax impact of $41.5 million.
• Identified material prior-period financial misstatements: accumulated errors included $6.2 million in improperly recognized deferred origination costs and $2.1 million in misstated accrued interest on defaulted loans, leading to restatements of 2024, 2025 full year results and Q1 2026 results, with amended SEC filings completed this week.
• Exited the SBA 7A lending business, eliminating future recurrence of the prior accounting errors and legacy credit risks from this segment.

Operational & Leadership Restructuring

• Restructured the leadership team to support focused growth: hired Trey Porn as Chief Banking Officer (a 22-year veteran Tampa market banker) to lead retail and commercial banking; retained Adam Curtis as Chief Lending Officer reporting to Porn; promoted Samantha Hill to Director of Retail Banking reporting to Porn, clarifying accountability for retail strategy.
• Added key new talent including a Chief Data Officer and retail personnel to support expansion, without significant net headcount increase.
• Submitted an application to open a new retail branch in South Tampa (a high-potential underserved market for the bank), which will bring the total branch network back to 12 locations after a Sarasota closure last quarter, with opening planned for September 2026.

Strategic Direction

• The bank's core strategy is to become the leading relationship-focused community bank serving the Tampa Bay region, centered on disciplined credit, local decision-making, and exceptional customer service.
• Top priorities include improving deposit mix by shifting from high-cost non-relationship transactional accounts to low-cost core relationship deposits, growing stable net interest income and fee income from traditional commercial and consumer lending to local borrowers, and investing in technology and process improvements to scale efficiently.
• The new $80 million capital raise provides the balance sheet strength and flexibility to execute this growth strategy thoughtfully.

• Management confirmed that after resolving legacy credit and accounting issues, the bank is positioned for return to profitability in future quarters, with core operations already near break-even in Q2 2026.
• Management expects continued run-off of remaining small amounts of broker deposits, but the current deposit base is largely core relationship deposits that serve as a stable foundation for future growth.
• The rights offering is expected to launch in August 2026, after completing all required regulatory filings and providing updated full financial disclosures to shareholders.
• The new South Tampa branch is expected to reach break-even sooner than the typical 2-year timeline, due to existing customer relationships already being built in the market.
• Treasury services fee income, which grew 75% year-over-year between 2024 and 2025, is expected to continue growing at a strong pace as the bank targets larger commercial customers, with incremental costs for team expansion offset by new fee revenue with no significant required capital expenditure.

Bay First Financial is a single-segment community bank, with the following Q2 2026 financial performance: Reported net loss of $32.7 million, compared to a restated net loss of $5.9 million in Q1 2026. Pre-tax loss for the quarter was $44 million, of which $43.8 million came from one-time charges tied to the completed asset resolution plan and restructuring. Excluding all one-time items, core operating loss for the quarter was approximately $200,000, just below break-even. Key balance sheet metrics: Loans held for investment decreased 4% quarter-over-quarter to $882.8 million, and decreased 21% year-over-year, primarily driven by legacy SBA 7A loan sales and exit from the SBA 7A lending business. Total deposits decreased 9% quarter-over-quarter to $989 million, a 15% year-over-year decrease, driven by intentional reduction of high-rate non-relationship and broker deposits. 80% of total deposits were FDIC-insured as of June 30, 2026. Shareholders' equity ended the quarter at $115.9 million, a $40.3 million increase from Q1 2026, from the $80 million capital raise net of asset resolution plan impacts. Excluding one-time asset resolution impacts, net interest margin was 4.07%, with cost of funds decreasing 24 basis points quarter-over-quarter to 2.66% (49 basis points lower year-to-date). Non-interest income was negative $6.8 million, while non-interest expense was $17.7 million, a $2.9 million quarter-over-quarter increase driven almost entirely by one-time charges. Provision for credit losses was $29 million in Q2 2026, compared to $3.4 million in Q1 2026. Total allowance for credit losses as of June 30, 2026 was $45.1 million, with the allowance ratio to total loans held for investment at 5.37% (up from 2.36% in Q1 2026), and 5.82% when excluding government-guaranteed loan balances (up from 2.55% in Q1 2026). Total unguaranteed SBA 7A loan balances were $142 million as of June 30, 2026, down from $159.3 million at the end of Q1 2026. Non-performing loans (excluding government guarantee balances) decreased to $14.4 million, with the non-performing loan ratio falling 10 basis points quarter-over-quarter to 1.72%. The bank's Tier 1 leverage ratio was 8.3% as of June 30, 2026, and the total capital to risk-rated assets ratio was 12.77%, both improved from Q1 2026.

• Legacy credit risk remains associated with the remaining $142 million in unguaranteed SBA 7A loan balances, requiring ongoing diligence in collections and problem asset resolution.
• Material internal control weaknesses over financial reporting led to prior-period material misstatements; management is currently conducting operational remediation to strengthen controls, with progress to be reported in future SEC filings.
• While the bank has built adequate reserves against higher-risk portions of the legacy SBA portfolio, actual future charge-offs could differ from management estimates as loans season and perform.
• Deposit levels declined 15% year-over-year as non-relationship deposits were intentionally reduced, and the bank must successfully grow new core relationship deposits to support sustained balance sheet growth.

Q: Analyst asks about the expected timeline to break even for the new South Tampa branch, and how large the location is expected to be. / A: The new branch is located in an underserved prosperous area of South Tampa that fills a gap in the bank's existing market footprint. Management already has started opening new accounts in the area, and expects the branch to reach break-even sooner than the typical two-year timeline given the existing customer traction and relatively low upfront investment. /

Q: Analyst asks for clarification on reserve levels for different sub-portfolios of the remaining unguaranteed SBA 7A loans, and how fast balances are expected to pay down. / A: The $60 million Bull Portfolio (amortized cost) has a 33% reserve; the $29 million FlashCap portfolio, which amortizes faster, has a 25% reserve; the $45 million core CNI larger loan portfolio has a 23% reserve; the $53 million real estate-backed SBA segment has only a 1% reserve, as it performs in line with expectations and is not a major loss driver. The Q1 to Q2 balance decline of $17.3 million included asset resolution plan impacts, so it is faster than the expected ongoing run rate. /

Q: Analyst asks for core earnings excluding one-time Q2 2026 charges, and clarification on key balance sheet items including deferred tax assets, preferred redemptions, and current deposit composition. / A: Excluding $43.8 million in one-time charges, core operating loss for Q2 was only $200,000, putting core operations just below break-even. No valuation allowance has been placed on the bank's deferred tax asset, as management expects future profitable growth to fully utilize the asset. The Series A/B preferred redemption payout of $9.7 million will occur in Q3 2026, with no impact on tangible common earnings, and the preferred-to-common share conversion dilution is already baked into Q2 2026 tangible book value. Non-relationship high-cost deposits are now very small, as almost all remaining non-brokered deposits are local core relationship customers, with no single depositor holding more than 5% of total deposits. Some residual broker deposits will continue to run off, but the current deposit base is a stable foundation for growth. /

Q: Analyst asks about the bank's plans to grow treasury services fee income, including required capital investment and competitive advantages in the crowded space. / A: The bank already has two fully implemented treasury platforms in place (one for small businesses, one for larger sophisticated commercial clients), so no significant technology capital expenditure is required. Growth will only require incremental additions to the small existing treasury team, and incremental costs will be offset by new fee revenue. The bank's competitive edge is its local relationship model: bankers are accessible, locally based, and provide responsive in-house support, which appeals to commercial clients looking for an alternative to large non-local banks. Treasury growth is aligned with the strategy of winning full operating relationships from new commercial lending clients, so it will grow naturally alongside loan growth. Treasury fee revenue already grew 75% year-over-year between 2024 and 2025, and management expects this strong growth to continue.